Chuck Wagon Catering, Inc. v. Raduege
277 N.W.2d 787, 1979 Wisc. LEXIS 1981, 88 Wis. 2d 740 (1979)
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Rule of Law:
A restrictive covenant is enforceable if it is reasonably necessary to protect a legitimate business interest, such as customer goodwill developed through direct, repeated contact by a route salesperson, even if the customer list itself does not qualify as a trade secret.
Facts:
- Chuck Wagon Catering, Inc. developed and serviced a mobile food truck route to various businesses for six years, building customer relationships.
- On February 27, 1973, Chuck Wagon leased the route and a truck to Warren Raduege under an agreement containing a one-year restrictive covenant.
- A Chuck Wagon driver accompanied Raduege for his first three days to show him the customer stops on the route.
- Raduege serviced the route for two and a half years, having daily contact with the customers at each stop.
- After one year, Raduege purchased his own truck and continued leasing only the route from Chuck Wagon.
- On October 1, 1975, Raduege stopped paying rent to Chuck Wagon and began servicing the route for his own benefit, using a different supplier.
- When Chuck Wagon attempted to service the route with a different driver, customers remained loyal to Raduege, even when Chuck Wagon offered reduced prices and free coffee.
- At some locations, Chuck Wagon's new driver was told not to enter the premises because Raduege was already servicing them.
Procedural Posture:
- Chuck Wagon Catering, Inc. sued Warren Raduege in the circuit court for Waukesha County (trial court), alleging breach of contract and tortious interference.
- The trial court held that the restrictive covenant was unenforceable and entered a judgment denying recovery to Chuck Wagon, except for a small, undisputed amount owed for purchases.
- Chuck Wagon Catering, Inc., as appellant, appealed the trial court's judgment to the Supreme Court of Wisconsin.
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Issue:
Is a restrictive covenant in a mobile catering route lease agreement, which prohibits the lessee from servicing the route for one year after termination, an enforceable protection of the lessor's customer relationships?
Opinions:
Majority - Day, J.
Yes, the restrictive covenant is an enforceable protection of the lessor's customer relationships. A business interest does not need to be a trade secret to be protectable by a reasonable restrictive covenant. The court found that Chuck Wagon had a legitimate and protectable interest in the customer goodwill and loyalty that Raduege developed while acting as its agent. The fact that a stranger could theoretically discover the route's stops is not controlling, because a stranger would lack the significant advantage of the established customer relationships and loyalty that Raduege had built. The covenant was deemed reasonable under the five-part test from Lakeside Oil Co. v. Slutsky because it was necessary to protect Chuck Wagon's business, the one-year duration and route-specific territory were reasonable, and it was not unreasonable to either Raduege or the public. Therefore, the covenant is valid and enforceable.
Analysis:
This case clarifies that an employer's protectable interest under a restrictive covenant extends beyond formal trade secrets to include customer goodwill, especially in a route-sales context. The decision distinguishes between the theoretical ability of a competitor to identify customers and the practical, unfair advantage a former employee has due to established personal relationships. This strengthens the position of businesses that rely on direct, repeated customer contact by enforcing reasonable covenants designed to give the business a fair opportunity to transition customer relationships to a new employee. It reinforces the application of the five-factor reasonableness test as the primary framework for evaluating such covenants in Wisconsin.
