{ "id": 8724135, "name": "PLASTICS RESEARCH & DEVELOPMENT CORP. v. Bill NORMAN et al", "name_abbreviation": "Plastics Research & Development Corp. v. Norman", "decision_date": "1967-12-18", "docket_number": "5-4308", "first_page": "780", "last_page": "789", "citations": [ { "type": "official", "cite": "243 Ark. 780" }, { "type": "parallel", "cite": "422 S.W.2d 121" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "128 F. 2d 6", "category": "reporters:federal", "reporter": "F.2d", "case_ids": [ 10693801 ], "opinion_index": 0, "case_paths": [ "/f2d/128/0006-01" ] }, { "cite": "63 N. Y. S. 2d 786", "category": "reporters:state", "reporter": "N.Y.S.2d", "year": 1946, "opinion_index": 0 }, { "cite": "376 U. S. 225", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 379713 ], "year": 1964, "opinion_index": 0, "case_paths": [ "/us/376/0225-01" ] }, { "cite": "199 Ark. 953", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1456640 ], "weight": 2, "year": 1940, "opinion_index": 0, "case_paths": [ "/ark/199/0953-01" ] } ], "analysis": { "cardinality": 725, "char_count": 15096, "ocr_confidence": 0.526, "pagerank": { "raw": 5.9379021195495074e-08, "percentile": 0.37046368340393593 }, "sha256": "a1c6975a5bc56889de79fd2f499572601f71323ecfdc5a607561bb1e68db064c", "simhash": "1:6c08a0b245408159", "word_count": 2477 }, "last_updated": "2023-07-14T18:02:41.806727+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "PLASTICS RESEARCH & DEVELOPMENT CORP. v. Bill NORMAN et al" ], "opinions": [ { "text": "Conley Byrd, Justice.\nThis litigation between appellant, Plastics Research & Development Corporation, and appellees, Bill Norman and Rebel Manufacturing 'Company, Inc., arises out of the manufacture and sale of a plastic fishing lure called \u201cRebel.\u201d At issue is (1) whether Bill Norman breached his employment contract with Plastics Research calling for 4 per cent of the net profits of their lure department, (2) the method of calculating the net profits for the lure department as distinguished from the net profits of appellant\u2019s whole operation, and (3) whether Bill Norman and Rebel Manufacturing are guilty of unfair competition in the marketing of an identical lure.\nBill Norman commenced the litigation by filing cause No. 3773 based onjiis contract of employment with Plastics Research, which provided in part:\n\u201c* * * 2. Employee will receive a base salary of $800.00 per month for the year November 1, 1964 through November 1, 1965. In.addition thereto Employer agrees to pay to Employee, as a bonus 4% of the net profits of the Lure Department for the fiscal year November 1, 1964, ending November 1, 1965.\u201d\nHe prayed for an accounting of the net profits of the lure department and \u25a0 for a judgment for 4 per cent thereof. Appellant pleaded that Norman had breached his employment contract by incorporating \u201cRebel Manufacturing Company, Inc.\u201d on October 25, 1965, before his employment ended, and that Norman had solicited appellant\u2019s sales representatives to withhold orders to appellant until Rebel Manufacturing got into production of an identical lure. Prayer was that Norman take nothing on his complaint and that he be enjoined from using any information acquired while employed by appellant in the manufacture, promotion or sale of fishing lures. It was also asked that Norman be enjoined from engaging directly or indirectly in the manufacture of lures using the name \u201cRebel\u201d or \u201cRebel Minnow.\u201d\nSubsequently appellant filed cause No. 3858 against both Norman and Rebel Manufacturing, alleging unfair competition and praying that Norman and Rebel Manufacturing bo restrained from, manufacturing' a fishing lure similar to the \u201cRebel\u2019Mure,.from using the name \u201cRebel\u201d and from representing that appellant was in financial trouble, that Norman me directed to turn over to appellant any molds made from appellant\u2019s materials, and for damages.\nThe two causes were consolidated for trial. In cause No. 3858 the trial court found no unfair competition but did enjoin Norman from making statements to the effect that appellant was in such bad financial shape that it could not make delivery of goods. In cause No. 3773 the trial court found no breach of the employment contract by Norman and calculated the net income of the lure department to be $367,231.64, resulting in a judgment in Norman\u2019s favor of $14,689.26 for his bonus.\nThe record shows that Norman was in the fishing lure manufacturing business on his own, to some extent, at the time of his employment by appellant in the spring of 1963. Norman\u2019s first pay check from appellant was for $300 before deductions. By-August 1964 his salary, by written agreement, had been increased to $15,000, and for the year ending October 31, 1965, he had a base contract for $800 per month plus 4% of the net profits of the lure department. Sales of the \u201cRebel\u201d lure had climbed from nothing, at the time Norman was employed, to $893,884.50 for the year ending October 31, 1965. Appellant fired Norman on November 5, 1965.\nA dispute between Norman and appellant about the net profits of the lure department had arisen before his discharge. Counsel was retained by Norman by October 18, 1965, and appellant was so notified on that date by Norman\u2019s counsel. Prior to June 20, 1965, statements showing sales and costs of purchases had been furnished to Norman, but because of labor problems between appellant and its employees no statements were furnished thereafter.\nWith reference to Norman\u2019s alleged breach of the employment contract, the record shows that he caused \u201cRebel Manufacturing Company, Inc.\u201d to be incorporated on October 25, 1965, six days before the termination of his employment contract. Prior to October 31 Norman had discussed with other employees the possibility of going into a competitive business. Furthermore, there was testimony by appellant\u2019s sales representatives that around November 1, 1965, Norman had solicited them to hold their orders until he could get into production.\nThe trial court found that Norman\u2019s conduct amounted to nothing more than a mere, planning for employment upon the termination of his employment contract. The finding is amply supported by the record and is in accord with our prior cases. In Hamilton Depositors Corp. v. Browne, 199 Ark. 953, 136 S. W. 2d 1031 (1940), we recognized that merely organizing a corporation during employment to carry on a rival business after expiration of the term of employment did not amount to a breach of an employment contract. One is entitled to seek other .employment before he is on the street.\nThe net profits of the lure department present the most difficult issue in this litigation. Obviously \u201cnet profit\u201d means that which is left after payment of necessary expenses. The dispute here is complicated by appellant\u2019s departmentalized accounting and the allocation of indirect expenses among its several departments. The departmentalized accounting and intercompany charges were explained by Loren Janes, appellant\u2019s accountant, in this manner: \u25a0\n\u201cQ. Now, take for instance, as I understand it, your plant is departmentalized?\nA. Yes.\nQ. Now mention has been previously made about charges to various departments. You have ' also outside customers do you not, such as Norge and so forth?\nA. Yes.\nQ. Are they charged on the same basis as your departments ?\nA. No\nQ. What is the difference?\nA. It is a compromise difference, but essentially it is half the profit potential or 10% less is just what it about amounts to. Exactly what it amounts to, in fact, the in the Lure Department for instance, [sic]\nQ. I don\u2019t understand that. Exactly what do you mean?\nA. In the case of Norge, we would take a job, we would take a mold to run in our press, we would charge them at $8.00 per hour per thousand pieces plus material at cost, or reasonably therefor.\nQ. What did this $8.00 encompass?\nA. This covers everything including profit for the Production Department.\nQ. Now, assume that the same item was manufactured for the Lure Department.\nA. You would charge it at $7.20 per hour.\u201d\nJanes testified that when a payroll was written, he directly allocated charges in labor hire, labor production, labor tooling, or labor overhead; and that when a person worked in a department his labor cost was directly charged to that department, but with overhead labor, the cost was spread according to an allocation agreed upon between the department heads, including Norman-\nWith reference to supplies and expenses, Janes testified that they were allocated each month on the basis of each department\u2019s outside sales as a percentage of the company\u2019s total outside sales. Thus, if the lure department sold 50 per cent of. the sales of the whole company, the production department 30 per cent and the tooling department 20 per cent, these supplies would be charged on the basis of 50 per cent of the cost, say, of printing checks, to the lure department, 30 per cent to the production department and 20 per cent to the tooling department.\nThe records kept monthly by Janes show many discrepancies between the monthly allocations and the final allocations. For instance, the total \u201cDirect Labor\u201d shown on the monthly books was $84,441.51, whereas the total calculated by appellant after Norman was fired was $98,005.18. No explanation is given for the nearly $14,000 difference. The cost of purchases, as shown by the monthly books, was $148,039.70, but appellant\u2019s final calculation showed this figure to be $280,023.02.\nThe discrepancy in the figures involving cost of purchases was demonstrated in the following manner. Janes showed that for the eight months ending June 30, 1965, sales totaled $707,992.47 and purchases totaled $180,019.09, being a cost-to-sales ratio of 24.3 per cent. Sales on September 30 totaled $849,863.87 and purchases to the same date totaled \u2022 $206,016.55, being a ratio of 24.2 per cent. Sales on October 31 totaled $893,884.50, but purchases had climbed to $280,023.02, for a cost-to-sales ratio of 31.3 per cent. By subtracting the September 30 total sales of $849,863.87 from the October 31 total of $893,884.50, and the total cost of purchases as of September 30 ($206,016.55) from the October 31 total ($280,023.02), we find that while sales increased only by $44,020.63 for October, the cost of purchases increased by $74,006.47. With respect to the October purchases, Janes testified (as abstracted by appellant):\n\u201cI have testified that the figures were kept monthly on each department. I have a breakdown on the cost allocated to the lnre department including outside purchases for October, 1965. That figure is $12,676.62. I am a dime off in my reconciliation, the outside invoices total $4,229.86. That\u2019s outside purchases as evidenced by invoices. The lure molding charge for the production department to the lure department for the month of October was $5,816.00 even. The lure metalizing charge for metalizing the lures for the month of October was $2,694.57. There was an audit adjustment and I have got the adjustment in a box, but there was an additional $63.91 minus due to an audit adjustment. I didn\u2019t have the .time last night to actually track it down. So we actually reduced the purchases by $63.91 and that should total with the 10-cent error that should total to $12,676.62. That is the figure that is reflected on the monthly financial statement of the lure department. With reference to Plaintiff\u2019s Exhibit 15 that does not reflect all the outside purchases for the lure department. It could not because there is only $3,000.00 here and we entered $4,000.00. It could not, they have missed something.\u201d (Emphasis supplied.)\nThe general ledger kept by Janes also showed an inventory for October 31 of $153,889.66 and a $44,049.82 adjustment which Janes stated was due to defective lures removed from inventory and placed in a warehouse. While Janes was sure of the inventory loss because of defects, yet both he and Mr. Perrin, appellant\u2019s president, testified that everything shippable from the lures placed in the warehouse had been shipped by October 31.\nMany other unexplained discrepancies appear in appellant\u2019s calculation of income for the lure department. For instance, Janes testified that costs of supplies and expenses were allocated monthly. By the monthly records the total of the costs allocated to the lure department was $4,560.60, but in appellant\u2019s subsequent tabulation of income for tbe lure department $9,178.30 had been allocated for these costs. In the matter of executive salary allocation, there was included in the lure department\u2019s charges for 1965 the sum of $5,600 paid to Norman in 1965 as the bonus on his 1964 contract.\nFurthermore, in connection with the net profits issue the record shows a number of accounting exhibits, which were referred to by the witnesses sometimes by exhibit number and sometimes as \u201cthat statement.\u201d None of the exhibits was abstracted, even though it would not have been impracticable to do so.\nUnder this state of the record, we are unable to say that the trial court\u2019s finding of net income, substantially upon the basis of appellant\u2019s general ledger, is not supported by the evidence. Because of the many discrepancies, he could very well have disregarded the allocations of indirect expenses made by appellant\u2019s accountants following Norman\u2019s dismissal.\nOn the issue of unfair competition, the record is clear that the \u201cRebel\u201d lure was copied from the \u201cRapalla\u201d lure, a balsam wood product from Finland. The difference is that the \u201cRebel\u201d lure is made of plastic and has some other refinements, such as floating depth and the manner and location of the hook attachments. There is no doubt that Norman\u2019s minnow is a copy of the appellant\u2019s. Furthermore, the testimony was that appellant had expended in excess of $100,000 advertising its minnow as the \u201cRebel Minnow\u201d and the \u201cAmazing Rebel Minnow.\u201d Norman advertised his minnow as the \u201cReb-1\u201d and as the \u201cAmazing Minnow.\u201d He used the same series number to identify the size of his minnows as did appellant.\nNorman\u2019s right to copy appellant\u2019s \u201cRebel\u201d minnow is guaranteed to him by the federal patent laws, see Sears, Roebuck & Co. v. Stiffel Co., 376 U. S. 225 (1964). However, this does not mean that he can poach on appellant\u2019s advertising in such manner as to palm off his product as that of appellant. Nor is it necessary for appellant to prove actual deception of customers before he is entitled to an injunction where that is the natural and probable result of Norman\u2019s conduct, Robert Reiss & Co. v. Herman R. Reiss, Inc., 63 N. Y. S. 2d 786 (1946).\nExhibit J-l, Norman\u2019s \u201cAmazing Minnow,\u201d is packaged in a blue and white box similar to that of appellant\u2019s \u201cRebel\u201d (Exhibit J-2). Where appellant has the word \u201cRebel\u201d printed in white on the blue background with the Confederate flag in the top of the letter \u201cR,\u201d Norman has two crossed Confederate flags in similar red and white on the blue background. On the white portion of the box Norman has in red the words \u201cAmazing Minnow.\u201d Appellant, on the white portion of its box, has in red an outline of its lure. On the white ends of the boxes both exhibits have either stamped or printed thereon \u201c103 Blue.\u201d Thus it is seen that confusion is the natural and probable result of Norman\u2019s conduct in the packaging of his product.\nConsequently we hold that the trial court, in addition to its action with reference to appellant\u2019s financial condition, should have enjoined Norman and Rebel Manufacturing Company, Inc., from using the words \u201crebel,\u201d \u201cReb-1\u201d or \u201camazing\u201d in connection with the marketing of its minnows. This includes also the word \u201cRebel\u201d in the Rebel Manufacturing Company, Inc. Nor do we think it was permissible for Norman to use the same series number to designate the color and sizes of his minnows \u2014 there is a considerable difference between the use of \u201c9\u201d and \u201c99\u2019r\u201d in the case of James Heddon\u2019s Sons v. Millsite Steel & Wire Works, (6 Cir., 1942) 128 F. 2d 6, and the exact duplication of the series here.\nAppellant asked for damages but tbe abstract fails to show any damages to have been sustained. Therefore its claim for damages is denied.\nThe bonus judgment is affirmed. We are reversing and remanding this cause with directions to enter an injunction restraining Norman\u2019s and Rebel Manufacturing Company\u2019s unfair competition in accordance with this opinion.", "type": "majority", "author": "Conley Byrd, Justice." } ], "attorneys": [ "Shaw, Jones So Shaw and Bethell So Pearce, for appellant.", "Hardin, Barton, Hardin So Jesson, for appellees." ], "corrections": "", "head_matter": "PLASTICS RESEARCH & DEVELOPMENT CORP. v. Bill NORMAN et al\n5-4308\n422 S. W. 2d 121\nOpinion delivered December 18, 1967\n[Rehearing denied January 22, 1968]\nShaw, Jones So Shaw and Bethell So Pearce, for appellant.\nHardin, Barton, Hardin So Jesson, for appellees." }, "file_name": "0780-01", "first_page_order": 802, "last_page_order": 811 }