Share Corp. v. Momar Inc
| Decision Date | 26 January 2011 |
| Docket Number | Case No. 10-CV-109 |
| Parties | SHARE CORPORATION, Plaintiff, v. MOMAR INC., RICHARD ARENSBERG, FRED BAYER, TED BERGER, WENDY BUTTREY, STEPHEN KUTI, ROD MILLER, LAWRENCE SMITH, and IRA WOREN, Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
On March 29, 2010, the plaintiff, Share Corporation ("Share"), filed an amended complaint against the above-named defendants, alleging violations of Wisconsin state tort and contract law. (Docket #68). On April 26, 2010, the defendants collectively filed, pursuant to Fed. R. Civ. P. 12(b)(6), a joint motion to dismiss Share's amended complaint in its entirety, contending that the complaint failed to state a claim upon which relief can be granted. (Docket #74). All of the parties have fully briefed the court on the relevant issues related to the motion to dismiss and, as a result, the court is prepared to rule on the motion.
BACKGROUND
The court already discussed the facts animating this dispute in its February 26, 2010 order on the plaintiff's motion for court-ordered expedited discovery (Docket #35) and again in its March 11, 2010 order on the plaintiff's motion for atemporary restraining order and preliminary injunction. (Docket #62). However, as a reminder, the present dispute is between companies within the chemical sales industry, Share and defendant Momar, Inc. ("Momar"). Each company sells chemicals and cleaning and maintenance products to customers throughout the country through its respective "sales representatives" whose work is overseen by a "manager." Both the customers and the products dealt with by each company are diverse. Starting in the summer of 2009, Momar hired several salespersons1 and managers2 who formerly worked for Share, all of whom consist of the individually named defendants. Worried that its former employees would lure away the customers they served while at Share, the plaintiff sent "cease and desist" letters to the individual defendants in October of 2009, demanding that the employee: (1) "immediately cease" any "solicitation of Share's customers, agents, or employees"; (2) stop the use of "Share's Proprietary and Confidential Information"; and (3) return "any and all of Share's" confidential information that is in the employee's possession. Share then filed a complaint against Momar and the plaintiff's former employees on February 9, 2010. (Docket #1). Three days after filing its complaint, Share opted to file a motion to expedite discovery in the case (Docket #3) and a motion for a temporary restraining order or a preliminary injunction. (Docket #4). The court denied both motions. (Docket #'s 35, 62). In the meantime, on March 4, 2010, thedefendants filed their first motion to dismiss the complaint. (Docket #50). Share then opted to file an amended complaint on March 29, 2010. (Docket #68). The defendants' response to the amended complaint-a second joint motion to dismiss-is now before the court. (Docket #74).
DISCUSSION
A motion to dismiss under Fed. R. Civ. P. 12(b)(6) challenges the sufficiency of the plaintiff's complaint by asserting that the claimant failed to state a claim upon which relief may be granted. See Fed. R. Civ. P. 12(b)(6). To survive a motion to dismiss under Rule 12(b)(6), claimant's complaint must allege facts sufficient to "state a claim for relief that is plausible on its face." Justice v. Town of Cicero, 557 F.3d 768, 771 (7th Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). Pleaders must "plead factual content that allows the court to draw the reasonable inference that the defendant is liable for the m isconduct alleged." Iqbal, 1129 S. Ct. at 1940. However, the court construes the complaint in the light most favorable to the claimant, accepts as true all well-pleaded facts alleged, and draws all possible inferences in the claimant's favor. Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). Yet, the court need not accept as true "legal conclusions." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Indeed, "[a] ruling concerning the legal sufficiency of the complaint is an appropriate determination to make in response to a motion to dismiss." Sanner v. Board of Trade of City of Chicago, 62 F.3d 918, 924 (7th Cir. 1995) (citing Gomez v. Illinois State Board of Education, 811 F.2d 1030, 1039 (7th Cir. 1987)). Moreover, "a defendant should not be forced to undergo costly discovery unless the complaint contains enough detail, factual or argumentative, to indicate that the plaintiff has a substantial case." Bissessur v. Indiana Univ. Bd. of Trustees, 581 F.3d 599, 602 (7th Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1949). In addition, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id.
Normally, the court cannot consider documents outside the pleadings before the district court unless the court converts the defendant's Rule 12(b)(6) motion to one for summary judgment and allows the plaintiff to submit additional evidentiary material of his own. Venture Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir. 1993). The court will not consider the evidence submitted by Share outside the pleadings and, thus, will not convert this motion to one for summary judgment.
Each of the individual defendants signed an agreement with Share when they were employed by the plaintiff. Share now contends that its former employees have breached various clauses in their employment agreements. Specifically, Share contends that its former managers breached clauses in their respective employment agreements that required: (1) for one year that the former employees not solicit customers they had served while at Share; (2) for two to three years, depending onthe individual agreement, 3 that the former employees not solicit employees of Share to join their new employer; and (3) that the former employees not disclose Share's proprietary or confidential information. Share also contends that its former sales representatives breached clauses in their employment agreements similar to the clauses in the managers' agreements, requiring confidentiality regarding Share's proprietary information. On the other hand, the defendants claim that each of the clauses are unenforceable, negating Share's breach of contract claims.
The parties agree that Wisconsin law is to be applied in assessing the plaintiff's claims and, with that, the enforceability of the restrictive covenants within the employment agreements. Wis. Stat. § 103.465 states in relevant part:
A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any covenant, described in this subsection, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint.
Covenants to not compete are generally disfavored, as Wisconsin law promotes the mobility of workers. Sysco Food Servs. of E. Wis., LLC v. Ziccarelli, 445 F. Supp. 2d 1039, 1043 (E.D. Wis. 2006). Therefore, "a contract that operates to restrict trade or competition is prima facie suspect and will be liberally construed in favor of the employee." Id. at 1043-44 (internal citations omitted). To determinewhether a provision is reasonable under § 103.465, Wisconsin courts typically examine five factors: (1) whether the agreement is necessary to protect a legitimate business interest of the employer; (2) whether it is reasonable as to duration; (3) whether it is reasonable as to geography; (4) whether it is reasonable as to the employee; and (5) whether it is reasonable as to the general public. Chuck Wagon Catering, Inc. v. Raduege, 88 Wis. 2d 740, 751 (1979). Ultimately, whether a non-compete agreement is reasonable depends on the totality of the facts and circumstances. Techworks, LLC v. Wille, 2009 WI App 101, ¶ 4.
As an initial matter, the court finds it necessary to address the plaintiff's argument that a determination of the reasonableness of restrictive covenants should not be made in addressing a motion to dismiss on the pleadings. Rather, Share contends that the reasonableness test is a fact-intensive exercise that requires further development of the record in every case. The plaintiff draws its view from a line of cases, including Rollins Burdick Hunter of Wisconsin, Inc. v. Hamilton, 101 Wis.2d 460, 304 N.W.2d 752 (1981), where the Wisconsin Supreme Court concluded that additional facts were required before deciding whether a particular restrictive covenant was unenforceable under § 103.465. In that decision, the court explained that "what is reasonable varies from case to case" and the issue is one that can only be determined "upon consideration of factual matters." Id. Since Rollins, several courts have required development of the record before deciding whether a restrictive covenant is enforceable under Wisconsin law. Farm Credit Services of North Central Wisconsin, ACA v. Wysocki, 2001 WI 51, ¶ 16, 243 Wis.2d 305, 627 N.W.2d 444; Aon Risk Services, Inc. v. Liebenstein, 2006 WI App 4, ¶ 15, 289 Wis.2d 127, 710 N.W.2d 175; General Medical Corp. v. Kobs, 179 Wis.2d 422, 434-36, 507 N.W.2d 381, 386-87 (Wis. Ct. App.1993); IDX Systems Corp. v. Epic Systems Corp., 285 F.3d 581, 586 (7th Cir. 2002); Henderson v. U.S. Bank, N.A., 615 F.Supp.2d 804, 811-12 (E.D. Wis. 2009). This court recognizes that development of the record may be necessary in some cases to determine the reasonableness of a restrictive covenant. Yet, this does not change those instances in which the law is absolutely clear as to what is reasonable and what is not. If the...
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