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DiTommaso-Lubin prosecutes and defends cases involving controversies over a covenant not to compete, or other restrictive covenants. Our Illinois restrictive covenant attorneys represent clients in active litigation over the validity and enforcement of these covenants, as well as helping to evaluate whether litigation may arise over such a contract. With more than 25 years of experience, we have handled these claims for businesses of every size, from large corporations to family-owned businesses, as well as individual employees. Based near Naperville, Aurora, Geneva, Lisle, Warrenville, Downers Grove, Wheaton, Wilmette, Evanston, Ill., and downtown Chicago, we represent clients throughout the state of Illinois, as well as in Indiana and Wisconsin. To learn more about how our Illinois covenant not to compete lawyers can help you, please do not hesitate to contact us through our Web site or call toll-free at 1-877-990-4990.

Our Illinois noncompete clause attorneys recently noted an important case addressing the standards for a preliminary injunction in Illinois lawsuits over covenants not to compete. In Lifetec, Inc. v. Edwards, No. 4-07-0300 (Ill. 4th Nov. 6, 2007), Lifetec sued former salesman Peter Edwards for breach of three restrictive covenants in his employment contract. It also sued his wife, Carol Edwards, and new employer, Patterson Medical Supply Inc., for tortious interference with the contract. Trial court granted Lifetec a preliminary injunction, and Edwards filed the instant appeal.

Lifetec sells medical devices and products. When Edwards began working there as a salesman, he signed a contract agreeing not to:

• Compete with Lifetec, or sell or lease the products he had been assigned during the last 18 months of his employment, or competing products, within the territory assigned to him in the last 18 months of his employment.
  
• Directly or indirectly solicit purchase or lease of the product or competing products within the same territory.
  
• Work as a distributor or sales representative for any manufacturer that was a client of Lifetec, or for a competitor that also handles the client’s products, within the last 12 months.

The restrictive covenant applied for 24 months after the employment agreement was terminated.

Edwards left Lifetec for Patterson, a larger competitor, after 10 years. According to the opinion, he knew the move could cause Lifetec to sue and gave Patterson a copy of the agreement, but Patterson said it would take care of him in any lawsuit. Several months later, he admitted to a former colleague that he was working for Patterson. Months later, Lifetec sued him for breach of contract and requested a preliminary injunction. At an evidentiary hearing, evidence was introduced that Edwards had solicited Lifetec customers, but he said all Lifetec customers were also Patterson customers because the bulk of Patterson’s business was from national contracts. On the basis of the evidence at this hearing, the trial court granted a preliminary injunction stopping Edwards from violating the contract.

Edwards appealed, asking only for a decision on whether there was enough evidence to support the granting of the injunction. The appeals court said there was. The question, the court wrote, was whether Edwards had used protectable confidential information gained at Lifetec for his own gain. Lifetec contended that its “open quotes” to buyers constituted protectable information, although not all open quotes necessarily resulted in sales. The court took it one step further, saying the way those quotes were calculated was the real confidential information, as the quotes themselves were not secret once submitted to customers. Edwards’ knowledge of the reasoning behind the bids could give Patterson an advantage in the competitive medical supply industry. The defendants’ arguments that Lifetec should have alleged that Edwards misappropriated its trade secrets also fail, the court wrote, since Lifetec is making no such claim. All of this is sufficient to raise fair questions of fact, the court said, so an injunction was proper until the merits of the case could be decided.

A special concurrence filed by Presiding Justice Robert Steigmann agreed with the outcome, but said the court was incorrect to use the “legitimate business interests” test. This test is three decades old, the justice wrote, but the Illinois Supreme Court had never embraced it and in fact failed to use it at all in its 2006 decision in Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 866 N.E.2d 85 (2006). Because of this, he wrote, the court should have stopped its analysis after finding that the time and territory restraints in the covenant were reasonable. The majority noted, however, that the parties made no argument on this basis.

Continue reading "Scope of Injunctions Enforcing Restrictive Employment Covenants Must Be Clear, Fourth District Decides" »

DiTommaso-Lubin’s Illinois breach of contract litigation attorneys were pleased to see a split Illinois Third District Court of Appeal decision clarifying the circumstances under which a post-employment restrictive covenant is valid. The decision came in Brown & Brown v. Patrick Mudron, No. 03-CH-1363 (Ill. 3rd March 11, 2008), in which a Florida insurance company sued a former employee for breaching a restrictive covenant in her employment agreement.

Diane Gunderson, the employee, worked for a Joilet, Ill. company that was taken over by Brown & Brown. Brown asked Gunderson to sign a new employment agreement with them, and in fact, fired an employee who refused to do so. The agreement said Gunderson’s employment could be terminated any time for any reason and prohibited her from soliciting or servicing any of Brown’s employees for two years after ending her employment with the company. She signed the agreement, but resigned seven months later and went to work for a competitor. Brown sued, alleging that Gunderson had breached the restrictive covenant at her new job. The trial court granted summary judgment in favor of Gunderson because it couldn’t find any evidence that she had breached the covenant, and Brown appealed.

The majority started by disposing of a “choice of law” provision in the contract requiring all disputes to be resolved in Brown’s home state of Florida. Illinois law applies anyway, the court wrote, because Illinois has a greater interest in the case and moving it to Florida would be against Illinois public policy interests. International Surplus Lines Insurance Co. v. Pioneer Life Insurance Co. of Illinois , 209 Ill. App. 3d (1990).

The court next considered Gunderson’s argument that the employment contract is not legally enforceable. Among other things, the majority wrote, restrictive covenants must give the employee adequate consideration to support the covenant. In post-employment contracts like Gunderson’s, they wrote, caselaw says continued employment can only count as that consideration if it is truly adequate -- generally meaning a duration of two years or more -- because of the possibility that at-will employment will mean a quick, causeless firing. Gunderson’s employment continued for only seven months, the court pointed out, and the fact that she resigned didn’t matter under Mid-Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d. (1993).

For that reason, the court wrote, there was no need to consider whether Brown’s case presented genuine issues of material fact. And for the same reason, Gunderson was not entitled to claim attorney fees under the voided employment contract. Thus, the majority said, the trial court’s decision to grant summary judgment stands.

However Judge Daniel Schmidt dissented, saying he believes seven months of continued employment could be adequate consideration under some circumstances. Importantly, he disagreed with the majority’s interpretation of Mid-Town, in which an employee also resigned after seven months with the new employer. In that case, he wrote, the facts differed considerably because the employee had been promoted as an incentive to sign a post-employment restrictive covenant, and quit after the promotion was later rescinded:

“To hold, as the majority does here, that an employee can void the consideration for any restrictive covenant by simply quitting for any reason renders all restrictive employment covenants illusory in this state. They would all be voidable at the whim of the employee.”

Because he also feels there are genuine issues of material fact at hand, Judge Schmidt wrote that he would prefer to reverse and remand the case.

DiTommaso-Lubin has an active practice in Chicago restrictive covenant litigation, in which we represent employers, employees and other parties seeking to protect their business interests and rights. In fact, we handle all types of breach of contract lawsuits in Illinois, including non-competition clauses, shareholder disputes and real estate litigation. Click here to see a summary of some of the cases we have litigated. Based in Chicago and Oakbrook Terrace, Ill. near Oak Brook, Joliet, Aurora, Elgin, Naperville and Wheaton, we handle business disputes throughout the state of Illinois as well as in Indiana and Wisconsin. If you need an experienced attorney’s help with your own business dispute and you’d like to learn more, you can

Posted by Peter S. Lubin and Vincent L. DiTommaso | Permalink | Email This Post

Posted In: Breach of Contract , Illinois Appellate Courts , Non-Compete Agreements , Restrictive Covenants