Millward v. Gerstung International Sport Education, Inc.
302 A.2d 14, 268 Md. 483, 1973 Md. LEXIS 1122 (1973)
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Rule of Law:
Non-competition covenants in employment contracts are enforceable against employees who perform unique services, possess significant publicity value, or exploit personal contacts established during their employment, provided the restrictions are reasonable in area and duration and do not impose undue hardship or violate public interest.
Facts:
- Gerstung International Sport Education, Inc. ("Gerstung, Inc."), founded by Siegfried Gerstung, operated a unique European method-based physical education program in winter and a day camp in summer for private elementary school children in northern Baltimore County.
- In spring 1968, Gerstung, Inc. hired Horace Douglas Millward because of his unique qualifications and significant publicity value as a well-known coach for the professional soccer team, the Baltimore Bays.
- Millward began working for Gerstung, Inc. as a camp counselor and teacher, and by September 1969, he became director of operations, signing a one-year contract that included a non-competition clause.
- On September 4, 1970, Millward signed a new one-year contract, which included a two-year non-competition covenant, and assumed the role of director of the summer camps, further increasing his responsibilities and contacts.
- In September 1971, Millward was re-employed without a written contract as a full-time teacher, and Gerstung, Inc. partially waived the restrictive covenant to allow him to give private tennis instructions.
- On December 18, 1971, Millward informed Mr. Gerstung of his resignation from Gerstung, Inc., offering to continue teaching temporarily to ease the transition.
- In February 1972, Millward notified Mr. Gerstung of his affiliation with Sports Camps, Inc., a new competing summer camp planned for Baltimore County near Gerstung’s camp, catering to the same clientele.
- Sports Camps, Inc. mailed its advertising brochures in February 1972, prior to Gerstung’s customary March mailing, prominently featuring Millward as the director of the new camp, and the brochure copied Gerstung’s fee schedule, causing potential confusion and harm.
Procedural Posture:
- Gerstung International Sport Education, Inc. filed a bill of complaint in the Circuit Court for Baltimore County (trial court) seeking to enjoin Horace Douglas Millward.
- The chancellor, after a full hearing, determined the restrictive covenant was enforceable and that Millward was in violation of it.
- The Circuit Court for Baltimore County entered an amended decree on June 15, 1972, enjoining Millward until September 4, 1973, from operating any summer camp, physical education, or sports instruction for children in Baltimore County, specifically referring to a camp operated by Sports Camps, Inc., but exempting his duties as a tennis instructor.
- Horace Douglas Millward appealed this decree to the Court of Appeals of Maryland (highest court).
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Issue:
Is a non-competition covenant in an employment contract enforceable against an employee who provided unique services, possessed significant publicity value, and developed personal contacts with clients during employment, where the employee subsequently joins a directly competing business within the restricted area and timeframe?
Opinions:
Majority - Digges, J.
Yes, the non-competition covenant against Horace Douglas Millward is enforceable. The Court affirmed the lower court's injunction, distinguishing this case from others where such covenants were found unenforceable against unskilled workers without unique services or customer solicitation (e.g., `Becker v. Bailey`, `Budget Rent A Car v. Raab`). Instead, this case aligned with precedents like `Tuttle v. Riggs-Warfield-Roloson` and `Ruhl v. Bartlett Tree Co.`, which emphasize protection for employers when an employee's personal contact with customers is a significant factor in business success. The covenant was found reasonable in its area and duration. Crucially, Millward possessed a unique reputation and qualifications, widely publicized by Gerstung, Inc., which had a direct bearing on the services he rendered. Through his position, Millward established personal contacts with students, parents, and others in the field, contacts essential for the new competing camp’s success. The Court concluded that even without direct solicitation or use of customer lists, Millward's affiliation with Sports Camps, Inc., leveraging his personal attributes and established contacts, would inevitably harm Gerstung, Inc., justifying the enforceability of the covenant.
Analysis:
This case significantly clarifies the enforceability of non-competition clauses in Maryland, particularly emphasizing the 'personal contact' and 'unique services' factors. It provides crucial guidance for employers seeking to protect proprietary interests tied to specific employees who develop strong client relationships or possess unique, marketable skills. The distinction drawn between employees whose value lies in their direct interaction and those whose value is less personal will be critical for future litigation, signaling that courts will balance an employee's right to earn a living against an employer's legitimate need to protect its business from unfair competition by leveraging relationships built on its dime.
