United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
REBECCA R. PALLMEYER United States District Judge.
Plaintiff
Penn Mutual Life Insurance Company (hereafter
“Plaintiff” or “Penn Mutual”) has
sued four of its former employees, along with their new
employer, America United Life Insurance Company (hereafter
“AUL or “America United”), alleging breach
of contract and tortious interference with contractual
relations. According to Plaintiff, the Defendant-employees
breached their employment contracts by enlisting, soliciting,
or inducing other Penn Mutual agents and employees to alter
their employment relationship with the company; by soliciting
or servicing Penn Mutual policyholders for the purpose of
inducing those policyholders to cancel, lapse, or fail to
renew their policies; and by “interfering” with
Penn Mutual's relationships with its customers. The
individual and corporate Defendants have filed two separate
motions for judgment on the pleadings, arguing that the
contractual provisions at issue are unenforceable under
Pennsylvania law. For the reasons explained below, these
motions are granted in part and denied in part.
BACKGROUND
Penn
Mutual, a Pennsylvania corporation with its principal place
of business in Pennsylvania, sells life insurance, annuities,
and other investment products. (Second Am. Compl. [56], at
¶¶ 1, 10.) All individual Defendants are citizens
of Illinois and former employees of Penn Mutual.
(Id. at ¶¶ 2-6.) Defendant America United
Life Insurance Company (AUL) is incorporated in Indiana and
has its principal place of business in
Indianapolis.[1]
From
April 2009 until May 2017, Defendants Jonathan Rotter and
Jonathan Corteen were employed by Penn Mutual as Managing
Partners of the company's field offices in Tinley Park,
Illinois, and Detroit, Michigan. (Id. at ¶ 11.)
Penn Mutual's Managing Partners are charged with
recruiting, selecting, and mentoring Sales Managers for their
field offices, among other tasks. (Id. at ¶
12.) Those Sales Managers, in turn, “recruit and
subsequently support” a network of “independent
agents, ” who sell Penn Mutual's products to
customers and “report into” a designated Penn
Mutual field office. (Id. at ¶¶ 10, 16.)
According to Penn Mutual, a “key component” of
its business success “has been its ability to recruit,
develop, and retain agents with large portfolios of
policyholders and clients. These agents serve as the primary
point of contact between Penn Mutual and its policyholders
and clients and develop a substantial amount of goodwill with
the policyholders and clients.” (Id. at ¶
15.)
At the
request of Rotter and Corteen, Penn Mutual hired Defendants
Russell Hartig and Aleksander Dabrowski to work as Sales
Managers at the field offices Rotter and Corteen managed.
(Id. at ¶ 13.) Hartig was hired as a Sales
Manager on or around April 1, 2009. (Id.) Dabrowski
was hired as a Sales Manager on or around August 1, 2014.
(Id.)[2] Together, the four individual Defendants
in this case recruited and supported approximately 100
independent agents. (Id. at ¶ 14.) These 100
agents “manage[d]” approximately 4, 800 policies
and contracts on behalf of Penn Mutual. (Id.)
When
Rotter and Corteen began their employment with Penn Mutual on
April 1, 2009, they entered into “Managing Partner
Contracts” with the company, which became effective on
that date. (Id. at ¶ 18.) Section 16 of these
contracts is titled “Trade Secrets; Agreement Not to
Interfere with Penn Mutual Policies or Policyholders.”
(Rotter Managing Partner Contract (hereafter “Rotter
MPC”) § 16, Ex. A to Second Am. Compl.; Corteen
Managing Partner Contract (hereafter “Corteen
MPC”) § 16, Ex. B to Second Am. Compl.) Among
other things, this section purports to prohibit certain
conduct for a period of one year following the contract's
termination. (Id. at § 16(b)(3).) Specifically,
during that one-year period, Managing Partners agree to
refrain from (a) further solicitation or servicing of
policyholders of Penn Mutual or any other insurance company
in the Penn Mutual holding company system for the purpose of
inducing or attempting to induce such policyholders to
cancel, lapse or fail to renew policyholders' policy
and/or contract with Penn Mutual; (b) enlisting any
representative of Penn Mutual to act in any capacity for
another insurance company, association, or society, and (c)
interfering in any way during such one-year period with
existing policies and policyholders of Penn Mutual or of any
other insurance company in the Penn Mutual holding company
system.
(Id.) These Managing Partner Contracts also include
severability clauses stating that “[i]f . . . any
provision of the contract is held under applicable law to be
invalid, illegal or unenforceable in any respect, such
provision shall be ineffective only to the extent of such
invalidity and the validity, legality and enforceability of
the remaining provisions of this contract shall not be
affected or impaired in any way.” (Id. at
§ 19.) Section 20 states that the contracts “shall
be construed and enforced in accordance with the laws of the
Commonwealth of Pennsylvania without regard to choice of law
principles.” (Id. at § 20.)
Defendants
Dabrowski and Hartig entered into Functional Sales
Manager's Contracts with Penn Mutual on December 29,
2015, and January 8, 2016, respectively. (Second Am. Compl.
¶ 20.) Section 14 of these contracts is largely similar
to Section 16 of the Managing Partner Contracts; it has the
same title (“Trade Secrets; Agreement Not to Interfere
with Penn Mutual Policies or Policyholders”), as well
as the same language that appears in subsections 16(b)(3)(a)
and (c) above. (Hartig Functional Sales Manager's
Contract (hereafter “Hartig FSMC”) §
14(b)(3), Ex. C to Second Am. Compl.; Dabrowski Functional
Sales Manager's Contract (hereafter “Dabrowski
FSMC”) § 14(b)(3), Ex. D to Second Am. Compl.)
Instead of a prohibition on “enlisting”
representatives of Penn Mutual, however, Section 14 purports
to bar the Functional Sales Managers, for a period of 18
months following termination of their employment, from
“solicit[ing] or otherwise induc[ing] any employ or
agent of Penn Mutual, including those who were affiliated
within 12 months prior to termination of [the Functional
Sales Manager's] agreement with the company, to terminate
or otherwise change her/his employment or affiliation with
the Company to join any business that directly or indirectly
competes with Penn Mutual.” (Id. at §
14(b)(4).) These Functional Sales Manager's Contracts
contain severability and choice-of-law provisions that are
identical to those in the Managing Partner Contracts noted
above. (Id. at §§ 16-17.)[3]
On
April 28, 2017, Hartig's wife, Kamala Hartig, then an
Office Manager at Penn Mutual's Chicago office,
“directed” an unidentified Penn Mutual employee
“to send, by overnight delivery, an iPad maintained in
the Chicago field office to Rotter and Corteen.”
(Id. at ¶ 29.)[4]The employee “followed this
directive and sent the iPad to Rotter and Corteen.”
(Id.) According to Penn Mutual, the iPad “was
primarily used”-it is not clear by whom-“in
connection with recruiting agents and included information on
potential agents being recruited, as well as evaluations of
current agents.” (Id.)
At 8:16
a.m. on May 1, 2017, Defendants Rotter and Corteen
simultaneously informed Penn Mutual of their resignations via
e-mail. (Second Am. Compl. ¶ 22.) On May 4, 2017,
Defendants Hartig and Dabrowski “announced their
resignations from Penn Mutual effective immediately.”
(Id. at ¶ 23.) Also on May 4, Kamala Hartig
resigned from her position as Office Manager at Penn
Mutual's Chicago office. (Id.)[5]
Penn
Mutual “subsequently learned”-it is not clear
exactly when or how- that all four individual Defendants
“informed Penn Mutual agents that they were joining
[America United], a direct competitor of Penn Mutual in [the]
field of life insurance, annuities, and investment
products.” (Id. at ¶ 24.) According to
Penn Mutual, an unidentified Penn Mutual employee “has
reported that she spoke with Corteen after his resignation,
and he encouraged her to e-mail the [America United] website
and that he would then tell her about potential new positions
there.” (Id. at ¶ 27.) An unidentified
agent, Plaintiff continues, “has announced his
intention to leave Penn Mutual to join Rotter, Corteen,
Dabrowski, and Hartig at [America United].”
(Id. at ¶ 28.) This same agent “also
reported that he would be taking his business to [America
United] and that Rotter and Corteen were trying to recruit
people from Penn Mutual.” (Id.) According to
Penn Mutual, “at least six of Rotter's former Penn
Mutual accounts have either lapsed or surrendered their life
insurance policies” since Rotter left the company.
(Id. at ¶ 31.) At least eight of Corteen's,
five of Dabrowski's, and six of Hartig's
“former Penn Mutual accounts” have done the
same.[6] (Id. at ¶¶ 32-34.)
On May
5, 2017, Penn Mutual mailed nearly identical letters to all
four individual Defendants, “remind[ing]” them
“of their contractual obligations to Penn Mutual,
including their obligations to not solicit Penn Mutuals'
[sic] agents and employees.” (Id. at ¶
31; Letter of May 5, 2017, Exs. G, H, I, J to Second Am.
Compl.) The letter also expressed concern that the individual
Defendants were “presently using, or planning to use,
[Penn Mutual's] confidential and trade secret information
in a competitive and unlawful fashion.” (Letter of May
5, 2017.) An attorney representing Rotter and Corteen
apparently obtained a copy of this letter on the same day it
was mailed, and e-mailed a response to Penn Mutual later that
afternoon. (E-mail of May 5, 2017, Ex. K to Second Am.
Compl.) This e-mail stated that Rotter and Corteen would
return the only “Penn Mutual files” in their
possession, which were “the files of their family
members that they possessed when they each resigned.”
(Id.)[7] The e-mail also stated that Rotter and
Corteen were “aware of the terms and conditions of the
Managing Partner Contract that they executed.”
(Id.) The attorney's response, however,
“did not confirm that [Rotter and Corteen] would abide
by those terms and conditions.” (Id.)
Penn
Mutual filed this lawsuit on May 11, 2017, asserting claims
of breach of contract and tortious interference with
contractual relations. (Compl. [1].) The company seeks
injunctive relief and compensatory damages from all
Defendants, as well as punitive damages from America
United.[8] The individual Defendants and America
United filed separate answers [17, 23] to Plaintiff's
First Amended Complaint [6], and then filed two separate
motions for judgment on the pleadings [24, 27]. While these
motions were pending before the court, Penn Mutual filed a
Second Amended Complaint [56], which included additional
allegations regarding the cancellation of certain Penn Mutual
accounts following the individual Defendants'
resignations. Defendants have notified the court [54, 55]
that they will not seek leave to amend their motions in light
of the Second Amended Complaint.
DISCUSSION
Motions
for judgment on the pleadings under Rule 12(c) of the Federal
Rules of Civil Procedure are governed by “the same
standard” as motions to dismiss under Rule 12(b)(6).
Buchanan-Moore v. Cty. of Milwaukee, 570 F.3d 824,
827 (7th Cir. 2009). To survive either motion, a
plaintiff's complaint must “state a claim that is
plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007). The court may
consider exhibits attached to the complaint to determine
whether this requirement is satisfied. Segal v. Geisha
NYC LLC, 517 F.3d 501, 504-05 (7th Cir. 2008). Although
the court must construe the complaint “in the light
most favorable to the nonmoving party, accept well-pleaded
facts as true, and draw all inferences in [the nonmoving
party's] favor, ” Berger v. Nat'l Coll.
Athletic Ass'n, 843 F.3d 285, 290 (7th Cir. 2016),
it need not accept “threadbare recitals of a cause of
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