Opinion
Cause No. IP 00-0162-C H/K
July 3, 2002
ENTRY ON MOTION FOR SUMMARY JUDGMENT
Plaintiff Karen Veen brought this diversity action against defendant AutoInsurance Network, Inc. ("AIN") after the deterioration of their business relationship. In 1996, Veen entered into an agreement with AIN to write insurance policies on AIN's behalf. In return, AIN agreed to pay Veen 80 percent of the commissions payable on the policies she wrote. Veen and AIN agree that these terms were included in their agreement, but there is no written contract in the record. By March 1999, Veen determined that AIN was not paying her the commissions that she was due, and she terminated their relationship. Without changing the location of her office or the sign above its entrance, Veen then began to operate her own insurance agency in competition with AIN. After efforts to end their relationship on mutually agreed terms failed, Veen brought this action.
Veen has brought several claims against AIN, including a claim to recover the commissions that AIN allegedly owes her under their agreement. In its answer, AIN denied that it has any obligation to Veen and asserted several counterclaims of its own. AIN then moved for summary judgment on Veen's complaint and all but one of its counterclaims. For the reasons stated below, the court denies AIN's motion for summary judgment in its entirety.
Standard on Summary Judgment
The purpose of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary judgment is appropriate when there are no genuine issues of material fact, leaving the moving party entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party must show there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A factual issue is material only if resolving the factual issue might change the suit's outcome under the governing law. A factual issue is genuine only if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party on the evidence presented. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
On a motion for summary judgment, the moving party must first come forward and identify those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, that the party believes demonstrate the absence of a genuine issue of material fact. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party has met the threshold burden of supporting the motion, the opposing party must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).
Material Facts
The following facts are either undisputed or stated in the light reasonably most favorable to plaintiff Karen Veen.
Defendant AIN is an insurance agency incorporated in Kentucky with its principal place of business in Kentucky. AIN operates offices in several states, including Indiana, by entering into agreements with "independent contractors licensed to act as insurance agents." Def. Mem. at 1. Plaintiff Karen Veen, an Indiana citizen, is licensed to act as an insurance agent in Indiana.
Veen entered into an agreement with AIN in April 1996. Veen Dep. at 9. Under the agreement, she agreed to operate an AIN agency in Bedford, Indiana. Id. at 5. AIN promised to provide Veen marketing and administrative support, referrals, and access to insurance companies. Veen Aff. ¶ 3. The agreement also provided that Veen would receive 80 percent of the commissions from the business that she generated and that AIN would receive the remaining 20 percent. Veen Dep. at 25.
In 1997 and 1998, Veen began to suspect that AIN was not paying her all the commissions that she was due under their agreement. Veen Dep. at 62-63. Veen testified that she received many of her commissions through AIN because many insureds sent their payments directly to their insurance companies. The insurance companies then sent the commissions payable on the policies to AIN. AIN was responsible for forwarding the appropriate percentage of each commission to the agent who generated the policy. Veen Aff. ¶¶ 5, 6.
Veen has testified that AIN failed to pay her commissions totaling $110,120.45 from mid-1996 through early 1999. Ans. to Inter. No. 4. Veen terminated her relationship with AIN in March 1999. After termination, Veen continued to work as an insurance agent in the same location, and to service many of the same customers, without interruption. Veen immediately changed the name of her business to "Insurance Network," although the sign in front of her office remained "AutoInsurance Network" for over a year.
Veen did not inform any of AIN's customers that she was no longer affiliated with AIN until time for renewal of their policies. Veen also did not return any of the materials that she received from AIN or provide AIN her "book of business."
Discussion
AIN has moved for summary judgment on all Veen's claims and on all but one of its counterclaims against Veen. AIN has not presented the kind of documentary evidence that could resolve these claims on summary judgment. Neither party has produced a copy of their written agreement. Neither party appears to have kept detailed or even complete records of their financial dealings and obligations. Given the inadequacy of the record, it is not surprising that genuine issues of material fact preclude summary judgment in this case.
I. AIN's Motion for Summary Judgment on Veen's Claims
AIN contends that it is entitled to summary judgment on all of Veen's claims, but AIN addresses only Veen's breach of contract claim in its supporting memorandum. On a motion for summary judgment, the moving party has the burden of showing there is no genuine issue of material fact. When the moving party has met this threshold burden on a particular issue, then the non-moving party must show that a genuine issue of fact exists with respect to that issue. Because AIN argued that it is entitled to summary judgment only on Veen's breach of contract claim, the court limits its consideration of AIN's motion for summary judgment on Veen's complaint to Veen's breach of contract claim.
The core allegation of Veen's breach of contract claim is that AIN did not pay her all the commissions that she earned. AIN contends that Veen, to succeed on this claim, must show that the insurance companies' commission statements reflect that she is entitled to additional payments. Def. Mem. at 8. In her deposition, Veen testified that the insurance companies' statements should be the most accurate reflection of the commissions that she earned. Veen has not submitted those statements as evidence. According to AIN, Veen cannot prove that she is entitled to additional payments without those statements.
Contrary to AIN's contention, Veen's deposition testimony is not a binding admission of her legal burden of proof. To state a claim for breach of contract, Veen must show the existence of a contract, the defendant's breach thereof, and damages. Rogier v. American Testing and Engineering Corp., 734 N.E.2d 606, 614 (Ind.App. 2000). On summary judgment, Veen must present sufficient evidence from which a jury reasonably could find that AIN breached the contract. See Anderson, 477 U.S. at 249; Jordan v. Summers, 205 F.3d 337, 342 (7th Cir. 2000). Veen is not required to present certain kinds of evidence or specific documents to meet this burden, although all evidence presented must be admissible at trial. Fed.R.Civ.Proc. 56(e); Clark v. Takata Corp., 192 F.3d 750, 761 (7th Cir. 1999) (affirming summary judgment for defendant where plaintiff failed to present admissible evidence to support his claim).
Veen testified that AIN failed to pay her commissions in excess of $100,000. In support of her testimony, Veen has presented a business record documenting the commissions that Veen earned, applicable deductions from those commissions, and the commissions that AIN actually paid. Ans. to Inter. No. 4. Veen testified that she recorded these figures using her business software program, which was updated monthly, and the statements that she received from individual insurance companies. Veen Dep. at 67-68, 77. However, Veen testified that she did not receive regular statements from all the insurance companies for which she wrote policies. Id. at 76-77. Thus, Veen's testimony and business record reflect the amount that, to the best of Veen's knowledge, AIN owes her in commissions. The fact that other evidence, which is not before the court, might provide a more reliable calculation does not mean that AIN is entitled to summary judgment.
On the basis of this evidence, a rational trier of fact could find that AIN breached its promise to pay commissions. AIN contends that it has produced records which it believes reflect that it fulfilled its obligation to Veen. Def. Mem. at 8. However, the question is not what AIN believes or Veen believes, but what a reasonable jury could find from conflicting evidence. Further, AIN has not explained to the court how its records demonstrate that it has fulfilled its obligation to Veen. Veen has met her burden on summary judgment. Accordingly, AIN's motion for summary judgment on Veen's breach of contract claim is denied.
II. AIN's Motion for Summary Judgment on its Counterclaims
Unfair Competition: AIN argues that it is entitled to summary judgment as to liability on its unfair competition counterclaim under both Indiana law and the federal Lanham Act, 15 U.S.C. § 1125(a).
Under Indiana law, unfair competition is "passing off or attempting to pass off, upon the public, the goods or business of one person as and for the goods or business of another." Hammons Mobile Homes, Inc. v. Laser Mobile Home Transport, Inc., 501 N.E.2d 458, 461 (Ind.App. 1986), quoting Hartzler v. Goshen Churn Ladder Co., 104 N.E. 34, 37 (Ind.App. 1914). To prove unfair competition, a plaintiff does not need to show actual deception, but only that deception is "the natural and probable consequence of the tortfeasor's actions." Hammons, 501 N.E.2d at 461. Damages for unfair competition are appropriate only when the defendant's conduct was deliberate and willful. Id. at 462.
AIN contends that Veen's continued operation of her insurance business constituted unfair competition. AIN notes that Veen did not immediately notify her customers that she was no longer affiliated with AIN and that Veen retained the "AutoInsurance Network" sign outside her office for roughly a year. AIN further notes that the Indiana Court of Appeals has found deliberate use of another's name sufficient evidence of irreparable harm to support a preliminary injunction. See Hacienda Mexican Restaurant of Kalamazoo Corp. v. Hacienda Franchise Group, Inc., 569 N.E.2d 661, 669-70 (Ind.App. 1991).
At this point, however, this court is not concerned with whether a preliminary injunction should have issued if AIN had sought one in 1999. The issue is whether AIN is entitled to summary judgment. Summary judgment is inappropriate on AIN's counterclaim because reasonable minds could differ as to whether deception was the natural and probable consequence of Veen's conduct. There is also a genuine issue of fact regarding whether Veen's conduct was deliberate and willful, a necessary element if AIN is to recover any damages.
Veen testified that while she did not immediately notify customers that she terminated her relationship with AIN, she did notify them when they renewed their policies. At that time, Veen had each of her customers sign a document stating that she was not affiliated with AIN. Construing the facts in the light most favorable to Veen, a reasonable jury could conclude that delaying notification until renewal was not likely to deceive AIN's customers regarding the affiliation of their agent, a fact as to which many customers were probably indifferent. A jury could reasonably find that an insured's primary concern is that she has insurance to cover her liabilities. No insured's coverage changed when Veen left AIN.
The timing of Veen's disclosure is relevant to whether her conduct was willful and deliberate. Veen's income came from the commissions she earned for writing a new policy or renewing an existing policy. If an insured decided to cancel a policy, Veen would have to reimburse a portion of the commission that she received for that policy. However, the evidence does not suggest that there was any real threat that the customers insured through AIN would choose to cancel their policies solely because the agent left AIN. Veen faced the greatest financial risk upon renewal of policies. At that time, however, Veen disclosed to insureds that she was not affiliated with AIN. Such conduct does not seem consistent with a willful and deliberate intent to deceive AIN's customers.
Veen also immediately changed the name of her business to "Insurance Network," although the sign outside her office did not change for roughly a year. Veen's sign alone cannot amount to unfair competition unless there is reason to believe that customers associated "AutoInsurance Network" with AIN's insurance services and then overlooked the fact that Veen otherwise identified her business as "Insurance Network." As discussed below, there is a genuine issue of fact regarding whether "AutoInsurance Network" is a distinctive mark, i.e., one that consumers would associate with a particular entity rather than a particular class of goods or services. Whether Veen's name change sufficiently communicated to customers that she was a separate agency is also a question for the jury. The court denies AIN's motion for summary judgment on its unfair competition counterclaim under Indiana law.
The federal Lanham Act imposes civil liability for unlawful competition on any person who, in connection with any services, uses in commerce any term, name or combination thereof which is likely to cause confusion or to deceive as to the affiliation, connection, or association of such person with another, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. 15 U.S.C. § 1125(a). To prevail on an unfair competition claim under the Lanham Act, a plaintiff must establish (1) that its mark is protectable and (2) that the defendant's use of the mark is likely to cause confusion among consumers. E.g., CAE, Inc. v. Clean Air Engineering, Inc., 267 F.3d 660, 673-74 (7th Cir. 2001).
Whether a mark is protectable depends on whether it specifically identifies and distinguishes a company's goods or services from those of its competitors. Platinum Home Mortg. Corp. v. Platinum Financial Group, Inc., 149 F.3d 722, 726 (7th Cir. 1998). When the claimed mark is not registered with the United States Patent and Trademark Office, the burden is on the claimant to establish that it is entitled to protection under the Lanham Act. Id. at 727, citing Mil-Mar Shoe Co., Inc. v. Shonac Corp., 75 F.3d 1153, 1156 (7th Cir. 1996).
For purposes of the Lanham Act, marks are often classified into five categories of increasing distinctiveness: (1) generic, (2) descriptive, (3) suggestive, (4) arbitrary, and (5) fanciful. Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 767-68 (1992). "A generic term is one that is commonly used and does not identify any particular source and, therefore, is not entitled to any trademark protection." Platinum Home, 149 F.3d at 727. A descriptive mark describes the ingredients, qualities, or characteristics of a product or service. Id. Generally, descriptive marks are not protectable unless they have acquired a secondary meaning "in the collective consciousness of the relevant community." Id., quoting Mil-Mar Shoe, 75 F.3d at 1157. Marks that are suggestive, arbitrary, or fanciful generally are entitled to trademark protection because they are inherently distinctive. Platinum Home, 149 F.3d at 727. The classification of a mark is a question of fact. Sands, Taylor Wood Co. v. Quaker Oats Co., 978 F.2d 947, 952 (7th Cir. 1992); G. Heileman Brewing Co. v. Anheuser-Busch, Inc., 873 F.2d 985, 992 (7th Cir. 1989).
AIN has the burden of proving that its name is protectable because it has not shown that it registered "AutoInsurance Network" as a trademark. Nothing in the record suggests that "AutoInsurance Network" is suggestive, arbitrary, or fanciful. Thus, "AutoInsurance Network" is entitled to protection only if it is a descriptive mark that has acquired a secondary meaning. AIN has not made any showing that its mark has acquired a secondary meaning.
AIN contends that a different standard should apply in this case because Veen did not start an independent business that used AIN's mark, but continued to operate, under AIN's mark, the same insurance business that she previously operated as AIN's agent. Def. Reply at 4. Although this factual distinction might have merit, it does not alter the court's determination of AIN's motion for summary judgment. Also, AIN has not cited any applicable authority to the effect that would allow it to avoid proof that its unregistered mark is protectable.
Even if the court excused AIN's failure to establish the protectability of its mark due to the unique circumstances of this case, AIN still must show that Veen's use of its mark was likely to cause confusion. See G. Heileman, 873 F.2d at 999 (claimant without protectable mark might be able to maintain action under Lanham Act for unfair competition by showing a likelihood of confusion); Liquid Controls, 802 F.2d at 939 ("an unfair competition claim might be supportable if consumer confusion or a likelihood of confusion arose from the failure of the defendant to adequately identify itself as the source of the product"). In Liquid Controls, the Seventh Circuit stated that in such a case the plaintiff must show that the defendant was intentionally "passing off" its products as those of the plaintiff. 802 F.2d at 940. See also G. Heileman, 873 F.2d at 1000 (affirming district court's finding that defendants lacked the intent to deceive or "pass off" to support alternative unfair competition claim).
As discussed above with respect to AIN's counterclaim under Indiana law, AIN has not shown that Veen's delayed disclosure to AIN's previous customers was likely to deceive them. Further, Veen's conduct was not consistent with a deliberate attempt to pass off her services as those of AIN. With respect to customers who did not have a previous relationship with AIN, AIN still cannot prevail without showing that its mark had acquired a secondary meaning: that customers associated the name "AutoInsurance Network" so closely with AIN that Veen's use of the mark was likely to cause confusion as to the source of the products and services that she offered. See Bliss Salon Day Spa v. Bliss World LLC, 268 F.3d 494, 496-97 (7th Cir. 2001) (affirming denial of preliminary injunction where plaintiff did not show that its mark, even though "suggestive," had acquired a secondary meaning). Without some indication that prospective customers associated "AutoInsurance Network" with AIN's services, there is no potential for confusion. AIN also has not shown any evidence that Veen's customers were actually confused as to her affiliation with AIN. See Spraying Systems Co. v. Delavan, Inc., 975 F.2d 387, 393 (7th Cir. 1992) (listing seven kinds of evidence that can be used to establish secondary meaning); G. Heileman, 873 F.2d at 1000 (most important factors in determining likelihood of confusion are the similarity of the marks, intent of the infringers, and evidence of actual confusion). Because AIN has not presented any evidence of secondary meaning or actual confusion, the court denies its motion for summary judgment on its counterclaim under the federal Lanham Act. See Bliss Salon at 497 ("If [plaintiff] wants to get anywhere in this litigation, it will have to prove that its mark has acquired secondary meaning and that [defendant's] use of the same mark is likely to cause confusion about source" in the relevant market.); Packman v. Chicago Tribune Co., 267 F.3d 628, 641 (7th Cir. 2001) (affirming summary judgment for defendant on unfair competition claim where plaintiff offered no evidence of secondary meaning).
Breach of Fiduciary Duty: AIN argues that it is entitled to summary judgment on its breach of fiduciary duty claim against Veen. AIN alleges that Veen breached a fiduciary duty by competing with AIN while still working as its agent and by retaining AIN's property, including its files and manuals, after termination of her affiliation with AIN.
To state a claim for breach of fiduciary duty, AIN first must show that Veen owed AIN such a duty. AIN states that while Veen was not its employee "strictly speaking," their agreement gave rise to a "similar position of trust and obligation to act in good faith." Def. Mem. at 5-6.
Whether Veen owed a fiduciary duty to AIN depends in part on whether she was AIN's employee or was an independent contractor. Under Indiana law, an employee owes a fiduciary duty to her principal/employer, see Potts v. Review Bd. of Ind. Employment Sec. Div., 475 N.E.2d 708, 711 (Ind.App. 1985), but an independent contractor does not. Mortgage Consultants, Inc. v. Mahaney, 655 N.E.2d 493, 495 (Ind. 1995). To determine whether a person acts as an employee or independent contractor, the following factors are considered:
(a) the extent of control which, by the agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workman supplies the instrumentalities, tools, and the place of work for the person doing the work;
(f) the length of time for which the person is employed;
(g) the method of payment, whether by the time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant; and
(j) whether the principal is or is not in business.
Mahaney, 655 N.E.2d at 495-96, quoting Restatement (Second) of Agency § 220 (1958). All of these factors must be considered; no single factor is dispositive. Mahaney, 655 N.E.2d at 496. The fact finder also may consider additional factors in making the agency determination. Id.
AIN has regarded Veen both as its employee and as an independent contractor. For example, AIN states in its supporting memorandum that it "operates its offices by entering into agreements with independent contractors licensed to act as insurance agents." Def. Mem. at 1. AIN's characterization of its relationship is ambiguous but not illogical. Independent contractors can act as agents. Bushnell v. Krafft, 183 N.E.2d 340, 345 (Ind.App. 1962) (finding that agency acted as an independent contractor in owning and operating its insurance business, but as an agent for purposes of soliciting business on behalf of the insurance company); accord Burkett v. Crulo Trucking Co., 355 N.E.2d 253, 261 (Ind.App. 1976) ("independent contractor may well be an agent"). AIN and Veen now dispute how their agreement described their relationship. Pl. Mem. at 8-9; Def. Reply at 2-3. More important, there is little evidence regarding the degree of control that AIN actually exercised over Veen's daily affairs. Even when an agreement expressly denies an agency relationship, the "true test . . . is how much control the principal has over the alleged agent and the intent and functioning of the parties." See Leon v. Caterpillar Industrial, Inc., 69 F.3d 1326, 1334 (7th Cir. 1995), quoting Dutton v. Int'l Harvester Co., 504 N.E.2d 313, 317 n. 2 (Ind.App. 1987).
AIN provided Veen with access to insurance companies, manuals containing the policies and procedures for those companies, computer software, and information regarding AIN's procedures. However, it is not clear whether Veen was expected to adhere strictly to AIN's procedures. Veen worked on a commission basis, which indicates an independent contractor relationship.
Veen reimbursed AIN for errors and omissions insurance and paid for her own advertising. However, AIN placed specific requirements on Veen's telephone directory advertisement. Construing the record in the light most favorable to Veen, she also appears to have paid the rent for her office and the everyday expenses of running her business, such as the telephone and utility bills.
Veen was personally responsible for most if not all of her business expenses and worked on a commission basis. It can also reasonably be inferred that Veen enjoyed substantial independence in the everyday operation of her insurance business — the record does not indicate that AIN exercised significant control. Given these facts, a reasonable jury could find that Veen acted as an independent contractor. Accordingly, the court denies AIN's motion for summary judgment on its breach of fiduciary duty claim.
Tortious Interference with Business Relationship: AIN also seeks summary judgment on its counterclaim that Veen tortiously interfered with its business relationship with its customers. In Indiana, the tort of tortious interference with a business relationship has five elements: (1) the existence of a valid business relationship; (2) the defendant's knowledge of the existence of the relationship; (3) the defendant's intentional interference in the relationship; (4) the absence of justification; and (5) damages. Comfax Corp. v. North American Van Lines, Inc., 587 N.E.2d 118, 124 (Ind.App. 1992). Indiana law also requires proof that the defendant acted illegally in interfering with the business relationship. Butts v. OCE-USA, Inc., 9 F. Supp.2d 1007, 1012 (S.D.Ind. 1998), citing, among others, Wright v. Associated Ins. Cos., 29 F.3d 1244 (7th Cir. 1994), and Watson Rural Water Co. v. Indiana Cities Water Corp., 540 N.E.2d 131, 139 (Ind.App. 1989).
AIN has shown an existing business relationship with its customers and that Veen knew of that relationship. However, there is a genuine issue of fact regarding whether Veen interfered with AIN's business relationships in an illegal manner. AIN alleges that Veen interfered by "continuing to operate what amounted to AIN's agency, without payment to AIN, and by not informing AIN's customers of her change in affiliation until the renewal of their insurance became due." Def. Mem. at 6. The court has already denied AIN summary judgment on its unfair competition counterclaims, which are based on this conduct. In its reply, AIN argues that this conduct was also a breach of contract. Def. Reply at 3. However, as discussed below, the court denies AIN's motion for summary judgment on its breach of contract counterclaim because Veen has a viable defense based on the alleged first breach by AIN. Thus, AIN is not entitled to summary judgment on its tortious interference counterclaim because it has failed to establish the illegality of Veen's conduct.
Even if it were established that Veen's conduct had been illegal, AIN's motion for summary judgment on this counterclaim still fails because there is also a genuine issue regarding whether Veen's conduct was "without justification." The Seventh Circuit has described this element as requiring malicious conduct "exclusively directed to injury and damage of another." Flintridge Station Associates v. American Fletcher Mortgage Co., 761 F.2d 434, 441 (7th Cir. 1985). Further, "the existence of a legitimate reason for the defendants' actions will provide the necessary justification to preclude judgment for the plaintiff in the tort action." Id.
Veen contends that she continued to service AIN's customers out of a desire primarily to keep her business afloat, but also to compete with AIN. Pl. Mem. at 14. See Economation, Inc. v. Automated Conveyor Systems, Inc., 694 F. Supp. 553, 562 (S.D.Ind. 1988) (defendant's interference would be justified if motivated by desire to compete for sales) (applying Indiana law). Veen alleges that her business was in severe financial distress due to AIN's refusal to pay her commissions in a timely manner. If Veen can prove these allegations, they certainly would not amount to malicious conduct directed exclusively to injure another.
The court denies AIN's motion for summary judgment on its counterclaim for tortious interference with a business relationship.
Breach of Contract: AIN also seeks summary judgment on its counterclaim that Veen breached their agreement not to disclose or use for her own advantage AIN's confidential and proprietary information. Originally, AIN also sought summary judgment on its counterclaim that Veen breached a covenant not to compete, but withdrew that request in its reply. Def. Reply at 3.
There is no dispute that Veen kept AIN's materials after she terminated their relationship. Veen Dep. at 43-44. Veen also testified that she used those materials in running her insurance business. Id. However, Veen disputes that the use of AIN's materials was a breach of their agreement. Veen contends that she was not obligated to return or refrain from using AIN's materials because AIN breached their agreement first. Pl. Mem. at 18, citing Sallee v. Mason, 714 N.E.2d 757 (Ind.App. 1999).
In Sallee, the plaintiff sued the defendant, a former employee, for breaching a covenant not to compete. The defendant asserted that the plaintiff-employer's material breach of their employment agreement — which included failing to compensate defendant as required under the agreement — relieved her of any duty to comply with the covenant not to compete. The Indiana Court of Appeals affirmed summary judgment for the defendant-employee, stating:
As a result of [plaintiff's] first material breach of the Employment Contract, we have already determined that [defendant] was not required to abide by the noncompete agreement. . . . In fact, [defendant] was required to mitigate her damages caused as a result of [plaintiff's] initial breach by seeking employment elsewhere.
Sallee, 714 N.E.2d at 763.
Like the defendant in Sallee, Veen will have a defense to AIN's claim for breach of contract if she can prove that AIN committed the first material breach of their employment agreement, such as failing to pay her commissions in excess of $100,000. If proven, such a failure could easily support a finding that AIN materially breached the employment agreement. Because Veen has asserted a viable defense, the court denies AIN's motion for summary judgment on its breach of contract counterclaim.
Conclusion
The court denies defendant AutoInsurance Network, Inc.'s motion for summary judgment with respect to all claims and counterclaims. The court will hold a scheduling conference on July 31, 2002, at 4:30 p.m. in Room 330, U.S. Courthouse, Indianapolis, Indiana, to set a new trial date.