Mo-Kan Cent. Recovery Co. v. Hedenkamp, MO-KAN

• Decision Date: 22 May 1984
• Docket Number: MO-KAN,No. WD,WD
• Parties: CENTRAL RECOVERY CO., Petitioner/Appellant, v. Carl HEDENKAMP, Defendant/Respondent. 34993.
• Court: Missouri Court of Appeals

Page 396

671 S.W.2d 396

MO-KAN CENTRAL RECOVERY CO., Petitioner/Appellant, v. Carl HEDENKAMP, Defendant/Respondent.

No. WD 34993.

Missouri Court of Appeals Western District.

May 22, 1984.

Patrick B. Starke, Blue Springs, for petitioner/appellant.

Robert M. Adams, Kansas City, for defendant/respondent.

Before SHANGLER, P.J., and KENNEDY and LOWENSTEIN, JJ.

LOWENSTEIN, Judge.

Appellant Mo-Kan Central Recovery Company ("Mo-Kan") is in the business of repossessing automobiles and trucks owned by third-party debtors on behalf of its clients who are foreclosing on their security interests. Respondent Carl Hedenkamp formerly was employed by Mo-Kan. Mo-Kan sought to enjoin its former employee's alleged breach of a restrictive covenant in which Hedenkamp had agreed not to compete with Mo-Kan's business within a fifty-mile radius of the Kansas City, Missouri city limits for a period of two years following termination of his employment. This appeal follows the trial court's denial after hearing, of preliminary and permanent injunctive relief. The court's judgment will be sustained unless it erroneously declares or applies the law, unless it is against the weight of the evidence, or unless no substantial evidence supports it. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976); Rule 73.01.

Mo-Kan, incorporated since 1978, operates ninety percent of its business within fifty miles of the Kansas City metropolitan area. According to Purdom, its president, Mo-Kan differs from other repossession businesses because it has the capability to enter and start vehicles without the use of keys. Automobile credit institutions often use in-house personnel for relatively easy repossessions but must look to outside help when keys are not available, or the cars to be repossessed either cannot be located, or are not accessible to tow trucks. Mo-Kan alleges it exists to fill those needs.

Gaining entrance to cars without the aid of keys requires specialized tools such as the "slimjim," which are not generally available to the public. Mo-Kan's evidence was vague on this point. Purdom claimed certain states (not Missouri) have laws restricting the public's general access to these tools. The tools are available from commercial distributors. Mo-Kan holds no patents on the design of any of the tools it uses ¹ nor did it design, develop, or manufacture any of the tools.

Mr. Purdom testified that "business procedures" and "business techniques," including a price list and bidding sheet, have been developed as a result of Mo-Kan's five-year experience in the business of repossessing cars. Counsel posed the question, "Could you give the court a value on what the common sense aspects of this job, this business ... is worth?" to which Purdom replied he could not. Ricky Greisom, the vice-president of Mo-Kan, testified that Mo-Kan's "pricing structure" was a confidential piece of information within the company. Mo-Kan's clients appear in public directories, however. Its pricing policy is also known to its clients because repossession costs are added to the backpayments which the debtor must pay in order to redeem repossessed cars.

Respondent Carl Hedenkamp was hired by Mo-Kan in October of 1982 and began working full time a month later. He quit some 1 1/2 months later in mid-January, 1983 and started his own repossession business. Hedenkamp came to Mo-Kan with a total of 3 1/2 years prior work experience in this business. He had worked for two different automobile credit companies as an account representative, where his duties included repossessing cars and collecting delinquent accounts.

On December 1, 1982, Hedenkamp signed two employment contracts with Mo-Kan. The first covered certain administrative duties such as answering the phone, for which he would receive a weekly salary. His wife did this work. The contract in question, labeled an "Independent Employee Contract," covered his duties of repossessing cars, for which he would receive 25% of Mo-Kan's repossession bill as commission.

The pertinent contract language included the following:

WHEREAS, in connection with Employer's repossession business, it has a number of valuable customer lists and other contracts and secrets within the knowledge of Employer which Employer intends to retain and restrict in connection with any of its employees, subject to lawsuits and penalty;

* * *

* * *

Employee, as well as Employer, expressly acknowledge that this employment involves a disclosure of Employer's trade secrets, research information, mailing lists, customer lists and other information of a very valuable nature; said information obviously must be accessible to Employee in his handling of corporate affairs. Under the circumstances, Employee agrees that at the end of this contract, or as might be sooner terminated by Employer with the 20-day notice described in the paragraph four above, he will not in any form or manner compete with Employer for a period of two (2) years within a fifty mile radius of the Kansas City, Missouri city limits, as now designated. Competition with Employer, as indicated, means working for a like or similar recovery or repossession-type business on any income basis, and/or owning or having any involvement with any such business.

It is undisputed that Hedenkamp received some training from Mo-Kan. Greisom testified he taught respondent how to use its specialized tools and Mo-Kan's "techniques" for repossessing cars. Greisom did not specify what these "techniques" involved but when asked by his counsel, "Are there certain techniques you use in order to prevent yourself from getting caught," Greisom answered, "Just common sense." Hedenkamp testified that after December 1 when the employment contracts were signed he received no further training. He also stated at his former employment he had access to key guns used to cut keys, and had previously used "slimjims."

Hedenkamp testified that the business atmosphere at Mo-Kan appeared pessimistic shortly before he quit. The possibility of bankruptcy, as well as of dropping a major account, was contemplated. In mid-January he began competing with Mo-Kan. He bought a tow truck, got a Mo-Kan employee to work for him, and purchased some of the same tools used at Mo-Kan through contacts made at his employment there. He obtained all of his repossession business from two former clients of Mo-Kan, one of which he had previously worked for, and the other he claimed had contacted him. In two months Hedenkamp had repossessed forty-eight cars for his two clients.

Missouri law recognizes that a temporally and spatially limited restraint on an employee's ability to compete with his former employer will be enforced in equity if reasonable under all of the attending circumstances and if enforcement serves the employer's legitimate protectible interest. See Deck and Decker Personnel Consultants, Ltd. v. Pigg, 555 S.W.2d 705, 708 (Mo.App.1977); Herrington v. Hall, 624 S.W.2d 148, 151 (Mo.App.1981). This opinion assumes without deciding that the covenant in question was reasonable under the circumstances. The dispositive issue as presented by the parties in this appeal involves whether or not Mo-Kan has a legitimate interest in which a court of equity will protect through the enforcement of the terms of the restrictive covenant. In this area Missouri courts limit the granting of equitable protection to two narrowly defined classes of employer interests, customer contacts and trade secrets, both of which Mo-Kan claims in its brief. See Continental Research Corporation v. Scholz, 595 S.W.2d 396, 400 (Mo.App.1980); Orchard Container Corporation v. Orchard, 601 S.W.2d 299, 303 (Mo.App.1980). Covenants of the kind here involved were first regarded by the courts as contrary to public policy and held to be in restraint of trade. Renwood Food Products, Inc. v. Schaefer, 240 Mo.App. 939, 223 S.W.2d 144, 150 (1949). Later the courts recognized the necessity of restrictive covenants in employee contracts, but held the employer is not entitled to freedom per se from competition. The threat of competition ceases to be a real danger, "unless it is accompanied by a knowledge of trade secrets learned by the employee during his employment, or an influence acquired by the employee over the customers of his employer." Renwood, supra, 223 S.W.2d at 151 (citation omitted). "This has led the courts to deny relief unless one of those elements is present." Renwood, supra, 223 S.W.2d at 151. See USA CHEM, Inc. v. Lewis, 557 S.W.2d 15, 22 (Mo.App.1977) (an essential element to the contract is showing the restriction is for the protection of the employer's business and good will); Continental Research Corp., supra, at 401 (employer may only 'fairly require' protection in narrow and well-defined interests of trade secrets and customer contacts). In sum, the restraint must be qualified as to time and space and not greater than required for the protection of the person whose benefit it is imposed. Renwood, supra, 223 S.W.2d at 151.

At oral argument, however, Mo-Kan abandoned...