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Gordon Termite Control v. Terrones
Citations: 84 Cal. App. 3d 176; 148 Cal. Rptr. 310; 1978 Cal. App. LEXIS 1850Docket: Civ. 52338
Court: California Court of Appeal; August 22, 1978; California; State Appellate Court
Defendant Frank Terrones appeals an adverse judgment related to a non-compete agreement with his former employer, Gordon Termite Control. The court reverses the judgment, concluding the agreement is illegal and void under California law. Terrones had been employed for ten years before a brief termination in March 1972, after which he was rehired under a written agreement that prohibited him from soliciting clients he had served while employed. Breaching this agreement would require him to pay $50 per account solicited. Terrones was employed under this agreement until October 1974, when Gordon sold its pest control accounts to Stanley Pest Control. Following allegations that Terrones’ activities with a competitor led to the cancellation of numerous accounts, Gordon settled with Stanley and subsequently sued Terrones for the losses. The court finds the non-compete agreement unenforceable under Section 16600 of the Business and Professions Code, which states that contracts restraining lawful professions are void, except to protect trade secrets. The court distinguishes between trade secrets and customer knowledge, ruling that the latter does not qualify as a trade secret. The plaintiff's argument that the agreement constituted an assignment of accounts rather than a non-compete was rejected, as similar claims have been dismissed in prior cases. The court emphasizes that the financial penalty for breaching the agreement serves to restrain Terrones from engaging in his profession, rendering the contract void. The judgment in favor of Gordon is reversed, with judges Jefferson and Jones concurring.