Town & Country House & Home Service, Inc. v. Newbery

• Decision Date: 16 January 1958
• Citation: 170 N.Y.S.2d 328,3 N.Y.2d 554,147 N.E.2d 724
• Parties: , 147 N.E.2d 724 TOWN & COUNTRY HOUSE & HOME SERVICE, Inc., Respondent, v. Percy C. NEWBERY et al., Appellants, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 328

170 N.Y.S.2d 328

3 N.Y.2d 554, 147 N.E.2d 724

TOWN & COUNTRY HOUSE & HOME SERVICE, Inc., Respondent, v. Percy C. NEWBERY et al., Appellants, et al., Defendants.

Court of Appeals of New York.

Jan. 16, 1958.

Durkes Clark, Hempstead, for appellants.

Thomas D. Conway and Murray, J. Halper, New York City, for respondent.

VAN VOORHIS, Judge.

This action was brought for an injunction and damages against appellants on the theory of unfair competition. The complaint asks to restrain them from engaging in the same business as plaintiff, from soliciting its customers, and for an accounting and damages. The individual appellants were in plaintiff's employ for about three years before they severed their relationships and organized the corporate appellant through which they have been operating. The theory of the complaint is that plaintiff's enterprise 'was unique, personal and confidential', and that appellants cannot engage in business at all without breach of the confidential relationship in which they learned its trade secrets, including the names and individual needs and tastes of its customers.

The nature of the enterprise is house and home cleaning by contract with individual householders. Its 'unique' quality consists in superseding the drudgery of ordinary house cleaning by mass production methods. The house cleaning is performed by a crew of men who descend upon a home at stated intervals of time, and do the work in a hurry after the manner of an assembly line in a factory. They have been instructed by the housewife but work without her supervision. The householder is supplied with liability insurance, the secrets of the home are kept inviolate, the tastes of the customer are served and each team of workmen is selected as suited to the home to which it is sent. The complaint says that the customer relationship is 'impregnated' with a 'personal and confidential aspect'.

The complaint was dismissed at Special Term on the ground that the individual appellants were not subjected to negative covenants under any contract with plaintiff, and that the methods and techniques used by plaintiff in conducting its business are not confidential or secret as in the case of a scientific formula; that house cleaning and housekeeping 'are old and necessary chores which accompany orderly living' and that no violation of duty was involved in soliciting plaintiff's customers by appellants after resigning from plaintiff's employ. The contacts and acquaintances with customers were held not to have been the result of a confidential relationship between plaintiff and defendants or the result of the disclosure of secret or confidential material.

By a divided vote the Appellate Division reversed, but on a somewhat different ground, namely, that while in plaintiff's employ, appellants conspired to terminate their employment, form a business of their own in competition with plaintiff and solicit plaintiff's customers for their business. The overt acts under this conspiracy were found by the Appellate Division to have been that, in pursuance of this plan, they formed the corporate appellant and bought equipment and supplies for their operations not on plaintiff's time but during off hours, before they had severed their relations as employees of plaintiff. The Appellate Division concluded that 'it is our opinion that their agreement and encouragement to each other to carry out the course of conduct thus planned by them, and their consummation of the plan, particularly their termination of employment virtually en masse, were inimical to, and violative of, the obligations owed by them to appellant as its employees; and that therefore appellant was entitled to relief. (Cf. Duane Jones Co. v. Burke, 306 N.Y. 172, 117 N.E.2d 237.)' (147 N.Y.S.2d 551.)

The Duane Jones case involved unusual facts. There the defendants appropriated overnight upwards of 50% of the business of their previous employer, and 90% of its skilled employees as well as a majority of the entire working force. There the findings were in favor of the plaintiff in the trial court, whereas in this case the findings of the trial court were in favor of defendants, and those of its findings which remain untouched by the Appellate Division stand in favor of defendants. The dominating purpose in the Duane Jones case was to damage and paralyze the plaintiff corporation to enable the defendants to seize it or force a sale to them on their own terms. There the employees were all executives, whereas in this simpler organization (although Newbery is called a key man) the formation and supervision of teams for house cleaning was not complicated and could be done by others. Moreover in Duane Jones there had been solicitation of the customers of plaintiff while the defendants were still employed; there was an attempt to panic and break the morale of the employees, again with the over-all purpose of paralyzing the plaintiff in order to seize it. Here, although these three employees and their wives left at the same time, there was no abrupt departure of most of the key men and nothing in reference to the interruption or paralysis of plaintiff's business. In fact, at the time of the trial, Mrs. Rossmoore testified that they had 280 customers and 8 crews, which were 40 more customers and 1 more crew than at the time when appellants departed.

Although the Appellate Division implied more relief than we consider to have been warranted, we think that the trial court erred in dismissing the complaint altogether The only trade secret which could be involved in this business is plaintiff's list of customers. Concerning that, even where a solicitor of business does not operate fraudulently under the banner of his former employer, he still may not solicit the latter's customers who are not openly engaged in business in advertised locations or whose availability as patrons cannot readily be ascertained but 'whose trade and patronage have been secured by years of business effort and advertising, and the expenditure of time and money, constituting a part of the good will of a business which enterprise and foresight have built up' (Witkop & Holmes Co. v. Boyce, 61 Misc. 126, 131, 112 N.Y.S. 874, 878, affirmed 131 App.Div. 922, 115 N.Y.S. 1150, followed in People's Coat, Apron & Towel Supply Co. v. Light, 171 App.Div. 671, 673, 157 N.Y.S. 15, 16, affirmed 224 N.Y. 727, 121 N.E. 886). In the latter case it was pointed out by the Appellate Division that although there was no evidence that the former employee had a written customers list, 'There was in his head what was equivalent. They were on routes, in streets, and at numbers revealed to him through his service with plaintiff. Their faces were familiar to him, and their identity known because of such employment.' That case was not overruled by Scott & Co. v. Scott, 186 App.Div. 518, 525, 174 N.Y.S. 583, 587, as is clear from the opinion by Justice Callahan in Kleinfeld v. Roburn Agencies, 270 App.Div. 509, 511, 60 N.Y.S.2d 485, 487, where it is said: 'A distinction is made in the cases between a former employee soliciting customers of his former employer who are openly engaged in business in advertised locations and his soliciting unadvertised customers who became known to the employee only because of information obtained during his employment. People's Coat, Apron & Towel Supply Co. v. Light, 171 App.Div. 671, 157 N.Y.S. 15, affirmed 224 N.Y. 727, 121 N.E. 886; Scott & Co., Inc., v. Scott, 186 App.Div. 518, 174 N.Y.S. 583.'

That case points the way toward the solution of this lawsuit. Nothing to the contrary was held in Boosing v. Dorman, 148 App.Div. 824, 133 N.Y.S. 910, or Peerless Pattern Co. v. Pictorial Review Co., 147 App.Div. 715, 132 N.Y.S. 37. Boosing distinguishes Witkop by stating (148 App.Div. at page 826, 133 N.Y.S. at page 911...