Summary
In Moore, the Montgomery County Common Pleas Court held that a corporation's failure to obtain an Ohio license is a technical requirement, and that a corporation can comply with the statutory requirement by obtaining the license at any time prior to judgment.
Summary of this case from CDA OF AMERICA, INC. v. MIDLAND LIFE INSURANCE CO.Opinion
No. 131008
Decided May 17, 1968.
Contracts — Employment — Salesman — Restraint of trade — Covenant unreasonable and invalid, when.
A restrictive covenant in the contract of employment of a salesman of products with a limited market, by which he was to be denied the right to work for any competitor after termination of the employment, anywhere in his entire territory of 139 counties in three states by calling on any customer or prospect on whom he had called, which covered a period of fourteen years, is oppressive, unreasonable and in general restraint of trade and therefore invalid.
Mr. Walter A. Porter and Messrs. Smith Schnacke, for plaintiff.
Mr. William R. Coen, Messrs. Coen Way and Mr. Thomas A. White, III, for defendant.
This cause has been submitted for determination upon the facts and exhibits presented during trial, together with the briefs and arguments of counsel.
On December 20, 1967, twenty days subsequent to the termination of employment, the plaintiff, the employer, obtained an ex parte injunction restraining defendant, the employee, among other things, to the letter of his employment contract as respects paragraph seven (7) thereof as of November 26, 1963.
The facts are not necessarily in dispute, however, the substance to be delineated therefrom undoubtedly gave rise to this law suit.
At the close of plaintiff's case defendant moved for dismissal on the grounds that plaintiff corporation was not licensed in Ohio, no damages proven, no consideration for the contract, and unilateral modification of the contract by the plaintiff. The court reserved its ruling thereon until the conclusion of the case.
This court is of the opinion that it is immaterial whether it rules on such motion because even upon the whole of the evidence and the law, plaintiff has failed to sustain its burden. Injunction being an equitable action, the plaintiff therein has the burden of establishing all the material facts which are essential to injunctive relief; and his right to such relief must be clear and where the right is doubtful, injunction will be denied.
Injunction is not a matter of right but rests in the sound discretion of the court, and is denied unless the whole matter is equitable.
The restraint is oppressive and unreasonable as to space. The court ascertains from the evidence that it covers fifty nine counties in Ohio, sixty two counties in Kentucky and eighteen counties in Indiana. This adds up to one hundred and thirty nine counties. And that is more area than any court has ever sanctioned except when predicated upon a partial restraint. The products sold and rented are limited and by reason thereof the market is limited. Further, it encompasses any one that has ever been a customer of the employer over a period of fourteen years, together with any one upon whom the employee had called during such period. The evidence also shows that there are approximately nine suppliers competing for similar and like business under consideration. It is certainly conceivable that over a period of fourteen years the employee has called on every potential customer in the limited market within the area sought to be covered by the restraint except the counties in Ohio recently added. The restraint puts the employee out of business in areas where he has been and areas to which he has been assigned regardless of the circumstances. Paragraph 4 of the employment contract provides that the employer may change the territory at will. The evidence is clear that his territory has been changed and altered on more than one occasion. The last change increased the Ohio counties from twenty as of February 3, 1954, and from nineteen as of November 26, 1963, to fifty four. The notice of this change was August 11, 1967, effective September 1, 1967. This was modified on September 29, 1967, to an effective date of December 1, 1967, even though the employer insists that the additional territory was assigned to him for coverage as of September 1, 1967.
The restrictive covenant considered, together with all the facts and circumstances, is in general restraint of trade and therefore invalid.
Another strike against the employer has to do with its modifying the employment contract without the consent of the employee. This was done twice on the same day. See defendant's exhibits A and B. The evidence is clear that the employee entered into the contract after careful consideration and upon advice of counsel that the restrictive covenant would be unenforceable.
This court is of the opinion that there is some merit, although it may not be conclusive, to the contention of the employee that he had some substantial right to rely upon the legal advice of the unenforceability of the restrictive covenant. Is this court to say that the employee would have made the contract as altered because its terms are more favorable (in this case less restrictive or might have had different legal advice) to him than those of the original instrument? Not any more than a like conclusion where the alteration imposes an additional liability. In neither case is the altered contract the contract which the employee made. This is just another shred of evidence of the lack of equitableness upon the whole matter.
The court also feels that the employer failed to clearly show irreparable injury. This is an elusive phrase and seldom definitive. Nonetheless, is the court to presume that by reason of the employee having notified, by mail, several old customers that he was now offering similar merchandise from another company, that they would all flock down the line. There was not one microscopic bit of evidence that the employee even had an inquiry or response from his written invitation, much less that he had made any personal call upon a former contact. Yet numerous former customers were paraded across the witness stand, called by the employee, yet employer failed to elicit one single shred of evidence to clearly show that even one of such former contacts and customers would switch his allegiance from E. R. Moore Company to the new and different supplier represented by employee, the defendant herein.
Injury must be real and not imaginary. There must be testimony from which it may be declared that it is reasonably certain that the employer will suffer immeasurable damages. No such showing has been made.
Employer also contends that employee is equipped with trade secrets. This court finds nothing in the evidence that is unique about any particular idea, tool method, or any other part of the business as imparted to or acquired by the employee. There is no presumption that any thereof is a trade secret and the employer failed to prove that any thereof is in fact a trade secret.
The remaining issues and contentions advanced by the parties do not require determination in reaching the conclusions herein. The court has, however, examined them and has thoroughly researched the propositions of law so advocated.
As to consideration for the contract on the part of the employee it is there and it is adequate. The court is not concerned with the value of consideration, unless it is grossly inadequate, but is concerned with the existence or absence of any consideration.
As to employer's failure to procure an Ohio license under Chapter 1703, Revised Code, until during the course of the trial, this is immaterial. It is purely a technical defense, proscribed by statute. The statute does not proscribe the guidelines and they may not be delineated with precision from the case law. Therefore any time before judgment that the license is in fact obtained fulfills the requirement of the statute with reference to maintaining an action. This is so because of the fact that in many situations it is most difficult to determine whether or not compliance is in fact a prerequisite.
Another inequitable feature of this case is the fact that the employer prevailed upon this court, ex parte, and obtained a temporary injunction that covered the restriction which it had unilaterally eliminated and this has continued now for almost five months. It is apparent from the record that such was not disclosed by the employer to its counsel. Another example of the tactics of the employer in its zest and zeal to hem in the employee.
The employer has enjoyed the fruits of its labor now for five months by obtaining the ex parte temporary injunction. It has therefore received from the hands of equity that which the court now determines it was not entitled. Wherefore, assuming that there may be underlying equities in the whole matter that should be balanced, the court finds that the employer has had more than the lion's share.
The court has examined and carefully researched each and every citation of authority submitted together with its independent research and thereby concludes that the conclusions reached are in accordance with law and are within the spirit and intention of the decisions of Hubman Supply Co. v. Irvin, 67 Ohio Law Abs. 119; Arthur Murray v. Witter, 62 Ohio Law Abs. 17; Briggs v. Butler, 140 Ohio St. 499, together with all the law heretofore expounded in Ohio and elsewhere on the questions herein presented. The authorities are vast, bewildering and compromising. Nevertheless, upon the peculiar facts and circumstances presented here the court finds that plaintiff's right to an injunction is not clear, and in fact it is doubtful, and thus on the record and in the exercise of its discretion, denies a permanent injunction.
The temporary injunction should be vacated and set aside and final judgment entered for the defendant.
Judgment for defendant.