Plaintiff, 1st American Systems (appellant), appeals from a summary judgment and jury verdict for defendant, Brian Re-zatto (appellee). Appellant prayed for in-junctive relief and damages resulting from appellee’s breach of contract and misuse of trade secrets. The trial court held that the contract was void as a restraint on trade and ordered summary judgment for appel-lee on that count. The action in tort, however, for misuse of trade secrets proceeded to trial. The jury found for appellee. Appellant raises numerous issues contesting the judgment and verdict which we treat severally.. We hold for appellant, reversing and remanding this case to the trial court for proceedings consistent with this opinion.
Appellant, a corporation, owns an agency, Insurance Counselors of Aberdeen, which employed appellee for almost seven years. During appellee’s employment, he began as a salesman and later managed appellant’s Aberdeen office. In June 1979, appellant terminated appellee.
The employment contract in force at the date of termination provided appellee with a salary and bonus for the sale of insurance contracts. In addition, it contained several post-employment restraints, as follow:
7. The Employee [appellee] acknowledges that as a result of his employment he will have and be given access to information as to renewal dates of insurance policies and to prospective customers which is usually and ordinarily kept confidential by the Company [appellant], and the Employee acknowledges that he understands that competition with the Company in the event of termination of this agreement would be unfair due to disclosures and confidences involved in the employment of this nature . . . The Employee hereby agrees that in the event his
employment with the Company is terminated . . . that he shall not and will not for a period of ten (10) years following the date of the termination of his employment . . . engage in the sоliciting of general insurance business as follows:
(a) The Employee shall not canvass, solicit, or accept any business from any customer or customers who have been named in the books or records of the Company during the period of the Employee’s employment.
(c) The Employee shall not directly or indirectly in any way request or advise any customer or customers whose names are on the books and records of the Company during the period of the Employee’s employment, to withdraw or cancel or divert his, or her or any of their business with the Company or then owner of such business.
(e) The Employee further agrees that he will not reveal any information concerning any policy or policies of insurance, or the expiration dates thereof, to any person whomsoever, except to officers of the Company, and that he will not solicit renewals of any insurance that is for any person or organization other than the Employer. The Employe© further agrees that upon the termination of his emplоyment for any cause whatsoever, he will not directly or indirectly solicit the insurance customers of the Company, either verbally or in writing, nor will he keep in his possession a list of customers of the company nor contact the customers of the Company in any manner, not use the names and addresses of the customers of the Company for solicitation by him or his agents after the termination of his employment.. . .
(f) The Employee shall not canvass, solicit or accept any business from any person, partnership, cоrporation or other entity, whatsoever, who is listed or has been listed at any time during the Employee’s employment with the Company, as a pros *54 pect by any person, firm, partnership, corporation or other entity with which the Company has a franchise agreement or any exclusive listing agreement.
8. It is further agreed that in the event of termination of the Employee’s employment, the Employee will not engage directly or indirectly, either personally or as an employee, associate, partner, mаnager, agent or otherwise, or by means of any corporation or other legal entity or devise, in the same business as that of the Company, or in any casualty, life, health and group insurance sales business or occupation, or in any way compete with the Company or the Company’s successor, if any, within the City of Aberdeen, South Dakota, or within a radius of twenty-five (25) miles from the City of Aberdeen, South Dakota, for a period of ten (10) years from the date hereof, or from January 1 of each year hereafter (the renewal date of this agreement) whichever is later. The Employee further agrees that in consideration for the continued employment with the Company that this provision shall be deemed renewed as of the first day of January of each year hereafter for so long as he remains in the employ of the Company.
It is further agreed that this entire paragraph and all the subparagraphs thereof, shall be the proper subject for injunctive relief in addition to any other remedies available in equity or in law.
9. It is agreed that if any part, term, paragraph or provision of this agreement is by the courts or any tribunal held to be illegal, void or unenforceable, or to be in conflict with any law or the state of South Dakota, the validity of the remaining portions or provision shall not be affected, and the rights and obligations of the parties shall be construed and enforced as if this agreement did not contain the particular part, term, paragraph or provision held to be invalid, illegal, void or unenforceable.
Appellеe received an attorney’s advice before signing this agreement.
While employed, appellee sold approximately ninety percent of the insurance at Insurance Counselors. Consequently, he had access to allegedly confidential customer data, including customer names and the type and amounts of insurance purchased by each, policy expiration dates, pricing data, premium amounts and the insurance company issuing the policy.
Although appellee offered to рurchase Insurance Counselors, negotiations broke down. Subsequently, appellee was terminated. Shortly thereafter, he associated with Stellner-Rivett Agency, then, a few months later, opened Rezatto Agency. These agencies were both located in Aberdeen and directly competed with Insurance Counselors.
At the time of trial, appellee had 101 insurance customers, 49 of which were former customers of Insurance Counselors. The former customers supplied more than fifty percent of the totаl premiums generated by the Rezatto Agency. Although Insurance Counselors usually experienced a normal attrition rate of about ten percent, the rate increased to twenty-six percent after appellee began work elsewhere. Ap-pellee admitted using customer data to solicit former customers of Insurance Counselors. Moreover, he admitted obtaining the data from the files of Insurance Counselors after his termination. Finally, appellant informed appellee and appеllee admitted knowing that the information he used was deemed confidential by appellant.
First, we address whether the noncom-petition clause, in paragraph 8 of the employment contract, is a restraint on trade void under SDCL 53-9-8. This statute voids contracts which generally restrain a profession, trade or business unless enumerated exceptions apply. One such exception provides,
An employee may agree with an employer . . . not to engage directly or indirectly in the same business or profession as that of his employer for any period not exceeding ten years from date of such agreement and within any specified territory not exceeding a radius of twenty- *55 five miles from the principal place of business of the employer, . . . but such contracts between employee and employer shall apply only to those engaged in some profession, the practitioners of which must be duly licensed in the state of South Dakota.
SDCL 53-9-11 (emphasis added).
Since paragraph 8 of the contract in question parallels the statute’s territorial and temporal terms, our only concern is construction of the last phrase of the statute. Although SDCL 53-9-11 uses the term “business or profession,” the final proviso uses only the word “profession.” Our inquiry focuses on whether the sale of insurance contracts is a profession as that term is used in SDCL 53-9-11. We hold that such an occupation is not a profession, since the legislature has not referred to insurance agents as professionals or their business as a profession.
The procedural history of SDCL 53-9-11 enlightens our construction of the statute. See
Oahe Conservancy Subdistrict v. Janklow,
In dealing with statutory exceptions, this court construes the language strictly resolving doubt in favor of the general provision.
Lien v. Rowe,
We also reject a reading of SDCL 53-9-11 which would negate the legislature’s use of “profession” as a limitation. See
Board of Regents v. Carter,
We hold that SDCL 53-9-11 applies to legislatively designated professions which also require licensing pursuant to a state statute. Although insurance companies and their agents must obtain state licenses, SDCL 58-30-2.1, 58-6-1 et seq., the South Dakota Code makes a single, veiled reference to the sale of insurance contracts as a profession. SDCL 58-2-3. That reference is too attenuated to confer status as a profession on appellee’s business. Although the trial court found that appellee was not engaging in a profession, it went too far in voiding the entire contract as a restraint on trade.
Appellant moved to limit the trial court’s summary judgment ruling to the noncom-petition сlause in paragraph 8 of the employment contract. It wished to prosecute *56 a breach of contract action based on paragraph 7 of the contract. Basically, in this paragraph appellee agreed that certain information; e. g., renewal dates of insurance policies, and names and addresses of customers and prospective customers (expira-tions), was confidential. Annot., 88 A.L. R.3d 1142 (1978) (expirations defined). Additionally, he agreed to refrain from using expirations to soliсit customers of Insurance Counselors. Appellee argued that paragraph 7 was nothing more than a species of the noncompetition covenant in paragraph 8. Apparently, the trial court agreed with appellee since it denied appellant’s motion. We hold that the trial court erred because the contract was divisible and a nondisclosure agreement differs from a noncompetition agreement.
In paragraph 9, appellee and appellant agreed that each provision of their contract must stand or fall on its own merits regardless of the illegality of a different provision. Moreover, so long as an illegal covenant is divisible, the remaining legal covenants are enforceable.
Aladdin, Inc. v. Krasnoff,
The courts are split on whether nondisclosure clauses are void аs restraints on trade. Annot.,
The Michigan statute prohibits “reasonable or unreasonable, partial or general, limited or unlimited,” restraints on trade. Id., at 779. Our statute, however, prohibits contracts only to the extent that they restrain trade. SDCL 53-9-8. Unlike thе Michigan statute, it does not contain the broad sweeping language which expressly prohibits a nondisclosure clause.
The California statute, however, is a verbatim copy of SDCL 53-9-8.
Loescher v. Policky,
The Oklahoma statute is similar to SDCL 53-9-8.
Loescher v. Policky,
Nondisclosure clauses support the public policy of fair competition by protecting confidential and secret information which stimulates research and development. 16G Business Organizations, Von Kalinow-ski, Antitrust Laws and Trade Regulatiоn, § 59.02[2][e] at 59-19. On the other hand, to the extent that the law protects confidential information, that information possesses monopoly power. Id. Because this dialectic exists, covenants, like paragraph 7, are strictly construed and enforced only to the extent reasonably necessary to protect the employer’s interest in confidential information.
United States v. Addyston Pipe & Steel Company,
The nondisclosure provisions are contained throughout paragraph 7 of the employment contract. Appellee agreed not to reveal renewal dates, “any information concerning any policy or policies of insurаnce or expiration dates thereof,” “customer lists,” “names and addresses of customers” and information ordinarily kept confidential. These terms are enforced only to the extent that they involve trade secrets or a confidential relationship.
State Farm Mutual Ins. Co. v. Dempster,
In
Mid-America,
It is undisputed in the record that expirations are customarily considered confidеntial. The agreement between appellee and appellant makes these materials appellant’s exclusive property. Moreover, appel-lee was put on notice by the employment contract that appellant considered the information secret and intended to seek remedial action to prevent a disclosure. See
Lear Siegler, Inc. v. Ark-Ell Springs, Inc.,
Almost fifty percent of appellee’s current customers were former customers of Insurance Counselors. In selling these contracts, he relied on the entire file, nоt merely a customer list or the expiration dates. On at least two occasions he obtained access to files after his termination. It follows that the information was valuable and appellant was damaged by its unauthorized use.
See Gordon v. Landau,
Although, generally, a contract is not significant, the circumstances surrounding the instant agreement lend it greater impor
*59
tance. At the time appellee signed the contract, he had sold insurance for at least six years. He also consulted an attorney regarding this contract of employment. We hold that the expiration and renewal dates, personal customer data and customer names and addresses within appellant’s files taken together and construed in light of the contract’s express creation of confidentiality comprise a trade secret even though separately each item may not rise to that level. See
American Welding & Eng. Co. v. Luebke,
Although the covenants at issue here are subject to the rule of reason, a term of art in this area of the law, “most courts hold today that many covenants which violate the rule may be partially enforced.” Comment, 15 Colum.J.L. & Soc.Prob. at 181. Indeed, South Dakota has “blue lined” similar covenants since 1969. Although
Loescher v. Policky,
The reasonableness of each provision is the benchmark for partial enforcement of the instant covenants.
Miller Mechanical, Inc. v. Ruth,
The nondisclosure covenant in paragraph 7 has a term of ten yеars. We can find no case which upholds such a duration as reasonable. The reasonableness of ten years raises a factual question for determination by the trial court on remand.
Raimande v. Van Vhrah,
The covenant in paragraph 7 does not contain an area restriction. Instead, it attempts to prevent canvassing, soliciting or accepting business from past, present and prospective customers of appellant. It is overbroad, however, placing an undue burden on appellee and the public to the extent that paragraph 7(a) and (f) prohibit
accepting
appellant’s customers’ business,
Continental Car-Na-Var Corp. v. Mosely,
As to the remainder of appellant’s arguments, we find they are not meritorious or mooted by our decision. We reverse the *60 trial court’s summary judgment and remand the instant case for consideration in light of this opinion. We hold that since insurance agents are not profеssionals for the purposes of SDCL 53-9-11, the trial court properly voided the instant noncom-petition clause as a restraint on trade proscribed by SDCL 53-9-8, but that in also voiding the nondisclosure provisions the trial court erred because these provisions are not within SDCL 53-9-8’s proscription to
the extent specified in this opinion. We reverse the trial court’s summary judgment and remand for trial on the issues of liability and relief for breach of contract.
Notes
“The contract only strengthens the right to relief. ... [T]he question of the contract between the parties becomes immaterial, except that its consideration plainly evinces the intent of the parties, the one to protect itself against the doing. The other to abstain from doing the very things which the court finds that the defendant upon termination of his employment immediately proceeded to do.” 2 R. Callmann, Unfair Competition, Trademarks and Monopolies, § 51.2(c) at 362 (3d ed. 1968). Although this analysis appears to confuse contract and tort law, Unfair Competition and Trade Regulation has emerged as a separate body of law developed from tort, contract, and equity concepts. Restatement (Second) of Torts, Introduction to Division Nine, at 1-3.