John Hancock Mut. Life Ins. Co. v. Austin

• Decision Date: 08 February 1996
• Docket Number: No. 94-CV-917.,94-CV-917.
• Citation: 916 F. Supp. 158
• Parties: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. Barbara L. AUSTIN, Defendant.
• Court: U.S. District Court — Northern District of New York

916 F. Supp. 158

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Plaintiff, v. Barbara L. AUSTIN, Defendant.

No. 94-CV-917.

United States District Court, N.D. New York.

February 8, 1996.

Whiteman, Osterman, & Hanna, Albany, NY (Beth A. Bourassa, of counsel), Stevens & Lee, Wayne, PA (William J. Payne, of counsel), for Plaintiff.

Gleason, Dunn, Walsh & O'Shea, Albany, NY (Ronald G. Dunn, Michael P. Ravalli, of counsel), for Defendant.

MEMORANDUM, DECISION AND ORDER

HURD, United States Magistrate Judge.

I. INTRODUCTION

Plaintiff John Hancock Mutual Life Insurance Company ("John Hancock") brings an action against defendant under Section 301(a) of the Labor Management Relations Act, 29 U.S.C. § 185(a) on one federal cause of action, and two state causes of action. First, plaintiff claims that the defendant Barbara L. Austin ("Austin") violated a Covenant Not to Compete within a Collective Bargaining Agreement. Second, plaintiff brings an action under New York law for breach of contract. Finally, plaintiff asserts that defendant tortiously interfered with their business resulting in direct financial loss which is also recoverable under New York law. Defendant has moved for summary judgment under Fed.R.Civ.P. 56 on the basis that the Covenant not to Compete is unenforceable. Oral argument was heard in Utica, New York, on January 18, 1996. The court reserved decision.

II. FACTS

In 1978, Austin went to work for John Hancock selling insurance. Prior to her job with John Hancock, Austin had no experience as an insurance salesperson. Austin worked for the John Hancock branch in Glenville, New York, and commuted from her home located near Fort Plain, New York. She worked for John Hancock for the next fifteen years. In 1993, she was informed that the John Hancock branch in Glenville was closing and the office would be consolidated with the larger branch in Albany, New York. This change of location would have added substantial time and distance to Austin's daily commute to work. On July 22, 1993, Austin informed her manager that she was going to resign. Upon receiving this information, the manager told her that it was not necessary for her to return to work. On July 26, 1993, Austin began working for the Prudential Life Insurance Company ("Prudential") which has an office in Fort Plain, New York.

Prior to her change of employment, Austin's labor union entered into a Collective Bargaining Agreement ("Agreement") with John Hancock that contained a Covenant Not to Compete ("Covenant"). The Covenant reads as follows:

Upon a Marketing Representative's termination or resignation, the Marketing Representative shall not directly or indirectly engage in any of the following conduct nor aid or abet others to do so:

1. Retain in his or her possession any Company records, files, manuals, supplies, material and forms nor photostat or otherwise copy same.

* * * * * *

3. For a period of two years following such termination, contact any Company policyholder or Annuity Contract holder within the confines of the District where the Marketing Representative was last employed for the purpose of inducing or attempting to induce such policyholder or Contract holder to cancel, lapse, or fail to renew such policyholder's policy(ies) or Annuity Contract(s) with the Company.

NOTE: For purposes of this Article, the term "Annuity Contract" shall include Individual Variable Annuity Contracts.

Violation of any of the above may be enjoined by any legal means available to the Company. The party who prevails in such litigation shall be entitled recover from the other party all costs and expenses incurred in connection with such litigation including all attorney's fees.

* * * * * *

Collective Bargaining Agreement, Article XXIV Covenant Not to Compete.

Upon beginning her new job, Austin sold several new Prudential policies to former customers who canceled their John Hancock policies. Also, Austin allegedly violated Article XVI section 12 of the Agreement which requires former employees to return their John Hancock records upon leaving.¹ She did not turn over such records to the plaintiff, and John Hancock maintains that this information was confidential and constituted trade secrets.

III. DISCUSSION

A. Summary Judgment Standard

Summary judgment must be granted when the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact, and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir.1991). The moving party carries the initial burden of demonstrating an absence of a genuine issue of material fact. Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Thompson v. Gjivoje, 896 F.2d 716, 720 (2d Cir.1990). Facts, inferences therefrom, and ambiguities must be viewed in a light most favorable to the nonmovant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Project Release v. Prevost, 722 F.2d 960, 968 (2d Cir.1983).

When the moving party has met the burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. at 1356. At that point, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56; Liberty Lobby Inc., 477 U.S. at 250, 106 S.Ct. at 2511; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356. To withstand a summary judgment motion, evidence must exist upon which a reasonable jury could return a verdict for the nonmovant. Liberty Lobby, Inc., 477 U.S. at 248-249, 106 S.Ct. at 2510-11; Matsushita Elec. Indus. Co., 475 U.S. at 587, 106 S.Ct. at 1356. Thus, summary judgment is proper where there is "little or no evidence ... in support of the non-moving party's case." Gallo v. Prudential Residential Servs., 22 F.3d 1219, 1223-24 (2d Cir.1994) (citations omitted).

B. Factual Dispute

As detailed above, when considering a motion for summary judgment, this court must consider the facts in a light most favorable to the non-moving party. Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. at 1355-56. By her own admission, Austin has violated Article XVI section 12 of the Agreement because she failed to turn her records over to an appropriate representative of John Hancock. (Austin Dep. at 57-59.) Instead, Austin testified that she threw the records away because she did not know she had to return them. Id.

The questions of fact remaining are straightforward: Did Austin violate paragraphs 1 and 3 of Article XXIV of the Agreement? In order to view the facts in favor of the nonmoving party, the court will continue this analysis under the premise that Austin did keep the John Hancock records in her possession and did not discard them. Further, the court will assume that Austin used those records to contact former clients and encouraged them to cancel their John Hancock policies.

With these assumptions, the only possible way that the defendant could prevail on this summary judgment motion is if the paragraphs within Article XXIV are unenforceable. Therefore, the court must determine the enforceability of these provisions.

C. Choice of Law

It is undisputed that this court has jurisdiction to hear this case under Section 301(a) of the Labor Management Relations Act which has been codified as 29 U.S.C. § 185(a).² Although Austin's labor union is not a party, Section 301(a) has been interpreted to apply to individuals being sued under a collective bargaining agreement entered into by a party defendant's union. See John Hancock Mut. Life Ins. Co. v. Schwertmann, 627 F.Supp. 143 (E.D.Mo., 1985).

Plaintiff argues that federal law and precedent should apply relying on the decisions of the Supreme Court as well as other federal courts. Further, plaintiff cites Federal District Court cases which have analyzed the clause at issue here and have ruled in favor of John Hancock. Defendant argues that the federal courts have never addressed the issue of Covenants Not to Compete. It is Austin's contention that because no body of federal law exists regarding this subject, New York State law should apply. According to defendant, New York State law prohibits agreements such as the Covenant in question here.

1. Federal Law and Section 301(a)

The Supreme Court dealt with Section 301(a) in Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957). In that case, the Supreme Court held that in § 301 cases, the common law to be applied is "federal law, which the courts must fashion from the policy of our national labor laws.... But state law, if compatible with the purpose of Section 301 may be resorted to in order to find the rule that will best effectuate the federal policy." Id. at 456, 77 S.Ct. at 918. It was the aim of the Court to establish a uniform body of law that would not be subject to the variations of state law. This idea was supported further when the Supreme Court stated that in dealing with cases involving collective bargaining agreements, "incompatible doctrines of local law must give way to principles of federal labor law." Teamsters Local v. Lucas Flour Co., 369 U.S. 95, 103, 82 S.Ct. 571, 576, 7 L.Ed.2d 593 (1962). The Court further discussed the rationale for the desire for uniformity in the interpretation of labor contracts: "The possibility that individual contract terms might have different meanings under state and federal law would inevitably exert a disruptive influence upon both the negotiation and administration of collective agreements." Id.

2. Federal Law and Covenants Not to Compete

The next question is whether or not a...