NO. 82-362 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1983 

FIRST AMERICAN INSURANCE AGENCY, 

Plaintiff and Appellant, 

VS. 

CAROL L. GOULD, 

Defendant and Respondent. 

Appeal from: District Court of the ~ighth Judicial District, 

In and for the County of Cascade 

Honorable John McCarvel, Judge presiding. 

Counsel of Record: 

For Appellant: 

James, Gray and McCafferty, Great Falls, Montana 

For Respondent: 

Church, Harris, Johnson & Williams, Great Falls, Montana 

Filed: 

Submitted on briefs: January 27, 1983 

Decided: March 24, 1983 

MAR 2 4 1983 

---_-- Clerk 
Mr. Justice Frank B. Morrison, Jr. delivered the Opinion of 

the Court. 

First American Insurance Agency appeals from two orders 

entered in the District Court of the Eighth Judicial 

District, Cascade County. The first order dissolved a 

temporary restraining order which enjoined Carol L. Gould 

from engaging in her insurance business in the Great Falls 

area. The second order awarded attorneys' fees to Carol 

Gould. 

Carol L. Gould was initially employed in 1973 as a 

clerical worker for the Yeoman Insurance Agency of Great 

Falls, Montana. First American Insurance Agency acquired 

that agency on March 1, 1977. Carol continued as a clerical 

worker. At the urging of her employer, Carol took the 

licensing exam and began selling insurance in January of 

1979. She was assigned a book of business customers to 

service in exchange for a guaranteed salary. The list of 

customers consisted primarily of people she knew and with 

whom she had already had substantial contact. 

On February 16, 1981, Carol signed an employment 

contract with First American. The contract provided for a 

$7,000 a year increase in sa1a.r~. It contained the following 

pertinent clause: 

''8, In the event of termination of this contract, 

the Employee agrees that he will not engage 

directly or indirectly, either personall-y or as an 

employee, associate, partner, manager, agent or 

otherwise, or by means of any corporate or other 

legal entity or device, in the same business as 

that of the Employer, or in any casualty insurance 

sales business, or occupation, or in any way 

compete with the Employer, or the Employer's 

successor, if any, within the City of Great Falls, 

Montana, or within a radius of twenty-five (25) 

miles from the City of Great Falls, Cascade County, 

Montana, for a period of ten (10) years from the 

date of such termination. The Employee agrees that 

in consideration for his continued employment with 

the Employer, this provision shall be deemed 

renewed as of January 1 of each year hereafter, for 
so long as he remains in the employ of the 

Employer. The Employee acknowledges that because 

of this employment and the nature thereof, he will 

be given and will have access to information as to 

renewal dates of insurance policies and as to 

prospective customers, which is usually and 

ordinarily kept confidential by the Employer, and 

the Employee acknowledges that he understands that 

competition with the Employer in the event of 

termination of this agreement, would be unfair due 

to the disclosure of confidences involved in the 

employment of this nature, and the Employee 

specifically further acknowledges receipt of good 

and valuable consideration sufficient to support 

the provision of this agreement and specifically 

further agrees that any violation or breach of this 

part of this contract of employment, or any part 

thereof, shall be a proper subject for injunctive 

relief in addition to any other remedy available in 

equity or at law. The Employee further agrees 

that he will not reveal any information concerning 

any policy or policies of insurance, or the 

expiration dates thereof, to any person whomsoever, 

except to officers of the Employer, and he will not 

solicit renewals of any insurance that is for any 

person or organization other than the Employer. 

The Employee further agrees that upon the 

termination of his employment for any cause 

whatsoever, he will not directly or indirectly 

solicit the insurance customers of the Employer, 

either verbally or in writing, nor will he keep in 

his possession a list of the customers of the 

Employer, nor contact the customers of the Employer 

in any manner, nor use the names and addresses of 

the customers of the Employer for solicitation by 

him or his agent after the termination of his 

employment. The Employee further agrees that upon 

termination of his employment for any cause 

whatsoever, he will surrender to the Employer in 

good condition, any and all records kept and 

maintained by him showing the names, addresses or 

other information with regard to the insurance 

customers or the conditions of this paragraph shall 

be a proper subject for injunctive relief in 

addition to any other remedies available in equity 

or in law. " 

Carol became dissatisfied with her job and terminated 

her employment on June 21, 1981. She opened her own 

insurance business in Great Falls on July 1, 1981. 

First American filed a complaint against Carol in the 

Eighth Judicial District Court of Montana on August 6, 1981, 

seeking injunctive relief. Among other things, the complaint 

alleged Carol to be in breach of Paragraph 8 of her 

employment contract. Specifically, First American alleged 
that Carol is engaged in the same business as her former 

employer in Great Falls and has in her possession a 

confidential list of First American's customers containing 

names, addresses and the renewal and expiration dates of 

policies. Further, Carol has contacted customers on that 

confidential list to solicit renewals on her own behalf. 

Other allegations in the complaint have since been resolved 

by the parties. 

In response to the complaint, a temporary restraining 

order was issued August 10, 1981, ordering that Carol not 

engage in the insurance business in the Great Falls area nor 

contact or solicit insurance husiness with First American's 

customers and that Carol surrender any lists or records of 

First American's customers in her possession. A show cause 

hearing was scheduled for August 20, 1981. 

Carol testified at the hearing that she had solicited 

approximately 91 accounts for her new insurance business. 

Approximately fifty percent (5 0% ) of those prospectj-ve 

accounts were customers of First American. Approximately 

one-half of those customers had initiated contact with Carol 

themselves. Carol actually wrote insurance for one-third of 

the First American customers with whom she had been in 

contact. 

Carol testified that she has never, since leaving First 

American, had any list of customer's names, addresses or 

insurance expiration dates. Rather, any information of that 

nature utilized by her in her own business came from general 

knowledge acquired during her employment. 

Only two letters sent by Carol to prospective customers 

contained a reference to the expiration date of the 

addressee's insurance policy. One letter wa.s to an 

individual who had never been a customer of First American. 
The other letter mentioned an expiration date, but the date 

quoted was not correct. 

First American offered no evidence at the hearing in 

support of its claim that Carol had taken a customer list 

with her when she left the agency. John Watson, Manager of 

First American, testified that he did not know, of his own 

personal knowledge, that Carol had taken any written customer 

information when she left the agency. 

In its findings of fact, conclusions of law and order of 

September 10, 1981, the District Court found no evidence that 

Carol had any customer lists belonging to First American. 

Further, no privileged information was used in contacting 

First American's customers. The court found that Carol had 

"relied only upon her memory and experience, together with 

public information" to contact First American's customers. 

The provisions of the employment contract which restrict 

competition or prohibit Carol from contacting customers of 

First American were found to be void as a matter of law under 

section 28-2-703, MCA. Judgment was granted to Carol against 

First American with respect to all portions of the complaint. 

The matter was then continued for hearing on a motion by 

Carol for attorneys' fees. 

That hearing was held June 3, 1982. Carol presented 

witnesses and exhibits in support of her claim for $2,274.00 

in attorneys' fees and $2.25 in costs. First American 

submitted no witnesses or exhibits. Judgment granting Carol 

$2,276.25 was issued July 16, 1982. 

First American now appeals those judgments and presents 

this Court with the following issues: 

1. Did the District Court err in denying injunctive 

relief and damages to First American for Carol's use of 

information obtained in her employment? 
2. Did the District Court err in the award and 

determination of the amount of attorneys' fees to Carol? 

Because of the specific facts of this case, both 

judgments of the District Court are affirmed. 

Section 28-2-703, MCA states: 

"Contracts in restraint of trade generally void. 

Any contract by which anyone is restrained from 

exercising a lawful profession, trade, or business 

of any kind, otherwise than is provided for by 

28-2-704 or 28-2-705, is to that extent void." 

(Both parties have agreed that neither section 

28-2-704, MCA nor section 28-2-705, MCA, is 

applicable to this case.) 

Contracts in restraint of trade generally are covenants 

not to compete. Covenants not to disclose customer 

information can be valid but the information must be 

"confidential and not readily accessible to competitors." 

Best Dairy Farms, Inc. v. Houchen (1968), 152 Mont. 194, 199, 

448 P.2d 158, 161, citing Gordon v. Schwartz (1957), 147 

Paragraph 8 of the employment contract between Carol 

Gould and First American contains covenants not to compete 

and covenants not to disclose confidential or public 

information. It also contains a provision prohibiting Carol 

from retaining in her possession any customer records upon 

the termination of her employment with First American. 

The covenants not to compete were correctly determined 

by the District Court to be unenforceable. They are 

covenants in restraint of trade and are therefore void under 

section 28-2-703, MCA. 

First American had the burden of proving that the 

covenants not to disclose do not also violate section 

28-2-703, MCA. J.T. Miller Co. v. Made1 (1978), 176 Mont. 

49, 53, 575 P.2d 1321, 1323. First American failed to meet 

that burden. 
No evidence was presented at the hearing that Carol 

retained in her possession any records or lists of First 

American's customers upon leaving its employ. However, 

violations of covenants not to disclose do not require a 

physical taking of customer records. Such covenants can also 

be violated, when an employee memorizes the privileged 

information and uses it elsewhere. 

Carol testified that any knowledge of names, addresses, 

insurance expiration dates and other information concerning 

her customers was solely the result of her work experience at 

First American. She committed no lists to memory. In fact, 

she knew most of the customers before she was ever given a 

list. 

The governing rule of law is settled. "The employee, 

having left his employment, is free to make use of his 

experience, so long as he does not violate his employer's 

confidence." J. T. Miller Co. v. Madel, supra at p. 55, 575 

P.2d at 1324, citing King v. Pacific Vitamin Corporation 

(1967), 256 Cal.App.2d 841, 64 Cal.Rptr. 486. 

There is substantial credible evidence to support the 

trial court's findings that Carol took no property from the 

employer nor did she violate any confidence. 

The judgment of the District Court denying injunctive 

relief and damages to First American is affirmed. 

Finally, the order granting Carol Gould attorneys1 fees 

and costs in the amount of $2,276.25 is affirmed. We held in 

Marta v. Smith (1981), Mont . - , 622 P.2d 1011, 

1015-1016, 38 St.Rep. 28, 33, that " . . . attorney fees and 

costs are recoverable under section 27-19-306, MCA, as 

elements of the damages sustained by reason of the injunction 

. . ." The costs for an injunction are limited to $100.00. 

Section 27-19-406, MCA. Carol's costs were $2.25. The 
attorney fees must be reasonable. Marta v. Smith, supra. 

Sufficient evidence was presented at the June 3, 1982, 

hearing to support the District Court's award of attorneys' 

fees as reasonable. 

The judgments of the Distr ourt are affirmed. 

We concur: 

Chief Justice