American Family Life Assurance Co. v. Tazelaar

482 N.E.2d 1072, 135 Ill. App. 3d 1069, 90 Ill. Dec. 789, 1985 Ill. App. LEXIS 2353
CourtAppellate Court of Illinois
DecidedAugust 27, 1985
Docket84-2931
StatusPublished
Cited by4 cases

This text of 482 N.E.2d 1072 (American Family Life Assurance Co. v. Tazelaar) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Family Life Assurance Co. v. Tazelaar, 482 N.E.2d 1072, 135 Ill. App. 3d 1069, 90 Ill. Dec. 789, 1985 Ill. App. LEXIS 2353 (Ill. Ct. App. 1985).

Opinion

JUSTICE BILANDIC

delivered the opinion of the court:

American Family Life Assurance Company (hereinafter plaintiff) sought to enjoin defendants, former sales persons, from soliciting plaintiff’s policyholders and from disclosing allegedly confidential information. The circuit court found that one subparagraph of the employment contract’s covenant not to compete was overly broad, thereby voiding the entire covenant. The court denied plaintiff’s motion for a preliminary injunction. On appeal, we agreed that subparagraphs (5) and (6) were overly broad. We noted, however, that plaintiff did not seek to enforce these subparagraphs, and we remanded the cause for a determination of the validity of subparagraphs (1) through (4). (American Family Life Assurance Co. v. Tazelaar (1984), 127 Ill. App. 3d 112, 468 N.E.2d 497.) After a hearing, the circuit court found that sub-paragraphs (1) through (4) were overly broad and invalid, and it again denied plaintiff’s motion for a preliminary injunction. Plaintiff filed this interlocutory appeal pursuant to Supreme Court Rule 307(a)(1). (87 Ill. 2d R. 307(a)(1).) The sole issue before us is whether the trial court abused its discretion in refusing to issue the preliminary injunction.

Plaintiff is an insurance company with its home office in Columbus, Georgia. Defendants are former sales persons who sold plaintiff’s policies in various areas of Illinois. About January 1983, all of the defendants signed an agreement that contained the following provision:

“PARAGRAPH SEVEN: Covenant not to Compete.
(a) During the term of this agreement and for a period of two (2) years after the termination of this Agreement, the Associate agrees that the Associate shall not, within the geographic area where the Associate has sold and serviced policies for American Family, engage in any of the following:
(1) Attempt to induce other Associates or sales agents of American Family to terminate their agreements with American Family or to become contracted or associated with another insurance company.
(2) Attempt to induce policyholders or accounts of American Family to relinquish their policies.
(3) Divulge the names of American Family policyholders, accounts, or agents to any competitor or potential competitor of American Family.
(4) Make available any information or materials acquired from American Family to any competitor or potential competitor of American Family.
(5) Sell or service an accident or health insurance policy for any other company which competes with any of the policies which the Associate has sold for American.
(6) Become a partner, associate, affiliate, employee, or independent contractor with any person or company which sells or services accident and health insurance policies which compete with policies which the Associate has sold for American Family.”

The contract also contained a severability clause and stated that Georgia law governed the agreement.

During 1983, all the defendants left plaintiffs employment and began to work for a competitor. In February 1984, plaintiff sued for injunctive and other relief. Plaintiff alleged that defendants were inducing policyholders to relinquish their policies with plaintiff, soliciting other sales persons to end their employment with plaintiff, and giving their new employer confidential information. Plaintiff asked the court to issue a temporary restraining order and a preliminary injunction.

The trial court entered a TRO. Defendants filed a verified answer, the parties filed memoranda, and oral arguments followed. The trial court, in ruling on the covenant not to compete, found that Georgia law did not allow for “blue-pencilling,” in which a court redrafts the covenant; therefore, because subparagraph (6) was overly broad, the entire covenant was void.

We reversed and remanded because subparagraph (6) was not the basis on which plaintiff asked for relief. The covenant contained both noncompetition and nondisclosure clauses, and plaintiff had asked for relief only as to the nondisclosure clauses. Furthermore, an action to prevent wrongful disclosure could be maintained subject to a determination of the covenant’s reasonableness, and the fact that the nondisclosure provisions were included as separate subparagraphs did not per se defeat the action. (American Family Life Assurance Co. v. Tazelaar (1984), 127 Ill. App. 3d 112, 117-18, 468 N.E.2d 497.) Thus, we remanded the cause with directions that the trial court conduct a hearing and make a determination of the reasonableness of subparagraphs (1) through (4). 127 Ill. App. 3d 112, 118.

On remand, plaintiff again sought a preliminary injunction. After both sides submitted memoranda, a hearing was held. The court found that, under Georgia law, three factors are to be considered in determining the reasonableness of a covenant not to compete: (1) the extent of the restraint; (2) the geographic restraint; and (3) the duration of the restraint. After hearing arguments of counsel, the court found that the term “geographic area where [defendants] sold and services policies” was ambiguous because it could mean anything from a specific building to a region of the country. Because “area” could mean many things, it was too indefinite, and therefore void. Thus, subparagraphs (1) and (2) were found to be unenforceable.

Subparagraphs (3) and (4) were also found to be unenforceable because “plaintiff’s expressed willingness to allow the information to be divulged to competitors so long as [it is] done outside the geographic area demonstrates that the business interests sought to be protected [are] not confidential and therefore [are] not entitled to protection.” Plaintiff’s renewed motion for a preliminary injunction, therefore, was denied.

We note that under either Illinois or Georgia law, the standard of review is whether the trial court abused its discretion in refusing to issue a preliminary injunction. (Kessler v. Continental Casualty Co. (1985), 132 Ill. App. 3d 540, 477 N.E.2d 1287; Zant v. Dick (1982), 249 Ga. 799, 294 S.E.2d 508.) Georgia has a strong policy in fostering competition and in discouraging contracts that are in restraint of trade. See Ga. Const., art. III, sec. 6, par. 5(c); Ga. Code Ann. sec. 13 — 8— 2(a)(2) (1982).

Despite the strong presumption against restraints of trade, however, a covenant not to compete in an employment contract is enforceable if it is strictly limited in time and place and if it is otherwise reasonable when one considers the interests of the employer and its effect on the employee. (Uni-Worth Enterprises, Inc. v. Wilson (1979), 244 Ga.

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Bluebook (online)
482 N.E.2d 1072, 135 Ill. App. 3d 1069, 90 Ill. Dec. 789, 1985 Ill. App. LEXIS 2353, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-family-life-assurance-co-v-tazelaar-illappct-1985.