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John Roane, Inc. v. Tweed

Court of Chancery of Delaware, New Castle County

April 20, 1951

JOHN ROANE, Inc.
v.
TWEED.

Action by John Roane, Incorporated, a Maryland corporation, against Pierce E. Tweed, to enjoin the defendant, a former employee, from competing with the plaintiff, the former employer, after termination of employment relationship. The Court of Chancery, New Castle County, Wolcott, Chancellor, held that under Maryland law the plaintiff could not enforce a covenant against competition in a contract of employment by an injunction.

Injunction denied.

[32 Del.Ch. 91] William Prickett, of Wilmington, for plaintiff.

Newton White, of Wilmington, for defendant.

WOLCOTT, Chancellor.

This case has come on for decision after final hearing. The plaintiff seeks to enforce a covenant against competition in a contract of employment between plaintiff and defendant.

The plaintiff is a corporation of Maryland engaged in the independent insurance adjusting business and having a branch office in Wilmington, Delaware. The defendant entered the employ of the plaintiff in 1941 and remained in that employ continuously except for a period during the war, returning on March 1, 1946. In July, 1947, he became manager of the plaintiff's branch office in Wilmington. On January 1, 1949, in Baltimore, Maryland, the parties executed the employment contract in question.

On December 7, 1950, in accordance with the terms of the employment contract, the defendant voluntarily left the plaintiff's employ and opened an independent insurance adjusting office in Wilmington.

The employment contract contained the following covenant:

Page 291

‘ 6. During the period of his employment under this agreement and for a period of 5 years after the termination thereof, Employee specifically agrees as follows:

‘ (d) That he will not, directly nor indirectly, for himself or as agent of or on behalf of or in conjunction with any other person, firm, association or corporation, engage in the insurance adjusting business within a radius of fifty miles (50) from any office of Employer where he has served as Manager under this contract.’

The parties are agreed that this case is to be decided in accordance with the law of Maryland. In view of their [32 Del.Ch. 92] stipulation, I am not called upon to decide the question of whether the enforcement in Delaware of a restrictive covenant in an employment contract executed in Maryland shall be decided in accordance with Delaware or Maryland law. I accept the parties' stipulation.

The law of Maryland governing the enforcement of covenants of this type is embodied in five decisions of the Maryland Court of Appeals, viz.: Deuerling v. City Baking Co., 155 Md. 280, 141 A. 542, 67 A.L.R. 993; Tolman Laundry, Inc. v. Walker, 171 Md. 7, 187 A. 836; Griffin v. Guy, 172 Md. 510, 192 A. 359; Western Maryland Dairy v. Chenowith, 180 Md. 236, 23 A.2d 660; and Tawney v. Mutual System of Maryland, 186 Md. 508, 47 A.2d 372. Two other decisions of the Maryland Courts have been called to my attention but they are inapposite. Rosenstein v. Zentz, 118 Md. 564, 85 A. 675, 44 L.R.A.N.S., 63, considered a restrictive covenant effective only during the term of employment and, as such, is distinguished in the Deuerling case from a restrictive covenant effective after termination of employment. Fulton Grand Laundry Co. v. Johnson, 140 Md. 359, 117 A. 753, 23 A.L.R. 420, is obviously not in point since it dealt with an attempt to enjoin a former employee from competing in the absence of a restrictive covenant to that effect.

The Deuerling case involved an employee of a bakery who, in the course of his employment, served a definite territory. The customers served by him comprised a definite selected group of customers gathered together at the expense of the employer. Under such circumstances, the employer was protected from the unfair ...


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