Oppenheimer v. Sayer

Tuley, J. The complainants, doing business in New York and Chicago, selling sausage casings, butchers’ supplies, meat and meat products, in 1884 employed the defendant, then about twenty years of age, as a traveling salesman, at a salary of seven dollars per week and one per cent, upon all sales made by him; and a few days after procured from the defendant a written agreement, in substance, that in consideration of such employment and of one dollar and other good and sufficient considerations, not to make known any information or trade secrets relative to the business of complainants, and that neither in Illinois and eighteen other named states, nor in the province of Ontario, Canada, would he, directly or indirectly, engage in the said business for the period of three years from the termination of his employment. In 1886, complainants having discovered that the defendant was a minor when he signed the agreement, obtained anew agreement or contract confirming that made in 1884. In December, 1888, defendant left the employment of complainants and soon thereafter entered into a partnership with one Wolf in the city of Chicago and commenced the business-of dealing in sausage casings and butchers’ supplies. Thereupon, on the 19th of January, 1889, this bill was filed] to restrain the defendant from parrying on such business ini -Illinois, Wisconsin, Michigan, Ohio and Minnesota, being the-states in which defendant had done business as a traveling-salesman for complainants. It appears to be admitted that the first contract is not binding on defendant by reason of his being a minor at the time of its execution, imless the confirmatory agreement is binding upon him. Defendant alleges fraud of complainant in obtaining the execution of the confirmatory agreement of 1886. Much evidence was taken which is conflicting and irreconcilable. While there is some evidence tending to show misrepresentations made to defendant to induce him to sign the agreement, there was none which in my opinion was of so material a character, or which was so controlling in inducing defendant-to sign the confirmatory agreement as to make the contract void for fraud. It is contended that the evidence shows that at least one hundred and one dollars was paid defendant as an additional consideration for Ms signing the last agreement. I find from the evidence that the defendant signed the same under a threat of discharge and received no consideration other than a continuation of his weekly employment and probably the one dollar mentioned in the agreement. The defendant contends that the contract is in restraint of trade and therefore contrary to public policy and void. Covenants in restraint of trade generally are void because contrary to public policy, but where the restraint is only par-dial, the consideration for the agreement is a good consideration, and the restriction is reasonable, such contracts are legal and can be enforced. The doctrine of the common law that contracts in restraint of trade which embrace the entire kingdom or state are void, has been much modified by the later decisions of the courts. Justice Bradley in Oregon Steam Navigation Company v. Winsor, 20 Wallace, 64, 67, well claims that “This country is substantially one country, especially in all matters of trade and business, and it is manifest that cases may arise in which it would involve too narrow a view of the subject to condemn as invalid a contract not to carry on a particular business within a particular state,” and that “Cases must be judged according to their circumstances, and can only be rightly judged when the reason and grounds of the rule are carefully considered. ’’ In the modern method of doing business, by means of traveling salesmen, a business ceases to be local or confined to any one state, but the whole territory traversed by the traveling salesman becomes the territorial limits of the business. A covenant not to do business within such limits may not be any more against public policy than, formerly, a covenant not to do business in a certain town or city. The methods of modem convenience in the transaction of business have done away with the reason of the rale founded upon territorial limitations. In the Diamond Match Case, 106 N. Y. 473, the covenant included all the United States except one. It was held valid. Beal v. Chase, 31 Mich. 491, is also a very strong case upon this point. It is contended that the consideration, which was only an •agreement to employ the defendant by the week at cértain wages and the one dollar mentioned in the contract, was inadequate and therefore the contract is void. At law the consideration—even that of one dollar—is a valuable consideration and sufficient to support a contract—■ sufficient to support this as well as any other contract. If the parties considered the employment and the one dollar a reasonable and adequate consideration, it is not for the court to say that it was unreasonable or inadequate. To hold otherwise it appears to me would be to make the contract rest upon the business capacity and intelligence of the court as compared with that of the complaining party. It is an old saying that the law does not attempt to give any man brains or business sense. A contract good at law should be good in equity. The only time a court of equity will inquire into the adequacy or sufficiency of the consideration is when the contract is sought to be specifically enforced, directly or indirectly, and the inquiry of the court then is not as to the validity of the contract, but whether the court of equity will lend its aid to enforce it. The restriction as to the length of time (three years) for which defendant bound himself not to engage in the business, is not unreasonable. I do not understand defendant’s counsel as contending that it is. The only remaining question is, should a court of equity give its aid towards the enforcement of this contract f It appears to me that the decisions governing courts of equity as to decreeing the specific performance of contracts should control this case. The application of complainant to this court is that this court decree that the defendant specifically perform his contract by decreeing a perpetual injunction against his breaking it. In other words,—that he abstain from going into and doing the business which 'by the contract he agreed he would abstain from for three years. It is the only specific performance of the contract by the defendant which this court could decree. There are no trade secrets in this business to be divulged, and it is only by the competition of the defendant in business that complainants can be injured. Pomeroy, in his work on the Specific Performance of Contracts says: “It may be laid down as a general proposition that if there-is any circumstance or fact connected with the preliminary negotiation * * * with the relations of the parties or conduct of the plaintiff which renders the enforcement unfair, harsh or inequitable upon the defendant, such specific-performance will be refused; and to produce such a result there need have been no intentional dishonesty or unfairness,, although in a great majority of instances the design to overreach or obtain an undue advantage exists.” * * * “The concealment, suppression or neglect to disclose any fact during the negotiation which, if known, could have reasonably affected the result, although not amounting to such-fraudulent concealment as would furnish ground for a rescission, will induce the court to withhold its equitable remedy.” (Pomeroy, secs. 183, 184.) In this case I found that in order to induce defendant to sign the contract, one of the complainants did represent to him that Nic Wolf, a fellow-employee, a friend of defendant and upon whom he was known to rely for counsel and advice, had signed a similar contract. This was false, and while not such a misrepresentation as would be material and enable the defendant to have a rescission of the contract, this court, which abhors deceit and false representations, whether material or not, can not look favorably upon an application for the enforcement of a contract obtained by such means. “Not only,” says Pomeroy, “must the agreement be fair and reasonable in its terms and its surrounding circumstances; it is a well settled doctrine that its specific execution must not be oppressive.” That—-“every unfair contract is unconscionable and hard.” ‘‘ The oppression and hardship, therefore, -which fall within the scope of the doctrine may result from the unequal, unconscionable provisions of the contract itself.” In this case the defendant, a boy of twenty, uneducated and ignorant to an extent that he could with difficulty read writing, applied for work to complainants, who employed him by the week at $7 per week, and one per cent, commission upon sales. He is asked to sign this contract,, and without reading it, does so, or if he did read it, was scarcely capable of comprehending its meaning. Under this contract complainants do not bind themselves to give him employment beyond week to week, do not bind themselves to teach him the business or the secrets, if any, of such business, but exact from him a mortgage upon his liberty of action and practically upon his means of livelihood, for three years. If he should continue in the employment long enough to learn the business, he is made to agree in effect that for an employment for one week he will not pursue a certain line of business for a term of three years after his discharge; It is true he affirmed this contract two years or more thereafter, when of full age, but he did it under a threat of discharge and upon a false representation that his friend, upon whose judgment he relied, had signed a similar one. The consideration for the confirmatory agreement was the continuation of the same weekly employment, and one additional dollar. Is it fair, is it a reasonable contract as between men of large business and contract experience, educated and intelligent men, and á boy of twenty or twenty-two, ignorant, uneducated, seeking wages unon which to live? Is it fair that such men should exact from such employe a covenant by which he surrenders for three years his “business freedom” as to following the business which may have required years to learn ? It is said, however, that all other business pursuits and trades were open to him. That is a good answer at law, but is an unconscionable one in equity. I do not want it to be understood that no contracts of this nature will be enforced in equity. But in order to have them enforced it must appear that they are not practically unilateral, or all on one side. The employer must agree to do something, must give an adequate consideration; the contract must be fair, not harsh or oppressive, in order to obtain an injunction which will restrain a party’s business freedom and which will operate more or less in restraint of trade. It is alleged that the defendant is insolvent, and that in a suit at law the damages are not capable of ascertainment. The circumstances may give a court of equity jurisdiction to enforce contracts of this nature which are fair and reasonable, not one sided in their covenants, obtained in a fair, not oppressive manner, and not founded upon deceit or misrepresentations. But this is not such a contract, and the fact that the remedy is not adequate does not make it the duty of this court to enforce contracts which do not possess these qualifications, and the enforcement of which would be against equity and good conscience. The complainants must seek their remedy at law, and the injunction herein granted must be dissolved and the bill dismissed for want of equity without prejudice to the complainant’s legal remedy. Defendant moved the court for leave to file suggestion of damages. NOTE. A. Injunction to Prevent Breach of Contract for Personal Services and to Restrain Employes from Soliciting Customers, Disclosing Trade Secrets, etc. Validity of Contracts, etc. Injunction will not lie to restrain an employe from, working for a rival concern in violation of his contract unless his services are unique and extraordinary. Kessler v. Chappelle, 77 N. Y. S. 285 (wine salesman); Stone Cleaning & Pointing Union v. Russell, 77 N. Y. S. 1049 (stone cleaning and pointing workman); Jewelry Co. v. O’Brien, 70 Mo. App. 432 (jewelry salesman); Lithographic Co. v. Crane, 12 N. Y. S. 834 (skilled lithographer); Johnston Co. v. Hunt, 21 N. Y. S. 314, 66 Hun, 504 (advertising solicitor). Rogers v. Rogers, 58 Conn. 356, 20 Atl. 467, 18 Am. St. Rep. 278 (cutlery salesman, agent and manager); Burnley v. Ryle, 91 Ga. 701, 17 S. E. 986 (insurance solicitor). See also vol. 4 Pomeroy, Equity Jurisp., 3rd ed., sec. 1343; Pomeroy, Specific Performance, 2nd ed., sec. 24. In Universal Talking-Machine Co. v. English, 69 N. Y. S. 813, 34 Misc. 342, it was held that equity would not enjoin an employe having special knowledge or skill, unless it was affirmatively shown that such skill cannot be supplied by others. Injtinction will lie where the services are unique and extraordinary. Lumley v. Wagner, 1 DeGex, MacN. & Gordon, 604 (singer); Hoyt v. Fuller, 19 N. Y. S. 962 (danseuse); Duff v. Russell, 14 N. Y. S. 134, 16 N. Y. S. 958, 133 N. Y. 678, 31 N. E. 1 (actress); Daly v. Smith, 38 N. Y. Super. Ct. 158, 49 How. Pr. 150 (actress). This decision contains a full review of the authorities. McCaull v. Braham, 16 Fed. 37 (actress). See note to above case on pp. 42-49. Metropolitan Exhibition Co. v. Ward, 9 N. Y. S. 779 (ball-player); Pratt v. Montegriffo, 10 N. Y. S. 903 (singer); Carter v. Ferguson, 5.3 Hun, 569, 12 N. Y. S. 580 (actor); Canary v. Russell, 30 N. Y. S. 122, 9 Misc. 558 (actress); Fredricks v. Mayer, 13 How. Pr. 566 (actor); Philadelphia Ball Club v. Hallman, 47 Leg. Int. 130, 8 Pa. Co. Ct. 57 (ball-player); American Association Ball Club of Kansas City v. Pickett, 8 Pa. Co. Ct. 232 (ball-player); Montague v. Flockton, L. R. 16 Eq. 189 (actor); Cort v. Lassard, 18 Ore. 221, 22 Pac. 1054, 17 Am. St. Rep. 1054, 6 L. R. A. 653 (acrobat); Metropolitan Exh. Co. v. Ewing, 42 Fed. 198, 7 L. R. A. 381 (ball-player); Philadelphia Ball Club Limited v. Lajoie, 202 Pa. 210, 51 Atl. 973, 90 Am. St. Rep. 627, 54 Cent. L. J. 446, 58 L. R. A. 227 (ball-player); Grimston v. Cunningham, L. R. (1894) 1 Q. B. D. 125 (actor). In the cases of The Columbus Baseball Club v. Reiley, 25 Week. L. B. 385, s. c. 11 Ohio Dec. 272; American Baseball & Athletic Exhibition Co. v. Harper, 54 Cent. L. J. 449, and Harrisburg Baseball Club v. Athletic Association, 8 Pa. Co. Ct. 337, injunctions were denied in the case of baseball-players on the ground that the services were not unique and extraordinary. See also H. W. Gossard Co. v. Crosby, 109 N. W. 483 (Iowa). In Philadelphia Ball Club Limited v. Lajoie, supra, it was held that to authorize an injunction, it is not necessary that the employe’s services be of such a character that it is impossible to replace them; it is sufficient if they are of such a unique character, and display such a special knowledge, skill and ability as to render them of peculiar value to the employer and difficult of substitution. In H. W. Gossard Co. v. Crosby (Iowa, Oct. 1906), 109 N. W. 483, the authorities are reviewed at length and it is held that in the absence of an express covenant not to work for another in a contract for personal services, equity will not aid the enforcement of such contract by restraining the employe from working for others. It is also held that even where there is an express covenant not tp work for others, injunction will not be granted, except where the services are special, unique, unusual and extraordinary, or of an intellectual character which render such services of peculiar value. In that case the defendant was employed to sell a front lace corset and to give lectures pertaining to physical culture. The services were alleged to be unique, requiring a cultured salswoman of strong individuality, with good address and ability as a lecturer, which requirements the employe was alleged to possess. It was held that such services were not unique and extraordinary. In Brooklyn Base Ball Club v. McGuire, 116 Fed. 782 (C. C. E. D. of Pa.), an injunction was denied in the case of a ball-player, for the reason that the contract contained a provision that the same might be terminated upon ten days’ notice. •In Welty v. Jacobs, 171 Ill. 624, it was held that the manager of a theatrical company could not enjoin the proprietor of a theater from refusing to furnish his theater, stage hands, etc., nor from letting the theater to another company, as such a contract cannot be affirmatively specifically enforced. In Robertson v. Montgomery Baseball Ass’n, 141 Ala. 348, 37 So. 388, it was held that a bill would not lie to restrain defendants from seeking an injunction to restrain complainants from playing baseball. See vol. 60 Cent. L. J. 93. See also upon the subject in general note in. vol. 90 Am. St. Rep. 646 and in vol. 54 Cent. L. J. 451. As to whether an injunction will lie in the absence of an express covenant see H. W. Gossard v. Crosby (Iowa 1906), 109 N. W. 483, where the authorities are reviewed. See also Butler v. Galletti, 21 How. Pr. 465; Welty v. Jacobs, 171 Ill. 624; Whitwood Chemical Co. v. Hardman, L. R. (1891) 2 Ch. Div. 416. In Hahn v. Concordia Society, 42 Md. 460, an injunction was denied where the employment contract provided for stipulated damages in case of a breach by the employe. B. Solicitation of Customers and Disclosure of Trade Secrets. In Cahill v. Madison, 94 Ill. App. 216, it was held that equity would interfere by injunction to restrain an employe- from attempting to take away or solicit the customers of his employer in violation of his contract. In Hoops Tea Co. v. Dorsey, 99 Ill. App. 181, it was held that injunction would lie to restrain a solicitor and salesman from soliciting the customers of his employer in violation of his contract. But in India Tea Co. v. Peterson, 108 Ill. App. 16, it was held, in a similar case, that an injunction would not be granted where the contract was otherwise unfair and unconscionable, or harsh and oppressive. •In Timm, v. Tioczynski, 114 Mich. 149, 72 N. W. 140, it was held that one who is given employment by a manufacturer whose processes of manufacture, methods, and machinery, are kept secret from the public, upon the agreement that he will not use the information imparted to him, in the course of his employment, for his own benefit, or communicate it to strangers, will be enjoined from breaking his agreement. The case contains a thorough review of the decisions. And in Salomon v. Hertz, 40 N. J. Eq. 400, it was held that an injunction would lie to restrain an employe from diigulging certain processes of manufacture, in violation of his agreement with his employer. The injunction was denied in so far as it was sought to prevent the employe from making known where or from whom the employer buys his materials, or to whom he sells his goods, or the prices at which he buys or sells, in violation of his agreement. Such an agreement will be construed as limited to the term of service. In Harrison v. Glucose Co., 116 Fed. 304 (C. C. A., 7th Cir.), it was held that an employe would be restrained from violating a covenant not to divulge trade secrets, etc. A large number of decisions are referred to in the decision of the court. C. Validity of Contracts not to Enter into Similar Employment. The rule (Point A, supra) that injunction will not lie to restrain an employe from working for a rival concern, unless his services are unique and extraordinary, apparently has no application, where the employe covenants that he will not engage in a similar business or in the service of a competitor for a reasonable period of time after the termination of his employment. Such a covenant is valid and will be enforced. In Carter v. Alling, 43 Fed. 208 (C. C. N. D. of Ill.), it was held that a contract between a manufacturing corporation, whose business extends throughout the United States and Canada, and one of its traveling salesmen, who had been in its employ for several years, whereby he agrees not to enter the service of any business competitor of the corporation, for three years, after leaving its service, is valid, and an injunction was awarded. A large number of cases, both American and English, are reviewed. But in Ehrman v. Bartholomew, L. R. (1898) 1 Ch. Div. 671, a traveler for the plaintiffs, a firm of wine merchants, agreed to devote the whole of his attention and time to the business of the plaintiffs, and not directly or indirectly to engage or employ himself in any other business with any other person than the plaintiffs for a term of ten years. The traveler having left the plaintiffs’ employ and entered that of another firm, the plaintiffs moved for an injunction to restrain Ijim from engaging in any other business, and from acting as a traveler for any other firm of wine merchants, during the term of ten years. Held, that the negative stipulations in the contract were unreasonable and ought not to be enforced, and that the application must therefore be refused. It was held also that the plaintiffs might enforce those provisions of the contracts relating to the solicitation of plaintiffs’ customers, or the supplying of such customers with goods, etc., and that in this respect the contract was severable. And in Sternberg v. O’Brien, 48 N. J. Eq. 370, 22 Atl. 348, it is held that an agreement not to enter a particular employment is valid where the contract is restricted to a particular business, but otherwise it is bad. And where it is not alleged that the defendant occupied a position of special confidence, or acquired knowledge of the complainant’s business secrets and methods, which he may use so as to benefit a rival, and where the length of time the defendant remained in the complainant’s employ is so short that he could not have acquired the slightest influence over the complainant’s customers, the injunction will be denied. It was also held that where an employe agrees that he will not enter the employ of any rival of his employer “in any capacity,” this will be construed to mean in any capacity in the particular business carried on by the employer. And in Harrison v. Glucose Co., 116 Fed. 304 (C. C. A., 7th Cir.), it was held that a covenant by an employe not to engage in the same business during the term' of his employment, within a radius of 1,500 miles from the city of Chicago, was not in restraint of trade, and would be enforced by injunction. But in Harding v. Glucose Co., 182 Ill. 551, a similar contract between vendor and vendee was declared void. In Underwood v. Barker, 1 Ch. Div. (1899) 300, it was held that a contract in which the defendant entered into a covenant that he would not, for the space of one year after leaving his employment, carry on the same business as his employer, or enter into the service of any person, in the same line of business, in either the United Kingdom, France, Belgium, Holland, or in the Dominion of Canada, was a valid and enforceable contract, and not in restraint of trade, and that the breach of such contract would be restrained by injunction.