Court Opinion

ID: 9742275
Source: CourtListenerOpinion
Date Created: 2023-08-26 21:09:57.94486+00
Date Added: 2024-06-11T07:24:30.531749
License: Public Domain

PRESIDING JUSTICE JIGANTI, dissenting: I respectfully dissent. Regent Printing Company is having difficulty getting its motion heard. Regent filed a motion for a preliminary injunction against Howard Shapiro. In accordance with the contract mentioned in the majority opinion, Regent sought to enjoin Howard from soliciting customers of Regent. The trial court, apparently in a well-meaning attempt to ameliorate a family situation, found that the agreement was invalid because of a failure of consideration. Howard had not contended that the agreement was invalid for this reason. Regent on appeal has again asked to have a preliminary injunction entered against Howard according to the terms of the contract. The majority has not ruled on Regent’s motion because, as noted parenthetically in a footnote, the majority has found that Regent had no right to appeal under supreme court rules. Howard did not raise that issue here. Regent is entitled to have its motion considered on the issues raised by the parties. The appeal should be placed in some perspective. The trial court entered an injunction for two months against Howard. Howard appeals, contending that the injunction was a permanent injunction and should not have been entered because he was only called upon to respond to a hearing on a preliminary injunction. The majority in this court found the injunction to be permanent but invalid because there was insufficient proof to warrant a permanent injunction. While I agree with the majority that the injunction is permanent, I would also agree with Howard’s contention that the permanent injunction should not have been entered because Howard was not called upon to respond to a hearing on a permanent injunction. I believe, as Regent contends on appeal, that Regent was entitled to a hearing on its motion for a preliminary injunction and that in light of the evidence a preliminary injunction should have been entered. I disagree with the majority holding, as noted in the footnote, that Regent did not have the power to cross-appeal from the denial of its motion for a preliminary injunction because it did not perfect its appeal pursuant to Supreme Court Rule 307. (107 Ill. 2d R. 307.) That rule provides that an aggrieved party may take an interlocutory appeal as a matter of right from the denial of an injunction. The majority makes no mention of the proposition that a cross-appeal may be taken pursuant to Supreme Court Rule 303(a)(3), which provides that any party may cross-appeal after the filing of an appeal. 107 Ill. 2d R. 307. Regent’s motion for a preliminary injunction is based on the provisions of the contract. Howard contends that the trial court was correct in finding that there was no consideration for the agreement. I agree with the majority that the contract was supported by adequate consideration and is therefore valid in this respect. Regent contends that the restrictive covenant is valid because it is reasonable in geographic scope and time and because Regent has a protectable business interest in its customers. Howard does not contest the time or the geographic scope of the covenant. Howard contends that in the factual setting here Regent does not have a protectable business interest. Regent’s specific response is that employers have a protectable interest in their customers under two circumstances: (1) where the employee has acquired confidential information and subsequently attempts to use it for his own benefit; or (2) where, by the nature of the business, the employer’s relationship with its customers is near permanent, and but for his association with the employer, the employee would not have had contact with the customers in question. (Corroon & Black of Illinois, Inc. v. Magner (1986), 145 Ill. App. 3d 151, 494 N.E.2d 785; The Instrumentalist Co. v. Band, Inc. (1985), 134 Ill. App. 3d 884, 480 N.E.2d 1273.) Regent contends that both of these situations exist in the present case. Howard responds that the facts of the instant case appear to be virtually identical to the recently decided case of Reinhardt Printing Co. v. Feld (1986), 142 Ill. App. 3d 9, 490 N.E.2d 1302, in which the court ruled that the evidence did not support a finding that the employer had a protectable business interest. To be valid, a contract in restraint of competition must be reasonable in its effect upon the parties and the public. The effect is reasonable if the agreement will not be injurious to the public, will not cause undue hardship to the employee and is not greater in scope than is necessary to protect the employer. (House of Vision, Inc. v. Hiyane (1967), 37 Ill. 2d 32, 225 N.E.2d 21; Dryvit System, Inc. v. Rushing (1985), 132 Ill. App. 3d 9, 477 N.E.2d 35.) Employers have a legitimate and protectable interest in protecting their relationships with their customers. (Cockerill v. Wilson (1972), 51 Ill. 2d 179, 281 N.E.2d 648.) An employer has no proprietary interest in its customers; however, the law will find a protectable interest where the employee acquired confidential information and attempted to use it, or where the customer relationship is near permanent and but for the employer the employee would not have had the customer contact. Corroon & Black of Illinois, Inc. v. Magner (1986), 145 Ill. App. 3d 151, 163, 494 N.E.2d 785, 792; The Instrumentalist Co. v. Band, Inc. (1985), 134 Ill. App. 3d 884, 892, 480 N.E.2d 1273, 1279. I believe, as did the majority and apparently the trial court, that the plaintiff had a protectable interest under the agreement. Howard has valuable, confidential customer information, including the names of personal contacts for each customer, the type of printing those customers need, the time of the month or year they need it, the credit worthiness of the customers, and their sales volume. As was stated in Donald McElroy, Inc. v. Delaney (1979), 72 Ill. App. 3d 285, 389 N.E.2d 1300, this inside information may potentially give a former employee an unfair advantage in bidding against the employer. In Reinhardt, the case that Howard cites for support, the employee had little customer information. I believe that Regent was entitled to a preliminary injunction based on the evidence presented. Regent has argued this appeal based on the cases which stand for the proposition that an employer has a protectable interest when an employee has acquired confidential information which he seeks to use for his own benefit, or the employer’s customer relationships were near permanent and but for the employment the employee would not have had contact with the customers. I am concerned that the suggestion is that only under these circumstances are customer relationships protected. The Reinhardt case fosters this idea with the statement that customer lists and other customer information will be deemed a protectable trade secret only where information has developed over a number of years, at great expense and under tight security. I do not believe that these are appropriate limitations. The broad proposition of law in the area of restraint of competition is that such a contract is reasonable when it is not injurious to the public, will not cause undue hardship to the employee, and is no greater than necessary to protect the employer. (Cockerill v. Wilson (1972), 51 Ill. 2d 179, 281 N.E.2d 648; House of Vision, Inc. v. Hiyane (1967), 37 Ill. 2d 32, 225 N.E.2d 21.) The interest of the employer that needs to be protected here is the interest the employer has in its clients. More specifically, it is the interest the employer has in preventing an employee from taking over its customers through the contacts that the employee has had with those customers while he worked for the employer. House of Vision, 37 Ill. 2d at 38, 225 N.E.2d at 24. In House of Vision, the employee was a contact lens fitter. He serviced between 700 to 800 customers in each of two offices of the employer. The work brought him into close contact with the customers and was of an intimate and highly personal nature. The employee was the principal, if not the only, point of contact between the plaintiff-employer and its customers. The employer sought to enforce the covenant that would restrict the employee from any employment in the same business within a radius of 30 miles. The Illinois Supreme Court acknowledged that an employer has a protectable interest in its customers, but refused to enforce the restrictive covenant in this case because it was unrealistic both as to time and space. The House of Vision court did not state that an employee’s acquisition of confidential information or an employer’s near permanent business relationship with customers is a prerequisite to an employer’s protectable interest in its customers. House of Vision, 37 Ill. 2d at 38, 225 N.E.2d at 24. The court in House of Vision cites to Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625 (1960) (cited in House of Vision, 37 Ill. 2d at 39, 225 N.E.2d at 25). Blake comments that “an employer has a sufficient interest in retaining his present customers to support an employee covenant whenever the employee’s relationship with customers is such that there is a substantial risk that he may be able to divert all or part of their business.” (73 Harv. L. Rev. at 657.) Blake refers to this as a “ ‘customer contact’ basis.” Whether the employer warrants protection will depend upon the frequency, the locale and the nature of the contacts between the employee and the employer’s customers. 73 Harv. L. Rev. at 659. The court in Cockerill takes a similar view. The plaintiff veterinarian' brought the defendant, also a veterinarian, into practice with him. The plaintiff sought to enforce a restrictive covenant when the defendant terminated the partnership. The court commented that when the plaintiff brought the defendant into association with him, he also brought him into contact with a clientele which the plaintiff had established over a period of years. The plaintiff had an interest in protecting his clients from being taken over by the defendant as a result of these contacts. The court commented that the plaintiff’s clientele was an asset, the protection of which is recognized as a legitimate interest of an employer. Cockerill, 51 Ill. 2d at 184, 281 N.E.2d at 651, citing Annot., 43 A.L.R.2d §4, at 117 (1955). Section 4(e) of the A.L.R. discussion on restrictive covenants (Annot., 43 A.L.R.2d §4 (1955)) states that the employer is entitled to protection against what is called a legitimate interest but not against ordinary competition. In order to be entitled to protection, the employer must be able to point to a legitimate interest: some additional facts and circumstances which render the restrictive covenant reasonably necessary. The annotation states at section 4(f) that the most important of the employer’s legitimate interests to be protected through the enforcement of a restrictive covenant are the customer contacts that the employer has developed for his business. The protection of this asset against appropriation is recognized everywhere as an important legitimate interest of the employer. Elsewhere in the annotation, the employer’s customer is described as the most important single asset of a business. Annot., 43 A.L.R.2d §4, at 162. For these reasons, I believe that restrictive covenants may be enforceable under more circumstances than the narrowly drawn limitations argued in this appeal.