Ram Products Co., Inc. v. Chauncey
| Citation | 967 F.Supp. 1071 |
| Decision Date | 03 June 1997 |
| Docket Number | No. 3:97 CV 77 AS.,3:97 CV 77 AS. |
| Parties | RAM PRODUCTS CO., INC., Plaintiff, v. Warren C. CHAUNCEY and Replex Mirror Co., d/b/a Replex Plastics, Defendants. |
| Court | United States District Courts. 7th Circuit. United States District Court of Northern District of Indiana |
P. Joseph Haas, Jr., Dresser Law Office, Sturgis, MI, for Plaintiff.
John J. Lorber, May, Oberfell & Lorber, South Bend, IN, for Defendants.
This cause is before the court on Plaintiff's Motion for Preliminary Injunction to enforce the terms of a "non-competition" clause in a former employment contract.
The court heard oral argument regarding the issues on February 5, 1997, at which time the court directed the parties to brief the issues. Subsequently, the parties entered into settlement negotiations with the Magistrate and requested several extensions for the filing of their briefs. The settlement conferences were ultimately unsuccessful. On March 18, 1997 the court received the parties' briefs addressing the preliminary injunction. At that time, the court expressed serious reservations regarding jurisdictional issues and requested the parties to supplement the record by briefing those issues.1 The plaintiffs timely filed their brief. Defendants did not file a response, and have therefore waived their right to do so. This court, having considered the briefs, the record and the relevant law, now issues its ruling.
This court has subject matter jurisdiction over this case pursuant to 28 U.S.C. § 1332, as amended October 19, 1996, because the matter in controversy exceeds the sum or value of $75,0002 and is between citizens of different states. This Court has the authority to grant injunctive relief pursuant to Federal Rule of Civil Procedure 65(a).
If the right of recovery is uncertain, the doubt should be resolved, for jurisdictional purposes, in favor of the subjective good faith of the plaintiff. See, Wiggins v. North American Equitable Life Ins. Co., 644 F.2d 1014 (4th Cir.1981). Moreover, even where those allegations leave "grave doubt about the likelihood of a recovery of the requisite amount, dismissal is not warranted." Zacharia v. Harbor Island Spa, Inc. 684 F.2d 199 (2d Cir.1982). Applying this rationale, this court resolves the jurisdictional conflict in favor of Plaintiff. If it appears to a legal certainty that the plaintiff cannot recover the jurisdictional amount will the case be dismissed for want of jurisdiction. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 58 S.Ct. 586, 82 L.Ed. 845 (1938).
This court held an evidentiary hearing in South Bend on February 5, 1997. The following facts were produced. Defendant Warren C. Chauncey (Chauncey), is an Indiana resident. He briefly held the position of Vice President of Sales and Marketing while employed at RAM Products. He is fifty-nine years old and has been in the plastics industry for twenty-five years. Defendant, Replex Plastics (Replex), is an Ohio Corporation. Chauncey is now employed by Replex and currently holds a management position with the company. Plaintiff, RAM Products (RAM) is a Michigan corporation. RAM and Replex are both in the plastics industry. RAM manufactures and sells acrylic and polycarbonate mirrors and related products. Replex manufactures only acrylic and polycarbonate mirrors. There are other companies currently manufacturing the same products and competing in the same market.
The employment contract in controversy was entered into between Chauncey and RAM in St Joseph County, Michigan on November 18, 1991. That contract contained a clause prohibiting former employees from competing against RAM for a period of one year after termination of employment with RAM. On December 3, 1996, Chauncey was released from his employment at RAM. Shortly thereafter he commenced employment with Replex. Plaintiff contends that this was a breach its former employment contract and covenant not to compete. Specifically, Plaintiff alleges that Chauncey has converted and continues to convert RAM's property and trade secrets and has made derogatory remarks regarding RAM to its customers and the general public. Plaintiff argues that Chauncey's breach of contract causes irreparable harm to it through the disclosure of confidential information, the loss of client confidence, loss of goodwill and loss of business reputation. As a result, Plaintiff asks this court to issue a preliminary injunction requiring Chauncey to cease his employment with Replex until the one year time period required by contract has expired. Furthermore, Plaintiff requests that Chauncey be restrained from working for any other competitor during the one year period.
Defendant Chauncey asserts that he is not violating his former employment contract. He claims the contract is void due to RAM's failure to perform certain provisions of the contract. He further alleges that the noncompetition clause is overly-broad and unenforceable. In addition, he claims he has not disclosed any trade secrets or confidential information. Both parties agree that Chauncey did not take any documents or records with him when he left his employment at RAM. Chauncey asserts this as proof that he has not disclosed any trade secrets.
This action is based on an employment contract with no express choice of law provision. Plaintiff acknowledges that Indiana and Michigan law is similar and cites Indiana law in its brief to support its position. See JAK Productions, Inc. v. Wiza, 986 F.2d 1080 (7th cir.1993) (applying Indiana law). Yet, the plaintiff avers, both in oral argument and in its brief, that Michigan law applies. Defendants do not specifically apply the law of any particular state. Defendants' brief cites mainly Seventh Circuit law and includes some Indiana and Michigan law. Neither party argues that Ohio law is applicable. Therefore, prior to determining the merits of plaintiffs request for an injunction, this court must determine which state's law applies to the substantive contract issues.
As a rule, a court in a diversity case must apply the substantive law of the forum in which it sits, Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), including that pertaining to choice of law. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); American Family Mut. Ins.. Co. v. Williams, 839 F.Supp. 579 (S.D.Ind.1993); Hubbard Mfg. Co., Inc. v. Greeson, 515 N.E.2d 1071 (Ind.1987). Therefore, if the laws of more than one jurisdiction arguably are in issue, Erie requires the federal court to apply the choice of law rules of the state in which it sits. Jean v. Dugan, 20 F.3d 255 (7th Cir.1994) (citing Klaxon Co, 313 U.S. at 496-97, 61 S.Ct. at 1021-22); Hubbard Mfg., 515 N.E.2d at 1073. Accordingly, this court will apply Indiana's choice of law rules in making its determination of which state's law governs the substantive issues.
The characterization of the nature of an action bears upon the choice-of-law question. The present action arises from a breach of contract claim. Formerly, in contract cases, Indiana courts applied the law of the state in which the alleged contract was made or was to be performed. See Hubbard Mfg., supra; Travelers Ins. Co. v. Rogers, 579 N.E.2d 1328 (Ind.Ct.App.1991). The focus upon performance, in most instances, resulted in application of the law where the breach took place. That rule was modified, however, to allow application of the law of the state with the most significant contacts to the subject matter of the litigation be applied, regardless of the place of the breach. W.H. Barber Co. v. Hughes, 223 Ind. 570, 63 N.E.2d 417 (1945); Travelers Ins. Co., 579 N.E.2d at 1330. The test requires that a court analyze "all acts of the parties touching the transaction in relation to the several states involved" and apply "the law of the state with which the facts are in most intimate contact." W.H. Barber, supra; OVRS Acquisition Corp. v. Community Health Serv., Inc., 657 N.E.2d 117 (Ind.Ct.App. 1995), reh'g denied (1996). As formulated by the Indiana Supreme Court, the rule has been stated succinctly as follows:
The court will consider all acts of the parties touching the transaction in relation to the several states involved and will apply as the law governing the transaction the law of that state with which the facts are in most intimate contact.
W.H. Barber, supra; Eby v. York-Division, Borg-Warner, 455 N.E.2d 623 (Ind.Ct.App. 1983). In determining which state has the "most intimate contact", Indiana recognizes the rule as formulated by the Restatement, Second, Conflict of Laws, § 188 (1971).3 Coldwell Banker & Co. v. Karlock, 686 F.2d 596 (7th Cir.1982); Sullivan v. Savin Business Machines Corp., 560 F.Supp. 938 (D.C.Ind.1983). The applicable section states that "[I]n the absence of an effective choice of law by the parties, the contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:
(d) the location of the subject matter of the contract, and
(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.
These contacts are to be evaluated according to their relative importance with respect to the particular issue." RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(2). If the place of negotiating the contract and the place of performance are in the same state, the local law of that state will usually be applied, except as otherwise provided in §§ 189-199 and 203. Id. at § 188(3). Also, in determining any conflicts of law questions with respect to the interpretation...
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