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No. 95-1589

No. 95-1648

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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.

Vigoro Industries, Inc., commenced this unfair competition action

against former employees of its farm supply store in Marvell, Arkansas, and

the competitor that hired them away, Cleveland Chemical Company. Vigoro's

former manager, Kenneth Crisp, counterclaimed for money allegedly owing

under Vigoro's incentive compensation plan. Following a one-week bench

trial, the
 The HONORABLE GARNETT THOMAS EISELE, United States District

1

Judge for the Eastern District of Arkansas.

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district court awarded Vigoro $75,000 against Crisp for breach of his

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employee's duty of loyalty. The court dismissed Vigoro's claims against

the other defendants and awarded Crisp $36,788.40 on his counterclaim.

Vigoro appeals, arguing primarily that clearly erroneous findings of fact

have produced a grossly inadequate damage award. Crisp cross appeals. We

affirm the disposition of Vigoro's claims, reverse the award in favor of

Crisp on his counterclaim, and remand for entry of an amended final

judgment.

I. Background.

We will only briefly summarize the relevant facts, which are set out

in detail in the district court's thorough published opinion, Vigoro

Industries, Inc. v. Cleveland Chemical Co., 866 F. Supp. 1150 (E.D. Ark.

1994). 

Crisp managed a successful farm supply store in rural Marvell for

twenty-four years. After Vigoro acquired the store in 1986, Crisp often

considered leaving. Finally, in late 1992, he approached Cleveland

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 Cleveland

Chemical, offered his property as the site for a new Cleveland Chemical

store, and began detailed discussions concerning facilities, equipment, and

personnel. Crisp provided Cleveland Chemical with estimated salaries and

wages, drawing on his knowledge and experience as a Vigoro farm store

manager. 

On July 16, 1993, Crisp sent a letter of resignation to Vigoro

management, advising that he would stay on for a short time to ease the

transition. Shortly before resigning, Crisp invited the other
 Vigoro dismissed claims against the non-sales employees at

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the close of its case at trial. 

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Marvell employees to join him at the new Cleveland Chemical store. His coworkers responded favorably, and Crisp stated in his resignation letter

that all of the Marvell employees would be leaving with him. Critical

among the dozen who left were three salesmen, appellees Dennis Cavette, Don

Scarbrough, and Donald Washburn, who had valuable relationships with nearly

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," the letter advised that the employees would soon leave

Vigoro for Cleveland Chemical, apologized for any inconvenience, and

stated, "we feel this change will enable us to offer you better services

in the future. As always, 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. Though

Vigoro brought in a new manager and sales force as quickly as possible, it

lost some seventy percent 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, and

intentional interference with business expectancies. On appeal, Vigoro

challenges the inadequate 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 was

free to notify his fellow workers and Vigoro customers of his intent to

leave. However, before leaving, Crisp had a duty of loyalty which

precluded him from soliciting other employees or customers to leave Vigoro

with him. We agree with this analysis. Arkansas law strikes a careful

balance between an employer's right to employee loyalty, and an employee's

right -- absent contrary contractual commitment -- to resign and pursue his

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 essential

employees, are free to resign and go into competition, so long as they

remain loyal prior to resigning. As the court said in Raines v. Toney, 313

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 because

freedom of employment and encouragement of competition

generally dictate that such persons can leave their corporation

at any time and go into a competing business. They cannot

while still corporate fiduciaries set up a competitive

enterprise . . . or resign and take with them the key personnel

of their corporations for the purpose of operating their own

competitive enterprise. But they can, while still employed,

notify their corporation's customers of their intention to

resign and subsequently go into business for themselves, and

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

interference with . . . the public's right to the availability of a

serviceman it prefers to use." 

Applying this standard, the district court found that Crisp had

breached his duty of loyalty to Vigoro in two respects. First,
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his July 28 letter to key Vigoro customers "crosse[d] the line from simple

notification to an active solicitation at a time when Mr. Crisp was still

working for Vigoro." 866 F. Supp. at 1165. Second, Crisp interfered with

Vigoro's relations with its other Marvell employees by securing commitments

from them to join him at Cleveland Chemical while he was still a Vigoro

employee. 

Vigoro of course takes no issue with these findings that Crisp

breached his duty of loyalty, though it casts Crisp's conduct in a far more

sinister light than did the district court. Crisp, on the other hand,

argues that the district court's findings of breach of duty are clearly

erroneous. We disagree. The findings that Crisp's pre-resignation

solicitation of co-workers and Vigoro customers breached his duty of

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 for

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 base, 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 Cleveland Chemical, or $4.7 million lost profits to Vigoro.

Second, Vigoro argues that the court should have assessed additional

damages because Crisp misappropriated trade secrets and confidential

customer information. Third, Vigoro argues that the district court

improperly ignored specific additional items of damage. We will take up

these points in that order.

A. Lost Profit Damages for Breach of Duty. The district court

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 Vigoro to join him at Cleveland Chemical if Crisp had

waited until after he resigned before soliciting them. After carefully

surveying competitive conditions in the Marvell local market, the court

further found that most of Vigoro's customers would have chosen to do

business with Crisp at Cleveland Chemical if he had not solicited them

before leaving Vigoro. Thus, the court found that 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 clearly erroneous." Hall v. Gus

Constr. Co., 842 F.2d 1010, 1017 (8th Cir. 1988). Here, the district court

was clearly correct in rejecting Vigoro's extravagant lost profit theories,

which irrationally attributed all of Vigoro's competitive losses to the

fact that Crisp had jumped the gun by three weeks in soliciting Vigoro's

employees and customers. That left the district court with the difficult

task of estimating what damage in fact flowed from Crisp's limited breach

of duty. While we might have been inclined to assign more financial

significance to the fact that Crisp took all of Vigoro's work force, with

advance notice to customers but inadequate warning 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 Confidential Information. Vigoro

claims that Crisp is liable under the Arkansas Theft 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 business

information, see Tlapek v. Chevron Oil Co., 407 F.2d 1129, 1134-35 (8th

Cir. 1969), for misappropriating the following types of customer

information: (1) the identity of Vigoro's farmer customers; (2) each

farmer's planting history, types of products purchased, and credit history;

and (3) whether the farmer allows a farm store salesman to "scout" the farm

for insects and to perform soil analyses. The district court concluded

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 farm store customers could be

easily discovered because they farm in a small geographic area. Interested

farmers would readily provide the other types of information because that

helps them purchase the most appropriate farm supplies. 

Although confidential and valuable customer information that would

be costly and time consuming to duplicate qualifies for trade secret

protection, readily ascertainable customer information does not. Compare

Allen v. Johar, Inc., 823 S.W.2d 824, 827 (Ark. 1992), and United

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 took

any written customer information when they left Vigoro. They brought to

Cleveland Chemical only their sales experience and their knowledge of the

local customers. Absent an enforceable covenant not to compete, a former

employer may not prevent a former employee from exploiting this kind of

knowledge with a new employer. The former employer should not be permitted

to achieve this anticompetitive objective indirectly through an overlyexpansive definition of customer trade secrets. As the court said in

Fleming Sales Co. v. Bailey, 611 F. Supp. 507, 514-15 (N.D. Ill. 1985):
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All the information [plaintiff] tries to wrap in the [Trade

Secret] Act's mantle is nothing more than the kind of knowledge

any successful salesman necessarily acquires through

experience. In the Act's terms, it is information 'readily

ascertainable by proper means' . . . . Nothing prevents such

an employer from guarding its interests by a restrictive

covenant. But it would really be unfair competition to allow

the employer without such a covenant to obtain trade secret

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 affirm the district court's determination that Crisp did not

misappropriate trade secrets or confidential customer information. 

C. Miscellaneous Damage Claims. Vigoro's remaining damage

contentions do not warrant 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 debt

losses allegedly caused by Crisp during his final months with the company

because Vigoro failed to raise this issue in its pleadings or at trial.

Third, Vigoro's damages for Crisp's breach of duty were not capable of

exact determination, so prejudgment interest may not be awarded. See

Lovell v. Marianna Fed. Sav. & Loan Ass'n, 589 S.W.2d 577, 578 (Ark. 1979);

Red Lobster Inns of Am. v. Lawyers Title Ins. Corp., 656 F.2d 381, 386-87

(8th Cir. 1981). Fourth, Crisp did not act with the malice that would

support an award of punitive damages, see Stein v. Lukas, 823 S.W.2d 832,

834 (Ark. 1992), and there is no basis for an award of attorneys' fees, see

Security Pac. Hous. Servs., Inc. v. Friddle, 866 S.W.2d 375, 379 (Ark.

1993). 

For the foregoing reasons, the district court's award of $75,000

damages against Kenneth Crisp is affirmed. 
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IV. Claims Against the Cleveland Chemical Defendants.

Vigoro argues that the Cleveland Chemical defendants conspired with

Crisp to breach his duty of loyalty to Vigoro and tortiously interfered

with Vigoro's customer and employee expectancies. The district court found

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 Cleveland

Chemical defendants in hiring Crisp and the other Vigoro employees and in

opening a retail farm store in Marvell constituted proper competition

rather than tortious interference with Vigoro's expectancies. These

findings are not clearly erroneous. Vigoro's claims against the Cleveland

Chemical defendants were properly dismissed. See Fisher v. Jones, 844

S.W.2d 954, 959 (Ark. 1993); Walt Bennett Ford, Inc. v. Pulaski County

Special Sch. Dist., 624 S.W.2d 426, 429 (Ark. 1981); Restatement (Second)

of Torts §§ 767-68 (1977).

V. Claims Against Cavette, Scarbrough, and Washburn.

Vigoro claims that Cavette, Scarbrough, and Washburn also

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, and

that they merely made proper use of their business skills and experience

in competing with Vigoro. These findings are not clearly erroneous and

required dismissal of Vigoro's claims against these defendants. 

VI. Crisp's Counterclaim.

Because of Crisp's success as a Vigoro store manager, Vigoro provided

him the most lucrative incentive compensation plan of any
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Vigoro farm store manager. However, his 1993 incentive plan permitted

Vigoro to deduct "amounts Management deems appropriate as a penalty for

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 counterclaim for the bonus that

would otherwise have been owing. The district court ruled that Vigoro

could not properly refuse to pay a bonus because Crisp had managed the

Farmarket assets in Vigoro's best interests. The court awarded Crisp

$36,788.40 in 1993 incentive compensation. 

On appeal, Vigoro argues that the incentive compensation plan left

this mismanagement issue to its discretion (Vigoro may deduct "amounts

Management deems appropriate"); therefore, the district court erred in

reviewing de novo Vigoro's decision to pay no bonus. We agree. When a

contract term leaves a decision to the discretion of one party, that

decision is virtually unreviewable. See Amant v. Kidde, Inc., 756 F.2d

685, 686 (8th Cir. 1985). At most, courts will step in "when the party who

would assume the role of sole arbiter is charged with fraud, bad faith, or

a grossly mistaken exercise of judgment." Golden 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 no

incentive bonus in a year in which he breached his duty of loyalty by

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 district

court erred in awarding Crisp $36,788.40 on his counterclaim. 
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VII. Conclusion

We reverse the district court's award of $36,788.40 in favor of

Kenneth Crisp on his counterclaim. We otherwise affirm the district

court's Amended and Substituted 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 from 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.