Ruhl v. F. A. Bartlett Tree Expert Co., 388

CourtCourt of Appeals of Maryland
Writing for the CourtBefore HAMMOND; OPPENHEIMER
Citation225 A.2d 288,245 Md. 118
Docket NumberNo. 388,388
Decision Date05 January 1967

Robert C. Thompson, Easton, for appellant.

John A. McGuinn, Washington, D. C. (Henry P. Turner, Easton, on the brief), for appellee.



The question presented is the validity of a restictive covenant in an employment contract between a company engaged in the business of tree care and one of its area managers, under which the employee agreed not to compete with his employer for a period of two years after the termination of his employment within the area of five Eastern Shore counties and a contiguous county in Delaware, the territory in which the employee worked for the company. The company's suit for damages and injunctive relief was tried before Chief Judge Carter in the Circuit Court for Talbot County.

The case was tried on a written stipulation of the parties and testimony was limited to the issue of whether the parties had agreed to a modification of the original contract respecting compensation or whether there had been a material breach by the company in changing the compensation. The appellant, Ruhl, while not agreeing with Judge Carter's findings of fact on the issue on which testimony was taken, properly concedes that the findings were not clearly erroneous. For the purposes of this appeal, therefore, the facts are not in dispute and the sole issue is the validity of the restrictive covenant. The trial judge ruled that the contract of employment, including the covenant not to compete, was valid, found that Ruhl impliedly agreed to the modification of his employment contract by the sumbstitution of a new pay plan for the the former one, awarded the appellee damages in the amount of $4420, the amount stipulated by the parties in the event of a decision against Ruhl, and enjoined Ruhl, his agents and employees, from engaging in any way in any business or operation for the care, preservation or treatment of trees in competition with the business carried on by the appellee for two years from April 7, 1965 (the date Ruhl ceased receiving compensation) in the six-county area covered by the restrictive covenant.

The appellee, The F. A. Bartlett Tree Expert Company (Bartlett), a Connecticut corporation, has for many years engaged in the business of general tree care, surgery and line clearance work in several states and has been doing business in the Easton, Talbot County, area for the last twenty-five vears. The principal nature of the business done out of the Easton office consists of tree care work performed for private home owners and municipal authorities. The business is highly competitive with similar compenies operating in the area. In soliciting prospective customers, Bartlett submits bids taking into consideration the labor involved, machinery to be utilized, materials to be expended, and percentage of profit to be realized on each job.

On December 29, 1961 Ruhl and Bartlett executed a written contract of employment, which contains the restrictive covenant to which reference has been made. The six-county area assigned to Ruhl, and covered by the agreement not to compete, is Caroline, Queen Anne's, Kent, Dorchester and Talbot Counties in Maryland and Kent County, Delaware. The contract provides that it may be terminated without cause at any time by either party giving 10 days written notice of intention to terminate to the other party.

As area manager of Bartlett's Easton office, Ruhl solicited tree care work in the six-county area, supervised such work and was in charge of the administration of the Easton office. He was compensated pursuant to the schedule attached to the contract of employment. During his 3 1/2 years employment as area manager at Easton, Ruhl contacted old customers of Bartlett and potential new customers, suggested tree work that should be done and quoted prices. Sales leads were furnished him from Bartlett's office and secured through Bartlett's advertising. Some business was procured directly by Ruhl. Personal contacts between Ruhl and the customers were essential to the continued well-being of Bartlett's operation in the area. From October, 1961 to January, 1964, Ruhl was the only person in Bartlett's Easton office acting as a sales representative; thereafter, an additional sales representative was added.

As Bartlett's area manager, Ruhl was issued a 'Standard Practices' manual describing in detail practices and procedures in the care and maintenance of trees approved by Bartlett. He was also issued weekly laboratory releases from Bartlett's main office in Stamford, Connecticut giving current information developed by Bartlett on the diagnosis and treatment of particular tree diseases and problems. He also attended division meetings where information on sales and operations was exchanged with other area managers. When Ruhl was appointed area manager in 1961 he was given a card index containing the names and addresses of all customers for whom Bartlett had previously done work in the six-county area, the amount charged each of them and the date when the work was done.

The business done by the Easton office in the area assigned Ruhl amounted to $57,300 in 1964. Of this amount $11,700 or 20% represented business from customers who had never before done business with Bartlett; $45,600 or 80% represented work for persons who had done business with Bartlett on one or more occasions prior to 1964; $34,300 or 60% of the 1964 volume represented business from customers who had doen business with Bartlett prior to 1961 when Ruhl became area manager. In 1963 Ruhl's commissions averaged 22.7% on a gross volume of $58,467.84 or a gross commission of $13,272.19. In 1964 his average commissions were 17% on a gross volume of $60,418.80, amounting to $10,271.

Ruhl was trained in the tree business by his uncle from the age of fourteen. He has only a high school education. In 1959, when he was twenty, he was employed by Bartlett as a sales representative and in other positions at other locations until his appointment as area manager at Easton in October, 1961. The tree business is the only means of livelihood in which Ruhl has ever engaged. On April 26, 1965, after his resignation from Bartlett's organization, he became the sole proprietor of Wye Tree Experts, whose business is all phases of the care of shade trees. This company operates in all the six counties originally assigned to Ruhl by Bartlett. Since establishing his company, Ruhl has solicited and obtained tree care work within this six-county area from many persons who, prior to Ruhl's resignation, were Bartlett customers. The total business done by Wye Tree Experts in 1965 amounted to approximately $27,000 of which about two-thirds was derived from former Bartlett customers.

This Court has had a number of cases involving the validity of restrictive covenants in a contract of employment. Covenants of this nature are in restraint of trade; the test is whether the particular restraint is reasonable on the specific facts. The general rule in Maryland, as in most jurisdictions, that 'restrictive covenants in a contract of employment, by which an employee as a part of his agreement undertakes not to engage in a competing business or vocation with that of his employer on leaving the employment, will be sustained 'if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the interests of the public." MacIntosh v. Brunswick Corp., 241 Md. 24, 31, 215 A.2d 222, 225 (1965). See also Silver v. Goldberger, 231 Md. 1, 6, 188 A.2d 155 (1963) and cases therein cited; Restatement, Contracts, §§ 515, 516(f).

The development of the law on this subject is analyzed in Blake, 'Employee Agreement Not to Compete,' 73 Harv.L.Rev. 625 (1960). The multitude of cases are classified in two encyclopedic annotations in 41 A.L.R.2d 15 (1955) and 43 A.L.R.2d 94 (1955). There is no arbitrary yardstick as to what protection of the business of the employer is reasonably necessary, no categorical measurement of what constitutes undue hardship on the employee, no precise scales to weigh the interest of the public. The decisions in this State and in other jurisdictions are helpful, but, as in so many other fields of the law, the determination must be made on the particular circumstances.

In the case before us, Bartlett is engaged in a highly competitive industry. The contract of employment refers to the trade secrets to which Ruhl was to have access, but, on the record, no trade secrets were involved. See Operations Research, Inc. v. Davidson & Talbird, Inc., 241 Md. 550, 556-558, 217 A.2d 375 (1966). Compare Space Aero Products Co. v. R. D. Darling Co., 238 Md. 93, 105-113, 208 A.2d 74, cert. denied, 382 U.S. 843, 86 S.Ct. 77, 15 L.Ed.2d 83 (1965). However, the nature of Ruhl's duties brought him into direct and continuous relationship with Bartlett's customers. When he entered into the employment contract with Bartlett in 1961, Ruhl was given the list of the persons in the area for which the company had previously done work, with details of the work performed. After Ruhl went into business for himself, in 1965, the greater part of his work volume was derived from former Bartlett customers.

This Court has recognized the importance of the personal relationship between the employee and his employer's customers whom the employee serves on a particular route, when the element of competition in the sale of the product was less significant than the employee's relationship with the persons he served. In such cases, restrictive covenants were held valid when they were found reasonable as to duration and area. Western Md Dairy v. Chenowith, 180 Md. 236, 23...

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