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Runzheimer Int'l, Ltd. v. Friedlen

Runzheimer Int'l, Ltd. v. Friedlen

Supreme Court of Wisconsin

October 1, 2014, Argued; April 30, 2015, Filed

No. 2013AP1392

Opinion

 [*P1]  [**105]  [***881]    DAVID T. PROSSER, J. This case is before the court on certification by the court of appeals pursuant  [***882]  to Wis. Stat. § (Rule) 809.61 (2011-12).1 It requires us to examine the enforceability of a restrictive covenant signed by an existing at-will employee.

 [*P2]  David Friedlen (Friedlen) had worked for Runzheimer [****2]  International, Ltd. (Runzheimer) for more than fifteen years when Runzheimer required all of its employees, including Friedlen, to sign restrictive covenants. Runzheimer gave Friedlen two weeks to review the covenant, after which Friedlen was required to sign it or be fired. Friedlen chose to sign the covenant and continued to work for Runzheimer for more than two years before being terminated in 2011. Friedlen then sought employment at Corporate Reimbursement Services (CRS), one of Runzheimer's competitors.

 [*P3]  Runzheimer sued both Friedlen and CRS, alleging that Friedlen's employment at CRS constituted  [**106]  a breach of the restrictive covenant. Friedlen and CRS moved for summary judgment on Runzheimer's claims on grounds that the covenant was unenforceable because it lacked consideration. The Milwaukee County Circuit Court2 initially denied the motion. The parties then conducted additional discovery, Runzheimer filed an amended complaint, and Friedlen and CRS again moved for summary judgment. This time the court granted summary judgment against three of Runzheimer's four claims. The court ruled that Runzheimer's promise not to fire Friedlen immediately if he signed the restrictive covenant [****3]  was an illusory promise and did not constitute consideration to support the agreement because Runzheimer retained "the unfettered right to discharge Friedlen at any time, including seconds after Friedlen signed the Agreement."

 [*P4]  Runzheimer appealed, and the Wisconsin Court of Appeals certified the case to this court. In its certification, the court explained that Wisconsin law fails to adequately address whether an employer's forbearance of its right to terminate an existing at-will employee in exchange for the employee agreeing to a restrictive covenant constitutes lawful consideration.3

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2015 WI 45 *; 362 Wis. 2d 100 **; 862 N.W.2d 879 ***; 2015 Wisc. LEXIS 174 ****; 39 I.E.R. Cas. (BNA) 1797; 165 Lab. Cas. (CCH) P61,586

Runzheimer International, Ltd., Plaintiff-Appellant, v. David Friedlen and Corporate Reimbursement Services, Inc., Defendants-Respondents.

Prior History:  [****1] APPEAL from a final judgment of the Circuit Court for Milwaukee County, William W. Brash, III, Judge. (L.C. No. 2012CV859).

Runzheimer Int'l, Ltd. v. Friedlen, 2014 Wisc. App. LEXIS 342 (Wis. Ct. App., Apr. 15, 2014)

Disposition: Reversed and cause remanded.

CORE TERMS

promise, covenant, restrictive covenant, at-will, compete, forbear, fired, signing, lawful consideration, majority opinion, employees, terminate, good faith, fair dealing, continued employment, illusory, employment relationship, fraudulent inducement, circuit court, right to terminate, cases, constitutes, principles, parties, promisor's, Contracts, argues, summary judgment, hired, court of appeals

Contracts Law, Contract Formation, Consideration, General Overview, Labor & Employment Law, Employment Relationships, At Will Employment, Conditions & Terms, Trade Secrets & Unfair Competition, Noncompetition & Nondisclosure Agreements, Civil Procedure, Appeals, Summary Judgment Review, Standards of Review, Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Contract Interpretation, Sufficient Consideration, Exceptions, Standards of Performance, Illusory Promises, Good Faith & Fair Dealing, Affirmative Defenses, Fraud & Misrepresentation, Material Misrepresentations