Court Opinion

ID: 2997318
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:35:24.835488+00
Date Added: 2024-06-11T15:03:13.764821
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                         ____________

No. 03-4107
THE OSLER INSTITUTE, INC.,
                                           Plaintiff-Appellant,
                               v.

LOIS FORDE,
                                          Defendant-Appellee.
                         ____________
        Appeal from the United States District Court for the
         Southern District of Indiana, Terre Haute Division.
     No. TH01-0019-C-M/H—Larry J. McKinney, Chief Judge.
                         ____________
   ARGUED SEPTEMBER 13, 2004—DECIDED OCTOBER 13, 2004
                         ____________

  Before BAUER, RIPPLE, and EVANS, Circuit Judges.
  EVANS, Circuit Judge. The Osler Institute, Inc. appeals
from an order granting its former employee, Lois Forde, at-
torney fees following her successful defense to this lawsuit.
  In considering the merits of this case in Osler Institute,
Inc. v. Forde, 333 F.3d 832 (7th Cir. 2003), we set out the facts
in some detail; our recitation here will be brief. The Osler
Institute, headquartered in Indiana, is a test preparation
company which runs 60 to 70 seminars a year to help doc-
tors prepare for medical board examinations. In 1995, Osler
hired Lois Forde on a part-time basis to coordinate some of
its seminars. Forde and Osler parted ways in 2000 and she
2                                               No. 03-4107

began working for PsyPrep, a new psychiatry board prepara-
tion company run by former Osler lecturers. Unhappy about
Forde’s new employment, Osler turned to its employment
agreement with Forde, which contained a noncompetition
clause. Osler sent Forde a copy of the agreement and a draft
of a complaint it said it was contemplating filing in federal
court. Faced with a federal lawsuit, Forde promptly re-
signed from PsyPrep. Her resignation did not save her from
the lawsuit, however. Osler filed its complaint in the United
States District Court for the Southern District of Indiana,
setting out four claims: that Forde breached the employ-
ment agreement’s noncompetition clause; that she breached
her fiduciary duty to the company; that she interfered with
Osler’s relationship with its lecturers; and finally that she
slandered Osler’s founder.
  The district judge granted summary judgment for Forde—
sua sponte (we discussed this wrinkle in our previous deci-
sion)—and Osler appealed, taking issue primarily with the
dismissal of its claim based on the noncompetition clause.
We affirmed the dismissal.
  We now arrive at the current controversy. In addition to
the noncompetition clause, the employment contract con-
tained a provision providing for attorney fees to the pre-
vailing party. Under that provision, Forde sought and was
granted attorney fees of almost $55,000. Osler appeals the
fee award, contending that the employment contract was
found to be void and therefore, for various reasons, the
attorney-fees provision cannot be used to support an award
of fees. The argument is, in effect, that Forde prevailed too
thoroughly and cannot now recover her fees.
  It is uncontested that Indiana law provides the basis for
decision. Indiana adheres to the American rule, under which,
in the absence of a statutory provision or an agreement
providing for fees, each party is required to pay its own at-
torney fees. Willie’s Construction Co. v. Baker, 596 N.E.2d
No. 03-4107                                                    3

958 (Ind. App. 1992). When a contract exists allowing for
the recovery of attorney fees, the provision will be enforced
according to its terms unless it violates public policy.
Harrison v. Thomas, 761 N.E.2d 816 (Ind. 2002).
  Under Indiana law, as Osler points out, a partially illegal
contract is wholly unenforceable unless the illegal pro-
visions can be eliminated without frustrating the contract’s
basic purpose. Harbour v. Arelco, Inc., 678 N.E.2d 381 (Ind.
1997). On this point, Osler is correct on the law but wrong
in its application. First of all, neither this court nor the
district court found the noncompetition provision to be per
se illegal. What Osler failed to show in this case is that it had
a protectable interest in Forde’s future employment. Forde did
not have access to protectable or confidential information;
rather, her duties at Osler were administrative and organi-
zational. Those duties, as they developed at Osler, were not
of the type to which noncompetition agreements can apply.
For that reason, the provision was described as void as
applied to her. The decisions said nothing at all about the
legality of the clause were it applied to someone in whom
Osler had a protectable interest. It is entirely possible that
at the time the contract was entered into, both Osler and
Forde may have had reason to think that her employment
would be of the type in which Osler would have a protectable
interest. Osler says as much in its brief when it says that
the agreement was “prepared for one basic purpose—to
protect Osler’s business by discouraging Forde from un-
fairly exploiting the unique competitive advantage she was
forecasted to gain from her association with the company.”
(Emphasis added.) As it turned out, she did not gain that
unique competitive advantage, a fact she established to the
satisfaction of both the district court and this court. Having
prevailed by showing the noncompetition clause could not
apply to her, she is entitled to her attorney fees under the
contract.
  Even were we to decide that somehow the prior decisions
had found the contract to be illegal, we would still not be
4                                                 No. 03-4107

convinced that the attorney fees provision would be unen-
forceable. The contract contains a severability clause which
provides that invalidity or unenforceability of “any term or
provision, or any clause or portion thereof of this agreement
shall in no way impair or affect the validity of enforceability
of any other provisions . . . .” Despite that clause, Osler
argues that the contract has been gutted and that therefore
the contract’s severability clause is not enough to save a
“moribund contract.” Although it acknowledges that
Indiana courts have not decided what effect a severability
clause has, Osler nevertheless says that a severability clause
should not save a provision when the essential purpose of
the contract has been undermined.
  We need not predict what Indiana courts would decide
regarding severability clauses. Even if Osler is right, the
argument cannot carry the day. While we agree that the
noncompetition provision is an important aspect of the
contract, we are not convinced that it alone is the essential
purpose. In addition to the noncompetition clause, the con-
tract has other significant provisions. It entitles Forde to
participate in pension, profit-sharing, medical or dental plans;
to group term life insurance; to educational opportunities; to
paid vacations and other benefits. It provides that the corp-
oration will provide reimbursement for business expenses.
The final clause of the contract sets out a requirement for
drug testing and for summary dismissal of an employee for
using illegal drugs and several other infractions, including
the falsification of a work record, violation of the nonsmok-
ing policy, and insubordination. Surely these provisions are
sufficiently significant to survive even in the absence of the
noncompetition provision.
  Furthermore, we are not convinced that the attorney-fees
provision is somehow a poor cousin to the rest of the con-
tract. The clause states:
    5. ATTORNEY’S FEES: In the event any action is com-
    menced by the Associate or the Corporation against the
    other and related in any way to Associate’s employment
No. 03-4107                                                  5

    by the Corporation, the prevailing party shall be
    reimbursed by the other party for the prevailing party’s
    reasonable attorney fees incurred therein.
The clause provides a significant benefit to either party and
is not limited to an award of fees for actions on the contract.
The present action involved four separate claims against
Forde, all involving her employment. The fact that she won
by convincing us that she did not qualify for coverage under
the noncompetition clause surely cannot mean that she
loses the benefit of the sweeping attorney fees provision. We
AFFIRM the district court’s award of attorney fees.

A true Copy:
       Teste:

                         ________________________________
                         Clerk of the United States Court of
                           Appeals for the Seventh Circuit

                   USCA-02-C-0072—10-13-04