McGlothen v. Heritage Environmental Services, L.L.C., 45A04-9807-CV-371

Decision Date18 February 1999
Docket NumberNo. 45A04-9807-CV-371,45A04-9807-CV-371
PartiesJames McGLOTHEN, Appellant-Defendant, v. HERITAGE ENVIRONMENTAL SERVICES, L.L.C., Appellee-Plaintiff.
CourtIndiana Appellate Court


James McGlothen appeals from the trial court's grant of a preliminary injunction to enforce the terms of his covenant not to compete with his former employer, Heritage Environmental Services, L.L.C. (Heritage). On appeal, he raises several issues for review, which we restate as follows:

I. Whether Heritage has a legally protectable interest in its trade information or goodwill.

II. Whether the trial court erred in finding that the standards for granting a preliminary injunction had been met.

We affirm.


From August 19, 1992 to March 6, 1998, McGlothen worked for Heritage, an industrial waste management company. Upon his employment with Heritage, McGlothen signed a Confidentiality Agreement and Covenant Not to Compete, which reads in part:

"2. Employee also agrees that he will not in any way directly or indirectly, at any time while he is in the employ of Employer, or within twelve (12) months after either voluntarily or involuntarily leaving or terminating said employment, for himself or any other person, firm or corporation, call upon or solicit orders or work from any person, firms or corporations who shall be customers of Employer; nor will Employee in any way, directly or indirectly, solicit, divert, or take away any customers of Employer within such time. Employee further agrees that he will not at any time during the term of this contract, or within twelve (12) months after leaving or termination of said services with Employer, for himself or any other person, firm, or corporation, engage in the business of industrial waste management or any other business that is in competition with Employer (a) within the principal State of his employment, or (b) within any other city, county or state where Employee had, within twelve (12) months prior to his leaving the employment of Employer, rendered services for or on behalf of Employer.

3. Employee further agrees that he will not during the term of her [sic] employment or for twelve (12) months thereafter (a) divulge to any person not an employee of Employer any trade secret, plan or method of operation, or special or confidential information employed in and conducive to Employer's business, or (b) directly or indirectly attempt to solicit or divert or take away any employees of Employer."

Record at 23-24. During his tenure with Heritage, McGlothen held a variety of positions, including project manager and interim division manager. In January 1998, he was assigned to a sales position. McGlothen did not like his new assignment and became unhappy in his position. He resigned on March 6, 1998.

At his exit interview with his managers, he was asked to turn in his laptop computer, cellular phone, pager, and magnetic pass key. At that time, his managers reminded him that he had signed a non-compete agreement. He was never asked, nor did he offer, to turn over Heritage trade information that he possessed.

After leaving Heritage, McGlothen began work at Tierra Environmental Services (Tierra), a firm in competition with Heritage. After a brief stint there, he began working at National Industrial Maintenance (National). While employed at these firms, he contacted and solicited Heritage customers. He also contacted a former coworker at Heritage and attempted to persuade him to leave Heritage and join him at Tierra.

When Heritage learned that McGlothen retained information it considered confidential and was contacting former customers and coworkers, it filed for and received a temporary restraining order. It also sought a preliminary injunction to enforce the terms of the covenant not to compete. At the preliminary injunction hearing, McGlothen turned over all Heritage materials. The materials in question included a spreadsheet program for producing bids which included Heritage's direct costs, customer lists, target customer lists, completed proposals, completed project lists, generator lists, and fee schedules.

The trial court issued extensive findings of fact and conclusions, and enjoined McGlothen from soliciting work from Heritage customers, working in the industry in the territory which he had formerly worked for Heritage, divulging confidential information, and soliciting Heritage employees to work for other firms for a period of one year from his termination. At McGlothen's request, the trial court certified this order for interlocutory appeal. We accepted jurisdiction pursuant to Indiana Appellate Rule 4(B)(3).

I. Protectable Interest

Generally, covenants not to compete are disfavored by law because they restrain trade. Hahn v. Drees, Perugini & Co., 581 N.E.2d 457, 459 (Ind.Ct.App.1991). Nevertheless such covenants will be enforced where they meet the following test: 1) the restraint is reasonably necessary to protect the employer's business; 2) it is not unreasonably restrictive of the employee; and 3) the covenant is not antagonistic to the general public. Slisz v. Munzenreider Corp., 411 N.E.2d 700, 704 (Ind.Ct.App.1980). In applying this test, we have held that an employer must demonstrate some special facts giving his former employee a unique competitive advantage or ability to harm the employer before the employer is entitled to the protection of a non-competition covenant. Id. Those special facts may include, but are not limited to, such things as trade secrets known by the employee, the employee's unique services, confidential information such as customer lists known to the employee, or the existence of a confidential relationship. Id. However, an employer is not entitled to protection from an employee's knowledge, skill, or general information acquired through experience or instruction while in the employment. Century Personnel, Inc. v. Brummett, 499 N.E.2d 1160, 1163 (Ind.Ct.App.1986).

Whether Heritage has a legally protectable interest in the information retained by McGlothen is the heart of the dispute between the parties. McGlothen concedes that he signed a non-compete agreement and that he retained certain information when he left Heritage. He argues that Heritage does not have a legally protectable interest to justify the enforcement of the covenant not to compete. By contrast, Heritage argues that it has two independent interests here: the confidential information McGlothen appropriated and its good will.

A. Confidential Information

The trial court determined that the information McGlothen appropriated was confidential information in which Heritage had a protectable interest. McGlothen first argues that the trial court applied the improper standard for determining whether Heritage's information is "confidential information." The trial court relied on the test in Amoco Prod. Co. v. Laird, 622 N.E.2d 912 (Ind.1993) to find that Heritage's information was confidential. In Amoco, our supreme court held that information that is the result of extensive compiling efforts can be protectable, even if it is developed from data and technology in the public domain. McGlothen argues that Amoco is distinguishable because the information at issue here--customer names, addresses, and requirements--is readily ascertainable from observation, and because the creation of the lists and reports here were not the products of extensive compiling efforts.

McGlothen contends that the correct standard is instead set out in American Shippers Supply Co. v. Campbell, 456 N.E.2d 1040 (Ind.Ct.App.1983). In American Shippers, the court rejected the employer's argument that its customer contact information was protectable. Id. at 1043-44. The court relied on the fact that some of the information was readily available in trade publications, while the remaining information was available to everyone employed by the employer and was not treated as confidential. The court concluded that "the employer must demonstrate a protectable interest in the customer list where the items are not novel or unique." Id. at 1045. Whether customer information constitutes a trade secret or confidential information depends upon the facts of each individual case. Woodward Ins. Inc. v. White, 437 N.E.2d 59, 67 (Ind.1982).

McGlothen's argument fails even under the standard he advances. Heritage offered evidence that it regarded the information at issue as confidential. Glenn Boresi, Heritage's Vice-President, testified that Heritage considered its cost and price information "absolutely confidential." Record at 470. Boresi explained that if Heritage's competitors were able to obtain and use this information, they would gain a competitive advantage over Heritage in bidding and winning projects. One of the more sensitive documents recovered from McGlothen was stamped with the word "confidential." In addition, Boresi testified that although Heritage's operations required it to allow all project managers to have access to this information, Heritage required all such employees to sign a confidentiality agreement and covenant not to compete. In contrast, McGlothen points to his own testimony that the information at issue is not confidential because most of the information is already known, that much of the information is readily given out by Heritage on request from its customers, that employees in the industry constantly change firms, providing a source of inside information to each firm about how the others operate, that the information is easily ascertainable, and that Heritage made no attempts to maintain the secrecy of the information. McGlothen asks us to reject the evidence offered by Heritage in...

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