R. E. Harrington, Inc. v. Frick

• Court: Missouri Court of Appeals
• Writing for the Court: DOUGLAS W. GREENE; ANDERSON, P.J., and WOLFE
• Citation: R. E. Harrington, Inc. v. Frick, 428 S.W.2d 945 (Mo. App. 1968)
• Decision Date: 21 May 1968
• Docket Number: No. 32969,32969
• Parties: R. E. HARRINGTON, INCORPORATED, (Plaintiff) Respondent, v. James E. FRICK and Allen R. Shoults, (Defendants) Appellants.

Page 945

428 S.W.2d 945

R. E. HARRINGTON, INCORPORATED, (Plaintiff) Respondent, v. James E. FRICK and Allen R. Shoults, (Defendants) Appellants.

No. 32969.

St. Louis Court of Appeals, Missouri.

May 21, 1968.

Sullivan & Joyce, Dennis J. Tuchler, St. Louis, Attorneys, for defendants-appellants.

Coburn, Croft, Kohn & Herzog, St. Louis, Attorneys, for plaintiff-respondent.

DOUGLAS W. GREENE, Special Judge.

Plaintiff filed suit against defendants asking for an injunction and for damages for the alleged breach of provisions of employment contracts between plaintiff and defendants. After hearing evidence, the trial court, on March 2, 1967, entered judgment for plaintiff and against defendants as follows:

'DECREE'

'IT IS HEREBY ORDERED AND DECREED: That defendants and each of them are hereby permanently enjoined from:

'(a) For a period of three (3) years from and after June 14, 1966, soliciting away from plaintiff any of plaintiff's customers known to any of defendants to be such and who were such on June 14, 1966, with intent to divert, take away or attempt to divert to take away, or solicit any of the clients of the plaintiff in the business of consultation services in unemployment compensation or workmen's compensation.

'(b) For a period of three (3) years commencing June 14, 1966, making any statements to any of plaintiff's customers known to any of defendants to be such and who were such on June 14, 1966, with the intent of for the purpose or with the effect of directly or indirectly diverting or taking away any of said customers from plaintiff.

'(c) Making any statements to any customer of plaintiff's in any way, directly or indirectly, derogatory, damaging or detrimental to plaintiff or disparaging to the value of plaintiff's service to its customers.

'(d) For a period of three (3) years commencing June 14th, 1966, acting to solicit for defendants or either of them or any other person or corporation, any of plaintiff's customers known to any of defendants to be such and who were such on June 14th, 1966, with intent to divert or take away the business of the plaintiff of consultation services in unemployment compensation or workmen's compensation.

'(e) For a period of three (3) years after June 14, 1966, engaging in or becoming interested directly or indirectly, as an individual, partner, stockholder, director, officer, agent, employee, trustee, or in any other relation or capacity whatsoever in and to the business of consultation services in unemployment compensation or workmen's compensation within the States of Ohio, Missouri, or Texas.

'IT IS FURTHER ORDERED AND DECREED that plaintiff recover its costs from defendants and each of them.'

Defendants' motion for judgment, or a new trial, was overruled, and they appeal.

On appeal, we review this case de novo. However, we should not set aside the judgment unless it is clearly erroneous. Farmers Underwriters Association v. Reid, Mo.App., 425 S.W.2d 247, l.c. 251.

The facts are as follows:

Plaintiff is a corporation organized and existing under the laws of the State of Ohio. Its principal place of business is Columbus, Ohio. It also has places of business in St. Louis, Missouri, and in Dallas, Texas, and is licensed and authorized to do business in Ohio, Missouri, and Texas. Plaintiff is in the business of furnishing unemployment compensation cost control services to its customers. It solicits customers throughout the United States and has on file with the appropriate state unemployment compensation commissions letters of authority giving it the power to act on behalf of its particular customers in certain matters in forty-nine states and the District of Columbia. Plaintiff has customers whose home offices are located in nineteen different states. It has approximately 2,000 customers, 1,000 of which are located in Missouri, 800 in Ohio, 100 in Texas, and the rest are scattered throughout sixteen other states. Plaintiff performs its services and business functions in its offices in Columbus, St. Louis, and Dallas, except that it solicits customers throughout the United States. It also makes some service calls at the home offices of its customers.

Defendant James E. Frick is a former employee of plaintiff. He was closely associated with plaintiff and with its predecessor, Holloway Marx, Inc., as a stockholder, officer, and director since early 1961. From July, 1963, until March, 1966, he was executive vice-president of plaintiff, and from March, 1966, until June 14, 1966, he was vice-president. From May, 1965, until May, 1966, he was in charge of sales on a nation wide basis. He was a member of the board of directors from April, 1963, until March, 1966. He is presently, and has been for several years, a shareholder of plaintiff. For almost all of the time of his employment he was in charge of plaintiff's entire operations in Missouri and Texas. His duties included the soliciting and servicing of customers in Missouri and Texas. On many occasions he attended board meetings, business meetings, and seminars in Ohio, and he was intimately acquainted with all of the operations and practices of plaintiff. On June 14, 1966, he was dismissed by the board of directors of plaintiff. Frick had access to the confidential files of the company, including copies of all contracts plaintiff had with its customers. At the time of his discharge, the customer contracts mysteriously disappeared. Only Frick and his secretary had keys to the cabinet where the contracts were kept.

Defendant Allen R. Shoults was employed by plaintiff in July, 1962. He was hired by Frick. Shoults was elected as vice-president of plaintiff and remained as such until March, 1966. He had responsibilities in both sales and service. Shoults was Frick's assistant and had charge of the day-to-day operations of the company for which Frick was responsible. He was discharged on June 15, 1966.

In April, 1965, plaintiff's management, as a matter of policy, requested all of plaintiff's officers and employees who wished to continue their status as such to sign an agreement, a copy of which was introduced into evidence by stipulation. Frick and Shoults signed the agreement on April 24th and April 25th, 1965, respectively, in St. Louis, Missouri. The agreement generally provides that the defendants will not engage in or become interested directly or indirectly in the business of consultation services in unemployment compensation and workmen's compensation within any state in which plaintiff was engaged in business at the time of termination of employment, and that defendants would not, in any way, directly or indirectly, attempt to divert, take away or solicit any of the customers of plaintiff. The agreement was to remain in effect for a period of three years after the employee left the service of plaintiff.

Beginning some time before June 14, 1966, defendants entered into a scheme to go into a business to compete with plaintiff. The name of the business was to be 'United Tax Service, Inc.' They reserved the corporate name with the Secretary of State, ordered stationery, business forms, calling cards, and established an office in the same building where plaintiff's office was located in St. Louis, Missouri. The defendants did so far the purpose of and with the intention of competing with plaintiff in the unemployment compensation consulting service field within the State of Missouri.

From January, 1966, to May, 1966, defendants' sales dropped from an individual high of $8700.00 per month to a low of zero. They solicited plaintiff's employees Mary Wette and Jim Scott, to quit their jobs with plaintiff and go to work for defendants. After their discharge, Frick and Shoults immediately embarked upon a campaign to discredit plaintiff with its customers and to solicit them for United Tax Service. Frick contacted at least thirty-six customers of plaintiff, and Shoults contacted at least fifteen. The customers were told that Frick had been 'double-crossed' by plaintiff and that Frick had been pushed out at a 'rump' stockholder's meeting. The customers were also told that they did not need the services provided by plaintiff. Defendants' purpose of contacting plaintiff's customers was not only to solicit their business, but to try and get them to cancel their contracts with plaintiff....