Woodward v. Cadillac Overall Supply Co.
Decision Date | 21 April 1976 |
Docket Number | No. 4,4 |
Citation | 396 Mich. 379,240 N.W.2d 710 |
Parties | Arthur WOODWARD et al., Plaintiffs-Appellants, v. CADILLAC OVERALL SUPPLY CO., a Michigan Corporation, et al., Defendants-Appellees. 396 Mich. 379, 240 N.W.2d 710, 1979-2 Trade Cases P 62,948 |
Court | Michigan Supreme Court |
Leitson, Dean, Dean, Segar & Hart, P.C. by Robert L. Segar, Flint, for plaintiffs-appellants.
Fenton, Nederlander, Dodge, Ritchie & Witte, P.C. by Alexander B. Ritchie, Patrick B. McCauley, Detroit, for defendants-appellees.
Butzel, Long, Gust, Klein & Van Zile by Leslie W. Fleming, Detroit, for American Can Co.; Edward N. Sherry, Griffith B. Price, Jr., Dewey, Ballantine, Bushby, Palmer & Wood, New York City, of counsel.
Joseph Levin, Dice, Sweeney & Sullivan, P.C., Detroit, for Robert C. Bannert.
This is a class action by employees and the widow of a deceased employee to recover pension benefits allegedly due pursuant to a plan adopted by Clean-Wear Service Company or Cadillac Overall Supply Co., its parent. All parties' benefits were 100% Vested but trustee National Bank of Detroit terminated pension rights at the direction of the Pension Trust Advisory Committee. The committee acted under the following provision of the retirement plan, entitled 'Forfeiture of Benefits' 'In the event that any participant shall enter the employment of any competitor of any Company without the written approval of such Company, or become associated in any manner with such a competitor in the opinion of the Advisory Committee, whose decision shall be final, before such participant has received the full amount in his segregated account or accounts to which he otherwise would be entitled, such participant shall lose all right to any balance in such account and the interest of such participant in any Trust shall at once cease and terminate and be allocated to other eligible employees covered by such Trust in accordance with the provisions of Section 3 below.'
When this clause was raised as a defense, plaintiffs moved for summary judgment as to liability pursuant to GCR 1963, 117.2(2). The trial court denied the motion but certified the question for interlocutory appeal. The Court of Appeals denied leave but this Court granted leave.
Appellants claim that the clause in question violates M.C.L.A. § 445.761; M.S.A. § 28.61:
'All agreements and contracts by which any person, co-partnership or corporation promises or agrees not to engage in any avocation, employment, pursuit, trade, profession or business, whether reasonable or unreasonable, partial or general, limited or unlimited, are hereby declared to be against public policy and illegal and void.'
Appellees rely on Couch v. Difco Lab, Inc., 44 Mich.App. 44, 205 N.W.2d 24 (1972). We agree that Couch controls.
The Legislature declared that promises or agreements not to engage in any employment were against public policy, illegal and void. This clause neither extracts nor embodies such a promise. Instead, it denies the right to further participation in the retirement plan if he does engage in such employment, an acknowledgment of his right to do so. While we recognize that employees may be deterred from engaging in competition by such an arrangement, we agree with Judge (now Justice) Levin's interpretation of the Michigan statute in Couch:
1
See also Judge (now Justice) Fitzgerald's opinion in Tobin v. General Motors Corp., 17 Mich.App. 475, 169 N.W.2d 644 (1969). If a broader prohibition is to be imposed, it is up to the Legislature, not this Court.
Appellants' other arguments are not properly presented for our consideration by this motion for summary judgment but depend upon facts which must be developed at trial. See Hubbard v. Miller, 27 Mich. 15, 15 Am.Rep. 153 (1873), and Reed v. Kaydon Engineering Corp., 38 Mich.App. 353, 196 N.W.2d 487 (1972).
The trial court's denial of summary judgment is affirmed. Remanded for further proceedings.
LEVIN and RYAN, JJ., not participating.
In this action for a summary judgment, we are asked to determine whether a clause in an employee retirement profit-sharing plan unilaterally established by the employer, which provides for the forfeiture of all benefits if an employee becomes associated in any manner with a competitor, is an unreasonable restraint of trade. The clause contains no limitations in time and area.
We hold that such a clause is void and unenforceable as an unreasonable restraint of trade unless there are reasonable limitations in time and area. Since there are none here, we grant a summary judgment for plaintiff.
This is a class action suit brought by persons who have been employees of Clean-Wear Service Company, or its parent company, Cadillac Overall Supply Company. The plaintiffs seek to recover benefits which had vested under a profit-sharing retirement plan unilaterally established by their employer and administered by the National Bank of Detroit.
The case comes to us on the pleadings only as the appeal is from the denial of the plaintiff's motion for summary judgment.
Each of the named plaintiffs had worked for one of the defendant-companies for a period of at least 18 years. Plaintiff Arthur Woodward had served for part of his tenure with Cadillac Overall Supply Co. as a manager and division manager. William Page, now deceased, and formerly husband of plaintiff Mabel Page, was employed by the same company, and had served as a branch manager. The specific responsibilities of the other named plaintiffs are unclear.
Each of the named plaintiffs had vested rights to benefits under the profit-sharing plan, ranging from $5,863.64 to $18,683.09. These benefits were declared forfeit under a provision of the retirement plan which reads as follows:
Defendants allege that plaintiffs, upon resigning from the employ of defendants, entered into the employment of competing firms. In two cases, it is alleged that the plaintiffs established their own businesses in the same area as they had worked for their former employer, and in one of those cases, it is alleged that plaintiff later sold that business and entered into an agreement not to compete.
After notification of the forfeiture, plaintiffs filed a complaint in the Wayne County Circuit Court seeking recovery of the forfeited benefits. Plaintiffs brought a motion for summary judgment as to liability only, which was denied, solely on the authority of Couch v. Difco Lab, Inc., 44 Mich.App. 44, 205 N.W.2d 24 (1972).
The trial court certified, in accordance with Rule 806.3(1)(a)(ii), that his order involved a controlling question of law as to which there was a substantial ground for difference of opinion, and that an appeal from the order might materially advance the ultimate termination of litigation.
Plaintiffs were denied leave to appeal the denial of summary judgment by the Court of Appeals on May 30, 1974. Leave to appeal to the Supreme Court was
granted on October 15, 1974. II--THE VALIDITY OF THE
Plaintiffs argue that the non-competition forfeiture clause before us is void and unenforceable as a matter of law under both statutory and common law.
Resolution of the claim that the clause is void under M.C.L.A. § 445.761; M.S.A. § 28.61 1 would require determination of whether non-competition forfeiture clauses in general are agreements or contracts not to engage in an employment, and therefore void under the statute.
Resolution of the claim that the clause is void under common law poses a narrower question: Is a non-competition forfeiture clause in an employee retirement profit-sharing plan unilaterally established by an employer which provides that retirement benefits are forefeited if the employee enters into the employment of a competitor void unless it provides for reasonable limitations in time and area?
We find it unnecessary for the disposition of this case to resolve the broader
statutory issue, and we refrain from doing so. III--THE
At the threshold, there seems little question that a non-competition forfeiture clause is a restraint of trade. In Stoia v. Miskinis, 298 Mich. 105, 298 N.W. 469 (1941), this Court, quoting with approval from Williston on Contracts, included in the definition of a restraint on trade the following:
"Any bargain or contract which purports to limit in any way the right of either party to work or to do business, whether as to the character of the work or business, its place, the manner in which it shall be done, or the price which shall be demanded for it, may be called a bargain or contract in restraint of trade.' 5 Williston on Contracts (Rev.Ed.), p. 4576, § 1633.' 298 Mich. 105, 117--118, 298 N.W. 469, 473.
This finding raises two questions....
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