Monumental Life Insurance Company v. Illinois Mutual Life Insurance Company
Filing
69
MEMORANDUM OPINION AND ORDER Signed by the Honorable Harry D. Leinenweber on 11/19/2012:Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MONUMENTAL LIFE INSURANCE
COMPANY, an Iowa Corporation,
Plaintiff,
v.
Case No. 11 C 8909
ILLINOIS MUTUAL LIFE INSURANCE
COMPANY, an Illinois Company;
JACK BUTTACAVOLI, an
Individual; GLADSTON DUSSARD,
an Individual; LESLIE HUGHEY,
an Individual; and CHARLENE
McCOY, an Individual,
Hon. Harry D. Leinenweber
Defendants.
MEMORANDUM OPINION AND ORDER
Before
the
Court
are
Defendant
Jack
Buttacavoli’s
(“Buttacavoli”) Motion for Partial Judgment on the Pleadings and
Plaintiff Monumental Life Insurance Company’s (“Monumental” or
“Plaintiff”) Motion for Sanctions (contained in its response to
Defendant’s motion).
For the reasons stated herein, both motions
are denied.
I.
BACKGROUND
Buttacavoli became a District Manager for Monumental in 2002,
signing a District Manager’s Agreement (the “Manager’s Agreement”)
at that time.
The Manager’s Agreement, drafted by Monumental,
contained restrictive covenants limiting Buttacavoli’s ability to
disseminate
confidential
company
information,
to
work
for
competitors
company.
from
and
to
entice
Monumental
employees
to
leave
the
According to Monumental’s Complaint, Buttacavoli retired
Monumental
retirement,
he
on
December
31,
2010.
worked
for
Plaintiff
again
However,
and
after
signed
a
his
new
agreement (the “Sales Associate Agreement”) with Monumental on
January 11, 2011.
(The record is not crystal clear on whether
there was any break in service between his retirement and his work
as a Sales Associate.)
The Sales Associate Agreement contained
restrictive covenants similar to the Manager’s Agreement.
Plaintiff fired Buttacavoli in June 2011, allegedly because he
was selling Defendant Illinois Mutual Life Insurance Company’s
policies in violation of the contract.
Buttacavoli denies this.
Plaintiff alleges several counts of action against Buttacavoli
and other Defendants, but the Motion for Judgment concerns only
Defendant Buttacavoli and deals only with Count I of the Complaint.
Count I alleges breach of both the Manager’s Agreement and the
Sales Associate agreement.
Buttacavoli
violated
the
Specifically, the Complaint alleges
contracts
by
misusing
confidential
information while employed and by poaching customers both before
and after his employment terminated.
Buttacavoli clarified in his
Reply that his Motion for Judgment concerns only those alleged
violations occurring after his retirement of December 31, 2010.
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II.
LEGAL STANDARD
Under Federal Rule of Civil Procedure 12(c), “a party can move
for judgment on the pleadings after the filing of the complaint and
answer.” Supreme Laundry Serv., LLC v. Hartford Cas. Ins. Co., 521
F.3d 743, 746 (7th Cir. 2008).
for
purposes
of
Rule
The Seventh Circuit has held that
12(c),
the
pleadings
consist
of
the
“complaint, the answer, and any written instruments attached as
exhibits.”
Langone v. Miller, 631 F.Supp.2d 1067, 1070 (N.D. Ill.
2009).
A motion for judgment on the pleadings pursuant to Rule 12(c)
is subject to the same standard as a motion to dismiss for failure
to state a claim pursuant to Rule 12(b)(6).
Spearman Industries,
Inc. v. St. Paul Fire and Marine Ins. Co., 109 F.Supp.2d 905, 906
(N.D. Ill. 2000).
pleaded
This means that the court must accept all well-
allegations
in
the
complaint
as
true
reasonable inferences in favor of the plaintiff.
and
draw
all
Id.
A motion for judgment on the pleadings should only be granted
where “the moving party demonstrates that there are no material
issues of fact to be resolved.”
III.
A.
Supreme Laundry, 521 F.3d at 746.
ANALYSIS
Enforceability of the Manager’s Agreement
Buttacavoli argues the post-employment restrictive covenants
of the Manager’s Agreement do not apply because the contract
specifies that it is automatically terminated in the event of
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Buttacavoli’s retirement.
Since the post-employment restrictive
covenants have no explicit savings clause indicating they survive
the termination of the contract, Buttacavoli argues that the
restrictive
covenants
also
terminated
upon
his
retirement.
Monumental argues, first, that Buttacavoli did not retire. Second,
Monumental
argues
that
even
if
Buttacavoli
did
retire,
his
interpretation would render an entire section of the contract (the
post-employment restrictions) meaningless, in contravention of the
canons of contract interpretation.
1.
Choice of Law
The Manager’s Agreement contains a choice-of-law provision
designating
Maryland
law
as
the
applicable
contract
law.
A
district court sitting in Illinois will enforce a contractual
choice-of-law provision unless the law to be applied is “repugnant
to a strong and fundamental policy of Illinois.” Labor Ready, Inc.
v. Williams Staffing, LLC, 149 F.Supp.2d 398, 405-406 (N.D. Ill.
2001).
Neither party argues that Maryland law is repugnant to
Illinois law, nor do they argue another state’s law should govern
the contract dispute.
2.
The
The Court thus applies Maryland law.
Interpretation of the Contract Term “Retirement”
parties
argue
about
the
interpretation
“retirement” in the District Manager’s Agreement.
¶3b.
argues
of
“Plaintiff
Monumental’s
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complaint
term
Compl. Ex. 1A.,
Plaintiff argues Buttacavoli did not retire.
that
the
Buttacavoli
concedes
that
Defendant
Buttacavoli
‘officially
retired’
from
Plaintiff
‘effective December 31, 2010.’ Ex. 1 (Complaint) ¶¶55, 57, & 170.”
Def.’s
Memo.
3.
Although
he
does
not
phrase
it
as
such,
Buttacavoli essentially argues that the complaint constitutes a
judicial admission that retirement occurred and that this admission
is binding upon Monumental.
“An admission made in a pleading is a ‘judicial admission,’
and ordinarily is binding.” Sullivan v. William A. Randolph, Inc.,
504 F.3d 665, 669 (7th Cir. 2007).
The fact that it is binding
does not prevent its being withdrawn, if the judge allows the
filing of an amended pleading.
Id. Even if properly superseded by
a new complaint, admissions in a previous complaint may nonetheless
be used as an evidentiary admission, which can be controverted or
explained by the party. Flannery v. Recording Indus. Ass’n of Am.,
354 F.3d 632, 640 (7th Cir. 2004).
The Court agrees Monumental has made a judicial admission that
Buttacavoli retired on December 31, 2010.
completely
failed
to
respond
to
Moreover, Monumental
Buttacavoli’s
argument
that
Monumental conceded this fact in its Complaint. Nor has Monumental
sought to amend its Complaint to retract the concession.
Therefore, Buttacavoli is correct that the contract terminated
once he retired, pursuant to Paragraph 3b of the contract, which
states “This agreement shall automatically terminate upon my death,
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retirement or if I cease to be duly licensed to conduct the
business of insurance.”
Def.’s Mem., Ex. 1A, at 3.
3. Whether Post-Employment Restrictions Survived
the Contract’s Termination Upon Buttacavoli’s Retirement
But that does not end the inquiry.
contract
clearly
contemplated
that,
Monumental argues the
even
in
the
event
of
Buttacavoli’s retirement and the termination of the Manager’s
Agreement,
the
post-employment
continue to be binding.
restrictions would
survive
and
Buttacavoli contends nothing in the
contract, which was drafted by Monumental, exempted the restrictive
covenants from the termination clause.
Because ambiguities should
be construed against the drafter, and because Plaintiff could have
put
a
savings
clause
in
the
restrictive
covenant
section,
Buttacavoli argues that the plain language of Paragraph 3 releases
him from any post-employment obligations.
In addition to Paragraph 3b cited above, the Court finds the
following paragraphs relevant.
Paragraph 3c states, “The terms of
this Agreement shall control my relationship, obligations, and
duties to the Company so long as I remain employed by the Company
. . . unless the Company shall enter into a new Agreement with
me . . .”
Id.
Paragraph 7a deals with the restrictive covenants and states:
For a period of two (2) years from the date of
the termination of my employment with the
Company, including my voluntary termination of
employment, I shall not directly or indirectly
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do any of the following, or aid or assist
others to do any of the following . . .
Id. at 6.
attempting
The contract then goes on to prohibit selling or
to
sell
insurance
to
Monumental’s
policy
holders,
inducing employees to terminate their employment with Monumental,
or inducing employees to sell other insurers’ products.
There is, as far as the Court can gather, no Maryland case
directly dealing with survivability of post-employment restrictions
that lack a savings clause.
However, Prison Health Services, Inc.
v. Baltimore County arguably favors Buttacavoli’s position.
In
Prison Health Services, a contract “continue[d] through 06/30/2005
. . . at which time the County [could have] exercise[d] its option
to renew.”
Prison Health Servs. v. Baltimore Health Services, 912
A.2d 56, 58 (Md. Ct. Spec. App. 2006).
The county attempted to
renew on July 1, 2005, arguing that the “at which time” phrase
allowed for a reasonable time period after June 30 in which to
renew.
The court disagreed.
[A]bsent express savings language, it does not
make sense that an option to renew a contract,
contained in the same contract, which itself
has a definite expiration date, could survive
that expiration date.
The right to renew
exists only because the contract grants it,
and therefore must expire when the contract
expires, unless the contract itself provides
that the renewal right survives the contract’s
expiration.
Id. at 64.
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On Plaintiff’s side of the ledger are Maryland cases that
disfavor interpretations that would render provisions within them
as having no effect.
See Questar Builders, Inc. v. CB Flooring,
LLC, 978 A.2d 651, 671 (Md. 2009) (refusing to adopt employee’s
termination “at will” interpretation when the contract contained an
express term specifying the agreement’s duration); see also Towson
University v. Conte, 862 A.2d 941, 948 (Md. 2004) (noting that
courts construe contracts as a whole and attempt to harmonize
separate provisions).
While
this
Court
agrees
ambiguities
are
traditionally
construed against the drafter that is not enough to tip the scales
in favor of Buttacavoli.
See Walther v. Sovereign Bank, 872 A.2d
735, 746 (Md. 2005) (noting the court “will not simply excise or
ignore terms merely because . . . they may operate to the perceived
detriment of the weaker party.”). Additionally, the Court does not
find the level of ambiguity that Buttacavoli does.
To require the degree of explicitness in a savings clause that
Buttacavoli
demands
would
render
restrictions section meaningless.
the
entire
post-employment
Additionally, the Court finds a
certain level of explicitness in the language of the savings clause
when it states a term of application “for a period of two (2) years
from the date of the termination of my employment.”
Reading the
contract as a whole, it is unambiguous that the parties intended
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the post-employment restrictions to continue for two years past the
general termination of the contract.
Prison Health Services is distinguishable from this case.
That case noted it was dealing with a unique animal in contract
law, the option clause, which normally requires exercise before the
contract expires.
Prison Health Servs., 912 A.2d at 61-62.
The
disputed section here is not an options clause, but a postemployment restriction, and thus the case is inapposite.
Buttacavoli further argues that comparisons of his Manager’s
Agreements
to
other
employee
reinforce his interpretation.
contracts
issued
by
Monumental
But this reference to extrinsic
evidence is improper where contract language is unambiguous. Ocean
Petroleum, Co. v. Yanek, 5 A.3d 683, 690 (Md. 2010) (noting that,
absent ambiguity, contract interpretation “requires us to restrict
our inquiry to ‘the four corners of the agreement.’”).
The Court
did not consider these other contracts, nor Buttacavoli’s reference
to settlement documents that he argues further contextualize the
agreement.
Buttacavoli’s Motion for Judgment on the Pleadings in respect
to the Manager’s Agreement is denied.
B.
Enforceability of the Sales Associate Agreement
Buttacavoli asks for a judgment on the pleadings finding that
the
Sales
Associate
consideration.
Agreement
is
unenforceable
for
lack
of
That contract was signed in January 2011 and
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Buttacavoli was fired in June of the same year.
He argues that,
even in at-will employment situations, continuation of employment
for a “substantial period of time” is required for a restrictive
covenant to be supported by adequate consideration.
Def.’s Mem. 5
(citing Simko, Inc. v. Graymar Co., 464 A.2d 1104, 1107-1108 (Md.
Ct. Spec. App. 1983)).
What qualifies as a “substantial period is
dependent on the facts and circumstances of a particular case.”
Id. at 1108.
Stated another way, bargaining in bad faith merely to secure
a restrictive covenant, and then quickly terminating the employee,
likely does not constitute adequate consideration.
Id. at 1107-
1108.
The Court reminds Buttacavoli that judgment on the pleadings
is appropriate only where material facts are not in dispute.
the
Maryland
court’s
own
language,
determination
of
constitutes a “substantial period” is dependent on facts.
By
what
Here,
the parties disagree on whether Monumental terminated Buttacavoli
because he was violating the contract, or whether it was the end
result of a bad-faith negotiation to secure his agreement to
restrictive covenants.
Rendering judgment on the pleadings would
require the Court to decide that Buttacavoli’s version of events
are true.
That the Court cannot do at this stage.
Therefore, the
Motion for Judgment on the Pleadings in regards to the 2011 Sales
Associate Agreement is denied.
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C.
In
arguing
Plaintiff’s Motion for Sanctions
his
position
on
the
Manager’s
Agreement,
Buttacavoli referenced settlement documents the parties exchanged
prior to a settlement conference. Plaintiff asks for sanctions for
violating
Federal Rule
of
Evidence
408,
Local
Rule
of Civil
Procedure 83.5 and Magistrate Judge Geraldine Soat Brown’s standing
settlement conference order.
IV.
The Court declines this invitation.
CONCLUSION
For the reasons stated herein, Defendant Buttacavoli’s Motion
for Judgment on the Pleadings is denied.
Plaintiff’s Motion for
Sanction is also denied.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
DATE:11/19/2012
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