*2 Hackman, Beck, employment agreement L. written Marvin No be- Sigmund J. Ind., Wishard, Crystal, Debtor, Indianapolis, Dudenhoffer and tween D. Gordon *3 existed. the five or Fairbanks ever Of petitioner-appellee. of of the board directors and members MARKEY,* and Before FAIRCHILD Debtor, of all but executive committee STEVENS, Circuit and Judges, Chief ex- Dudenhoffer and Herman Miller had Judge. employment having contracts cov- ecuted left compete. enants not Miller Debt- MARKEY, Judge. resigned Chief from employ, the board of or’s directors, up a in and set business Flori- appeal judgment is from the This an apparently solicited customers da and order of the district court sustain- employees from Debtor’s Florida and subsidiary. modification, ing, with the order of urging, At Dudenhoffer’s bankruptcy judge declaring that Duden- in Fairbanks instituted action Flor- had duties in hoffer certain enforceable against Miller which resulted in a ida trustee, equity by the Fairbanks. We agreed to order wherein Miller consent affirm. from of customers refrain solicitation employees Debtor’s Florida sub- and of Background for a time. sidiary specified 8, 1970, On December Fairbanks was discharge, Duden- At the time of in appointed Reorganization Trustee of a refused, until the matter could hoffer be publicly corporation, held Delaware Un- court, sign an settled iservices, (Debtor), Chapter Inc. under X Crystal. Sep- not to On Act, Bankruptcy Crystal of Industri- 25, 1972, petitioned Fairbanks tember Services, (Crystal) al Inc. is a Delaware regard. in of this a declaration Corporation wholly owned Debtor. had a duty Whether Dudenhoffer not to is provid- The business involved that of or to solicit customers of compete with ing rental, laundry, industrial uniform appeared bankruptcy Crystal shop towel, (in- and dust control services require judge to such declaration in aid laundry) in central Indiana. dustrial plan a determination of whether a of of reorganization of Dudenhoffer certain members possible Chap- was in the family sold the assets and busi- had proceedings. ter X corporation of ness an Indiana named evidentiary hearing an con- After Crystal Industrial Inc. to Services Debtor the bankruptcy the briefs sideration . time of in 1966. At the following: judge entered the order, al. still judge’s Dudenhoffer et of Debtor. Dudenhoffer held 20.77% ORDER director, vice-presi- served as a executive IS, THEREFORE, ORDERED, IT president dent and of Debtor and of DECREED that: ADJUDGED AND Crystal organized the latter after 1. Dudenhoffer has a William H. the assets sold et receive enforce- obligation, which is 1, 1966, From August al. 8, 1970, to December equity by in the Trustee or able the full time Dudenhoffer was in assignee or successor interest to the manager and chief executive of- general Services, Industrial business Crystal. When Fairbanks took ficer not, period (2) years Inc. for a trustee, he Dudenhof- over as continued 31, 1972, August and after from August fer in that On engage, directly indirectly, either as Dudenhof- Fairbanks terminated * Markey Appeals Judge T. United States Grfurt Customs and Howard Patent Chief ! . s-' sitting by designation. amount of officer, which to or other- employee principal, determined a wise, at a later date. laundry, uni- the industrial form, or dust control garment, towel ENTERED at Indianapolis, Indiana, a radius of sev- within business rental enty-five day this 14 June, (75) direction miles court, The district after a hearing and directly drawn from a line from consideration of the briefs and tran- Indiana, to the Indianapolis, City of script, found sufficient evidence to sus- Indiana, except Wayne, City of Fort tain the bankruptcy judge’s Findings, employee of the Trustee as- Conclusions and Order and affirmed in interest to the signee or successor them in the order on review. In that Services, Industrial business order, however, the district court re- Inc. versed the non-competition portion (par. has a H. Dudenhoffer William 1) of the bankruptcy judge’s order and *4 obligation, duty which enforce- and instructed that it be re-entered pro- to any the Trustee or equity by in able vide a for non-competition period of no to or successor in interest the assignee more than year. one Services, Crystal of Industrial business Inc., not, (2) years for of two period a The Issue 31, 1972, August di- and after from The sole issue before us is the validity indirectly, princi- either as a rectly or of the declaration that Dudenhoffer had officer, otherwise, or employee pal, a duty to refrain serving from or at- provide to attempt or indus- serve tempting to serve Crystal’s August 31, uniform, laundry, garment, towel trial 1972 for customers after that services to custom- dust control or date a duty and to refrain from engag- Services, Crystal Inc., Industrial ers of ing in the industrial laundry business Crystal of Indus- were customers who within the specified geographical area Services, August 31, 1972, Inc. on trial year for one after August his 31, 1972 the except employee Trustee discharge. assignee in or successor interest Dudenhoffer’s brief repeatedly (and of Crystal the business Industrial to erroneously) stated that he was “en Services, Inc. joined.” Apparently he had refrained injunction 3. will issue at the No competition from for the nine month pe the time in absence of evi- present riod between discharge his and the date that William H. Dudenhoffer dence of the bankruptcy judge’s order. For or threatens to has violated violate reason, that as the stated, order no in herein; obligations and but the duties junction issued. His election to await a jurisdiction retain will of this Court final court declaration of and purpose receiving for the matter obligation before competing cannot be hearing any subsequent petition and equated with an injunction.1 any assign- the Trustee or petitions or successor in interest the busi- ee OPINION Services, Industrial ness a violation of alleging paragraphs Inc. Determination of the extent and Order, or 2 of this or both. 1 corporation’s of a property nature is a proceeding 4. The costs of this are evaluation, in required element the Respondent, the bankruptcy, proposed taxed of a trustee August Assuming risk that such since 1973. Dudenhoffer avoided risk been without respecting refraining competition customer solicitation ter- from until the district The order 4, 1974, Though April though August designated no minated order under court’s free, “orders,” bankruptcy so, injunction he the actions of do as of date, violating any judges constituted declarations without risk district duty. rights. In view declared count’s ‘reduc- non-competition period, of the he has 496 which is both fair tition and unfettered. plan. To that reorganization X Chapter The balance of duties rights
end,
necessary
proper
it is often
the district court struck herein is reason-
sitting
court
a federal
parties
able as between the
and is not
that which consti-
to determine
matters
public
oppressive to the
interest.
under state
property
protectible
tutes
rights ac-
property
law and
cordingly.
declare
attempt
In an
to show that
See,
example, In re Bet-
given
Debtor’s
were
excessive
(D.Mass'.
Corp.,
F.Supp.
197
273
tinger
weight,
challenges
the con
1961).
touchstone on review in this
Our
fidentiality of Crystal’s customer data on
law.
is Indiana
case
ground
anyone
could learn the
Ortman,
235 Ind.
In Miller v.
136
identity by
customers’
surveillance of
highest
(1956),
Indiana
N.E.2d
salesmen on their routes. The obvious
stated:
cannot be secret or confidential. See
Corp.,
(7th
v. Dravo
Smith
F.2d 369
to the
policy
Public
is committed
1953). But
Cir.
more than customer
proposition that a man is free to con-
identity
than a mere list of names
and that
duct a lawful business
—more
and addresses—is involved here. The
business, including
will of a
con-
good
data
maintains extends
partic
representa-
with its dealers and
tracts
requirements, preferences,
ular
and hab
information,
and confidential
tives
its
individual customers. None of
such as names and addresses and re-
*5
by
those factors could be learned
surveil
customers,
quirements of
and the ad-
Hence, they
lance.
could be maintained
vantage acquired through representa-
secret.
with the trade in the area
tive contact
a
application,
property right
of their
is
Dudenhoffer
further contends
protect.
an owner is entitled to
that certain customer data is not secret
emphasis
omitted and
add-
[Footnote
generally
because it
is
known in the
ed.]
Although
trade.
the evidence indicates
that some of Crystal’s
might
data
be
That Crystal’s customer infor
competitors,
known to
we do not find
protectible property
mation constitutes
is
Crystal’s property right,
insofar as it
assignment
by
underscored
thereto
may
against Dudenhoffer,
be enforceable
values,
independent market
more
ful
inquiry
to be
Our
effected.
not how
Miller,
ly discussed
In
below.
the court
data;
others could have acquired the
but
property
protectible by
such
as
con
saw
rather, how did Dudenhoffer acquire it?
and,
contract, against
absent a
tract
con
gained
Dudenhoffer
his knowledge of
by
to
unlawful
spiracy
appropriate
acts.
Crystal’s trade data in confidence. Use
protectible,
the property
Once found
gained through
of information
lawful in
a
may
protected by
be
court declaration
spection and surveillance cannot be re
rights.
stricted; use of the same information
Notwithstanding a determination
may
disclosed in confidence
be restricted.
here,
Crystal’s property, we must face
v. Dravo Corp., supra.
See Smith
It is
do,
as we often
the need to balance com
Crystal’s
immaterial that some of
com
rights.
right
Dudenhoffer’s
peting
to
petitors may
legitimate possession
be in
engage
the business in which he had
portion
of some
of its secret trade data.
active,
long been
and to call on custom
judge found
employer,
ers of his former
cannot be
his
by
estopped
disregarded.
lightly
rights
Nor can the
trade
deny
to
conduct
prior
information-type
of Debtor in its
proper
contracts
service
customer
routes
ty
expectations
confidentiality
and its
agree.
We
him.
as to
secrets
trade
are
ignored.
party’s
Each
duties and
be
as
sold the
family
his
tempered
must be
with considera Dudenhoffer
“trade
to Debtor
other’s;
of the
the final
sets
tion
considera
val-
agreements”
routes, covenants
being
public’s
compe-
interest in
tion
$1,500,000.
ued at
The last annual re-
The district
held
court
Dudenhoffer to
port
published prior to reor-
that Debtor
implied,
bound
an
limited covenant
names,
ganization valued “trade
routes
with Crystal and held
$1,092,725.
contracts” at
continuing
and service
As
that covenant
a
for
reason-
corporate
a
officer Dudenhoffer
treated
able time after
separation.
We
Crystal’s
agree
trade data as
requir-
secret
that on the
case,
facts of this
ing
employees
sign
agreements
sitting
equity may
imply such a
disclosure,
by emphasizing
their
limited
not to compete. Be-
security
the need for internal
concerning
cause of his standing in the hierarchy of
by requiring Crys-
the data and further
corporation,
Dudenhoffer was able to
prospective purchasers
tal’s
and other
and did demand covenants not to com-
given
pete
subsidiaries
Debtor who were
from employees, which covenants
non-public
agree-
information to enter
year
continued
one
after termination
Crystal’s
ments not
solicit
customers
employment.
refused,
their
He
when
years.
While this action was
requested,
to make such commitment
bankruptcy judge,
before
Dudenhof-
himself. We know of no reason in equi-
urged
challenge
fer
ty why
Fairbanks
Her-
Dudenhoffer should escape the
man Miller’s solicitation of Debtor’s cus-
imposed
restriction he
on
merely
others
tomers in Florida.
superior
Dudenhoffer consist- because
corporate
of his
position
ently treated Debtor’s trade data as a or because of the admittedly justifiable
valuable asset.
termination of his
The ex-
tent of
implied
imposed
covenant
above,
From all the
we conclude that
the district court is coincident in scope of
the district court committed no error in
geographical
time and
area with cove-
protecting Debtor’s confidential informa-
imposed by
nants
Dudenhoffer on other
by imposing upon
Dudenhoffer the
employees.
duty not to solicit customers
years following
discharge
for the two
concluding
After
that appel
employ.
from Debtor’s
implied
lant is bound
covenant, the
*6
foregoing
considerations are based
definite,
terms
which are
we have
duty,
on the
which Dudenhoffer owed only to decide whether those terms are
Debtor,
respecting
information re-
A
reasonable.
restraint on competition
ceived in confidence.
It is of no import
legitimate
must
exceed the
individu
that Dudenhoffer consistently refused to
al interest served by the restraint. Bu
recognize
and refused to agree
Weinraub,
v.
557,
anno
226 Ind.
81
not to
Crys-
and not to
(1948);
solicit
N.E.2d 600
Grand Union Tea Co.
tal’s customers for a
period.
Walker,
limited
245,
We v.
208 Ind.
ploye will not disclose trade secret is not unreasonable. We note that peri imparted him or discovered him long ods of as as five have been in the course A held reasonable Indiana. Miller v. acquired disclosure such secrets thus Gas, Frankfort Bottle supra. only is not breach contract on his part, but is a breach of trust which a Accordingly, the decision of the dis- equity prevent. court of will trict court is in respects all affirmed. STEVENS, Judge Circuit (concurring).
For reasons stated in footnote 1 of Judge Markey’s lucid opinion,
Chief I unnecessary it is express
think on the
opinion question whether the dis-
trict court properly held that Dudenhof- bound, prior
fer was September
1973, by an implied contract in restraint concur, of trade. I however, do Crystal’s in the
holding customer informa- protectable constituted property. America, STATES
UNITED Plaintiff-Appellee,
v. BRADBERRY,
Linda Defendant-Appellant. Joseph P. Dean Leslie Foschio and No. 74-1628. Bauer, Dame, Ind., Notre for defendant- Appeals, States Court of United appellant. Circuit. Seventh Gary Atty., James R. U. S. Thompson, Starkman, Tighe, Asst. L. Ann C. U. S. 24, 1975. Argued Feb. Ill., Attys., Chicago, plaintiff-appel 9, 1975. June Decided lee. CASTLE, Judge, Senior Circuit
Before STEVENS, and SWYGERT Circuit Judges.
STEVENS, Judge. Circuit *7 Appellant guilty conspir was found judges other ing with four election during primary fraud commit vote 21, 1972, in violation election on March government 241.1 The U.S.C. § proved that false were cast for votes candidates, not neces and local but state sarily federal candidates. appeared present record therefore statutory left question of construction ****** Conspiracy citi “§ $10,000 They zens. not or fined more than shall be both; years, or imprisoned more than ten conspire injure, persons or more If two results, they subject shall threaten, and if death intimidate citizen oppress, imprisonment term of or for enjoyment any right or or exercise free life.” him the Constitution privilege secured States, or because of the United laws same; having exercised so