The opinion of the court was delivered by: POLLACK
This is a diversity action by The Coolidge Company, Inc., a mailing list broker, to enforce a restrictive covenant prohibiting the defendant Mokrynski, its former employee, from competing with it for two years after leaving its employ. The complaint seeks damages for losses incurred during the ten and one-half months that Mokrynski and his closely-held corporation, the defendant Mokrynski & Associates, Inc., have competed with the plaintiff and an injunction prohibiting the defendants from competing with it for the balance of the two-year period. Mokrynski has counterclaimed for commissions alleged to be due him on business he placed while still employed by the plaintiff.
The matter was tried to the Court without a jury. Before setting forth specific findings of fact and conclusions of law, it will be useful to describe briefly the business in which the parties are engaged.
There are normally four parties involved in the rental of mailing list. The List owner keeps a list of names and addresses, such as a membership list kept by an association or a subscription list maintained by a magazine. The Mailer pays the list owner for the use of some or all of the names on the owner's list. Mailers include charitable organizations seeking contributions, periodicals seeking new subscribers, retailers seeking orders by catalogue, and many others. If a list owner does not itself want to deal with mailers, it may engage a List manager, who will try to rent the list to various mailers. Similarly, if a mailer does not itself want to deal with list owners or managers, it may engage a List broker, who will advise the mailer on the best lists for its purposes and arrange with the list owner or manager to rent the list to the mailer.
The plaintiff has been a list broker for over 40 years. It now represents mailers of many different types located throughout the Eastern part of the Nation. In February 1973, the plaintiff hired Mokrynski, who was then unemployed but had a measure of experience in the direct mail order market, to build up its business in the catalogue mail order market, a special branch of the mailing list business. On April 2, 1973, Coolidge and Mokrynski signed a form contract that provided (Emphasis supplied):
THIRD: that he further acknowledges that such Information, methods and principles of the Employers' business are confidential and their disclosure to others, or his making use thereof, for himself, outside of his employment is a violation of this agreement, and would be extremely detrimental to the rights and business of the Employers.
The Employee does hereby agree that he will not make Personal use of, nor will he directly or indirectly furnish or divulge the mailing lists and/or the name of actual or prospective customers who have Dealt with the Employers ; nor will he, during the life of this contract, or at any time in the future, within two years from the termination of his employment, Make personal use of, or furnish to any person, firm or corporation, the methods of conducting business of the Employers nor furnish any of the mailing list information and/or customers or the manner in which the mailing lists and/or customers are obtained. That Upon termination of his employment, the Employee Shall deliver to the Employers all mailing lists, names or lists of customers, together with Any and all documents, records and other information pertaining to the business of the Employers to which he had access.
FOURTH: The Employee agrees that for a period of two years following the date of termination of his employment, whether such termination is with or without cause, and in an area consisting of the territory East of the Mississippi River, and including Wisconsin, and Illinois, he will not enter the employ of any person, firm or corporation, or become an officer or director of any corporation, nor be engaged directly or indirectly in any mailing list business similar to that of the Employers; nor shall he solicit mailing lists and customers for such lists; nor offer his services to such companies.
The form contract also included certain clauses that the parties agreed to delete, namely:
WHEREAS, the employee has no knowledge and/or training in the business of the employer or of any similar business, and
THIRD: That the employee acknowledges that prior to this employment, he had no knowledge of the activities and working of the mailing list broker, nor knew of or had any mailing list or customers heretofore.
Mokrynski worked for Coolidge until August 17, 1978, when he left without prior indication of such intention and formed Mokrynski & Associates, Inc., to compete with Coolidge as a list broker, primarily in the catalogue mail order field. There is significant evidence that Mokrynski readied himself for the change by arranging before severing his employment from plaintiff to lease premises for his new enterprise, print up stationery, incorporate his new venture, and shortly after leaving to obtain the business of the employer's customers in this field and to take over the only other executive in the catalogue mail order department, his secretary and assistant, employed by the plaintiff, to service the new business. The inferences are clear that the bulk of the plaintiff's expectancy of business from the customers of the house was appropriated by the defendants, and the plaintiffs within a brief period were deprived of and no longer had the customers that had been built up at its expense during Mokrynski's tenure; indeed the plaintiff no longer enjoyed a catalogue mail order business. All of this was plainly in breach of Mokrynski's fiduciary obligations to and contractual commitments with plaintiff.
Mokrynski's compensation had been increased several times during his five and one-half years at Coolidge. His starting salary in 1973 was $ 16,000 per year against a commission arrangement based on the volume of the earnings of the catalogue mail order division. As of January 1, 1978, the effective date of his last increase in the fixed compensation, Mokrynski was to receive 30% Of all revenue that Coolidge earned on business that he produced; plus fifty cents per 1,000 names rented from lists that Mokrynski had arranged to be available exclusively to Coolidge; plus reimbursement for reasonable expenses and participation in Coolidge's profit-sharing trust.
After January 1, 1978, Mokrynski asked for a further increase in fixed compensation and the opportunity to buy stock in the Coolidge Company. Coolidge offered Mokrynski a compensation package consisting of $ 100,000 in commissions, $ 5,000 for a car; $ 20,000 in expenses; $ 15,000 from the profit-sharing trust; and the right to buy up to three shares of Coolidge stock at the then-current book value. Mokrynski rejected this offer, saying that it amounted to less than he was earning under the ...