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Illinois Appellate Court Affirms Trial Court’s Decision That Non-Compete Agreement is Unenforceable

In the recent case of Critical Care Systems, Inc. v. Heuer, the Illinois Appellate Court agreed that a non-compete agreement was too broad and thus unenforceable and affirmed the trial court’s refusal to enjoin the employee from joining a competitor of his former employer.  The Appellate Court also refused the employer’s request to blue pencil and rewrite the agreement to make it narrower and thus enforceable holding Illinois law did not permit it to do that.

In November 2012, plaintiff, Critical Care Systems, Inc., filed a verified complaint against defendants, Dennis Heuer and IV Solutions, LLC, seeking injunctive relief barring its former employee Heuer under his non-compete agreement from taking a new job with IV Solutions.  Critical Care also sought compensatory and punitive damages. Critical Care, the plaintiff thereafter petitioned the trial court to enter a preliminary injunction, which the trial court denied.  The Appellate Court affirmed the trial court’s decision agreeing that Critical Care didn’t have unique information to protect and that its non-compete agreement was too broad.

Before rendering its decision the Appellate Court reviewed the applicable law noting that to obtain a preliminary injunction, the moving party is required to show “(1) a clearly ascertained right in need of protection, (2) irreparable injury in the absence of an injunction, (3) no adequate remedy at law, and (4) a likelihood of success on the merits of the case.” “To obtain a preliminary injunction, the movant must raise a ‘fair question’ that each of these elements is satisfied.”  The Appellate observed that the trial court must also determine if the balance of hardships to the parties supports the grant of a preliminary injunction. In doing so, we will reverse only where the trial court abused its discretion in holding as it did. Whether injunctive relief should be granted to enforce a restrictive covenant not to compete in an employment contract depends on the validity of the covenant, the determination of which is a question of law.

Illinois courts carefully examine post-employment restrictive covenants because they operate as partial restrictions on trade.Although the lower court’s judgment in granting or denying a preliminary injunction “is accorded great deference, it must still be exercised within the established legal framework for injunctive relief.” “A restrictive covenant, assuming it is ancillary to a valid employment relationship, is reasonable only if the covenant: (1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee, (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public.”  The protection of the employer’s legitimate business interest is a long-established component in this three-prong rule of reason. Each case must be determined on its own particular facts, and whether a legitimate business interest exists is based on the totality of the facts and circumstances of the individual case. An employer seeking to enforce the restrictive covenant bears the burden of showing that the full extent of the restriction is necessary to protect its legitimate business needs.

In the Appellate Court, the plaintiff, employer argued that that it had four bases upon which the trial court should have found a protectable interest: the professional nature of its services; its loss of good will; customer relationships; and confidential information. Plaintiff asserted that the trial court denied the motion for an injunction solely because it concluded that plaintiff lacked a legitimate protectable interest in enforcement. The Appellate Court disagreed and concluded that the trial court properly analyzed the 2011

The Appellate Court rejected all of plaintiff’s arguments.  It found that the trial court thoroughly considered the covenant at issue and all of the evidence presented, expressly stating that it was guided by the standards our supreme court provided in Reliable Fire Equipment. The Appellate Court found that the trial court  properly found that Critical Care’s relationship with a customer Alexian was “merely a referral relationship,” and that Critical Care failed to persuade the Appellate Court otherwise.  It also agreed that the trial court properly concluded that Critical Care presented no evidence of any confidential information that Heuer, its employee obtained through his employment. The Appellate Court found that the trial court’s finding that Critical Care’s references to confidential information were vague and unsubstantiated was well founded, and further, agreed the Critical Care presented no evidence reflecting that any of Heuer’s knowledge regarding Alexian was first learned while he was employed with plaintiff or that plaintiff considered or treated the information as confidential. The record reflected that Heuer’s employment responsibilities with Critical Care were essentially the same responsibilities he had with his prior employer, Apria Healthcare, for whom he worked for 14 years prior to his employment with Critical Care.

Moreover, the Appellate Court found that trial court properly determined that the covenant did not serve any legitimate business interest when it concluded that plaintiff failed to establish evidence of confidential information. Because Heuer did not possess any proprietary or confidential information of plaintiff’s, an employment restriction enjoining Heuer from employment with his new employer, IV Solutions did not serve any legitimate business needs of plaintiff.  The Appellate Court concluded that no error occurred when the trial court determined that plaintiff’s noncompetition agreement was unenforceable and that the trial court did not abuse its discretion in its refusal to enter a preliminary injunction against defendants.

The Appellate Court also rejected the employer’s request to blue pencil and rewrite the covenant to render it enforceable because would be an impermissible rewriting of the covenant forbidden under Illinois law.  The Court obeserved: “It is the function and duty of the reviewing court to construe the contract and not to make a new contract under the guise of construction.” Thus, finding no proprietary or confidential information involved or any other protectable interest, the Court could not say that plaintiff  demonstrated a proprietary business interest such as to warrant an enforcement of a covenant not to compete. Plaintiff failed to establish any confidential or proprietary information, and therefore, could not establish the necessity of protecting such information.

Our Chicago non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.

DiTommaso-Lubin a firm of Chicago business dispute lawyers handles litigation over non-compete clauses for individuals and businesses of all sizes, including small or closely held businesses for whom competition from an ex-employee can be a serious threat. Our Chicago business lawyers with offices near Schaumburg, Lake Forest and Mt. Prospect have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.

DiTommas-Lubin a Chicago business litigation law firm represents both plaintiffs and defendants in such cases, and can also help stop litigation before it starts by reviewing contracts to look for covenants and clauses that could create problems later. Based in Oakbrook Terrace and downtown Chicago, our Evanston and Lake Forest non-compete clause lawyers take cases from Lake Bluff, Kennilworth and Hinsdale and many other cities throughout Illinois, as well as in Indiana, Wisconsin and the entire United States. To learn more or set up a free consultation, please contact one of our Chicago business dispute lawyers through the Internet or call toll-free at 1-877-990-4990 today.