American Welding Engineering Co.v.Luebke

Supreme Court of WisconsinJan 30, 1968
37 Wis. 2d 697 (Wis. 1968)
37 Wis. 2d 697155 N.W.2d 576

January 5, 1968. —

January 30, 1968.

APPEAL from a portion of a judgment of the circuit court for Milwaukee county: ROBERT M. CURLEY, Circuit Judge. Reversed.

For the appellant there was a brief by Lichtsinn, Dede, Anderson Ryan of Milwaukee, and oral argument by Eldred Dede.

For the respondents there was a brief by Foley, Sammond Lardner, attorneys, and David E. Beckwith and Maurice J. McSweeney of counsel, all of Milwaukee, and oral argument by Mr. McSweeney.

American Welding Engineering Company, Inc., plaintiff-appellant, is a Wisconsin corporation located in Cudahy, Wisconsin, and is engaged in the business of steel fabrication, the manufacture of steel weldments and the manufacture of adjustable loading platforms.

Marvin H. Luebke, Edward R. Kozlowski and Alfred E. DeAmico, defendant-respondents, are former employees of plaintiff who organized the Oak Creek Corporation, a Wisconsin corporation located in Oak Creek, Wisconsin, also a defendant-respondent in this action.

Defendant Luebke was first employed by plaintiff on October 10, 1958, and continued in its employ until his employment terminated on January 11, 1965, at which time he was an officer of the plaintiff corporation and held the position of vice-president in charge of sales. Prior to his employment with plaintiff, Luebke had been employed by Milwaukee Boiler Manufacturing Company for twenty-eight years. At the time of the termination of his employment with Milwaukee Boiler in August of 1958, he occupied the position of executive vice-president and general manager. Plaintiff and Milwaukee Boiler are competitors and during his years at Milwaukee Boiler he developed many sales contacts which were valuable to plaintiff.

When Luebke commenced his employment with plaintiff he brought with him a steel card file and a list of customers he had at Milwaukee Boiler. While an employee of plaintiff, his secretary composed a new card file from the cards, slips of paper and memoranda he had compiled. He described the card file as his telephone directory. Additional cards were added during his employment with plaintiff.

Luebke took this card file with him when his employment with the plaintiff terminated on January 11, 1965, and this action on his part forms the basis for the present litigation.

March 11, 1965, Luebke effected the incorporation of Oak Creek Corporation, which was organized to engage in business similar to that of plaintiff and therefore as a competitor.

Luebke contacted several employees of the plaintiff to join him in the Oak Creek venture and at least one of them refused. However, on September 22, 1965, Kozlowski, chief estimator for the plaintiff, and DeAmico, a principal designer for it, did join Oak Creek and made investments in the new corporation. September 23, 1965, they submitted their resignations to the plaintiff.

Neither Luebke, Kozlowski nor DeAmico were prohibited by contract from competing with the plaintiff.

October 15, 1965, the plaintiff commenced action against the defendants seeking both a temporary and permanent injunction restraining defendants from competing with it and seeking both compensatory and punitive damages.

A temporary order restraining defendants from contacting any of the customers of the plaintiff was issued February 25, 1966. May 31, 1966, the issue of the injunction against competition was tried before the court. December 15, 1966, an order was entered, pursuant to a written stipulation of the parties, dismissing the claim of the plaintiff for damages on its merits and without costs to any of the parties.

May 26, 1967, judgment was entered in the injunction proceedings which restrained the defendants from contacting four specifically named companies who were customers of the plaintiff and taxing costs against the defendants.

The plaintiff appeals from that portion of the judgment limiting the permanent injunction to the four firms and the defendants thereupon appealed contending that no injunction should have been issued and that costs should have been taxed against the plaintiff. Additional facts will be included in the opinion.

We are of the opinion that the decision of this court in Abbott Laboratories v. Norse Chemical Corp. (1967), 33 Wis.2d 445, 147 N.W.2d 529, is decisive of the issue in the case presently under consideration. We are also appreciative of the fact that Abbott, supra, was a case of first impression in Wisconsin, and that the decision was rendered subsequent to that of the trial court in the instant case and therefore not available to either the trial court or counsel.

The issues presented in Abbott, supra, were twofold: (1) Technology of the production process of a synthetic sweetener, and (2) customer lists and information, and in that case it was held neither constituted a trade secret. The case now before us concerns only customer lists and information. In Abbott, supra, we stated that the Restatement of the Law correctly states the general law of trade secrets.

Restatement, 4 Torts, p. 5, sec. 757.

"An exact definition of a trade secret is not possible. Some factors to be considered in determining whether given information is one's trade secret are: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others." Restatement, 4 Torts, p. 6, sec. 757.

In considering the matter of customer lists in Abbott, supra, page 467, the court stated:

"Customer lists are on the periphery of the law of unfair competition, because legal protection does not provide as much incentive to compile lists and because most are developed in the normal course of business anyway."

"`. . . Written customer lists generally have been regarded as trade secrets when the nature of the industry permits the list to be kept secret and the list cannot readily be duplicated by independent means. The size of the list and the type of information it contains about the customers may be relevant to the latter determination, as may the amount of time and effort which went into its composition.'"

Further, when determining the customer list was not a trade secret this court held, Abbott, supra, page 465:

"The customer lists taken by Mueller were not complicated marketing data which had been laboriously compiled by Abbott. These cards contained only the names and addresses of the customers and the individual to be contacted. There was no complicated marketing data concerning projected market needs of the customer or the customer's market habits."

An examination of the record and an inspection of the card file that Luebke took with him, based upon the standards hereinabove set forth, leads to but one conclusion. The cards and the information contained thereon are definitely not trade secrets.

It has been previously mentioned that Luebke brought much of this information with him when he commenced employment with the plaintiff. Also, the cards do not contain information concerning the particular types of orders of plaintiff's customers; special methods of fabrication utilized to fill orders; the costs of fabrication; past or future profits involved in such orders; the methods which particular customers use in their operations; the value of repeat business; the type of order or terms thereof; bidding factors; customer standards or specifications; the potential of the individual accounts.

In general, the cards contain the name, address and telephone number of the customer, sometimes the names number of persons employed by the firm, the position which the various individuals held in the firm and occasionally what apparently is the person's most commonly used first name. Most any person possessing Luebke's experience, contacts and knowledge of the industry, could have compiled a similar file, without undue difficulty, by recalling his past experiences and by reference to telephone and trade manual directories. Many of the cards listed only the customer's name, address and telephone number. Some of them contained obsolete information.

There are two other significant factors. Gene Shorey, a former salesman for the plaintiff, had a very similar file and was permitted to take it with him when he left the plaintiff's employment. Also, Luebke testified he did not make copies of the cards and offered to give them to the plaintiff to avoid litigation, which offer was refused.

While the record demonstrates that the defendant corporation did some $108,000 worth of business with customers of the plaintiff, it also reveals that the entire business of the plaintiff continued to grow; that a substantial backlog of orders existed; that the work force increased; and that plaintiff was frequently advertising for additional help.

Therefore, we conclude the record does not disclose that any trade secrets are involved in the issue before the court; that the limited permanent injunction issued by the trial court was not proper; and that the defendants should not be restrained generally from contacting the customers of the plaintiff.

As a result of our decision, it becomes unnecessary to consider the issue raised by the respondents as to taxation of costs by the trial court because the taxation of costs falls with the injunction.

By the Court. — Judgment reversed.