Whitmyer Bros., Inc. v. Doyle

• Decision Date: 08 March 1971
• Parties: WHITMYER BROS., INC., a New Jersey corporation, Plaintiff-Respondent, v. James K. DOYLE et al., Defendants-Appellants. James K. DOYLE et al., Defendants-Counterclaimants, v. WHITMYER BROS., INC., a New Jersey corporation, Plaintiff, and Sam Codario et al., Impleaded Defendants to the Counterclaim.
• Court: New Jersey Supreme Court

Page 25

58 N.J. 25

274 A.2d 577

WHITMYER BROS., INC., a New Jersey corporation, Plaintiff-Respondent, v. James K. DOYLE et al., Defendants-Appellants.

James K. DOYLE et al., Defendants-Counterclaimants, v. WHITMYER BROS., INC., a New Jersey corporation, Plaintiff, and Sam Codario et al., Impleaded Defendants to the Counterclaim.

Supreme Court of New Jersey.

Argued Jan. 11, 1971.

Decided March 8, 1971.

William Tomar, Camden, for appellants (Plone, Tomar, Parks & Seliger, Camden, attorneys; Samuel Mandel, Camden, on the brief).

James Hunter, III Camden, for respondent (Archer, Greiner, Hunter & Read, Camden, attorneys; Charles W. Heuisler and Lee M. Hymerling, Camden, on the brief).

The opinion of the Court was delivered by

JACOBS, J.

The plaintiff Whitmyer Bros., Inc. is a New Jersey corporation engaged primarily in erecting highway guard rails, signs and fences and other items with similar functions. The defendant James K. Doyle entered the plaintiff's employ in 1949 and later became an officer and director. On March 2, 1967 Whitmyer and Doyle executed an employment agreement which stipulated that Whitmyer employed Doyle as General Manager of the Northern Division for three years with provision for automatic renewal unless terminated on 90 days notice. Doyle duly gave the 90-day notice and terminated his employment with Whitmyer, effective March 2, 1970. In April, 1970 Doyle and the defendant George Smith formed the defendant Statewide Hi-Way Safety, Inc. Smith had been an employee and director of Whitmyer but left that company in 1967 to join the J. Marienski Contracting Company. He organized Marienski's guard rail and fence division which thereafter competed with Whitmyer though on a relatively small scale. Towards the end of March, 1970 Marienski agreed to sell its guard rail and fence division and Statewide has taken it over and has expanded its operations. On April 20, 1970 the defendant Richard Wetterau, a former employee of Whitmyer, joined Statewide.

On June 17, 1970 Whitmyer filed a complaint in the Chancery Division naming Doyle, Statewide, Smith and Wetterau as defendants. The complaint sought enforcement of a restrictive covenant in the employment agreement between Doyle and Whitmyer to the effect that Doyle would not, for a period of five years after the termination of his employment, 'be connected' in any state east of the Mississippi or in any other state in which Whitmyer had operated within three years, 'in any manner with the ownership, management, operation or control of any business' which in the opinion of Whitmyer's Board of Directors is in 'competition with the business' of Whitmyer. The complaint prayed for suitable restraint against all of the defendants along with an accounting of profits, damages, etc. The defendants filed answer and counterclaim and voluminous affidavits were filed on behalf of the respective parties. The affidavits on Whitmyer's behalf were largely designed to establish that, while in Whitmyer's employ, Doyle had a high executive position and was entrusted with confidential information which may not justly be made available to Whitmyer's competitors. On the other hand the affidavits on behalf of the defendants were largely designed to establish that, although Doyle acquired his general knowledge or skill in the trade while in Whitmyer's employ, he was not entrusted with and did not acquire any confidential information which should justly remain as such for the protection of Whitmyer's legitimate business interests.

In his affidavit, Doyle states that although his title at Whitmyer was manager of the Northern Division his title was a hollow one since most of his time 'was spent collecting money from accounts receivable by contacting contractors over the telephone.' He acknowledges that he assisted in preparing bids but affidavits by Smith and Wetterau specifically dealt with the bidding aspects and disputed the assertions in an affidavit by Peter Hegedus, manager of Whitmyer's engineering department, that Whitmyer's bidding procedures and constituent elements were highly confidential. In his affidavit, Smith states that for eighteen years he has been involved in various aspects of the guard rail and fence business, which is the principal business of both Whitmyer and Statewide. He points out that contracts for guard rails and fences are obtained 'almost exclusively by bidding with public authorities or bodies or prime contractors for such authorities or bodies' and that 'nearly all contracts are awarded solely on the basis of price.'

Smith states that he considers essentially the same factors as does Hegedus in formulating a bid; they include (1) material, (2) labor, (3) equipment, (4) insurance and fringe benefits, (5) overhead, and (6) profits. He denies that there is anything confidential about these factors, stating that 'there are no special suppliers for the materials used in constructing guard rail and fence,' that 'suppliers are known by and to everyone in the trade,' and that 'anyone competing in this business may negotiate with the suppliers.' Insofar as labor is concerned he states that 'all of the labor utilized in the guard rail and fence business belong to unions for the particular activity which they perform' and that 'rates are set by union contracts, and are uniform in the industry.' Finally, Smith notes that bidding computations 'vary from job to job,' that 'a former employee of Whitmyer would have no way of knowing the variables on a future job,' and that it is 'impossible to predict Whitmyer's bid on any given job situation.'

In his affidavit, Wetterau denies that Doyle had ever solicited or approached him with respect to employment by Statewide. He states that in February, 1970 he received a salary reduction at Whitmyer, in March he submitted his resignation, and in April he took a job with Statewide. While at Whitmyer he did estimate work and was familiar with the way bids were formulated. He states that Whitmyer's bids were formulated in the same manner as bids are formulated at other companies and that 'there is nothing secret or confidential with regard to the component parts in formulating the bid.' He denies that he knows anything about the 'revised procedure' which is referred to in Whitmyer's complaint and also denies that he ever had access to any confidential information at Whitmyer, other than particular bids which became public property after their transmission to the public bodies and disclosure by them. He acknowledges that the factors referred to by Hegedus are those used but notes that 'the component parts vary, sometimes substantially, from job to job' and that Whitmyer's bid cannot be predicated unless its estimates of the constituent items, 'which estimates vary from job to job,' are actually known.

There are additional factual disputes in the affidavits which need not be dealt with at this juncture. The trial judge after considering the affidavits and legal memoranda concluded that the plaintiff was entitled to a preliminary injunction restraining the defendant Doyle, along with those acting in concert with him, 'from competing, east of the Mississippi River or in any other State in which Whitmyer Bros., Inc., operated within three years prior to March 2, 1970 with plaintiff and from, directly or indirectly, owning, managing, operating, controlling or being employed by or participating in or connected in any manner with the ownership, management, operation or control of any business in competition with the business of Whitmyer Bros., Inc.' The trial judge made no findings as to the controverted factual issues nor did he define or point to the plaintiff's 'legitimate interests' which he considered to be entitled to judicial protection by way of preliminary restraint. See Solari Industries, Inc. v. Malady, 55 N.J. 571, 576, 264 A.2d 53 (1970). He did not mention any consideration of 'undue hardship on the employee' or injury 'to the public' (Solari, supra, 55 N.J. at 576, 264 A.2d 53) but expressed the narrow view that the issue was 'almost completely one of the violation of the agreement between the parties Whitmyer and Doyle dated March 2, 1967.' Although he did not believe that any preliminary restraint should be issued specifically against Smith, Wetterau or Statewide, he considered that Doyle's position was 'completely different.' He noted that Doyle had 'chosen to go into a competitive company' and that that was 'exactly the reason why the plaintiff sought and secured the restrictive covenant.' So far as the breadth of the restriction was concerned, he would not then say that it was unreasonable but he voiced his understanding that Solari, supra, 55 N.J. 571, 264 A.2d 53 gave him 'an opportunity at a proper time to weigh the fact as to whether or not these are too broad and limit them within the scope that is required.'

After the trial judge entered his order restraining Doyle pending final hearing, application was made by Doyle to the Appellate Division for a stay and for leave to appeal. A stay pending determination of the application for leave was granted but later leave was denied and the stay was vacated. Thereafter this Court stayed the interlocutory injunction and granted Doyle leave to appeal. The order granting leave directed the parties to deal with the question as to 'what kind of interest will support this kind of restrictive covenant.' Briefs were duly filed and the matter has been fully argued.

Doyle's primary position is that he has not taken any trade secrets or confidential information and has not interfered with the good will of the plaintiff's business; he acknowledges that he has acquired general knowledge or skill in the trade but asserts that he has the right to use that general knowledge or skill in the only business he knows in competition with his former employer, and that the restrictive covenant may not lawfully or justly be enforced to preclude such use. See Dunfey...