436 N.E.2d 349 | Ind. Ct. App. | 1982
Defendant-appellant Harter L. Leather-man, Jr. appeals from the trial court’s issuance of a preliminary injunction against him. The injunction prohibited Leather-man from conducting any business with any clients of plaintiff-appellee Management Advisers, Inc. (MAI) for a period of three years from April 15, 1981.
Leatherman is an insurance agent and pension consultant. MAI is in the business of selling and administering various kinds of insurance programs. In 1976, Leather-man became acquainted with William Garrity who is president of MAI. Thereafter, Leatherman became an independent consultant to an affiliate of MAI. After negotiating with Garrity for some months, Leatherman became an employee of MAI in August of 1978.
Discretion to grant or deny preliminary injunctive relief is measured by several factors: (1) whether the plaintiff’s remedies at law are inadequate thus causing irreparable harm pending the resolution of the substantive action if the injunction does not issue; (2) whether the plaintiff has demonstrated at least a reasonable likelihood of success at trial by establishing a prima facie case; (3) whether the threatened injury to the plaintiff outweighs the threatened harm the grant of the injunction may inflict on the defendant; (4) whether, by the grant of the preliminary injunction, the public interest would be disserved.
Leatherman challenges only the trial court’s finding that MAI had demonstrated a reasonable likelihood of success at trial.
Consideration is an essential element of every contract. Puetz v. Cozmas, (1958) 237 Ind. 500, 147 N.E.2d 227. Thus, Leath-erman’s promise to not compete with MAI must have been supported by adequate consideration to be enforceable. MAI contends, however, that there was adequate consideration to support the second non-piracy. agreement. MAI first argues that consideration was provided by the contemporaneous purchase of two insurance accounts from Leatherman. At about the same time that the second non-piracy agreement was executed, Leatherman sold to MAI two insurance accounts.
The consideration for one instrument may be found in a contemporaneous instrument. Torres v. Meyer Paving Co., (1981) Ind.App., 423 N.E.2d 692. However, contemporaneously executed contracts are construed together only when they relate to the same transaction or subject matter. See Baker v. Gordon, (1960) 130 Ind.App. 585, 164 N.E.2d 118. In this case, the two contracts did not relate to the same transaction or subject matter. One contract dealt with Leatherman’s employment, which had been ongoing for some time. The other contract dealt with the sale of insurance accounts. This case is unlike McGann & Marsh Co. v. K & F Manufacturing Co., (1979) Ind.App., 385 N.E.2d 1183, cited by MAI. In McGann & Marsh the two separate contracts were part of a package transaction. The attorney involved used two separate agreements because of his concern with tax consequences. In the present case, there was no such concern. Two documents were used because these were two separate and unrelated agreements. The purchase of two insurance accounts by MAI does not constitute adequate consideration to support the non-piracy covenants.
MAI also contends that Leather-man’s continued employment served as adequate consideration to support the non-piracy covenants. Whether continued employment is adequate consideration to support a covenant not to compete was specifically left undecided by this court in Advanced Copy Products, Inc. v. Cool, (1977) 173 Ind. App. 363, 363 N.E.2d 1070, and has not been subsequently decided by any Indiana case.
The courts of other jurisdictions which have considered whether continued employment is adequate consideration to support a covenant not to compete have split on the result. Compare George W. Kistler, Inc. v. O’Brien, (1975) 464 Pa. 475, 347 A.2d 311 with Farm Bureau Service Co. v. Kohls, (Iowa 1972) 203 N.W.2d 209. See generally Annot., 51 A.L.R.3d 825 (1973). The view that continued employment is adequate consideration to support a noncompetition covenant is very narrowly the majority position. The more recent cases, however, are somewhat more likely to find that continued employment is not adequate consideration.
We agree with those cases that hold that continued employment is not sufficient consideration to support a covenant not to compete. When an employee agrees to a covenant not to compete in exchange for continued employment he gains nothing that he did not already have and the employer is under no additional obligation. Continued employment for an indefinite period at the employer’s discretion is illusory consideration. An employee could agree to the covenant one day and be fired the next day. The opportunity for coercion is too great. Thus, we hold that the second non-piracy agreement is void for lack of consideration and not binding on Leatherman. The trial court erred in finding that MAI had demonstrated a likelihood of success at trial by establishing a prima facie case. Therefore, the issuance of an injunction was improper.
The judgment is reversed and the case is remanded to the trial court for proceedings consistent with this opinion.
.' The exact date of Leatherman’s employment, either August 1, 1978 or August 11, 1978, is in dispute. However, the exact date is not important for the resolution of this appeal.
. The “non-piracy” provisions of the agreement were as follows:
(5) In the event this agreement is terminated by the Employer, Employee hereby covenants and agrees with the Employer that he will not for a period of three (3) years from the date of such discharge, transact any business with any (individual) persons and/or (corporate-commercial) accounts and/or Association and its member accounts doing business with the Employer at the time of such termination without first obtaining the written consent of Employer. Excluded from this paragraph and also paragraph 6 hereunder are any contracts of insurance generated by Leatherman prior to August 15, 1978 and the persons, entities or corporations who had purchased same.
(6) In the event of the voluntary termination of employment of the Employee, Employee hereby covenants and agrees with the Employer, that he will not for a period of three (3) years from the date of such termination, transact any business with any (individual) persons and/or (corporate-commercial) accounts and/or Association and its member accounts doing business with the Employer at the time of such termination without first obtaining the written consent of Employer. See paragraph 5 hereinabove for exclusions.
.The first and second agreements are identical except that the exclusions in the last sentence of paragraphs 5 and 6 of the first agreement were deleted from the second agreement.
. We note that the trial court’s findings of fact were not very specific. See Ind.Rules of Procedure, Trial Rule 65(D). This lack of specificity is not assigned as error and because we resolve the appeal on other grounds, we need not decide whether it was in fact error.
. The record is unclear as to the exact date that the two insurance contracts were sold to MAI. However, the exact date is not important for the resolution of this appeal.