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INGREDIENT TECH. CORP. v. NAY

February 8, 1982

INGREDIENT TECHNOLOGY CORPORATION, Plaintiff,
v.
David W. NAY, Florence M. Nay, Daniel S. Nay, and Food Processing Ingredients,Inc., Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM AND ORDER

In this suit for injunctive and monetary relief, originally brought in State court, plaintiff ("ITC") charged David Nay with breach of a covenant not to compete, Florence Nay and Daniel Nay, his wife and son, with tortiously inducing the breach, and all defendants with unfair competition. Defendants removed the action here before answer on the basis of the parties' diverse citizenship and amount in controversy. Defendants are all citizens of Ohio and plaintiff is a Delaware corporation with its principal place of business in a State other than Ohio.

 Plaintiff has now moved for a preliminary injunction and defendants have cross-moved to transfer venue to the United States District Court for the Southern District of Ohio, 28 U.S.C. § 1404(a). Based on the depositions of defendants and non-parties in Ohio and affidavits from others in support of plaintiff's motion and in opposition to the motion to transfer, the Court concludes that the motion to transfer should be denied, and that a preliminary injunction should issue without further delay for a hearing. In addition, plaintiff's motion to strike defendants' jury demand as untimely should be granted.

 The depositions and affidavits submitted establish that for over 40 years prior to 1979, David Nay was a salesman of spices and seasonings (sometimes referred to collectively as "ingredients") and other products to customers in the food processing industry. His sales territory throughout that time period covered principally the State of Ohio, although some of his accounts were located as well in the neighboring States of Kentucky, West Virginia, Indiana, Pennsylvania, and even as far away as Georgia and New York.

 After twenty years of calling on essentially the same customers in the same territory for other spice and seasoning companies, Nay and two others started their own company in 1962, called Seasoning Mills, Inc., and Nay continued to call on the same customers in the same area. His sales efforts often led to close, sometimes personal relationships with his customers, and Seasoning Mills consequently enjoyed a strong customer base for its products. By 1979, however, the company was apparently hardpressed by want of capital, and Nay himself was nearing a retirement age of 65.

 After negotiations between the principals in Ohio, Michigan and New York, Nay and his co-owners executed in New York an asset purchase agreement transferring Seasoning Mills' entire business to plaintiff. The agreement covered "properties and assets of every kind and character, real, personal or mixed, tangible or intangible," and expressly included "customer and supplier lists and records of Seller." Purchase Agreement, P 1.2(iii), Exh. 1 to Order to Show Cause. On deposition, Nay acknowledged that Seasoning Mills' customer base was among the assets transferred.

 The agreement also provided that after the closing, the three shareholders would not, within five years of the July 30, 1979 closing date,

 
"directly or indirectly engage in, or have any interest in any person, firm, corporation, or business (whether as an employee, officer, director, agent, security holder, creditor, consultant or otherwise) that engages in, any activity in any geographic area where (Seasoning Mills) now engages in such activity, which activity is the same as, similar to, or competitive with any activity now engaged in by (Seasoning Mills) in any such geographic area so long as ITC or any subsidiary or affiliate thereof (or any successor thereto) shall engage in that activity in such geographic area." Id., P 3.3(a)(iii).

 The three further agreed

 
"not to divulge, communicate, use to the detriment of ITC or any subsidiary or affiliate thereof or for the benefit of any other person or persons, or misuse in any way, any confidential information or trade secrets of Seller, including personnel information, secret processes, know-how, customer lists, recipes, formulas, or other technical data." Id.

 The parties also agreed that the Agreement "shall be construed in accordance with, and governed by, the laws of the State of New York." Id., P 8.6.

 The agreement transferring the Seasoning Mills business to ITC did not end Nay's work as a spice and seasoning salesman to his former long-time customers. Although no signed copy of an agreement has been located, ITC apparently agreed to designate defendant Food Processing Ingredients, Inc. ("FPI") as its sales representative in the area Nay formerly covered for Seasoning Mills. David Nay's wife Florence caused FPI to be incorporated, and she became its president, while her husband became its employee and salesman at a weekly salary of $ 87.00, an amount set to keep him eligible for Social Security retirement benefits. Thus, Nay solicited sales for ITC's spices and seasonings as an employee of FPI, and ITC filled the orders he secured.

 FPI's place of business was the office which occupied the first floor of the Nays' home in Worthington, Ohio, outside Columbus. The company's phone number, 888-4044, was the same one Nay had used when selling for Seasoning Mills, and Florence sought and received ITC's permission to change the name registered to the number from Seasoning Mills to FPI.

 In June 1980 Florence and her stepson Daniel Nay incorporated Food Processing Supplies, Inc. ("FPS") to conduct a business of selling work supplies to the food processing industry, e.g., aprons, gloves, knives and boots. While the business involved lines of goods distinct from spices and seasonings, the food companies to which David Nay had sold for over 40 ...


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