Affinion Benefits Group, LLC v. Econ-O-Check Corp.
2011 U.S. Dist. LEXIS 30152
| M.D. Tenn. | 2011Background
- Affinion Benefits Group, LLC v. Econ-O-Check Corp. involves alleged inducement of breach of contract and TCPA violations in Tennessee federal court.
- Affinion alleges Econ-O-Check induced banks to breach joint marketing agreements and fee programs with Affinion, causing customer defections.
- EOC moves for summary judgment arguing the challenged contract provisions (same-or-similar and continuation-of-benefits) are unenforceable as a matter of law.
- Affinion cross-moves for summary judgment on EOC’s counterclaims (Sherman Act, intentional interference) and requests declaratory relief and injunctive relief concerning contract provisions.
- The court held hearings and granted partial summary judgment to EOC on the inducement claim to the extent based on unenforceable same-or-similar and COB provisions, denying other aspects of both parties’ motions.
- The jurisdiction is diversity (Delaware LLC and Georgia corporation, Tennessee district court).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of same-or-similar clauses under Tennessee law | Affinion contends clauses protect legitimate business interests; reasonable duration. | Clauses are restraints on trade and unenforceable as unreasonable post-termination covenants. | One-year same-or-similar clause unenforceable; inducement claim fails on this basis. |
| Enforceability of continuation-of-benefits (COB) clauses under public policy and federal law | COB protects Affinion’s costs and customer base; post-termination benefits lawful. | COB violates GLBA, Reg E, NACHA rules; violates public policy. | COB provisions unenforceable; inducement claim based on COB fails. |
| Effect of unenforceability on inducing breach claim | Affinion can still prove inducement apart from unenforceable clauses. | Without enforceable underlying contract, inducement claim cannot succeed. | Inducement claims fail because key provisions are unenforceable; court reserves other factual issues. |
| TCPA claim viability against EOC | Affinion asserts unfair or deceptive practices include misappropriation and deceptive conduct. | TCPA does not cover anticompetitive conduct; and evidence insufficient. | TCPA claim denied; however, court denies summary judgment on other grounds, leaving issues for trial. |
Key Cases Cited
- Hanger Prosthetics & Orthotics E., Inc. v. Kitchens, 280 S.W.3d 192 (Tenn.Ct.App.2009) (existence of enforceable contract required for inducement claim)
- New Life Corp. v. Thomas Nelson, Inc., 932 S.W.2d 921 (Tenn.Ct.App.1996) (threshold enforceability of contract for inducement)
- Emmco Ins. Co. v. Beacon Mut. Indem. Co., 204 Tenn. 540, 322 S.W.2d 226 (Tenn.1959) (public policy and enforceability of covenants)
- Allright Auto Parks, Inc. v. Berry, 409 S.W.2d 361 (Tenn.1966) (reasonableness of covenants not to compete)
- Vantage Tech., LLC v. Cross, 17 S.W.3d 637 (Tenn.Ct.App.1999) (factors for reasonableness of covenants in Tennessee)
- Statco Wireless, LLC v. Southwestern Bell Wireless, LLC, 95 S.W.3d 13 (Ark. Ct. App.2003) (covenant reasonableness and enforceability in agency/partnership context)