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COURT OF APPEALS
DECISION
DATED AND FILED
December 16, 2008
David R. Schanker
Clerk of Court of Appeals
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NOTICE
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This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official
Reports.
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See Wis. Stat. § 808.10 and Rule 809.62.
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Appeal No.
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STATE OF WISCONSIN
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IN COURT OF
APPEALS
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DISTRICT II
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John Martin,
Plaintiff-Appellant,
v.
Stassen Insurance Agency, Inc.,
Defendant-Respondent.
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APPEAL
from a judgment of the circuit court for Walworth County: Robert
J. Kennedy, Judge. Affirmed.
Before Curley, P.J., Fine and Kessler, JJ.
¶1 FINE, J. John Martin
appeals a judgment dismissing his declaratory-judgment action against his
former employer, the Stassen Insurance Agency, Inc. Martin claims that the circuit court erred
when it upheld choice-of-law and forum-selection clauses in an employment
contract requiring that any dispute between Martin and Stassen Insurance be
resolved by Illinois law in certain Illinois state or federal courts. We affirm.
I.
¶2 Martin sold insurance for Stassen Insurance in its Woodstock, Illinois,
office. The “Stassen Insurance Agency”
was a sole proprietorship when Martin signed his employment agreement with the
firm in July of 1997. On January 1, 1998, the sole
proprietorship merged into a corporation, the “Stassen Insurance Agency,
Inc.” Martin was notified of the merger
and continued to work for the corporation. The employment agreement had choice-of-law and
forum-selection clauses:
17. GOVERNING
LAW:
This Agreement shall be governed in
all respects, whether as to validity, construction, capacity, performance, or
otherwise, by the laws of the State of Illinois.
….
19. CONSENT
TO JURISDICTION:
Any
suit or proceeding arising out of or related to this Agreement shall be
commenced only in a state court located in McHenry County,
Illinois or a federal court located in Rockford, Illinois,
and each party to this Agreement hereby consents to the exclusive jurisdiction
of such courts.
(Uppercasing and
bolding in original.) The employment
agreement also had a covenant not to compete and a restrictive covenant
governing non-competition and confidential customer information.
¶3 In September of 2007, Martin resigned his employment with
Stassen Insurance and started an insurance agency in Lake Geneva, Wisconsin. This spawned two legal actions—one in Wisconsin and one in Illinois.
¶4 On October 23, 2007, Martin sued Stassen Insurance in the
Circuit Court for Walworth County, Wisconsin, seeking declarations
whether: (1) the employment agreement
“was assigned or otherwise transferred to Stassen Insurance Agency, Inc.”; and
(2) the post-employment restrictions in the employment agreement, particularly
the restrictive covenant, were valid and enforceable under Wis. Stat.
§ 103.465 (restrictive covenants in employment contracts). See
Wis. Stat.
§ 806.04(2) (Uniform Declaratory Judgments Act).
¶5 Martin’s lawyer then sent a letter dated October 29, 2007, to Stassen Insurance
telling it of the declaratory-judgment action and trying to settle the case:
At Mr. Martin’s request I have filed a declaratory
judgment action in Walworth
County to ask the
Court to determine whether the contract is enforceable, and if so, whether the
post employment restriction is valid and enforceable.
However, before proceeding with any type of litigation,
I thought it appropriate and prudent to write you and advise you of the filing
of this lawsuit and to allow you the opportunity to review this issue with your
counsel. That is, I have not taken steps
to have the summons and complaint served, and will withhold taking any action
to serve the summons and complaint for a period of 30 days to allow you to
review this issue with your counsel.
¶6 On December
5, 2007, Stassen Insurance sued Martin in the Circuit Court for McHenry County, Illinois,
seeking to enforce the covenant not to compete and the restrictive covenant. On December 6, 2007, the Illinois circuit court issued a temporary
restraining order prohibiting Martin from “engaging in any competitive act
which involves any existing or former client” of Stassen Insurance. Sometime on that same day, Martin served the Wisconsin summons and complaint on Stassen
Insurance.
¶7 On January
10, 2008, Stassen Insurance filed an answer in the Wisconsin case. It
also moved to dismiss that case under the choice-of-law and forum-selection
clauses, or in the alternative, stay it pending the outcome of the Illinois case. In support, Stassen Insurance submitted an
affidavit from John Stassen, the president of Stassen Insurance, in which he
claimed, as material that:
·
Stassen Insurance was founded in 1967 and had
“always” been located in Woodstock,
Illinois.
·
Stassen Insurance was “an Illinois domestic corporation.”
·
Martin lived in Harvard, Illinois
when he signed the employment agreement.
·
Martin moved to Wisconsin in May of 1999.
·
Martin “always” worked out of the Woodstock, Illinois
office.
Martin did not
dispute any of these averments, but contended that Wisconsin law applied because:
(1) he now lived in Wisconsin;
and (2) his business was in Wisconsin.
¶8 On February
19, 2008, the Illinois
circuit court issued a preliminary injunction prohibiting Martin from
“soliciting or accepting any form of insurance business from any customer as of
9/26/07 of
[Stassen Insurance] or from using the confidential information of [Stassen
Insurance] regarding its customers.”
¶9 On March
10, 2008, Stassen Insurance’s lawyer told the Wisconsin circuit
court that the Illinois circuit court had
entered a preliminary injunction enforcing the employment agreement, representing
that “[t]hroughout proceedings in the Illinois Litigation, the parties have
proceeded under Illinois
law. Martin has never contested that, or
taken the position that Wisconsin law applies
to the contract.” The lawyer also
submitted Martin’s deposition testimony that he lived in Harvard, Illinois
“at the time [he] executed the Employment Agreement.”
¶10 As we have seen, the Wisconsin circuit court granted Stassen
Insurance’s motion to dismiss, concluding that Illinois law applied.
II.
¶11 In deciding Stassen Insurance’s motion to dismiss, the circuit
court had before it many exhibits, affidavits, and Martin’s deposition. Accordingly, we consider the motion as one
for summary judgment. See Wis. Stat. Rule 802.06(2)(b) (“If
… matters outside of the pleadings are presented to and not excluded by the
court, the motion shall be treated as one for summary judgment.”). We review de
novo a circuit court’s grant of summary judgment. Green Spring Farms v. Kersten, 136 Wis. 2d 304, 315–317,
401 N.W.2d 816, 820–821 (1987). Summary
judgment must be granted when there is no genuine issue of material fact and a
party is entitled to judgment as a matter of law. Wis. Stat.
Rule 802.08(2).
¶12 This case turns on whether the choice-of-law and forum-selection
clauses in the employment agreement are valid.
This is also a question of law that we review de novo. See Drinkwater v. American Family Mut. Ins. Co.,
2006 WI 56, ¶14, 290 Wis.
2d 642, 649, 714 N.W.2d 568, 571 (choice-of-law determination question of law
subject to independent review); Beilfuss v. Huffy Corp., 2004 WI App
118, ¶6, 274 Wis. 2d 500, 504, 685 N.W.2d 373, 375 (interpretation of contract
is question of law subject to de novo
review).
¶13 The general rule in Wisconsin
is that parties to a contract may agree that the law of a particular
jurisdiction will control their contractual relationship. Bush v. National Sch. Studios, Inc.,
139 Wis. 2d
635, 642, 407 N.W.2d 883, 886 (1987). Martin
claims, however, that the choice-of-law and forum-selection clauses are invalid
under Beilfuss because Illinois law
is contrary to Wisconsin’s
law on covenants not to compete. Cf. Pactiv Corp. v. Menasha Corp., 261
F. Supp. 2d 1009, 1015 (N.D. Ill. 2003) (“Under
Illinois law,
a court, at its discretion, may modify or ‘blue-pencil’ an unreasonable
agreement in order to make it comport with the law, or sever unenforceable provisions
from a contract.”). We disagree.
¶14 Beilfuss invalidated forum-selection and choice-of-law clauses
in a contract between an Ohio corporation and a Wisconsin resident requiring that:
(1) any suit in connection with the
employment agreement be brought in Ohio courts; and (2) that Ohio law
govern any dispute between the parties. Id., 2004 WI App 118, ¶¶2–3, 7, 16, 274 Wis. 2d at 502–503, 504–505,
509, 685 N.W.2d at 374, 375, 377. Acknowledging
that under Bush, parties are generally free to choose by contract the
forum and applicable law that will govern their disputes, Beilfuss, 2004 WI App
118, ¶13, 274 Wis. 2d at 507–508, 685 N.W.2d at 377, Beilfuss held that in
that case Wisconsin’s policy of protecting employees against non-compete
clauses that violated Wis. Stat. § 103.465 made the clauses unenforceable, Beilfuss,
2004 WI App 118, ¶¶13–15, 274 Wis. 2d at 508–509, 685 N.W.2d at 377. This recitation of Beilfuss does not,
however, end our analysis.
¶15 In contract cases, we must apply the law of the state with
which the contract has its “‘most significant relationship.’” State Farm Mut. Auto. Ins. Co. v. Gillette,
2002 WI 31, ¶26, 251 Wis.
2d 561, 577, 641 N.W.2d 662, 670–671 (quoted source omitted). As we show below, this is what Beilfuss
did. Relevant contacts for the
choice-of-law analysis include: (1) the
place where the contract was executed; (2) the place where the contract was
negotiated; (3) the place where the contract was performed; (4) the place most
relevant to the subject matter of the contract; and (5) the respective
domiciles, residences, places of incorporation, and places of business of the
parties. Utica Mut. Ins. Co. v. Klein &
Son, Inc., 157 Wis. 2d
552, 557, 460 N.W.2d 763, 765 (Ct. App. 1990). Further, the “justified expectations” of the
parties to the contract are entitled to deference. Id., 157 Wis. 2d at 557 n.1,
460 N.W.2d at 765 n.1.
¶16 Here, the undisputed facts show significant contacts with Illinois:
(1) Stassen Insurance is and was an Illinois
corporation with its office in Illinois;
(2) Martin was an Illinois resident when
he signed the employment agreement; and (3) Martin worked out of Stassen
Insurance’s office in Illinois.
In contrast, the only contacts with Wisconsin are that:
(1) Martin moved to Wisconsin in 1999; and
(2) Martin started an insurance agency in Wisconsin
after he quit working for Stassen Insurance in Illinois.
These contacts with Wisconsin are, in the context of the parties’
relationship, minimal compared to the parties’ contacts with Illinois. Further, unlike the situation in Beilfuss,
they blossomed after the parties negotiated the employment agreement and after
it was in large part performed. Thus,
unlike the situation here, the plaintiff in Beilfuss not only lived
in Wisconsin for almost a decade before he
started to work for Huffy, but also worked for Huffy exclusively out of his Wisconsin home. Brief of Plaintiff-Appellant David Beilfuss
at 1,
Beilfuss v. Huffy Corp., 2004 WI App 118, 274 Wis. 2d 500, 685 N.W.2d 373 (No. 03-2006). Further, according to the Record in that
case, he visited Ohio
“on no more than four occasions” during his fifteen-month work for Huffy. Brief of Plaintiff-Appellant David Beilfuss
at 1–2. Here, Illinois is the state with the most
significant relationship to Martin’s employment agreement. See
Burns
v. Geres, 140 Wis. 2d 197, 201–202, 409 N.W.2d 428, 430–431 (Ct. App.
1987) (Arizona law applied to negligence action against Arizona corporation for
injuries sustained in Arizona where only contacts with Wisconsin were plaintiff
was a Wisconsin resident and corporation had facility in Wisconsin). Accordingly, the parties’ choice-of-law and
forum-selection agreements are valid. See Ford Motor Co. v. Lyons, 137 Wis. 2d 397, 453–454, 405
N.W.2d 354, 377 (Ct. App. 1987) (choice-of-law provision enforced where the
contract’s significant contacts were with the state whose law was selected); Converting/Biophile
Labs., Inc. v. Ludlow Composites Corp., 2006 WI App 187, ¶23, 296 Wis.
2d 273, 286, 722 N.W.2d 633, 640 (“parties’ agreement as to the place of the
action cannot oust a state of judicial jurisdiction, but will be enforced if not
unfair or unreasonable”).
¶17 It would be contrary to the public-policy interests recognized
by Beilfuss
to require the nullification of otherwise valid contract clauses merely
because the party seeking their nullification moves to Wisconsin
after the contract is negotiated, signed, and largely performed; both Stassen
Insurance and Martin relied on the employment agreement until Martin started
his own agency in Wisconsin.
See
Utica Mut.
Ins. Co., 157 Wis.
2d at 557 n.1, 460 N.W.2d at 765 n.1 (In making a choice-of-law analysis,
the “justified expectations” of the parties to the contract are entitled to
deference.). Given the plethora of
significant contacts with Illinois,
the circuit court properly applied the parties’ choice-of-law and forum-selection
agreements and dismissed Martin’s action.
By
the Court.—Judgment affirmed.
Publication in the
official reports is not recommended.