Court Opinion

ID: 3142392
Source: CourtListenerOpinion
Date Created: 2015-10-22 17:56:16.861459+00
Date Added: 2024-06-11T11:54:51.835772
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                         Appellate Court

            Diederich Insurance Agency, LLC v. Smith, 2011 IL App (5th) 100048

Appellate Court            DIEDERICH INSURANCE AGENCY, LLC, Plaintiff-Appellant, v.
Caption                    CHAD SMITH, Defendant-Appellee.

District & No.             Fifth District
                           Docket No. 5–10–0048

Filed                      Filed June, 7, 2011

Held                       In an action seeking money damages for defendant’s breach of a
(Note: This syllabus       restrictive covenant prohibiting defendant from soliciting insurance
constitutes no part of     business from plaintiff’s customers for two years after he stopped
the opinion of the court   working for plaintiff, the trial court properly dismissed the claim based
but has been prepared      on its finding, as a matter of law, that there was insufficient consideration
by the Reporter of         given for defendant’s agreement, notwithstanding plaintiff’s contentions
Decisions for the          that the job defendant obtained and continued for three months after
convenience of the         signing the agreement was sufficient consideration and that the
reader.)
                           subsequent reduction of the time period from two years to one year was
                           an actual benefit to defendant, since defendant’s continued employment
                           after signing the agreement was an illusory benefit in view of the fact that
                           he was an at-will employee who was already obligated not to compete
                           against plaintiff’s business and he could be fired immediately, and his
                           continued employment after reducing the time period from two years to
                           one year did not provide adequate consideration, especially when there
                           generally must be at least two years or more of continued employment to
                           constitute adequate consideration for such an agreement.
Decision Under              Appeal from the Circuit Court of Jackson County, No. 09–L–57; the Hon.
Review                      W. Charles Grace, Judge, presiding

                            Thomas F. Crosby, of Winters, Brewster, Crosby & Schafer, LLC, of
                            Marion, for appellee.
Judgment                    Affirmed.

Counsel on                  Edward Renshaw, of Feirich/Mager/Green/Ryan, of Carbondale, for
Appeal                      appellant.

Panel                       JUSTICE GOLDENHERSH delivered the judgment of the court,
                            with opinion.
                            Presiding Justice Chapman and Justice Donovan concurred in the
                            judgment and opinion.

                                              OPINION

¶1             Plaintiff, Diederich Insurance Agency, LLC, filed a two-count complaint against
        defendant, Chad Smith, a former employee of plaintiff. Count I sought money damages for
        breaching the terms of a restrictive covenant, and count II sought money damages for failing
        to repay commissions advanced to defendant by plaintiff. The circuit court of Jackson
        County granted defendant’s motion to dismiss count I pursuant to section 2–619(a)(9) of the
        Code of Civil Procedure (Code) (735 ILCS 5/2–619(a)(9) (West 2008)). Plaintiff later
        voluntarily dismissed count II. That count is not a part of this appeal. The issues raised in this
        appeal are as follows: (1) whether the circuit court erred in finding as a matter of law that
        there was insufficient consideration given by plaintiff for defendant’s nonsolicitation
        agreement and (2) in the alternative, whether defendant’s continued employment for three
        months after signing the nonsolicitation agreement provided sufficient consideration for that
        agreement. We affirm.

¶2                                              FACTS
¶3             Defendant worked as an insurance broker/agent for plaintiff from October 1, 2007,
        through June 16, 2008. At the time defendant began working for plaintiff, he signed an
        employment agreement in which he agreed not to solicit insurance business from plaintiff’s
        customers for a period of two years after he stopped working for plaintiff. The employment

                                                   -2-
     agreement specifically stated the following:
            “[Defendant] also covenants that in the event of termination of this Agreement, as
            provided herein, for whatsoever reason, he/she shall not, either directly or indirectly
            on his/her own account, or for or on behalf of any person, company, or agency, other
            than [plaintiff], record, solicit, or otherwise procure insurance from individuals,
            partnerships, corporations or other entities who have done business with or in any
            way been associated with [plaintiff], for a period of 2 years after the termination of
            this Agreement. Further, [defendant] agrees during the continuance of this Agreement
            and after its termination for the period specified[ ] that he/she will not directly or
            indirectly divert or take away or attempt to divert or take away any of the customers,
            business, or patronage of such customers as are served by [plaintiff].”
¶4          On March 14, 2008, defendant signed an employee confidentiality agreement that
     reduced the terms of the nonsolicitation agreement from 2 years to 12 months.
¶5           On June 16, 2008, defendant stopped working for plaintiff. On May 15, 2009,
     plaintiff received notification from Logan Primary Care Service Corporation (hereinafter
     Logan), one of plaintiff’s long-standing clients, that Logan would no longer be utilizing
     plaintiff as its medical malpractice professional liability insurance broker. Logan informed
     plaintiff that it was appointing Arthur J. Gallagher & Co. (hereinafter Gallagher) as its
     medical malpractice professional liability broker. Defendant arranged the transfer of Logan’s
     medical malpractice professional liability insurance carrier services from plaintiff to
     Gallagher.
¶6           On June 8, 2009, plaintiff filed its two-count complaint against defendant. Defendant
     filed a motion to dismiss both counts of the complaint with prejudice pursuant to section
     2–619(a)(9) of the Code. On August 27, 2009, the circuit court dismissed count I, finding,
     “[T]here is insufficient consideration as a matter of law and there is no genuine issue of
     material fact, and pursuant to Fuller [Fuller Family Holdings, LLC v. Northern Trust Co.,
     371 Ill. App. 3d 605, 863 N.E.2d 743 (2007)] and Woodfield [Woodfield Group, Inc. v.
     DeLisle, 295 Ill. App. 3d 935, 693 N.E.2d 464 (1998)], Count I herein is dismissed pursuant
     to 2–619.” On December 14, 2009, plaintiff filed a motion to voluntarily dismiss count II,
     which the circuit court granted. Plaintiff filed a timely notice of appeal.

¶7                                        ANALYSIS
¶8           The first issue we are asked to address is whether the circuit court erred in finding as
     a matter of law that there was insufficient consideration given by plaintiff for defendant’s
     nonsolicitation agreement. Plaintiff contends the two-year covenant not to compete, which
     defendant entered into when he started his employment with plaintiff, was enforceable and
     supported by sufficient consideration, namely, the job he obtained. Furthermore, plaintiff
     argues, the reduction of the length of the covenant not to compete from two years to one year
     was an actual benefit to defendant, and thus no additional consideration was needed to
     support the nonsolicitation agreement. Alternatively, plaintiff argues that its agreement to

                                               -3-
       reduce the duration of defendant’s covenant not to compete provided the necessary
       consideration or defendant’s continued employment for three months after signing the
       nonsolicitation agreement provided sufficient consideration. Defendant responds that the
       nonsolicitation agreement was a modification of the previous contract and required additional
       consideration to be valid and enforceable and that because no additional consideration was
       given, the circuit court did not err in finding that the nonsolicitation agreement was not valid
       and enforceable. We agree with defendant.
¶9             A section 2–619 motion is similar to a motion for a summary judgment and allows
       a complaint to be dismissed on the basis of issues of law or easily proven facts. Carroll v.
       Paddock, 199 Ill. 2d 16, 22, 764 N.E.2d 1118, 1122 (2002). An action will be dismissed
       under section 2–619 if, after construing the pleadings and supporting documents in the light
       most favorable to the nonmoving party, the circuit court finds there is no set of facts that can
       be proven upon which relief could be granted. Fuller Family Holdings, LLC v. Northern
       Trust Co., 371 Ill. App. 3d 605, 613, 863 N.E.2d 743, 752 (2007). A reviewing court applies
       a de novo standard to the dismissal of a complaint under section 2–619. Carroll, 199 Ill. 2d
       at 22, 764 N.E.2d at 1122.
¶ 10           Defendant originally signed a two-year nonsolicitation agreement as a part of his
       original employment agreement. The terms of the agreement were changed on March 14,
       2008, when defendant signed a new nonsolicitation agreement, which reduced the period of
       time from 2 years to 12 months that defendant would not be allowed to solicit plaintiff’s
       customers after he was no longer employed by plaintiff. While plaintiff argues that this new
       nonsolicitation agreement required no additional consideration because it decreased the
       obligation, it cites no authority in support of this contention. Moreover, as the circuit court
       correctly pointed out, plaintiff brought count I as an action under the subsequent noncompete
       agreement signed on March 14, 2008, not under the original 2007 employment agreement,
       thereby making this a case concerning a postemployment restrictive covenant.
¶ 11           In determining whether a restrictive covenant is enforceable, our colleagues in the
       First District succinctly set forth the following:
                   “The determination of whether a restrictive covenant is enforceable is a question
              of law. [Citation.] A postemployment restrictive covenant is unenforceable when ‘its
              sole purpose is to restrict competition.’ [Citation.] ‘[O]rdinarily an employer has no
              proprietary interest in its customers.’ [Citation.] An individual has a fundamental
              right to pursue a particular occupation and ‘[o]ne who has worked in a particular field
              cannot be compelled to erase from his mind all of the general skills, knowledge and
              expertise acquired through his experience.’ [Citation.]
                  A postemployment restrictive covenant will be enforced if its terms are
              reasonable. [Citation.] It must be reasonable in geographical and temporal scope and
              necessary to protect a legitimate business interest of the employer. [Citation.] Prior
              to analyzing the reasonableness of a covenant not to compete, the court must make
              two determinations: (1) the covenant must be ancillary to a valid contract, that is, it
              must be subordinate to the contract’s main purpose; and (2) there must be adequate

                                                 -4-
               consideration to support the covenant. [Citation.]” Woodfield Group, Inc. v. DeLisle,
               295 Ill. App. 3d 935, 938, 693 N.E.2d 464, 466-67 (1998).
       In the instant case, the circuit court found that there was insufficient consideration to support
       the postemployment covenant not to compete, and therefore, the court dismissed count I. We
       agree.
¶ 12           Plaintiff’s contention is that the reduction in length from two years to one year
       constituted sufficient consideration. As defendant points out, this argument is based on the
       underlying assumption that the original nonsolicitation clause was valid and enforceable.
       Assuming, arguendo, that it was valid, no new consideration was given by reducing the
       length of the agreement, due to the preexisting duty rule, described as follows:
               “Valuable consideration for a contract consists either of some right, interest, profit
               or benefit accruing to one party, or some forbearance, detriment, loss of responsibility
               given, suffered or undertaken by the other. [Citation.] The preexisting duty rule
               provides that where a party does what it is already legally obligated to do, there is no
               consideration as there is no detriment.” White v. Village of Homewood, 256 Ill. App.
3d 354, 356-57, 628 N.E.2d 616, 618 (1993).
       If defendant was already obligated not to compete against plaintiff, we fail to see how his
       promise not to compete for 12 months could be new, valid consideration. We are
       unconvinced by plaintiff’s arguments to the contrary.
¶ 13           When a defendant is an employee at will, such as he was in the instant case, his
       continued employment is an illusory benefit because the minute after he signed the
       nonsolicitation agreement, plaintiff could have fired him and then he would have received
       nothing in exchange for his fresh promise represented by the signing of the second agreement
       on March 14, 2008. See Curtis 1000, Inc. v. Suess, 24 F.3d 941, 946 (7th Cir. 1994). Here,
       as in Curtis 1000, Inc., the new covenant was a modification of an existing contract and,
       therefore, required consideration in order to be enforceable.
¶ 14          The second issue we are asked to consider is whether defendant’s continued
       employment for three months after signing the nonsolicitation agreement provided sufficient
       consideration. Plaintiff argues that defendant’s continued employment for three months after
       signing the second nonsolicitation agreement provided sufficient consideration for that
       agreement. We disagree.
¶ 15            “[C]ontinued employment for a substantial period is sufficient consideration to
       support an employment agreement.” Corroon & Black of Illinois, Inc. v. Magner, 145 Ill.
       App. 3d 151, 163, 494 N.E.2d 785, 791 (1986). In Corroon & Black of Illinois, Inc., the
       plaintiff signed a postemployment covenant not to compete and worked for the defendant for
       four more years, and four years was found to be a substantial period. Corroon & Black of
       Illinois, Inc., 145 Ill. App. 3d at 163, 494 N.E.2d at 791-92. However, in general, there must
       be at least two years or more of continued employment to constitute adequate consideration.
       See Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc., 292 Ill. App. 3d
131, 138, 685 N.E.2d 434, 441 (1997). In both Brown & Brown, Inc. v. Mudron, 379 Ill.

                                                 -5-
       App. 3d 724, 729, 887 N.E.2d 437, 441 (2008), and Mid-Town Petroleum, Inc. v. Gowen,
       243 Ill. App. 3d 63, 70-71, 611 N.E.2d 1221, 1227 (1993), seven months of continued
       employment was found to be not long enough to constitute sufficient consideration.
       Accordingly, here, the circuit court did not err in finding that three months of continued
       employment did not constitute sufficient consideration. The fact that defendant quit does not
       change the analysis. See Mid-Town Petroleum, Inc., 243 Ill. App. 3d at 69-71, 611 N.E.2d
       at 1226-27. Because there was insufficient consideration given, the restrictive covenant is
       unenforceable as a matter of law against defendant.
¶ 16          For the foregoing reasons, the judgment of the circuit court of Jackson County is
       hereby affirmed.
¶ 17          Affirmed.

                                                -6-