Cherena v. Coors Brewing Co.
| Decision Date | 07 August 1998 |
| Docket Number | Civil No. 98-1703(HL).,Civil No. 98-1653(CCC). |
| Citation | 20 F.Supp.2d 282 |
| Parties | Arturo CHERENA, Plaintiff, v. COORS BREWING COMPANY, et al., Defendants. COORS BREWING COMPANY, Plaintiff, v. Arturo CHERENA, Defendant. |
| Court | U.S. District Court — District of Puerto Rico |
Enrique Peral Soler, Muñoz, Boneta, Gonzalez, Arbona, Benitz, Peral, San Juan, PR, for Arturo Cherena.
Francisco A. Besosa, Axtmayer, Adsuar, Muñiz & Goyco, San Juan, PR, for Coors Brewing Co.
Arturo Cherena filed the first of these consolidated actions on June 8, 1998, seeking declaratory and injunctive relief against Coors Brewing Company and Adolph Coors Company attacking the validity of an "Inventions and Non-Disclosure Agreement" executed on August 12, 1993. Diversity jurisdiction is invoked. 28 U.S.C. § 1332 (Supp. 1998). Mr. Cherena was employed by Adolph Coors Company on July 30, 1993, as area manager involved in promotions, and resigned in early May, 1998, to accept the position of managing director for the Anheuser-Busch Companies in Puerto Rico, effective May 15, 1998. As a result of the August 12, 1993 agreement, Mr. Cherena has been asked by Coors to resign his current employment with Anheuser-Busch.
Mr. Cherena argues that the non-competition clause of the agreement is unreasonable in that it does not identify the geographic locations in the United States and foreign markets where Coors participates and that practically speaking, the enforcement of the clause would prohibit Mr. Cherena's marketing of beer in the Americas. Because the geographic scope of the clause is unreasonable, plaintiff argues that the same is null and void. See Arthur Young & Co. v. Virgilio Vega III, 136 D.P.R. ___, 94 JTS 75. He argues further that the clause is null and void for lack of consideration, and for lack of consent.1 Plaintiff Cherena thus seeks declaratory relief in relation to the nullity of the agreement and injunctive relief to allow him to continue working for Anheuser-Busch.
The defendants move to dismiss the complaint on June 18, 1998 (Docket No. 3) for lack of subject matter jurisdiction in that the requisite jurisdictional amount has not been met.2 Plaintiff earned $93,000 a year when he left Coors. He had a company car, $1,500 in stock options, was entitled to a 25% performance bonus, and would be paid that salary for a year after leaving Coors under the agreement if he were not able to acquire comparable employment. If one considers plaintiff's testimony of July 31, 1998, that his current salary is $135,000, plus a bonus of $35,000, plus a performance bonus of $100,000, plus $5,000 in stock options, plus a company car, plus 401K pension plan with a 50% contribution, the jurisdictional requirement is easily met. The motion to dismiss is therefore denied.
On June 19, 1998, Coors Brewing Company filed an amended complaint in a separate action against Arturo Cherena also seeking declaratory and injunctive relief in relation to the validity and enforcement of the agreement, as well as damages in the amount of $250,000.
Arturo Cherena moved for summary judgment on July 18, 1998, stressing that the agreement is null and void and that therefore he is entitled to judgment as a matter of law.
An evidentiary hearing was held in both cases and the parties were fully heard on the issues. I will address the threshold issue first.
Coors wishes to enforce the agreement which Mr. Cherena stresses is null and void, particularly in relation to a clause regarding the geographical scope of the agreement. The clause reads as follows:
3. I agree (a) not to enter into competition with Coors, (b) not to serve for any competitor of Coors in a capacity similar to any capacity in which I served Coors or that I have held with Coors and (c) not to solicit sales or sell products or services of the kind or nature with which I was involved during my employment with or services to Coors, in any United States or foreign market in which Coors participates, for a period of one year from the date of termination of my employment with Coors. I will not accept a job offer from a competitor of Coors unless and until I have obtained and provided to Coors written assurance from the competitor, confirmed by my own written reaffirmation of my obligations hereunder, either that (a) my capacity with such competitor shall not conflict my obligations under this Agreement, or (b) my obligations of confidentiality hereunder will be respected and maintained.3
The Supreme Court of the Commonwealth of Puerto Rico determined in Arthur Young that a covenant which failed to meet certain standards not only violates the contractual duty of good faith, "but also public policy, by excessively and unjustifiably restricting the employee's freedom of choice." Arthur Young & Co. v. Virgilio Vega III, 136 D.P.R. ___, 94 JTS 75, P.R. Offic. Trans. at 17-18. Mr. Cherena argues that since the covenant fails to identify the foreign markets and the geographic limitations of the same, it is null and void.
At the evidentiary hearing, Mr. Cherena portrayed himself as an expert in beer promotion in Puerto Rico but relatively ignorant of different beer promotion and distribution markets in the United States, and ignorant of foreign markets. He said that nobody explained the agreement to him and that he signed it without having read the same.
Eric Drummond, director of International Human Resources for Coors, testified that Mr. Cherena was considered "critical" to the company and that if the company lost him, it would be damaging. Mr. Cherena had more potential than anyone in the international division. His only weakness was that he needed greater business exposure, but the consensus is that Mr. Cherena was a rising star at Coors and excelled in potential and performance.
Eduardo Galíndez Matos, general manager for Coors, was supervised by Mr. Cherena and related Mr. Cherena's extraordinary knowledge of promotion/advertising/marketing in the Coor's Puerto Rico market.
It is clear from the relevant case law and statutes that parties in general are free to contract as they wish,4 that an employment contract is a typical adhesion contract,5 that any doubt in its interpretation should be construed in favor of the weaker party,6 and that, in the case of a non-competition clause or contract, a company is barred from imposing restrictions that exceed the real need to protect the company from competition.7 It is also clear that the controlling law is imbedded within the confines of Arthur Young & Co.
The Supreme Court of Puerto Rico has required that the contract specify the geographic limits of the prohibition. Arthur Young & Co. v. Virgilio Vega III, 136 D.P.R. ___, 94 JTS 75, P.R. Offic. Trans. at 16. The prohibited area must be strictly limited to that necessary to prevent an actual competition between employer and employee. Id. The geographic clause included in Mr. Cherena's contract is void precisely because it lacks specificity. To prohibit employment with competitors in the United States or foreign markets in which Coors participates is unnecessarily vague to welcome enforcement under the focus lens of the civil law.8 Coors has made Mr. Cherena appear like a world-class operator but, the evidence reflects a success born of knowledge within the milieu which engendered him, which is not the whole Coors world but rather Puerto Rico and potentially, with more business exposure, the United States.
If the above clause were found to be valid within the Arthur Young rubric, however, the agreement would yet be invalid as applied to Mr. Cherena for lack of requisite consideration under the civil law. The Supreme Court of Puerto Rico has held that one of the essential conditions a non-competition covenant must meet is that "the employer shall offer a consideration in exchange for the employee signing ..." said contract.9 Such a consideration in this jurisdiction must be forthcoming at the moment the agreement was entered into and not at the moment of discharge from employment.10 Such consideration does not appear to have been given in this case.
As explained earlier, the Supreme Court of Puerto Rico has held that when a covenant not to compete does not meet the conditions in Arthur Young, "it would be deemed that not only do[es] ... [it] violate contractual good faith but also public policy, by excessively and unjustifiably restricting the employee's freedom of contract." Arthur Young & Co. v. Virgilio Vega III, 136 D.P.R. ___, 94 JTS 75, P.R. Offic. Trans. at 17-18. Since the non-competition covenant signed by Mr. Cherena does not meet the conditions of Arthur Young in that the scope of the geographic prohibition lacks specificity and in that it did not offer adequate consideration, it must be declared void. Id.
Barring the per se fatality of the suspect clause, and the lack of consideration required by such a clause, as revealed by extrinsic facts, the covenant becomes enforceable, which arguably invites release only upon agreement of Coors, and the entering into a confidentiality agreement. However, since it is not enforceable, the Clerk is directed to enter judgment of dismissal in Civil No. 98-1703(HL). In Civil No. 98-1653(HL), the Clerk is directed to enter judgment declaring null and void the Inventions and Nondisclosure Agreement.11
SO ORDERED.
On August 24, 1998, Coors Brewing Company (CBC) filed a motion to alter or amend judgment seeking the reconsideration of this court's opinion and order of August 7, 1998, and the judgment entered as a consequence thereof on August 12, 1998. (Docket No.31.) Pursuant to Federal Rule of Civil Procedure 59(e), CBC has requested that this court vacate its judgments of August 12, 1998. Specifically it has requested that this court reconsider its denial of CBC's motion to dismiss in civil action ...
To continue reading
Request your trial
-
Roman v. Delgado Altieri
...Inc., 37 F.3d 25, 29 (1st Cir.1994) citing F.D.I.C. v. World University, Inc., 978 F.2d 10, 16 (1st Cir.1992); Cherena v. Coors Brewing Co., 20 F.Supp.2d 282, 286 (D.P.R.1998); see also National Metal Finishing Co. v. BarclaysAmerican/Commercial, Inc., 899 F.2d 119, 124 (1st Cir.1990). Henc......
-
Fagot Rodriguez v. Republic of Costa Rica, No. CIV. 93-2406(DRD).
...37 F.3d 25, 29 (1st Cir.1994); (citing F.D.I.C. v. World University, Inc., 978 F.2d 10, 16 (1st Cir.1992)); Cherena v. Coors Brewing Com., 20 F.Supp.2d 282, 286 (D.P.R.1998); see also National Metal Finishing Com. v. BarclaysAmerican/Commercial, Inc., 899 F.2d 119, 124 (1st Cir.1990). The C......
-
Ortiz-Rosario v. Toys "R" Us Puerto Rico, Inc.
...Inc., 37 F.3d 25, 29 (1st Cir.1994) citing F.D.I.C. v. World University, Inc., 978 F.2d 10, 16 (1st Cir.1992); Cherena v. Coors Brewing Com., 20 F.Supp.2d 282, 286 (D.P.R.1998); see also National Metal Finishing Corn. v. BarclaysAmerican/Commercial, Inc., 899 F.2d 119, 124 (1st Cir.1990). "......
-
Soto v. State Indus. Products Inc.
...Young to hold that continued employment cannot constitute valid consideration for an arbitration agreement. Cf. Cherena v. Coors Brewing Co., 20 F.Supp.2d 282 (D.P.R.1998) (holding that although a non-competition clause failed to satisfy Puerto Rico's requirements of consideration under Art......