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Dixon v. Royal Cup, Inc.
Citations: 386 So. 2d 481; 1980 Ala. Civ. App. LEXIS 1101Docket: Civ. 1986
Court: Court of Civil Appeals of Alabama; July 23, 1980; Alabama; State Appellate Court
Royal Cup, Inc. initiated legal action against D. Jack Dixon, seeking injunctive relief to enforce a non-compete clause in their employment contract, which prohibited Dixon from competing with Royal Cup after termination. Additionally, Royal Cup sought liquidated damages as stipulated in the contract. Dixon counterclaimed for unpaid salary, commissions, expenses, and severance pay. The trial court issued a permanent injunction against Dixon, awarded Royal Cup $4,210.65 in damages, including attorney fees and costs, and granted Dixon a set-off of $2,158.29. The non-compete clause restricted Dixon from disclosing business information or engaging in competitive activities within specific territories for one year post-termination. The enforceability of such restrictive contracts hinges on whether the restrictions are deemed reasonable for protecting the business interests of the employer. Dixon referenced the case Robinson v. Computer Servicenters, Inc. to argue against enforcement, claiming Royal Cup intended to terminate him when the contract was signed, thus rendering the agreement inequitable. Testimony from Royal Cup's vice president indicated no prior knowledge of Dixon's competitive plans at the time of contract execution. However, a district manager revealed that Dixon had expressed intentions to start a competing coffee business, but did not inform upper management until after the contract was finalized. Royal Cup did not demonstrate an intention to terminate Dixon before he signed the employment contract, making it reasonable to enforce the contract's non-compete provisions. Dixon argued that he did not violate these provisions, specifically stating he did not engage in coffee sales or solicit orders for competitors. However, evidence showed that he ordered coffee from competitor Maxwell House, printed business cards for "Southern Coffee Service," set up an answering service, and listed his coffee service in classifieds. Testimony from Ina Shaw confirmed Dixon offered to sell her Maxwell House coffee without mentioning Royal Cup. Additionally, district manager Wayne Eason testified that Dixon sought a partnership in a Maxwell House distributorship while still employed by Royal Cup, intending to use Royal Cup's resources to gain customers. The non-compete provisions were deemed clear and unambiguous, and the evidence indicated Dixon violated all of them. Furthermore, Dixon's claim that the non-compete provisions were void due to him not "engaging in business" was rejected. The court maintained that preparing to operate a competing business constituted engaging in business and that setting up operational structures is included in this definition. Thus, the court affirmed the trial court's decision, concluding that Dixon violated his employment contract.