Peters v. Davidson, Inc.

• Decision Date: 31 January 1977
• Docket Number: No. 1--976A173,1--976A173
• Parties: William E. PETERS and Fluid Connectors, Ltd., Inc., Defendants-Appellants, v. DAVIDSON, INC., Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 556

359 N.E.2d 556

172 Ind.App. 39

William E. PETERS and Fluid Connectors, Ltd., Inc., Defendants-Appellants, v. DAVIDSON, INC., Plaintiff-Appellee.

No. 1--976A173.

Court of Appeals of Indiana, First District.

Jan. 31, 1977.

Rehearing Denied March 10, 1977.

Frost & Faires, Indianapolis, Parr, Richey, Obrenskey & Morton, Lebanon, for defendants-appellants.

Robert L. McLaughlin, David T. Stutsman, Wooden, Stark, McLaughlin & Sterner, Indianapolis, Michael M. Disler, Hillis & Disler, Zionsville, for plaintiff-appellee.

ROBERTSON, Chief Judge.

Davidson, Inc. (Davidson) filed suit against William Peters and Fluid Connectors, Ltd., Inc. (Peters) seeking injunctive and monetary relief. After a hearing on Davidson's application for a preliminary injunction, the trial court entered an interlocutory order granting a preliminary injunction from which Peters appeals.

The facts of the case are that on May 3, 1971, Avels, Inc. (Avels) employed William Peters as a sales engineer. At the time of his employment, Peters and Avels entered into an employment agreement contract which contained the following restrictive covenant not to compete:

'Sales Representative covenants that he shall not, during the term of his employment or any time thereafter, disclose, divulge or use trade and manufacturing secrets, including shop drawings and prints, assembly data, application studies, engineered systems and design techniques, customer and supplier lists or any other confidential information relating to the products sold by or the business operation of Avels or its affiliates. In addition, Sales Representative further covenants that he shall not, during the term of his employment by Avels or its affiliates and for a period of one (1) year thereafter, in any territory in which he was employed by Avels or its affiliates, and any county adjacent thereto, directly or indirectly, own, manage, operate or control, or in any manner be connected with the ownership, control or operation, either as a shareholder, director, officer, employee or in any other capacity, or any organization engaged in the business of manufacturing or selling, or consulting with regard to, any products competitive to those manufactured, distributed or sold by Avels or its affiliates. Sales Representative covenants that he shall not, during the term of his employment by Avels or its affiliates and for a period of two (2) years thereafter, directly or indirectly, refer to his employment with Avels or its affiliates for any purpose which could adversely affect their business prospects, divert or attempt to divert in any manner any business, customers or suppliers of Avels or its affiliates to himself or to any third party, hire any employee of Avels or its affiliates, or induce or attempt to induce any employee of Avels to discontinue or terminate his or her employment with Avels or its affiliates.'

Peters worked for Avels until January 1, 1973. On that day, Avels merged with Dividend Leasing Co., Inc., under the Indiana General Corporation Act, ¹ to form Davidson, Inc. Following the merger, Peters assumed the same position with Davidson, performing the same duties in the same territory. He remained with Davidson until he tendered his resignation on December 12, 1975.

After resigning, Peters incorporated Fluid Connectors, Ltd., Inc. on December 19, 1975. Subsequent to its incorporation, Fluid Connectors engaged in a competitive business with Davidson in the same geographical area serviced by Peters prior to his resignation. Approximately ninety percent (90%) of the purchase orders received and invoices issued by Fluid Connectors covered the identical products and customers handled by Peters while employed with Avels and Davidson.

On April 28, 1976, Davidson initiated this action against Peters. In its complaint, Davidson alleged that it acquired and assumed all rights and obligations under Peters' employment agreement when the merger occurred. Davidson further alleged that Peters breached his covenant not to compete by establishing a competitive business, by selling identical products to Davidson's customers, by inducing Davidson employees to work for Fluid Connectors, and by using confidential information. Davidson sought injunctive relief to prohibit Peters from continuing his competitive business.

The trial court conducted a hearing on Davidson's application for a preliminary injunction, and on August 27, 1976, the trial court entered its findings of fact and conclusions of law and issued the following order granting the preliminary injunction:

'IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that defendant William E. Peters and Fluid Connectors Ltd., Inc. are hereby enjoined, pending further order of the Court:

1. For a period of one year following December 12, 1975, within the territories denominated as 493 and 496 on the map attached hereto as Exhibit 'A', either directly or indirectly, from engaging in the ownership, control, management, or operation of, or to be employed by, any business competitive with the products distributed tributed or sold by plaintiff.

2. For a period of two years following December 12, 1975, directly or indirectly, from diverting or attempting to divert in any manner any business, customers, or suppliers of plaintiff to themselves or to any third party.

3. For a period of two years following December 12, 1975, from hiring any employee of plaintiff, or inducing or attempting to induce any employee of plaintiff to discontinue or terminate his or her employment with plaintiff.

IT IS FURTHER ORDERED that the preliminary injunction granted herein shall be effective upon the filing by plaintiff of a written undertaking, with surety, in the penal sum of $50,000.00 for the payment of all damages and costs which may accrue to defendant by reason of the erroneous granting of this preliminary injunction, such bond to remain in effect until further order of this Court.'

Davidson posted bond on September 20, 1976, and the preliminary injunction became effective.

Peters appeals from the trial court's interlocutory order granting the preliminary injunction assigning numerous errors for our review. The assigned errors for the following issues: whether on review of an interlocutory order granting a preliminary injunction, this court may examine the final merits of the case; and whether the trial court abused its discretion in granting the preliminary injunction.

We affirm.

Peters asks us to review the trial court's interlocutory order granting the preliminary injunction as if a decision on the merits had been made. He argues that the pleadings and record sufficiently show the merits of this case, and that, therefore, a review of the final merits is necessitated.

It is well settled in Indiana that the grant or denial of a preliminary injunction rests within the sound discretion of the trial court and that we will not interfere with the exercise of that discretion unless it is shown that the trial court's action was arbitrary or constituted a clear abuse of discretion. Rosenburg v. Village Shopping Center, Inc. (1968), 251 Ind. 1, 238 N.E.2d 642. In cases of this posture, we, therefore, review the trial court's decision for abuse of discretion and do not review the final merits of the case. Angel v. Behnke (1975), Ind.App., 337 N.E.2d 503.

However, we will review the merits of the case if the hearing on the application for the preliminary injunction has been consolidated with the trial on the merits pursuant to Trial Rule 65(A)(2) of the Indiana Rules of Civil Procedure. In the instant case, there is no indication in the record that the trial court contemplated or gave notice to the parties that the application hearing was to be treated as a trial on the merits.

We will not review the trial court's grant or denial of a preliminary injunction on the merits absent a clear showing that the trial court intends and the parties are aware that the hearing for the preliminary injunction is to be consolidated with the trial on the merits. Such a showing is not present here, and we, therefore, limit our review to the question of whether the trial court's action constituted a clear abuse of discretion.

Peters contends that the trial court abused its discretion in granting the preliminary injunction enforcing the covenant not to compete. Although it is not entirely clear in what respect he wishes to challenge the trial court's judgment, we have reviewed his arguments and have concluded that his attack is based upon the following grounds: (a) the complaint fails to state a claim upon which relief may be granted; (b) Davidson failed to plead and prove complete performance; (c) no showing of irreparable harm was made; (d) the evidence is insufficient to support the judgment; (e) the trial court's findings of fact and conclusions of law are inconsistent, incomplete and inadequate in form and content; (f) the amount of the security bond is insufficient; and (g) the trial court improperly applied the law.

In presenting his case for a preliminary injunction, an applicant is not required to plead and prove a case which would entitle him to relief at a final hearing on the merits. The applicant's burden of proof is generally recognized to be the following:

'In our determination of whether or not the trial court committed any error in granting the temporary injunction in this case, the appellee (the plaintiff below) need only show a prima facie case for an injunction and that injury to him would be certain and irreparable if the application be denied . . .. It is not necessary that a case should be made that would entitle the plaintiff to relief in all events. It is necessary only that the pleadings and evidence be such that it makes out a...