Superior Gearbox Co. v. Edwards

• Decision Date: 22 December 1993
• Docket Number: No. 18102,18102
• Citation: 869 S.W.2d 239
• Parties: SUPERIOR GEARBOX COMPANY, Plaintiff-Respondent, v. Wallace L. EDWARDS, John Carter, Robert Bell and SCG Incorporated, Defendants-Appellants.
• Court: Missouri Court of Appeals

Page 239

869 S.W.2d 239

SUPERIOR GEARBOX COMPANY, Plaintiff-Respondent, v. Wallace L. EDWARDS, John Carter, Robert Bell and SCG Incorporated, Defendants-Appellants.

No. 18102.

Missouri Court of Appeals Southern District.

Dec. 22, 1993.

Motion for Rehearing or Transfer

Denied Jan. 12, 1994.

Application to Transfer Denied Feb. 22, 1994.

Joseph B. Phillips, Phillips & Phillips, Stockton, Lloyd L. Messick, Cronan & Messick, Kansas City, for defendants-appellants.

David E. Wilhite, Donnelly, Baldwin & Wilhite, Lebanon, Samuel J. Short, Stockton, for plaintiff-respondent.

MONTGOMERY, Judge.

In July 1989, Plaintiff, Superior Gearbox Company (Superior), brought this action against Defendants Wallace L. Edwards (Edwards), John Carter, Robert Bell, and SCG Inc., ¹ alleging eight contractual and commercial trade violations. ² After severing Superior's prayer for damages from the equitable issues presented, the trial court granted injunctive relief in favor of Plaintiff. Defendants appeal the propriety of those injunctions. ³

Defendants raise five points on appeal. ⁴ They contend that the trial court erred, first, by enjoining Edwards from engaging in the gearbox business; second, by ordering that Edwards' injunction should run for a 10-year period, commencing at the time of judgment; third, by forbidding Defendants for 10 years from using a particular milling process that Superior developed and still employs; fourth, by prohibiting Defendants from using the

mark SCG to advertise or sell gearboxes; and fifth, by enjoining Defendants from using a so-called "double web" design for its gearbox housings--a design Superior has used for several years before Defendants began using it.

ISSUES

Defendants' complaints raise the following questions, arranged according to Defendants' points relied on.

First, based on the evidence in the record, was the trial court justified in holding that Edwards was terminated for good cause by his employer?

Second, did the trial court's decision to enforce a non-competition agreement against Edwards for 10 years from the date of judgment constitute an abuse of discretion, go against the weight of the evidence, or violate public policy?

Third, was the trial court justified in not believing Defendants' proffered evidence that the metal milling process Superior developed, and which Defendants later used, was well known, easily discoverable, and easily duplicated?

Fourth, is there sufficient evidence in the record to support the trial court's finding that Plaintiff began using the mark SGC (the initials of Superior Gearbox Company) in connection with its products before Defendants began using the similar mark SCG? Assuming that the court's finding was justified on this point, is there sufficient evidence in the record to support the court's finding that Plaintiff's product had become associated with the mark SGC and that Defendants' use of the similar mark SCG would likely cause confusion among customers and others?

Fifth, when the trial court enjoined Defendants from using a double web design for its gearboxes--a design allegedly identical to the one Superior uses--was that decision based on sufficient evidence and a proper application of the law?

FACTS

In 1975, Detroit Tool & Engineering Company (Detroit) purchased the assets of Feem, Inc., a bankrupt Kansas corporation. The next year, Detroit used these assets to form a new entity, Superior Gearbox Company, a Missouri corporation that operates in Stockton, Missouri. At the time it organized Superior, Detroit offered a 10 percent ownership interest in the new company both to Stewart Thomson and to Defendant Wallace Edwards, each of whom had formerly been associated with Feem. Both men accepted the offer and began working for the new company. Edwards became Superior's president and chief executive officer.

Soon after Superior was organized, Thomson, Edwards, and Detroit's Chief Executive Officer, Richard Carr, began working with Detroit engineering personnel to develop an efficient, effective method of manufacturing aluminum split-case gearboxes. These gearboxes were to be, and now are, Superior's primary product. ⁵ In time, Detroit personnel developed a so-called plunge milling race machine and corresponding plunge milling procedure for manufacturing these split-case gearboxes. ⁶ Superior has used both the race machine and the plunge milling procedure ever since.

In 1986, Richard Carr left his position as Detroit's CEO, purchased Detroit's 80 percent interest in Superior, and became CEO at Superior. Later that year, he approached Edwards and Thomson about signing a Stock Purchase Agreement. Carr intended this agreement to be a means of enticing Edwards and Thomson to stay with Superior, because Carr had no desire to manage the company's day-to-day affairs. After six months or more of negotiation among the parties, during which time Thomson and Edwards insisted upon and received a number of changes in the original proposed document, the three signed the agreement.

Included in this agreement, among other things, was a multi-year non-competition covenant. As part of that covenant, Edwards and Thomson acknowledged that the milling machinery and procedures developed and used by Superior were unique and were a valuable part of the company's assets. Each man also agreed that, if he should ever cease to be an officer or employee at Superior, for 10 years thereafter he would not engage in a business anywhere in the United States that manufactures or sells gearboxes or uses plunge milling procedures or technologies. As part of the same agreement, each man was to (and did) receive a five percent annual bonus as long as he remained with Superior. In addition, Edwards obtained a commitment from Carr that, should Edwards ever default on a certain personal loan, Carr would purchase Edwards' 10 percent stock interest in the company.

In the years after Edwards and Carr signed this agreement, the relationship between the two men was at times strained. In particular, they came to disagree about Edwards' duties and responsibilities within the company. In July 1988, after having previously instructed Edwards to concentrate full time on sales, Carr followed up with instructions that either Edwards or his sales associate needed to be "on the road" at all times, seeking new customers and new orders. When Edwards failed to meet Carr's expectations of increased sales activity, Carr demanded and received Edwards' resignation on October 10, 1988.

Following his departure from Superior, Edwards, along with Defendants John Carter and Robert Bell (both of whom were long-time Superior employees), formed Split Case Gearbox Co. (Split Case), a Missouri corporation also located in Stockton, Missouri, and doing business as SCG Inc. Like Superior, Split Case manufactured aluminum split-case gearboxes. Also like Superior, it used a plunge milling race machine and corresponding plunge milling process as part of its operations.

The plunge milling race machine Split Case used was substantially the same as the one developed at Superior. The milling procedure it used was also substantially the same as Superior's. In addition, in 1989 Split Case began using the mark SCG in connection with the company and began producing gearboxes distinguished by a so-called double web design, the same design Superior uses for its gearboxes. After its founding, Split Case marketed its products to many of the same customers Edwards served during his years as sales supervisor at Superior.

I.

Defendants' first point on appeal is that Richard Carr, acting for Superior, terminated Edwards' employment without good cause; and because of this, the trial court should not have enforced the non-compete provisions of Edwards' Stock Purchase Agreement. We cannot agree. Competent evidence appears in the record to support the court's finding that Carr dismissed Edwards for good cause.

The scope of our review of this judge-tried case is established by Rule 73.01(c), as construed by Murphy v. Carron, 536 S.W.2d 30 (Mo. banc 1976). The judgment of the trial court will be sustained unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law. Id. at 32.

Determining what constitutes a discharge for good or just cause presents a problem in the instant case because Edwards was an employee-at-will, and the law in Missouri is well settled that an at-will employee Unfortunately, "[t]he term 'just cause' has not been defined generally by Missouri cases." Roach v. Consolidated Forwarding Co., 665 S.W.2d 675, 680 (Mo.App.1984). Neither have terms like "good cause," "sufficient cause" and other similar terms been generally defined. Nonetheless, in cases like Roach, in which individuals employed under collective bargaining agreements or other fixed-term employment contracts have challenged their dismissals, courts have attempted to define these terms. In Roach, for example, the Court held the following definition of "just cause" in a jury instruction to be proper:

                may be discharged for any reason at all, or even for no reason. 7  Johnson v. McDonnell Douglas Corp., 745 S.W.2d 661, 663 (Mo. banc 1988);  Eggleston v. Phillips, 838 S.W.2d 80, 82 (Mo.App.1992).  Nevertheless, in light of Showe-Time Video Rentals, Inc. v. Douglas, 727 S.W.2d 426 (Mo.App.1987), 8 and other cases Defendants rely on, consideration of the question is necessary
                

[It is] a real cause or basis for dismissal as distinguished from an arbitrary whim or caprice--that is, a cause or ground that a reasonable employer, acting in good faith under the collective bargaining agreement here in question, would regard as good and sufficient reason for terminating the services of an employee.

Id. at 679 n. 2. According to the same court, a discharge may also be described as being for just cause (or for "justifiable cause," ...