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Amer. Family Life Assur. Co. v. Tazelaar

OPINION FILED AUGUST 28, 1984.

AMERICAN FAMILY LIFE ASSURANCE COMPANY, PLAINTIFF-APPELLANT,

v.

EDWIN J. TAZELAAR ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Richard L. Curry, Judge, presiding.

JUSTICE DOWNING DELIVERED THE OPINION OF THE COURT:

This appeal questions the validity, based upon Georgia law, of a covenant not to compete contained in an employment agreement.

American Family Life Assurance Company (American Family), plaintiff, filed an action to enjoin defendants, six of its former employees, from (1) inducing other salespersons to terminate their agreements with plaintiff, (2) inducing policyholders to relinquish their policies written with plaintiff, (3) divulging the names of policyholders to plaintiff's competitors, and (4) making available to competitors information and material acquired from plaintiff.

Defendants, as salespersons for plaintiff, signed agreements with plaintiff promising to refrain from doing these acts. The pertinent provisions of the agreements were:

"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 and 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 agreement also contained (i) a provision that it is governed by the laws of the State of Georgia, and (ii) a severability clause that if any paragraph or subparagraph be held invalid, illegal or unenforceable, such will not affect any other provision of the agreement.

The trial court entered a temporary restraining order. Defendants filed a verified answer to the complaint, the parties filed memoranda of law, and oral arguments followed. The trial court, in considering paragraph seven, held (1) the law does not permit the blue-penciling of restrictive covenants in employment contracts and that the covenant must stand or fall as a whole, and (2) if any provision is unenforceable, the entire clause is unenforceable. The court found that subparagraph 6 of paragraph seven is overly broad and unenforceable. Therefore, no part of paragraph seven could be enforced. Finding ...


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