LinkedIn Connection Requests Don’t Violate Insurance Salesman’s Noncompete – IL Court

The First District recently considered whether an insurance salesman’s generic LinkedIn invites to some former co-workers violated non-compete provisions in his employment contract.

The plaintiff in Bankers Life v. American Senior Benefits employed the defendant for over a decade as a sales manager.  During his employment, plaintiff signed an employment agreement that contained a 24-month noncompete term that covered a specific geographic area (Rhode Island).  Plaintiff sued when it learned the defendant sent some LinkedIn connection requests to some former colleagues.

The court granted the defendant’s summary judgment motion on the basis that the plaintiff failed to offer any evidence that the defendant breached the noncompete by trying to induce three of plaintiff’s employees to join defendant’s new agency.  Plaintiff appealed.

Plaintiff argued that the LinkedIn requests were veiled, if not blatant, attempts to circumvent the noncompete by inviting former co-workers to join a competitor.

The First District affirmed summary judgment for the defendant.  For support, it looked to cases in other jurisdictions that considered if social media overtures can violate employee restrictive covenants.  The Court noted that a majority of these cases hold that passive social media postings (LinkedIn and Facebook, mainly) don’t go far enough to violate a noncompete.

The cases that have found that social media breached noncompete obligations involve clear statements of solicitation by the departed employee where he directly tries to sign up a former client or colleague. Since all the defendant did in this case was send generic LinkedIn messages, they didn’t rise to the level of an actionable solicitation.

The Court also rejected the plaintiff’s argument that summary judgment was premature and that the plaintiff should have the opportunity to take more discovery on this issue.  Illinois Rule 191 allows a summary judgment opponent to stave off judgment while it takes written and oral discovery to assemble evidence to oppose the motion.  But the plaintiff must show a “minimum level of information” showing a defendant is possibly liable before initiating a lawsuit or making a defendant submit to discovery requests.

Since the plaintiff failed to produce any evidence the defendant solicited any of plaintiff’s employees in the prohibited Rhode Island area, summary judgment for the defendant was proper.

Afterwords:

LinkedIn generic invites that don’t specifically ask someone to sever his/her relationship with current employer don’t go far enough to constitute improper solicitation;

Summary judgment is “put up or shut up moment;” the party opposing summary judgment must offer evidence that raises a question of material fact that can only be decided after a trial on the merits.

 

Missing “Course Of Dealing” Evidence Dooms Wedding Dress Seller on Summary Judgment – IL ND

In a Memorandum Opinion and Order that quotes Neil Sedaka and Taylor Swift in its footnotes, the District Court in House of Brides, Inc. v. Angelo, 2016 WL 698093 (N.D.Ill. 2016), examines the quantity and quality of evidence required to win a summary judgment motion. 

The plaintiff sold wedding clothes on-line and in retail stores and the defendant was the plaintiff’s main supplier.  The plaintiff sued the dress maker in state court for breach of contract claiming many of the dresses were defective or shipped later than promised. 

After it removed the case to Federal court, the defendant counter-sued the plaintiff for unpaid invoices. The defendant moved for summary judgment on its counterclaims as well as on plaintiff’s claims.

Partly siding with the defendant, the court discussed some common Uniform Commercial Code (UCC) claims and defenses and the required elements of a summary judgment affidavit.

The UCC governs contracts for the sale of goods and wedding dresses constitute goods under the UCC.  A seller who delivers accepted goods to a buyer can sue the buyer for the price of the goods accepted along with incidental damages where a buyer fails to pay for the goods.  810 ILCS 5/2-709.

In a goods contract, written contract terms can be explained or supplemented by a “course of performance, course of dealing, or usage of trade.” However, written terms cannot be contradicted by evidence of a prior agreement or an oral agreement made at the same time as the written one by the parties.

Here, the plaintiff argued that the course of dealing showed that defendant routinely accepted late payments and so defendant’s “net 30” invoice language was excused.

The court rejected this argument.  It held that avoiding the 30-day payment deadline was a material change that would have to be in writing since the Statute of Frauds governs contracts for the sale of goods exceeding $500 and the dresses involved in this suit easily eclipsed that value.

The court also rejected the plaintiff’s set-off defense against the defendant’s breach of contract counterclaim since a set-off must relate to the same contract being sued on (the court’s example: a seafood buyer can’t set off the price of frogs’ legs because the seller previously sent bad fish in a previous order)

Next, the court struck the plaintiff’s affidavit in support of its breach of implied warranty of merchantability claim on the basis of hearsay. 

In Federal court, an affidavit in support of or opposing summary judgment must be based on personal knowledge, show the witness’s competence and constitute admissible evidence.  Conclusory statements or affidavit testimony based on hearsay is inadmissible on summary judgment.  

The plaintiff’s affidavit testimony that there were dress defects that required refunds was too vague to survive defendant’s summary judgment motion.  This was because no employee stated that he/she personally issued any refunds or had first-hand knowledge of any dress defects that warranted a refund. 

What’s more, the seller failed to offer any authenticated business records that showed either the claimed dress defects or the refund amounts.  Without admissible evidence, the plaintiff seller failed to challenge the defendant’s breach of contract claim and the court awarded summary judgment to the defendant.

Afterwords:

1/ This case shows importance of furnishing admissible evidence when challenging summary judgment;

2/ Hearsay evidence in a summary judgment affidavit will be rejected;

3/ Course of performance or course of dealing can augment or explain written contract terms but cannot contradict them;

4/ A set-off defense must pertain to contract being sued on instead of a separate agreement;

 

 

 

Retailers’ Sales Forecasts Not Factual Enough to Buttress Fraud In Inducement Claim (IL ND)

The Northern District of Illinois provides a useful synopsis of Federal court summary judgment standards and the scope of some Illinois business torts in a dispute over a canceled advertising contract to sell hand tools.

The plaintiff in Loggerhead Tools, LLC v. Sears Holding Corp., 2016 WL 5111573 (N.D.Ill. 2016) sued Sears when it canceled an agreement to promote the plaintiff’s Bionic Wrench product and instead bought from plaintiff’s competitor.   The plaintiff claimed that after Sears terminated their contract, it was too late for the plaintiff to supply product to competing retailers.  Plaintiff filed a flurry of fraud claims alleging the department store giant made inflated sales forecasts and failed to disclose it was working with  plaintiff’s competitor.  Sears successfully moved for summary judgment on the plaintiff’s claims.

Summary Judgment Guideposts

Summary judgment is appropriate where the movant shows there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.  Courts deciding summary judgment must view the facts in the light most favorable to the nonmoving party only if there is a “genuine” dispute as to those facts.  A genuine fact dispute exists where a reasonable jury could return a verdict for the nonmoving party. 

The summary judgment movant has the initial burden of establishing an absence of a genuine fact dispute.  Once the movant meets this burden, it then shifts to the nonmovant/respondent who must point to specific evidence in the record that shows there is a genuine issue for trial.  But only “material” factual disputes will prevent summary judgment.  A fact is material where it is important and could potentially affect the outcome of a case.

The summary judgment movant has the initial burden of establishing an absence of a genuine fact dispute.  Once the movant meets this burden, it then shifts to the nonmovant/respondent who must point to specific evidence in the record that shows there is a genuine issue for trial.  But only “material” factual disputes will prevent summary judgment.  A fact is material where it is important and could potentially affect the outcome of a case.

The summary judgment movant has the initial burden of establishing an absence of a genuine fact dispute.  Once the movant meets this burden, it then shifts to the nonmovant/respondent who must point to specific evidence in the record that shows there is a genuine issue for trial.  But only “material” factual disputes will prevent summary judgment.  A fact is material where it is important and could potentially affect the outcome of a case.

The summary judgment movant has the initial burden of establishing an absence of a genuine fact dispute.  Once the movant meets this burden, it then shifts to the nonmovant/respondent who must point to specific evidence in the record that shows there is a genuine issue for trial.  But only “material” factual disputes will prevent summary judgment.  A fact is material where it is so important that it could alter the case’s outcome.

Fraud Analysis:

The crux of Plaintiff’s fraud suit was that Sears strung Plaintiff along by creating the false impression that Sears would market Plaintiff’s products.  Plaintiff alleged that Sears concealed its master plan to work with Plaintiff’s competitor and only feigned interest in Plaintiff until Sears struck a deal with a competing vendor.

An Illinois fraud plaintiff must show:  (1) defendant made a false statement of material fact, (2) defendant knew the statement was false, (3) the defendant intended the statement to induce the plaintiff to act, (4) the plaintiff justifiably relied on the statement’s truth, and (5) plaintiff suffered damages as a result of relying on the statement.

A bare broken promise doesn’t equal fraud.  An exception to this “promissory fraud” rule is where the defendant’s actions are part of a “scheme to defraud:” that is, the defendant’s actions are part of a pattern of deception.  The scheme exception also applies where the plaintiff can show the defendant did not intend to fulfill his promise at the time it was made (not in hindsight).

In determining whether a plaintiff’s reliance on a defendant’s misstatement is reasonable, the court looks at all facts that the plaintiff had actual knowledge of as well as facts the plaintiff may have learned through ordinary prudence.

Here, Sears’ sales forecasts were forward-looking, “promissory” statements of hoped-for sales results.  Sears’ profuse contractual disclaimers that sales forecasts were just “estimates” to be used “for planning purposes” only and “not commitments” prevented the Plaintiff from establishing reasonable reliance on the projections.

The court also rejected the plaintiff’s fraudulent concealment claim.  To prevail on a fraud claim premised on concealment of material facts, the plaintiff must show that the defendant had a duty to disclose the material fact.  Such a duty will arise where the parties have a special or fiduciary relationship that gives rise to a duty to speak.  

Parties to a contract are generally not fiduciaries.  Relevant factors to determine whether a fiduciary relationship exists include (1) degree of kinship of the parties, and (2) disparity in age, health, mental condition, education and business experience between the parties.

Here, there was no disparity between the parties.  They were both sophisticated businesses who operated at arms’ length from one another.

Afterwords: This case provides a good distillation of summary judgment rules, promissory fraud and the scheme to defraud exception to promissory fraud not being actionable.  It echoes how difficult it is for a plaintiff to plead and prove fraud – especially in the business-to-business setting where there is equal bargaining power between litigants.

This case provides a good distillation of summary judgment rules, promissory fraud and the scheme to defraud exception to the promissory fraud rule.  The case further illustrates the difficulty of proving fraud – especially in the business-to-business setting where there is equal bargaining power between the parties.