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Law School Case Brief

Robbins v. Finlay - 645 P.2d 623 (Utah Sup.Ct. 1982)

Rule:

The general rule in contract law is that the damages recoverable for a breach are those which arise naturally from the breach and which reasonably may be supposed to have been within the contemplation of the parties or are reasonably foreseeable. They are essentially compensatory in nature.

Facts:

Defendant Douglas Finlay had been employed by plaintiff Robbins, dba Beltone Utah (Beltone) to sell hearing aids. Beltone is a distributor of Beltone brand hearing aids. After Finlay terminated his employment with Robbins, he went into business for himself selling hearing aids. Beltone thereafter sued Finlay for breach of a covenant prohibiting unauthorized use of customer leads provided by Beltone and for breach of a covenant not to compete . Upon a jury verdict finding that Finlay had breached the covenants of his employment contract with Beltone., the trial court entered a judgment awarding Plaintiff Beltone damage amounts stipulated in the employment contract: $5000 for breach of a covenant not to misuse customer leads supplied by Beltone, and $3000 for breach of a covenant not to compete with Beltone in its service area for a period of one year following termination of employment. Plaintiff was also awarded $2500 as attorney's fees. Defendant Finlay appealed.

Issue:

Was an employer entitled to liquidated damages for the breach of covenant of defendant employee who resigned and established a similar business?

Answer:

Yes.

Conclusion:

The Court held that the employment contract's liquidated damages provision was enforceable as being reasonable as to actual damages, but the covenant not to compete was unenforceable as being based upon a common calling. The court also held that the covenant not to compete was primarily designed to limit competition or restrain the right to engage in a common calling and was, thus, unenforceable, and defendant's general knowledge or expertise acquired through his employment could not be appropriated as a trade secret.

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