author: GENE CARTER, District Judge.

text:
    SACO DEFENSE SYSTEM DIVISION, MAREMONT CORPORATION and Saco Defense, Inc., Plaintiffs, v. Casper WEINBERGER, Secretary, U.S. Department of Defense and John O. Marsh, Jr., Secretary, U.S. Department of the Army, Defendants.
    Civ. No. 85-0082-P.
    United States District Court, D. Maine.
    April 8, 1985.

      Josephine L. Ursini, Leigh S. Ratiner, Dickson Shapiro & Morin, Washington, D.C., Ralph I. Lancaster, Pierce Atwood, et al., Portland, Me., for plaintiffs.
    Kevin A. Gaynor, Asst. U.S. Atty., Portland, Me., Lt. Col. Howard Curtis, Headquarters, Dept, of the Army, Washington, D.C., for defendants.
   MEMORANDUM OF DECISION DENYING PLAINTIFFS’ MOTION FOR A PRELIMINARY INJUNCTION

GENE CARTER, District Judge.

I. Background

Plaintiffs have filed a Complaint for Declaratory and Injunctive Relief alleging that defendants acted in violation of Federal Acquisition Regulations in evaluating their bid for the contract to produce 9mm hand guns for the Army. The Complaint seeks preliminary and permanent injunctive relief. Plaintiffs have also filed with the Complaint a Motion for Expedited Discovery and a Motion for a Temporary Restraining Order. The Court declined to act on the motion for a Temporary Restraining Order ex parte, and notice was given to the defendants and a hearing held on the pending motions on April 4, 1985. The Court will, therefore, treat the motion as one for preliminary injunction pursuant to Fed.R. Civ.P. 65(a). Dilworth v. Riner, 343 F.2d 226, 229 (5th Cir.1965). The defendants had filed, and have now withdrawn, a Motion to Transfer Venue in this case to the District of Massachusetts pursuant to 28 U.S.C. § 1404(a).

The Army has announced that the contract will be awarded to Beretta U.S.A. Corporation. Counsel for the Army indicated at hearing that the Army intended to award the contract on the day following the hearing, April 5, 1985. At the request of the Court, the Army has agreed to withhold the actual award of the contract until 5:00 p.m. on April 9, 1985 in order to give this Court an opportunity to decide the plaintiffs’ request for preliminary injunctive relief. Before filing this action plaintiffs had filed a protest of the bidding process with the General Accounting Office. That protest was dismissed as untimely filed.

The plaintiffs assert that the Army, in violation of Federal Acquisition Regulation 15.610(c)(3) & (4), incorrectly applied cost evaluation factors submitted by Saco, without attempting to resolve uncertainties concerning Saco’s technical proposal or to resolve any suspected mistakes in Saco’s bid by calling them to Saco’s attention. Plaintiffs also allege that the defendants, in violation of Federal Acquisition Regulation 15.606, knew of modifications in their requirements for the handgun but did not issue an amendment to the solicitation and allow all bidders to submit new or amended proposals on the basis of the revised requirements.

II. Preliminary Injunctive Relief A.

In order to prevail on its request for preliminary injunctive relief, the plaintiffs must satisfy four essential requirements. This Court has had occasion in the past to set out succinctly those requirements in UV Industries, Inc. v. Posner, 466 F.Supp. 1251 (D.Me.1979) (per Gignoux, J.):

It is well settled law that, in the ordinary case, a plaintiff must satisfy four criteria in order to be entitled to a preliminary injunction. The court must find: (1) that the plaintiff will suffer irreparable injury if the injunction is not granted; (2) that such injury outweighs any harm which the granting of injunctive relief would inflict on the defendant; (3) that plaintiff has exhibited a likelihood of success on the merits; and (4) that the public interest will not be adversely affected by the granting of the motion.

Id. at 1255; see also Women’s Community Health Center, Inc. v. Cohen, 477 F.Supp. 542, 544 (D.Me.1979) (per Gignoux, J.). This formulation of these criteria has been approved by the United States Court of Appeals for the First Circuit. Planned Parenthood League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981) (quoting Women’s Community Health Center, Inc.)', Keefe v. Geanakos, 418 F.2d 359 (1st Cir.1969); Automatic Radio Manufacturing Co., Inc. v. Ford Motor Co., 390 F.2d 113 (1st Cir.1968), cert. denied, 391 U.S. 914, 88 S.Ct. 1807, 20 L.Ed.2d 653 (1968). This Court has indicated in the recent past the continuing applicability of these requirements to a request for temporary injunctive relief. Stanton v. Brunswick School Department, 577 F.Supp. 1560 (D.Me.1984) (per Carter, J.); Sheck v. Baileyville School Committee, 530 F.Supp. 679 (D.Me.1982) (per Cyr, C.J.).

Further, it is well established general law with respect to equitable injunctive relief that the Court is to bear constantly in mind that an “[injunction is an equitable remedy which should not be lightly indulged in, but used sparingly and only in a clear and plain case.” Plain Dealer Publishing Co. v. Cleveland Type. Union #53, 520 F.2d 1220, 1230 (6th Cir.1975), cert. denied, 428 U.S. 909, 96 S.Ct. 3221, 49 L.Ed.2d 1217 (1977). The Court’s hesitation to utilize so drastic an aspect of its prerogative should be heightened where the relief requested is only temporary in nature. Kass v. Arden-Mayfair, Inc., 431 F.Supp. 1037, 1047 (C.D.Cal.1977).

B.

When injunctive relief is sought in the area of Government procurement contracts, the Court must apply these precepts of judicial restraint more stringently, especially with respect to the factor of the likelihood of plaintiffs’ success on the merits. Princeton Combustion Research Laboratories, Inc. v. McCarthy, 674 F.2d 1016, 1019 (3d Cir.1982). In Princeton Combustion Research Laboratories the Court noted that in spite of the fact that the bidder has a legitimate interest in being treated fairly under the applicable statutes and regulations, “the strong public interest in efficient procurement and cost minimization mandates that the procurement contract not be set aside at the behest of a single ‘disappointed bidder’ unless the awarding agency’s decision was irrational or clearly illegal.” Id. The district court is not to substitute its judgment for that of the contracting authority and “should not overturn any procurement determination unless the aggrieved bidder demonstrates that there was no rational basis for the agency’s decision.” Id. (quoting Sea-Land Service, Inc. v. Brown, 600 F.2d 429, 434 (3d Cir.1979). In the effort to demonstrate a likelihood of success on the merits the plaintiffs must overcome the “presumption of administrative regularity.” See, id., at 1021.

Even when the Court concludes that a showing of irrationality in the decision has been made, “prudent judicial discretion may still refuse declaratory or injunctive relief because of overriding public interest.” Sea-Land, 600 F.2d at 434; Acme of Precision Surgical Co., Inc. v. Weinberger, 580 F.Supp. 490, 503 (E.D.Penn.1984). In the exercise of that discretion the district court is to be guided by the balancing of three factors: (1) the practical considerations of efficient procurement of supplies for continuing government operations; (2) the public interest in avoiding excessive costs; and (3) the bidder’s entitlement to fair treatment through adherence to statutes and regulations. Id. In performing this weighing judgment, the Court must keep the following admonition constantly in mind:

The court is obligated to restrict its inquiry to a determination of whether the procurement agency’s decision had a reasonable basis. This inquiry must fully take into account the discretion that is typically accorded officials in the procurement agencies by statutes and regulations. Such discretion extends not only to the evaluation of bids submitted in response to a solicitation, but also to determination by the agency with respect to the application of technical, and often esoteric, regulations to the complicated circumstances of individual procurements____ If the court finds a reasonable basis for the agency’s action, the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations. Otherwise the courts would become the forum for all manner of objections to procurement decisions — objections that counsel can readily relate to the language of some provision or other in some procurement regulation — and would be propelled without adequate preparation into a tangle of complex statutory and decisional rules.

M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301-02 (D.C.Cir.1971).

The controlling principle is that while contracting officers are not free to act in disregard of the provisions of pertinent statutes, rules and regulations, they are entitled to exercise discretion upon a broad range of issues which confront them, including “considerations of price, judgment, skill, ability, capacity and integrity” in the solicitation and evaluation of business proposals from those persons and firms with whom the Government chooses to enter into contracts. Kinnett Dairies, Inc. v. Farrow, 580 F.2d 1260, 1277 (5th Cir.1978) (quoting Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859, 869 n. 10 (D.C.Cir.1970)).

To put it succinctly, the question before the Court is not whether the contracting authority’s decision to award the contract was the right policy decision in the view of this Court. Rather, the Court must determine “whether or not the contracting officer’s decision was ‘the result of a considered process, rather than an arbitrary and capricious choice based on factors lacking any intrinsic rational basis or relationship to the questions at issue.’ ” Keene Corp. v. United States, 584 F.Supp. 1394, 1401 (D.Del.1984) (emphasis in original) (iquoting Kinnett Dairies, 580 F.2d at 1277).

III. The Plaintiffs’ Likelihood of Success On the Merits

Plaintiffs level their challenge at three aspects of the defendants’ procurement procedure: (1) the requirement of a 10% quantity factor for spare parts; (2) the possible double-counting by the Army of spare parts causing a misevaluation of the costs of each bidder’s weapon; and (3) the Army’s failure to seek new bids when they knew that the requirements for the gun to be produced would be different from those on which best and final offers were made. The Court finds that plaintiffs have not made an adequate showing that any of the three alleged errors in the procurement process rendered the award of the contract irrational or clearly illegal.

A.

Plaintiffs argue that a 10% quantity factor for spare parts bears no relationship to the actual frequency with which individual parts break and need replacement and is, therefore, an irrational basis for the pricing of spare parts. The Court notes that plaintiffs have submitted no evidence that a 10%, across-the-board quantity figure for spare parts is out of line with average frequencies of repair. The complaint alleges that choice of the 10% figure was particularly erroneous with respect to the frame subassembly, for which a spare part price was requested. According to the affidavit of Michael Derr, however, the frame assembly was not one of the spare parts included in the spare parts cost adjustment.

Counsel for the Army explained that a 10% factor was selected because it was impossible to tell in advance specifically what the spare parts needs would be since they differ from weapon to weapon. The decision of how best to assess spare parts requirements and costs, given the difference in weapons, is clearly a matter particularly within the expertise of the contracting officer, see, M. Steinthal & Co., 455 F.2d at 1301, and the reviewing court should not succumb to any temptation to substitute its own judgment for that of the contracting officer. Sea-Land Service, Inc. v. Brown, 600 F.2d at 435 (3d Cir.1979). There has been no showing that the Army’s use of the 10% factor lacked a rational basis. Also, since, on the record here made, the 10% factor was applied to both bidders and was known to all in advance, its application is not unfair.

B.

Next plaintiffs assert that the Army double-counted some spare parts in arriving at its adjusted cost for the weapon because certain individual parts were also included in subassemblies. Specifically, plaintiffs allege that the Army erroneously “double count[ed] the frames and slides assemblies, so the inevitable result would be an award to Beretta.” Complaint, 1f 32. Plaintiffs contend that such double-counting results in cost distortion because if the parts were used in the form of assemblies, they would not be used individually. Plaintiffs point out that in its Instructions, Conditions and Notices to Offerors, the Army stated that it “reserves the right to use either the subassembly prices or the piece part prices.” Complaint, Ex. K, § (C)(3). (Emphasis added.)

The affidavit of Michael Derr makes it clear that neither the frame nor slide assemblies specifically complained of by plaintiffs were included in the list of spare parts on which cost was evaluated. Derr Affidavit, ¶ 4 and attachments. It is also clear from that affidavit that certain other assemblies and their component parts both were included, as plaintiffs contend, on the list of spare parts from which the adjusted price of the weapon was determined, e.g., the hammer, hammer strut assembly and hammer assembly are all included, as are the slide with sights and individual front and rear sights. Mr. Derr, the chairman of the cost subteam, explained that the assemblies and their components were, in some limited respect, both included because the Army in fact planned on purchasing both the assemblies and their components as spare parts to be used in different repair situations:

The Hammer Assembly, the Hammer Strut Assembly, and the Slide with Sights were included in the spare parts adjustment because it was not economical or practical to buy the parts that comprise these items and assemble them in the field when they were readily available as assemblies. The same consideration would apply to the inclusion of a complete magazine as opposed to the component parts thereof. Additional Front and Rear Sights, which are also a part of the Slide with Sights, were included in Exhibit A because it is not economical to replace a complete Slide because of a broken Front or Rear Sight.

Derr Affidavit, ¶ 4.

Since the Army wants to buy both assemblies and components as spare parts, no improper double-counting as alleged by plaintiffs occurred. Neither does it appear that there were any uncertainties or suspected mistakes in plaintiffs’ bid which defendants should have resolved under Federal Acquisition Regulations 15.-610(c)(3) & (4) before evaluating the cost of each bidder’s weapon.

The Instructions to Bidders did reserve to defendants the right to use either the subassembly prices or the piece part prices, and instead they used both with respect to a very restricted number of parts. The Court fails to see, however, how any harm resulted from the use of both prices in the circumstances of this case where both pieces of equipment were desired, rather than just one or the other. The Government determined which spare parts it would stock and issue, and the same cost evaluation procedures were applied, so far as the record shows, to each bidder’s proposal. The restrictive discretion of the Court extends “to determination by the [contracting] agency with respect to the application of technical, and often esoteric, regulations to the complicated circumstances of individual procurements.” M. Steinthal & Co., 455 F.2d at 1301. This minor deviation from the language of the Instructions to Bidders, if it be that, cannot be found to be a “clear illegality,” especially when viewed in the context of the defendants’ policy decision that in some limited respects it would be necessary to purchase individual parts, as well as subassemblies, as spares. Further, even if clear illegality were shown, the bidder’s interest in enforcing a precise reading in all respects of the language of the Invitation, where no significant harm is demonstrated, cannot be said to outweigh the public interest in having the Government’s procurement decision expeditiously finalized. Sea-Land Service, 600 F.2d at 434. Such a requirement would do little good to the “disappointed bidder” and would be of no “measurable benefit to the public.” Id.

C.

Finally, the plaintiffs argue that the Army violated their Acquisition Regulation 15.606 by informing plaintiffs by letter, after submission of their best and final offer, that there were “hardware changes and weak points [which] would have to be corrected or implemented after award” if plaintiffs won the bid. The letter went on to state specifically that “these hardware changes and weak points are to have no bearing or impact on solicitation DAAA0984-R-8506 or the pending best and final offer.” Beretta received a similar post-bid letter.

Federal Acquisition Regulation 15.606 provides:

(a) When, either before or after receipt of proposals, the Government changes, relaxes, increases, or otherwise modifies its requirements, the contracting officer shall issue a written amendment to the solicitation____
(c) If the proposal considered to be most advantageous to the Government (as determined according to the established evaluation criteria) involves a departure from the stated requirements, the contracting officer shall provide all offerors an opportunity to submit new or amended proposals on the basis of the revised requirements____

48 C.F.R. § 15.610(c)(3) & (4).

Three affidavits submitted by defendants address the allegation that the Army changed the requirements for the contract weapon without allowing plaintiffs to amend their bid accordingly. The affidavit of Brian Schmidt, the Army’s Contract Specialist responsible for the request for proposals in this case, states that “[t]his letter did not purport to change any performance characteristics but merely cited small factors noted by the Human Engineering Laboratory during the performance testing.” Schmidt Affidavit, If 3 (emphasis added). The anonymous affidavit of the Chairman of the Source Selection Advisory Council states that the letter “delineat[ed] minor changes to be made in the event of possible award.” Anonymous Affidavit, If 4. The affidavit of Lt. Col. Michael Roddy, III states that both candidate weapons fully met the requirements and could be purchased as tested. “At no time were the requirements changed.” Roddy Affidavit, ¶ 4. All three affidavits emphatically state that the evaluation was made on the basis of the originally stated requirements, and that the changes mentioned in the post-bid, letter had no bearing on the selection of the winning proposal.

In the face of three sworn affidavits stating that the proposed changes were not a factor in the evaluation process, the Court cannot credit plaintiffs’ bald assertion that the changes must have been a factor because press releases have indicated that durability of the Beretta weapon had been one of its important features. At this stage of the proceedings, the affidavits establish to the Court’s satisfaction that the proposal considered most advantageous to the Government did not involve a departure from the stated requirements, necessitating an opportunity for resubmission of bids by all offerors under 48 C.F.R. § 15.-606. The Army’s reading of the regulation is to have the benefit of judicial deference. M. Steinthal & Co., 455 F.2d at 1301.

Plaintiffs also argue that new bids were in order because the changes would have affected the price of the weapon, and cost had been the major factor in the choice of the Beretta weapon. Plaintiffs assert that the changes requested by the post-bid letter were more significant than those set forth in amendment three to the request for proposals, upon which the best and final offers were based. The regulation says that an amendment to the solicitation shall be issued when the Government changes its requirements. Again, although plaintiffs assert that the referenced hardware changes and weak points are significant and should be considered “requirements,” plaintiffs have submitted no evidence of how the changes are significant. They could, for example, have shown specifically the changes in cost expected to be caused by such changes. Defendants have unequivocally stated that the requested changes are considered by them to be “minor.” They are “small factors” which do not rise to the level of requirements which would, under the regulations, require submission of new bids. As the Court has previously stated, its review in this area is limited. It is not within the Court’s purview to tell the Army what the requirements should be on which it should base its evaluation. Prudential Maryland Joint Venture Co. v. Lehman, 590 F.Supp. 1390, 1404 (D.D.C.1984). Plaintiffs have made no showing that defendants in fact adopted other requirements. Since it appears on the record that both competitors were judged on the same requirements and by the same procedure, the Court does not find legally inappropriate the Army’s suggestion that other minor changes might have to be made after award. On the basis of the record before it, the Court finds it unlikely, for any of the reasons alleged, that plaintiffs will succeed in proving that the award of the handgun contract to Beretta rather than to plaintiffs was not rationally based.

D.

Plaintiffs also vigorously suggest that “political intrigue” was a motivating cause of the award of the handgun contract to Beretta U.S.A. This suggestion is premised upon the temporal confluence of the Army’s decision favoring Beretta and (1) a meeting of the Chairman of the National Security Council with Italian Defense Minister Spadolini, closely followed by the announcement of the award to Beretta U.S.A.; (2) a succeeding visit in Washington between Minister Spadolini and President Reagan; (3) a personal telephone call by Defense Secretary Weinberger to Minister Spadolini “to congratulate the latter on the award of the contract to Beretta,” Complaint 1Í 26; and (4) Minister Spadolini’s ongoing “vocal concern about the trade imbalance,” Complaint ¶ 25, between the United States and Italy. In an effort to give heightened circumstantial probative force to these events, plaintiffs point to a September 1981 Memorandum setting forth the recommendation of the Joint Service Small Arms Program Management Committee that the Beretta weapon be acquired “by sole source acquisition.” Complaint, ¶ 24 (emphasis in original).

Although intriguing, this artfully constructed predicate for the suggestion that political or diplomatic goals and motives entered into the evaluative process is wholly circumstantial in its basis and, in the view of this Court, of no demonstrative probative force. The Court has concluded that plaintiffs have shown no legal impropriety or irrationality in the Army selection of Beretta to receive the award. This finding is a sufficient answer to the airy circumstantiality of a series of events, which are easily justified as serving other legitimate purposes, and whose allegedly causative connection to the awarding of the contract is not supported by any convincing evidence. The plaintiffs claim that, if offered the opportunity, they might “turn up” some evidence in discovery supportive of a causative relation. On such a bare and speculative showing, allowance of that opportunity is not consistent with the public interest in having a governmental decision derived by a legally sufficient process executed, undelayed by unfounded suspicion. So long as the activities of high officials of the two governments are not shown to touch upon the legal propriety of the award, they are beyond the pale of this Court’s review.

E.

Finally, the plaintiffs argue that there is shown legitimate question as to the propriety of the award because plaintiffs know that the unit costs of their proposed weapon is lower than that affixed by the Army to the Beretta handgun. They assert that this must be so because the element of cost is weighted to make up at least 50% of the basis of the award.

If it be assumed that both of these propositions are correct, they do not compel the conclusion that the Army’s decision issued in any improper way. First, it is beyond any doubt that the cost determination in respect to each competing weapon is not a matter of simple arithmetic. It involves complex questions of evaluation of a myriad of technical questions, compounded in their intricacy by policy considerations concerning the contemplated life, utilization and efficacy of the selected weapon. All of these issues are properly committed to the exclusive authority and expertise of the contracting agency. See M. Steinthal & Co., 455 F.2d at 1301. In policy matters of such complexity and of generically great moment, the Court may not intrude, for to do so will create by judicial fiat a condition in which the most important and urgent of governmental affairs may be conducted only by lawsuit. Whatever may be the majesty and utility of the legal process, its abilities are insufficient to effectively undertake activities that smack of the general governance of the nation.

Second, however much weight is ascribed to cost, other factors too have weight in the determination of the award. The determination of the appropriate weight to be given all of the factors in the final equation is again a matter of varied expertise and policy considerations committed to the judgment of the contracting agency. How those factors are to be set off against each other and ultimately against unit or total contract cost is for the agency to determine. The record here is devoid of any evidence from which those judgments, as made in this case, can even be known, much less critically evaluated for their reasonableness. Here the Court does not even know the extent of any per item cost margin that may exist between the two weapons in question. Absent that data, it would be impossible for the Court to be critical of the agency’s rational process in melding the various procurement considerations into a final evaluation.

Thus, the Court is without either the legal authority or the evidentiary resources to second-guess the agency in respect to this critical aspect of its procurement decision.

IV. Conclusion

The Court being fully satisfied that the plaintiffs have failed to show a likelihood of prevailing on the merits of their case, there is no need for extended discussion of the remaining three criteria for preliminary injunctive relief. As the Court stated in Princeton Combustion Research Laboratories:

[0]nce the district court, having considered allegations that the agency’s decision lacked sufficient factual basis, was tainted by procedural irregularities, and so on, nevertheless determines that an agency’s procurement decision is rational, its inquiry is at an end. The district court must deny the motion for a preliminary injunction, and may not go on to engage in a balancing of the three factors specified in Sea-Land.

Princeton Combustion Research Laboratories, 674 F.2d at 1022.

Accordingly, the entry will be:

(1) Plaintiffs’ Motion for a Preliminary Injunction is hereby DENIED; and

(2) Plaintiffs’ Motion for Leave to Request Discovery and for Expedited Discovery is hereby GRANTED.

SO ORDERED.

      . Regulation 15.610(c)(3) & (4) provides in pertinent part:
      (c) The contracting officer shall—
      (3) Attempt to resolve any uncertainties concerning the technical proposal and other terms and conditions of the proposal;
      (4) Resolve any suspected mistakes by calling them to the offeror's attention as specifically as possible without disclosing information concerning other offeror’s proposals or the evaluation process.


source: Caselaw Access Project

author: SPRIZZO, District Judge.

license: Public Domain

text:
    COMPUSORT, INC., Plaintiff, v. Stuart C. GOLDBERG and Edward A. Kenwood, Defendants.
    No. 82 Civ. 4687 (JES).
    United States District Court, S.D. New York.
    April 9, 1985.
    Saul D. Kassow & Associates, Fishkill, N.Y., for plaintiff; Saul D. Kassow, Fish-kill, N.Y., of counsel.
    Wilson, Elser, Edelman & Dicker, New York City, for defendant Goldberg.
   OPINION AND ORDER

SPRIZZO, District Judge.

Plaintiff moves pursuant to Fed.R.Civ.P. 59 and 60, for reconsideration of those parts of Judge Werker’s May 25, 1983 Memorandum Decision and March 23, 1984 Judgment which dismissed the third count of plaintiff’s amended complaint. The third count claimed negligence by attorney Stuart C. Goldberg in his “alleged representation” of plaintiff Compusort, Inc. See Amended Complaint 111160-61. Judge Werker dismissed the negligence claim as barred by res judicata, holding that plaintiff could have raised it in a previous action commenced by Goldberg against Compusort for legal fees, which Goldberg brought in the Civil Court of the City of New York. See Memorandum Decision, 82 Civ. 4687 (HFW), slip op. at 7 (S.D.N.Y. May 25, 1983).

At the time of Judge Werker’s decision, the dispute over attorneys fees had been resolved by arbitration in favor of Goldberg. See id. The issue was subsequently tried de novo before the Civil Court. By Order dated November 28, 1983, Judge Shirley Fingerhood held that Goldberg and his firm could not recover legal fees from Compusort because they had failed to meet the burden of proving that they had been properly retained to represent Compusort. See No. 82289/80, slip op. at 3 (N.Y.Civ.Ct. Nov. 28, 1983) (annexed to Plaintiff’s Notice of Motion).

Plaintiff moves for reconsideration on the ground that the Civil Court judgment rendered the res judicata ruling “totally without any substance.” Plaintiff fails to state, however, why the Civil Court judgment that Goldberg was not entitled to attorneys’ fees requires reconsideration of Judge Werker’s ruling of res judicata. Indeed, if anything that holding confirms that the issue of whether there was an attorney-client relationship was specifically determined by the state court. The fact that the Civil Court found differently than the arbitrator in no way impacts upon the question of whether or not the issue was resolved in the state court. The applicability of res judicata or collateral estoppel does not depend upon who ultimately prevails upon an issue. Rather it turns upon the circumstance that the issue has or could have been litigated and therefore as a matter of policy should not be litigated again.

Furthermore, this would be a particularly inappropriate case in which to grant the motion for reconsideration because it is clear that plaintiff’s negligence claim cannot be sustained under New York state law. In the absence of an attorney-client relationship, there can be no action for negligence under New York law, and no such relationship exists in this case. See, e.g., Harder v. McGinn, 89 A.D.2d 732, 733, 454 N.Y.S.2d 42, 43 (3d Dept.), aff'd, 58 N.Y.2d 663, 444 N.E.2d 1006, 458 N.Y.S.2d 542 (1982); Gifford v. Harley, 62 A.D.2d 5, 7, 404 N.Y.S.2d 405, 406 (3d Dept.1978); Drago v. Buonagurio, 61 A.D.2d 282, 285, 402 N.Y.S.2d 250, 252 (3d Dept.), rev’d on other grounds, 46 N.Y.2d 778, 386 N.E.2d 821, 413 N.Y.S.2d 910 (1978); Victor v. Goldman, 74 Misc.2d 685, 685, 344 N.Y.S.2d 672, 673 (N.Y.Sup.Ct. 1973), aff'd, 43 A.D.2d 1021, 351 N.Y.S.2d 956 (2d Dept.1974).

Plaintiff also argues that Goldberg is liable to plaintiff, despite the lack of an attorney-client relationship, for fraud, collusion, or malicious or tortious acts, citing Newburger, Loeb & Co. v. Gross, 563 F.2d 1057 (2d Cir.1977), cert. denied, 434 U.S. 1035, 98 S.Ct. 769, 54 L.Ed.2d 782 (1978); Gifford, supra; Drago, supra. This argument goes beyond the scope of the motion for reconsideration, which was addressed solely to that aspect of Judge Werker’s ruling which held that the negligence claim was barred by res judicata.

In any event, plaintiff has set forth no basis, either legal or factual, upon which to conclude that Judge Werker’s dismissal of the fraud claims was incorrect. Moreover, since no new facts are alleged, the Court would not be justified in granting plaintiff leave to amend the fraud claim pursuant to Fed.R.Civ.P. 15.

It follows that plaintiff’s motion is denied in all respects.

It is SO ORDERED.

      . The facts of the case are discussed in Judge Werker’s Memorandum Decision, 82 Civ. 4687 (HFW) (S.D.N.Y. May 25, 1983).
      Plaintiff also sued Goldberg for violations of sections 12(2) and 17(a) of the Securities Act of 1933, 15 U.S.C. §§ 77/(2) & 77q(a), sections 10(b), 14 and 20(a) of the Securities Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78n & 78t(a), Rule 1 Ob-5, 17 C.F.R. § 240.10b-5, and Delaware and New York law.
      Judge'Werker dismissed all these allegations for failure to state a claim upon which relief can be granted, pursuant to Fed.R.Civ.P. 12(b)(6). See Memorandum Decision, supra. Plaintiff has not moved for reconsideration of any of these rulings.

      . Plaintiff cites the case of Schwartz v. Greenfield, Stein and Weisinger, 90 Misc.2d 882, 396 N.Y.S.2d 582 (N.Y.Sup.Ct.1977), for the proposition that under New York law, since Goldberg "volunteered” to act on behalf of Compusort, he is liable to Compusort for his negligent performance.
      The Schwartz case is factually distinguishable from the case before this Court. In Schwartz, plaintiff loaned money to the client of defendant attorney. In connection with the loan, plaintiff and defendant’s client entered into a security agreement in plaintiffs favor. Defendant attorney agreed with plaintiff that he would file and perfect the security agreement for plaintiff. The attorney failed to properly perfect the security interest, and plaintiff sued for negligence.
      The court found that the case was different from a situation where a non-client sues an attorney for damages caused by that attorney’s negligence in performing his duty to his client — a suit which would be barred by New York’s privity requirement. See 90 Misc.2d at 885-86, 396 N.Y.S.2d at 584. Rather, according to the court, plaintiff could sue the attorney for negligence, because they had dealt “face to face,” and the attorney, "though in fact engaged by the [other party to the security agreement], undertook a duty to the plaintiff personally.” 90 Mise, at 886; 396 N.Y.S.2d at 584 (emphasis added). Therefore, according to the court, there was no problem of privity of contract, or of plaintiff suing on a third-party beneficiary theory; "defendant voluntarily assumed the duty to file these papers, [and] he had a positive duty to do so.” Id.

      In the instant action, there were no "face to face" dealings between Compusort and Goldberg. Goldberg did not volunteer to or agree with Compusort to do anything on Compusort’s behalf, and no duty was created in favor of Compusort upon which Goldberg can properly be sued. See also, Harder, supra, 89 A.D.2d at 733, 454 N.Y.S.2d at 43.


author: RICHARD L. WILLIAMS, District Judge.

text:
    Donald C. TOBIAS, Plaintiff, v. SHELL OIL COMPANY, Defendant.
    Civ. A. No. 84-1231-A.
    United States District Court, E.D. Virginia, Alexandria Division.
    April 9, 1985.
    Robert L. Fredericks, Jr., Fairfax, Va., for plaintiff.
    Maureen E. Mahoney, Alexandria, Va., for defendant.
   MEMORANDUM OPINION

RICHARD L. WILLIAMS, District Judge.

This case comes before the Court on plaintiff’s and defendant’s cross motions for summary judgment. The case involves a discrete issue of law raised under the Petroleum Marketing Practices Act, 15 U.S.C. §§ 2801 et seq. [“PMPA”]. Specifically, the Court must determine whether the facts of this case include a bona fide offer to sell, transfer or assign a franchise interest under PMPA § 2802(b). For the reasons stated below, the Court finds that the defendant made a bona fide offer of sale and, therefore, grants summary judgment in favor of the defendant.

FACTS

The case involves a petroleum franchise relationship between plaintiff Donald C. To-bias and defendant Shell Oil Company. Plaintiff leased from defendant an automobile service station located in Fairfax County, Virginia. Plaintiff also retailed Shell Petroleum Products and other Shell products under the terms of a dealer agreement between the parties. The lease and the dealer agreement ran from July 1, 1981 to June 30, 1984.

By letter dated November 8, 1983, defendant notified plaintiff that it did not intend to renew the lease and dealer agreement when they expired in June. Defendant stated in the letter that its decision was made in good faith and in the normal course of business. In a second letter dated March 9, 1984, defendant offered to sell the service station to plaintiff for $183,-000.00. The offer, however, specifically excluded the underground storage tanks used for storage of motor vehicle fuels. Defendant offered to remove the tanks at no cost to plaintiff.

Following the March 9th letter, plaintiff and defendant entered into a series of negotiations regarding the sale of the service station. During these negotiations, plaintiff requested that the existing storage tanks remain in place. Defendant, however, refused plaintiffs request based on environmental considerations. The five tanks presented a significant risk of environmental damage. On June 26, 1984, plaintiff accepted defendant’s original offer of sale and negotiations continued as to financing. On June 27, 1984, defendant extended plaintiff’s lease for an additional 90 days in order to close the sale.

During the lease extension, defendant offered to sell plaintiff new fiberglass storage tanks at cost. Plaintiff, though, refused the offer. The sale of the service station closed on October 16, 1984. On or about October 29,1984, defendant removed the existing fuel storage tanks from the premises.

DISCUSSION

The discrete issue raised by this case is whether defendant Shell Oil Company’s offer to sell the service station, absent the existing fuel storage tanks, constitutes a bona fide offer under PMPA § 2802(b). PMPA regulates the relationship between petroleum franchisors and franchisees, including the conditions and grounds for which a franchisor may terminate or not renew a franchise. Under § 2802(b) of the Act, a petroleum franchisor such as Shell Oil Company can decide not to renew a franchise relationship if it makes a good faith determination to sell its service station in the normal course of business. See 15 U.S.C. § 2802(b)(3)(D)(i). In addition, the Act requires a franchisor to make a bona fide offer to sell, transfer, or assign to the franchisee the franchisor’s interest in the service station. The offer must be made within 90 days of a notice of nonrenewal. See 15 U.S.C. § 2802(b)(3)(D)(iii). In this case, plaintiff does not dispute defendant’s good faith in determining nonrenewal. However, plaintiff maintains that defendant did not make a bona fide offer of sale, as required by the Act, because its offer excluded the existing storage facilities.

The question of what constitutes a bona fide offer under § 2802(b) is novel to this circuit. Moreover, only one other circuit has addressed the issue. In Roberts v. Amoco Oil Co., 740 F.2d 602 (1984), the Eighth Circuit concluded as a matter of law that a franchisor must offer for sale its interest in all of the equipment used in distributing motor fuel, including but not limited to the franchisor’s interest in the existing gasoline pumps, storage tanks and dispensers. The Roberts court voiced a concern for protecting franchisees from franchisor domination and read the statute’s language in a manner that requires a franchisor to always offer for sale all of the station’s existing equipment regardless of a hazardous condition.

This Court shares the Eighth Circuit’s concern for franchisees, which is a dominant feature of PMPA, but refuses to join in such a strict reading of what constitutes a bona fide offer of sale. Although defendant in this case refused to sell the existing fuel storage tanks, this Court nevertheless finds that the offer satisfied § 2802(b) of the Act.

There are a number of reasons why defendant’s offer of sale in this case was bona fide. First, defendant refused to sell storage tanks that were known to present a high risk of environmental damage. To read PMPA in a manner that forces petroleum franchisors to sell all of its service station equipment, including environmentally hazardous storage tanks, is not only unsound but is inconsistent with congressional intent to protect the environment. Second, defendant offered to sell plaintiff new fiberglass fuel storage tanks at cost. This offer was made during sale negotiations and illustrates defendant’s willingness to provide plaintiff with an opportunity to purchase tanks on very reasonable terms. Finally, there is no evidence in this case of franchisor domination or manipulation. Defendant’s actions, in fact, indicate a good faith willingness to work with plaintiff as opposed to arbitrary or discriminatory conduct prohibited by the Act. For all these reasons, this Court finds that defendant’s offer to sell the service station, absent the existing storage tanks, was a bona fide offer of sale under PMPA § 2802(b).

      . Of the five existing storage tanks, three were 20 years of age, one was 17 years old and one was 13 years old. More than 85% of all fuel leaks which can cause serious environmental damage occur in steel tanks over 10 years of age. See American Petroleum Institute Tank and Piping Leak Survey (1981). In addition, the tanks were made of unprotected steel, a type of tank that Congress has prohibited from new installation due to its risk of environmental harm. See The Hazardous and Solid Waste Amendments of 1984, Pub.L. 98-616, § 601, 98 Stat. 3221, 3277 (1984).

      . The Roberts court looked to the definition of “leased marketing premises” in PMPA § 2801(9) to support its objective interpretation of what constitutes a bona fide offer of sale. The Act defines marketing premises as "[those] premises owned, leased, or in anyway controlled by a franchisor and which the franchisee is authorized or permitted, under the franchise, to employ in connection with the sale, consignment, or distribution of motor fuel.”

      . See Pub.L. 98-616, supra note 1.


author: EDWARD WEINFELD, District Judge.

text:
    William McCONNELL, Plaintiff, v. CHAUFFEURS, TEAMSTERS AND HELPERS LOCAL 445, Raymond Ebert, personally and as Secretary-Treasurer of Local 445, Elmore Schueler, personally and as President of Local 445, Michael. Marco, personally and as Business Agent of Local 445, and “John Doe” and “Richard Roe,” Defendants.
    No. 84 Civ. 4020 (EW).
    United States District Court, S.D. New York.
    April 10, 1985.

      Jack J. Sissman, Albany, N.Y., for plaintiff.
    David Kramer, New York City, for defendants Local 445 IBT, R. Ebert, E. Schueler and M. Marco.
   OPINION

EDWARD WEINFELD, District Judge.

This is the second forum in which plaintiff, William McConnell (“McConnell”), has brought a dispute with his Union over its policies with respect to the negotiation and administration of collective bargaining agreements. McConnell claims his criticism of Union contract policies caused defendant Chauffeurs, Teamsters and Helpers Local 445 (hereinafter “Local 445” or “Union”) to retaliate against him by taking him off hiring hall lists and bringing false charges resulting in his dismissal as the Union’s business agent. Characterizing the Union’s conduct as an unfair labor practice, plaintiff brought his grievance to the National Labor Relations Board (“NLRB”), which declined to issue a complaint, finding that the claims either lacked merit or were time-barred. Since the NLRB failed to issue a complaint, its prior consideration of plaintiff’s claims is no bar to the present action. Thus, plaintiff now brings an action claiming violations of the union members’ “Bill of Rights,” under the Labor-Management Reporting and Disclosure Act (“LMRDA”), 29 U.S.C. § 401 et seq. Specifically, plaintiff claims that the Union violated his right to openly and freely express his views as to Local 445’s contract policies and deprived him of due process in the conduct of a disciplinary hearing.

Defendants move to dismiss the complaint on a number of grounds, claiming that the subject matter of plaintiff’s claim is within the exclusive jurisdiction of the NLRB; that plaintiff’s claims are time-barred; and finally, that plaintiff fails to state a claim since he seeks to vindicate an interest in his employment as a business agent by the Union, an interest not protected by the LMRDA.

At the outset, the Court is faced with the defendants’ claim that it must defer to the jurisdiction of the NLRB. Defendants contend that the union conduct underlying plaintiff’s claim, if unlawful, is “arguably” an unfair labor practice within the meaning of Sections 8(b)(1)(A) and 8(b)(2) of the National Labor Relations Act (“NLRA”) and that in such circumstances, “federal courts must defer to the exclusive competence of the National Labor Relations Board.” In relying upon the general principles enunciated in San Diego Building Trades Council v. Garmon, defendants ignore the Supreme Court’s holding in International Brotherhood of Boilermakers v. Hardeman. “Hardeman stands for the proposition that ‘NLRB jurisdiction over an unfair labor practice does not divest the federal courts of jurisdiction to hear an LMRDA claim arising out of the same pattern of misconduct.’ ”

The “Bill of Rights” claims here, which allege retaliation for the exercise of free speech rights and fundamental unfairness in disciplinary proceedings, do not fall within the special competence of the NLRB. They are brought pursuant to an express right to prosecute an action in the federal courts. Accordingly, defendants’ assertion of a threshold jurisdictional bar is unavailing. So, too, the fact that McConnell initially sought redress of his grievance before the NLRB does not constitute an election of remedies so as to bar the maintenance of this action.

While plaintiff may have brought his claims to the proper forum, the question remains whether they have been brought too late. Because Congress has not explicitly provided a limitations period for claims based on 29 U.S.C. § 412, the Court must determine the applicable statute of limitations. Defendants urge the Court to adopt the six month period provided by Section 10(b) of the NLRA. Plaintiff does not dispute that application of Section 10(b) would bar his claims, and instead, relies on New York law to urge application of a three year limitations period for civil rights actions. The Court finds that plaintiff’s LMRDA claims are governed by Section 10(b)’s six month period for unfair labor practice charges, and therefore, are time-barred.

In DelCostello v. International Brotherhood of Teamsters, the Supreme Court held that fair representation suits under Section 301 of the Labor Management Relations Act must be brought within the six month period applicable to unfair labor practice charges. While the Court was faced there with a “hybrid” action against a Union and an employer, it found that unfair labor practice charges provided an analogy “more apt” than any State law parallels. Thus the Court stated:

Even if not all breaches of the duty [of fair representation] are unfair labor practices, however, the family resemblance is undeniable, and indeed there is a substantial overlap. Many fair representation claims ... include allegations of discrimination based on membership status or dissident views, which would be unfair labor practices under § 8(b)(1) or (2). Aside from these clear cases, duty of fair representation claims are allegations of unfair, arbitrary, or discriminatory treatment of workers by unions — as are virtually all unfair labor practice charges made by workers against unions.

Since DelCostello, the courts addressing the question have almost uniformly found the analogy between LMRDA claims alleging violation of labor’s “Bill of Rights” and unfair labor practice charges at least as “apt” as the analogy the DelCostello court found between such claims and Section 301 hybrid suits.

Here, the analogy is particularly acute. There is more than a theoretical “family resemblance”; it has been demonstrated. Plaintiff has already brought his claims to the NLRB as unfair labor practice charges. In such circumstances, to find the congressional limitations period inapplicable would be anomalous at best.

Plaintiff’s attempt to liken his action to a civil rights case ignores the fact that although the LMRDA contains what is known as the union members’ “Bill of Rights,” the “purpose and operation of such rights cannot be divorced from general principles governing our federal labor policy.” In furtherance of those policies Congress struck a balance in Section 10(b) between “the national interests in stable bargaining relationships and finality of private settlements, and an employee’s interest in setting aside what he views as an unjust settlement.” The interests balanced by Congress in establishing the statute of limitations in Section 10(b) are the same interests at issue here. Promoting stable bargaining relationships between unions and employers necessitates prompt resolution of not only fair representation claims arising from employee grievances, but also the type of policy disputes and disciplinary action upon which plaintiff bases his claims against Local 445.

Finally, plaintiff attempts to avoid the statute of limitations upon a contention that even if the six month period bars an LMRDA claim, his second cause of action states a claim under state law. Having found that McConnell’s federal claims are barred by the statute of limitations, the Court declines to exercise subject matter jurisdiction over any remaining state law claim.

Accordingly, defendants’ motion to dismiss the complaint is granted in its entirety-

So ordered.

      . Peltzman v. Central Gulf Lines, Inc., 497 F.2d 332, 334 (2d Cir.1974), aff'd after remand, 523 F.2d 96 (2d Cir.1975), cert. denied, 423 U.S. 1074, 96 S.Ct. 857, 47 L.Ed.2d 83 (1976); see Edna H. Pagel, Inc. v. Teamsters Local Union 595, 667 F.2d 1275, 1280 nn. 12-13 (9th Cir.1982) and cases cited therein.

      . See 29 U.S.C. §§ 411(a), 412, 529 (1982).

      . 29 U.S.C. §§ 158(b)(1)(A), 158(b)(2) (1982).

      . San Diego Building Trades Council v. Garmon, 359 U.S. 236, 245, 79 S.Ct. 773, 779, 3 L.Ed.2d 775 (1959).

      . 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959).

      . 401 U.S. 233, 91 S.Ct. 609, 28 L.Ed.2d 609 (1971).

      . Quinn v. DiGiulian, 739 F.2d 637, 643 (D.C.Cir.1984) (quoting Quinn v. DiGiulian, No. 81-1921, slip op. at 5 (D.D.C. Mar. 29, 1983)); see Hardeman, supra, 401 U.S. at 237-41, 91 S.Ct. at 612-15; Benda v. Grand Lodge of Int'l Assoc, of Machinists and Aerospace Workers, 584 F.2d 308, 313, 314 n. 2 (9th Cir.1978), cert. denied, 441 U.S. 937, 99 S.Ct. 2065, 60 L.Ed.2d 667 (1979); Vandeventer v. Local 513, 579 F.2d 1373, 1377 (8th Cir.), cert. denied, 439 U.S. 984, 99 S.Ct. 576, 58 L.Ed.2d 656 (1978).

      . See Hardeman, supra, 401 U.S. at 238-39, 91 S.Ct. at 613-14.

      . 29 U.S.C. § 412 (1982).

      . Quinn v. DiGiulian, 739 F.2d 637, 644 (D.C.Cir.1984).

      . 29 U.S.C. § 160(b) (1982).

      . 462 U.S. 151, 103 S.Ct. 2281, 76 L.Ed.2d 476 (1983).

      . 29 U.S.C. § 185 (1982).

      . 462 U.S. at 169, 103 S.Ct. at 2293.

      . Id. at 170, 103 S.Ct. at 2293.

      . Vallone v. Teamsters Local 705, 755 F.2d 520, 118 Lab.Rel.Rep. (BNA) 2546 (7th Cir.1984) (per 606 F.Supp. — 13 curiam); Local Union 1397 v. United Steelworkers, 748 F.2d 180 (3rd Cir.1984); Linder v. Berge, 739 F.2d 686 (1st Cir.1984); Turco v. Local Lodge 5, lnt’l Brotherhood of Boilermakers, 592 F.Supp. 1293 (E.D.N.Y.1984); but see Gordon v. Winpisinger, 581 F.Supp. 234 (E.D.N.Y.1984).

      . Local Union 1397 v. United Steelworkers, 748 F.2d 180, 183 (3rd Cir.1984).

      . DelCostello, supra, 462 U.S. at 171, 103 S.Ct. at 2294 (quoting United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 70-71, 101 S.Ct. 1559, 1567-1568, 67 L.Ed.2d 732 (1981) (Stewart, J„ concurring).

      . See Local Union 1397 v. United Steelworkers, 748 F.2d 180, 182 (3rd Cir.1984); see Vallone v. Teamsters Local 705, 755 F.2d 520, 118 Lab.Rel. Rep. (BNA) 2546, 2547 (7th Cir.1984) (per curiam).


author: DILLIN, District Judge.

text:
    PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff, v. Gregory M. CROUCH, Defendant.
    No. IP 85-245-C.
    United States District Court, S.D. Indiana, Indianapolis Division.
    April 10, 1985.

      William M. Evans, Ronald E. Elberger, Bose McKinney & Evans, Indianapolis, Ind., for plaintiff.
    David Margerum, Burris, Gross, Burris & Margerum, Indianapolis, Ind., for defendant.
   MEMORANDUM OF DECISION

DILLIN, District Judge.

This case is before the Court on plaintiff’s motion for a preliminary injunction. For the following reasons, the motion is denied.

Background

The plaintiff, Prudential Insurance Company of America (Prudential), seeks relief in this cause of action against the defendant, Gregory M. Crouch (Crouch), in the form of a declaratory judgment, injunctive relief and damages. Prudential alleges that following Crouch’s resignation from Prudential, he breached an implied covenant of good faith and breached an alleged fiduciary duty to Prudential in causing the termination of certain whole life insurance policies sold or serviced by him while a Prudential agent.

Crouch was employed by Prudential as a District Agent, selling Prudential life insurance policies exclusively, from August 9, 1974 to August 17, 1984. While a Prudential agent, Crouch developed a substantial clientele and upon his resignation, Crouch took with him a list of his client’s names and addresses. This client list included Prudential policyholders whose policies were purchased through Crouch or were serviced by Crouch. Crouch returned all other property which may have belonged to Prudential at the time of his resignation.

On August 16, 1984, Crouch became a Career Agent employed by State Mutual Life Assurance Company and its wholly owned subsidiary SMA Life Assurance Company (SMA). Crouch solicited and sold insurance on behalf of SMA to his former Prudential clients. In some instances Crouch encouraged his clients to terminate their Prudential whole life insurance policies if they had a surrender value. In other instances, Crouch encouraged his clients to allow their Prudential policies to lapse by failing to pay premiums as they fell due so they could then purchase insurance through SMA.

Upon the replacement of any Prudential policy with an SMA policy and pursuant to Indiana Department of Insurance Regulation 160 IAC 1-16.1, Crouch and the Prudential policyholder would execute an “Important Notice Regarding Replacement of Life Insurance.” This notice informs the policyholder of his rights regarding the replacement of insurance policies including the right to cancel the new replacement policy within twenty days for a full refund of the premium paid. A copy of each notice is delivered to Prudential, thus enabling Prudential to contact its policyholder in order to persuade the policyholder to retain the Prudential policy and cancel the replacement. At the time of the hearing on Prudential’s motion for a preliminary injunction, Crouch had succeeded in replacing approximately fifty Prudential policies with SMA policies.

Crouch was employed by Prudential pursuant to an Agent’s Agreement and received compensation pursuant to a collective bargaining agreement between Prudential and the United Food and Commercial Workers International Union (AFL-CIO & CLC). Briefly, Crouch received compensation in the form of commissions on insurance policies he sold and serviced. Upon the sale of a whole life insurance policy, the selling agent became provisionally entitled to a prescribed percentage of the premiums paid by the policyholder for the first four years of the policy (45-53% for year 1, 10-11% for each of years 2, 3, and 4). Thereafter, the agent would be entitled to a service commission in the amount of 2% of the annual premium paid by the policyholder.

Commissions are credited to the selling or servicing agent’s account upon the sale or annual renewal of a policy but the commission credit is subject to adjustment if the policy lapses for nonpayment of monthly premiums. Should the policyholder, following payment of a premium, cancel the policy, the policyholder may obtain a refund of some or all of the unearned premium. In such case, the agent’s commission may be reduced correspondingly. Upon termination of the agent’s employment with Prudential, no further commissions are paid even though premiums subsequently may be received under those policies.

The schedule of commissions (approximately 50% new policy, 10% renewal for each of years 2-4, and 2% service thereafter) is based upon an expectation that a whole life insurance policy will remain in force for approximately fifteen years. Additionally, the premiums and investment income therefrom do not cover the expenses incurred until five years after issue.

Neither the Agent’s Agreement nor the Collective Bargaining Agreement expressly prohibits Prudential agents from engaging in replacement activities or otherwise soliciting or selling insurance to Prudential policyholders following termination of their employment with Prudential. Crouch's Agent’s Agreement contains only the following provisions respecting his duties to Prudential following termination of employment:

“Sec. 7(a) That upon termination of this Agreement either by myself or the Company, or at any other time upon request by the Company, I will immediately submit said books and records for an inspection and accounting, to be made in accordance with the rules of the Company then in force.
(b) That all books, records, and supplies furnished to me by the Company shall be the property of the Company; and that, upon the termination of this Agreement, I will hand over said books, records, and supplies to a proper representative of the Company.”

Although Crouch returned Prudential’s property upon termination of his employment, Crouch took with him the names and addresses of his clients. Crouch’s client list contained no other information except names and addresses.

Prudential makes no claim against Crouch under Section 7, above, and does not seek to enjoin Crouch from using the client list in selling additional insurance to his former Prudential clients. Rather, Prudential seeks to prevent Crouch from inducing or endeavoring to induce his former clients to cancel their Prudential policies or to allow them to lapse by nonpayment of premiums in order that Prudential policies may be replaced by other insurance policies sold by or through Crouch. Prudential argues that during Crouch’s employment, Crouch made an implied promise of good faith and became subject to a fiduciary duty to Prudential and that these obligations survived the termination of the employment relationship to proscribe Crouch’s replacement activities.

Discussion

Prudential seeks a preliminary injunction against Crouch to prevent him from engaging in replacement activities with his former Prudential clients. The decision whether to grant or deny a preliminary injunction rests in the sound discretion of the trial court. Factors to consider in this regard are whether the plaintiff has shown that it has (1) a reasonable likelihood of success on the merits, (2) that no adequate remedy at law is available, (3) that irreparable injury will result prior to the final determination in the case absent injunctive relief, (4) that the threatened harm to the plaintiff outweighs the harm the injunction may cause the defendant, and (5) that the granting of the injunction will not disserve the public interest. Roland Machinery Co. v. Dresser Industries, 749 F.2d 380 (7th Cir.1984); Shaffer v. Globe Protection, Inc., 721 F.2d 1121, 1123 (7th Cir.1983); see also Steenhoven v. College Life Insurance Co. of America, 458 N.E.2d 661, 664 (Ind.App.1984); College Life Insurance Co. of America v. Austin, 466 N.E.2d 738, 741-42 (Ind.App.1984).

In determining whether Prudential is reasonably likely to succeed on the merits, this Court, sitting in diversity, is constrained to apply the substantive law of Indiana. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Prudential has defined the issues and relief sought in this case narrowly to avoid the direct application of Indiana precedent. Nevertheless, existing Indiana law in this area is instructional and must be examined to determine whether Prudential’s legal arguments are consistent with the law in this state.

The common law in Indiana favors competition. Businesses may protect their goodwill, which may include confidential customer information and repeat business for certain products, only “by contract or against a conspiracy to appropriate it by unlawful acts.” Woodward Insurance, Inc. v. White, 437 N.E.2d 59, 67 (Ind.1982); Licocci v. Cardinal Associates, Inc., 445 N.E.2d 556 (Ind.1983). If an employee is not bound to a covenant not to compete and does not misappropriate a trade secret or confidential information, he is free to exercise his right to compete against his former employer. Woodward, supra, at 67. Should an employer contract with its employee to restrict the employee’s right to compete following termination of the employment, the covenant not to compete will be strictly construed against the employer because such covenants are in restraint of trade. Licocci v. Cardinal Associates, Inc., supra; Woodward Insurance, Inc. v. White, supra; College Life Insurance Co. of America v. Austin, 466 N.E.2d 738 (Ind.App.1984). Additionally, the Indiana Supreme Court stated in Licocci that “if the covenant as written is not reasonable, the courts may not create a reasonble restriction under the guise of interpretation, since this would subject the parties to an agreement they had not made.” 445 N.E.2d at 561.

In the absence of a restrictive covenant, Indiana law prohibits former employees from misappropriating and using trade secrets or confidential information acquired during employment for his or a competitor's benefit in a manner which is detrimental to the former employer. See Woodward Insurance Inc. v. White, supra; Ind.Code § 24-2-3-2 (Supp.1984). This protection afforded to trade secrets, however, has not been extended to encompass policyholder lists and other information compiled by insurance companies regarding their policyholders. College Life Insurance Co. of America v. Austin, supra; Steenhoven v. College Life Insurance Co. of America, 458 N.E.2d 661, reh. denied with opinion, 460 N.E.2d 973 (Ind. App.1984) (trans. denied). Such information concerning policyholders is generally not confidential. This information is readily obtainable from the policyholders, the policies, and from the insurance company. Although the names and addresses of policyholders may not be “readily obtainable” as other information is, insurance companies generally do not’ hold the names and addresses of their policyholders in confidence, Woodward Insurance, Inc. v. White, supra, and there is no independent value attaching to such a policyholder list. Steenhoven v. College Life Insurance Co. of America, 460 N.E.2d 973 (Ind.App.1984). Therefore, policyholder lists do not constitute confidential information entitled to protection as a trade secret.

In the present case, Prudential recognizes that Crouch’s Agency Agreement contains no restrictive covenant and that the policyholder list retained by Crouch is not confidential information entitled to protection as a trade secret. Nevertheless, Prudential contends that Crouch is bound by an implied promise of good faith and by a fiduciary duty which survived the termination of Crouch’s employment with Prudential. Prudential argues that this implied promise and continuing fiduciary duty preclude Crouch from endeavoring to replace Prudential policies with insurance policies of other companies following termination of his employment with Prudential.

First, Prudential relies upon the general rule that every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. Restatement (2d) of Contracts § 205 (1981); 17A C.J.S. Contracts § 328; see Ang v. Hospital Corp. of America, 182 Ind.App. 381, 395 N.E.2d 441 (1979). This implied covenant precludes a party to a contract from destroying or injuring the right of the other party to receive the fruits of the contract, but as a negative covenant, it will be applied only when necessary to effectuate the clear intent of the parties. 17A C.J.S. Contracts § 328.

Prudential’s “fruits” under its employment contract with Crouch are the premiums paid on the life insurance policies sold or serviced by Crouch. Crouch’s “fruits” under the contract are the commissions paid from those premiums. Pursuant to the implied covenant of good faith and fair dealing therefore, Prudential and Crouch are precluded from destroying each other’s rights to premiums and commissions received or earned during the employment relationship.

Crouch is entitled only to commissions based upon premiums received by Prudential during Crouch’s employment, and following termination of the employment, Crouch is not entitled to future commissions even though premiums may be paid to keep the policies in force. Prudential, however, asserts that it is entitled not only to keep the premiums received during Crouch’s employment but also to preclude Crouch from interfering with its ability to receive all future premiums which might be paid under the policies which had been handled by Crouch while he was employed with Prudential.

The application of the implied covenant of good faith and fair dealing to prevent an insurance agent from destroying his former employer’s right to keep and enjoy premiums which were received during the employment has been recognized in other jurisdictions and is not inconsistent with the law in Indiana. Scottish Union & National Insurance Co. v. Dangaix, 103 Ala. 388, 15 So. 956 (1897); American Steam-Boiler Insurance Co. v. Anderson, 130 N.Y. 134, 29 N.E. 231 (1891). A contractual relationship arises when an insurance agent procures the payment of a premium to his employer; the employer then becomes obligated to pay to the agent a commission, which generally is a percentage of an annual premium amount. The agent also becomes obligated not to destroy the employer’s right to keep and enjoy the premium which had been paid. If the policy is cancelled prior to the expiration of its term (established by the amount of premium paid), the employer may be required to refund to the policyholder any unearned premium. When policies handled by a former employee are cancelled due to that employee’s replacement activities, the former employer may hold its former employee liable for the commissions paid to him which are attributable to the refunded premiums. Scottish Union & National Insurance Co. v. Dangaix, supra; American Steam-Boiler Insurance Co. v. Anderson, supra. Therefore, to the extent that the agent received a commission based upon the receipt of a premium by the company, the agent may not interfere with the insurance company’s right to keep and enjoy that premium.

The implied covenant of good faith and fair dealing may be extended no further. Crouch is obligated under the employment contract only to the extent that he receives compensation for his services. Following completion of the obligations for which he is paid, he is free to exercise his right to compete against his former employer as provided under Indiana law. College Life Insurance Co. of America v. Austin, supra; Steenhoven v. College Life Insurance Co. of America, supra; Woodward Insurance Inc. v. White, supra.

Prudential argues that the compensation paid to Crouch on new policies imposed obligations upon Crouch which extended past the policy period for which each premium was paid. Prudential suggests that the commissions paid during the first four years of a whole life insurance policy are based upon the expectation that the policy will remain in force at least five and usually about fifteen years. Prudential, however, does not condition receipt of the first four annual commissions upon the policy being in force for five or more years. Rather, the payment of commissions by Prudential is conditioned only upon its receipt of corresponding premiums. Therefore, the contractual obligations of Prudential and Crouch are based upon the policy period for which a premium is received and a commission is paid and do not extend further.

In conclusion, under the implied covenant of good faith and fair dealing, Crouch is precluded from causing the cancellation of Prudential insurance policies which he sold or serviced and for which he received a commission when such cancellation would require Prudential to refund any portion of the premium to the policyholder. Crouch is contractually obligated only to preserve Prudential’s right to keep and enjoy the premiums received by Prudential during Crouch’s employment. Following completion of the obligations under the employment contract for which Crouch received compensation, the implied covenant terminates, and thereafter Crouch may engage in competition against Prudential which may include efforts by Crouch to cause the lapse of Prudential policies for nonpayment of future premiums.

Alternatively, Prudential relies upon the general rule of agency law that every agent owes a fiduciary duty to his principal to act with good faith and loyalty in furtherance of the principal’s interests. 3 C.J.S. Agency § 271; 3 Am.Jur.2d Agency § 199. This fiduciary duty precludes the agent from engaging in conduct dealing with the subject matter of the agency for his own benefit or in derogation of the interests of his principal. Upon termination of the agency, the fiduciary duty generally no longer applies and the former agent may compete with his former principal. 3 C.J.S. Agency § 287; 3 Am.Jur.2d Agency § 222. Nevertheless, it is universally recognized that the agent, following termination of the agency, may not use trade secrets or other confidential information acquired during the agency in a manner which is detrimental to the principal’s interests in the subject matter of the agency. 3 C.J.S. Agency § 287; 3 Am.Jur.2d § 222. Additionally, an agent is bound by his fiduciary relationship to refrain from interfering with the principal’s ability to accomplish the purpose of the agency. Trice v. Comstock, 121 Fed. 620 (8th Cir. 1903).

This latter principle, although stated in broad language by the court in Trice, has been narrowly applied. The duty of an employee to a former employer must be considered alongside the common-law right of an employee to compete against his former employer. Group Ass’n Plans, Inc. v. Colquhoun, 466 F.2d 469 (D.C.Cir.1972). The continuing duty described in Trice does not abrogate the right to compete, even “steal” clients following termination of employment. Id. at 474. Rather, the rule in Trice is applied only to prohibit an employee from completing transactions, which the employee negotiated during his employment, for his own benefit following termination of the employment. Id. See also Brown & Root, Inc. v. La Bauve, 219 F.Supp. 179 (W.D.La.1962), aff'd 319 F.2d 582 (5th Cir.1963); Opie Brush Co. v. Bland, 409 S.W.2d 752 (Mo.App.1966); Raines v. Toney, 228 Ark. 1170, 313 S.W.2d 802 (1958); Byrne v. Barrett, 268 N.Y. 199, 197 N.E. 217 (1935); Connelly v. Special Road & Bridge District, 99 Fla. 456, 126 So. 794 (1930). This application of the rule in Trice is consistent with the law in Indiana which recognizes the right to compete against one’s former employer absent contractual or statutory restrictions. See College Life Insurance Co. of America v. Austin, supra; Steenhoven v. College Life Insurance Co. of America, supra; Woodward Insurance, Inc. v. White, supra.

In the present case, therefore, the “purpose of the agency” must be viewed in terms of the “transactions” which Crouch was employed to complete on behalf of Prudential. Crouch was employed to sell and service insurance policies so that Prudential would receive the premiums thereunder. With respect to each insurance policy sold or serviced by Crouch, the “purpose of the agency” or the “transaction” was completed when the premium was paid to Prudential. Each sale of a new policy or renewal of an existing policy is represented by the payment of a premium and constitutes a separate transaction. Under the continuing fiduciary duty owed by Crouch to Prudential, therefore, Crouch is prohibited from negotiating any sale (either original sale or renewal) of a life insurance policy during his employment with Prudential and then completing that sale after his resignation by receiving the premium payment for his own or his new employer’s benefit.

Again, consistent with the common-law right to compete against one’s former employer, Crouch is otherwise free to engage in replacement activities after termination of his employment which may include inducing his former clients to allow their Prudential policies to lapse.

In conclusion, Prudential has shown a reasonable likelihood of success on the merits only to a limited extent. Pursuant to the implied covenant of good faith and fair dealing, Prudential may hold Crouch liable, with respect to policies sold or serviced by Crouch, for any commissions which are attributable to unearned premiums which Prudential was required to refund to policyholders due to Crouch’s replacement activities. Pursuant to the fiduciary duty of an agent to his principal, Crouch may be held liable for the premium received on each sale or renewal which was negotiated by him during his employment with Prudential.

Under these two theories, Prudential may be able to recover damages against Crouch. The calculation of such damages would not be speculative and Prudential has not shown that damages would be inadequate for the limited recovery available. Therefore, Prudential has an adequate remedy at law.

Additionally, Prudential has not shown irreparable injury. Prudential is given notice of each replacement policy and has an opportunity to convince the policyholder to cancel the replacement policy and obtain a full refund of the premium paid thereon within twenty days of delivery of the replacement policy. Moreover, Prudential is not prohibited from soliciting its former policyholders at any time in an effort to replace their new policies with Prudential policies. Therefore, Prudential has ample opportunity to compete for business against any replacement attempts and cannot claim that it will be irreparably harmed if an injunction does not issue. Steenhoven v. College Life Insurance Co. of America, 458 N.E.2d at 668, n. 20.

Furthermore, Prudential has shown neither that the threatened harm to it outweighs the harm an injunction would cause Crouch during the pendency of this action nor that an injunction is in the public interest. Imposing a restrictive covenant upon Crouch would greatly hinder his ability to engage in his profession. In light of Prudential’s access to an adequate remedy at law, the injury to Prudential in the absence of an injunction does not outweigh the threatened harm to Crouch. Moreover, Prudential could have contracted with Crouch to restrict Crouch’s right to compete following his employment, but did not do so. The public interest favors competition and an injunction imposing a restrictive covenant upon parties who did not agree to such a covenant would greatly disserve the public interest.

For the foregoing reasons, therefore, Prudential is not entitled to injunctive relief and its motion for a preliminary injunction will be denied.


text:
    John M. STACK, Plaintiff, v. ALLSTATE INSURANCE COMPANY, Allstate Life Insurance Company, National Emblem Insurance Company, Allstate Enterprises, Inc., Defendants.
    No. IP 83-732-C.
    United States District Court, S.D. Indiana, Indianapolis Division.
    April 10, 1985.

      Barry A. Macey, Segal & Macey, Indianapolis, Ind., for plaintiff.
    Charles F. Robinson, Jr., Linda Y. Hammel, Yarling, Robinson, Hammel & Lamb, Indianapolis, Ind., for defendants.
   . MEMORANDUM OF DECISION

DILLIN, District Judge.

This ease is before the Court on defendants’ motions for summary judgment on plaintiff’s complaint and for partial summary judgment as to liability on its counterclaim against the plaintiff. For the following reasons, the motions will be denied.

Background

The plaintiff, John Stack, brings this action against the defendants (hereafter collectively referred to as Allstate) alleging he was wrongfully discharged in breach of his employment contract. Allstate has counterclaimed alleging Stack breached the employment contract’s covenant not to compete following his discharge.

Allstate and Stack entered into a written employment contract on or about May 2, 1971, whereby Allstate employed Stack to sell insurance exclusively for Allstate. The contract contained Section XI of Part Four, relating to termination of employment, which provides in relevant part as follows:

XI. This agreement will automatically terminate upon your death. Either you or Allstate have the right to terminate this agreement upon mailing to the other, at his or its last known address, written notice of termination. After such termination you agree not to act or represent yourself in any way as our agent. The Company [Allstate] will not terminate your employment because of unsatisfactory work unless you have been notified that your work is unsatisfactory and that your job is in jeopardy and unless you have been given a reasonable opportunity to bring your performance up to satisfactory standards.

The employment contract also contained a covenant not to compete embodied in Part Four, Section XIII, as follows:

XIII. For a period of two years immediately following the termination of your employment under this agreement, you agree that you will not solicit or sell insurance of any kind
A. with respect to any person, company or organization to whom you previously sold an Allstate policy, or
B. within one mile from any Allstate location from which you solicited or sold insurance during the year immediately preceding such termination.

Subsequent to the execution of this contract and by 1982, Allstate amended the contract in relevant part, as follows:

The following paragraphs are added following the second paragraph of Section XI of Part Four: The term “unsatisfactory work” relates to the quality of performance. Notification that your job is in jeopardy is not required in the event of termination of employment for a criminal act or an act of dishonesty, such as, by way of example but not limited to, the following: embezzlement, falsification of any Company or industry plan documents completed or approved by you in the performance of your duties, fraud or misrepresentation of material fact, or forgery.

Although Stack signed a copy of this amendment, the record does not show that any consideration was exchanged in support of the amendment.

On December 2, 1982, Allstate terminated Stack’s employment for allegedly falsifying documents prepared or approved by Stack. The falsification charge stemmed from certain insurance policies sold by Stack in which protective devices discounts or over-age-55 discounts were granted when the policyholders did not, in fact, fully qualify for the discounts. Stack admits giving certain discounts upon the representations or promises of clients that they qualified or would immediately purchase items to qualify for the discounts. Stack, however, also asserts that certain other alleged falsifications were not attributable to him but were made by other Allstate employees and that in several cases a reasonable dispute exists over the interpretation of the discount requirements as applied to individual situations. Nevertheless, Allstate conducted an investigation which in its opinion substantiated the discrepancies in the policies sold by Stack. There is no indication that Allstate acted in bad faith in discharging Stack.

Following his discharge, Stack continued to solicit and sell insurance policies as an independent agent associated with CNA Insurance Agencies, Inc. Pursuant to his new employment he solicited and sold insurance policies to former Allstate clients with whom he had previously done business.

Allstate has moved for summary judgment on plaintiffs complaint, asserting that the contract created an at-will employment relationship terminable for cause or for no cause by either party at any time. Allstate, furthermore, claims it terminated Stack for cause (falsifying documents) and therefore, under the amendment to the contract set forth above, it was not obligated to comply with the clause of the original contract requiring notice and an opportunity to improve performance.

Separately, Allstate has moved for partial summary judgment on its counterclaim alleging that the covenant not to compete is reasonable, valid, and clearly has been violated. The plaintiff asserts that the contract is not an at-will employment contract but rather validly imposes restrictions upon Allstate’s ability to terminate his employment. He also claims that material factual issues exist regarding whether his conduct constitutes “falsification of documents” and whether Allstate acted in bad faith in terminating his employment without prior notice and an opportunity to improve.

Discussion

This case raises basic issues regarding sufficiency of consideration for contracts and Indiana’s employment-at-will doctrine.

Under the employment-at-will doctrine in Indiana, a contract of employment for an indefinite term or duration is unenforceable to the extent it remains executory. Consequently, either party may terminate the employment relationship at any time, for any or no reason, and escape liability or further obligation under the contract. Mead Johnson and Co. v. Oppenheimer, 458 N.E.2d 668 (Ind.App.1984); Pepsi Cola General Bottlers, Inc. v. Woods, 440 N.E.2d 696 (Ind.App.1982); Campbell v. Eli Lilly and Co., 413 N.E.2d 1054 (Ind.App.1980).

Limited exceptions to this doctrine exist when an employee is discharged solely for exercising a right conferred on him by statute, constitution, or other positive law. Mead Johnson and Co. v. Oppenheimer, supra. Included within this exception is the right to enter into a contract imposing restrictions on the employer’s power to discharge the employee. See 458 N.E.2d at 671. If an employment contract is supported by adequate independent consideration (other than the employee’s promise to render services), it may be enforced even though it does not establish a definite term of employment. Ryan v. J.C. Penney Co., 627 F.2d 836 (7th Cir.1980); Ohio Table Pad Co. of Indiana v. Hogan, 424 N.E.2d 144 (Ind.App.1981).

In such cases, if adequate independent consideration was exchanged, “then in the absence of mutual agreement, the company could only terminate the employee for good cause without incurring liability for its action.” Ohio Table Pad Co. of Indiana v. Hogan, 424 N.E.2d 144, 146 (Ind.App.1981). The contract is not invalid or unenforceable due to uncertainty or indefiniteness. Toni v. Kingan & Co., 214 Ind. 611, 15 N.E.2d 80 (1938); Pennsylvania Co. v. Dolan, 6 Ind.App. 109, 32 N.E. 802 (1892).

The Indiana Court of Appeals in Ohio Table Pad examined the types of consideration which would be adequate to take an indefinite employment contract out of the at-will doctrine in Indiana. The court found that consideration sufficient to support the imposition of restrictions on an employer’s ability to discharge an employee includes an employee’s release of personal injury claims against the employer, an employee’s assignment of a valuable coal lease to the employer, an employee abandoning his own competing business, and an employee surrendering his own permanent employment with the express understanding that he would not do so except for permanent employment. Ohio Table Pad Co. of Indiana v. Hogan, 424 N.E.2d 144, 146 (Ind.App.1981) and cases cited therein.

Moving one’s household to a new location or surrendering prior employment, without more, however, will not constitute adequate consideration. Ohio Table Pad Co. of Indiana v. Hogan, supra. The court reasoned that “in moving and/or giving up her prior job, the employee is merely placing herself in a position to accept the new employment. There is no independent detriment to the employee because she would have had to do the same things in order to accept the job on any basis, and there is no independent benefit bestowed upon the employer.” Id. at 146.

In the present case, the employment contract is indefinite as to its duration and thus is an unenforceable, at-will employment contract unless supported by additional independent consideration. Stack asserts that he provided adequate consideration to support the restrictions placed on Allstate’s ability to terminate the employment contract by his agreement to sell Allstate insurance exclusively and by his agreement to the covenant not to compete.

Stack’s promise to sell only Allstate insurance policies does not constitute adequate independent consideration. A promise not to sell a competitor’s product when employed to sell employer’s product is equivalent to surrendering prior employment before starting new employment. Surrendering one’s prior employment implies continued abstinence from engaging in the prior employment while performing the new. Stack did not give up a competing business as contemplated by the exception noted above in Ohio Table Pad Co. of Indiana v. Hogan, supra, arid by agreeing to sell insurance exclusively for Allstate, Stack did not confer an independent benefit upon Allstate. Therefore, Stack’s agreement to the exclusive agency did not constitute adequate independent consideration to take the employment contract out of the at-will doctrine.

Stack also argues that the covenant not to compete serves as adequate consideration for the restrictions on Allstate’s ability to terminate the employment contract. Although this specific situation has not been confronted by Indiana courts, the converse situation has been considered.

The Indiana Supreme Court has recently examined the adequacy of a promise of employment to support a covenant not to compete. In Licocci v. Cardinal Associates, Inc., 445 N.E.2d 556 (Ind.1983), the court held that a promise to employ for a term of one year was sufficient consideration to support a covenant not to compete. In Leatherman v. Management Advisors, Inc., 448 N.E.2d 1048 (Ind.1983), the court found that a promise of continued employment in an existing employment-at-will relationship was also adequate consideration for such a covenant. See also Woodward Insurance, Inc. v. White, 437 N.E.2d 59 (Ind.1982).

In the former case, the court found that the covenant not to compete, standing alone, was reasonable in its terms. The court, however, also considered the adequacy of the consideration exchanged in support of the covenant. The court stated the general rule that “the validity of a non-competition clause is dependent not merely upon the covenant itself but upon the entire contract and the situation to which it is related.” Licocci v. Cardinal Associates, Inc., 445 N.E.2d 556, 563 (Ind.1983), citing Woodward Insurance, Inc. v. White, 437 N.E.2d 59 (Ind.1982); Donahue v. Permacel Tape Corp., 234 Ind. 398, 127 N.E.2d 235 (1955). The court rejected the two former employees’ efforts to enforce certain provisions of the employment contract while arguing that the covenant not to compete was unenforceable for lack of consideration. The court stated: “We will not allow a party to claim that certain provisions of a contract are valid since supported by adequate consideration while maintaining that other provisions of the very same contract are not valid because they are not supported by adequate consideration.” Licocci, supra, at 565. See also Raymundo v. Hammond Clinic Ass’n, 449 N.E.2d 276 (Ind.1983) (even if contract is voidable, a party cannot benefit under a transaction or instrument and at same time repudiate its obligations thereunder).

The court concluded that the employer’s binding promise of employment for a term of one year was adequate consideration for the employees’ promises to render services and to relinquish certain future employment opportunities.

In Leatherman, the Indiana Supreme Court went further. It found that in an existing employment-at-will relationship, an additional promise of continued employment was adequate consideration to support a covenant not to compete. Justice Hunter dissented, arguing that the promise of continued employment was unenforceable under the employment-at-will doctrine and therefore the promise could not stand as consideration for the covenant. Leatherman, 448 N.E.2d at 1050-1052; see also Woodward Insurance, Inc. v. White, 437 N.E.2d 59 (Ind.1982) (Hunter, J. dissenting).

Indeed, if the promise of continued employment is unenforceable, the employer has not given anything of value to the employee and the employee has not received any benefit in exchange for the covenant not to compete. Therefore, no consideration has been exchanged to support the covenant.

The full court, however, rejected Justice Hunter’s argument that the promise of continued employment is illusory consideration. Prior to the exchange of the promise of continued employment and the covenant not to compete, the employment contract in Leatherman was terminable at the will of either party without further obligation or liability. Then, as the court stated, “MAI [the employer] made certain promises to Leatherman, namely the promise to continue employment and to pay certain compensation and other benefits to him, in exchange for his return promises to work and perform certain duties and also to refrain from pirating MAI clients for three years after he left their employ. Thus each party’s promises were supported by consideration in the form of the other party’s return promises. We hold there is sufficient consideration for each party’s set of promises to the other.” Id. at 1050. Therefore, the court recognized that the promise of continued employment was enforceable pursuant to the terms of the contract and despite the indefinite duration of the contract.

In the present case, Stack and Allstate entered into a written employment contract which did not establish a definite term of employment but which contained other provisions including limitations on the parties’ rights to terminate the contract at will. Allstate’s right to discharge Stack was restricted by the prior notice and opportunity to improve performance clause. In return, Stack agreed to the covenant not to compete which restricts Stack’s ability to solicit and sell insurance near his former office or to his former Allstate clients for a period of two years following termination of the employment relationship. The covenant’s validity based upon its reasonableness as to time, place, and manner of imposing restrictions upon Stack is not disputed. Under Indiana law, therefore, the employment contract is supported by adequate independent consideration and is therefore enforceable despite the contract’s indefinite duration.

The undisputed facts clearly show that both parties failed to comply with the provisions of the contract noted above. Stack admits soliciting and selling insurance to his former Allstate clients following his discharge by Allstate. Allstate also admits giving Stack no prior notice or opportunity to improve his performance.

Allstate, nevertheless, asserts that it was not required to give such notice and opportunity to improve in this instance. Subsequent to the execution of the primary contract, Allstate amended the notice and opportunity to improve clause of that contract to eliminate application of the clause when an employee is discharged for a criminal act or an act of dishonesty. Although Stack signed the amendment, there is no indication that Allstate provided any consideration to Stack in support of the amendment. Additional consideration is required to support an amendment or modification of a contract which imposes a new burden on an employee. Licocci, 445 N.E.2d at 565.

The validity of the amendment has not been directly challenged by the parties herein. Nevertheless, the apparent lack of consideration supporting the amendment concerns the court because the amendment has the effect of removing the consideration supporting the covenant not to compete. Additionally, Stack denies committing any intentional act of dishonesty or falsification. He has proffered explanations for the discrepancies found by Allstate which, if proven, may indicate that the amendment did not apply to relieve Allstate of its duty to notify and provide an opportunity to improve performance.

The final determination of this case depends upon the validity of the amendment to Stack’s employment contract and its application to the facts. Resolution of these issues involves facts which are either unknown to the Court at this time or are disputed. Therefore, genuine issues of material fact exist and summary judgment is inappropriate.

Accordingly, Allstate’s motions for summary judgment on the complaint and for partial summary judgment on the counterclaim will be denied.

      . Mutuality of obligation may not be required for the enforceability of an employment contract in Indiana but even a unilateral employment contract, to be enforceable, must establish a definite term of employment or be supported by independent consideration other than the rendering of services by the employee. Ryan v. J.C. Penney Co., 627 F.2d 836 (7th Cir.1980); see also Seco Chemicals, Inc. v. Stewart, 169 Ind.App. 624, 349 N.E.2d 733 (1976).