November 10, 2013

Central Adjustment Bureau, Inc. v. Ingram | Case Brief - 678 S.W.2d 28 (1984) - Supreme Court of Tennessee

FACTS:  Ingram worked for CAB for sometime and rose through the ranks until his was the fifth highest paid employee.  Soon after he had begun working at the CAB he was asked to sign a covenant which forbid him from ever working for another collection agency which competed with CAB, from divulging information about CAB's clients, and from soliciting CAB's clients.  In February 1979 Ingram started his own company called Ingram and Associates and then resigned from CAAB on the 22nd of February.  He had collected master client lists and begun soliciting CAB clients with old contacts.

HISTORY: The Chancellor found that non-competition covenants were unreasonably broad with regards to geographical and time limitations.  He went on to modify the restrictions enforcing them as injunctive relief and awarded the plaintiff $80,000 in damages for breach of contract and other torts.

ISSUE:  Does consideration exist for such a covenant exist when it is signed after employment has begun?

HOLDING:
Yes   

RATIONALE:


-the mutual promises of the parties as to continued employment form a binding bilateral contract with the promise of employment constituting sufficient consideration

- reasonableness is also affected by the circumstances under which the employee leaves

- the employees were also employed for a long time so the covenant should be binding

DISPOSITION:
 The covenants are supported by sufficient consideration.

DISSENT:
The covenants were presented to the defendants after they began working for CAB and therefore they were no longer subject to free bargaining because the defendants had already quit their old jobs