Menter Co. v. Brock

180 N.W. 553, 147 Minn. 407, 20 A.L.R. 857, 1920 Minn. LEXIS 761
CourtSupreme Court of Minnesota
DecidedDecember 24, 1920
DocketNo. 21,915
StatusPublished
Cited by45 cases

This text of 180 N.W. 553 (Menter Co. v. Brock) is published on Counsel Stack Legal Research, covering Supreme Court of Minnesota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Menter Co. v. Brock, 180 N.W. 553, 147 Minn. 407, 20 A.L.R. 857, 1920 Minn. LEXIS 761 (Mich. 1920).

Opinion

Holt, J.

The action is to enjoin defendants from carrying on the same business which plaintiff is engaged in in the city of Minneapolis. When plaintiff rested, the court dismissed the action. The appeal is from the judgment of dismissal.

No error is claimed in the dismissal of any defendant other than Brock. As to Brock the facts are these: Plaintiff operated a chain of clothing stores in many of the large cities of this country. It has one in Minneapolis, and Brock became its manager on April 4, 1916, at the' weekly salary of $35. The contract of employment was in writing signed by both parties. It contains numerous covenants and agreements to be kept and performed by Brock, but we look in vain for one to be carried out or kept by plaintiff. It does not agree to keep him in its employ for a single day, nor does it, in terms, agree to pay the salary he bound himself to accept. In March, 1918, Brock and two other employees of plaintiff organized a corporation to engage in a business similar to plaintiff’s, rented a store two blocks away from plaintiff’s, and are now conducting a business there. The basis -of the asserted hold on Brock is a paragraph in the contract mentioned, which provides, in substance, that in consideration for the employment, by the week, and the knowledge thereby obtained in plaintiff’s method and trade secrets, Brock agreed that, for a period of four years after his employment by plaintiff should cease, he would not directly or indirectly enter into or [409]*409engage in the same business as plaintiff in the city of Minneapolis, or work in such line of business. If his employment ceased before the end of one year, the prohibited period should be four times as long as the time he actually worked. In case of a violation of the foregoing covenant Brock must forfeit and pay -to plaintiff $3,000, which is “agreed upon as liquidated damages therefor, and shall be considered as such and not as a penalty .”

The proof showed that when Brock notified plaintiff that he desired to quit its employ, no difficulty was experienced in at once supplying his place, and, in fact, more business was transacted thereafter than during Brock’s management. While some witnesses for plaintiff referred in general terms to trade secrets and special methods of doing business possessed by plaintiff, when required to name any in particular they failed utterly, or else pointed out methods known and' practiced generally in carrying on business like plaintiff’s. The only tangible evidence is that Brock ordered for the use of his corporation books of account and records similar in form to plaintiff’s and from the same firm that supplies it. However, it does not appear that the books and records used by plaintiff are copyrighted or that there is any special peculiarity about them whereby their use by a competitor could cause loss to plaintiff’s business.

The record does not indicate the grounds for the dismissal. Counsel for appellant seemingly thinks that, because of the provision in respect to the payment of liquidated damages, the court concluded the only remedy was an action at law, for much effort is expended in combatting that proposition. We think that question was not reached by the court below, and, as the proof stands, need not be considered here.

Equity will not enjoin the breach of a negative covenant in a contract, unless it is made to appear that irreparable injury has resulted or will in all probability result to complainant from such breach. In eases where an established business or trade and its good will has been sold, and, as part of the transaction, the seller has covenanted not to engage in the same business in the vicinity for a certain period, the mere breach strongly points to irreparable injury, in that the old business built up by him and his name will lose by having its customers drawn [410]*410to a similar new enterprise when he enters it. By the purchase the buyer, upon a supposedly adequate consideration, secured a going business and its protection by the covenant from encroachment by the seller. Examples of such cases are furnished by Holliston v. Ernston, 124 Minn. 49, 144 N. W. 415; Andrews v. Kingsbury, 212 Ill. 97, 72 N. E. 11; Ropes v. Upton, 125 Mass. 258; Diamond Match Co. v. Roeber, 106 N. Y. 473, 13 N. E. 419, 60 Am. Rep. 464. We think the breach of a like covenant in an employment contract does not so readily indicate irreparable injury to the employer. Injury is not shown by the mere fact that the employee has left the service and has entered the employ of a rival concern. In McCall Co. v. Wright. 198 N. Y. 143, 91 N. E. 516, 31 L.R.A.(N.S.) 249, the rule applicable is, in substance:

Where the services have been of such a character that the employee’s name carries with it the good will of the 'employer’s business, or where the employee has obtained knowledge of secrets in such business, -the disclosure of which would result in irreparable damage to the employer, it appearing that the subsequent employment was to obtain the benefit of the secrets or there was danger that such secrets would be disclosed in the subsequent employment, injunctive relief will be granted. See also Simms v. Burnette, 55 Fla. 702, 46 South. 90, 16 L.R.A. (N.S.) 389, 127 Am. St. 201, 15 Ann. Cas. 690; Osius v. Hinchman, 150 Mich. 603, 114 N. W. 402, 16 L.R.A.(N.S.) 393.

Tested by that rule this case fails. There is no evidence that Brock, in the position of manager, came in contact with customers of plaintiff so as to obtain any personal hold upon the good will of the business, or that he had made or threatened to malee any effort to secure or attract plaintiff’s patrons.

Plaintiff’s business is selling men’s and women’s clothing on the in-stalment plan, the purchaser of the garment signing a contract to pay for the same in small future instalments. We have already adverted to the absence of any so-called trade secrets or peculiar methods possessed only by plaintiff in conducting this business, hence no reason exists for an injunction to protect these, under the rule of such cases as Magnolia Metal Co. v. Price, 65 App. Div. 276, 72 N. Y. Supp. 792. Nor is this case like one where a person is hired to work up a route or [411]*411territory and serve the customers obtained therein, as, for instance, a milk or laundry route, and the like. There the employee comes directly in contact with the customers. They may be attracted to him personally, and are likely to go with him should he enter the service of a competitor. Typical eases of this sort are found in Mutual Milk & Cream Co. v. Heldt, 120 App. Div. 795, 105 N. Y. Supp. 661; A. L. & J. J. Reynolds Co. v. Dreyer, 33 N. Y. Supp. 649, 12 Misc. 368; American Ice Co. v. Lynch, 74 N. J. Eq. 298, 70 Atl. 138; Eureka Laundry Co. v. Long, 146 Wis. 205, 131 N. W. 412, 35 L.R.A.(N.S.) 119. The right to injunction there is rested on the principle that the employer’s business is wrongfully interfered with, and such interference readily appears when the former employee invades the route in behalf of a new employer.

Of course, cases relating to services of a unique kind, such as those of an opera singer, actor or person of special qualifications, are not in point here.

It is readily seen that courts are and should be cautious in complying with the request of an employer to enjoin a former servant who has violated a covenant of this sort from earning a livelihood.

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Bluebook (online)
180 N.W. 553, 147 Minn. 407, 20 A.L.R. 857, 1920 Minn. LEXIS 761, Counsel Stack Legal Research, https://law.counselstack.com/opinion/menter-co-v-brock-minn-1920.