___________ No. 95-1589 No. 95-1648

___________ Vigoro Industries, Inc., * * Plaintiff - Appellant/ * Cross-Appellee, * * v. * * Kenneth Crisp, * * Appeals from the United States Defendant - Appellee/ * District Court for the Cross-Appellant, * Eastern District of Arkansas. * Cleveland Chemical Company of * Arkansas, Inc.; James M. * Sanders; Michael W. Sanders; * Dennis E. Cavette; Don * Scarbrough, Jr.; Donald R. * Washburn, * * Defendants - Appellees, *

___________ Submitted: November 17, 1995 Filed: April 29, 1996

___________ Before McMILLIAN, WOLLMAN, and LOKEN, Circuit Judges.

___________ LOKEN, Circuit Judge.
Vig oro Industries, Inc., commenced this unfair competition actio n against former employees of its farm supply store in Marvell, Arkansas, an d the competitor that hired them away, Cleveland C hemical Company. Vigoro's former manager, Kenneth Crisp, counterclaimed for money allegedly owin g under Vigoro's incentive compensation plan. Following a one-week benc h trial, the

### The HONORABLE GARNETT THOMAS EISELE, United States Distric t 1 

### Judge for the Eastern District of Arkansas.
-2- district court awarded Vigoro $75,000 against Crisp for breach of hi s 1 employee's duty of loyalty. The court dismissed Vigoro's claims against the ot her defendants and awarded Crisp $36,788.40 on his counterclaim

. Vigoro appeals, argui ng primarily that clearly erroneous findings of fact have produced a grossly inadequate damage award. Crisp cross appeals. We affirmthe disposition of Vigoro's claims, reverse the award in favor of Crisp on his counterclaim, and remand for entry of an amended fina l judgment.

I. Background.
We will only briefly summarize the r elevant facts, which are set out in det ail in the district court's thorough published opinion, Vigor o Industries, Inc. v. Cleveland Chemical Co. , 866 F. Supp. 1150 (E.D. Ark. 1994).
Crisp managed a successful farm supply store in rural Marvell fo r twenty-four years. After Vigoro acquired the store in 1986, Crisp often consid ered leaving. Finally, in late 1992, he approached Clevelan d Chemical, a wholesale supplier that had expressed an interest in entering the retail market in the Marvell area. In February 1993, Crisp purchased commercial property in Marvell. In May, he committed to join Clevelan d Chemical, offered his property as the site for a new Cleveland Chemica l store, and began detailed discussions concerning facilities, equipment, an d personnel. Crisp pro vided Cleveland Chemical with estimated salaries and wages, dra wing on his knowledge and experience as a Vigoro farm stor e manager.

On Ju ly 16, 1993, Crisp sent a letter of resignation to Vigor o managem ent, advising that he would stay on for a short time to ease th e transition. Shortly before resigning, Crisp invited the other

### Vigoro dismissed claims against the non-sales employees a t 2 

### the close of its case at trial.
-3- Marvell employees to join him at the new Cleveland Chemical store. His co

worker s responded favorably, and Crisp stated in his resignation lette r that all of the Marvell employees would be leaving with him. Critica l among the dozen who left were three salesmen, appellees Dennis Cavette, Do n Scarbrough, and Donald Washburn, who had valuable relationships with nearl y all of Vigoro's farmer-customers. On July 28, 1993, Crisp sent a letter to the farmers he considered Vigoro's best customers. Addressed to "our valued customers," th e letter advised that the employees would soon leave Vi goro for Cleveland Chemical, apologized for any inconvenience, an d stated, "we feel this change will enable us to offer you better services in the future. As al ways, we look forward to serving any needs you might have."
Crisp left Vigoro on August 7, 1993, and began working for Cleveland Chemical. The other Marvell employees joined him later that month. Thoug h Vigoro brought in a new manager and sales force as quickly as possible, it lost some seventy per cent of its Marvell customers to its new competitor, and the Marvell Farmarket began operating at a substantial loss. Vigoro sued the former employees, Cleveland Chemical, and Cleveland Chemical' s principal officers, asserting claims for misappropriation of trade secrets , breach of fiduciary duties, conspiracy to breach those duties, an d intentional interference with business expectancies. On appeal, Vigoro challenges the inadeq uate damage award against Crisp and the dismissal of its claims against the Cleveland Chemical defendants and former salesmen Cavette, Scarbrough, and Washburn. 2

II. Claims Against Kenneth Crisp.

Crisp was an at-will employee at Vigoro. He signed no agreement or covenant not to compete with Vigoro if he left.

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Therefore, the district court ruled that Crisp had a right to leave and wa s free to n otify his fellow workers and Vigoro customers of his intent t o lea ve. However, before leaving, Crisp had a duty of loyalty whic h precluded him from soliciting other employees or customers to leave Vigoro with hi m. We agree with this analysis. Arkansas law strikes a carefu l balance between an employer's right to employee loyalty, and an employee's right -- absent contrary contractual commitment -- to resign and pursue hi s
career with a competing employer. See Witmer v. Arkansas Dailies, Inc. , 151 S.W.2d 971, 973-74 (Ark. 1941). Even corporate officers and directors , who have fiduciary duties to the corporation beyond those of less essentia l employees, are free to resign and go into competition, so long as the y remain loyal prior to resigning. As the court said in Raines v. Toney , 31 3 S.W.2d 802, 809 (Ark. 1958) (citations omitted):

It is, however, a common occurrence for corporate fiduciaries to resign and form a competing enterprise. Unless restricted by contract, this may be done with complete immunity becaus e freedomof employment and encouragement of competitio n generally dictate that such persons can leave their corporation at any time and go into a competing business. They canno t whi le still corporate fiduciaries set up a competitiv e enterprise . . . or resign and take with them the k ey personnel of their corporations for the purpose of operating their ow n compet itive enterprise. But they can, while still employed , notify their corporation's customers of their intention t o resign and subsequently go into business for themselves, an d accept business from them when offered to them.

See also Evans Lab., Inc. v. Melder , 562 S.W.2d 62, 64 (Ark. 1978), which struck down a two-year covenant not to compete because it created "undue interfere nce with . . . the public's right to the availability of a serviceman it prefers to use."
Applying this standard, the district court found that Crisp ha d breached his duty of loyalty to Vigoro in two respects. First,

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his July 28 letter to key Vigoro customers "cros se[d] the line from simple notification to an ac tive solicitation at a time when Mr. Crisp was still working for Vigoro." 866 F. Supp. at 1165. Sec ond, Crisp interfered with Vigoro's relations with its other Marvell employees by securing commitment s from th em to join him at Cleveland Chemical while he was still a Vigor o employee.
Vigoro of course takes no issue with these findings that Cris p breached his duty of loyalty, though it casts Crisp's conduct in a far mor e sinister light than did the district court. Crisp, on the other hand , argues that the district court's findings of breach of duty are clearl y
errone ous. We disagree. The findings that Crisp's pre-resignatio n solici tation of co-workers and Vigoro customers breached his duty o f loyalty are well supported in the record. That brings us to the crucial issue on this appeal, the district court's award of $75,000 damages fo r that breach.

III. Damages for Crisp's Misfeasance.

Vigoro attacks the district court's damage award at three levels

. First, claiming that Crisp's breach of duty decimated Vigoro's workforce and purloined seventy percent of its customer ba se, Vigoro argues that the court should have adopted one of Vigoro's "uncontested" five-year damage estimates -- $2.19 million lost going concern value, $3.5 million unjust enrichment to Clevela nd Chemical, or $4.7 million lost profits to Vigoro. Second , Vigoro argues that the court should have assessed additiona l da mages because Crisp misappropriated trade secrets and confidentia l custom er information. Third, Vigoro argues that the district cour t improperly ignored specific additional items of damage. We will take up these points in that order.

A. Lo st Profit Damages for Breach of Duty. The district cour t rejected Vigoro's damage theories as without factual support. The court found that the other Marvell employees were loyal to Crisp

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and would have left V igoro to join him at Cleveland Chemical if Crisp had wai ted until after he resigned before soliciting them. After carefull y survey ing competitive conditions in the Marvell local market, the cour t further fo und that most of Vigoro's customers would have chosen to d o busin ess with Crisp at Cleveland Chemical if he had not solicited the m before leaving Vigoro. Thus, the court found th at Vigoro's damages should be limited to the harm caused immediately after Crisp's departure by his pre-resignation soliciting. The court estimated this damage at $75,000. See 866 F. Supp. at 1172.
"In a bench trial, ascertaining the plaintiff's damages is a form of factfinding that can be set aside only if clearl y erroneous." Hall v. Gus Constr. Co. , 842 F.2d 1010, 1017 (8th Cir. 1988). Here, the district cour t
was clearly correct in rejecting Vigoro's extravagant lost profit theories , which irrationally attributed all of Vigoro's competitive losses to th e fact that Crisp had jumped the gun by three weeks in soliciting Vigoro's employees and custome rs. That left the district court with the difficult task of estimating wh at damage in fact flowed from Crisp's limited breach of dut y. While we might have been inclined to assign more financia l significance to the f act that Crisp took all of Vigoro's work force, with advance notice to customers but inadequate warni ng to Vigoro, the question for an appellate court "is not whether it would have made the findings the trial court did, but whether on the entire evidence [it] is left with the definite and firm conviction that a mistake has been committed." Zenith Radio Corp. v. Hazeltine Research, Inc. , 395 U.S. 100, 123 (1969 ) (quotation omitted). Applying this standard, we conclude that the breachof-duty damages found by the district court are not clearly erroneous.

B. Damages for Misappropriation of C onfidential Information. Vigoro claims that Crisp is liable under the Arkansas T heft of Trade Secrets Act, Ark. Code Ann. § 4-75-601 et seq. , and the

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common law doctrine that protects an employer's confidential busines s information, see Tlapek v. Chevron Oil Co. , 407 F.2d 1129, 1134-35 (8t h Cir. 1 969), for misappropriating the following types of custome r informa tion: (1) the identity of Vigoro's farmer customers; (2) eac h farmer's planting history, types of products purchased, and credit history ; and (3) whether the farmer allows a farm store salesman to "scout" the far m for insects and to perform soil analyses. The district court conclude d that this information is not entitled to trade secret protection because it is "readily ascertainable." See Ark. Code Ann. § 4-75-601(4)(A). We agree. The identity of Vigoro's two hundred far m store customers could be easily discovered because they farm in a small geographic area. Intereste d farmers would readily provide the other types of information because that helps them purchase the most appropriate farm supplies.

Alth ough confidential and valuable customer information that woul d be c ostly and time consuming to duplicate qualifies for trade secre t protection, readily a scertainable customer information does not. Compare Allen v. Johar, Inc. , 823 S.W.2d 824, 827 (Ark. 1992), and Unite d Centrifugal Pumps v. Cusimano , 9 U.S.P.Q.2d 1171, 1173-74 (W.D. Ark. 1988) , with Hi-Line Elec. Co. v. Moore , 775 F.2d 996, 997 (8th Cir. 1985). The issue is fact intensive. In this case, neither Crisp nor the salesmen too k any written customer information when they left Vigoro. They brought to Cleveland Chemical on ly their sales experience and their knowledge of the local customers. Abs ent an enforceable covenant not to compete, a former employer may not prevent a former employee from exploiting this kind o f knowledge with a new employer. The former employer should not be permitte d to achieve this anticompetitive objective indirectly through an overly

expansive definition of customer trade secrets. As the court said i n Fleming Sales Co. v. Bailey , 611 F. Supp. 507, 514-15 (N.D. Ill. 1985):

### -8- All the information [plaintiff] tries to wrap in the [Trad e Secret] Act's mantle is nothing more than the kind of knowledge any successful salesman necessarily acquires throug h exp erience. In the Act's terms, it is information 'readil y ascertainable by proper means' . . . . Nothing prevents such an employer from guarding its interests by a restrictiv e covenant. But it would really be unfair competition to allow the employer without such a covenant to obtain trade secre t status for the fruits of ordinary experience in the business, thus compelling former employees to reinvent the wheel as the price for entering the competitive market.

We aff irm the district court's determination that Crisp did no t misappropriate trade secrets or confidential customer information.

C. Miscellaneous Damage Claims. Vigoro's remaining damag e contentions do not wa rrant extended discussion. First, Crisp's breach of his duty of loyalty does not require him to forfeit compensation already earned. See Baldwin v. Prince , 578 S.W.2d 240, 243 (Ark. 1979). Second, the district court properly rejected Vigoro's claim for $94,000 in bad deb t losses allegedly caus ed by Crisp during his final months with the company because V igoro failed to raise this issue in its pleadings or at trial

. Third , Vigoro's damages for Crisp's breach of duty were not capable o f exact d etermination, so prejudgment interest may not be awarded. Se e Lovell v. Marianna Fed. Sav. & Loan Ass'n , 589 S.W.2d 577, 578 (Ark. 1979) ; Red Lobster Inns of A m. v. Lawyers Title Ins. Corp. , 656 F.2d 381, 386-87 (8th Cir . 1981). Fourth, Crisp did not act with the malice that woul d support an award of p unitive damages, see Stein v. Lukas , 823 S.W.2d 832, 834 (Ark. 1992), and there is no basis for an award of attorneys' fees, se e Secur ity Pac. Hous. Servs., Inc. v. Friddle , 866 S.W.2d 375, 379 (Ark

. 1993).

For the foregoing reasons, the district court's award of $75,00 0 damages against Kenneth Crisp is affirmed.

### -9- IV. Claims Against the Cleveland Chemical Defendants.

Vigoro ar gues that the Cleveland Chemical defendants conspired with Crisp to breach his duty of loyalty to Vigoro and tortiously interfere d with Vigoro's customer and employee expectancies. The district court foun d expressly to the contrary -- that Crisp's breach of duty was not done in concert with any other defendant, and that the actions of the Clevelan d Chemical defendants i n hiring Crisp and the other Vigoro employees and in openin g a retail farm store in Marvell constituted proper competitio n
ra ther than tortious interference with Vigoro's expectancies. Thes e findings are not clearly erroneous. Vigoro's cl aims against the Cleveland Chemical defendants were properly dismissed. See Fisher v. Jones , 84 4 S.W.2 d 954, 959 (Ark. 1993); Walt Bennett Ford, Inc. v. Pulaski Count y Special Sch. Dist. , 6 24 S.W.2d 426, 429 (Ark. 1981); Restatement (Second) of Torts §§ 767-68 (1977).

V. Claims Against Cavette, Scarbrough, and Washburn.

Vi goro claims that Cavette, Scarbrough, and Washburn als o intentionally interfered with Vigoro's customer expectancies. Like Crisp, these salesmen were at-will employees of Vigoro, and none had signed a covenant not to compete. The district court found that they had a right to leave Vigoro and join Cleveland Chemical, that they did not induce or participate in Crisp's pre-resignation breach of duty, that they did not disclose any confidential Vigoro information to Cleveland Chemical, an d that they merely made proper use of their business skills and experience in competing with Vigoro. These findings are not clearly erroneous an d required dismissal of Vigoro's claims against these defendants.

VI. Crisp's Counterclaim.

Because of Crisp's success as a Vigoro store manager, Vigoro pr ovided him the most lucrative incentive compensation plan of any

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Vigoro farm store manager. However, his 1993 incentive plan permitte d Vig oro to deduct "amounts Management deems appropriate as a penalty fo r mismanagement of total assets of the Farmarket." After Crisp left, Vigoro refused to pay him a bonus for the year in which he resigned, citing this mismanagement provision. Crisp asserted a count erclaim for the bonus that would otherwise have been owing. The district court ruled that Vigor o could not properly refuse to pay a bonus because Crisp had managed th e Farmark et assets in Vigoro's best interests. The court awarded Cris p $36,788.40 in 1993 incentive compensation.

On appeal, Vigoro argues that the incentive compensation plan lef t this m ismanagement issue to its discretion (Vigoro may deduct "amount s Mana gement deems appropriate"); therefore, the district court erred i n revie wing de novo Vigoro's decision to pay no bonus. We agree. When a cont ract term leaves a decision to the discretion of one party, tha t decision is virtually unreviewable. See Amant v. Kidde, Inc. , 756 F.2 d 685, 686 (8th Cir. 1985). At most, courts will step in "when the party wh o would assume the role of sole arbiter is charged with fraud, bad faith, or a grossly mistaken exercise of judgment." Golde n v. Kentile Floors, Inc. , 512 F.2d 838, 847 (5th Cir. 1975) (involving pre-ERISA plan benefits).

In this case, Vigoro's management decided that Crisp deserved n o incentive bonus in a year in which he breached his duty of loyalty b y soliciting employees and customers to join him in a competing venture

. This cannot be called a bad faith or grossly mistaken exercise of judgment

. Cf. O'Madigan v. General Motors Corp. , 202 F. Supp. 190, 193 (E.D. Mo

. 1961) , aff'd , 312 F.2d 250 (8th Cir. 1963). Accordingly, the distric t court erred in awarding Crisp $36,788.40 on his counterclaim.

### -11- VII. Conclusion

We revers e the district court's award of $36,788.40 in favor o f Kenn eth Crisp on his counterclaim. We otherwise affirm the distric t court's Amended and S ubstituted Judgment. The case is remanded for entry of an amended final judgment consistent with this opinion, with interest on that judgment under 28 U.S.C. § 1961 to run f rom November 4, 1994. See Fed. R. App. P. 37. We award costs on appeal to appellees.

A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.