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Lavey v. Edwards

January 25, 1973

LAVEY, RESPONDENT,
v.
EDWARDS ET AL, APPELLANTS. MOORE, RESPONDENT, V. EDWARDS ET AL, APPELLANTS. BROWN, RESPONDENT, V. EDWARDS ET AL, APPELLANTS



Appeal from Circuit Court, Multnomah County. Charles S. Crookham, Judge.

Charles F. Hinkle, Portland, argued the cause for appellants. With him on the briefs were Phillip D. Chadsey, and Davies, Biggs, Strayer, Stoel and Boley, Portland.

William E. Tassock, Portland, argued the cause for respondents. With him on the brief were Barzee, Leedy & Tassock, Portland.

Tongue, Justice. O'Connell, Chief Justice, and Denecke, Holman, Howell and Bryson, Justices.

Tongue

In these three cases plaintiffs seek to recover contributions made by their employer, Industrial Lumber Co., into a "Profit-Sharing Retirement Plan for Salaried Employees * * *." As affirmative defenses to these claims defendants, the trustees under that plan, allege that one of the provisions of that plan was that if an employee who participated in it "accepted employment with a competitor of the Employer, or established his own competing business * * * such participant's benefits shall be suspended or terminated, in whole or in part * * *." Defendants also alleged that these three plaintiffs were salaried employees employed as

"wood product traders"; that they voluntarily terminated their employment; that "shortly thereafter" plaintiffs Moore and Brown became officers, stockholders and employees of a direct competitor and that plaintiff Lavey became an employee of that competitor.

The plaintiff in each case demurred to this affirmative defense on the ground that such a "noncompetition" provision in a pension plan was void as a contract in restraint of trade and was therefore invalid and unenforceable as a matter of law. The trial court sustained that demurrer in each case. Judgments were entered in each case in favor of plaintiffs. Defendants appeal.

These cases present to this court for the first time the question of the validity of a provision in a noncontributory profit-sharing pension plan under which an employee's right to recover contributions by his employer for his benefit under such a plan may be forfeited in the event that he leaves his employment for employment by a competitor. More specifically, the question is whether such a provision is invalid and unenforceable as a matter of law, particularly if it is without limitation as to the time and territory of employment by the competititor.

Plaintiffs' primary contentions are: (1) that noncompetition clauses without limitation as to time and territory are void and unenforceable in Oregon as a matter of law and (2) that the effect upon an employee of the forfeiture of an economic interest such as a pension is even greater than the effect of a prohibition by injunction of employment by a competitor.

Defendants contend, on the contrary, (1) that reasonable limitation as to time and territory may be

"read into" noncompetition clauses that contain no such limitations and that such clauses may be enforced as so interpreted, and (2) that regardless of the validity or invalidity of such noncompetition clauses in employment contracts, provisions for the forfeiture of benefits under noncontributory profit-sharing pension plans when an employee accepts employment by a ...


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