Blalock v. Perfect Subscription Co.

Decision Date03 October 1978
Docket NumberCiv. A. No. 77-620-H.
Citation458 F. Supp. 123
PartiesLeRoy T. BLALOCK, Plaintiff, v. PERFECT SUBSCRIPTION COMPANY, Defendant.
CourtU.S. District Court — Southern District of Alabama

Thomas W. Underwood, Jr., Foley, Ala., for plaintiff.

David A. Bagwell, Mobile, Ala., for defendant.

HAND, District Judge.

The plaintiff initiated this lawsuit by a complaint seeking recovery for services he allegedly rendered on behalf of the defendant as a magazine salesman. The plaintiff alleges that he earned commissions totaling $15,704.46 which, after reductions for purchases made by the plaintiff against such commissions, resulted in a debt by the defendant to the plaintiff of $14,500.00.

In answer to the complaint defendant Perfect Subscription Company (Perfect) admits that it contracted with the plaintiff as an independent contractor to sell magazines subscription plans to schools for the defendant. It denies that it is indebted to the plaintiff for services rendered, however.

Included in Perfect's answer is a three count counterclaim, alleging first that the plaintiff violated the anti-competition covenant of the contract; second, that the plaintiff breached the contract by not acting in good faith with respect to defendant Perfect; and third, that the conduct of the plaintiff breached his common law obligations and amounted to tortious conduct.

In response to the counterclaim the plaintiff denied the allegations on each and every count.

The matter was then presented to the Court for consideration on stipulated facts and the Court, having considered the record, the memoranda of law and arguments propounded by counsel, together with the applicable law, finds as follows:

FINDINGS OF FACT

1. The plaintiff is a resident citizen of Baldwin County, Alabama. Defendant Perfect is a Delaware corporation whose principal place of business at all material times has been a state other than the State of Alabama.

2. Perfect engages in the business of selling magazines through school magazines drives and similar activities. Such activities are carried out through independent contractors or franchisees operating in various states. The plaintiff was one such franchisee who assigned territory included parts of South Alabama and a two-county portion of Northwest Florida.

3. The relationship between plaintiff and Perfect originated in 1973 with the execution of a written contract. The contractual terms allowed for the extension of the contract for successive one year periods by both parties, upon signature of the franchisee upon a letter sent to him for that purpose. The 1973-74 contract was extended by the parties for both the 1974-75 and 1975-76 school years under the contractual extension provisions.

4. The 1975-76 contract terminated by its terms on June 30, 1976. Perfect's home office mailed an extension notice to the plaintiff for extension of the contract for the 1976-77 school year, but the plaintiff never signed the letter or returned it to the home office. Although this precluded any extension of the express contract, Perfect and the plaintiff continued to transact their business affairs as they had done in previous years under the contract.

5. The contract had three provisions that are relevant to the questions before this Court and this lawsuit. Section 3 of the contract provided that:

This agreement shall remain in force through June 30, 1974 . . . and shall be renewable for successive one-year periods upon written consent of the parties.

Section 14 of the contract contained the covenant against competition that raised the major dispute in this case:

Franchisee recognizes that by virtue of his association with corporation, corporation will place its business and customer goodwill in the patronage of corporation's customers and schools in a large measure, under the direct and immediate control of franchisee. Therefore, in recognition of this fact and as consideration for franchise, franchisee agrees that during the term of this agreement and for 120 days thereafter, irrespective of the reason for termination, he will not own, manage, operate, control, participate in, act as an employee, or in any manner own or be connected with any business, individual, partnership, firm, corporation, or other entity which is substantially and directly in competition with any of corporation's school plan or other similar subscription activity in which the corporation is engaged or is about to engage and in any such capacity directly or indirectly solicit in connection with the sale or distribution of any magazines, books, subscriptions, educational materials, goods, wares or merchandise of any nature, any school or other unit which franchisee has called upon or for which franchisee performed services covered by this agreement within two (2) years prior to the date of termination. This covenant shall not be interpreted so as to preclude franchisee from acting for other companies which do not compete with corporation.

The final provision of the contract having relevance to this lawsuit was the choice of law provision:

This agreement is to be executed in the commonwealth of Pennsylvania and the parties agree that the law of Pennsylvania shall apply.

The Court finds that Pennsylvania is relevant in this case only to the extent that the defendant's primary place of business at the time of the execution of the contract was in Pennsylvania. It is clear from the evidence that the primary place of business is now New Jersey.

6. On May 28, 1977 the plaintiff wrote to Perfect and informed the company that he resigned "effective June 1, 1977." Shortly thereafter the plaintiff accepted a job with Sunland Plans, Inc., one of Perfect's competitors. During the 120 day period after his termination, the plaintiff engaged in acts prohibited by the covenant against competition, supra.

CONCLUSIONS OF LAW

1. This Court has jurisdiction over the subject matter of this lawsuit and the parties hereto by virtue of Title 28, U.S. C.A., § 1332, there being diversity of citizenship between the parties and the sum in controversy exceeding $10,000.00, exclusive of interest and costs.

2. It is a general rule of law that where parties who have entered into a contract continue their respective performances under the terms of the contract beyond the expiration date of the contract, the parties are deemed to have mutually agreed to a new implied contract encompassing the same terms. A. Corbin, Contracts, § 684; W. Williston, Contracts, § 90. While there is no Alabama authority directly in point, the Alabama cases recognizing that a contract may be implied in fact from circumstances demonstrating a mutual intent to so contract indicate to this Court that Alabama would follow the majority rule set out above. See, e. g., Sims v. Etowah County Board of Education, 337 S.2d 1310 (Ala.1976); Montgomery Water Works and Sanitary Board v. Norman, 282 Ala. 41, 208 So.2d 788 (1968); Broyles v. Brown Engineering Company, 275 Ala. 35, 151 So.2d 767 (1963). The defendant urges the Court that the general rule set out above, while not having received appellate approval in Alabama, has been accepted in at least one state trial court of general jurisdiction, citing Duralux Lighting, Inc. v. Randall Woodham, Civil No. 77-500044-K (Mobile County...

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    ...laws of another state will govern in the case of any dispute under the contract are enforceable in Alabama." Blalock v. Perfect Subscription Company, 458 F.Supp. 123 (S.D.Ala.1978); aff'd, 599 F.2d 743 The trial court was apparently misled as to the federal district court's holding in Blalo......
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