Standard Register Co. v. Cleaver
| Decision Date | 14 October 1998 |
| Docket Number | No. 1:98-CV-231.,1:98-CV-231. |
| Citation | 30 F.Supp.2d 1084 |
| Parties | The STANDARD REGISTER COMPANY, Plaintiff, v. Phil CLEAVER, Defendant. |
| Court | U.S. District Court — Northern District of Indiana |
Lawrence R. Elleman, James V. Schuster, Dinsmore and Shohl, Cincinnati, OH, Leonard E. Eilbacher, Eilbacher Scott Inc., Fort Wayne, IN, for Plaintiff.
Robert L. Thompson, Thompson and Rogers, Fort Wayne, IN, for Defendant.
This matter is before the Court1 on the issues raised by the motion for preliminary injunction filed by the Plaintiff, The Standard Register Company (hereafter "Standard Register").
Pursuant to the order of this Court, counsel have submitted briefs and proposed findings of fact and conclusions of law in support of their respective positions. An evidentiary hearing was held on Standard Register's motion for a preliminary injunction on September 21, 1998. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
For the following reasons, Standard Register's motion for a preliminary injunction will be GRANTED in part and DENIED in part.
In the summer of 1981 the Defendant, Phil Cleaver ("Cleaver"), an Indiana resident, interviewed for a job with UARCO, Incorporated ("Uarco") in both Fort Wayne and Indianapolis, Indiana. Uarco was a Delaware corporation, having its headquarters and principal place of business in Barrington, Illinois. Eventually, Cleaver was offered a position with Uarco by District Manager Max Bodkin ("Bodkin"), while interviewing at Uarco's Toledo, Ohio, district office. Cleaver accepted employment with Uarco on the spot, and signed a Salesman's Agreement ("the Salesman's Agreement") on August 24, 1981. (See Plaintiff's Exh. 9.) Cleaver thus became an employee at will for Uarco, selling such things as printed business forms, pressure sensitive labels, stock computer forms, bar code labels, and other Uarco business specialty printing items.
More importantly for our discussion here, however, is the following language contained in the Salesman's Agreement:
8. Salesman agrees that while in the employ of Company or at any time thereafter he will not, without the express written consent of the Company, directly or indirectly communicate or divulge to or use for the benefit of himself or any other person, firm, association or corporation, any of Company's trade secrets or other confidential information, which trade secrets and confidential information were communicated to or otherwise learned of or acquired by Salesman in the course of employment with Company....
* * * * * *
9. For a period of two years following the termination of his employment for any reason whatsoever (or if this period. shall be unenforceable by law, then for such period as shall be enforceable), Salesman agrees that he will not contact, with a view towards selling any product competitive with any product sold or proposed to be sold by Company at the time of the termination of Salesman's employment, or sell any product to, any person, firm, association or corporation:
(a) to which Salesman sold any product of Company during the year preceding the termination of Salesman's employment,
(b) which Salesman solicited, contacted, or otherwise dealt with on behalf of Company during the year preceding termination of Salesman's employment.
(c) which is known by Salesman to have been a customer of Company during the year preceding termination of Salesman's employment and which is located either within the geographical territory served by any District Office of Company to which Salesman was assigned during such year or within the same metropolitan area as any customer named in the Confidential Customer List in effect hereunder as of the date of termination of Salesman's employment.
Salesman agrees that he will not directly or indirectly make any such contract or sale either for the benefit of himself or for the benefit of any other person, firm, association or corporation, and further that he will not in any manner assist any person, firm, association or corporation to make any such contract or sale.3
The Salesman's Agreement also acknowledges that any breach of either paragraphs 8 or 9 would cause irreparable harm to the employer and that actual damages would be difficult if not impossible to ascertain. (Id. ¶ 10(b).)
Immediately following his employment, Cleaver was assigned a sales territory in the Lima, Ohio, area where he lived and worked until he was ultimately transferred to Fort Wayne, Indiana, in the spring of 1982. Cleaver's new sales territory thus became the counties of northeast Indiana. At first, Cleaver continued to report to Bodkin, his Toledo supervisor, but in 1989 he was redistricted by Uarco to District Manager Leigh Anderson ("Anderson"), in Indianapolis. Following his transfer, Cleaver solicited customers and sold Uarco products almost exclusively within northeast Indiana. Moreover, until his Uarco employment ended on April 15, 1998, almost all of Cleaver's communications with Uarco were with Anderson in Indianapolis or with corporate headquarters in Barrington, Illinois.4
Eventually, in the fall of 1997, Cleaver heard rumors that Standard Register would be acquiring Uarco. Uarco and Standard Register, an Ohio corporation with its principal place of business in Dayton, Ohio, were at the time two of the leading business form printing companies.5 Indeed, on January 1, 1998, Standard Register acquired all of the shares of Uarco, and on March 31, 1998, Uarco merged with Standard Register pursuant to Ohio Rev.Code § 1701.82(A)(3). (See Plnf. Exhs. 23-24.) Cleaver remained employed by Uarco until its merger on March 31, 1998, and was then with Standard Register until he resigned his employment on April 14, 1998, effective the next day. (See Plnf. Exh. 10.)
Cleaver commenced new employment with Prograde, Inc. ("Prograde") on April 16, 1998, as a salesman selling the same type of printed business materials he sold for Uarco and Standard Register. (Plnf.Exh. 8.) As he was leaving Standard Register, however, Cleaver misrepresented to Anderson the name of his new employer, knowing that any mention of Prograde would spark enforcement of the Salesman's Agreement.6 (Plnf. Exhs. 18, 19; Def. Exh. Q.)
Upon his leaving the Uarco/Standard Register office on April 14, 1998, Cleaver took some documents which memorialized the names of some of his customers and some prior sales. However, this information does not disclose any pricing proprietary to Uarco or Standard Register. Indeed, throughout the merger, Uarco's computer system of pricing, the Bann system, had been largely phased out in favor of Standard Register's STAR and PRISM systems, with which Cleaver was not familiar.
In his employment with both Uarco and Standard Register, Clever developed a personal acquaintanceship with his customers which was his employer's primary, and in many cases, sole contact with its customers. Cleaver gained a position of trust and confidence with respect to his employer's affairs and its products, and his relationships with customers were highly service oriented. Indeed, regardless of re-ordering cycles, he visited his major customers at least every two weeks, and sometimes more often.7 (Plaintiff's Exh. 17.) Uarco and Standard Register depended on Cleaver developing personal relationships with their customers and they were highly vulnerable in the event Cleaver would leave and solicit such customers on behalf of a competitor. Indeed, in this business, customer relationships frequently took years to develop, and in fact, it had taken Cleaver many years to develop his major accounts to their current level by the time of his resignation in April 1998. For example, in the first year of his business relationship with HWI, and even through HWI was an existing Uarco customer, he did only about $350,000 in business, after about four (4) years his business with them grew to $750,000, but by the time of his departure, he was doing over $1,000,000 per year with HWI. In the first four months of his employment at Prograde, he sold over $1,000,000 to HWI.8
Cleaver also solicited his other customers on behalf of Prograde. Between April 15, 1998, and August 1998, he sold Prograde competitive products to the following Standard Register customers, to which he had sold similar products, on behalf of Uarco or Standard Register within the last year of his employment with them:
HWI, a/k/a Do it Best Corp. $1,031,600.00
Centennial Communications $55,825.00
Wells Community $4,552.00
Super Valu $9,660.00
Dana Corp. $4,480.00
Gasoline Equipment $1,408.00
Fasson $746.00
DeKalb Memorial $841.009
Fort Wayne Newspapers $79.00
_____________
TOTAL $1,109,191.00
(See Plnf. Exh. 4.)
Standard Register contends that as a result of Cleaver's affiliation with Prograde it will suffer irreparable harm unless he is enjoined from soliciting those customers to whom he sold Uarco or Standard Register products during the year preceding April 15, 1998, in accordance with paragraph 9(a) of the Salesman's Agreement. Indeed, Standard Register also wants to enjoin Cleaver from selling to anyone he even solicited or contacted within the year preceding April 15, 1998. (See Salesman's Agreement ¶ 9(b).)
On the other hand, Cleaver contends that none of the provisions of the Salesman's Agreement are enforceable, and that they are certainly not enforceable by Standard Register in particular.
More facts may be provided later, see footnote 1, supra, but the Court...
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