Case Name: White Baking Co. v. Snell
Court: Montgomery County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1930-07-22
Citations: 28 Ohio N.P. (n.s.) 172
Docket Number: 
Parties: White Baking Co. v. Snell.
Judges: 
Reporter: Ohio nisi prius and general term reports (new series)
Volume: 28
Pages: 172–179

Head Matter:
White Baking Co. v. Snell.
Common Pleas Court of Montgomery County.
Decided July 22, 1930.
Burkhart, Heald & Pickrel.
Ma/hlon Gebhart, Mattern & Mattern.

Opinion:
Snediker, J.
This case was brought by the plaintiff for injunctive relief. The petition recites that the defendant was an employee of the plaintiff company. Plaintiff is engaged in the manufacture and sale of baked goods. Defendant was operating a route for the retail sale of plaintiff's products in this and in Warren county. An employment contract was entered into between the parties on December 19, 1929, by the terms of which the defendant was to receive $25 per week for his services and for the use of his truck; maintenance expense on the truck was to be kept up by the defendant; in addition to the regular wage, plaintiff agreed to pay the defendant "a sum of money each week which will equal 26 per cent, of the gross receipts of the baked goods and product" sold by the defendant. Among other terms of the contract are the following:
"In consideration of the premises and the mutual covenants herein contained, Second Party (defendant) agrees to sell the goods and merchandise so manufactured by First Party, on said route, to diligently, faithfully, soberly, and courteously work said entire route at least once every day, Sundays excepted, and not to sell any other baked goods than those of the Party of the First Part, over and on said route; Further, said Second Party agrees to sell all goods at the prices given to him by Party of the First Part and not to solicit or sell any trade outside said territory; and said Second Party further agrees faithfully and conscientiously to maintain said route, the property and good will of the First Party in said route, by courteous and business-like attention to the customers of First Party along said route, and also to solicit orders and negotiate further sales at the residences of the customers of the First Party.

"Said Second Party shall deliver to First Party all cash received by him each day and any goods taken out by Second Party and not sold by him.
"Said Second Party agrees that in event this contract-is terminated for any cause whatsoever, he will not engage alone or with others, either directly or indirectly as employer or employee, in the solicitation, distribution or selling of any baked goods of any kind whatever, within the above designated territory nor interfere with, prevent or in any manner hinder First Party, its agents or employees from selling its goods within said territory for a period of one year thereafter;

"This contract may be terminated by First Party, without notice in case of Second Party failing to comply with any of the conditions, duties or obligations imposed by this agreement or provisions contained therein otherwise the agreement continues in force for five years from date thereof.

"First Party may have certain rules and regulations concerning and governing the conditions of employment of Second Party and each and all of which the Second Party agrees to follow and obey."
From the 19th day of December,' 1929, until about April 24, 1930, his contract with the plaintiff company was availed of by the defendant. During that period he solicited the trade along his route and received compensation therefor. On April 22, 1930, however, he became ill with cold and fever, and was confined to his bed. He sent his truck over to the place of business of the plaintiff, and rt-ported his illness. Another man was put on his route, and on April 23d, although not yet recovered, the defendant accompanied the supervisor of the route, to furnish whatever information he could, or which would be required for the operation of the plaintiff's business thereon. The truck continued in possession of the plaintiff and was used for a little over a week, and eventually the defendant was allowed compensation for its use. On May 5, 1930, he returned to the offices of the plaintiff in condition to resume his work, when he was told that his services were no longer required. The reasons given at the hearing by the several witnesses for the discontinuance of his services were as follows:
1. That he had not started on his route at an early enough hour.
2. That he had declined to wear the standard uniform prescribed by the plaintiff. Here it may be said that the uniform referred to is one which is generally used by the route men of the plaintiff company, and is thought necessary by it to the furtherance of its business.
3. That he was not polite and agreeable to the customers, and generally, that he did not take care of the business as he should have done.
The information that was given him on May 5th was regarded by him and by the company as a discharge from its employment. Thereafter he sought employment elsewhere of a like kind for another baking company, and went over the route which he had established, or at least continued for the plaintiff, solicited its customers on behalf of his new employer, and as we recall, he called upon two-thirds of his old customers, who were and had been while he was in plaintiff's employ, buying its product. This was learned by the plaintiff, and the petition in this case was filed.
The defendant does not deny his employment by the plaintiff under the contract to which we have referred; he does not deny that he had established a route in the territory described; nor does h,e deny that after his discharge he became an employee of a company in a like business and as such covered the same route, soliciting his same customers as theretofore for the plaintiff. He says, however, that his discharge was not justified by the facts, that the plaintiff broke its own contract with him; that therefore he is not bound by its terms, and that the injunction sought for by the plaintiff ought to be denied.
Having regard to the contract, and finding therein agreement on the part of the defendant that if it be terminated for any cause whatsoever "he will not engage alone or with others, either directly or indirectly as employer or employee, in the solicitation, distribution or selling of any baked goods of any kind whatever, within the above designated territory, nor interfere with, prevent or in any manner hinder First Party, its agents or employees from selling its goods Within said territory for a period of one year thereafter," and remembering that the ground of complaint of the plaintiff company was substantial so far as its business interests were concerned, we are constrained to hold that the breach of the defendant of this contract was sufficiently material to justify the action of the plaintiff, and if that be true, then he is bound by the terms of his contract.
We do not regard this evidence as disclosing any ulterior purpose on the part of the plaintiff, or as indicating that it sought to take advantage of the defendant because of his illness and to transfer the route to another at a time when, he was unable to protect himself. What happened was that in his absence, there having been theretofore certain things going on that were not pleasing to the plaintiff and not in accord with his contract, a more thorough inspection of his conduct was made and it was determined that he ought to be let go and another man put in his place.
"To justify the discharge of an employee before the completion of the term of employment, it is sufficient for the employer to show that the employee was guilty of a default in duty whose natural tendency was to injure his business. An actual injury thereto need not be shown." (66 Ohio St., p. 136.)
The remedy of injunction in a case like this, however, is not confined strictly to a cause of action arising out of the written contract. The law which protects an employer from unfair competition of the character in the petition described is broader than that. There is subsisting between the employer and employee under such conditions a quasi contract that the employee will not use the information which he acquires while in the employment, after he has left it, to destroy the business of his employer. Even in the absence of a clause in the contract which prevents the use of information of this character in that way, the law throws about the business and about the property of the employer a protection which prohibits the improper use of information to the detriment of the employer.
In the case of Red Star Yeast & Products Co. v. Hague, 25 Ohio Appellate Reports, page 100, it was held:
"In action by employer to enjoin employee from engaging in competitive business under contract prohibiting such competition by employee for 6 months after leaving employment from whatsoever cause, it was immaterial whether discharge was justifiable."
In the case of Empire Steam Laundry, Respondent, v. Rudolphus Lozier, Appellant, 165 Cal., p. 95, there is a discussion of the principle which we have just referred to. In that case the facts as to solicitation of trade were similar to the acts of this defendant. The syllabus reads:
"Equity will always protect an employer against the unwarranted disclosure and unconscionable use by an employee of trade secrets and confidential business communications. The equitable jurisdiction in this connection is not dependent upon express provisions in the contract of employment prohibiting such disclosure or use.
"An employee of a laundryman, whose duties were to drive a laundry, wagon along a designated route in a city, to serve well the customers of his employer, to increase his business, to solicit new business, and to keep a complete and confidential list of all the customers on the route, is engaged in an agency of trust and confidence, and such list, even though in part prepared by him, is the absolute, and a valuable part of the property of the employer.
"Knowledge acquired by such employee during his employment of the names and addresses of the customers along the route, is in the nature of a trade secret or confidential communication, and equity will enjoin him, after the termination of his employment from soliciting or receiving, on behalf of another laundryman, laundry work from any of such customers."
In the case of Lamb v. Evans, L. R. 1893, Chancery Div., 218, the court used this language:
"What right has any agent to use materials obtained by him in the course of his employment and for his employer, against the interests of that employer? I am not aware that he has any such right. Such a use is contrary to the relation which exists between principal and agent. It is contrary to the good faith of the employment, and good faith underlies the whole of an agent's obligation to his principal. No case, unless it be the one which I will notice presently, can, I believe, be found which is contrary to the general principle upon which this injunction is framed, namely, that an agent has no right to employ as against his principal, materials which that agent has obtained only for his principal and in the course of his agency. They are the property of the principal. The principal has, in my judgment, such an interest in them as entitles him to restrain the agent from the use of them except for the purpose for which they are got."
Other language of the California court is as follows:
"That equity will always protect against the unwarranted disclosure of trade secrets and confidential communications and the like, is, of course, settled beyond peradventure."
Here follow numerous authorities upon which the court relied for its opinion in that case.
In the 61st Misc. Rep., N. Y., p. 126, there was before the court the case of Witkop & Holmes Co. v. Erwin G. Boyce, a case similar to the instant case, in which the court held as did the court in the California case from which we have quoted, and in the opinion used this language :
"The doctrine is broadly stated by Mr, Justice Story in his work on Equity Jurisprudence where he says:
" 'Courts of equity will restrain a party from making-disclosures of secrets communicated to Mm in the course of a confidential employment; and it matters not, in such cases, whether the secrets be secrets of trade or secrets of title, or any other secrets of the party important to his interests.'
"High, in his excellent work on Injunctions declares that
" 'The disclosure of secrets which have come to one's knowledge during the course of a confidential employment will be restrained by injunction. And where a confidential relationship has existed out of which one of the parties has derived information concerning the other, equity fastens an obligation upon his conscience not to divulge such knowledge, and enforces the obligation when necessary by injunction.' "

"The principle of law, however, is not confined to secret processes of manufacture or methods of doing business, but has a much wider application, as stated by Mr. Justice Story. The names of the customers of a business concern whose trade and patronage have been secured by years of business effort and advertising, and the expenditure of time and money, constituting a part of the good-will of a business which enterprise and foresight have built up, should be deemed just as sacred and entitled to the same protection as a secret of compounding some article of manufacture and commerce."
In the case of Robb v. Green, II Queen's Bench Division, 1895, there was a case in which the defendant, being employed by the plaintiff as manager of his business, secretly copied from his master's order book a list of the names and addresses of his customers, with the intention of using it for the purpose of soliciting orders from them after he had left the plaintiff's service and set up a similar business on his own account.' Subsequently his service with the plaintiff having terminated, he did so use the list',
"Held, that it was an implied term of the contract of service that the defendant would not use, to the detriment of the plaintiff, information to which he had access in the course of the service, and therefore that the defendant was liable in damages for any loss caused to the plaintiff by reason fif the breach of that term."
In view of all the foregoing, we are of the opinion that this plaintiff is entitled to a permanent injunction against the defendant preventing him from further engaging along the route which he formerly worked for the plaintiff in soliciting the trade of its old customers, for a competing business.
An entry may be drawn accordingly.