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JOSTENS, INC. v. KAUFFMAN

January 14, 1994

JOSTENS, INC., A MINNESOTA CORPORATION, PLAINTIFF,
v.
JON KAUFFMAN, DEFENDANT. JON KAUFFMAN, COUNTER-PLAINTIFF, V. JOSTENS, INC., A MINNESOTA CORPORATION, COUNTER-DEFENDANT.



The opinion of the court was delivered by: McDADE, District Judge.

ORDER

Before the Court is Defendant's Second Motion for Summary Judgment on Count IV of Plaintiff's Complaint [Doc. # 49]. Plaintiff, Jostens, Inc., is a corporation involved in the preparation and sale of school yearbooks. Defendant, Jon Kauffman, was a sales representative for Jostens from December, 1982 to December 31, 1990. Following the Court's August 5, 1993 Order granting Defendant's Motion for Summary Judgment to all Counts except Count IV, the Court granted Defendant's request to file an additional motion for summary judgment directed to the issue of post-employment fiduciary duties of an employee as contained in Count IV. Defendant subsequently filed the present motion. Plaintiff has responded to Defendant's motion, and Defendant replied thereto. The Court has diversity jurisdiction over this action pursuant to 28 U.S.C. § 1332.

"A motion for summary judgment is not an appropriate occasion for weighing the evidence; rather, the inquiry is limited to determining if there is genuine issue for trial." Lohorn v. Michal, 913 F.2d 327, 331 (7th Cir. 1990); See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). This Court must "view the record and all inferences drawn from it in the light most favorable to the party opposing the motion." Holland v. Jefferson National Life Insurance Co., 883 F.2d 1307, 1312 (7th Cir. 1989). When faced with a motion for summary judgment, the non-moving party may not rest on its pleadings. Rather, it is necessary for the non-moving party to demonstrate, through specific evidence, that there remains a genuine issue of triable fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986); Bank Leumi Le-Israel, B.M. v. Lee, 928 F.2d 232, 236 (7th Cir. 1991).

BACKGROUND

On January 1, 1991, Defendant left Plaintiff and entered into an agreement to become a sales representative for Walsworth Publishing Company ("Walsworth"). Walsworth is involved in the preparation, publication, and sale of yearbook products and is a direct competitor of Plaintiff. Thereafter, it is alleged, Defendant began to solicit and service the schools/accounts which he had serviced while under Plaintiff's employ. Id. at 5.

On May 16, 1991, Plaintiff filed this suit against Defendant alleging in five counts: tortious interference with contracts; tortious interference with business relationships; defamation; breach of fiduciary duty; and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. Defendant filed a Motion for Summary Judgment on all five Counts of the Complaint on February 26, 1993. The Court in its August 5, 1993 Order granted Defendant's motion as to Counts I, II, III, and V, but denied the motion as to Count IV. On September 7, 1993, Defendant filed a Motion to Reconsider the August 5, 1993 Order. In an Order dated September 29, 1993, the Court denied Defendant's motion. However, the Court granted Defendant leave to file an additional motion for summary judgment on Count IV addressing the issue of post-employment fiduciary duties in the context of the present case. Subsequently, Defendant filed the present Motion for Summary Judgment.

ANALYSIS

In Count IV of its Complaint, Plaintiff alleges that Defendant breached his fiduciary duty to Plaintiff both while employed by Plaintiff and during the one year period following the termination of Defendant's employment with Plaintiff. As for the alleged breach of fiduciary duty by Defendant while in the employ of Plaintiff, Plaintiff alleges that Defendant entered into an employment contract with one of Plaintiff's competitors and engaged in the solicitation and sale of that competitor's yearbook products to Plaintiff's customers while employed by Plaintiff. As for the alleged breach of fiduciary duty by Defendant following the termination of his employment with Plaintiff, Plaintiff alleges that Defendant owed Plaintiff a fiduciary duty not to compete with it for one year following termination of his employment by virtue of a restrictive covenant contained in the Agreement signed by Defendant and that Defendant breached this duty by competing with Plaintiff. The Court shall address each of these time periods in turn.

Defendant owed Plaintiff, his employer, a fiduciary duty not to solicit customers away from Plaintiff while still in its employ. Prudential Insurance Co. v. Van Matre, 158 Ill. App.3d 298, 110 Ill.Dec. 563, 571, 511 N.E.2d 740, 748 (5 Dist. 1987). Defendant, in his memorandum in support of his Motion for Summary Judgment, concedes that he owed Plaintiff a fiduciary duty while employed by Plaintiff. Defendant, however, maintains that he did not violate this duty and has submitted numerous affidavits and deposition transcripts supporting his position from the administrators of the schools named by Plaintiff in its Complaint and in discovery. Plaintiff in his response to Defendant's Motion for Summary Judgment also submitted affidavits in support of its position. The Court's August 5, 1993 Order stated that Defendant's affidavits have not been refuted by the affidavits submitted by Plaintiff, and that Defendant had, therefore, "shown that he did not solicit in violation of the Agreement prior to January 1, 1991." (Order dated August 5, 1993 at 7 and 14). By the earlier Order, the Court has found that Defendant did not violate his fiduciary duty to Plaintiff prior to the termination of his employment. This aspect of Count IV is, therefore, no longer in controversy.

What still is in controversy is whether or not Defendant owed Plaintiff a fiduciary duty following the termination of his employment with Plaintiff, and if he did, whether or not this duty was violated. Defendant, in his Motion for Summary Judgment, maintains that once he left the employ of Plaintiff, he owed no fiduciary duty to Plaintiff. In support of his position, Defendant cites to cases which have held that, generally, once an employee leaves the service of an employer, he no longer owes a fiduciary duty to his former employer. As for the covenant restricting Defendant from competing with Plaintiff for one year following his departure, Defendant maintains that such a covenant cannot be a basis for a continuing common law fiduciary duty by an ex-employee. Defendant's argument is unpersuasive.

Illinois law holds, generally, that once an employee leaves the service of an employer, he ceases to owe that employer a fiduciary duty and is free to compete with his former employer. Prudential Insurance Co. v. Sempetrean, 171 Ill. App.3d 810, 121 Ill. Dec. 709, 713, 525 N.E.2d 1016, 1020 (1 Dist. 1988); Prudential Insurance Co. v. Van Matre, 158 Ill. App.3d 298, 110 Ill.Dec. 563, 571-572, 511 N.E.2d 740, 748-749 (5 Dist. 1987). Defendant relies heavily upon Sempetrean and Van Matre for support for the proposition that he owed no fiduciary duty to Plaintiff despite the presence of the restrictive covenant in the Agreement. While as a general proposition it is true that no fiduciary duty is owed an employer by an ex-employee, these two cases make it clear that the existence of an express restrictive covenant presents an exception to the general rule.

In Sempetrean, the court, when considering a claim by a corporation that an ex-employee violated his fiduciary duty to the corporation through his activities following the termination of his employment, stated:

  Here, the "Agency Agreement" entered into between
  Prudential and Sempetrean contained no provision
  which circumscribed Sempetrean's post employment
  duties. The Agency Agreement that Prudential refers
  to is a standardized employment contract. Prudential,
  in drafting this agreement, did not have the
  foresight to include such a restrictive covenant and
  we will not imply one. Therefore, the trial court
  properly dismissed this count in finding that as a
  ...

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