New England Overall Co. v. Woltmann

• Decision Date: 22 June 1961
• Parties: NEW ENGLAND OVERALL CO., INC. v. Clinton H. WOLTMANN and others (two cases). . Suffolk
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 193

176 N.E.2d 193

343 Mass. 69

NEW ENGLAND OVERALL CO., INC. v. Clinton H. WOLTMANN and others (two cases).

Supreme Judicial Court of Massachusetts. Suffolk.

Argued May 2, 1961.

Decided June 22, 1961.

Elliot E. Rosenberg, Boston, for plaintiff.

Edward O. Proctor, Jr.,Boston, for defendants.

Before WILKINS, C.J., and SPALDING, WILLIAMS, KIRK, and SPIEGEL, JJ.

KIRK, Justice.

We treat these two cases in a single opinion since they are between the same parties and arise out of the same facts. The second case, a contempt proceeding, is but an incident of the first, in which the plaintiff sought to enjoin the defendants from using certain confidential information.

The Principal Suit.

The defendants appeal from an interlocutory decree which confirmed a master's report and from a final decree which awarded damages to the plaintiff and which enjoined the defendants from soliciting or communicating with customers of the plaintiff in the New England States and in New York and Pennsylvania. We disregard the defendants' purported appeal from the denial of their motion to strike out certain portions of the master's report. It has no standing before us for the reasons stated in Respro, Inc. v. Worcester Backing Co., 291 Mass. 467, 472, 197 N.E. 198, and Ingram v. Eichel's Spa, Inc., 313 Mass. 109, 113-114, 46 N.E.2d 583. Rule 90 of the Superior Court (1954), last paragraph. ¹

The master made extensive findings of fact, which we summarize. The plaintiff a corporation solely owned and controlled since 1903 by a family named Gordon, has been continuously engaged in the manufacture, sale, and distribution of work and sports clothes for men, women, and children to retail dealers throughout New England, and in New York and Pennsylvania. It is a leader a creator of styles in the particular industry, and has about two thousand substantial customers and a very valuable good will. It has always safeguarded with the utmost secrecy all information concerning its internal business, especially the names, addressed, requirements, and credit standing of its customers, the identity of and dealings with its suppliers, its costs, and the styles for approaching seasons.

On February 12, 1952, the defendant Woltmann, who for many years had been a buyer of large quantities of the plaintiff's merchandise for a New York firm, was hired by the plaintiff as its sales manager. He thereby became, and he knew that he became, the first person outside the Gordon family to hold an authoritative executive and administrative position with the plaintiff and to have access to its innermost secrets. Before he was hired, there was an understanding between Woltmann and the plaintiff that if employed "he would keep inviolate and never use nor divulge to anyone any trade and business secrets and information of the plaintiff that might come to him, especially as to its customers, suppliers, costs and forthcoming lines, nor would he permit the same to be utilized by anyone." Throughout his employment which lasted until November, 1959, Woltmann had full charge of salesmen, the projection of future sales, the maintenance of records of supplies, costs and sales, the control of inventories, and the safeguarding of secret information about the plaintiff's business. To perfect the concealment of the identity of the plaintiff's suppliers he devised a code system of reference to them which he and the Gordon family memorized. He had custody of the written customers' lists and the confidential data relating to the customers. With this information he was better able to perform his duties as sales manager for the plaintiff.

The defendant Richman was in the employ of the plaintiff as a salesman from July, 1947, to November, 1959. He covered territory in the State of New York including New York city. He knew the importance of keeping secret the names, addresses, and credit standing of customers, and was aware of a general custom in the industry that salesmen were not to reveal employment to the detriment of their employers.

For the first six and one half years of his employment, Richman had worked under a written contract with the plaintiff whereby he agreed "to keep secret and not to divulge to any person, firm or corporation * * * the names, addresses, or any information concerning any customers, prices, policy, or other matters pertaining to the business * * *." Thereafter he worked from year to year with certain changes in his basis of compensation "but with no other changes in the condition of his employment." We construe the latter as being a finding that Richman continued in his employment under the same agreement as to confidential matters. Woltmann was aware of Richman's terms of employment.

The master found that the plaintiff's customers were friendly toward the plaintiff and purchased their work and sport clothes exclusively from it. Similarly, the plaintiff's suppliers never sold any of the styles or fashions created by the plaintiff to anyone else. Woltmann had direct contact with both customers and suppliers in his own name, and he had their trust and confidence because of his high position with the plaintiff.

In September, 1958, Woltmann and Richman secretly agreed to compete with the plaintiff, and in the following months surreptitiously advanced their plan. Woltmann for example, in 1958, bought in his own name from the plaintiff's suppliers merchandise which was of the same design as that planned by the plaintiff for 1959 with the object of selling it to the plaintiff's customers before the plaintiff disclosed the spring and summer line to its own salesmen. The master set forth in chronological sequence the double dealing in which Woltmann and Richman thereafter engaged adverse to the plaintiff's interests while in the employ of the plaintiff. We need not recount it all. In September, 1959, Woltmann, Richman, and one Nahaas organized Zeal, Inc., a corporation, to compete with the plaintiff. The business address of Zeal, Inc., was the same as that of a company in which Nahaas was a partner, and which had credit standing. Woltmann and Richman in person ordered merchandise for Zeal, Inc., from the plaintiff's suppliers in North Carolina and directed delivery to the Nahaas firm's address. Woltmann left the plaintiff's employ November 13, 195. On the same day Richman gave notice that he would leave November 23, 1959. Still later on the same day, both informed the plaintiff for the first time that they planned to go into business together. Efforts to dissuade them, including offers of substantial stock ownership in the plaintiff, failed.

Shortly thereafter, the plaintiff learned that many of the confidential items and listings relating to customers and suppliers of the plaintiff were missing. The master found that Woltmann had taken them; and that Woltmann and Richman were soliciting on behalf of Zeal, Inc., and were continuing to solicit both customers and suppliers of the plaintiff. They had obtained from the suppliers merchandise of a manufacture, style, and pattern which could not be distinguished from that sold by the plaintiff without careful examination, and were selling it at cut prices which tended to destroy the plaintiff's trade reputation and good will established over many years. The master found that it was difficult to ascertain the damage which has been done and will be done to the plaintiff's good will and reputation by the defendant's price cutting and efforts to induce customers and suppliers to "break away" from the plaintiff.

The defendants filed forty objections to the master's report which became exceptions by operation of Rule 90 of the Superior Court (1954). Chopelas v. Chopelas, 303 Mass. 33, 35, 20 N.E.2d 445.

The evidence is not reported. An examination of the exceptions discloses that they do not raise questions of law, but are all designed to require the master (a) to find certain facts desired by the defendants, or (b) to make findings in greater detail, or (c) to explain the meaning of words in common usage which are in the report. In these circumstances, no summaries of evidence are required under Rule 90 of the Superior Court (1954). The exceptions per se are without standing, Shaw v. United Cap Cod Cranberry Co., 332 Mass. 675, 678, 127 N.E.2d 296, and the defendants do not appear to contend the contrary. Whether the report should have been recommitted rested in the discretion of the judge. Buckley & Scott Util., Inc. v. Petroleum Heat & Power Co., 313 Mass. 498, 508, 48 N.E.2d 154; Black v. Parker Mfg. Co., 329 Mass. 105, 118, 106 N.E.2d 544. No affidavit under Rule 46 of the Superior Court (1954) was filed in support of the motion. Cantor v. Cantor, 325 Mass. 719, 721, 92 N.E.2d 368. The report does not disclose error on its face. There was no abuse of discretion in denying the motion to recommit, and no error in confirming the master's report which was complete in all essentials, and was not inconsistent, contradictory or plainly wrong. Macera v. Mancini, 327 Mass. 616, 621, 99 N.E.2d 869.

We accordingly accept the master's findings as final. Peabody Gas & Oil Co. v. Standard Oil Co. of N.Y., 284 Mass. 87, 88, 187 N.E. 112; Dodge v. Anna Jaques Hosp., 301 Mass. 431, 435, 17 N.E.2d 308. The question presented is whether the facts found by the master justify the relief granted by the final decree. We first consider the injunctive relief.

In situations where there has been no express contract of an employee not to use or disclose confidential information entrusted to him during his employment, this court has held that, although an employee may carry away and use general skill or knowledge acquired during the course of his employment, he may be enjoined from using or disclosing confidential information so acquired. Essex Trust Co. v. Enwright, 214 Mass. 507, 511, 102 N.E. 441, 47 L.R.A., N.S., 567; Aronson v. Orlov, 228 Mass. 1, 4-5, 116 N.E. 951; Wireless Specialty Apparatus Co. v. Mica Condenser...