3 B. Termination of the Dealership Agreement
The Law Court has explained, I/[a] promissory note is a contract." QAD Investors
v. Kelly, 2001 ME 116, en 13, 776 A.2d 1244, 1248. Accordingly, ordinary rules of
construction apply. Id. When a contract is unambiguous, the interpretation of the
contract is a question of law. Id. (citing Acadia Ins. Co. v. Buck Constr. Co., 2000 ME 154,
en 8, 756 A.2d 515, 517). Here, the Note expressly provides that a condition of Geiger Bros.'s promise not
to demand payment is that I/[t]he Independent Dealer Agreement between [Conradson]
and Geiger Bros. shall remain in full force and effect." Geiger Bros.'s has taken the
position that when it terminated the Dealer Agreement, it was entitled to demand full
payment on the note because the condition permitting it to demand payment was
triggered. PI.'s Mot. at 5-6. Conradson has replied that the termination was illegal
because she had not violated any condition of the Note. Def Mot. at 5.
Here, Conradson appears to be confusing Geiger Bros. ability to terminate the
Dealership Agreement with its ability to demand payment under the Note. The
Dealership Agreement outlines the terms and conditions of the relationship between
Geiger Bros. and Conradson as wholesaler and distributor. Section 1 of the Dealership
Agreement states I/[n]othing in this agreement shall implicitly or expressly allow either
party to assume or create any contract obligation or responsibility for in the name of the
other party in any way whatever." This language implies that the agreement can be
freely terminated at any time, and that Geiger Bros. is not obligated to continue
retaining Conradson as a dealer, nor is Conradson obligated to continue selling Geiger
4 Bros. products. s Consequently, whether or not Conradson violated any of the terms of
the Note is immaterial as to whether Geiger Bros. had the power to terminate the
Dealership Agreement, thus excusing its obligation to forbear. 6
Accordingly, the court finds that Geiger Bros.'s duty to forbear IS excused
because the Dealership Agreement is no longer in effect.
C. Invoicing of Blue Cross by YESS
The next argument advanced by Geiger Bros. in support of its claim is that
Conradson violated the non-competition provision of the Note when she allegedly
billed Blue Cross for storage and warehousing fees in September 2008 and when she
began engaging in the business of selling promotional products as SWAGZ.
Regarding the alleged billing of Blue Cross in September 2008, summary
judgment on this ground is inappropriate.
Geiger Bros. has submitted copies of invoices to the court from an entity called
YESS, indicating an address that Geiger claims is Conradson's address, and also
indicating the Geiger salesperson as "AG."? However, Conradson's sworn statement
denies ever having any ownership in YESS and claims that she was not the person who
billed Blue Cross. This inconsistency creates a genuine issue of fact as to what role, if
any, Conradson played in the September invoicing of Blue Cross that is material to
whether the non-competition provision was violated.
5. Section 4 of the Dealership Agreement relates to termination. Although it does outline specific instances that constitute grounds for termination by either party, it does not expressly state that either party is prohibited from terminating the agreement under other circumstances. 6 This raises a potential concern regarding the extent Geiger Bros. control over a condition precedent to its own performance. Here, however, it does not appear that Geiger Bros. was acting in bad faith, but was instead basing its decision to terminate the agreement on information received that Conradson had acted in a way that it deemed to be improper. See £.B. Harper & Co. v. Nortek, Inc., 104 F.3d 913, 919 (7th Cir. 1997) ("[g]ood faith and fair dealing requires that parties use reasonable efforts to bring about the occurrence of conditions precedent within their control").
7 The complaint names the defendant as"Anita Conradson, f/kl a Anita Gregolynskyj." The defendant's answer to the complaint is signed"Anita Gregolynskyj."
5 Regarding SWAGZ, Conradson concedes that she has, in fact, been doing
business as SWAGZ, although she contests whether this is in violation of the Note
because it allegedly occurred after Geiger tenninated the agreement. See PSMF at CJI 20;
DSMF at CJI 20; PASMF at CJI 71. Again, Conradson's argument is confusing the
distinction between violating the terms of the Note and violating the terms of the
Dealership Agreement. Despite the fact that the Dealership Agreement had been
tenninated when she began doing business as SWAGZ, the conditions to Geiger's
obligation to forbear an immediate demand of the $15,000 were still in effect, assuming
that obligation was not already discharged by the tennination of the Dealership
Agreement. Consequently, no genuine issue of material fact exists on this issue and
summary judgment is appropriate on this grounds.
D. Enforceability of the Non-Competition Provision of the Note
The next issue raised by the parties is, assuming that Conradson violated the
non-competition provision of the Note, whether that provision is enforceable.s In this
portion of their arguments, the parties disputed whether the non-compete provision
contained in the Note withstands scrutiny as a covenant to not-compete under Maine
law, pursuant to Chapman & Drake v. Harrington, 545 A.2d 645, 647 (Me. 1988).
However, a significant issue raised here that was not discussed in the memoranda of
counsel, is whether the provision contained in the Note should even be subject to the
legal requirements of a covenant to not compete. See Sarnoff v. American Home Prods.
Corp., 798 F.2d 1075, 1080-81 (7th Cir. 1986) ("[a]lthough the condition is carefully
designed to avoid being classified as a covenant not to compete -- there is no promise by
the employee not to compete, only a condition forfeiting his rights if he does compete
8 Although this motion is only for count II, count I of the Complaint seeks damages resulting from Conradson's alleged breach of the Non-Compete provisions of the Note. Accordingly, this creates grounds for dismissal of count I.
6 · .. might pierce the formal wrappings, thinking it an unimportant detail whether
Sarnoff received a carrot for not competing or was hit over the head with a stick (an
injunction) for competing"). The Law Court has not addressed whether a condition of
forfeiture for violating a non-competition provision is subject to the same requirements
as a covenant to not compete. However, a distinction drawn in a Federal District Court
case is instructive. In Combined Ins. Co. v. Hansen, an employment contract provided an
employee with post-termination benefits, conditioned on a provision that the employee
refrains from competing with the company. 756 F. Supp. 458, 460 (D. Or. 1991). The
Court explained that this arrangement was not subject to the requirements of a
restrictive non-competition covenant because a violation of the provision results in a
forfeiture of benefits being presently received, rather than penalties, injunctive or
otherwise, or the forfeiture of benefits that have already been earned. Id. at 465. See also
Smith v. Maine Unemployment Ins. Comm'n, 2002 Me. Super. LEXIS 239, at **8-9
(December 13, 2002) (holding that Chapman does not apply to an agreement between an
employer and employee that the employee will not engage in simultaneous
employment).
The situation here is similar to that in Combined Ins. Conradson agreed to execute
a Note to Geiger Bros. for $15,000. She further agreed that in exchange for Geiger Bros.
promise to forbear demanding immediate payment on the note, she would not compete
against Geiger Bros. An act of competition by Conradson does not result in an
injunction or subject her to civil damages resulting from the competition, but instead
causes her to only forfeit a benefit she is currently receiving at the time of action. The
policy against non-competition covenants is based on the fact that such a provision
inhibits a person's ability to support him or herself in their chosen profession without
subjecting themselves to civil liability. Chapman, 545 A.2d at 646-647. Invalidating a
7 non-competitive provision in a Promissory Note that simply causes a person to forfeit a
benefit she is currently receiving does not further this policy. Accordingly, the non
competition provision of the Note is not a promissory covenant to not compete that is
subject to the standard in Chapman.
Should the court find that the provision is subject to the requirements of
Chapman, the provision of the Note is unenforceable in this case. The Law Court has
explained that non-competition covenants "are contrary to public policy and will be
enforced only to the extent that they are reasonable and sweep no wider than necessary
to protect the business interests in issue." Chapman, 454 A.2d at 647. The provisions of
the covenant must be reasonable, and "[t]he reasonableness of a specific covenant must
ultimately be determined by the facts developed in each case as to its duration,
geographic area and the interests sought to be protected." [d. Accordingly, the court
examines the agreement "only as [plaintiff] sought to apply it and not as it might have
been enforced."
Geiger Bros. argues that enforcement is reasonable here because it only seeks to
enforce the Note against Conradson for soliciting business from Geiger Bros.'s
customers in Arizona. This argument is puzzling. Geiger Bros. claims that preventing
Conradson from soliciting business from Blue Cross is reasonably necessary for the
protection of it's relationship with Blue Cross. PI.'s Rep. Mot. at 4. However, it is
unclear how Conradson's alleged charging of warehousing and storage fees for Geiger
Bros. products. owned by Blue Cross affects that business interest. Geiger Bros. is a
wholesaler and has not submitted any evidence suggesting it is in the business of
storage of the promotional products it sells. Were Conradson engaging in the business
of soliciting business from Blue Cross to purchase from Geiger Bros.'s competitors, the
argument would carry more weight. However, prohibiting Conradson from providing
8 warehousing services to Blue Cross is an unreasonable restriction In light of the
business interests Geiger Bros. is purporting to protect.
IV. DECISION AND ORDER
The clerk will make the following entry as the Decision and Order of the court:
• Whereas the dealership agreement was terminated, plaintiff's obligation to forbear from execution on the note is excused.
• Plaintiff's Motion for Summary Judgment as to Count II, liability on the promissory note is granted.
• Because final judgment has not been entered on all issues, no interest or costs are awarded at this time.
SO ORDERED
February 10,2010
9 GEIGER BROTHERS - PLAINTIFF SUPERIOR COURT ANDROSCOGGIN, S8. Attorney for: GEIGER BROTHERS Docket No AUBSC-CV-2008-00242 JAMES E BELLEAU - RETAINED 12/15/7.008 SKELTON TAINTOR & ABBOTT 95 MAIN STREET DOCKET RECORD PO BOX 3200 AUBURN ME 04212-3200
vs ANITA CONRADSON FKA GREGOLYNSKYJ - DEFENDANT 5024 EAST FLOWER ST, PHEONIX AZ 85018 Attorney for: ANITA CONRADSON FKA GREGOLYNSKYJ DAVID SHERMAN - RETAINED 03/16/2009 DRUMMOND WOODSUM & MACMAHON 84 MARGINAL WAY SUITE 600 PORTLAND ME 04101
Filing Document: COMPLAINT Minor Case Type: CONTRACT Filing Date: 12/15/2008
Docket Events: 12/16/2008 FILING DOCUMENT - COMPLAINT FILED ON 12/15/2008
12/16/2008 Party(s): GEIGER BROTHERS ATTORNEY - RETAINED ENTERED ON 12/15/2008 Plaintiff's Attorney: JAMES E BELLEAU
12/16/2008 CERTIFY/NOTIFICATION - CASE FILE NOTICE SENT ON 12/16/2008
01/13/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ RESPONSIVE PLEADING - ANSWER FILED ON 01/12/2009
01/13/2009 ORDER - SCHEDULING ORDER ENTERED ON 01/13/2009 THOMAS E DELAHANTY II, JUSTICE ORDERED INCORPORATED BY REFERENCE AT THE SPECIFIC DIRECTION OF THE COURT. COPIES TO PARTIES/COUNSEL
01/13/2009 DISCOVERY FILING - DISCOVERY DEADLINE ENTERED ON 09/13/2009
01/13/2009 Party(s): ANITA CONRADSON.FKA GREGOLYNSKYJ SUMMONS/SERVICE - PROOF OF SERVICE SERVED ON 12/18/2008 TO THE DEF IN HAND
01/13/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ SUMMONS/SERVICE - PROOF OF SERVICE FILED ON 01/13/2009
01/14/2009 party(s): GEIGER BROTHERS RESPONSIVE PLEADING - REPLY/ANSWER TO COUNTERCLAIM FILED ON 01/14/2009 PLT'S
03/17/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ ATTORNEY - RETAINED ENTERED ON 03/16/2009 Page" 1 of 4 Printed on: 03/02/2010 AUBSC-CV-2008-00242 DOCKET RECORD
Defendant's Attorney: DAVID SHERMAN
03/17/2009 ADR - NOTICE OF ADR PROCESS/NEUTRAL FILED ON 03/16/2009 PARTIES HAVE AGREED TO USE PETER FESSENDEN ESQ., AS MEDIATOR, NO DATE SET YET.
03/25/2009 ADR - NOTICE OF ADR PROCESS/NEUTRAL FILED ON 03/25/2009 ADR IS SCHEDULED FOR 4/27/09 WITH PETER FESSENDEN ESQ. AS MEDIATOR.
04/10/2009 Party(s): GEIGER BROTHERS MOTION - MOTION TO AMEND PLEADING FILED ON 04/09/2009 SCHEDULING ORDER WITH DRAFT ORDER
04/13/2009 Party(s): GEIGER BROTHERS MOTION - MOTION TO AMEND PLEADING GRANTED ON 04/10/2009 THOMAS E DELAHANTY II, JUSTICE THE DEADLINE FOR PLT TO DESIGNATE EXPERTS IS MAY 13, 2009 AND DEFENDANT TO DESIGNATE BY JULY 13, 2009. COPIES TO PARTIES ON 4-13-09.
04/30/2009 ORDER - REPORT OF ADR CONF/ORDER ENTERED ON 04/29/2009 THOMAS E DELAHANTY II, JUSTICE ORDERED INCORPORATED BY REFERENCE AT THE SPECIFIC DIRECTION OF THE COURT. COPIES TO PARTIES/COUNSEL
04/30/2009 ORDER - REPORT OF ADR CONF/ORDER UNRESOLVED ON 04/29/2009 THOMAS E DELAHANTY II, JUSTICE
05/15/2009 Party(s): GEIGER BROTHERS MOTION - MOTION TO AMEND PL~ADING FILED ON 05/12/2009 WITH MEMORANDUM OF LAW AND PROPOSED ORDER
06/19/2009 Party(s): GEIGER BROTHERS MOTION - MOTION TO AMEND PLEADING GRANTED ON 06/19/2009 THOMAS E DELAHANTY II, JUSTICE PLAINTIFF SHALL BE ENTITLED TO AMEND ITS COMPLAINT. COPIES TO COUNSEL ON 6-19-09
06/19/2009 Party(s): GEIGER BROTHERS SUPPLEMENTAL FILING - AMENDED COMPLAINT FILED ON 06/19/2009
06/25/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ RESPONSIVE PLEADING - ANSWER TO AMENDED PLEADING FILED ON 06/25/2009
07/07/2009 Party(s): GEIGER BROTHERS MOTION - MOTION PARTIAL SUMMARY JUDG FILED ON 07/06/2009 PLT WITH STATEMENT OF MATERIAL FACTS, MEMORANDUM OF LAW IN SUPPORT OF MOTION, AFFIDAVIT OF JO-AN LANTZ WITH PROPOSED ORDER REC'D 08-13-09: DEFENDANT'S OPPOSITION WITH RESPONSE TO STATEMENT OF MATERIAL FACTS AND REPLY STATEMENT REC'D 08-31-09: REPLY MEMORANDUM WITH REPLY STATEMENT OF MATERIAL FACTS, SECOND AFFIDAVIT OF JO-AN LANTZ
07/28/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ MOTION - MOTION FOR ENLARGEMENT OF TIME FILED ON 07/28/2009 TO FILE OBJECTION TO MOTION FOR SUMMARY JUDGMENT
07/29/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ Page 2 of 4 Printed on: 03/02/2010 AUBSC-CV-2008-00242 DOCKET RECORD
MOTION - MOTION FOR ENLARGEMENT OF TIME GRANTED ON 07/29/2009 JOYCE A WHEELER , JUDGE DEFENDANT SHALL HAVE UNTIL AUGUST 10, 2009 TO FILE HER OBJECTION TO THE PENDING MOTION FOR SUMMARY JUDGMENT. COPIES TO COUNSEL ON 7-29-09
08/13/2009 Party(s): GEIGER BROTHERS MOTION - MOTION FOR ENLARGEMENT OF TIME FILED ON 08/12/2009 TO FILE REPLY TO MOTION FOR SUMMARY JUDGMENT
08/17/2009 Party(s): GEIGER BROTHERS MOTION - MOTION FOR ENLARGEMENT OF TIME GRANTED ON 08/17/2009 DONALD H MARDEN , JUSTICE REPLY TO SUMMARY JUDGMENT TO BE FILED BY AUGUST 31, 2009. COPIES TO COUNSEL ON 8-17-09
08/19/2009 party(s): ANITA CONRADSON FKA GREGOLYNSKYJ OTHER FILING - AFFIDAVIT FILED ON 08/18/2009 OF DEF
09/29/2009 OTHER FILING - STATEMENT OF TIME FOR TRIAL FILED ON 09/28/2009
09/29/2009 Party(s): GEIGER BROTHERS OTHER FILING - REQUEST FOR HEARING FILED ON 09/28/2009 FOR MOTION FOR PARTIAL SUMMARY JUDGMENT
10/21/2009 HEARING - MOTION PARTIAL SUMMARY JUDG SCHEDULED FOR 10/28/2009 @ 11:15
10/27/2009 party(s): ANITA CONRADSON FKA GREGOLYNSKYJ MOTION - MOTION TO CONTINUE FILED ON 10/27/2009 CONSENTED MOTION TO CONTINUE HEARING ON MOTION FOR PARTIAL SUMMARY JUDGMENT
10/27/2009 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ MOTION - MOTION TO CONTINUE GRANTED ON 10/27/2009 THOMAS E DELAHANTY II, JUSTICE COPIES TO PARTIES/COUNSEL
10/27/2009 HEARING - MOTION PARTIAL SUMMARY JUDG CONTINUED ON 10/27/2009 THOMAS E DELAHANTY II, JUSTICE
12/29/2009 ORDER - PRETRIAL/STATUS ENTERED ON 12/24/2009 THOMAS E DELAHANTY II, JUSTICE ORDERED INCORPORATED BY REFERENCE AT THE SPECIFIC DIRECTION OF THE COURT. COPIES TO PARTIES/COUNSEL
12/29/2009 TRIAL - BENCH SCHEDULED FOR 02/09/2010
01/05/2010 HEARING - MOTION SUMMARY JUDGMENT SCHEDULED FOR 02/04/2000 @ 9:45
01/13/2010 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ MOTION - OTHER MOTION FILED ON 01/13/2010 DEFENDANT'S MOTION TO APPEAR TELEPHONICALLY AT TRIAL REC'D ON 1/29/10 PLT'S OPPOSITION
01/29/2010 Party(s): GEIGER BROTHERS DISCOVERY FILING - RULE 26(G) LETTER FILED ON 01/29/2010 Page 3 of 4 Printed on: 03/02/2010 AUBSC-CV-200B-00212 DOCKET RECORD
PLT'S
01/29/2010 Party(s): GEIGER BROTHERS MOTION - MOTION TO ENFORCE FILED ON 01/29/2010 WITH MEMORANDUM OF LAW, DRAFT ORDER, NOTICE OF HEARING FILED BY PLT TO ENFORCE SETTLEMENT AGREEMENT REC'D ON 2/3/10 OBJECTION
02/04/2010 HEARING - MOTION SUMMARY JUDGMENT HELD ON 02/04/2010 THOMAS E DELAHANTY II, JUSTICE Defendant's Attorney: DAVID SHERMAN Plaintiff's Attorney: ADAM R LEE TAPE NO 343 INDEX NO'S 3554-4196. PER TED IT IS OK FOR THE DEF TO APPEAR THROUGH VIDEO CONFERENCE FOR TRAIL, NOT VIA TELEPHONE. MATTER TAKEN UNDER ADVISEMENT.
02/11/2010 Party(s): GEIGER BROTHERS MOTION - MOTION TO ENFORCE DENIED ON 02/10/2010 THOMAS E DELAHANTY II, JUSTICE COPIES TO PARTIES/COUNSEL
02/11/2010 Party(s): ANITA CONRADSON FKA GREGOLYNSKYJ MOTION - OTHER MOTION DENIED ON 02/10/2010 THOMAS E DELAHANTY II, JUSTICE DEFENDANT'S MOTION TO APPEAR TELEPHONICALLY AT TRIAL REC'D ON 1/29/10 PLT'S OPPOSITION DEFENDANT MAY APPEAR BY VIDEO CONFERENCE
02/11/2010 Party(s): GEIGER BROTHERS MOTION - MOTION PARTIAL SUMMARY JUDG GRANTED ON 02/10/2010 THOMAS E DELAHANTY II, JUSTICE WHAREAS THE DEALERSHIP AGREEMENT WAS TERMINATED, PLAINTIFF'S OBLIGATION TO FORBEAR FROM EXECUTION ON THE NOTE IS EXCUSED. PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AS TO COUNT II, LIABILITY IN THE PROMISSORY NOTE IS GRANTED. BECAUSE FINAL JUDGMENT HAS NOT BEEN ENTERED ON ALL ISSUES, NO INTEREST OR COSTS ARE AWARDED AT THIS TIME.
02/12/2010 Party(s): GEIGER BROTHERS OTHER FILING - WITNESS LIST FILED ON 02/11/2010 AMENDED
02/12/2010 Party(s): GEIGER BROTHERS OTHER FILING - EXHIBIT LIST FILED ON 02/11/2010 UPDATED
02/24/2010 party(s): GEIGER BROTHERS OTHER FILING - EXHIBIT LIST FILED ON 02/23/2010
A TRUE COPY ATTEST: Clerk
Page 4 of 4 Printed on: 03/02/2010