Opinion
Decided November 20, 1929.
Contracts — Restraint of trade — Salesman's agreement against engaging in competing business for one year, enforceable — Injunction.
A contract of exclusive selling rights in two states and two cities in other states, providing that the salesman shall not, for a period of twelve months after the termination of his employment, otherwise engage in the business or aid any competitor's business within the territory assigned, is not in restraint of trade and may be enforced by injunction, where the contract was supported by sufficient consideration, its terms were not oppressive, and the restraint was only partial.
APPEAL: Court of Appeals for Cuyahoga county.
Messrs. Snyder, Henry, Thomsen, Ford Seagrave, for plaintiff.
Messrs. Holliday, Grossman McAfee and Mr. Maurice F. Hanning, for defendant.
The parties hereto on August 20, 1928, entered into a contract by which the defendant, Maurice E. Frankel, was to sell disinfectants and like products for the plaintiff on commission, the plaintiff to afford the defendant a drawing account of $125 per week. The defendant was given "exclusive selling rights in Ohio and Michigan on all Catholic schools and Catholic institutions; the cities of Erie, Pa., and Louisville, Ky." It was expressly agreed that for a period of twelve months after the termination of the defendant's employment the defendant should not otherwise engage in the business for which he was employed; nor act in aid of the business of any competitor within the boundaries of the territories assigned the defendant for a period of twelve months. In May, 1929, the defendant left the plaintiff's employment, and entered the service of a rival company, and proceeded to solicit for that rival company some of the purchasers to whom he had sold the goods of the plaintiff. These purchasers were Catholic schools and institutions in Ohio and Michigan. This action was brought to enjoin the defendant from further violating his contract in so soliciting for a rival concern.
The defendant admits that he has been selling for a rival of the plaintiff in the territory and to the customers referred to, and that he will continue so to do unless restrained by a decree of this court. He attempts to justify his conduct solely on the ground that the contract is unenforceable. He relies in this behalf largely on the principle laid down in Lufkin Rule Co. v. Fringeli, 57 Ohio St. 596, 49 N.E. 1030, 41 L.R.A., 185, 63 Am. St. Rep., 736. In Lange v. Werk, 2 Ohio St. 519, it was settled that contracts in general restraint of trade are illegal, but that one seeking the enforcement of the kind of contract now under consideration may do so, provided he shows that the restraint is partial only, that it is founded upon a valuable consideration, and that its terms are reasonable and not oppressive. These fundamental rules were adhered to in the Lufkin case. In the latter case the contract was denounced because it tended to create a monopoly in the party seeking to enforce it, and that opinion only qualifies or clarifies the Lange case by applying the principles of the former to the peculiar circumstances of the Lufkin case.
In the case now before us it is apparent that the restraint is but partial. The agreement only restrains the defendant from soliciting in two states, leaving him at liberty to transact business with all institutions not under Catholic control in those two states, and leaves him all the world outside those two states. It is predicated upon a sufficient consideration, because by virtue of this stipulation he obtained employment on a commission with a weekly advance that at least to some degree helped him to build up and maintain relations with the institutions referred to. It is not oppressive, because it leaves him with a vast field to work, part of which he is now actually under contract to work for the rival firm. In the Lufkin case a tendency to monopoly was disclosed, because in that case the goods being manufactured were a kind of goods for which there was a limited demand, restricted to particular sections of the country. In the case at bar there is no such restriction either as to the quantity of goods that may be sold or the place where they may be salable. The controlling principle under the facts developed by this record are set forth in a note to Samuel Stores v. Abrams, 9 A.L.R., 1450, where, on page 1468, it is said:
"It is clear that if the nature of the employment is such as will bring the employee in personal contact with the patrons or customers of the employer, or enable him to acquire valuable information as to the nature and character of the business and the names and requirements of the patrons or customers, enabling him, by engaging in a competing business in his own behalf, or for another, to take advantage of such knowledge of or acquaintance with the patrons or customers of his former employer, and thereby gain an unfair advantage, equity will interfere in behalf of the employer and restrain the breach of a negative covenant not to engage in such competing business, either for himself or for another, providing the covenant does not offend against the rule that as to the time during which the restraint is imposed, or as to the territory it embraces, it shall be no greater than is reasonably necessary to secure the protection of the business or good will of the employer."
It follows that the plaintiff is entitled to the decree prayed for. The same entry will be made in this court as in the common pleas.
Decree for plaintiff.
MIDDLETON and HOUCK, JJ., concur.
Judges MIDDLETON and MAUCK, of the Fourth Appellate District, and Judge HOUCK, of the Fifth Appellate District, sitting in place of Judges SULLIVAN, VICKERY and LEVINE, of the Eighth Appellate District.