Kim Kinnavy ("Kinnavy") worked in the Illinois office of Del Monte Fresh Produce N.A., Inc. ("Del Monte") as district sales manager from 1999 until she resigned in 2007. As a sales manager, Kinnavy worked with customers who had banana supply contracts. Kinnavy signed Del Monte’s Policy of Trade Secret and Non-Competition ("Non-Compete Agreement") which provided, in relevant part, as follows:
For a period of 12 months from the date of Employee's separation from the employment with the Company, the Employee shall not be employed by ... or connected in any manner with, any business which represents, distributes, sells or brokers fresh vegetables, fresh fruit, and other fresh produce products: (a) to any person who or entity which is a customer of the Company on the date of termination of the Employee's employment ... or during the 12 month period prior thereto ... or (b) on behalf of or supplied by any person who or entity which is a supplier of the Company at the date of termination ...
After resigning, Kinnavy went to work for Chiquita Brands International, one of Del Monte's chief competitors. Del Monte sued Kinnavy for breach of the Non-Compete Agreement. In a decision rendered on March 19, 2009, the United States District Court stated as follows:
In Illinois, restrictive covenants are disfavored in the law and closely scrutinized because they are repugnant to the public policy encouraging an open and competitive marketplace. . . . Post-employment restrictive covenants ‘operate as partial restrictions on trade’ and must be carefully scrutinized by the reviewing court. Nevertheless, a restrictive covenant may be enforceable if its terms are ‘reasonable and necessary to protect a legitimate business interest of the employer.’ A ‘restrictive covenant's reasonableness is measured by its hardship to the employee, its effect upon the general public, and the reasonableness of the time, territory, and activity restrictions.’ The Court found the restrictive covenant in the Non-Compete Agreement signed by Kinnavy was too broad and far-reaching to be enforceable, for the following reasons:
First, the Non-Compete contained no geographic restrictions. The Court stated: "Even if Kinnavy were to move to Lagos, Nigeria, she would still be bound by the restrictive covenant; this is unreasonable."
Second, the Non-Compete agreement also contained blanket prohibitions on the types of employment Kinnavy could pursue. The Court stated: "In Illinois, an individual has a fundamental right to use his general knowledge and skills to pursue the occupation for which he is best suited. . . .
But here, the Non-Compete prohibits Kinnavy from ‘being connected in any manner with’ an entity that bought fruit, vegetables, or other produce from Del Monte. Under these terms, Kinnavy could not work as a cashier at a Piggly-Wiggly that bought produce from Del Monte. These restrictions are simply too broad to be enforceable."
Pursuant to the severability clause contained in the Non-Compete Agreement, Del Monte asked the Court to re-write the restrictive covenant so it was in compliance with Illinois law. The Court declined to do so for the reason that the restrictive covenant was simply too broad and far-reaching to be salvageable. The Court has the option of "blue-penciling" these types of restrictions, but it frequently declines to do so since substantial modification and/or deletions to the covenant would be required.
Finally, since the restrictive covenant contained in the Non-Compete Agreement was invalid as a matter of law, the Court addressed the issue of whether the valid portions of the Non-Compete Agreement could be severed from the document. In general, courts which will enforce a contract with a portion severed when the severed portion does not go to the contract's essence. In this case, the restrictive covenant was an essential feature of the contract at issue. The plain language of the contract stated: "Each of the above provisions is essential to the Company and the Company would not furnish the Employee the consideration set forth in this Policy absent the Employee's agreement to abide by and be bound by each of the above provisions."
The Court concluded Del Monte intended the Non-Compete Agreement to be an all or nothing, take it or leave it proposition. In other words, the Non-Compete Agreement was not divisible. A contract is not divisible where the parties assented to all the promises as single whole so that there would have been no bargain whatsoever if any promise or set of promises were struck out. Accordingly, the Court concluded, the entire Non-Compete Agreement was invalid and unenforceable.
This case stands for the proposition that patently unreasonable and overbroad restrictive covenants will be struck from employment-type agreements, and potentially render an entire agreement invalid. Please do not hesitate to contact us if you have any questions about restrictive covenants, non-competition agreements, or this case.
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