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NEWELL CO. v. LEE

January 8, 1997

NEWELL CO., a Delaware Corporation, Plaintiff,
v.
GARY D. LEE, Defendant.



The opinion of the court was delivered by: GETTLEMAN

 Plaintiff, Newell Co. ("Newell"), has filed an amended complaint against defendant, Gary D. Lee ("Lee"), alleging breach of a covenant not to compete and requesting preliminary and permanent injunctive relief. Defendant has filed a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(3) and 12(b)(6) or, in the alternative, a motion to transfer pursuant to 28 U.S.C. 1404(a). For the reasons set forth below, defendant's motion is denied in part and granted in part.

 FACTS

 Plaintiff is a Delaware Corporation with its principal place of business in Freeport, Illinois. Defendant is a resident and citizen of Missouri. Defendant's business is conducted at the offices of Gary D. Lee & Associates, 11255 Olive Street, Suite 2B, St. Louis, Missouri.

 
[Defendant] agrees that he will not, for a period of five years from the Effective Time of the Merger (as defined in the Reorganization Agreement) (the "Limitation Period"), directly or indirectly, in his or her individual capacity or otherwise, anywhere in the United States, Canada, Mexico, or the United Kingdom, (a) own, manage, operate or control, or participate in the ownership, management, operation or control of, or otherwise be engaged in, employed by, render services or give advice to, or be connected with or have any interest in, as a stockholder, director, officer, employee, agent, consultant, partner, investor or lender or in any other capacity, any natural person, corporation, partnership, proprietorship, other business organization, trust, union, association or any group or division of any of the foregoing (the "Lee-Rowan Competitor"), which is engaged in the design, manufacture, marketing, distribution or sale of . . . any product similar to, or the same appearance as, or fulfilling the same function as, any product of Lee-Rowan identified in Lee-Rowan's product catalog as of the Termination Date.

 Lee-Rowan is a company founded by defendant's grandfather that manufactures and markets shelving, organizers, and other storage products for closets and other areas of the home. As of 1993, LeeRowan's sales in the United States, Canada, Mexico and the United Kingdom exceeded $ 100,000,000, making Lee-Rowan a substantial player in the billion dollar storage and shelving industry. The majority of Lee-Rowan's sales are made through mass marketers such as K-mart, Walmart, and Target, and home centers such as Builders Square and Home Depot.

 Lee-Rowan's shelving and related storage products are generally, but not exclusively, made from industrial grade steel. The steel is finished with a baked-on epoxy of different colors. Plaintiff contends that Lee-Rowan's "wire" or "ventilated" products compete directly with similar shelving and storage products made of plastic and wood. For the convenience of their customers, marketers of storage and shelving products offer varieties of such products in plastic, wire, and wood.

 Prior to plaintiff's acquisition of Lee-Rowan, defendant was the Chief Executive Officer and shareholder of the company. After the effective date of the acquisition, September 22, 1993, defendant became the president of Lee-Rowan. Defendant resigned from this position on January 1, 1996.

 On or about May 30, 1996, defendant requested from plaintiff an "okay to proceed" with a product line of closet shelving, organizers and related accessories. Plaintiff argues that these products would directly compete with its own product line. Defendant contends that the Covenant Not to Compete covers only "wire" products and that, because defendant's proposed product line consists of only plastic and wood products, the covenant is not violated. Accordingly to plaintiff, defendant also suggested that, because plaintiff had permitted defendant and another former employee to be involved with certain storage products which would not affect Lee-Rowan's business, plaintiff had lost the right to protect its product line from defendant's individual business ventures.

 In a phone conversation with plaintiff, defendant allegedly suggested that he may "test the non-compete." Shortly thereafter, defendant's attorneys informed plaintiff that defendant's "intention at this time is to participate in the custom storage industry via full or solid surface shelving products manufactured in plastic, wood or other non-wire material." Defendant's attorney's insisted that, because the proposed products were not made of "wire," they would not "fulfill the same function as any product of Lee-Rowan" and, thus, did not violate the Covenant Not to Compete.

 On August 30, 1996, plaintiff filed an amended complaint requesting specific performance of the Covenant Not to Compete until September 22, 1998. Plaintiff requests preliminary and permanent injunctive relief, as well as damages, costs of suit, attorney's fees, and "other and further relief as is just and proper." Defendant brings the instant motion to dismiss for failure to state a claim and improper venue or, in the alternative, for transfer of venue.

 DISCUSSION

 I. Motion to ...


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