Ritterpusch v. Lithographic Plate Service, Inc.

Hammond, J., delivered the opinion of the Court. A jury found that the appellant, Ritterpusch, had violated his obligation as an employee by soliciting the business of customers of his employer, Lithographic Plate Service, Inc., the appellee, for a competitor with whom he was soon to become affiliated, and assessed damages against him. It is urged upon us that the trial court erred (1) in failing to grant a motion for a directed verdict on the ground that there was no evidence legally sufficient to prove the violation of any duty owed by the appellant, and (2) in instructing the5 jury that at the time the solicitation of business might be found to have ⁵⁹⁵ occurred, the appellant was, as a matter of law, an employee, owing full loyalty to his employer. The trial court instructed the jury that the duty of fidelity and loyalty owed by an employee to an employer does not prevent him from making preparations for future competition with his employer, either in business alone or with others, but that he may not go as far as to solicit the business of customers of his employer before the termination of his employment.

We think the charge correctly stated the applicable law. Therefore, if there was evidence which permitted the finding that appellant did solicit business for himself while still in the employ of the appellee, the case properly went to the jury. The evidence was conflicting on most, if not all, of the key points but the record reveals that the jury well could have resolved the conflict by deciding that the facts set out in the two succeeding paragraphs had been proven to its satisfaction and so, justifiably reached the verdict it did. Maran Printing Company is in the business of printing, typesetting and lithographing in Baltimore.

Its principal owner and operating partner is Maurice Annenberg. In 1946, he began to use the process of printing called off-set, which prints from paper-thin flexible zinc plates instead of conventional metal type. He decided to make his own plates, rather than buy from others and employed Ritterpusch as a plate maker. Soon this aspect of Maran’s business was moved to a separate location and operated under the name of Lithographic Plate Service.

About a year later Annenberg incorporated Lithographic Plate Service, Inc., the appellee, and transferred Maran’s plate making assets to it in return for 800 shares of its stock. Maran kept 480 shares, and transferred 160 shares each to two of its old employees, Hecht and Patterson, who became secretary and treasurer, respectively, of the new company with Annenberg as president. In the beginning Plate Service, which operated as a trade shop, doing work for outsiders as well as Maran, lost money and was subsi ⁵⁹⁶ dized by Maran. Until 1951 Maran paid Ritterpusch’s salary.

Business increased only when several large plants, including Rheem Manufacturing Co., with plants at Sparrows Point and Linden, N. J., put in off-set presses. Sales of Plate Service increased from $22,000 in 1948 to $124,000 in 1953. Four customers represented most of these sales — Rheem, about 34%, Thomsen-EllisHutton, about 11%, Publication Press, 8%, and Maran, 28%. Plate Service was the only shop in Baltimore with equipment large enough to make the extra size plates Rheem needed.

When Ritterpusch started to work in 1946, he was paid $70.00 a week. He did a little of everything about the plant and showed particular aptitude as a salesman. As the business began to grow, Ritterpusch grew with it and became general manager, the man whose lengthened shadow Plate Service was, and his earnings rose so that in 1953 he made $150.00 a week. Annenberg had little direct connection with, or supervision of, Plate Service.

As the company prospered, Ritterpusch felt he should be paid more. In 1952 he submitted a proposal for a commission on gross business, which would rise 1% a year until it reached 5%. This was not agreed to and in November, 1953, he approached Annenberg with the proposition that Maran, Hecht and Patterson each give him 5% of their stock holdings so that then Maran would have 55% of the stock, and Hecht, Patterson and Ritterpusch each 15%. This arrangement was never consummated.

In the middle of December, 1953, one Bowling told Ritterpusch that he was planning to organize a plate making business which would be in direct competition with Plate Service, and invited Ritterpusch to join him and his two associates in the new venture. Ritterpusch did not commit himself, saying that he was in a well organized company and he thought Annenberg would look out for him. Nevertheless, he gave advice to Bowling as to the kind of equipment and the amount of space that would be needed. He attended conferences with Bowling and his associates and suppliers of plate making equipment.

Equipment was ordered and ⁵⁹⁷ delivered in December, 1953. Ritterpusch admitted that it was on his suggestion that the order included appliances large enough to do the work of Rheem Manufacturing Co., the only firm requiring extremely large plates. Bowling said he invested in the large equipment so as to be able to compete for the Rheem account. Ritterpusch said that in December, 1953, he was “in a general way” thinking of joining the new venture.

On January 4, 1954, Bowling signed a lease on behalf of the new company, Lincoln Lithoplate, Inc., for space for its operations although the company was not incorporated until January 8, 1954. Bowling and his two associates purchased all stock for cash and caused all of the preferred stock and three-fourths of the common stock to be issued to them, and the other one-fourth of common stock to be issued gratis to Ritterpusch. As early as November, 1953, Ritterpusch had visited the Rheem plant at Linden, N. J. and told Siebert, the assistant purchasing agent, that he had been thinking of going into business for himself and asked “if he ever did * * * would he have a chance of getting part or all of our business up in the Linden plant.” Siebert discussed the matter with his superior and Ritterpusch was told that there was no reason he could not have a fair share of the business if he proved his ability to handle it. In the Rheem Sparrows Point plant, orders originated in the sales department of which Tucker was manager, and the purchasing department was merely a conduit.

In December, 1953, soon after Bowling had invited him to join the new venture, Ritterpusch talked to Tucker and asked his advice about the proposition, having in mind the doing of Rheem’s work, and Tucker advised him to go into it. Between Christmas and New Year’s Eve, 1953, Ritterpusch told Kisling, plant foreman for Plate Service for seven years, that he had decided to quit and asked whether he would like to go along as manager. On Saturday, January 2, 1954, he called on Annenberg, who had been home sick for several days, and told him for the first time of his intention to quit and go into a competing ⁵⁹⁸ business. Annenberg became quite upset and told him that there was such a limited market in Baltimore, that he couldn’t be stupid enough to go into the plate making business.

Annenberg says, Ritterpusch denies, that Ritterpusch replied: “ * * I’m not dumb enough to go into business without sewing up anything * * *. I’ve already sewed up Rheem * * * and have them lined up, their business is twice as much as yours [Maran’s], and if I only have that one account and starve on it, I’ll go in.’ ” Ritterpusch told Annenberg that he would stay on until February 1, 1954, and when Annenberg said he would make Kisling general manager, Ritterpusch told him he had Kisling tied up and that he was taking him with him and that he was also taking Blinke, another employee. Annenberg then told Ritterpusch to come to the Service Plate plant Monday morning, January 4, and wait for him and not to “touch a single thing, don’t touch any more accounts, even the ones you’ve been doing on the outside, I’ll appoint somebody else manager as soon as I see what’s in there.” On Monday morning, Annenberg spoke again to Ritterpusch in the plant and told him to stay there and train whomever would be appointed manager. Ritterpusch requested permission to go to the hospital to visit his ill son and left for the rest of that day.

The next day, Tuesday, January 5, Ritterpusch went to Rheem’s Sparrows Point plant at quarter to nine in the morning and conferred with Eifert, head of the purchasing department, and his assistant. A memorandum of Eifert’s conference with Ritterpusch was admitted in evidence pursuant to stipulation, because Eifert was unavailable to testify. It set forth that Ritterpusch told him that he was going into business for himself and would be in a position to give them the same kind of service he had given them in the past. It continued: “* * * based further upon the strong recommendations of Rog Hard and Tuck, we decided to go along with him.” Tuck was the nickname of the manager of the sales department with whom Ritterpusch had consulted in December, 1953, and Hard was his assistant.

From the Rheem plant, Ritter ⁵⁹⁹ pusch went to Thomsen-Ellis-Hutton and, according to Ellis: “He spoke about starting up for himself and could he count on some of our business.” He added that as far as he knew, Ritterpusch was in his place of business for the purpose of soliciting business for the new enterprise. Ritterpusch then went to lunch and returned to the Plate Service plant around one o’clock. Shortly thereafter, Rheem’s truck arrived to take from Plate Service all of its negatives and art work which were essential to the doing of its work. Kisling, with Ritterpusch’s knowledge and acquiescence, if not direction, gave the order to release the negatives and art work and ordered Rheem’s driver to take them to Ritterpusch’s new place of business on S. Gay St. While this was going on, Ritterpusch went to Annenberg’s office across the street, in response to a summons, and because of his visits to Rheem and Thomsen-Ellis-Hutton of which Annenberg had learned, was forthwith discharged.

Annenberg directed that Ritterpusch be paid for the full month of January, 1954, but Patterson refused to agree, as a matter of principle, and, finally, Ritterpusch was given a check for his full basic salary for January 4 and 5, which he accepted and cashed. Ritterpusch says that he was an employee of Plate Service at the time he called on Rheem and Ellis, that the calls were made for the account of Plate Service, and that he merely advised the customers of his resignation to take effect at the end of the month. Eifert says in the memorandum that Ritterpusch told him he would be in a position to service Rheem’s account “when he left Litho Plate Service”. Beginning January 6, 1954, Rheem’s sales department cancelled a number of orders which Plate Service had in process and placed them with Ritterpusch’s new company, Lincoln Lithoplate, Inc. Within a period of less than thirty days, the new company had virtually all of Plate Service’s customers and key employees.

In 1953, appellee’s sales were $124,000 with a profit of $8,000 after payment of a similar amount in officers’ salaries, and in 1954 they dropped to $60,000, with a loss ⁶⁰⁰ of $5,000 after the payment of only $2,000 to officers. Ritterpusch’s company, for 1954, had $122,000 in sales, 90% of which was represented by business from Plate Service’s former customers. The Rheem account alone represented 26% of the gross volume. The business of four other former customers of Plate Service represented 40%; thus some 66% was represented by the business of five of Plate Service’s former customers.

Ritterpusch received a total of $11,780 in salary and bonus in 1954. Bowling and associates got $12,800 and the company earned about $12,000. The trial court charged the jury that an employee, during the time of his employment, owes his employer the duty of fidelity and loyalty and must not injure his interests. He instructed them that an employee has the legal right, while still an employee, to make arrangements to compete with his employer by subsequently engaging in business, either by himself or with others.

As soon as his employment ends, he may solicit the customers and key employees of his employer. He may advise the customers with whom he