Continental Warranty Inc. v. Warner et al

Filing 33

MEMORANDUM. Signed by Judge Sue L. Robinson on 6/5/2015. (fms)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
CONTINENTAL WARRANTY, INC.,

Plaintiff,

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v.

JENNIFER WARNER and JOSEPH
VIVIANI,
Defendants.

Civ. No. 13-1187-SLR

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MEMORANDUM
At Wilmington this

fl,- day of June, 2015, having reviewed defendant Joseph

Viviani's motion for summary judgment (D.I. 23), and the papers filed in connection
therewith; the court issues its decision based on the following reasoning:
1. Introduction. On May 30, 2013, plaintiff Continental Warranty, Inc.
("plaintiff''), a vehicle service contract provider, filed a verified complaint against its
former sales representatives defendants Jennifer Warner ("Warner") and Joseph Viviani
("Viviani") (collectively, "defendants") in the Delaware Court of Chancery. (D.I. 1, ex. A)
Plaintiff alleged breach of contract with respect to a non-compete agreement contained
within an employment application, interference with existing and prospective business
relations, and defamation against Viviani, seeking damages and injunctive re-lief for
each claim. (Id.) On July 3, 2013, defendants removed the action to this court. (D.I. 1)
By an order dated June 17, 2014, the court denied plaintiff's motion to remand. (D.I. 7)
Trial is currently scheduled to begin on July 21, 2015. Presently before the court is

Viviani's motion for summary judgment on each claim. (0.1. 23) The court has
jurisdiction over these issues pursuant to 28 U.S.C. §§ 1332 and 144'1.
2. Background. Viviani completed an "Application for Employment" ("the
application") on September 27, 2010. (0.1. 4, ex. 3at1f 2) The parties agree that after
Viviani completed the application, plaintiff hired Viviani as an independent contractor.

(0.1. 24 at 6; 0.1. 28 at 10-11) The application contained an "Employee Non-Compete
Agreement" ("the agreement") that states that the employee "agrees not to directly or
indirectly compete with the business of the Company ... during the period of
employment and for a period of two years following termination of employment" and that
the agreement "shall be in full force and effect for two years, commencing w1ith the date
of employment termination." (0.1. 1, ex. A, ex. C) The application twice states that the
document "does [not] create a contract of employment, offer, or promise of
employment." (Id.) The application also includes a provision stating that "as a condition
of employment ... I may be required to sign a confidentiality, non-compete, and/or
conflict of interest statement." (Id.) Plaintiff alleges that it required Viviani to execute
the agreement as a condition of his engagement as an independent contractor. (0.1. 1,
ex. A at 1f 32) Viviani contends that he executed the agreement as pa11 of his
application for a position as plaintiff's employee. (0.1. 4, ex. 3at1f 2)
3. James Thompson of Automotive Financial Management ("AFM") contacted
Viviani in April 2013 to discuss selling reinsurance contracts. (0.1. 28, ex.Cat 76:1-8;
18-21) AFM brokers insurance and warranty products to car dealerships from a variety
of providers. (0.1. 28, ex. 0 at 17:3-8) Viviani completed a W-9 form for AFM on April
20 or 26, 2013. (0.1. 28, ex. F) Viviani tendered his resignation to plaintiff around April

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11, 2013, and offered to continue working until May 1, 2013. (D.I. 28, ex.Cat 57:17-21)
Plaintiff alleges that Viviani, through his association with AFM, solicited plaintiff's
existing customers and offered competing vehicle service contracts before April 26,
2013. (D.I. 1, ex. A at ,-i,-i 40-41) Plaintiff terminated its relationship with Viviani on April
26, 2013. (D.I. 1, ex. A at 1f 45)
4. Plaintiff sent Viviani a cease and desist letter alleging violations of his noncompete agreement on or about April 26, 2013. (D.I. 1, ex. A, ex. D) Plaintiff contends
that Viviani continued to violate the non-compete agreement after April 26,

~~013.

(D.I.

1, ex. A at mf 47, 55)
5. Standard. "The court shall grant summary judgment if the rnovant shows that
there is no genuine dispute as to any material fact and the movant is emtitlecl to
judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party bears the burden
of demonstrating the absence of a genuine issue of material fact. Matsushita Elec.

Indus. Co. v. Zenith Radio Corp., 415 U.S. 475, 586 n.10 (1986). A party asserting that
a fact cannot be-or, alternatively, is-genuinely disputed must be supported either by
citing to "particular parts of materials in the record, including depositions, documents,
electronically stored information, affidavits or declarations, stipulations (including those
made for the purposes of the motions only), admissions, interrogatory answers, or other
materials,'' or by "showing that the materials cited do not establish the absence or
presence of a genuine dispute, or that an adverse party cannot produce admissible
evidence to support the fact." Fed. R. Civ. P. 56(c)(1 )(A) & (B). If the

movin~J

party has

carried its burden, the nonmovant must then "come forward with specific facts showing
that there is a genuine issue for trial." Matsushita, 415 U.S. at 587 (internal quotation

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marks omitted). The court will "draw all reasonable inferences in favor of the
nonmoving party, and it may not make credibility determinations or weigh the evidence."
Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000).
6. To defeat a motion for summary judgment, the non-moving party must "do
more than simply show that there is some metaphysical doubt as to the material facts."
Matsushita, 475 U.S. at 586-87; see also Podohnik v. U.S. Postal Service, 409 F.3d
584, 594 (3d Cir. 2005) (stating party opposing summary judgment "must present more
than just bare assertions, conclusory allegations or suspicions to show the existence of
a genuine issue") (internal quotation marks omitted). Although the "mere existence of
some alleged factual dispute between the parties will not defeat an otherwise properly
supported motion for summary judgment," a factual dispute is genuine where "the
evidence is such that a reasonable jury could return a verdict for the nonmoving party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). "If the evidem;e is merely
colorable, or is not significantly probative, summary judgment may be !;]ranted." Id. at
249-50 (internal citations omitted); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986) (stating entry of summary judgment is mandated "against a party who fails to
make a showing sufficient to establish the existence of an element essential to that
party's case, and on which that party will bear the burden of proof at trial").
7. Discussion. The parties dispute whether Viviani's application created an
enforceable agreement not to compete with plaintiff. It is undisputed that Delaware law
governs the formation of any such agreement. "Under Delaware law[,] a contract
comes into existence if a reasonable person would conclude, based on the objective
manifestations of assent and the surrounding circumstances, that the parties intended

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t
l

t

to be bound by their agreement on all essential terms." Rohm and Haas Elec.
Materials, LLC v. Honeywell Intern., Inc., 2009 WL 1033651, at *5 (D. Del. 2009)
(quotations and citations omitted). A contract contains all essential terms and,
therefore, is enforceable when "it establishes the heart of the agreement;" it need not,
however, contain all terms as some matters may be left for future negotiation. ParkerHannifin Corp. v. Schlegel Elec. Materials, Inc., 589 F. Supp. 2d 457, 463 (D. Del.
2008). In other words, "[u]ntil it is reasonable to conclude, in light of all of these
surrounding circumstances, that all of the points that the parties themselves regard as
essential have been expressly or ... implicitly resolved, the parties have not finished
their negotiations and have not formed a contract." Leeds v. First Allied Conn. Corp.,
521A.2d1095, 1102 (Del. Ch. 1986). In short, "an enforceable contract exists where a
reasonable person would conclude that the parties had reached a definite and final
agreement on all essential terms." Rohm and Haas, 2009 WL 1033651, at *:5.
8. The court notes that "[w]here there is no mutual assent or meeting of the
minds, there is no enforceable contract in Delaware." Thomas v. Thomas, 2010 WL
1452872, at *4 (Del. Com. Pl. Mar. 19, 2010) (citing Rodgers v. Erickson Air--Crane Co.
L.L.C., 2000 WL 1211157, at *6 (Del. Super. Aug. 17, 2000)). It is axiomatic that mutual
assent is not achieved when both parties unknowingly attach materially different
meanings to a contract term. Restatement (Second) of Contracts§ 20(1) (1 H81 ).
Viviani argues that he "applied for a position as an employee." (D.I. 29 at 2) Plaintiff, by
contrast, argues that "Viviani was only applying for, and was only being considered for,
employment as an independent contractor." (D.I. 28 at 10) The conflicting meanings

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the parties attach to the application demonstrate that there was never a meeting of the
minds with respect to the application's legal effect.
9. In addition to the divergence of the parties' subjective views, the application's
language does not objectively manifest the intent to be bound. The application includes
the language "this application [does not] create a contract of employment, offer, or
promise of employment." Plaintiff contends that this provision prohibits the formation of
an employment contract but permits the application to establish other contractual
obligations. Plaintiff reads the provision as one term describing the at-will nature of
prospective employment within a larger agreement establishing the contractual
obligations between plaintiff and applicants. The presence of conditional language
elsewhere in the application, however, does not support the claim that the application
establishes any larger agreement The conditional language - stating "if hired by the
Company, employment is on an at-will basis" and "as a condition of employment ... I
may be required to sign a confidentiality, non-compete, and/or conflict of interest
statement" - classifies the application as a pre-employment document that does not
create contractual obligations until an employment relationship begins . The application
does not initiate an employment relationship because it does not create an "offer, or
promise of employment." Moreover, the parties do not dispute that Viviani eventually
worked for plaintiff as an independent contractor and not as an employee. 1 Standing
alone, the application does not manifest the objective intent to be bound.

The court rejects plaintiff's argument that the distinction between status as an
employee and an independent contractor is "semantics [that] place form ove1·
substance." (D.I. 28 at 11) A reasonable person would interpret the application to bind
only applicants hired as employees.

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10. The court also notes the application does not manifest the objective intent to
be bound because the application anticipates future negotiations. Plaintiff and Viviani
continued to negotiate "the heart of the agreement" after Viviani completed the
application. Parker-Hannifin, 589 F. Supp. 2d at 463. As noted

abovE~.

the issue of

whether Viviani would be employed as an employee or independent contractor
remained unresolved when Viviani completed the application. Viviani also testified that
the amount of his compensation was "open-ended" before he started

workin~J

for

plaintiff. (D. I. 28, ex. C at 21: 17-22:9) The application itself is a standard form that
does not specify the nature, time, or place of the work to be performed. In

li~Jht

of these

omissions, the application does not indicate a "definite and final agreement on all
essential terms" necessary for a contract between plaintiff and Viviani. Rohm and

Haas, 2009 WL 1033651, at *5.
11. Plaintiff argues that failure to give effect to the non-compete agreement
violates the rule that "contract terms should not be read to be illusory or meaningless."

Troumouhis v. State, 2006 WL 1579776, at *4 (Del. Super. 2006). This rule of
interpretation presupposes the existence of a contract. The rule does not apply here
because a reasonable person would not conclude, based on the application as a whole,
that the parties demonstrated the intent to be bound.
12. Plaintiff's suggestion that the non-compete agreement stands alone as a
separate enforceable contract is unpersuasive. 'Whether or not the terms of a contract
are severable is purely a question of the intent of the parties." Tracey

\l.

Franklin, 67

A.2d 56, 61 (Del. Ch. 1949). When determining the parties' intent regarding
severability, Delaware courts ask whether the parties gave a single assent to the whole

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transaction or whether they assented separately to several things. Orenstein v. Kahn,
119 A. 444, 446 (Del. Ch. 1922). The application contained two subsections, both of
which contained the language disclaiming the creation of an employment contract. In
the first section, titled "Application for Employment," Viviani entered personal
information including his address, educational background and work history. The
second section, titled "Applicant Certification," contained nine paragraphs of conditions
for prospective employment and the text of the agreement. The application includes
only one signature line and does not contain a severability clause. The court finds that
the agreement is not severable under Delaware law under these circumstances.
13. Plaintiff also alleges that Viviani interfered with existing and prospective
business relations. Plaintiff correctly notes that Viviani misstated this allegation as
interference with contractual relations in his brief. As Viviani has not adequately briefed
this issue, the court will not rule on plaintiff's interference claim at this stage in the
litigation.
14. The court will grant Viviani's motion for summary judgment with respect to
the defamation claims because plaintiff did not address these issues in its answering
brief.
15. Conclusion. For the foregoing reasons, Viviani's motion for summary
judgment is granted-in-part and denied-in-part.
An appropriate order shall issue.

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