THIRD DIVISION 

September 27, 2006 

No. 1-05-0597 

COOPER LINSE HALLMAN CAPITAL ) Appeal from the 

MANAGEMENT, INC., ) Circuit Court of 

) Cook County. 

Plaintiff-Appellant, ) 

) 

v. ) 

) 

THOMAS HALLMAN and JAMES McQUINN, ) 

) No. 00CH13781 

Defendants-Appellees ) 

) 

) 

(Hallman and McQuinn Capital Management, ) The Honorable 

Inc., ) Nancy J. Arnold, 

) Judge Presiding. 

Defendant). ) 

JUSTICE GREIMAN delivered the opinion of the court: 

Plaintiff Cooper Linse Hallman Capital Management, Inc., brought seven counts of 

corporate misconduct against defendants Thomas Hallman, James McQuinn and Hallman & 

McQuinn Capital Management, Inc. (H&M). At a bench trial, the trial court entered a directed 

finding on four of the counts. The court subsequently found for Hallman on plaintiff=s allegation 

that he had breached his fiduciary duty as an officer, director and shareholder of plaintiff and on 

plaintiff=s allegation that he had breached his fiduciary duty as a shareholder of plaintiff, a 

closely held corporation. The court additionally found for McQuinn on plaintiff=s allegation that 

he had breached his duty of loyalty as an employee of plaintiff. On appeal, plaintiff contends 

that the trial court erred in holding Hallman and McQuinn to the fiduciary duty of a Ageneral 

employee,@ rather than to the heightened fiduciary duty of a director or officer, and in holding 
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that Hallman and McQuinn did not breach their heightened fiduciary duties. 

Plaintiff is an investment advisor specializing on Amarket timing@ investments. Plaintiff 

was founded in 1993 by Don Linse and Lori Cooper. In 1994, plaintiff hired Hallman, who 

brought with him approximately 100 clients from his former place of employment. Hallman 

purchased 20% of the voting shares of plaintiff, leaving the remaining 80% of the shares split 

evenly between Linse and Cooper, and was named chief financial officer and vice president of 

plaintiff. When Hallman was hired, the parties did not execute a written confidentiality 

agreement. At trial, Linse testified that an oral confidentiality agreement was entered. Hallman 

denied that allegation. Hallman=s duties included maintaining customer relations, answering 

phones and soliciting clients. 

In 1996, plaintiff hired McQuinn. Again, the parties did not enter a written 

confidentiality agreement. While Linse maintained that an oral agreement was entered, 

McQuinn disagreed. McQuinn=s duty was to maintain customer relations. 

The testimony presented at trial showed that Hallman was charged with managing 

plaintiff=s office staff and with paying office bills. While Hallman would advise Linse and 

Cooper concerning what he thought were appropriate salaries and bonuses for plaintiff=s 

employees, Hallman=s suggestions were never followed. According to all witnesses, ultimately, 

Linse and Cooper made all decisions concerning plaintiff, including all hiring and firing 

decisions. 

In 1998, the parties began researching the effectiveness of a new market timing 

methodology known as a Asector fund.@ Plaintiff established a sector fund with a firm called 
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Rydex to test the new methodology. In 1999, Hallman, McQuinn, Linse and Cooper each also 

opened personal Rydex funds. McQuinn volunteered to trade the corporate Rydex fund and 

testified that he never hid its goings on, nor the happenings of his own or the other parties=

personal Rydex funds from Linse and, in fact, spoke to Linse about the funds Amost days.@ 

Plaintiff=s clients= assets were held in trust by Independent Trust Corporation (Intrust). In 

April 2000, it was revealed that Intrust had a multi-million dollar cash shortage. As a result, a 

civil receivership action was initiated against Intrust and all of Intrust=s assets were frozen, 

including plaintiff=s clients= accounts. Accordingly, plaintiff was unable to pay its employees 

and plaintiff=s clients were unable to withdraw funds from their accounts. 

According to Linse=s testimony, he began negotiations with Intrust president Gary 

Bertacchi in April 2000, for plaintiff to lease Bertacchi office space and to establish a new inhouse trust company. Hallman and McQuinn testified that in April 2000, Linse informed them 

that he was hiring Bertacchi. Hallman and McQuinn testified that it was then that they began to 

take steps to establish a competing market timing firm. 

In anticipation of their competing firm, in June and July 2000, Hallman and McQuinn 

executed a lease for office space, bought office equipment and filed the H&M articles of 

incorporation with the Secretary of State. Hallman also copied from plaintiff prospect lists, 

customer account spreadsheets and customer mailing labels, among other documents. Hallman 

and McQuinn resigned on September 1, 2000, taking the copied documents with them. Shortly 

thereafter, they were certified as investment advisors and registered with the Securities and 

Exchange Commission. Hallman and McQuinn sent announcements of their departure to 
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plaintiff=s clients in which they detailed their personal Rydex sector funds track records since 

1999. 

After Hallman=s and McQuinn=s resignations, plaintiff hired a computer forensics expert 

who discovered that the H&M business plan had been saved to plaintiff=s computers and that 

Hallman and McQuinn had experimented with fonts for an H&M advertisement on the 

computers. 

In order to obtain business, plaintiff relied on solicitors. One such solicitor, ProFutures, 

had referred about 30% of plaintiff=s business. In November 2000, ProFutures became 

concerned about the service provided by plaintiff. Later that year, it sent its clients letters 

advising them to suspend trading in their accounts with plaintiff. In March 2001, the 

relationship between ProFutures and plaintiff was terminated. Meanwhile, in February 2001, the 

newly established H&M had entered an agreement with ProFutures whereby it would pay 

ProFutures 10% more in commission than plaintiff had paid ProFutures. While they were still 

employed by plaintiff, in the summer of 2000, Hallman and McQuinn had met with a ProFuture 

employee several times. Hallman and McQuinn denied soliciting ProFuture=s business for their 

new venture and testified that Linse had actually been invited and had arrived late to at least one 

of these meetings. 

Plaintiff filed suit on September 20, 2000. On December 20, 2001, plaintiff filed a 

second amended complaint alleging seven counts of corporate misconduct. The case proceeded 

to a bench trial. After plaintiff had rested, the trial court granted a directed finding on counts I, 

V, VI and VII of plaintiff=s second amended complaint. At the end of trial, the court found for 
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Hallman on count II, alleging that he had breached his fiduciary duty as an officer, director and 

shareholder of plaintiff, and on count III, alleging that he breached his fiduciary duty as a 

shareholder of plaintiff, a closely held corporation. The court found for McQuinn on count IV, 

alleging that he breached his duty of loyalty as an employee of plaintiff. Plaintiff appealed the 

court=s findings on counts II and IV. Accordingly, H&M is not a party to this appeal. 

Plaintiff first contends that the trial court erred in treating Hallman and McQuinn as 

general employees, rather than as officers and directors that owed a heightened fiduciary duty to 

plaintiff. As Hallman and McQuinn point out, the trial court did not err in this respect. 

With regard to Hallman, contrary to plaintiff=s contention, the court specifically found 

that Hallman owed plaintiff a heightened fiduciary duty because he was a shareholder, director 

and officer of plaintiff. 

With regard to McQuinn, plaintiff did not allege in the trial court that he owed the 

heightened fiduciary duty of an officer or director. Instead, it argued that McQuinn was an 

employee who owed a fiduciary duty of loyalty. Because this contention was not raised in the 

trial court, it is waived on appeal. See Cangemi v. Advocate South Suburban Hospital, 364 Ill. 

App. 3d 446, 466 (2006), quoting Central Illinois Public Service Co. v. Allianz Underwriters 

Insurance Co., 244 Ill. App. 3d 709, 720 (1993) (A >It is well settled that issues not raised in the 

trial court are generally waived on appeal= @). Waiver aside, it is irrelevant whether McQuinn 

owed the heightened fiduciary duty of an officer or a director to plaintiff because, as discussed 

below, even under that standard, the trial court did not err in finding that Hallman=s and 

McQuinn=s actions did not constitute a breach of that duty. 
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Former employees may compete with their former employer and solicit former customers 

as long as they do not do so before the termination of their employment. Veco Corp. v. 

Babcock, 243 Ill. App. 3d 153, 160 (1993). Moreover, while still working for an employer, 

employees may plan, form and outfit a competing corporation so long as they do not commence 

competition. Veco, 243 Ill. App. 3d at 160. ACorporate officers, however, stand on a different 

footing; they owe a fiduciary duty of loyalty to their corporate employer not to (1) actively 

exploit their positions within the corporation for their own personal benefit, or (2) hinder the 

ability of a corporation to continue the business for which it was developed.@ Veco, 243 Ill. App. 

3d at 160. Under Illinois law: 

AOfficers and directors have been found to have breached their fiduciary duties 

when, while still employed by the company, they (1) fail to inform the company 

that employees are forming a rival company or engaging in other fiduciary 

breaches [citation]; (2) solicit the business of a single customer before leaving the 

company [citation]; (3) use the company=s facilities or equipment to assist them in 

developing their new business [citation]; or (4) solicit fellow employees to join a 

rival business.@ Foodcomm International v. Barry, 328 F.3d 300, 303 (7th Cir. 

2003). 

Preferred Meal Systems, Inc. v. Guse, 199 Ill. App. 3d 710, 725 (1990). Illinois courts have also 

found that officers and directors have breached their fiduciary duties when they Aused the 

company=s confidential business information for the new business, either before or after [their] 

departure [citation]; or *** orchestrated a mass exodus of employees shortly after [their] 
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resignation from the company.@ Preferred Meal Systems, 199 Ill. App. 3d at 725. The 

applicable standard of review is whether the trial court=s finding that Hallman and McQuinn did 

not breach their fiduciary duties to plaintiff was against the manifest weight of the evidence. 

Dowd & Dowd, Ltd. v. Gleason, 352 Ill. App. 3d 365, 373 (2004). 

Plaintiff asserts that Hallman and McQuinn breached their fiduciary duties when they (1) 

failed to inform plaintiff while still in its employ that they were planning to form a competing 

corporation; (2) solicited fellow employees (each other) to join the competing corporation; (3) 

solicited ProFuture=s business prior to their resignation; (4) used plaintiff=s computer to type a 

business plan and advertisements; (5) used confidential information about plaintiff=s customers 

to outfit their competing corporation; and (6) usurped plaintiff=s corporate opportunity to exploit 

its success with the Rydex sector funds. The evidence unequivocally shows that Hallman and 

McQuinn did commit several of the above allegations; in particular, they failed to inform 

plaintiff of their plans to form a rival corporation, conspired with one another to form a rival 

corporation and used plaintiff=s computer to type a business plan and advertisements. However, 

after reviewing all of the facts presented in this case, we cannot say that the trial court=s 

determination that Hallman and McQuinn=s actions fall short of a breach of their fiduciary duties 

to plaintiff was against the manifest weight of the evidence because the evidence proved that 

they neither exploited their positions with plaintiff for their own benefit nor hindered the ability 

of plaintiff to continue business. 

First, we reject plaintiff=s contention that the trial court erred in finding for Hallman and 

McQuinn when they solicited ProFutures= business prior to resigning and used confidential 
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information about plaintiff=s clients to outfit their new corporation. Concerning ProFuture=s 

business, the testimony presented at trial showed that Hallman and McQuinn met with a 

ProFutures employee during the summer of 2000 but that Linse was invited to at least one of 

those meetings. There was no evidence presented that Hallman and McQuinn actually solicited 

ProFutures= business. In fact, Hallman and McQuinn testified that they did not solicit 

ProFutures= business. Accordingly, we cannot say that the trial court=s determination on this 

issue was contrary to the manifest weight of the evidence. Concerning the confidentiality of 

plaintiff=s client information, the evidence showed that neither Hallman nor McQuinn signed a 

written confidentiality agreement. While Linse testified that the parties entered an oral 

confidentiality agreement, Hallman and McQuinn testified to the contrary. Because the court 

was in the best position to assess the credibility of the witnesses and is charged with resolving 

any conflicts in the evidentiary record (see Williams v. Cahill, 258 Ill. App. 3d 822, 825 (1994)), 

we cannot say that its determination that no confidentiality agreement existed was contrary to the 

manifest weight of the evidence. 

Moreover, we agree with the trial court=s determination that plaintiff did not demonstrate 

that Hallman and McQuinn usurped its corporate opportunity to capitalize on its success with its 

Rydex sector fund. Certainly, more than one corporation may offer that form of investment and, 

while Hallman and McQuinn may have advertised their personal Rydex sector funds= successes 

as a lure to potential customers to their new corporation, plaintiff offered no evidence that it 

cannot also capitalize on its success with its Rydex sector fund. 

Concerning the remaining allegations, clearly this case is distinguishable from the 
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extreme cases of fiduciary misconduct to which plaintiff compares it. In Unichem Corp. v. 

Gurtler, 148 Ill. App. 3d 284 (1986), the defendant, the former president and a member of the 

board of directors of the plaintiff chemical company, appealed summary judgment entered for 

the plaintiff on its claim that the defendant had breached his fiduciary duty. The defendant=s son 

had been a salesperson employed by the plaintiff. While his father remained the plaintiff=s 

president and a member of the board, the defendant=s son resigned and established a rival 

chemical company. The defendant did not inform the plaintiff of his son=s resignation or plans to 

form a competing company until a month after the fact. Moreover, without disclosing to the 

plaintiff his actions, the defendant encouraged other of the plaintiff=s employees to go to work 

for his son=s rival company, personally approved five separate sales of the plaintiff=s goods to his 

son at a drastically reduced price, knowing that his son would resell the products to the plaintiff=s 

regular customers, and obtained a loan in his name to be distributed to his son=s company. The 

defendant was also aware, but did not inform the plaintiff, that his son and wife were soliciting 

the plaintiff=s employees to join the rival company and that his wife had taken several of the 

plaintiff=s labels and was using them to make the rival company=s labels. The defendant 

provided his wife A >technical input= @ in this regard. Unichem, 148 Ill. App. 3d at 288. 

Eventually, the defendant resigned from his position with the plaintiff and assumed the position 

of president of his son=s company. The appellate court held that the defendant had breached his 

fiduciary duties to the plaintiff because he had failed to disclose facts which threatened the 

plaintiff=s existence and had, in fact, intentionally hidden such developments. Accordingly, the 

appellate court affirmed the trial court=s summary judgment order. 
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In Vendo Company v. Stoner, 58 Ill. 2d 289 (1974), the trial court entered judgment for 

the plaintiff, a vending machine manufacturer, against the defendant, a former officer and 

director of the plaintiff, on the plaintiff=s claim that the defendant had breached a noncompetition 

covenant. On appeal in the supreme court, the court noted that it was clear that the defendant 

had violated his fiduciary duties during his employment as an officer and director of the plaintiff. 

 During that period, the defendant, without disclosing such actions to the plaintiff, had 

contributed substantial personal funds to the development of a superior vending machine that 

would compete with that manufactured by the plaintiff. The defendant also represented the 

plaintiff in its attempts to purchase the design of the new vending machine. The court concluded 

that the defendant 

Ahad a foot in each camp. Not only did his undisclosed individual interest in 

controlling the futher development and ultimately the manufacture and sale of the 

[superior machine] create the possibility of his taking an unfair advantage of 

plaintiff, but the evidence gives strong indication that he actually misled plaintiff 

while he was purportedly acting as plaintiff=s agent with regard to plaintiff=s 

possible acquisition of the [superior machine].@ Vendo, 58 Ill. 2d at 304. 

In ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 62 Ill. App. 3d 

671 (1978), the plaintiff, a freight forwarding company, appealed the trial court=s refusal to 

enjoin defendants, the former president and vice presidents of the plaintiff=s subsidiary, and the 

competing company they had established from soliciting or serving its former customers. The 

evidence showed that, while employed by the plaintiff, the defendants set out to establish a rival 
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freight forwarding company. To this end, the defendants invested in the new corporation, 

obtained the services of a cartage firm which began making deliveries for the new corporation 

and met with the plaintiff=s customers in an attempt to obtain their commitment to the new 

corporation. The defendants encouraged the plaintiff=s staff members to come to work for the 

rival corporation, telling them that the plaintiff=s subsidiary would soon become insolvent and 

that they would consequently be unemployed and that all of the plaintiff=s major accounts would 

be transferred to the rival corporation. The defendants further organized a multistate massive 

walkout of the plaintiff=s employees who had committed to working for the rival corporation. 

The defendants encouraged the plaintiff=s employees to use the plaintiff=s facilities, funds and 

personal property to prestamp the rival corporation=s air bills, furnish the rival corporation with 

office supplies and airline containers and prepare the new corporation=s daily reports. The 

appellate court held that these actions evidenced a clear breach of the defendant=s fiduciary 

duties and, therefore, the injunction was proper. 

The case at bar is also distinguishable from Foodcomm, a closer case of fiduciary 

misconduct. In Foodcomm, the district court granted the plaintiff, an importer of chilled 

Australian beef, an injunction against the defendants, the plaintiff=s former employees who were 

held to the heightened fiduciary duty of directors or officers, from providing service to the 

plaintiff=s former customer. While employed by the plaintiff, one of the defendants had been 

assigned to A >smooth *** over= @ a dispute between the plaintiff and one of its largest customers. 

Foodcomm, 328 F.3d at 302. The customer indicated to the defendant that it would no longer do 

business with the plaintiff; however, the defendant failed to relate this information to the 
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plaintiff. Instead, the defendants contacted the customer to inquire whether it would be 

interested in their services. The customer requested a written business plan for a new business 

that would compete with the plaintiff=s, which the defendants prepared on computers and 

personal digital assistants owned by the plaintiff. After the defendants resigned, their new 

competing business began operating as a division of the customer=s company. On appeal, the 

Seventh Circuit found that the injunction was proper because the plaintiff was likely to succeed 

on its claim that the defendants had breached their fiduciary duties. The court reasoned that the 

defendant was 

Aprivy to the collapse of negotiations between [the plaintiff] and [its customer] 

regarding the redistribution deal and offered to >smooth things over.= The 

evidence adduced at the hearing supports the finding that instead of >smoothing 

things over,= [the defendant] conspired with [his codefendant] to present [the 

customer] with a business plan to create [a customer-owned] entity that would 

provide the same services as were already being provided by [the plaintiff], and 

directly compete with [the plaintiff]. Such efforts to actively exploit their 

positions within [the plaintiff] for their own personal benefits, and to hinder [the 

plaintiff=s] ability to conduct its business with [the customer], if proved at trial, 

constitute a breach of fiduciary duty.@ Foodcomm, 328 F.3d at 304. 

The court further noted that a finding of breach would be supported by the facts that the 

defendants did not inform the plaintiff of their intentions to form a rival company and that they 

used the plaintiff=s property to write their business plan. 
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In this case, Hallman and McQuinn began planning and, in fact, incorporated a 

competing business while still employed by plaintiff. However, they did not solicit business for 

their new corporation or begin competing with plaintiff until after they had resigned. Though, as 

in the above-discussed cases, Hallman and McQuinn did not inform plaintiff of their intentions 

to create a competing corporation and may have typed their new business plan and experimented 

with advertisement fonts on plaintiff=s computers, simply put, their conduct did not rise to the 

level of a breach of their fiduciary duties because they neither exploited their positions for their 

personal benefit and to the detriment of plaintiff nor impeded plaintiff=s ability to do business. 

Unlike in Unichem and Vendo, Hallman and McQuinn did not actively invest in a rival 

company, taking advantage of benefits to which they, as fiduciaries to plaintiff, were entitled to 

insure the success of that rival company. Nor did Hallman and McQuinn mislead plaintiff about 

their actions, impeding plaintiff=s ability to do business, as in Vendo. Unlike in ABC, Hallman 

and McQuinn did not use and steal property belonging to plaintiff in order to operate its rival 

business nor did their new corporation actually begin doing business while they were still 

employed by plaintiff. Finally, unlike in Foodcomm, while employed by plaintiff, Hallman and 

McQuinn did not actively exploit their position as employees, using their contacts with plaintiff=s 

customers, to establish a rival business. Moreover, their actions in creating their new 

corporation did not interfere with plaintiff=s relationships with its customers nor did they impede 

plaintiff=s ability to conduct its business, as occurred in Foodcomm. Hallman and McQuinn 

simply did not participate in the monkey business participated in by the defendants in the 

discussed cases. To hold that Hallman=s and McQuinn=s actions were a breach of their fiduciary 
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duties would be to virtually prevent all officers and directors from seeking new employment 

prior to resigning from their current positions. 

For these reasons, we affirm the judgment of the trial court. 

Affirmed. 

THEIS, P.J., and KARNEZIS, J., concur.