Opinion ID: 1835915
Heading Depth: 4
Heading Rank: 2

Heading: Star Direct's Interests in Prohibiting Competition with its Past Customers

Text: ¶ 31 The customer clause prohibited Dal Pra from contacting past customers, defined as those who purchased from Star Direct within one year prior to his termination. Dal Pra asserts that Star Direct does not have a legitimate protectable interest in these past customers. The circuit court agreed, and so does the dissent. ¶ 32 No Wisconsin case has explicitly addressed or affirmed an employer's interest in customers who have recently chosen to cease doing business with the employer. However, Wisconsin courts, including this court, have reviewed provisions that clearly apply to past customers, and have been untroubled by this asserted interest. ¶ 33 In Rollins Burdick Hunter of Wis., Inc. v. Hamilton, 101 Wis.2d 460, 304 N.W.2d 752 (1981) (hereafter  Hamilton ), this court considered a restrictive covenant that prohibited the two defendant employees from soliciting, contacting, or doing any competitive business with anyone who had been a customer of the company during the two years preceding termination or the period of their employment, whichever was shorter. Id. at 462-63, 304 N.W.2d 752. Because the employees worked for more than two years, the two-year timeframe was applicable. Id. During those two years preceding termination, the employer had over 6,000 customers, only 175 of which had contact with the defendant employees. Id. at 463, 304 N.W.2d 752. Though the court did not discuss it, such a customer pool certainly could have included customers who had chosen to take their business elsewhere. Thus, this provision prevented the employees from contacting both current and past customers with whom they may or may not have had contact. It bears reminding that the two-year timeframe here is one year longer than the provision in the case at bar. ¶ 34 The litigants and the courts were primarily concerned that this prohibited contact with customers the employees may not have serviced at all. Id. at 463-64, 304 N.W.2d 752. On review, we determined that the employer may have a legitimate protectable interest where the employees had access to important customer information, even if they did not personally have contact with those customers. Id. at 468-69, 304 N.W.2d 752. Though not ultimately determining whether the provision was valid, we reversed the court of appeals and circuit court who had previously found the provision invalid. Id. at 471-72, 304 N.W.2d 752. ¶ 35 A similar restrictive covenant was at issue in Farm Credit Servs. of N. Cent. Wis., ACA v. Wysocki, 2001 WI 51, 243 Wis.2d 305, 627 N.W.2d 444. In that case, for one year following termination, an employee who provided accounting, bookkeeping, and tax preparation assistance was prohibited from engaging in the same business activities with persons the employee consulted or serviced at any time during the one year immediately prior to the date of separation. Id., ¶ 4. Again, though not discussing this point, the total world of possible customers that the employee could not contact included customers who may have chosen to no longer do business with the employer. We concluded that such a restriction was not invalid per se, and remanded to the circuit court for further fact-finding. Id., ¶ 16. ¶ 36 In a similar court of appeals case, the court determined that a restrictive covenant prohibiting, among other things, interference with a client who was a customer during the past two years, was reasonable as a matter of law. Techworks, LLC v. Wille, 2009 WI App ___, ¶ 6, ___ Wis.2d ___, ___ N.W.2d ___, 2009 WL 818970. Though again not discussed in the court's analysis, this provision includes customers who may have chosen to take their business elsewhere during the previous two years, and the court determined this provision was enforceable. ¶ 37 As this brief review of the case law shows, Wisconsin courts and litigants have been untroubled by an employer's asserted interest in its recent past customers. While these cases do not settle the matter, the customer clause is distinguishable from these other cases only in that it expressly divided the customers into two identifiable groupscurrent and past customers. This brings the issue to the fore, and the question is does Star Direct have that interest vis-à-vis Dal Pra? [7] ¶ 38 Star Direct does have an interest in prohibiting the solicitation of its recent past customers. First, Dal Pra obtained significant knowledge regarding Star Direct's business that could be used against Star Direct. If not prohibited, Dal Pra would be able to approach these customers with knowledge of Star Direct's prices and pricing strategies, proprietary marketing techniques, and profit margins. He would have all the information a competitor would want and need to know to effectively undercut Star Direct. ¶ 39 Second, through his employment and because of Star Direct's investment in him, Dal Pra would, as the customer clause so states, have serviced, dealt with, or have special knowledge about these customers. He would know their specific needs and product desires, and would have a relationship history with many of them. This would place him in a far better position than an ordinary competitor, and give him a distinct advantage. ¶ 40 Finally, Star Direct does have a general interest in winning back the business of its recent past customers. The record shows this is a relationship-based and highly competitive business. It takes significant effort and investment to win customers. These past customers may have chosen to take their business elsewhere only temporarily, and would still have a history with Star Direct. While an employer's prospects of rekindling customer relationships fades considerably over 15 years (as in Equity Enters., Inc. v. Milosch, 2001 WI App 186, 247 Wis.2d 172, 633 N.W.2d 662), we believe under the facts of this case that an employer is entitled to an opportunity to recoup the considerable investment of resources it made in developing and fostering customer relationships and business opportunities that were active as recently as one year prior to the employee's termination. ¶ 41 For the reasons articulated above, Dal Pra would not simply be engaging in ordinary competition with Star Direct if permitted to interfere with recent past customers. He would have a distinct competitive advantage, and this advantage would be detrimental to Star Direct's business. We render no opinion as to how much time must pass between a customer placing an order and a route salesperson's termination before the employer no longer has a legitimate protectable interest in that customer. Our holding today under the facts of this case is that the interim of one year is not too long.