author: MacLAUGHLIN, District Judge.

text:
    Sharon SLAUGHTER, Helen Stewart and Kathryn Jenkins, Plaintiffs, v. Leonard LEVINE, in his capacity as Commissioner of the Minnesota Department of Public Welfare, Defendant and Third Party Plaintiff, v. Margaret HECKLER, in her capacity as Secretary, United States Department of Health and Human Services, Third Party Defendant.
    Civ. No. 4-83-579.
    United States District Court, D. Minnesota, Fourth Division.
    April 2, 1985.

      Mary Grau, Legal Aid Society of Minne-. apolis, Inc., Minneapolis, Minn., for plaintiffs.
    Hubert H. Humphrey, III, Atty. Gen., State of Minn., and Vicki Sleeper, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendant and third party plaintiff.
    James M. Rosenbaum, U.S. Atty., and Mary L. Egan, Asst. U.S. Atty., Minneapolis, Minn., Donna Morros Weinstein, Regional Atty., Dept. of Health and Human Services, Chicago, Ill., and Lewis K. Wise, Wendy Kloner, Civ. Div., Dept. of Justice, Washington, D.C., for third party defendant.
   MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

This matter is before the Court on defendant’s motion pursuant to Federal Rules of Civil Procedure 59(a) and 60(b) to reconsider the Court’s Memorandum and Order of December 10, 1984.

FACTS

Plaintiffs in the instant action are recipients of Aid to Families with Dependent Children (AFDC) benefits who live in Minnesota. Plaintiffs brought this action on behalf of themselves and others similarly situated challenging the defendant Minnesota Department of Public Welfare’s (DPW) policy regarding the receipt of lump sum income by AFDC recipients. Defendant’s policy requires AFDC recipients who receive lump sum income to budget the sum for a predetermined number of months, during which time the recipient is ineligible for benefits. In a Memorandum and Order dated December 10, 1984, the Court certified a class of plaintiffs and ruled on cross motions for summary judgment which had been brought by the parties. The Court rejected plaintiffs’ argument that defendant’s lump sum policy violated the Social Security Act, 42 U.S.C. § 602(a)(7), or the due process or equal protection clauses of the Constitution. The Court did, however, hold that the failure to provide adequate written notice to plaintiffs of the lump sum policy constituted a violation of the federal notice regulation, 45 C.F.R. § 206.10(a)(2)(i). In order to remedy this violation, the Court ordered the defendant to prepare a written notice explaining the lump sum policy, and to send this notice to all current AFDC recipients and all applicants for AFDC benefits. Finally, the Court held that the defendant must give those members of the class whose benefits were terminated in violation of the regulation an opportunity to apply for corrective payments.

Defendant now moves the Court to reconsider its Memorandum and Order of December 10, 1984, pursuant to Fed.R.Civ.P. 59(a) and 60(b). Defendant raises a number of arguments in this motion. First, defendant contends that named plaintiff Kathryn Jenkins does not have standing to raise the notice issue. Second, defendant argues that oral notice of the lump sum rule, supplemented by written notice, would be preferable to the written notice ordered by the Court. In the alternative, defendant requests that the Court approve the proposed written notice which it has submitted to the Court. Third, defendant argues that the “notice relief” ordered by the Court, which would give class members the opportunity to apply to the defendant for corrective payments, violates the eleventh amendment. Finally, the defendant requests that the Court order the third party defendant Margaret Heckler, Secretary of the United States Department of Health and Human Services, to pay federal financial participation for any AFDC benefits paid to class members in accordance with the Court’s December 10, 1984 Order.

DISCUSSION

A. Standing of named pláintiff Kathryn Jenkins

The Court allowed named plaintiff Kathryn Jenkins to intervene in this litigation on September 21, 1984, at the hearing on the parties’ cross motions for summary judgment, pursuant to Fed.R.Civ.P. 24(b). Counsel for plaintiffs conceded at this hearing that the remaining named plaintiff, Helen Stewart, did not have standing to raise the regulatory and constitutional notice claims, and indicated that plaintiff Jenkins’ intervention was designed to preserve those claims. The defendant requested an opportunity to conduct limited discovery regarding plaintiff Jenkins. The Court ordered that defendant could conduct discovery regarding Jenkins until November 15, 1984. Subsequent to the hearing, defendant served interrogatories on both Jenkins and the third party defendant. The defendant also reviewed Jenkins’ welfare files, which were in the custody of Hennepin County. It is on the basis of this discovery that defendant argues that plaintiff Jenkins does not have standing to raise the notice claims on behalf of the class.

Plaintiff Jenkins applied and was found eligible for AFDC benefits in Hennepin County in November of 1982. Plaintiff’s husband, who was disabled as a result of a job-related accident, had workers’ compensation and social security disability claims pending at the time of the AFDC application. Plaintiff has stated in an affidavit that she advised the AFDC caseworker of these pending claims, but that she was not informed of the lump sum formula used by defendant. Plaintiffs husband received a lump sum of $5,752 on October 31, 1983. According to plaintiffs affidavit, she never received notice of the lump sum rule prior to this date. Plaintiff reported the receipt of her lump sum to Hennepin County welfare authorities on November 2, 1983; by that time, plaintiffs family had spent the entire sum on, among other things, overdue mortgage payments and car repair bills. In her affidavit, plaintiff stated that it was during a conversation with her caseworker on November 2, 1983 that she was first advised of her budgeting responsibilities under the lump sum rule.

Defendant claims that evidence obtained during discovery establishes that plaintiff Jenkins did receive notice of the lump sum rule prior to the time she received and spent the lump sum in October and November of 1983. Plaintiff was an AFDC recipient in September of 1981, when the defendant sent a letter dated September 18 to all recipients which included the following information about the lump sum rule:

Lump Sum Money: When a family receives lump sum money such as an inheritance, a Social Security back payment, insurance settlement, gift, etc., the money will be deducted from the AFDC grant, whether or not it has already been spent. If the lump-sum added to other family income totals more than the AFDC maximum for that size family, the family will be ineligible for the month in which the lump sum was received (and possibly for a number of following months), whether or not the money is spent before the period of ineligibility has gone by. If the family already received an AFDC grant that month, the grant would be “recouped” by the welfare agency.

Defendant contends that plaintiff Jenkins lacks standing to raise the notice claims on behalf of the class because she received this letter. Plaintiff has submitted an affidavit in which she states that she does not remember receiving this letter.

The Court finds that plaintiff Jenkins has standing to raise the notice claims on behalf of the class, notwithstanding the fact that she may have received the September 18, 1981 letter. The Court’s decision rests on two grounds. First, the description of the defendant’s lump sum policy which was contained in the September 18 letter was simply inadequate. As the Court noted in its initial Memorandum and Order, “[t]his letter merely told recipients that receipt of a lump sum may ‘possibly’ affect their eligibility, without detailing the lump sum formula or its inflexible application....” Memorandum and Order of December 10, 1984 at 34-35; 598 F.Supp. at 1050. The defendant’s letter contained neither a coherent explanation of the lump sum formula nor examples of its application. The Court finds that the letter’s description of the lump sum policy is both incomplete and confusing. The fact that plaintiff Jenkins received this letter therefore does not mean that she lacks standing to raise the class notice claims.

The second ground for the Court’s determination that plaintiff Jenkins has standing is that Jenkins received a lump sum subsequent to the September 18, 1981 letter which was not treated by defendant in a manner consistent with the explanation in the letter. Defendant stated in the letter that the new lump sum policy, along with a number of other changes in AFDC policy, would take effect on October 1, 1981. As a result of litigation, however, the defendant was enjoined from implementing the new lump sum policy until February of 1982. Minnesota Recipients Alliance v. Noot, 527 F.Supp. 140 (D.Minn.1981). Individuals who received lump sum income during the period between October of 1981 and February of 1982 were evaluated under the old policy, despite what the September, 1981 letter indicated. Therefore, the lump sum was treated as income in the month received and as a resource thereafter. Plaintiff Jenkins’ husband received a partial workers’ compensation settlement in December, 1981 and January, 1982 that was treated in this manner. Defendant did not calculate a period of ineligibility for plaintiff as a result of this lump sum. Rather, when plaintiff reapplied for benefits in November of 1982 after her family had exhausted the lump sum, she was found eligible after providing receipts which demonstrated how the lump sum had been spent.

Plaintiff Jenkins, like other individuals who received lump sum income during the period from October, 1981 to February, 1982, could only assume that the original policy regarding lump sums was still in effect, in light of the fact that her husband’s workers’ compensation settlement was treated in accordance with the original policy. Even if the explanation of the new lump sum rule contained in the September, 1981 letter had been completely adequate, then, the notice would have still been ineffective because the rule was not implemented in accordance with the letter. The Court notes that defendant did not send any follow up notice to AFDC recipients explaining that the effective date of the new lump sum policy had been changed. Moreover, the defendant did not send any notice to recipients subsequent to the September, 1981 letter in an attempt to explain the lump sum rule. Defendant’s claim that plaintiff Jenkins received effective notice of the new policy, and that she therefore lacks standing to raise the notice claims on behalf of the class, accordingly must be rejected.

B. The notice requirement

Defendant moves the Court to reconsider its holding that defendant must provide all AFDC recipients and applicants with a written notice which explains the lump sum rule. Defendant contends that face-to-face communication is the most effective manner in which to inform AFDC recipients of technical program requirements, and that it should therefore only be required to provide advance oral notice of the lump sum rule (supplemented with written notice) to those recipients who either report the likelihood of a lump sum receipt or whose circumstances indicate such a likelihood. The Court will not alter the notice requirements set forth in its original Order.

There are a number of shortcomings with the defendant’s proposed alteration of the Court’s notice requirement. First, the federal notice regulation provides for oral explanations of AFDC policy as a supplement to written material, rather than vice versa, as the defendant proposes. 45 C.F.R. § 206.10(a)(2)(i) (“individuals are given information in written form, and orally as appropriate, about coverage, conditions of eligibility, scope of the program, and related services available....”) The Court notes that oral notice would be very hard to prove or disprove. Second, the notice regulation requires that information about the eligibility conditions for the AFDC program be provided uniformly to all applicants and recipients, rather than to selected individuals whom caseworkers determine are in need of the information. Id. Third, the defendant’s proposal to give notice of the lump sum rule only to those individuals who anticipate the receipt of a lump sum, or whose circumstances indicate that receipt of a lump sum is imminent, rests too heavily on the exercise of discretion of the individual caseworker. Even the most competent caseworker may on occasion forget to provide the required notice, or provide it in an untimely fashion. The defendant’s proposal simply leaves too much room for error to constitute effective notice. Finally, as plaintiffs point out, AFDC recipients cannot always anticipate the receipt of a lump sum. Under the defendant’s proposed notice scheme, a recipient who receives a lump sum with no advance warning would have no notice of the budgeting requirements of the lump sum rule. Such an individual might well not learn of the strict requirements of the lump sum rule until after he or she spends all or a portion of the lump sum. For the above reasons, the Court believes that the advance written notice of the lump sum rule required by its December 10, 1984 Order is the best way to ensure that all AFDC recipients and applicants are aware of their responsibilities under this critically important rule. The defendant should not hesitate, of course, to provide oral notice to those individuals who have received or will receive a lump sum.

Defendant has requested in the alternative that the Court approve the proposed written notice that it has provided to the Court. The first proposal which defendant submitted to the Court was an eight page document containing a wide range of information on a number of AFDC requirements, as well as information on other public assistance programs; the description of the lump sum rule was found on the third page of this document and was not highlighted in any way. Plaintiffs objected to this notice on the ground that the information on the lump sum rule should be contained in a separate notice, and provided the Court with a proposed one page notice that clearly explains the particulars of the lump sum budgeting rule. Defendant has responded to this notice with a second proposal. This proposed notice is a single sheet with printing on both sides, entitled “IMPORTANT NOTICE ABOUT WHAT YOU SHOULD DO WHEN YOU HAVE INCOME, OR THINK YOU MIGHT RECEIVE INCOME IN THE FUTURE.” The front of the sheet contains general information on AFDC recipients’ rights and responsibilities regarding income reporting. The reverse side of the sheet contains a description of the lump sum rule which incorporates the plaintiffs’ proposed language almost verbatim.

With some very minor modifications, the Court will approve the defendant’s proposed notice. A copy of this notice is appended to this Order as Appendix A. The notice contains a clear exposition of the lump sum rule and is not unduly lengthy. Plaintiffs continue to object to the notice on the ground that the information explaining the lump sum rule seems to get “lost” in the text. The Court believes that the defendant’s proposal sufficiently draws the readers’ attention to the lump sum information. Moreover, the defendant is entitled to a fair amount of deference when it comes to the question of notifying AFDC recipients about their rights and responsibilities under the program. While the Court has found that the federal regulations require defendant to provide advance written notice of the lump sum rule, the Court recognizes that the defendant possesses considerable expertise regarding administration of the AFDC program. The Court will therefore decline to dictate the precise parameters of the lump sum notice. The notice provided by the defendants, as modified by the Court, clearly satisfies the requirements of 45 C.F.R. § 206.10(a)(2)(i).

C. Defendant’s eleventh amendment objections to “notice relief’

The Court’s Order of December 10, 1984 did not order the defendant to pay retroactive AFDC benefits to any class members. Under the Supreme Court’s decision in Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed. 662 (1974), such an order is clearly barred by the eleventh amendment. The relief which the Court ordered in its December 10 decision was rather the “notice relief” sanctioned by the Supreme Court in Quern v. Jordan, 440 U.S. 332, 99 S.Ct. 1139, 59 L.Ed.2d 358 (1979); the defendant was simply ordered to notify class members that they may apply to the defendant for corrective payments. Defendant argues that this remedial order violates the eleventh amendment. The Court cannot agree. First, as the Supreme Court recognized in Quern, this type of order does not by itself trigger the state’s administrative machinery; the decision whether to pursue corrective payments rests with each class member. Second, the decision whether to grant corrective payments rests entirely with the State, and not the federal court. It is clear that not all class members would be eligible for corrective payments under the Court’s order. Third, the defendant has made no issue of the administrative expense associated with the preparation and mailing of the notice. The absence of administrative expense was a factor in the Quern decision. 440 U.S. at 335 n. 3, 347 & n. 19, 349, 99 S.Ct. at 1142 n. 3, 1148 & n. 19, 1149. Finally, the retroactive relief contemplated by the Court’s order is incidental to a grant of prospective relief—the requirement that advance written notice be given. For the above reasons, the Court declines to alter the “notice relief” required by its December 10 Order. Accordingly, the defendant should prepare a notice to the members of the class regarding the opportunity to apply for corrective payments. A copy of such notice should be provided to counsel for the plaintiffs, and the notice should then be distributed to the class.

D. Federal financial participation

The AFDC program is designed as a “scheme of cooperative federalism”' that is funded jointly by the federal government and participating states. King v. Smith, 392 U.S. 309, 316, 88 S.Ct. 2128, 2132, 20 L.Ed.2d 1118 (1968). In accordance with this scheme, the AFDC funding statute establishes a cost-sharing formula which allocates AFDC program costs between federal and state governments. 42 U.S.C. § 603. The payments made by the federal government toward legitimate AFDC program expenditures are referred to as “federal financial participation” (FFP). The state defendant in the instant action requests that the Court order the federal third party defendant to pay FFP for any benefits paid to class members in accordance with the Court’s Order. The Court will grant defendant’s request and order the third party defendant to pay FFP.

The Secretary of Health and Human Services’ regulations provide that FFP is available for “[p]ayments of assistance within the scope of Federally aided public assistance programs made in accordance with a court order.” 45 C.F.R. § 205.-10(b)(3). The plain language of this regulation clearly requires the payment of FFP in the instant case. The federal third party defendant has taken the position in this and other litigation that it has the discretion to decide whether it will pay FFP for court-ordered benefits. Chu Drua Cha v. Noot, 696 F.2d 594 (D.Minn.1982). The regulation in question admits of no such discretion, and has been interpreted to require FFP payments for benefits given by the state even when the federal defendant considers the benefits to be improper. State of Georgia v. Heckler, 583 F.Supp. 1377, 1380-81 (N.D.Ga.1984) (state payment of Medicaid benefits pursuant to temporary federal court injunction a legitimate state expenditure requiring FFP). The United States Court of Appeals for the First Circuit has observed that the cooperative federalism structure of the AFDC program is ill-served when “the Secretary of HHS seeks to avoid sharing with the states both the burden of defending beneficiary suits and the financial consequences of an adverse judgment.” Kozera v. Spirito, 723 F.2d 1003, 1011 (1st Cir.1983). In the instant case, the state defendant is entitled to assurance that the federal third party defendant will participate in any corrective payments made pursuant to the Court’s Order. Cf. Brogan v. Miller, 101 F.R.D. 729 (N.D.Ill.1984) (state defendant’s third party complaint against federal agency dismissed where agency declared that court’s orders were consistent with federal reghlations and promised not to terminate FFP).

The defendant has a legitimate basis for feeling insecure about the payment of FFP in this case. The federal third party defendant has given no assurances that it will pay FFP, and it has taken several positions in this and similar litigation which indicate that it may not consider itself bound to pay FFP. Third party defendant has taken the position that prior written notice of the lump sum rule is not required by 45 C.F.R. § 206.10(a)(2)(i), and that its interests are not “implicated” by the adequacy of the notice claims asserted by the plaintiffs. In previous litigation, Chu Drua Cha v. Noot, the third party defendant has claimed that it has the authority to decline to pay FFP if court ordered benefits are attributable to the state’s administration of the AFDC program, a claim which it could conceivably raise in the instant case. This latter argument has been rejected by several courts in analogous situations. See, e.g., Bermudez v. United States Department of Agriculture, 490 F.2d 718 (D.C.Cir.), cert. denied, 414 U.S. 1104, 94 S.Ct. 737, 38 L.Ed.2d 559 (1973) (federal government financially responsible for restored benefits to food stamp recipients injured-by state administrative errors); Carter v. Butz, 479 F.2d 1084, 1087 (3d Cir.), cert. denied, 414 U.S. 1094, 94 S.Ct. 727, 38 L.Ed.2d 552 (1973) (federal agency financially liable for restored benefits to recipients injured by state’s error in delivery of food stamp cards). In short, defendant faces considerable uncertainty on the question of FFP. In view of the fact that defendant is clearly entitled to FFP, the Court will order the third party defendant to contribute its share of any corrective payments made to the class.

The third party defendant argues that the question of FFP is a matter which is not yet ripe for judicial review because the defendant has not exhausted the administrative procedures for the consideration of FFP claims set forth in 42 U.S.C. § 1316(d) and 45 C.F.R. Part 16, Appendix A, § B(a)(1). Defendant’s response to this argument is that exhaustion of administrative remedies is inappropriate in the instant case. Defendant contends that exhaustion would be futile and would protract the litigation. The Court agrees. The requirement that administrative remedies be exhausted can be judicially waived where exhaustion would be futile or where the goals underlying the doctrine would not be furthered by its application. See Weinberger v. Salfi, 422 U.S. 749, 765, 95 S.Ct. 2457, 2466, 45 L.Ed.2d 522 (1975); Kozera v. Spirito, 723 F.2d 1003, 1010 (1st Cir.1983); State of New Jersey v. Department of Health and Human Services, 670 F.2d 1262, 1277-78 (3d Cir.1981); Montgomery v. Rumsfeld, 572 F.2d 250, 253 (9th Cir.1978). The Supreme Court in Weinberger noted that

[e]xhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may function efficiently and so that it may have an opportunity to correct its own errors, to afford the parties and the courts the benefit of its experience and expertise, and to compile a record which is adequate for judicial review.

422 U.S. at 765, 95 S.Ct. at 2466. A decision by the Court at this time that the third party defendant must pay FFP will not interfere with any of the above purposes of the exhaustion doctrine.

The FFP issue in this case is a legal question rather than a factual question. There is therefore no special need for agency expertise or for the development of a factual record sufficient for judicial review. Moreover, the legal question in this case is a straightforward one which is answered by the third party defendant’s own regulations, 45 C.F.R. § 205.10(b)(3), so that judicial resolution of the issue at this time would not undercut any legitimate exercise of agency discretion. An administrative forum is simply not appropriate for a determination of whether the federal government should be required to reimburse the state for AFDC payments not required by a state plan but made in accordance with a court order. See Women’s Health Services, Inc. v. Maher, 514 F.Supp. 265, 276 (D.Conn.1981). The Court can see no reason to defer consideration of the FFP issue, especially given the fact that the state defendant is entitled to a clear picture of what responsibility it will bear for any corrective payments made in the case.

CONCLUSION

Based on the foregoing, IT IS ORDERED that:

1. the third party defendant is directed to pay federal financial participation (FFP) for any corrective payments made to class members in accordance with the Court’s Order of December 10, 1984;

2. defendant’s motion for reconsideration pursuant to Federal Rules of Civil Procedure 59(a) and 60(b) is in all other respects denied;

3. the notice attached to the Court’s Order as Appendix A satisfies the requirements of 45 C.F.R. § 206.10(a)(2)(i), and should be distributed to AFDC recipients and applicants forthwith in the manner set forth in the Court’s Order of December 10, 1984.

APPENDIX A

[information to be contained on front of notice form]

IMPORTANT NOTICE ABOUT WHAT YOU SHOULD DO WHEN YOU HAVE INCOME, OR THINK YOU MIGHT RECEIVE INCOME IN THE FUTURE

This sheet explains what you, as an AFDC recipient, should do when you receive income. This applies to income from earnings and income from other sources or people, including gifts, inheritances, government programs like veteran’s benefits, workers’ compensation, Social Security, and all other ways in which you might receive checks or cash.

It is very important that you read this sheet, both the front and the back. INFORMATION ABOUT LUMP SUM INCOME IS INCLUDED. It will give you some valuable help in knowing what you are supposed to do when you find out that you will be receiving a new kind of income that the welfare office doesn’t know about yet. If you don’t read it and then you find out what the rules are too late, you will risk:

. getting unnecessary reductions in your future AFDC grants because of overpayments that could have been avoided.
. losing a choice that you might have to have the income treated in a way that’s better for you and your family.
. being penalized for not reporting, or for reporting late.
. being charged with fraud and, if convicted, suffering severe penalties.

TYPE OF INCOME

The two types of income are “earned” and “unearned” income.

“Earned” income is what you receive from working. When you have earned income, you are allowed to have some of it not deducted from your AFDC grant to cover work expenses and costs you have for day care, and, for a limited number of months, an extra amount to provide you with a work incentive bonus.
“Unearned” income generally means all other kinds of payments or money you receive that does not come from working. Some kinds of unearned income aren’t counted by AFDC, but most are. Some kinds of unearned income can come regularly (like every month), or occasionally, or just once. Usually, it is hardest to remember to report unearned income, and hardest to know ahead of time how each kind of unearned income will be handled in AFDC.

HOW TO REPORT “EARNED” INCOME

Earned income is the easiest to report. You always list it on your Household Report form that we send to you, usually each month. If you get a new job, lose a job, or have a change in your hours or hourly pay rate, you should let your financial worker know that is happening by calling or visiting the welfare office. If you think it might happen, you can call your worker to find out how that would affect your grant.

HOW TO REPORT “UNEARNED” INCOME

There are some kinds of unearned income that you should tell your worker about before you receive it. For example, if you are getting a loan, your worker can tell you what will be needed by AFDC so that the loan will not get counted against your grant. Another important example is with “lump sum” income—a kind of income that is usually a fairly large amount and that you will not be receiving regularly. In the case of lump sums, you have some very important choices that you can make that will benefit you and your family, but these must be made before you actually receive the payment. READ THE LAST SECTION ON LUMP SUMS CAREFULLY FOR MORE INFORMATION.

[information to be included on back of notice form]

Once you receive any unearned income, you must always report it on your Household Report form. Any time you want to know how a certain kind of unearned income will affect your AFDC grant, call or visit your financial worker.

YOUR RIGHT TO AN EXPLANATION OF THE AFDC PROGRAM’S RULES ABOUT INCOME

You have the right to know and understand the AFDC program’s rules about income, whether you have already received the income or not. Your financial worker is required to tell you about policies in the program that could affect you, and what choices you have under the program that will be of benefit to you and your family or that will result in getting a higher grant. However, there are so many rules in AFDC that cover every possible situation that your financial worker can’t possibly tell you all of them in advance. IT IS YOUR RESPONSIBILITY TO KEEP YOUR FINANCIAL WORKER INFORMED ABOUT YOUR SITUATION—especially any income you might expect to start receiving—SO THAT YOUR FINANCIAL WORKER CAN TELL YOU WHAT YOU CAN DO TO GET THE MOST BENEFIT FROM THE AFDC PROGRAM. The last section on this sheet gives an example of one situation in which it is very important for you to find out the program’s rules before you actually receive your income. This is especially important because the AFDC rules do change a lot, and the old rules that you know about may now be different.

LUMP SUM INCOME

Lump sum income is any cash payment that you do not receive every month, like workers’ compensation settlements, personal injury settlements, back payments of Social Security disability benefits, inheritances, and so forth. If you or anybody in your family gets a lump sum while on AFDC, the county will apply the LUMP SUM RULE to your case.

Under the LUMP SUM RULE, you will be expected to save the money and live on it instead of receiving an AFDC grant for a period of months. This is called a PERIOD OF INELIGIBILITY. AFDC will use a formula to determine how long you will be expected to live on the lump sum money. The length of time you will be ineligible for AFDC will vary depending on the size of the lump sum.

Here is how the lump sum rule works. Assume that you have one child and no other income besides AFDC of $431 per month. If you get an inheritance of $4,310, AFDC will divide the amount of the lump sum—$4,310—by the amount of your monthly grant—$431—to produce a period of 10 months during which you and your entire family will be ineligible for AFDC. Your PERIOD OF INELIGIBILITY begins in the month in which you get the lump sum, and in this example would last for 10 months regardless of what happens to the money in the meantime. You will not be allowed to go back on AFDC until the period of ineligibility is over even if you have used up some of the lump sum money on expenses like back bills.

There are a few exceptions to the lump sum rule. That is why it is very important that you get in touch with your AFDC financial worker as soon as you think you may be receiving a lump sum. Your financial worker will be able to give you a more detailed explanation of how the lump sum rule applies to your individual case. If you don’t know in advance that you will be getting a lump sum, you should contact your financial worker as soon as you receive the money. You should not spend any of the money until you talk to your financial worker.

If you receive lump sum income during a month when you are not on AFDC, then the lump sum rules does not apply. For example, if you stop receiving AFDC as of October 1st, and get a lump sum on October 6th, the lump sum rule isn’t applicable. In that case, you could reapply for AFDC benefits as soon as the money was gone. REMEMBER, if you get a LUMP SUM while you are on AFDC, you’ll be expected to live on the lump sum money until your PERIOD OF INELIGIBILITY has expired.

IF YOU HAVE ANY QUESTIONS, OR ARE NOT SURE ABOUT ANY OF THE RULES, CONTACT YOUR AFDC WORKER AND ASK.

      . A more complete description of defendant’s policy and of the factual background of this case can be found in the Court’s Memorandum and Order of December 10, 1984. 598 F.Supp. 1035 (1984).

      . The class was defined as follows:
      those individuals in the state of Minnesota who are otherwise eligible for AFDC benefits and who have been, or will be, found ineligible for AFDC benefits for a predetermined number of months as a consequence of receipt of lump sum income by one of the members of an AFDC assistance unit of which they have been a member, and whose lump sum has or will become unavailable to them in whole or in part prior to their re-eligibility for benefits.

      . Plaintiff Stewart did not have standing to raise the notice claims on behalf of the class because she did not expend any of her lump sum funds prior to receiving notice of the defendant’s policy.

      . The September 18 letter contained information on a number of other significant changes in AFDC rules resulting from the Omnibus Budget Reconciliation Act of 1981.

      . Defendant does not object to the notice required by the Court on the grounds that it would pose administrative inconvenience or expense.

      . The instant case is therefore distinguishable from Colbeth v. Wilson, 554 F.Supp. 539, 546 (D.Vt.1982), aff’d, 707 F.2d 57 (2d Cir.1983), a case cited by the defendant.

      . The Court stresses that while any corrective payments would be in accordance with the Court's December 10, 1984 Order, and thus within the scope of 45 C.F.R. § 205.10(b)(3), it has not ordered the state to make retroactive benefit payments.


source: Caselaw Access Project

author: NANGLE, Chief Judge.

license: Public Domain

text:
    SIGMA CHEMICAL COMPANY, Plaintiff, v. Foster HARRIS, Defendant.
    No. 84-529C(1).
    United States District Court, E.D. Missouri, E.D.
    April 3, 1985.
    On Motion to Alter or Amend April 30, 1984.

      Alan C. Kohn, St. Louis, Mo., for plaintiff.
    Theodore F. Schwartz, Clayton, Mo., for defendant.
   MEMORANDUM

NANGLE, Chief Judge.

This case was tried to this Court sitting without a jury. This Court having considered the pleadings, the testimony of the witnesses, the documents in evidence, and the stipulations of the parties, and being fully advised in the premises, hereby makes the following findings of fact and conclusions of law, as required by Rule 52 of the Federal Rules of Civil Procedure. Fed.R.Civ.P. 52.

A. FINDINGS OF FACT

1. Sigma Chemical Company (hereinafter “Sigma”), plaintiff herein, is a Missouri corporation having its principal place of business in the City of St. Louis, State of Missouri. Sigma is in the business of selling 16,000 esoteric or fine chemicals used in research, production and analysis in laboratories, universities and hospitals all over the United States and in 140-160 foreign countries. It sells primarily by the use of a catalogue. Of these 16,000 chemicals, 10,000 are purchased from suppliers in the United States and all over the world. The remaining 6,000 are manufactured by Sigma. The items purchased by Sigma for resale are analyzed upon receipt, re-packaged in small units and then sold. Purchases are made from 2,300 suppliers, many of whom are small “mom and pop” operations. The heart of Sigma’s business is matching the right supplier with the product sold by Sigma. Although Sigma’s suppliers send out catalogues and advertisements to many buyers, including Sigma^ competitors, and although the chemicals and their names are in the public domain, Sigma’s knowledge of which supplier sells a particular chemical of a certain quality that satisfies a particular purpose at the right price is not in the public domain. The chemicals sold by Sigma are often used for advanced pharmaceutical research and for the detection and analysis of disease. The exact nature and constituent parts of the chemicals it sells are often unknown. For example, it purchases and then resells a certain constituent part of milk. While two or more suppliers may offer that item for sale, all but one of them have purified the chemical so well that the active ingredient used for research has been purified out. The result is that Sigma uses only the one supplier which has not removed the one impurity that makes the product usable for research.

2. Foster Harris (hereinafter “Harris”), defendant herein, is a former employee of Sigma. Harris, formerly of St. Louis, Missouri, now resides permanently in California. Harris was employed by Sigma as a purchasing agent or chemical buyer.

3. Sigma employs approximately 900 individuals. Approximately 100 of these indivduals are employed in the quality control depiartment. Sigma analyzes or assays every chemical or shipment of chemicals that it purchases. Each chemical is subjected to nine different tests to determine whether it complies with the seller’s specifications, Sigma’s standards and the needs of Sigma’s customers. Sigma even tests new shipments from previously tested lots. On the average, Sigma rejects approximately 15% of the items that it purchases because said items fail to meet the seller’s, Sigma’s, or the customer’s specifications. Sigma frequently does not return rejected products, especially where a rejected product was purchased from a competitor, because they do not wish to advise its suppliers of what is wrong with their products. Jerry Annunciato, Manager of K & K Chemicals, testified that his firm does not do any quality testing of the chemicals that it sells and that he occasionally receives complaints from customers. Thus, although a seller’s catalogue will contain a statement of the chemical’s specifications and a certificate of analysis which may accompany the chemical purchased, the product does not always meet either the seller’s catalogue’s specifications or the certificate of analysis.

4. Sigma deals with approximately 2,300 suppliers. However, there are literally thousands of potential suppliers and there is often more than one supplier for many items. Quality is a major criteria in choosing a particular supplier for a particular product. This is one of the reasons that Sigma employs a significant proportion of its work force in the area of quality control. One of the keys to Sigma’s success has been its ability to sell chemicals which are high in quality and which satisfy its customers’ sometimes specific needs.

5. The President of Sigma, Dr. Thomas Cori, testified that finding the supplier who can supply a particular chemical with particular quality attributes at a particular price is akin to “finding a needle in a haystack”. This Court credits Dr. Cori’s testimony.

6. Sigma maintains a great deal of information about the products that it purchases for resale. This information is kept primarily in product files and vendor files. These files are maintained in the purchasing department at Sigma. These files have been developed by Sigma over a period of 40 years at a significant cost. A typical product file contains the name of the product, information regarding Sigma’s source or sources for that product, quality control testing information, price and purchasing history information, and complaints, if any, from customers. A typical vendor file consists of the supplier’s name, and price and quality information regarding products purchased from that vendor. Some of the individual items in these files are in the public domain. For example, many files contain excerpts from suppliers’ published catalogues and sales materials. The knowledge of which supplier’s catalogue is in a particular product is not in the public domain. The files also contain other information that is not public and is, in fact, kept secret. The types of information that are secret include the following: 1) Sigma’s particular source for a particular product; 2) the negotiated price that Sigma pays for a particular product; 3) the results of Sigma’s quality control tests, i.e., which supplier’s products fail to meet Sigma’s specifications; 4) the quantities in which plaintiff purchases particular products; and 5) sales and purchasing history for a given product.

7. Taken as a whole, the information maintained by Sigma in its product and vendor files constitutes confidential and highly valuable proprietary information. Sigma has approximately 60 to 70 competitors in the fine and esoteric chemical business. Sigma and its competitors are inundated with suppliers’ marketing information on a daily basis. One of defendant’s witnesses, Jerry Annunciato, testified that abstracting such information is a full time job. Mr. Annunciato testified that his firm, K & K Laboratories, a division of ICN, has developed an index consisting of 200,000 3" X 5" cards, which index relates to potential sources of chemicals, and that it has taken 27 years to compile said index. Moreover, the primary basis of competition between Sigma and its competitors is price and quality. Success is based in large part on a competitor’s ability to determine which supplier, among many, provides an item of a particular quality at the right price. The identity of the seller for that price and that quality is valuable to a competitor in Sigma’s business. Two (2) of defendant’s witnesses, Jerry Annunciate and Robert Beatty, an officer with ICN Cleveland, a major competitor of Sigma, testified that they maintain the confidentiality of the price paid by their respective firms to their suppliers and the identity of their firms’ respective suppliers and would not divulge said information to one of their competitors. Thus, Sigma’s competitors treat such information as valuable. This Court also credits Dr. Cori’s testimony that Sigma’s competitors do not keep records as detailed or as complete as Sigma does. This Court also credits Dr. Cori’s testimony that prior price and purchasing information can be useful in price negotiations and that Sigma negotiates nearly all of the prices that it pays for the products that it purchases. The confidential product and vendor files maintained by Sigma would be valuable to a competitor and would be extremely difficult to reproduce, given the number of items that Sigma offers and the large volume of supplier information that exists.

8. Sigma takes several measures to guard and maintain the confidentiality and secrecy of the information contained in its product and vendor files. First, there is only one entrance to the building where the purchasing department is located and that entrance is guarded by an armed guard 24 hours a day, seven days a week. Second, each employee must wear an identification badge with his or her photograph on it. The badges are colorcoded by department so that it is obvious if an employee is in a department where he or she is not authorized to be. Third, said files are not supposed to be removed from the purchasing department. Fourth, visitors may not enter the purchasing department, unless escorted by an authorized employee who has identified said visitor at the front entrance.

Several former and current Sigma employees testified that they seldom wore their identification badges subsequent to entering the building. However, these employees were authorized to have access to the product and vendor files. Moreover, there was no evidence that Sigma’s alleged failure to strictly enforce the identification badge rule ever resulted in unauthorized personnel gaining access to Sigma’s confidential information. In addition, there was testimony that Sigma reveals certain information to shippers, airlines, and customs officials in the course of shipping and receiving the products that Sigma purchases. The information revealed thereby is limited to the name of the product and the name of the vendor. However, this does not warrant a finding that Sigma’s product and vendor information is not kept secret. Much of the information which is not proprietary is never revealed to persons involved with shipping or receiving, such as purchasing history of a given product, testing results, frequency of purchases, and any complaints from customers. Also, shippers and customs officials are exposed to only isolated examples of Sigma’s proprietary information and these individuals probably lack the requisite chemical experience and knowledge to use said information to compete with plaintiff. There was no evidence that any of plaintiff’s competitors have ever received Sigma’s proprietary information from shippers or customs officials. The confidentiality of Sigma’s proprietary information is also not lost by the fact that it purchases some of its products from competitors. When Sigma purchases a product from a competitor, that competitor obviously knows Sigma’s source and price for that product. However, that competitor does not know for sure that the product being offered for resale by Sigma is, in fact, the product that that competitor sold to Sigma. The product sold by that competitor may fail Sigma’s quality criteria and that competitor may never learn this. Also, that competitor’s knowledge is obviously limited to the products that it sells to Sigma. The value of Sigma’s proprietary information lies in having access to the sum total of its product and vendor files and a single competitor’s knowledge of the source and price of a few of Sigma’s 10,000 purchased products does not detract from the confidentiality of the whole.

The procedures and precautions taken by Sigma to safeguard the confidentiality and secrecy of the information contained in its product and vendor files are both adequate and reasonable.

9. The President of Sigma and other critical employees are required to sign non-compete and non-disclosure contracts. In determining which employees will be required to sign such contracts, Sigma officials make a judgment as to the threat that an individual employee might pose to Sigma if he or she were exposed to Sigma’s confidential proprietary information. This Court credits the testimony of Dr. Cori and John Haynes, Purchasing Manager for Sigma, that because of the technical and complex nature of the fine chemical business, only employees with significant experience or educational background in the chemical field pose a serious threat to Sigma through the use of Sigma’s confidential proprietary information. Employees, such as defendant, who had a chemical background and who worked with a large number of files on a daily basis could absorb enough information about Sigma’s sources of supply to harm plaintiff’s competitive position. Sigma did not require certain hourly employees, many of whom had little more than a high school education and who occasionally worked with or had access to Sigma’s product and vendor files, to sign non-compete and non-disclosure contracts. This Court credits Sigma’s judgment that these types of employees could neither absorb nor understand the information contained in plaintiff’s product and vendor files in such a way as to harm plaintiff or destroy the confidential nature of such information. There was no evidence that Sigma’s failure to require such employees to sign non-compete and non-disclosure contracts ever resulted in misappropriation or misuse of Sigma’s confidential proprietary information. Sigma has sought to protect the confidentiality of its proprietary information by enforcing its non-compete and non-disclosure agreements against employees bound thereby after they have left employment with Sigma and where necessary to protect Sigma’s interests.

10. Sigma’s employees who have signed non-compete and non-disclosure contracts and who have left Sigma have not had difficulty obtaining other employment at chemical companies, pharmaceutical companies, laboratories, universities and bio-technology companies. Sigma and its competitors operate and compete on a worldwide basis.

11. The only Sigma employees who had regular and frequent access to its product and vendor files were those in the purchasing department and the competition department. The purchasing department consists of 18 employees. The competition department consists of 10 employees. Ten (10) of the employees in the purchasing department are buyers and all of them have non-compete and non-disclosure contracts. Eight (8) of the employees in the purchasing department do not have non-compete and non-disclosure contracts, but only one of these has any significant buying responsibilities and, due to that employee’s limited education, does not pose a threat to plaintiff.

12. Defendant Foster Harris is 37 years old and was born in Arkansas. He obtained a B.A. in Biology and Chemistry from the University of Missouri in St. Louis in 1969 and an M.A. in Economics in 1978 from Webster University. Prior to working for Sigma, Harris worked for Washington University School of Medicine doing basic biochemical research for three years and did similar work at Jewish Hospital for seven years.

13. On December 3, 1979, Harris went to work for Sigma and signed a non-competition and non-disclosure agreement at that time. He signed another such agreement on September 24, 1982. According to the latter contract, defendant agreed that he would not:

directly or indirectly (whether as owner, partner, consultant, employee or otherwise) ... for a period of two years following termination for any reason of [his] employment with the Company engage in or contribute [his] knowledge to any work or activity that involves a product ... which is then competitive with and the same or similar to a product ... on which [he] worked or with respect to which [he] had access to Confidential Information while with the Company.

By the latter contract, he further agreed that:

Following expiration of said two year period [he would] continue to be obligated under the “confidential information” section of this agreement not to use or to disclose confidential information so long as it shall remain proprietary or protectable as confidential trade secret information.

14. Harris worked for Sigma from 1979 until November 22, 1983, when he resigned. His starting annual salary with Sigma was $15,500.00 and was gradually increased to $23,500.00. He spent the majority of his time buying esoteric and fine chemicals for Sigma. He was given a stock status list of around 700 items to work from. Said list showed the inventory on hand for a particular item and if there were less than 26 weeks of supply on hand he would buy that item. After identifying the chemical for purchase on his stock status list, he would go to the product folder for that item. This folder provided Harris with the entire purchasing history for that product, including the suppliers, the prices, the quantities bought in the past, previous purchase orders, any comments about manufacturing or other problems, and test reports on the purity, appearance and salability of the product from Sigma’s quality control laboratory.

15. If Harris needed the names of more potential suppliers of the product, he had available a vendor index book which he kept current and which listed categories of products and the names of suppliers for those categories. Harris developed this book. He testified that he used this book so frequently that he had its entire contents memorized. Defendant has stated that he was the “best source person” at Sigma and that other buyers consulted him for the names of suppliers of chemicals which were on their own stock purchase lists. Harris testified that when he left Sigma, the vendor index book was fresh in his mind.

16. From the vendor index book, Harris would go to vendor files for each vendor to determine if that vendor sold the product to be purchased. In doing his work, defendant determined whether certain suppliers were manufacturers or brokers, a fact he usually learned by the price being charged.

17. After obtaining vendors for the chemical, Harris called them and obtained price quotes and availability. He determined whether the price quoted was appropriate and, resorting to his cathode ray screen, determined Sigma’s selling price. If the quoted price from the supplier was higher than in the past, he would notify the competition department and recommend that Sigma make a corresponding increase in Sigma’s price.

18. Harris had additional responsibilities with regard to all products imported from foreign suppliers. He gave each such product the proper tariff number and “quite a bit” of the time, he learned the name of the foreign supplier and its price. This, of course, included products not on his stock status list. He also purchased raw materials for Sigma’s plant use and, finally, he did research for new chemicals to add to Sigma’s catalogue. In the latter connection, he added labetatol to Sigma’s catalogue and he “introduced tagamet [also known as cimetidine] to the research world.”

19. After becoming dissatisfied with Sigma, Harris started sending out resumes to pharmaceutical companies, such as Boots, and chemical companies, such as Upjohn. Neither Boots nor Upjohn is in competition with Sigma. Harris also sent a resume to a subsidiary of McDonnell Douglas, named “Vitek”, which is not in competítion with Sigma. Harris also sent a resume to ICN. ICN is one of Sigma’s five (5) major competitors and ICN lists Sigma in ICN’s 1982 annual report as one of its competitors.

20. Harris accepted a job with ICN as a purchasing agent and began employment on November 29, 1983. Prior to leaving Sigma, Harris lied about the identity of his future employer. Harris told his supervisor, John Haynes, that he was going to work for a friend who owned Afram, a company that imports from and exports to third world countries. However, the September 24, 1983, non-compete agreement between Sigma and Harris obligated Harris to “advise the Company of [his] new employer within ten days after accepting new employment.” Harris did not tell ICN about his non-compete and non-disclosure agreement with Sigma when he went to work for ICN.

21. When Harris went to work for ICN, he was required to sign an agreement in which he promised not to disclose “confidential information, trade secrets, technical data or know how which [he] may acquire while in the employment of ICN”.

22. Defendant’s office with ICN was to be at its division in California. However, prior to going there he traveled to ICN in Cleveland for two weeks, and spent two-three days at ICN KOR and ICN Schwartz-man. While in Cleveland, Harris talked to ICN buyers Beatty and Wilcox about sources of supply and strategies regarding employment of dealers. Harris discussed Sigma supplier Pharmachemique with Beatty, who said he had never tried Pharmachemique before because he had not thought of it. While in Cleveland, Harris tried to buy casein for ICN from Pharmachemique and discussed using Pharmachemique as a source of supply with his boss, Fred Andrea. Harris also tried to buy bilirubin for ICN from Lab Plan, a Sigma exclusive supplier he used when he worked for Sigma. At ICN KOR, he talked to buyers Bob Capadeche and Joe Fontana about sources.

23. After visiting the ICN divisions in the east, Harris returned to California. Defendant’s job duties include buying chemicals and radioisotopes for ICN’s division in California and coordinating purchases for ICN Nutritional Biochemicals in Cleveland, Ohio, ICN KOR in Cambridge, Massachusetts, and ICN Schwartzman, also in Cambridge. At ICN, Harris is responsible for purchasing approximately 3,000 chemicals and there is a significant overlap between those products and the 700 products that Harris was responsible for at Sigma. Harris keeps in regular contact with ICN Cleveland, ICN KOR and ICN Schwartzman by telephone and telex. ICN Cleveland sells 2,425 products which are also sold by Sigma and 163 of these were on Harris’ stock status list at Sigma. ICN Schwartzman sells 92 products which are also sold by Sigma and 4 of these were on Harris’ stock status list at Sigma. ICN KOR sells 89 products which are also sold by Sigma but none of these were on Harris’ stock status list at Sigma. ICN California does not currently have a catalogue.

24. Sigma and ICN are keen competitors and Harris is in a position to use Sigma trade secret and confidential information learned at Sigma to aid ICN.

25. On May 15, 1984, this Court ordered Harris not to render services “directly or indirectly to or for ICN Pharmaceuticals, Inc., until November 22, 1985....” See 586 F.Supp. 704. On May 17, 1984, Harris requested a quote by ICN telex from Konig and Company with respect to a particular chemical. Konig and Company is a firm that Harris dealt with during his employment at Sigma.

26. On June 1, 1984, ICN Cleveland published a catalogue containing 230 items. Of these, 151 items had been previously listed by ICN and 31 of these 151 items were on defendant’s stock status list at Sigma. There were 79 items in this catalogue which had not been previously listed by ICN. Of these 79, 39 items were on defendant’s stock status list at Sigma.

27. Defendant’s salary with ICN was $32,500.00 per year.

28. On June 1, 1984, Harris signed a promissory note to ICN in the principal amount of $50,000.00 at 10% interest payable quarterly. ICN, however, did not pay that amount to Harris. Instead, it allowed Harris to draw $1,000.00 every two weeks. At the time of trial, Harris had drawn over $8,000.00 from ICN, but it failed to make the quarterly interest payment when due.

B. CONCLUSIONS OF LAW

This Court has subject matter jurisdiction because the parties are of diverse citizenship and the amount in controversy exceeds $10,000.00, exclusive of costs and interest. See Findings of Fact Nos. 1 and 2; 28 U.S.C. § 1332. This is an action by Sigma, defendant’s former employer, to obtain permanent injunctive relief against defendant’s alleged breach of the restrictive covenant and non-disclosure agreement in his employment contract with Sigma. The primary legal issues in this case are whether the restrictive covenant is valid and enforceable and whether Sigma is entitled to permanent injunctive relief.

1. Validity of Restrictive Covenant

The benchmark in determining the validity of a restrictive covenant is whether it is reasonable. Orchard Containers Corp. v. Orchard, 601 S.W.2d 299, 303 (Mo.Ct.App.1980). “Missouri law recognizes that a temporally and spatially limited restraint on an employee’s ability to compete with his former employer will be enforced in equity if reasonable under all of the attending circumstances and if enforcement serves the employer’s legitimate protectible interest.” Mo-Kan Central Recovery Co. v. Hedenkamp, 671 S.W.2d 396, 399 (Mo.Ct.App.1984). Thus, reasonableness has three (3) components: 1) the covenant must be reasonably necessary to protect the employer’s legitimate interest; 2) the covenant must be reasonable in terms of temporal scope; and 3) the covenant must be reasonable in terms of geographic scope. Orchard, 601 S.W.2d at 303.

The covenant in the case at bar prohibits employment with competitors for two (2) years, but does hot contain an express geographical limitation. See Findings of Fact No. 13. Two (2) years is a reasonable time limitation and defendant does not seriously argue to the contrary. However, defendant argues that the restrictive covenant, which effectively prohibits defendants from working for a competitor for two (2) years anywhere in the world, is invalid because it is not reasonably limited to any territory of competition. See National Motor Club of Missouri v. Noe, 475 S.W.2d 16, 22 (Mo.1972). Defendant’s reliance on Noe is misplaced because Noe is factually distinguishable from the case at bar. Unlike the employer in Noe, Sigma both buys and sells its products on a worldwide basis. See Findings of Fact Nos. 1 and 10. In addition, Sigma’s major competitors compete with it on a worldwide basis. See Findings of Fact No. 10. The test for the reasonableness of the geographic scope of a restrictive covenant is whether it is “no greater than fairly required for protection.” Continental Research Corporation v. Scholz, 595 S.W.2d 396, 400 (Mo.Ct.App.1980). See also Prentice v. Rowe, 324 S.W.2d 457, 461 (Mo.Ct.App.1959). The restrictive covenant in the case at bar is valid, despite the absence of a specific limit on its geographical scope, because Sigma’s need for protection covers the face of the earth. Although it is not on point, the case of Mills v. Murray, 472 S.W.2d 6, 11 (Mo.Ct.App.1971), supports this Court’s conclusion that Sigma’s restrictive covenant is reasonable in terms of its geographic scope. Mills v. Murray, 472 S.W.2d 6, 11 (Mo.Ct.App.1971) (restrictive covenant valid despite absence of a geographical limitation). Accordingly, the temporal and geographical scope of Sigma’s restrictive covenant passes muster under the reasonableness test.

Whether Sigma has a legitimate interest to protect is the third and final prerequisite to enforceability of Sigma’s restrictive covenant and is the primary source of combat in this case. In the area of restrictive covenants, “Missouri courts limit the granting of equitable protection to two narrowly defined classes of employer interest, customer contacts and trade secrets, ....” Hedenkamp, 671 S.W.2d at 399 (citations omitted). Sigma claims that its product and vendor files constitute trade secrets and, therefore, warrant the protection of a restrictive covenant.

Missouri courts have adopted § 575 of the Restatement of Torts to define the term “trade secrets”, as follows:

[A]ny formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business ... in that it is not simply information as to single or ephemeral events in the conduct of the business, as, for example, the amount or other terms of a secret bid....
The subject matter of a trade secret must be secret. Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret.... Some factors to be considered in determining whether given information is one’s trade secret are: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Continental Research Corp. v. Scholz, 595 S.W.2d 396, 400-01 (Mo.Ct.App.1980), quoting National Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 18-19 (Mo. banc 1966) (emphasis added). See also Metal Lubricants Company v. Engineered Lubricants Co., 284 F.Supp. 483 (E.D.Mo.1968); Hedenkamp, 671 S.W.2d at 399-400. An analysis of these factors leads this Court to conclude that Sigma’s product and vendor files are entitled to trade secret protection.

The first factor is the extent to which the information that is alleged to be a trade secret is known outside of the employer’s business. Defendant argues that much of the information contained in Sigma’s product and vendors files is in the public domain, because some of said information consists of excerpts from suppliers’ published catalogues and marketing materials. Defendant’s argument fails to fully understand the nature of the information that Sigma seeks to protect. Sigma’s knowledge of which supplier, of the many potential suppliers for each and every one of the 10,000 chemicals it purchases, is able to supply that chemical at the requisite quality and price is not in the public domain. See Findings of Fact Nos. 1 and 6. No one outside of Sigma knows which supplier is Sigma’s source for a particular product sold by Sigma. Id. The distinction is the difference between knowing that firms, A, B, C, D, and E are suppliers of product X and knowing that reseller S purchases X from C. In addition, the secret information contained in Sigma’s product and vendor files extends beyond the identity of Sigma’s particular souree for a particular product. Other information that is not in the public domain includes the negotiated price that Sigma pays for a particular product, the results of Sigma’s quality control tests, the quantities in which plaintiff purchases particular products, and sales and purchasing history for a given product. See Findings of Fact No. 6. The confidentiality of Sigma’s proprietary information is not lost by the facts that it must reveal certain isolated information to shippers, airlines, and customs officials or that Sigma: purchases some of its products from competitors. See Findings of Fact No. 8. Thus, the information contained in Sigma’s product and vendor files is not known outside of Sigma to any significant extent.

The second factor is the extent to which the trade secret information is known internally. The evidence on this factor is that, of Sigma’s approximately 900 employees, only the 28 employees in the purchasing and competition departments have regular and frequent access to the product and vendor files. See Findings of Fact No. 11. Other employees, such as those involved with shipping and receiving, may occasionally be exposed to isolated examples of information that could be found in Sigma’s product and vendor files, but the extent of said exposure is not great enough to warrant a conclusion that Sigma’s trade secret information is generally known throughout Sigma’s work force. Moreover, the technical and scientific nature of much of Sigma’s trade secret information makes the possibility that said employees could either understand or exploit said information very unlikely.

The third factor is the extent of the measures taken by the employer to guard the secrecy of the information sought to be protected. The measures taken by Sigma consist of armed guards, colorcoded identification badges, and work rules regarding the removal of product and vendor files and the presence of visitors. See Findings of Fact No. 8. Although defendant attempted to attack these measures with evidence that the identification badge rule is not strictly enforced within Sigma’s premises, there was no evidence that this laxity resulted in unauthorized employees having access to the product and vendor files. Id. In addition, Sigma sought to protect the confidentiality of its proprietary information by requiring certain critical employees to sign employment contracts containing restrictive covenants and non-disclosure agreements. See Findings of Fact No. 9. Defendant takes issue with the fact that only half of Sigma’s work force was required to sign such contracts. However, Sigma properly made the judgment that such contracts were not necessary for employees who, because of their lack of significant experience or educational background in the chemical field, did not pose a serious threat to Sigma through the use of Sigma’s confidential proprietary information. Id. In addition, there was no evidence that Sigma’s failure to require such employees to sign non-compete and non-disclosure contracts had ever resulted in misappropriation or misuse of Sigma’s confidential proprietary information. This Court concludes that Sigma has taken adequate and reasonable steps to keep its trade secret information secret.

The fourth factor is the value of the trade secret information to the employer and to its competitors. The information contained in Sigma’s product and vendor files is valuable to Sigma, because it enables Sigma to choose, from among thousands, the supplier that provides the particular product that meets Sigma’s price and quality standards. See Findings of Fact Nos. 1 and 4. Without its vast network of files, Sigma would be unable to locate the “needle in the haystack”. See Findings of Fact No. 5. The results of Sigma’s quality control program are also valuable to avoid customer complaints and to locate and discard suppliers whose products result in unsatisfied customers. See Findings of Fact No. 3. Further, the fact that several of Sigma’s competitors attempt to maintain similar types of compilations of information and treat said information as confidential, is particularly supportive of this Court's conclusion that Sigma’s product and vendor files are valuable to Sigma and would be valuable to its competitors. See Findings of Fact No. 7. A competitor would not expend the effort required to maintain 200,-000 index cards over a period of 27 years, if the information maintained on those cards were not valuable. Id.

The fifth factor is the amount of effort or money expended by the employer in developing the trade secret information. The evidence on this factor is that Sigma has developed its product and vendor files over a period of 40 years at a significant cost. See Findings of Fact No. 6. Moreover, one of defendant’s witnesses, Jerry Annunciate, testified that competitors in Sigma’s business are inundated with suppliers’ marketing information on a daily basis and that abstracting such information is a full time job. See Findings of Fact No. 7. It is obvious that it requires no small amount of effort to sift through the vast amount of information supplied by the vast number of suppliers to choose that supplier which provides a particular item of a particular quality at a profitable price. Id.

The final factor is the ease or difficulty with which the trade secret information could be properly acquired or duplicated by others. The evidence which is relevant to this factor is that there is a vast quantity of supplier marketing material in existence and that it has taken Sigma approximately 40 years to develop its product and vendor files in their current state. See Findings of Fact Nos. 6 and 7. In addition, one of Sigma’s competitors, Jerry Annunciate with K & K, testified to the amount of time and effort required to abstract suppliers’ product offering information. See Findings of Fact No. 7. Under these circumstances, this Court concludes that it would be very difficult for a competitor to duplicate the trade secret information contained in Sigma’s product and vendor files.

Based on the foregoing, it is the opinion of this Court that the compilation of information contained in plaintiff’s product and vendor files constitutes a trade secret. In National Rejectors, Inc. v. Trieman, 409 S.W.2d 1 (Mo. banc 1966), the Missouri Supreme Court noted that a “compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it” may be protected as a trade secret. Id. at 18 (quoting from comment b to § 757, Restatement of Torts). Sigma’s product and vendor files constitute such a compilation. Said compilation is the result of years of researching, testing, negotiating and searching. Sigma has determined for each and every one of the 10,000 chemicals it purchases for resale which one of the many potential suppliers is able to supply a particular chemical at the requisite quality and price to meet Sigma’s rigid standards. This determination is not known outside of Sigma to any significant extent and it is as much a key to Sigma’s business success as a secret formula or manufacturing process is to other firms.

The cases relied on by defendant are factually distinguishable from the case at bar. See, e.g., Pressure Science, Inc. v. Kramer, 413 F.Supp. 618 (D.Conn.), aff’d. without opinion, 551 F.2d 301 (2d Cir.1976) (production technique); Cudahy Company v. American Laboratories, Inc., 313 F.Supp. 1339 (D.Neb.1970) (profit, cost, customer, plant design, and production technique information); Hayden’s Sport Center, Inc. v. Johnson, 109 Ill.App.3d 1140, 65 Ill.Dec. 612, 441 N.E.2d 927 (1982) (pricing information based on cost, suppliers’ catalogue and price, and volume of purchase); McCann v. Bosman, 44 Ill.App.3d 1020, 3 Ill.Dec. 655, 358 N.E.2d 1340 (1977) (customer list); J.T. Healy & Sons, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 260 N.E.2d 723 (1970) (process to make jewelry parts); Dynamics Research Corp. v. Analytic Sciences, Corp., 9 Mass.App. 254, 400 N.E.2d 1274 (1980) (management information system); Josten’s, Inc. v. National Computer Systems, 318 N.W.2d 691 (Minn.1982) (computer system). Defendant relies on most of these cases to support his argument that Sigma’s efforts to maintain the secrecy and security of its product and vendor files were inadequate. In these cases, facts which were considered significant to the finding that no trade secret existed, included the following: 1) the claimed trade secret was easily learned or duplicated; 2) there was a total absence of non-disclosure or non-competition contracts; 3) observation of the claimed trade secret was allowed during public tours of plants; 4) detailed discussions or presentations of the claimed trade secret took place at seminars or in scientific publications; 5) there was an absence of efforts to maintain the secrecy or security of the claimed trade secret; 6) the claimed trade secret was publicly available; or 7) the claimed trade secret was available to all of the employers’ employees and not internally restricted. In the case at bar, the information contained in Sigma’s product and vendor files cannot be easily duplicated, Sigma utilized non-disclosure and non-competition contracts where necessary, the public did not have access to Sigma’s product and vendor files, the contents of the product and vendor files were not otherwise published by Sigma, Sigma took reasonable steps to maintain the security of its product and vendor files, the identity of Sigma’s suppliers is not publicly available, and Sigma’s employees did not have unfettered access to Sigma’s product and vendor files.

Because Sigma’s product and vendor files constitute a trade secret and because the temporal and geographic scope of the restrictive covenant in Harris’ employment contract with Sigma is reasonable, said restrictive covenant is valid and enforceable.

2. Propriety of Permanent Injunctive Relief

The principles which guide this Court in determining whether permanent injunctive relief is appropriate in this case are well known. “[T]he determination whether to issue an injunction involves a balancing of the interests of the parties who might be affected by the Court’s decision—the hardship on plaintiff if relief is denied as opposed to the hardship to defendant if it is granted....” 11 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2942 at 366-67 (1973). Moreover, “the main prerequisite to obtaining injunctive relief is a finding that plaintiff is being threatened by some injury for which he has no adequate legal remedy.” Id. at 368-69. In the opinion of this Court, Sigma is entitled to permanent injunctive relief in this case.

First, it is clear that Harris is violating or would violate the restrictive covenant in his employment contract by working for ICN as a purchasing agent. See Findings of Fact Nos. 13, 22, 23, 24, 25, and 26. Given Harris’ responsibilities and activities at ICN, as well as the overlap both between the products sold by Sigma and the products sold by ICN and between the products on Harris’ stock status list at Sigma and the products for which Harris is responsible at ICN, Harris is contributing his knowledge to a service or product which is competitive with and similar to a service or product on which Harris worked at Sigma. See Findings of Fact Nos. 22, 23, 25 and 26. In addition, Harris is in a position where it is very likely that he will, directly or indirectly, use or disclose trade secret information that Harris learned from Sigma’s product and vendor files. Under these circumstances, there is a strong threat of irreparable injury to Sigma. Plaintiff stands to lose part of a competitive edge that has taken over forty (40) years to develop. The threat that Harris poses to Sigma is particularly great in view of defendant’s own testimony that he had memorized some information through daily use and that he was the “best source person” at Sigma. See Findings of Fact No. 15. Moreover, the facts that defendant attempted to mislead plaintiff about his new employment, see Findings of Fact No. 20, that Harris violated his contract with Sigma by not advising Sigma of his new employer, id., that Harris solicited some of plaintiff’s suppliers in the course of working for ICN, see Findings of Fact No. 22, and that Harris apparently, violated this Court’s preliminary injunction on May 17, 1984, see Findings of Fact No. 25, strongly suggests a threat of harm to plaintiff. See Modern Controls, Inc. v. Andreadakis, 578 F.2d 1264, 1270 (8th Cir.1978); Minnesota Mining and Manufacturing Co. v. Kirkevold, 87 F.R.D. 324, 327 (D.Minn.1980); Mixing Equipment Co. v. Philadelphia Gear, Inc., 312 F.Supp. 1269 (E.D.Pa.1970).

On the other hand, the harm that would occur to Harris if a permanent injunction were granted is not insubstantial. By the terms of the restrictive covenant, Harris will be prevented from working for ICN until November 22, 1985. See Findings of Fact No. 14. In addition, Harris may be barred from utilizing his knowledge of Sigma’s sources in the fine chemical business, so long as Sigma’s trade secret information remains secret. However, the harm to Harris during the duration of the restrictive covenant is tempered by ICN’s extension of credit. See Findings of Fact No. 28. The potential harm to Harris is also diminished by the fact that other Sigma former employees have not had difficulty obtaining other employment at chemical companies, pharmaceutical companies, laboratories, universities and bioteehnical companies, all of which do not compete with Sigma. See Findings of Fact No. 10. Further, the balance of the equities do not favor Harris because he was aware of the restrictions imposed on him by his contract with Sigma and he took a voluntary, knowing and calculated risk by deciding to violate that contract.

On balance, it is the opinion of this Court that the threat of harm to Sigma if an injunction were not granted greatly outweighs the threat of harm to Harris if an injunction were granted. Accordingly, Sigma is entitled to permanent injunctive relief.

ORDER

Pursuant to the Memorandum filed herein this day,

IT IS HÉREBY ORDERED, ADJUDGED and DECREED that defendant be and is hereby restrained and enjoined from: 1) rendering services directly or indirectly to or for ICN Pharmaceuticals, Inc., as a purchasing agent involved in the purchase of, or the selection of sources of supply for, chemicals which are also sold by Sigma, until November 22, 1985, or further Order of this Court, whichever first occurs; and 2) using or disclosing any trade secret or other confidential information that is the property of plaintiff which defendant acquired by reason of his employment with plaintiff.

On Motion to Alter or Amend

IT IS HEREBY ORDERED that plaintiffs motion to alter or amend the judgment be and is denied. In the opinion of this Court, the breadth of the April 3, 1985 injunction is appropriate.


author: DORSEY, District Judge.

text:
    John P. SIVELL v. CONWED CORPORATION.
    No. Civ. H-83-1083 (PCD).
    United States District Court, D. Connecticut.
    April 3, 1985.

      Joel M. Ellis, West Hartford, Conn., for plaintiff.
    Jeffrey J. Mirman, Dennis L. Pieragostini, Tarlow, Levy Mandell & Kostin, West Hartford, Conn., for defendant.
   RULING ON MOTION TO DISMISS AND FOR SUMMARY JUDGMENT

DORSEY, District Judge.

Plaintiff, John P. Sivell (Sivell), contends in this action that his 1980 demotion and 1982 discharge by defendant, Conwed Corporation (Conwed), violated his rights under state and federal law. Conwed has moved dispositively as to all counts. For the following reasons the court, on the present record, denies the motion as to Counts 2-6, but grants the motion as to Count 1.

Facts

The pertinent facts are as follows. Sivell, a Connecticut resident, was employed from June 1972 through August 1980 as Eastern Regional Sales Manager for Conwed, a manufacturer and supplier of acoustical products, incorporated in Delaware with its headquarters in Minnesota. Conwed’s sales force was deployed among four national “regions” and thirty smaller areas or “territories.” During Sivell’s service as Eastern Regional Sales Manager with Conwed, the business of that office was conducted from regional headquarters in West Hartford, Connecticut.

In or shortly after August 1980, Sivell was removed from his position as Eastern Regional Sales Manager and reassigned as sales representative for one or more of the Eastern Region’s sales territories. While this contract may have been memorialized in writing, wholly or in part, (Sivell Affidavit 117), no such documentation is before the court.

Sivell promptly commenced his duties as sales representative, continuing to work in part out of the West Hartford regional office and in part—as he had since joining Conwed in 1952—out of an office in his West Hartford residence. (Sivell Affidavit ¶¶ 12, 13). In or after January 1981, Conwed’s Eastern Regional Headquarters was relocated from West Hartford to Cranston, New Jersey. (Roberson Affidavit 117, Sivell Affidavit 119). Thereafter, Sivell continued to use his West Hartford residence in the discharge of a substantial part of his duties as sales representative, particularly involving correspondence and other paperwork, most of which he accomplished on weekends. (Sivell Affidavit ¶¶ 12-18). In April 1982—then 62 years of age—Sivell was discharged from his employment with Conwed. Thereafter, a salesman 29 years of age was appointed to the position he had occupied.

In this action, Sivell seeks relief for both his 1980 demotion and 1982 discharge. With respect to his discharge, Sivell makes federal claims of age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. §§ 621, et seq. (ADEA) (Count 1), and state law claims based upon alleged violations of an employee manual allegedly incorporated in Sivell’s contract of employment (Count 2); breach of an implied covenant of good faith and fair dealing (Count 3); and fraud, deceit or misrepresentation arising from the allegation in Count 2 (Count 4). With respect to his demotion, Sivell alleges in parallel to Counts 2 and 3, breach of contract (Count 5) and breach of an implied covenant of good faith and fair dealing (Count 6). Diversity of citizenship is the jurisdictional basis for the five state law counts.

Discussion

I. ADEA Claim (Count 1)

Defendant has moved to dismiss plaintiff’s principal and sole federal count asserted under ADEA, on grounds that rather than pleading the factual specifics of any presumed unsuccessful administrative agency challenge to defendant’s practices, the complaint asserts merely that “plaintiff has fully complied with the provisions of 29 U.S.C. § 626(d).” (Complaint, Count 1 ¶ 9). While the statute may not in terms require anything further, clearly once defendant has called into question plaintiff’s satisfaction of the prerequisites to suit, it is incumbent on plaintiff to demonstrate the satisfaction of these prerequisites.

Defendant properly notes (Memorandum in Support at 15) that without sufficient factual specificity in the complaint to establish plaintiff’s compliance with the administrative prerequisites to an ADEA claim, “the Court may well have to wait until discovery is completed to ascertain whether [the ADEA claim] ... is properly before it. Such a delay subverts judicial economy and expeditious decision-making.”

Plaintiff not having seized upon the instant opportunity to rectify this deficiency, the court shall grant the motion to dismiss Count 1 but without prejudice to plaintiff, within fifteen (15) days hereof, to amend his complaint.

II. The State Law Discharge Claims (Counts 2, 3 and k)

Invoking diversity jurisdiction, Counts 2, 3 and 4 assert causes of action sounding respectively in breach of contract, breach of an implied covenant of good faith and fair dealing, and fraud, deceit or misrepresentation, all stemming from the asserted failure of Conwed in its discharge determination to adhere to certain standards, conditions and procedures contained in an employee manual entitled “Personnel Policy and Procedure, Management Guide.” Conwed has moved for summary judgment as to these three counts.

Under the Connecticut choice-of-law rules which this court must apply, Klaxon Co. v. Stentor Elec. Mfg., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), Conwed asserts, first, that causes of action alleged in Counts 2, 3 and 4 must all be deemed to sound in contract; second, that the prevailing Connecticut contract choice-of-law rule requires the application of New Jersey law to these counts; and third, that New Jersey law precludes recovery thereunder.

While the court agrees, as an initial matter, with Conwed’s characterization of Count 4 as sounding in contract, no less than the concededly contractual claims raised in Counts 2 and 3, it is deemed premature to survey New Jersey employment contract and wrongful discharge law, for the present record is insufficient upon which to determine whether Connecticut’s prevailing contract choice-of-law dictates the application of Connecticut law or of New Jersey law.

The parties agree that the Connecticut contract choice-of-law rule provides that the manifested intent of the parties governs the question of controlling law no less than it does other aspects of the contract. Thus:

The general rule is that the validity and the construction of a contract are determined by the law of the place where the contract was made. But if the contract is to have its operative effect or place of performance in a jurisdiction other than the place where it was entered into, our rule is that the law of the place of opera-five effect or performance governs its validity and construction.

Breen v. Aetna Cas. & Sur. Co., 153 Conn. 633, 637, 220 A.2d 254 (1966) (emphasis added), quoted in Whitfield v. Empire Mut. Ins. Co., 167 Conn. 499, 506, 356 A.2d 139 (1975); see also Jenkins v. Indemnity Ins. Co., 152 Conn. 249, 253, 205 A.2d 780 (1964); Graham v. Wilkins, 145 Conn. 34, 40, 138 A.2d 705 (1958); Levy v. Daniels’ U-Drive Auto Renting Co., 108 Conn. 333, 338, 143 A. 163 (1928).

The parties are further in essential agreement that Sivell’s contract as sales representative “was made”—for purposes of the choice-of-law rule—in Connecticut, where he accepted the offer first communicated to him at Conwed’s Minnesota headquarters, where he had been informed of his being relieved of his former duties as Eastern Regional Sales Manager. (See Si-veil Affidavit ¶¶ 7, 8; Memorandum in Opposition at 1-2). At issue, then, is whether the second prong of the choice-of-law rule points toward the law of a jurisdiction other than Connecticut as being controlling, i.e. whether the contract had its “operative effect” or “place of performance” other than in Connecticut.

On the present record, i.e. in the absence of any writings, embodying in whole or part the terms of Sivell’s 1980 contract as a salesman, and given the widely conflicting factual assertions contained in the affidavits on file, particularly with regard to the nature and geographic scope of Sivell's employment obligations thereunder, see n. 2 supra, the court is unable soundly to determine as without contradiction Conwed’s assertion that “it is clear that the parties intended that the contract ... be governed by the laws of New Jersey, inasmuch as the principal place of performance was to be in New Jersey” (Reply Memorandum in Support at 5) or that of Sivell, “our contract was a Connecticut contract for services to be performed in significant part ... in Connecticut [and] ... in at least three other jurisdictions.” (Memorandum in Opposition at 4).

The motion for summary judgment as to Counts 2, 3 and 4, subject to n. 4 supra, is, therefore, denied without prejudice.

III. The State Law Demotion Claims (Counts 5 and 6)

A.

Counts 5 and 6 parallel the claims asserted in Counts 2 and 3. Based on asserted failures to comply with the employee manual, the claims are for breach of contract and for breach of an implied covenant of good faith and fair dealing, respectively. As there is no dispute but that Sivell’s contract as Eastern Regional Sales Manager was made in, and had its principal place of performance or operative effective in, Connecticut, Connecticut law governs these two counts.

While the Connecticut Supreme Court has never held that statements in employee handbooks or manuals create valid contractual rights, protecting an employee in an otherwise terminable-at-will employment contract, it has nonetheless recently embraced one form of wrongful discharge action, see Sheets v. Teddy’s Frosted Foods, 179 Conn. 471, 427 A.2d 385 (1980); Conn.Gen.Stat. § 31-51m (“whistle-blowing” statute), and acknowledged that courts in other jurisdictions:

have occasionally found an implied promise to discharge only for cause ... in the representations contained in an employee relations manual or handbook.

Magnan v. Anaconda Indust., Inc., 193 Conn. 558, 564, 479 A.2d 781 (1984), citing Greene v. Howard Univ., 412 F.2d 1128 (D.C.Cir.1969); Leikvold v. Valley View Hosp., 141 Ariz. 544, 688 P.2d 170 (1984); Toussaint v. Blue Cross, 408 Mich. 579, 292 N.W.2d 880 (1980); Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458, 443 N.E.2d 441, 457 N.Y.S.2d 193 (1982); see also Lopatka, The Emerging Law of Wrongful Discharge—A Quadrennial Assessment of the Labor Law Issue of the 80’s, 40 Bus.Lawyer 1, 17, n. 92 (1984) (“The prevailing law in ... 18 states ... recognizes, to various extents and with different thresholds, a wrongful discharge action for breach of an implied employment contract arising from employee, other personnel policies, and/or oral or written representations regarding job security.”).

Connecticut Superior Courts, see, e.g., Bilbao v. Wyatt, Inc., 9 Conn.L.Trib. No. 45 at 14 (Super.Ct. 6/6/83), and federal district courts sitting in diversity, see, e.g., Beckwith v. Raymark Corp., Civil No. B-82-149 (D.Conn. 2/25/85); Carlson v. Board of Educ., Civil No. B-83-751 (D.Conn. 11/18/84), have not precluded plaintiffs from attempting to prove that representations in employee manuals or handbooks become part of an employment contract. Especially where, as here, all well-pleaded factual allegations are taken as true, and neither the contract nor the representations allegedly made a part of it have fully been put before the court, it would be improper to preclude Sivell from attempting to prove this “implied in fact” claim. The motion to dismiss as directed to Count 5 is accordingly denied.

B.

The complaint’s sixth count involves the covenant of good faith and fair dealing, which the law implies in all contracts, see 2 Restatement (Second) Contracts § 205 (1979); Magnan, 193 Conn. at 568-72, 479 A.2d 781, as “a rule of construction designed to fulfill the reasonable expectations of the contracting parties as they presumably intended.” Id. at 567, 479 A.2d 781.

Here, as in Beckwith, the contours of the actual employment contract, i.e. whether or not the employee manual was in fact incorporated in the contract of employment, are not established. In such circumstances, as in Beckwith, the reasonable expectations of the parties—which is the “essence” of the covenant of good faith and fair dealing, Magnan, 193 Conn. at 572, 479 A.2d 781— with regard to their contract cannot be determined. The motion to dismiss Count 6 is accordingly denied.

For the foregoing reasons, Conwed’s motions to dismiss Counts 5 and 6 and for summary judgment as to Counts 2, 3 and 4 are denied. Subject hereto, the motion to dismiss Count 1 is granted.

SO ORDERED.

      . While Conwed’s motion is styled as a motion to dismiss for failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(6), affidavits have been submitted in support of and in opposition to the motion as directed to the state law claims respecting plaintiffs 1982 discharge. The court having considered such material, the motion as to those counts is properly deemed a motion for summary judgment. Samara v. United States, 129 F.2d 594 (2d Cir.), cert. denied, 317 U.S. 686, 63 S.Ct. 258, 87 L.Ed. 549 (1942).

      . Compare Sivell Affidavit ¶¶5, 11 (describing his sales position as encompassing eighteen counties in Pennsylvania, ten in New Jersey and four in New York and characterizing it as the "Northern New Jersey, Western Pennsylvania and Lower New York State territory”) (emphasis added) with the Affidavit of Swell's National Sales Manager, I.L. Roberson, ¶ 6 (characterizing the sales territory as simply the "northern New Jersey territory”) and Conwed’s apparent lack of certainty as to Swell's actual assignment (Reply Memorandum in Support at 2, n. 2).

      . The parties have not made this manual available for the court's consideration in conjunction with the pending motion. The summary of the pertinent provisions in the complaint, Count 2 ¶¶ 5-8, Count 3 ¶¶ 5-10, Count 4 ¶¶ 5-9, indicates that the manual provides for the exhaustion of a series of discussions, action plans and monitoring dates before Conwed’s Director of Administration may terminate a salaried employee for a serious performance problem. For purposes of this motion, it is assumed that this synopsis accurately characterizes the manual as then in effect and that plaintiff was terminated in violation of these provisions.

      . While Sivell devotes substantial attention, see Memorandum in Opposition at 6-12, to the proposition that the claim in Count 4 that Conwed’s “intentional non-fulfillment [of the above-noted provisions of the employee manual] constituted fraud, deceit or misrepresentation" (Complaint, Count 4 ¶ 8), is one sounding in tort, the court concurs with Conwed that ”[t]he interference with one's own contract is merely a breach of that contract." Cappiello v. Ragen Precision Indust., Inc., 192 N.J.Super. 523, 471 A.2d 432 (1984). To the extent Sivell seeks in. Count 4 to state a claim sounding in tort— and thus allowing, in appropriate circumstances, the award of punitive damages—apparently for the identical contractual breach upon which Counts 2 and 3 are premised, such claim is dismissed.

      . See, e.g., Pierce v. Ortho Pharmaceutical Corp., 84 N.J. 58, 417 A.2d 505 (1980) (recognizing a cause of action for wrongful discharge of an at-will employee where the discharge contravenes a clear mandate of public policy).

      . Conwed’s token resistance to this proposition is noted. See Reply Memorandum in Support at 4-5.

      . The court rejects Conwed’s assertion that any rights secured an employee terminable-at-will by Connecticut law inure to the sole benefit of discharged employees, rather than employees demoted, discriminated against or otherwise penalized short of actual discharge.