Wilson v. Clarke

• Citation: 470 F.2d 1218
• Decision Date: 21 December 1972
• Docket Number: No. 72-1267.,72-1267.
• Parties: J. Watson WILSON et al., Plaintiffs-Appellants, v. Alan R. CLARKE, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

470 F.2d 1218 (1972)

J. Watson WILSON et al., Plaintiffs-Appellants, v. Alan R. CLARKE, Defendant-Appellee.

No. 72-1267.

United States Court of Appeals, First Circuit.

Argued November 6, 1972.

Decided December 21, 1972.

Harold M. Willcox, Boston, Mass., with whom James M. Hughes, and Herrick, Smith, Donald, Farley & Ketchum, Boston, Mass., were on brief, for appellants.

Francis W. Conlin, Worcester, Mass., with whom Conlin & Wolfson, Worcester, Mass., was on brief, for appellee.

Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.

CAMPBELL, Circuit Judge.

Nordli, Wilson Associates ("Nordli") appeals from a decision of the district court refusing to enforce a provision of an employment contract against its former employee, Alan R. Clarke ("Clarke").

Nordli is a partnership of psychologists serving as professional consultants to businesses and other organizations. Through evaluations (or "assessments") by tests and interviews, it assists its clients in making judgments about matters such as the hiring, placement, promotion and firing of personnel. There are probably a dozen or two such firms in the country.

Nordli hired Clarke in March, 1964. Then 31 years old, he had received a Ph.D. degree in psychology in 1961; had done post-doctoral work at a state hospital from 1962-3; and had engaged privately in diagnosis and psychotherapy for several educational institutions.

In September, 1964, Clarke signed a letter agreement prepared by Nordli which confirmed his existing employment as a "consulting psychologist" at a starting annual salary of $12,000. The agreement made provision for vacations, sick leave, and fringe benefits. Clarke could leave, or Nordli could terminate him, upon the giving of specified advance notice. If after leaving Clarke went to work for a Nordli client or prospective client, certain obligations were imposed.¹ These obligations are the subject of this litigation.

Clarke's principal duties with Nordli were to make psychological assessments of candidates for positions within its business clientele. Two of these were life insurance companies, for which he mainly assessed persons seeking positions as salesmen (he also assessed some prospects for advancement or termination). For a Buffalo, New York, firm, he assessed candidates for middle or lower-middle management positions, and a few candidates for executive positions. A single assessment would take from one to one-and-a-half hours. Clarke would meet the individual and administer a psychological test designed by Nordli. He would later prepare a report "pulling together" (as he testified) the test results and interview impressions, which he would usually submit to the client company's director of industrial relations or personnel. He might also, in some cases, meet again with the person tested and provide "feedback", i. e., explain the evaluation to him.

At the time Clarke began working for Nordli, ITT was not its client. In April 1964, Dr. Beare of ITT called Mr. Wilson, a Nordli partner, to arrange an appointment to discuss Nordli's becoming one of ITT's consulting firms. Wilson could not keep the appointment, and Clarke met with Beare instead. Thereafter, Nordli worked for ITT "in a small way." In September, 1965, Dr. Beare called Clarke and asked if he was interested in working for ITT. Beare said that he was planning to leave and was looking for someone to replace him. In October, 1965, Clarke, still in Nordli's employ, made two assessments of candidates for ITT employment in New York. In early November, 1965, he indicated that he would leave Nordli, and did so early in 1966.

Nordli contends that Clarke's duties with ITT (until August 1969, when it concedes they became "very much different") were such that the latter received "professional psychological services" from Clarke within the terms of the employment contract. As ITT had been its client, Nordli claims that it is entitled to 15% of Clarke's ITT compensation from salary and bonuses from February 1, 1966 until August 1969. Clarke denies any such liability.

Clarke's title at ITT was "Manager, Executive Selection and Appraisal." In September, 1966, it was changed to "Director of the Executive Selection and Appraisal Branch." Clarke administered and supervised ITT's "assessment center" in New York. His staff consisted of one (later two) psychologists, an administrator, and clerical personnel. The center, headed by Clarke, hired outside psychological consultants, like Nordli, which under its supervision carried out assessments all over the world of candidates for ITT executive positions. The aggregate fees paid to outside consultants were ten times the budget for the internal employees supervised by Clarke. The assessment center's function appears to have been to establish standard tests and procedures, coordinate testing, and arrange and supervise a unified program carried out largely by the hired consultants.

From Clarke's testimony, which the district court found to be truthful, it could reasonably be found that the preparation of test materials and the coordination of the activities and programs of the assessment center was carried out by others than Clarke, but under his overall direction. Written tests were prepared by the man responsible for administration of the center. They were approved by Clarke but not altered by him. The tests were standard psychological tests. They were not the tests used by Nordli (Clarke testified in his deposition to dissatisfaction with the Nordli tests). Interview guidelines were "typically" given by the administrator of the center. Communications with consulting psychologists were normally through the staff psychologist, who from time to time consulted with Clarke. Clarke did not usually read assessment reports. Clarke denied developing any new assessment concepts and practices and denied maintaining quality control of reports, although he admitted that these matters were within his overall responsibility. Statistical studies of the effectiveness of assessments were maintained by a subordinate. There was no evidence that anything done by Clarke at ITT was copied from practices uniquely developed by Nordli.

In 1967, when Clark's title changed, he delegated more of the responsibilities to subordinates. Much of his time was spent developing a "rather ambitious" program of executive training.

Clarke testified that he himself conducted a few individual assessments and feedbacks prior to 1967 when subordinates or consultants were not available, but these consumed less than one per cent of his time. He maintained that these were not psychological services, since assessments were often performed by non-psychologists. He was not a licensed psychologist in New York state, although a license would be required in order to practice there. He stated that he had left Nordli because of dissatisfaction with the role of a psychologist, his interests lying more in administration and business organizations.

The district court concluded that from February 1, 1966 to June 1967, Clarke spent less than one per cent of his time with ITT on professional psychological work, and that since June 1, 1967, none of his ITT activities included or constituted professional psychological work, being more properly characterized as personnel and administrative work.

In August of 1966, Nordli notified ITT that it would no longer provide it with psychological consulting services (which it said it had provided for "about a year"). In its letter, Nordli alluded to alleged unethical practices involving the pirating of employees, including Clarke. The district court found that Nordli had exacerbated its damages, if any, by "firing" ITT.

Nordli challenges the district court's conclusion that only Clarke's very occasional (less than 1%) personal participation in assessments and feedbacks constituted professional psychological services to ITT within the meaning of the contract. It asserts that Clarke's responsibility for the global activities of outside psychologists hired and coordinated by the assessment center, which he headed, constituted the furnishing "directly or indirectly" of "professional psychological services of any sort" to ITT.

We hold, however, that even were the agreement to be so interpreted, Nordli may not recover. It would be unenforceable both as a restraint going beyond Nordli's legitimate interest in its own self-protection, and as imposing liquidated damages insufficiently related to any harm to Nordli.

Bargains between employers and employees which place restrictions upon an employee's exercise of a gainful occupation after leaving the employer are, and were at common law considered to be, void as in restraint of trade. Restatement of Contracts, §§ 513-515. Sherman v. Pfefferkorn, et al., 241 Mass. 468, 474, 135 N.E. 568, 570 (...