Professional Documents
Culture Documents
Runzheimer Int'l v. Friedlen (Wisconsin)
Runzheimer Int'l v. Friedlen (Wisconsin)
SUPREME COURT
CASE NO.:
COMPLETE TITLE:
OF
WISCONSIN
2013AP1392
Runzheimer International, Ltd.,
Plaintiff-Appellant,
v.
David Friedlen and Corporate Reimbursement
Services, Inc.,
Defendants-Respondents.
Circuit
Milwaukee
William W. Brash
ATTORNEYS:
2015 WI 45
NOTICE
This opinion is subject to further
editing and modification.
The final
version will appear in the bound
volume of the official reports.
No.
2013AP1392
(L.C. No.
2012CV859)
STATE OF WISCONSIN
IN SUPREME COURT
FILED
v.
Diane M. Fremgen
Clerk of Supreme Court
Defendants-Respondents.
APPEAL
from
final
judgment
of
the
Circuit
Court
for
Reversed and
cause remanded.
DAVID T. PROSSER, J.
809.61
(2011-12).1
It
requires
us
to
examine
the
No.
David
International,
when
Friedlen
Ltd.
Runzheimer
Friedlen,
to
(Friedlen)
(Runzheimer)
required
sign
had
for
all
of
restrictive
worked
more
its
2013AP1392
for
than
Runzheimer
fifteen
employees,
covenants.
years
including
Runzheimer
gave
covenant and continued to work for Runzheimer for more than two
years before being terminated in 2011.
employment
at
Corporate
Reimbursement
(CRS),
one
of
Runzheimer's competitors.
3
Friedlen's
employment
restrictive
covenant.
at
CRS
constituted
Friedlen
and
CRS
breach
moved
for
of
the
summary
The Milwaukee
The parties
and
Friedlen
and
CRS
again
moved
for
summary
judgment.
three
Runzheimer's
of
Runzheimer's
promise
four
not
to
claims.
fire
The
Friedlen
court
ruled
immediately
that
if
he
No.
at
any
time,
including
seconds
after
Friedlen
2013AP1392
signed
the
Agreement."
4
Runzheimer
appealed,
and
the
Wisconsin
Court
of
In its certification,
the
fails
court
address
terminate
explained
whether
an
an
that
Wisconsin
employer's
existing
law
forbearance
at-will
employee
in
of
to
adequately
its
right
exchange
for
to
the
for
theoretically,
an
signing
employer
restrictive
could
covenant.
terminate
an
Although,
employee's
Because the
we
decline
to
address
it.
Accordingly,
we
reverse the decision of the circuit court and remand the cause
3
No.
to
that
court
for
further
proceedings
2013AP1392
consistent
with
this
opinion.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
7
Friedlen
Wisconsin
mobility
travel
was
an
corporation
services
that
relating
management,
programs."
Runzheimer
Runzheimer,
different
employee
provides
to
hired
"a
business
corporate
Development Consultant.
for
at-will
Runzheimer,
range
of
vehicles,
aircraft,
Friedlen
at
and
in
employee
relocation,
virtual
1993
as
office
Business
except
from
capacities.
2001
Friedlen
to
2006
when
participated
he
in
worked
in
Runzheimer's
the
consisted
year
of
he
was
bonuses
employee's territory.
hired.
based
Runzheimer's
on
percentage
Incentive
Plan
sales
the
of
in
restrictive
covenant.
Runzheimer's
Director
of
Business
Program
also
was
contingent
on
his
signing
the
restrictive covenant.
9
No.
2013AP1392
Incentive
Plan
in
addition
to
his
regular
compensation.
No.
restrictive covenant.
2013AP1392
Following
his
termination,
Friedlen
reached
out
to
guidelines
to
determine
how
employers
can
reimburse
personal
vehicles.
Friedlen
retained
independent
covenant
was
not
enforceable.
CRS
then
offered
He
demanding
his
Friedlen
ignored
restrictive
compliance
with
Runzheimer's
covenant
was
the
demand
restrictive
because
he
unenforceable.
covenant.
believed
the
Consequently,
2012,
covenant,
alleging:
(2)
(1)
Friedlen
Friedlen
breached
misappropriated
the
restrictive
Runzheimer's
trade
No.
13
seeking
On
February
dismissal
16,
(or,
Runzheimer's claims.
was
unenforceable
Friedlen
and
alternatively,
CRS
2013AP1392
filed
summary
motion
judgment)
of
it
lacked
consideration.
The
On
November
5,
2012,
after
conducting
additional
additional
claim
of
common
law
misappropriation
of
of
tortious
interference
with
prospective
business
On November 15,
Friedlen and CRS again moved for summary judgment on all claims.
15
On
defendants'
claim.
May
14,
motion
In
on
explaining
2013,
all
its
the
claims
ruling
circuit
except
on
court
the
granted
the
misappropriation
Runzheimer's
breach
of
Such a promise
The fact
The
court
determined
that
Wisconsin
law
does
not
No.
analysis
of
employment-at-will
situations,
as
2013AP1392
well
as
this
claims against CRS and Friedlen with prejudice, and an order for
dismissal was filed on June 4, 2013.
on June 19.
entered
into
by
an
existing
at-will
employee."
We
Co.,
2009
WI
67,
10,
318
769
N.W.2d 481.
Dal Pra, 2009 WI 76, 18, 319 Wis. 2d 274, 767 N.W.2d 898.
19
"Wisconsin
employment
like
between
employers
hiring
that
relationship.
Cir.
2002)
N.W.2d 666
any
and
courts
treat
other
contract,"
at-will
supplant
or
contracts
including
employees
modify
concerning
the
formed
agreements
subsequent
original
to
employment
(citing
(1985)).
Ferraro
A
v.
Koelsch,
covenant
8
not
to
124
Wis. 2d 154,
compete
is
368
such
No.
contract.
NBZ,
N.W.2d 93
(Ct.
Inc.
App.
v.
Pilarski,
1994)
(citing
185
2013AP1392
Wis. 2d 827,
Behnke
v.
Hertz
837,
520
Corp.,
70
The
elements
of
an
enforceable
acceptance
consideration
contract."
are
is
mutual
evidence
NBZ,
185
are
offer,
contract
expressions
of
the
Wis. 2d at
intent
837
of
to
assent,
be
bound
Arthur
(citing
to
and
the
Linton
of
the
promisor . . . .
Neither
the
benefit
to
the
See
(quoting
Samuel
Williston
&
Walter
H.E.
Jaeger,
also
Hardscrabble
Wis. 2d 334,
344,
promise
for
constitute
bilateral
166
Ski
N.W.2d 191
promise,
consideration
nature."
Area
or
to
Ferraro,
the
v.
Nat'l
(1969).
exchange
support
124
First
any
Bank,
42
Additionally,
"a
of
promises,
contract
Wis. 2d at
of
will
[a]
164
(citations
an
employer's
omitted).
B. Legal Background
22
We
have
previously
addressed
whether
No.
2013AP1392
See Wis. Ice & Coal Co. v. Lueth, 213 Wis. 42, 43, 250 N.W. 819
(1933).5
lawful
existing
consideration
at-will
either.
employees
who
Runzheimer
are
required
argues
to
that
sign
employees
because
in
both
cases
the
employer
is
as
they
are
several
years
later.
Accordingly,
employee's
signing
of
restrictive
covenant
constitutes
lawful consideration.
24
the
creation
circumstances
relationship.
relationship,
of
an
at-will
surrounding
He
both
argues
parties
employment
an
that
existing
at
experience
relationship
the
at-will
from
employment
beginning
numerous
the
of
detriments
the
and
See also Eureka Laundry Co. v. Long, 146 Wis. 205, 131
N.W. 412 (1911), for extended discussion of the issue.
10
No.
benefits.
2013AP1392
employers
expend
resources
on
workers'
compensation,
to
the
facility,
business
information,
at
the
beginning
of
the
relationship
supports
However,
Friedlen
argues,
there
is
not
similar
employee
something
in
addition
to
promising
continued
employment.6
26
of an employee who has worked for the same employer for a number
of
years.
The
employee
may
develop
specialized
skills
and
Some
examples
of
what
may
suffice
as
additional
consideration in states that require it include "increased
wages, a promotion, a bonus, a fixed term of employment, or
perhaps access to protected information."
Labriola v. Pollard
Group, Inc., 100 P.3d 791, 794 (Wash. 2004) (en banc).
11
No.
2013AP1392
another
restrictive
employerexcept
covenant.
These
for
skills
the
newly
and
established
knowledge
may
not
Given
these
different
circumstances,
we
decline
to
forbearance
of
its
right
to
terminate
an
at-will
Instead, we believe
Direct.
Both
NBZ
and
Star
Direct
involved
restrictive
cases to argue that neither this court nor the Wisconsin Court
of Appeals has ruled that forbearance of the right to terminate
an at-will employee does not constitute lawful consideration for
a restrictive covenant.
No.
2013AP1392
that NBZ is not dispositive of the issue but that our holding in
Star
Direct
conflicting
provides
reliance
on
ruling
in
these
his
two
favor.
cases
The
suggests
parties'
that
an
consideration
exists
if
an
employer
does
not
condition
an
Studio 890, a
the
Id. at 833-34.
salon
and
began
working
for
one
of
Studio
890's
Studio
890
sued
Pilarski,
seeking
permanent
Id.
as
it
is
subject
to
both
common
law
contract
Id. at 836.
No.
31
2013AP1392
that
the
covenant
was
not
Id. at 838.
supported
by
The court
consideration
because "the evidence [did] not show that Studio 890 conditioned
employment or promised to do anything in exchange for Pilarski's
signing the covenant."
32
Id. at 839.
employee
lacks
consideration
when
the
employer
neither
nor
the
promises
to
covenant.
whether
lawful
do
anything
This
ruling
else
did
consideration
in
exchange
not
would
for
affirmatively
exist
if
an
employment
on
his
or
her
signing
proffered
restrictive covenant.
33
In
Star
Direct,
this
court
addressed
whether
an
when
the
employer
does
not
require
the
same
from
14
No.
route.
2013AP1392
After working for Star Direct for about four years, Dal
Id.,
sought
injunctive
relief
to
prevent
Id., 12.
Dal
Pra
Star
from
Id., 13.
Star Direct explained that "there was the obvious risk that the
current employees would not sign them if asked to, or would
leave and begin competing with Star Direct."
35
We
disagreed
with
Dal
Pra
Id., 50.
that
Star
Direct's
legitimately
feared
the
possibility
that
the
new
Id., 51.
In
may
not
compel
their
existing
employees
to
sign
Id.,
50
Star
(citing
Direct
NBZ,
decision
185
did
Wis. 2d at
not
837-39).
explain
"additional consideration."
15
what
However,
would
the
constitute
No.
36
2013AP1392
demonstrates
an
employer's
promise
of
continued
continued
employment
meant
nothing
because
an
at-will
NBZ
satisfies
the
requirement it describes.
"additional
consideration"
Jurisdictions
forbearance
throughout
of
the
right
the
to
country
are
terminate
split
an
on
at-will
not
to
compete
represent
the
"distinct
minority."
Simko, Inc. v. Graymar Co., 464 A.2d 1104, 1107 (Md. Ct. Spec.
App. 1983).
16
No.
39
2013AP1392
Restatement
8.06
cmt.
(Third)
e
of
(2014)
Employment
("Continuing
Law,
Proposed
employment
of
Final
an
See
Draft
at-will
In
Wisconsin,
"[f]orbearance
in
exercising
legal
17
No.
Coll.,
Inc.,
154
Wis. 2d 831,
837,
454
2013AP1392
N.W.2d 356
(Ct.
App.
1990) (citing Hammel v. Ziegler Fin. Corp., 113 Wis. 2d 73, 81,
334 N.W.2d 913 (Ct. App. 1983)).
in
restrictive
exchange
for
the
covenant
valid
employee
example
immediately
of
signing
"forbearance
a
in
doctrine.
Wisconsin
has
an
exception
to
the
at-will
doctrine
Id.
at-will
doctrine
is
in
the
interest
of
the
public,
conditions
compete
Id. at 574.
and
is
to
take
reduce
the
business
risk
from
18
that
the
former
company.
employees
Many
will
employers
No.
2013AP1392
103.465.
44
Thus,
if
Friedlen
had
not
signed
the
restrictive
Runzheimer
did
Friedlen's employment.
to
fire
Friedlen
for
not
exercise
its
right
to
terminate
promise
not
to
compete
with
was
contract
is
illusory
when
it
is
Metro.
Ventures, LLC v. GEA Assocs., 2006 WI 71, 33, 291 Wis. 2d 393,
717
N.W.2d 58
(alteration
in
original)
(quoting
Nodolf
v.
Nelson, 103 Wis. 2d 656, 660, 309 N.W.2d 397 (Ct. App. 1981)).
Put another way, "[t]he fundamental element of [an illusory]
promise
is
promisor's
expression
of
intention
that
the
19
No.
2013AP1392
covenant
was
not
illusory
because
it
was
not
promise
Rather,
and
for
that
reason.
Thus,
Runzheimer
performed
An
the
at-will
employee
employment
has
just
relationship
as
as
the
much
power
employer
to
does.
relationship
in
exchange
for
Friedlen
signing
the
20
No.
covenant.
fact,
we
2013AP1392
repeatedly
recognized
the
existence
of
In
lawful
working
for
the
employer
in
exchange
the
employer
is
not
getting
for
In these
"additional
If
11
21
No.
2013AP1392
v.
1994).
Suess,
24
F.3d
941,
947
(7th
Cir.
It
is
more
appropriate for forbearance of the right to fire an existing atwill employee to constitute lawful consideration.
49
We
22
Lawful
No.
2013AP1392
51
It
is
true
that
shortly
after
Friedlen
signed
the
This possibility
23
No.
illusory.
2013AP1392
a situation.
53
Wis. 2d 207, 209, 293 N.W.2d 530 (1980), we stated that "if a
party to a contract is induced to manifest his assent to the
contract
by
[]
means
of
fraudulent
or
material
voidable
if
the
misrepresentation."
recipient
Thus,
justifiably
an
employee
relies
who
relies
on
the
on
an
dealing
between
the
parties
to
it . . . ."
Beidel
v.
Sideline Software, Inc., 2013 WI 56, 27, 348 Wis. 2d 360, 842
N.W.2d 240 (quoting Chayka v. Santini, 47 Wis. 2d 102, 107 n.7,
176 N.W.2d 561 (1970)).
disfavors
"following
the
letter
but
not
the
spirit
of
an
Id.
employee
if
the
employee
agrees
to
sign
restrictive
No.
2013AP1392
sought
to
breach,
id.,
28
restrictive
prevent,"
(citation
covenant
which
constitutes
omitted),
unenforceable.
and
The
an
independent
would
make
modification
in
the
the
contract
modification
that
of
would
reasonable
become
duration;
unenforceable
and
if
it
the
is
the
employer
great
economic
expense."
Yet,
employees
who
wish
to
same
burden,
as
the
"burden
of
proving
failure
of
Our
sign
57
Normally,
restrictive
an
employer
covenant
that
does
requires
so
an
because
employee
the
to
employer
No.
2013AP1392
get
employees."
58
reputation
for
tricky
dealings
with
their
Id.
Thus, although the parties did not argue the case in this way,
it is likely that Runzheimer could have prevailed in the circuit
court under a theory that Friedlen's actual continued employment
for 29 months constituted lawful consideration.
III. CONCLUSION
59
in
exercising
constitutes
Although,
its
lawful
right
to
terminate
consideration
theoretically,
an
for
an
at-will
restrictive
employer
could
employee
covenant.
terminate
an
contract
inducement
or
formation
good
faith
principles
and
fair
such
as
dealing,
fraudulent
so
that
the
Because the
We therefore
reverse the decision of the circuit court, and remand the cause
26
No.
2013AP1392
27
No.
61
SHIRLEY
S.
ABRAHAMSON,
C.J.
2013AP1392.ssa
The
(concurring).
Ltd.)
and
one
of
its
former
employees
(David
question
between
an
presented
employer
is
and
whether
an
covenant
existing
not
at-will
to
compete
employee
is
years.
Runzheimer
did
not
promise
to
continue
employing
He was
The
consideration
compete.
majority
An
majority
for
holds
Friedlen's
internal
opinion
opinion
and
that
signing
contradiction,
renders
its
the
Runzheimer
covenant
however,
holding
provided
not
pervades
ambiguous
to
the
and
troublesome.
65
Majority op., 2.
1
No.
that
reason."
Runzheimer
therefore
"performed
2013AP1392.ssa
immediately,"
to
fire
Runzheimer's
constituted
Friedlen
at
forbearance
consideration
that
from
for
time."3
In
immediately
Friedlen's
other
firing
signing
words,
Friedlen
the
covenant
not to compete.
66
On
the
other
hand,
the
majority
opinion
determines
If
Friedlen had been fired shortly after signing the covenant, then
according to the majority opinion, Friedlen could have brought
suit to prevent the covenant's enforcement.
More specifically,
fraudulent
protect
inducement
Friedlen
from
and
being
good
fired
and
shortly
fair
after
dealing
signing
to
the
Id., 46.
Id., 5, 59.
Id., 5.
2
No.
2013AP1392.ssa
Thus,
to
hold
that
the
covenant
not
to
compete
is
of
fraudulent
inducement
and
good
faith
and
fair
Understood
70
begin
by
examining
the
majority
opinion's
stated
In other
more
than
promise
to
forbear
from
immediately
As
the
majority
opinion
explains,
promise
is
Id., 46.
3
No.
about
is
left
wholly
discretion . . . ."7
to
his
[or
her]
2013AP1392.ssa
own
will
and
Corbin on Contracts
There
C's
is
no
promise
meaningful
in
distinction,
Corbin's
in
prototypical
my
opinion,
example
and
Runzheimer's forbearance
Thus,
if
Runzheimer
immediately
firing
Friedlen,
promise
Friedlen
to
was
promised
to
then
my
illusory.
in
forbear
view
Accordingly,
only
from
Runzheimer's
under
this
No.
interpretation
of
Runzheimer's
promise,
2013AP1392.ssa
Runzheimer
failed
to
The
to
majority
forbear
opinion
from
employee is illusory.
its
interpretation
seems
to
immediately
recognize
terminating
that
an
the
at-will
Runzheimer's
promise,
Runzheimer
the
covenant
not
to
compete.11
The
majority
opinion
If
immediately
Runzheimer
terminating
promised
Friedlen's
only
at-will
to
forbear
employment,
from
then
12
Id.
5
No.
2013AP1392.ssa
majority
Friedlen
to
Friedlen
for
opinion
be
more
as
reinterprets
than
long
as
Runzheimer's
promise
Runzheimer
to
promise
forbear
wished
to
from
to
firing
forbear.
The
Unless
doctrines
of
Runzheimer's
fraudulent
promise
inducement
is
and
so
interpreted,
good
faith
and
the
fair
brief
examination
of
the
doctrines
of
fraudulent
First,
fraudulent
inducement
occurs
when
the
engages
recklessly
in
making
"fraudulent
a
false
behavior"
statement
when
by
that
knowingly
statement
A
or
is
intended to defraud the other party and induce him or her to act
13
No.
2013AP1392.ssa
upon it, and when the other party in fact believes the false
statement and relies upon it to his or her detriment.14
81
Thus,
to
show
that
Runzheimer
fraudulently
induced
all
Runzheimer
promised
was
to
forbear
from
terminating
After all,
The
14
Id., 27.
7
No.
2013AP1392.ssa
In other
Thus,
covenant
of
to
good
show
faith
that
Runzheimer
and
fair
breached
dealing,
the
Friedlen
implied
cannot
If
all
Runzheimer
promised
was
to
forbear
from
be
none.
An
at-will
employment
contract
specifically
authorizes the employer to fire the employee at any time and for
any reason.
84
conclude
that
Friedlen's
claims
of
fraudulent
inducement and good faith and fair dealing are doomed to failure
if Runzheimer promised to forbear only from immediately firing
Friedlen.
promising
Friedlen
to
a
terminate
reasonable
its
time,
employment
then
had
relationship
with
Runzheimer
fired
Id., 29.
19
No.
2013AP1392.ssa
Friedlen
signed
the
covenant
not
to
compete.
This
states
that
Runzheimer
promised
to
forbear
from
firing
promise
constitutes
to
forbear
consideration
from
for
immediately
Friedlen's
It states
firing
signing
the
Friedlen
covenant
The
Reporters'
Restatement
Notes
to
(Third)
Comments
of
e.
Employment
9
and
Law,
f.
to
8.06
Proposed
of
Final
the
Draft
No.
(2014).
that
2013AP1392.ssa
These cases are all over the map, but many states hold
promise
of
continued
indefinite
employment
is
promise
to
forbear
from
firing
the
employee
for
as
Friedlen
opinion
having
for
as
Friedlen's
a
in
implicitly
reasonable
effect
signing
the
promised
time.
holding
covenant
I
just
not
to
forbear
from
firing
understand
the
that:
exchange
to
In
compete,
majority
for
Runzheimer
20
No.
2013AP1392.ssa