Nalco Chemical Company v. Hall

• Decision Date: 22 June 1965
• Docket Number: No. 22257.,22257.
• Citation: 347 F.2d 90
• Parties: NALCO CHEMICAL COMPANY, Appellant, v. Merwin G. HALL, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

347 F.2d 90 (1965)

NALCO CHEMICAL COMPANY, Appellant, v. Merwin G. HALL, Appellee.

No. 22257.

United States Court of Appeals Fifth Circuit.

June 22, 1965.

John C. Snodgrass, Houston, Tex., Ralph L. Kaskell, Jr., New Orleans, La., Vinson, Elkins, Weems & Searls, Houston, Tex., Deutsch, Kerrigan & Stiles, New Orleans, La., for appellant, Nalco Chemical Co.

Cicero C. Sessions, Sessions, Fishman, Rosenson & Snellings, New Orleans, La., for appellee, Merwin G. Hall.

Before HUTCHESON, BROWN and GEWIN, Circuit Judges.

HUTCHESON, Circuit Judge:

This is an appeal from the district court's order denying the appellant a temporary injunction pending a final hearing on the merits of this Louisiana diversity action. The controversy arose out of an employment contract which contained a non-competition clause.

Appellant is in the business of servicing oil and gas wells with various chemicals, such as emulsion breakers, corrosion inhibitors, etc. Appellee was one of its sales representatives in Louisiana. His duties included using small portable laboratories in the field to test samples from wells to recommend the chemicals to be used. He signed an employment contract with appellant which provided, among other things, that appellee would not engage in or be interested in the same or any similar line of business in competition with appellant within a specified district of Louisiana for a period of three years immediately following his termination of employment with appellant. In November, 1964, rather than accept a transfer to another territory, appellee resigned his position with appellant and immediately thereafter went to work for one of its major competitors.

Appellant seeks to enjoin appellee from continuing his employment by its competitor and to prevent him from using appellant's customer lists, location lists, and technical reports and analyses, on the grounds that these activities are forbidden by the terms of his employment contract. The trial court found that at the time of the hearing on the temporary injunction appellee had returned all such lists and technical data to appellant and that he presently had no access to any such material, except to the extent he may remember it from his work for appellant.

Prior to 1962 Louisiana prohibited non-competition agreements in employment contracts by statute, and declared such agreements "null and unenforceable in any court". LSA-R.S. 23:921. This statute was amended by Act 104 of 1962 so that the prohibition against such agreements should not apply,

"where the employer incurs an expense in the training of the employee or incurs an expense in the advertisement of the business that the employer is engaged in * *"

In such cases a non-competition provision could be used, when restricted to the territory of the employment, for a period of two years.

The district judge, applying Louisiana law, had no case to guide him in interpreting the exceptions contained in the statute. He denied the temporary injunction on the grounds that the training given appellee and the advertising done by appellant were not the kind contemplated by the statutory exceptions. He concluded that the exceptions must be read so as to apply to the situation where the training is of a substantial nature or the advertising pertained in some way to the employee's connection with the employer's business. He held they did not apply where only usual or customary training was given to acquaint the employee with his duties or only general advertising of the employer's business or products was used. He concluded that the employment contract in question could not be enforced because neither appellee's training nor appellant's advertising expense was of the kind contemplated by the statutory exceptions.

Subsequent to the district court's denial of the temporary injunction, two decisions of the Louisiana Court of Appeals have construed the statute in question. The first agreed with the position taken by appellant here that all the statute requires is that the employer incur some expense in training the employee or that he incur some expense in advertising his business, whether or not it pertains to the employee's connection with the business. Aetna Finance Co. v. Adams, 170 So.2d 740 (C.A. of La. 1st Cir. 1964, cert. denied by La.Sup.Ct., 247 La. 489, 172 So.2d 294). The second agreed with...