Menter Co. v. Brock

• Decision Date: 24 December 1920
• Docket Number: No. 21915.,21915.
• Citation: 147 Minn. 407,180 N.W. 553
• Parties: MENTER CO. v. BROCK et al.
• Court: Minnesota Supreme Court

147 Minn. 407

180 N.W. 553

MENTER CO.

v.BROCK et al.

No. 21915.

Supreme Court of Minnesota.

Dec. 24, 1920.

Appeal from District Court, Hennepin County; E. F. Waite, Judge.

Action for injunction by the Menter Company against Arthur M. Brock and others. From a judgment of dismissal, plaintiff appeals. Affirmed.

Syllabus by the Court

The employee, upon entering the service, agreed that, for a certain period after the service ceased, he would not directly or indirectly engage in the same business as the employer in the city. Within the prescribed period he engaged in a like business in the city. In this action to enjoin him from working in the new employment, plaintiff failed to show that it had sustained or was likely to sustain irreparable damage on account of his conduct, and for that reason the dismissal ordered when plaintiff rested was right. Kingman, Cross & Cant and Henry W. Haverstock, all of Minneapolis, for appellant.

Wm. B. Anderson, of Minneapolis, for respondents.

HOLT, J.

The action is to enjoin defendants from carrying on the same business which plaintiff is engaged in in the city of Minneapolis. When plaintiff rested, the court dismissed the action. The appeal is from the judgment of dismissal.

No error is claimed in the dismissal of any defendant other than Brock. As to Brock the facts are these: Plaintiff operates a chain of clothing stores in many of the large cities of this country. It has one in Minneapolis, and Brock became its manager on April 4, 1916, at the weekly salary of $35. The contract of employment was in writing, signed by both parties. It contains numerous covenants and agreements to be kept and performed by Brock; but we look in vain for one to be carried out or kept by plaintiff. It does not agree to keep him in its employ for a single day, nor does it, in terms, agree to pay the salary he bound himself to accept. In March, 1918, Brock and two other employees of plaintiff organized a corporation to engage in a business similar to plaintiff's, rented a store two blocks away from plaintiff's, and are now conducting a business there. The basis of the asserted hold on Brock is a paragraph in the contract mentioned which provides, in substance, that in consideration for the employment by the week, and the knowledge thereby obtained in plaintiff's method and trade secrets, Brock agreed that, for a period of four years after his employment by plaintiff should cease, he would not directly or indirectly enter into or engage in the same business as plaintiff in the city of Minneapolis, or work in such line of business. If his employment ceased before the end of one year, the prohibited period should be four times as long as the time he actually worked. In case of a violation of the foregoing covenant Brock must forfeit and pay to plaintiff $3,000, which is ‘agreed upon as liquidated damages therefor, and shall be considered as such, and not as penalty.’

The proof showed that, when Brock notified plaintiff that he desired to quit its employ, no difficulty was experienced in at once supplying his place, and in fact more business was transacted thereafter than during Brock's management. While some witnesses for plaintiff referred in general terms to trade secrets and special methods of doing business possessed by plaintiff, when required to name any in particular they failed utterly, or else pointed out methods known and practiced generally in carrying on business like plaintiff's. The only tangible evidence is that Brock ordered for the use of his corporation books of account and records similar in form to plaintiff's and from the same firm that supplies it. However, it does not appear that the books and records used by plaintiff are copyrighted, or that there is any special peculiarity about them whereby their use by a competitor could cause loss to plaintiff's business.

The record does not indicate the grounds for the dismissal. Counsel for appellant seemingly thinks that, because of the provision in respect to the payment of liquidated damages, the court concluded the only remedy was an action at law; for much effort is expended in combating that proposition. We think that question was not reached by the court below, and, as the proof stands, need not be considered here.

Equity will not enjoin the breach of a negative covenant in a contract, unless it is made to appear that irreparable injury has resulted, or will in all probability result, to complainant from such breach. In cases where an established business or trade and its good will has been sold, and as part of the transaction the seller has covenanted not to engage in the same business in the vicinity for a certain period, the mere breach strongly points to irreparable injury, in that the old business built up by him and his name will lose by having its customers drawn to a similar new enterprise when he enters it. By the purchase the buyer, upon a supposedly adequate consideration, secured a going business and its protection by the covenant from encroachment by the seller. Examples of such cases are furnished by Holliston v. Ernston, 124 Minn. 49, 144 N. W. 415;Andrews v. Kingsbury, 212 Ill. 97, 72 N. E. 11;Ropes v. Upton, 125 Mass. 258;Diamond Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 419, 60 Am. 464. We think the breach of a like covenant in an employment contract does not so readily indicate irreparable injury to the employer. Injury is not shown by the mere fact that the employee has left the service and has entered the employ of a rival concern. In McCall Co. v. Wright, 198 N. Y. 143,91 N. W. 516,31 L. R. A. (N. S.) 249, the rule applicable is, in substance: Where the services have been of such a character that the employee's name carries with it the good will of the employer's business, or where the employee has obtained knowledge of secrets in such business the disclosure of which would result in irreparable damage to the employer, it appearing that the subsequent employment was to obtain the benefit of the secrets or there was danger that such secrets would be cisclosed in the subsequent employment injunctive relief will be granted. See, also, Simms v. Burnette, 55...