NALLEY'S INC. v. CORONA PROCESSED FOODS, INC.

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[Civ. No. 28807. Second Dist., Div. Two. Mar. 21, 1966.]

NALLEY'S INC., Plaintiff and Respondent, v. CORONA PROCESSED FOODS, INC., et al., Defendants and Appellants.

COUNSEL

Fierstein & Dolin and Harvey Fierstein for Defendants and Appellants.

Tremaine & Shenk and John W. Shenk for Plaintiff and Respondent.

OPINION

ROTH, P. J.

On March 11, 1964, Nalley's Inc. (Nalley's) respondent, sought an injunction against Corona Processed Foods, Inc. (Corona), Gary Osborne (Osborne) and James [240 Cal. App. 2d 950] Daly (Daly). A verified complaint to which an unverified answer is filed alleged that: Nalley's is a processor and distributor of Spanish foods, salads, and other food products; Corona is engaged in the same business; Osborne and Daly were salesmen for Nalley's until November 22, 1963; their function was to take orders and deliver Nalley's food products on assigned routes originated by it for which they were paid a salary plus commission; both men had acquired by reason of their employment trade secrets of great value to Nalley's, including customer lists and business methods of Nalley's; and that since November 22, 1963, Osborne and Daly have been employed by Corona as salesmen distributors.

The complaint further alleges that: some of the customers on the aforementioned routes were more profitable than others; the identity of those customers was confidential information; said customers would ordinarily patronize only one distributor; the business relationship between Nalley's and these customers would normally continue unless interfered with. Further, it was alleged that: after November 22, 1963, Corona altered its marketing procedure to employ a route system similar to Nalley's; Osborne and Daly as employees of Corona utilized their friendly relations with Nalley's customers and confidential information obtained while in the employ of Nalley's to solicit the most profitable customers of Nalley's for their new employer; all appellants have acted as aforesaid with intent to injure Nalley's; Nalley's has been harmed and will continue to suffer irreparable injury unless appellants are restrained from further solicitation; and that Nalley's has no plain, adequate or speedy remedy at law.

Nalley's then prayed for judgment enjoining appellants from soliciting any of the present or past customers of Nalley's on the aforesaid routes and from utilizing any of the confidential information obtained by Osborne and Daly while they were employed by Nalley's.

A temporary restraining order predicated on the verified complaint was issued and appellants were ordered to show cause why a preliminary injunction should not issue against them.

The hearing on the order to show cause why a preliminary injunction should not issue was on the record and the declarations filed by the litigants. A preliminary injunction was issued and appellants Corona, Osborne and Daly were enjoined [240 Cal. App. 2d 951] from selling, offering to sell, or soliciting the sale of potato salad, macaroni salad and cole slaw, in bulk form, to 11 specified business establishments.

Appellants appeal from the order granting the preliminary injunction.

The gist of appellants' argument is that the declarations fail to present probative evidence supporting the issuance of the preliminary injunction. Integrated with this argument is the contention that many of the criticized declarations contain conclusions and hearsay.

It should be noted preliminarily that the record shows no objection to the form of Nalley's declarations. [1] "It is well settled that relevant and material evidence, though incompetent and therefore inadmissible, if received without proper objection or motion to strike, is to be regarded as sufficient to establish a fact and as supportive of an order or judgment. This rule applies to incompetent statements in affidavits. [Citations]." (Cope v. Cope, 230 Cal. App. 2d 218 233 [40 Cal. Rptr. 917].) The rule is equally applicable to statements made under penalty of perjury. (Code Civ. Proc., ยง 2015.5.)

[2] It is also established that the rule on appeal favoring evidence which supports the order or judgment where conflict appears on the record is as applicable to declarations and affidavits as it is to evidence orally presented. (Flood v. E. L. Goldstein Co., 158 Cal. 247, 248 [110 P. 916]; Beckett v. Kaynar Manufacturing Co., Inc., 49 Cal. 2d 695, 699 [321 P.2d 749].)

We confine ourselves therefore to a determination whether the declarations irrespective of form contain sufficient probative evidence to validly support the preliminary injunction.

All parties to this appeal rely heavily on the case of Alex Foods, Inc. v. Metcalfe, 137 Cal. App. 2d 415 [290 P.2d 646]. In Metcalfe, the legal and factual issues are substantially identical to those in the case at bench. In Metcalfe the court discussed the law and policy underlying the right of an employer to enjoin former employees and their new employers from utilizing confidential information gained by such former employees under a prior employment. The court said at pages 423-424:

"Section 2860 of the Labor Code provides that everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, [240 Cal. App. 2d 952] belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment. A customer list built up by the employer over a period of years is his property, and its use by a former employee for his own advantage will be enjoined. (California Intelligence Bureau v. Cunningham, 83 Cal. App. 2d 197 [188 P.2d 303].) Equity will intervene to restrain an employee from divulging confidential information gained in the course of his employment or using such information to his employer's prejudice. On the other hand, every individual possesses a form of property, the right to pursue any calling, business or profession he may choose. A former employee has the right to engage in a competitive business for himself and to enter into competition with his former employer, even for the business of those who had formerly been the customers of his former employer, provided such competition is fairly and legally conducted. Equity will, to the fullest extent, protect the property rights of employers in their trade secrets and otherwise, but public policy and natural justice require that equity should also be solicitous for the right inherent in all people, not fettered by negative covenants upon their part to the contrary, to follow any of the common occupations of life. (Continental Car-Na-Var Corp. v. Moseley, 24 Cal. 2d 104 [148 P.2d 9].)'

[3] To balance the conflicting policy considerations set forth in the above excerpt, the court stated what it conceived to be proper guidelines which must be established as conditions precedent to obtain an injunction against the unlawful use of confidential information by a former employee. These are:

(1) The information must be confidential and not readily accessible to competitors; (2) The former employee solicited the customer of his former employer with intent to injure him. (3) The former employee sought out certain preferred customers whose trade is particularly profitable and whose identities are not generally known to the trade; (4) The business is such that a customer will ordinarily patronize only one concern; (5) The established business relationship between the customers and the former employer would normally continue unless interfered with.

When these facts are established the injunction may issue not only against the guilty employee, but also against his new employer. (Alex Foods, Inc. v. Metcalfe, supra, at p. 429.)