National Starch & Chemical Corp. v. Snyder

34 Pa. D. & C.2d 533, 1964 Pa. Dist. & Cnty. Dec. LEXIS 136
CourtPennsylvania Court of Common Pleas, Philadelphia County
DecidedJune 26, 1964
Docketno. 4304
StatusPublished
Cited by3 cases

This text of 34 Pa. D. & C.2d 533 (National Starch & Chemical Corp. v. Snyder) is published on Counsel Stack Legal Research, covering Pennsylvania Court of Common Pleas, Philadelphia County primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
National Starch & Chemical Corp. v. Snyder, 34 Pa. D. & C.2d 533, 1964 Pa. Dist. & Cnty. Dec. LEXIS 136 (Pa. Super. Ct. 1964).

Opinion

Gold, P. J.,

Plaintiff, National Starch and Chemical Corporation (National), filed a complaint in equity requesting enforcement of an agreement against Marvin D. Snyder (Snyder), its former employe, and American Manufacturing Co., Inc. (American), present employer of Snyder. Preliminary objections were filed by defendants, the essence of which is the agreement containing the restrictive covenant is not enforceable in equity because: (1) There is no consideration to support the agreement; (2) the enforcement of the agreement would be an unreasonable hardship on Snyder, and (3) the enforcement of the agreement would be an unreasonable restriction on the right of American to compete fairly with National.

[534]*534Testimony was taken of Irving Fisher, general manager in this area for National; his secretary, Jessica B. Mogerman; William F. Sweeney, an employe of Wolf Brothers, Inc., a customer of National, and of defendant Snyder.

National is in the business of manufacturing all types of adhesives used in packaging and paper converting, as well as corn starches, other starches, dex-trins, vinyl acetate monimers and polymers and co-polymers. It also manufactures pressure-sensitive, adhesive-coated papers and tapes.

Defendant Snyder started his employment with National beginning on February 20, 1950, and continuing to on or about March 27, 1964. During the course of these 14 years, Snyder, at the request of National, executed three written agreements, each containing a restrictive covenant in the event he left the employment of National. Each employment contract was at will, but provided for notice of two weeks in case either party wished to terminate the agreement. The first agreement was dated February 20, 1950; the second, July 8, 1958; and the final agreement, upon which National relies, is dated September 18, 1961.

In the agreement dated September 18, 1961, no consideration is mentioned, except as may be implied from (1) National’s agreement to continue his employment and (2) the presence of the seal (L.S.) which immediately follows the signature of Snyder. In the September 18, 1961, agreement, it was specifically provided in paragraph eight that “any employment agreement heretofore made by the parties hereto is hereby terminated.” In the final 1961 agreement, the restrictions in the 1950 and 1958 agreements were eased. In the 1950 agreement, Snyder was restricted from competing with National within a 200-mile radius for a period of two years. In the 1958 agreement, Snyder was restricted from disclosing to others any confidential in[535]*535formation of National and from taking with him any notes, records, charts, formulae or other documents containing such confidential information. Thus he was free to operate anywhere in a competitive business, without any geographical restriction whatsoever, provided he did not use or disclose any of National’s confidential information. In the 1961 agreement, Snyder was prevented from soliciting or accepting any business for a competitor’s product from any customer of National with whom he had dealt, and from taking or utilizing confidential information, for a period of two years.

The question posed for immediate determination is whether the agreement of September 18, 1961, is legally enforceable. National contends that there is a binding and adequate consideration passing from National to Snyder, and, in the alternative, should the court decide that there is no such consideration, that consideration is presumed or imported from the presence of the seal on the agreement. National contends that the consideration passing from National to Snyder consists of the following:

1. Snyder obtained work for National in 1950 without any knowledge or information concerning the trade secrets of plaintiff’s business. He accepted a restrictive covenant and worked continuously under these restrictive covenants until he voluntarily terminated his employment on March 27, 1964.
2. Snyder was employed to sell adhesives to industrial users. The job required continuous technical training, assistance and disclosure of confidential information, all of which was furnished by National to Snyder.
3. The contract is for a period that continues until termination by either party, but only upon two weeks’ written notice.
4. The employment agreement was under seal.

[536]*536As to the first item, the agreement of 1950 was superseded by the agreement of 1958 which, in turn, was superseded by the agreement of 1961. The latter agreements contained a similar supercession clause. Moreover, National has conceded that its case rises or falls on the enforceability of the 1961 agreement. It is crystal clear to the chancellor that items two and three are not consideration per se within the meaning of contract law. It is also perfectly clear to the chancellor that, within the meaning of consideration as defined and elaborated upon in Morgan’s Home Equipment Corporation v. Martucci, 390 Pa. 618 (1957), no present and valuable consideration passed from National to Snyder when the agreement of September 18, 1961, was executed, nor was the continuation of Snyder’s employment good consideration: Consolidated Home Furnishing Co. v. Getson, 80 D. & C. 488 (1951).

The chancellor sustains the contention of defendants that under the 1958 agreement Snyder was not restricted in any way from soliciting or accepting business from any customer of National after his employment with National was terminated. Therefore, the restrictive covenant contained in the 1961 agreement was a new restriction placed upon him after 11 years of service with National, and was not supported by any new consideration. Morgan is authority for the proposition that a restrictive covenant in an agreement against an employe will not be enforceable unlesá the consideration for the restrictive covenant is the employment relationship itself. The distinguishing feature of Morgan is that Central’s employes were retained initially on a provisional basis, and regular employment was not offered until the time of the signing of the contract. In addition, other valuable consideration was present, consisting of the grant to the employes of fringe benefits, vacation periods and additional customers’ lists. What the Supreme Court held [537]*537in Morgan is briefly this: That the covenant not to compete must be ancillary to the employment relationship itself, and the fact that the employment was terminable at will nevertheless does not destroy the factor of consideration to support the restrictive covenant against the employes.

Under Morgan, which is the fundamental authority in Pennsylvania on restrictive covenants, a contract in restraint of trade made independently of a contract of employment is void as against public policy, regardless of the valuableness of the consideration exchanged therein. Thus presented to the chancellor is the duty to examine the evidence, including the agreement to decide whether, in fact, it was incidental or ancillary to the taking of employment. If it is ancillary to the taking of employment, then the employment itself is sufficient consideration to uphold and enforce the restrictive covenant. If, on the other hand, the employment has started and the agreement is signed some time thereafter during the couise of employment, the restrictive covenant will not be enforced, despite the fact that good consideration may have passed to the employe.

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Bluebook (online)
34 Pa. D. & C.2d 533, 1964 Pa. Dist. & Cnty. Dec. LEXIS 136, Counsel Stack Legal Research, https://law.counselstack.com/opinion/national-starch-chemical-corp-v-snyder-pactcomplphilad-1964.