Duane Jones Company, Inc. v. Burke

117 N.E. 2d 237 (1954)

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Nature of the Case

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Facts

P is an advertising agency organized in 1942 by Duane Jones who, since its founding, has been its majority stockholder and either president of the corporation or chairman of its board of directors. By 1951 P had produced a gross billing of $9,000,000. P's customers were free at any time to discharge P as its agency; and similarly, P had the right at will to resign any of its accounts. P's employees were not under formal contract to it. In July 1951, plaintiff serviced approximately twenty-five customers or accounts. During the preceding six months, P had lost three of its accounts - total gross billings of which approximated $6,500,000 - and had received resignations from three executives as well as from certain staff members of the organization. This stated when Duane Jones, the president of P, had been guilty of certain behavior lapses at his office, at business functions and during interviews with actual and prospective customers. Several of P's officers and directors expressed dissatisfaction with conditions - described as 'intolerable' - which existed in the spring and summer of 1951. On June 28, 1951, a buyout was offered to Duane and if refused that the employees leave and start a new company. Mr. Jones' recital of that conversation was that Ds told him of the group's intention either to buy him out or to start their own agency and that if he did not agree to a sale, they would resign en masse within forty-eight hours. Jones had been told by Ds that the agency's customers had been 'already presold' on the alternative plan. Jones did accept the buyout, but it was never consummated. Ds resigned as officers, and as directors of P. Each contained a statement that the writer would continue his duties as an employee of P, and stated 'As an employee, I will continue to service those accounts now assigned to me, to the best of my ability.' At the next board meeting, the board voted to discharge Ds immediately and for cause. Despite being fired, many of the Ds continued to get paid and serviced accounts. On August 22, 1951, D signed a certificate of incorporation of Scheideler, Beck & Werner, Inc. They opened for business as an advertising agency on September 10, 1951. Within six weeks Scheideler being formed it had seventy-one of the one hundred thirty-two persons formerly employed by P. Scheideler testified that, on August 21, 1951, he had informed an officer of Manhattan Soap Co. that he (Scheideler) had 'decided definitely to go ahead' with the creation of a new agency and that he had already solicited several key employees, some of whom were then employed by P. Prior to August 23d Scheideler had solicited an assistant account executive to become an employee of Scheideler, Beck & Werner, Inc. Hulshizer became secretary of defendant corporation on August 23d when - to Scheideler's knowledge - he was still an employee and officer of P. In August, Scheideler instructed his people to get the personnel necessary to staff the corporate defendant on the basis of an anticipated annual billing of $4,500,000. Scheideler, Beck & Werner, Inc. pilfered a good deal of P's accounts. On August 24, 1951 - the day following incorporation of Scheideler, Beck & Werner, Inc. - Scheideler addressed a letter to Duane Jones as president of P corporation in which Ds admitted they had been working in their own spare time on organizing a new agency and were taking P’s employees with them P sued Ds for conspiracy and won. Ps appealed.