GORDON v. LANDAU

Reset A A Font size: Print

District Court of Appeal, Second District, Division 1, California.

Harry S. GORDON and David J. Williams, copartners doing business under the fictitious firm name and style of Independent Home Supply Co., Plaintiffs and Appellants, v. Irving LANDAU, Defendant and Respondent.*

Civ. 22002.

Decided: August 19, 1957

Joseph Stell, Los Angeles, for appellants. Harry A. Franklin, Los Angeles, for respondent.

This is one of several cases, parallel in their essential features. Plaintiffs are the same in each case. Defendants in different cases are former employees of plaintiffs.

Plaintiffs have a house-to-house credit business, on a dollar down and a dollar a week credit plan. The story told by the evidence in these cases reveals an interesting development in city life. For a good statement of how this business came about and how it is carried on see the recent case of Gordon v. Schwartz, 147 Cal.App.2d 213, 305 P.2d 117, decided in December, 1956, hearing denied by the Supreme Court.

Defendant in this case is a former collector-salesman of plaintiffs. He quit working for them and went into the same business for himself.

Plaintiffs brought this action, alleging in their complaint that defendant was using their lists of customers and praying for damages and for injunctive relief.

The trial judge found that after defendant went into business for himself he sold goods to 117 former customers of plaintiffs in the amount of $6,752.89.

The follows an enigmatical finding:

‘Except as hereinabove found the defendant Landau has not diverted and taken away business of certain of plaintiffs' customers, and the said defendant did not damage or injure plaintiffs' business or good will.’

Finally the judge found that plaintiffs were not damaged at all, and concluded that they should take nothing by this action.

Plaintiffs appeal from the judgment.

This court cannot agree with either the conclusion or the judgment.

Only one inference can be drawn from the evidence: That defendant sold goods to at lease 117 of plaintiffs' preferred customers, and that in doing so he used plaintiffs' lists entrusted to him while he was in their employ.

It is true that there is a big turnover of customers in plaintiffs' business. But they do have many who like the convenience of having goods delivered to their homes, and who have shown an ability and a willingness to make weekly payments upon this credit plan. And some of them have been buying from plaintiffs for years.

Such customers are a real asset to plaintiffs' business; the foundation upon which its success, and indeed its survival, must rest. As one of the witnesses said, ‘They are the cream of the crop.’

It follows then as a logical sequence that a list of such perferred customers is a valuable trade secret. Its use by a former employee comes squarely within subdivision 3 of the rules in route cases stated by our Supreme Court in Aetna Bldg. Maintenance Co. v. West, 39 Cal.2d 198, 204, 246 P.2d 11, 15: that ‘[t]he former employee sought out certain preferred customers whose trade is particularly profitable and whose identities are not generally known to the trade.’ And such use is unlawful, and should be enjoined (California Intelligence Bureau v. Cunningham, 83 Cal.App.2d 197, 188 P.2d 303), and damages should be assessed therefor. Gordon v. Schwartz, supra, 147 Cal.App.2d 213, 305 P.2d 117.

The parties have argued at some length the effect of a contract between plaintiffs and defendant, in which defendant agreed not to solicit plaintiffs' customers to purchase goods from him for a year after he left their employ.

No particular consideration has been given to this argument or to the contract itself; whether it was or was not valid or enforceable. It gives to plaintiffs no rights that they did not already have in equity, and a decision as to these questions is not necessary in this case.

The judgment is reversed, with directions to the superior court to fix the amount of damages, using the method approved in the Schwartz case; and to enjoin defendant from any use of any list of plaintiffs' preferred customers to which he had access while in their employ.

DRAPEAU, Justice pro tem.

WHITE, P. J., and FOURT, J., concur.