Modern Laundry & Dry Cleaning Co. v. Farrer

• Decision Date: 19 January 1988
• Citation: 370 Pa.Super. 288,536 A.2d 409
• Parties: MODERN LAUNDRY & DRY CLEANING CO., Appellant, v. William FARRER, Individually, d/b/a Farrer Laundry & Dry Cleaning.
• Court: Pennsylvania Superior Court

Page 409

536 A.2d 409

370 Pa.Super. 288

MODERN LAUNDRY & DRY CLEANING CO., Appellant, v. William FARRER, Individually, d/b/a Farrer Laundry & Dry Cleaning.

Superior Court of Pennsylvania.

Submitted Oct. 13, 1987.

Filed Jan. 19, 1988.

Barbara L. Farley, Philadelphia, for appellant.

Barry M. Miller, Norristown, for appellee.

Before TAMILIA, POPOVICH and CERCONE, JJ.

POPOVICH, Judge:

This is an appeal from the Order entered April 16, 1987, in the Court of Common Pleas of Montgomery County, which dissolved appellant's temporary restraining order and dismissed his petition for a preliminary injunction. Appellant alleges the lower court erred in declaring that the restrictive employment covenant was invalid, and, consequently, it erred in denying the Motion for Preliminary Injunction. For the following reasons, we reverse and remand the case for determination of the remaining issue, i.e., whether the restrictive covenant is reasonably limited in time and territory.

On November 6, 1972, Modern Laundry and Dry Cleaning Company (Modern) hired William Farrer to work as a route salesman. For approximately one month, Farrer trained as a probationary employee under the supervision of an experienced route salesman on company Route Thirty-Six. During this probation period, Farrer worked without an employment contract. Under Modern's training program, Farrer was taught how to handle a particular route but was not given any responsibility for the route until Modern was satisfied with his performance. Once Modern became confident in Farrer's ability, he was offered full-time employment. In order to assume full-time status, Farrer was required to sign an employment contract. Included in the employment contract was the following restrictive covenant:

As an inducement to the execution of this agreement, and to any renewal or continuation thereof, it is agreed that in the event Employee shall leave the said employment, or be discharged by Employer, during, or at the expiration of this agreement, or any renewal or extension thereof, the said Employee agrees that he shall not, or will not, directly or indirectly, for the space of one year after ceasing in any manner to be in the employ of the Employer, engage in the laundry business in any form or manner on his own account, or as agent, employee, or in any other capacity, for any other person, firm, company, or corporation, in the route or routes, territory or territories assigned to, covered, or served by him, or within three full squares of any point in or on said territory; and that he will not, directly or indirectly, for himself on his own account, or as driver, canvasser, or in any other capacity, for any other person, persons, firm, company or corporation, within the route or routes, territory or territories assigned to, covered, or served by him, or within three squares of any point in or on said route or routes, territory or territories, solicit for or do any laundry work, or furnish any laundry service whatsoever, to any customer or customers served by said Employer, whether said customer or customers originally belonged to the Employer or were secured by the Employee, or through his efforts, while in the employ of the Employer.

Once the contract was signed, Farrer assumed complete responsibility for Route Thirty-Six. Farrer continued to service Route Thirty-Six for Modern until January 30, 1987, at which time he notified the company that he was terminating his employment effective immediately.

After Farrer's departure, Modern estimated that from January, 1987, to April, 1987, the company lost approximately 41% of its customers on Route Thirty-Six. In late March, 1987, Modern learned that Farrer had started his own laundry and dry cleaning business and that he was servicing his old route in violation of the restrictive covenant in his employment contract. Modern sought to prevent Farrer from operating his business within his old territory and to gain access to his business records so that the damages to Modern's business could be determined.

On April 7, 1987, Modern filed a Complaint in Equity and a Motion for Temporary Restraining Order and Preliminary Injunction. A temporary restraining order enjoining Farrer from soliciting or servicing any person within "three full squares" of his previous territory was issued. After hearings on April 13, 1987, and April 15, 1987, the lower court ordered the Temporary Restraining Order dissolved and denied the Motion for Preliminary Injunction. This appeal followed.

It is the law of the Commonwealth that for a covenant in restraint of trade to be enforceable, it must meet the following requirements: 1) the covenant must relate to (be ancillary to) a contract for the sale of the good will of a business or to a contract of employment; 2) the covenant must be supported by adequate consideration; 3) the covenant must be limited in both time and territory. George W. Kistler, Inc. v. O'Brien, 464 Pa. 475, 347 A.2d 311, 314 (1975); Jacobson & Co. v. International Environment Corp., 427 Pa. 439, 235 A.2d 612 (1967); Morgan's Home Equipment Corp. v. Martucci, 390 Pa. 618, 136 A.2d 838 (1957). Our courts have consistently held that the taking of employment is sufficient consideration for a restrictive covenant. Records Ctr. v. Comprehensive Management, Inc., 363 Pa.Super. 79, 525 A.2d 433, 435 (1987); Capital Bakers v. Townsend, 426 Pa. 188, 190, 231 A.2d 292, 293 (1967); Barb-Lee Mobile Frame Co. v. Hoot, 416 Pa. 222, 206 A.2d 59 (1965).

In the instant case, the lower court ruled that the employment contract between the parties was not ancillary to his taking of employment, and, therefore, it was invalid and unenforceable. However, the appellant cites cases and the record reveals facts which support appellant's contention that the contract was ancillary to the taking of employment. To be valid the restrictive covenant need not appear in the initial...