The opinion of the court was delivered by: PARKER
International Paper Company ("IP") has sued Mark A. Suwyn, its former Executive Vice President and the current Chairman and Chief Executive Officer of Louisiana-Pacific Corporation, alleging breaches of a noncompetition agreement and of fiduciary duties arising from Suwyn's departure from IP and his subsequent hiring by Louisiana-Pacific. Before the Court is defendants' motion for summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons set forth, the motion is denied.
Recognizing that on a motion for summary judgment all factual ambiguities are resolved, and reasonable inferences drawn, in the nonmoving party's favor, see Quinn v. Syracuse Model Neighborhood Corp., 613 F.2d 438, 444-45 (2d Cir. 1980), the following facts are properly before the Court for purposes of this motion.
Suwyn commenced his employment with IP in March 1992. As Executive Vice President, Suwyn had oversight responsibility for IP's timberlands as well as for its forest products, building products, and paper distribution businesses. These business groups generated revenues of approximately $ 10 billion in 1995.
In 1994, IP requested certain of its most senior executives to execute a noncompetition agreement ("the Agreement") The Agreement required its signatories to agree, for a period of eighteen months following the termination of their employment with IP, to refrain from joining any company that "produces, develops or markets, a product, process, or service which is competitive" with those of IP, "whether existing or planned for the future," and as to which the employee "has acquired knowledge of or had access to Protected Information" during the preceding five years.
Approximately seventy-five of IP's most senior executives, including Suwyn, were asked to sign the Agreement. According to IP, while no executive was threatened with termination, a failure to sign would jeopardize continued employment in the same position at IP. Moreover, any senior executive who was asked but failed to sign the Agreement would be precluded from receiving future incentive compensation under the LTICP.
Suwyn, although initially reluctant to do so, eventually signed the Agreement. He returned the signed Agreement with a side note dated July 17, 1994. The side note, the meaning and significance of which are principal issues in this case, states:
I am returning a signed Noncompete Agreement (attached) with this note to record the discussions we have had on this subject so there is no confusion in the future. As you have described it and would intend to enforce it, the Agreement is aimed at restricting me from working for another major paper company such as Georgia Pacific, Champion or Weyerhauser for 18 months if I were to leave International Paper. In addition, it is aimed at restricting me from joining the Imaging businesses of Kodak, Fuji, Du Pont and Agfa as they are direct competitors with the Imaging business of International Paper. In the other business areas under my responsibility we are more of a niche player and therefore the agreement would not be viewed as being in force when it comes to joining such companies as Xerox, Dow, Exxon and other participants in broad industries in which we compete.
On January 2, 1996, Suwyn tendered his resignation from IP and joined Louisiana-Pacific as Chairman and CEO. A short while later, on January 10, 1996, IP brought this action for injunctive relief, asserting claims against Suwyn for breach of the Agreement and breach of fiduciary duty, and against Louisiana-Pacific for tortious interference with contractual relations. Defendants' motion for summary judgment, pursuant to Fed. R. Civ. P. 56, is now before this Court.
In pursuit of summary judgment, Suwyn advances the argument that the Agreement is void for lack of consideration because it was supported only by IP's promise to perform a preexisting contractual duty -- in other words, its obligation to qualify Suwyn for certain stock options and performance-based compensation plans. Suwyn contends that the terms of the January 1992 letter already entitled him to continued eligibility for the compensation programs. Thus, IP's subsequent conditioning of Suwyn's continued eligibility for incentive compensation on his execution of the Agreement would have been a promise to perform a preexisting contractual obligation -- a promise without new consideration and hence insufficient to support the covenant not to compete imposed by the Agreement. Since this syllogism does not accord with applicable law, defendants' motion on this theory is denied.
Suwyn is correct that consideration is a necessary prerequisite to a valid contract and that a promise to perform an existing legal or contractual obligation is, without more, insufficient consideration to support a new contract. Roth v. Isomed, Inc., 746 F. Supp. 316, 319 (S.D.N.Y. 1990); Goncalves v. Regent Int'l Hotels, Ltd., 58 N.Y.2d 206, 460 N.Y.S.2d 750, 447 N.E.2d 693 (1983); James A. Haggerty Lumber & Mill ...