Rego Displays, Inc. v. Fournier

• Decision Date: 23 November 1977
• Docket Number: No. 76-214-A,76-214-A
• Citation: 119 R.I. 469,379 A.2d 1098
• Parties: REGO DISPLAYS, INC. v. Louis FOURNIER et al. ppeal.
• Court: Rhode Island Supreme Court

Page 1098

379 A.2d 1098

119 R.I. 469

REGO DISPLAYS, INC. v. Louis FOURNIER et al.

No. 76-214-Appeal.

Supreme Court of Rhode Island.

Nov. 23, 1977.

[119 R.I. 478] Higgins, Cavanagh & Cooney, Gerald C. DeMaria, Providence, for plaintiff.

Jules Gelade, Matthew J. Zito, North Providence, for defendants.

OPINION

DORIS, Justice.

This is a civil action brought to enjoin the defendants ¹ from solicitation of the plaintiff's customers, and to seek compensatory and punitive damages for unfair competition, interference with contractual relations, and breach of trust and confidence. The defendant Louis Fournier is a jewelry display designer and former employee of the plaintiff corporation, which manufactures jewelry display units. The cause was heard by a justice of the Superior Court, sitting without a jury. A judgment was entered permanently enjoining the defendant from solicitation of the plaintiff's specifically listed Rhode Island customers and awarding the plaintiff compensatory damages totalling $3,391.23 plus costs. Punitive damages were denied. The defendant now appeals to this court.

Rego Displays, Inc. (Rego) employed Louis Fournier as a display designer, sample maker, and manager of the woodworking shop. Fournier was employed without a contract from 1970 to January 1974, and from August 1974 to November 17, 1975. Joseph Soave, Rego's vice president, secretary, managing officer and salesman since 1973, developed and increased Rego's business by establishing continuing relationships with customers through referrals, jewelry representatives, and jewelry shows. Although the customers did not do business exclusively with Rego, the enduring aspect of the relationships was important because of the constantly changing trends in display design and the highly competitive nature of the business. The defendant Fournier often attended Soave's meetings with customers, both in the Rego office and at jewelry shows, and offered his expertise as designer and technician in procuring and appeasing customers. The duplication of models presented by customers and the creation of samples conforming with requested specifications are common practices in the jewelry display business. These duties devolved upon Fournier, which placed him in a confidential and responsible position in Rego's operation. Fournier was aware not only of the identities of Rego's customers, but also of their specific needs. Therefore, when Alanco Company (Alanco), a New York jewelry firm, came to Rego in January 1975 with ideas for a plexiglass display, it was Fournier who developed a display unit referred to as the U-2000 base. This unit was sold by Rego to Alanco until October 1975, when plaintiff stopped receiving orders from Alanco. Gross sales by plaintiff to Alanco totalled $16,956.75, of which $8,949.45 was attributed to the U-2000 display. The U-2000 displays sold to Alanco by plaintiff brought a profit to plaintiff of $1 per unit. In July 1975, plaintiff increased the price of U-2000 from $2.05 to $2.25 per unit. Sometime in July, defendant had begun manufacturing displays in his basement with a view toward establishing his own independent business and did his first work on his own in September 1975.

As Alanco's representative had complained of Rego's increased price for the U-2000 unit, defendant Fournier took the opportunity to obtain orders from Alanco for the U-2000 base Fournier was manufacturing on his own at a price of $1.95 per unit. The defendant received his first order from Alanco in October 1975. Fournier did not inform anyone at Rego of his private manufacturing business or of his dealings with Alanco. The defendant testified that he never did any of his business on plaintiff's time, but worked in the basement of his home from 5 p. m. to 12 p. m. He claimed that he never saw plaintiff's actual customer list and never made a copy of the list. Fournier testified he delivered 2,116 U-2000 units to Alanco in the period from October through December 1975, and that 1,250 units were in progress. The defendant was dismissed from employment with Rego on November 17, 1975, one day after Joseph Soave learned of Fournier's activities.

The focus of the issues in this case is on the question of balance between an individual's right to entrepreneurial freedom and the need to protect established business concerns from unfair competition. The remedy chosen is of equal importance with the substantive matters of the case in achieving an appropriate balance, and will be so considered. The defendant contends that the trial justice incorrectly balanced the public interest in free competition and individual freedoms against one's right to the protection of business assets. He further asserts that plaintiff's customer list was not a trade secret and that damages are excessive.

It is well settled that where parties have submitted their cause to a trial justice sitting without a jury, the findings of fact of the trial justice will be given great weight, Ducharme v. Champagne, 110 R.I. 270, 292 A.2d 224 (1972); F. D. McKendall Lumber Co. v. Buratti, 107 R.I. 158, 265 A.2d 732 (1970), and will not be disturbed on appeal unless it can be shown that such findings are clearly wrong or that the trial justice misconceived or overlooked material evidence. Raheb v. Lemenski, 115 R.I. 576, 350 A.2d 397 (1976); Barattini v. McGovern, 110 R.I. 360, 292 A.2d 860 (1972).

The plaintiff argues and the trial justice determined that the problems in this case were defined and governed by Colonial Laundries, Inc. v. Henry, 48 R.I. 332, 138 A. 47 (1927). As in the instant case, Colonial Laundries did not involve a contract forbidding post-employment competition or the piracy of copyrighted or patented materials. The defendants were laundry wagon drivers who, upon leaving the employ of Colonial Laundries, solicited 80% of the customers on their former routes to do business with a competitive organization. This court held that although the defendants did not actually steal a customer list, the identities of those persons on the laundry routes were carried in the drivers' memories and were misappropriated to the new business. This action appeared to be such a breach of confidence that the customer list achieved the status of a trade secret. However, this court drew a distinction in Colonial Laundries between route businesses and traveling salesmen, indicating that the latter were not assured of a sale from week to week, but had to acquire customers anew on each occasion. Therefore, the traveling salesman's customer list was not entitled to the same kind of protection as the route list because the traveling salesman was constantly competing to secure his customers.

In a more recent case, Callahan v. Rhode Island Oil Co., 103 R.I. 656, 240 A.2d 411 (1968), we held that a customer list committed to memory and used in competition with a former employer would be a trade secret only if the customer information could not be obtained through public channels. As we pointed out in Callahan, the general rule in the majority of jurisdictions is that absent a covenant not to compete, the use of such a memorized list will not be treated as a trade secret. However, the exception to this rule is still within the implications of Colonial Laundries so that if an employee greatly abuses the trust of his employer in dealing with customers, the employee may be forbidden to enjoy the fruits of his improper actions. Go-Van Consolidators, Inc. v. Piggy Back Shippers, Inc., 111 R.I. 697, 699-700, 306 A.2d 164, 165 (1973); Town & Country House & Homes Serv., Inc. v. Evans, 150 Conn. 314, 317, 189 A.2d 390, 392-93 (1963); Carl A. Colteryahn Dairy, Inc. v. Schneider Dairy, 415 Pa. 276, 280, 203 A.2d 469, 471 (1964); Lewis Pac. Dairymen's Ass'n v. Turner, 50 Wash.2d 762, 776, 314 P.2d 625, 633-34 (1957).

Here, although it may have been possible for defendant Fournier to have obtained the names of his employer's customers through public channels in order...