While it’s always a good idea to put agreements in writing, taking that step isn’t always enough to guarantee that everyone involved will continue to abide by the terms of the contract, even if they all sign their names to it. When one or more parties violates the agreed-upon terms, you can sue them for breach of contract and get the court to issue an injunction requiring them to abide by the terms of the contract, but sometimes even that isn’t enough. Below are just a few examples of what can happen when people insisted on having it their own way.
A Salesman’s Gotta Sell
John Osborne worked as a salesman selling business forms for Uarco, Inc. The employment agreement he signed with the company included a non-compete clause that said Osborne would not sell business forms for any of Uarco’s competitors. After Osborne’s employment with Uarco ended, he went to work selling similar business forms for one of Uarco’s competitors. Uarco sued him for breach of contract and succeeded in obtaining an injunction from the court that, in part, forbade Osborne from reaching out to certain customers of Uarco for a period of two years. But the injunction had a loophole that let Osborne sell to a customer of Uarco if the customer expressed a desire to purchase business forms in an open bid situation (meaning different vendors submit a request for proposal and the customer goes with the lowest price).
Uarco then accused Osborne of being in contempt of court by violating the injunction when he contacted Uarco customers. When the court looked into the accusations, it found that Osborne had violated the terms of the injunction more than 100 times. Osborne admitted to contempt on two counts but claimed the rest of the customers did not fall within the limitations of the court’s injunction against him. The court disagreed and imposed further injunctions of an additional 190 days against him, as well as monetary sanctions.
Osborne appealed that decision and the case went before the Supreme Court of Kansas, which upheld the lower court’s ruling of the extended injunction and also awarded Uarco almost $10,000 to cover their legal costs in filing the lawsuit and arguing their case and an additional $10,000 fine.
What Does a Dentist Owe Their Clients?
A much more expensive breach of contract lawsuit was filed against Dr. Butler by his former employer, the Prairie Eye Center in Illinois, which resulted in the court holding him in civil contempt of court.
After several appeals and a long trial, Dr. Butler was finally enjoined from practicing ophthalmology for a period of two years and ordered to pay the clinic more than $1.8 million for lost profits, damage to the clinic’s business, and legal fees and costs.
The problem with doctors is that, once someone finds a doctor they like, they’re often averse to switching to a stranger and will avoid it if they can. The same goes for dentists, or at least that’s what Dr. Whitman, a dentist in Massachusetts, claimed when the court slapped him with an injunction for practicing dentistry within the restricted radius from his former business partner, Dr. Goldberg. When he was served with a complaint for acting in contempt of a court order, Dr. Whitman argued there were several complex procedures he had begun before the injunction was filed and that he felt obligated to complete them. He also said that he felt obligated on a moral and ethical level to continue seeing them as patients.
The judge found that Dr. Whitman had decided to ignore the terms of the injunction, rather than attempt to clarify them in accordance with what he believed to be his own moral and ethical obligations. The court, therefore, awarded Dr. Goldberg the requested compensation for legal fees and costs.
If taken far enough, some of these cases could even result in jail time. For example, Donald O’Connor spent 11 days in jail before being released on probation for 18 months after deliberately trying to steal business from a competitor.
O’Connor had been working as an independent contractor and had signed a non-compete agreement as part of his affiliation with Trost, whose business provided painting, insulation, and drywall installation services in a specific geographic area in Louisiana. O’Connor offered to buy Trost’s business for $75,000, but since it was taking in more than $1 million a year in gross income, Trost declined.
O’Connor responded by competing directly with Trost, even going so far as to take clients directly from Trost’s own office. Trost obtained an injunction against O’Connor that prohibited him from competing with Trost within a 75-mile radius for a period of two years, but that did nothing to stop O’Connor. Instead, O’Connor formed a company designed to compete with Trost’s business and continued to actively take business away from Trost. After the court found O’Connor in contempt and he had served his time in jail, O’Connor quickly transferred his business to his brother for $100, which prompted the court to file yet another injunction against O’Connor.
Trost then brought another allegation of contempt against O’Connor for the second injunction. The court then ordered O’Connor to pay Trost $470,000 in stolen profits and reinstated his 1-year jail sentence, which had previously been suspended. The court allowed O’Connor to avoid the jail sentence if he agreed to pay Trost the full amount of damages in installments of $25,000 each. Instead, O’Connor appealed the decision and the appellate court not only upheld the lower court’s ruling but also ordered O’Connor to pay Trost an additional $4,000 for the legal fees he incurred in defending himself against the appeal.
All this is to say that courts are not messing around when they issue injunctions. They expect them to be obeyed, and those who refuse can quickly find themselves in even bigger trouble.
Our Oak Brook 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.
Our firm of Chicago business dispute attorneys 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 Lombard, Oakbrook Terrace and Naperville have substantial experience in restrictive covenant and breach of contract cases, and we are proud of our record of strong results.
Lubin Austermuehle 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 Naperville and Lake Forest non-compete clause lawyers take cases from Wheaton, Geneva 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 630-333-0333 today.