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In Re Solar Textiles Co. v. Fortino

FEBRUARY 24, 1964.

IN THE MATTER OF SOLAR TEXTILES CO., A CORPORATION, PLAINTIFF-APPELLANT,

v.

RALPH FORTINO AND DURACREST FABRICS, INC., A CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. B. FAIN TUCKER, Judge, presiding. Affirmed.

MR. JUSTICE KLUCZYNSKI DELIVERED THE OPINION OF THE COURT.

Solar Textiles seeks to restrict the individual defendant Ralph Fortino, Jr., from engaging in the sale of grille cloth, and the corporate defendant Duracrest Fabrics from continuing him in its employ. The court granted defendants' motions to strike the complaint and dismiss the suit, and refused to issue a permanent injunction. No evidence was taken. Plaintiff appeals.

On November 27, 1962 plaintiff filed a complaint for injunction basing its suit upon an employment contract entered into between it and Fortino on June 19, 1959. By the terms of this employment contract it was provided:

1. Employer agrees to employ Employee, and Employee agrees to work for Employer, from the date hereof to and until this agreement is terminated by either party. Either party may terminate this agreement without notice at any time.

2. Employer shall pay to Employee for his services the sum of $140.00 per week, or such other sum as may hereafter from time to time be mutually agreed upon.

4. (a) Employee agrees that during the period of his employment by Employer, and for a period of five (5) years after termination of such employment, he will not, directly or indirectly, as a principal, partner, agent, officer, director, stockholder, lender of money, employee, clerk or otherwise, engage in any business which is the same as, similar to, or competitive to the business of Employer, within the City of Chicago or the City of New York, or within a radius of 350 miles of the Cities of Chicago or New York.

Plaintiff averred in its complaint that it is engaged in the City of Chicago and within a radius of 350 miles thereof, in the business of selling grille cloth to manufacturers of television, radio and phonograph equipment, and that defendant, during his employment by plaintiff, was taught plaintiff's business; that a close relationship was established between said defendant and plaintiff's customers; that defendant was made familiar with plaintiff's suppliers, and was given intimate knowledge of plaintiff's plans, production methods, and current samples.

The complaint charged that defendant, in violation of the terms of the agreement, is now engaged in the City of Chicago in the business of selling grille cloth to manufacturers of television, radio and phonograph equipment, and to that end has quoted prices, has solicited business, and has offered grille cloth for sale to such manufacturers in competition with plaintiff, to the damage and prejudice of plaintiff and the business which it conducts. That Duracrest Fabrics, knowing it was interfering with the contractual relationship then existing, employed defendant and has directed him, on its behalf, to compete with plaintiff in the sale of grille cloth in the City of Chicago.

Plaintiff alleged that it is suffering great and irreparable damage and has no adequate remedy at law, and prayed for a permanent injunction restraining the individual defendant, Fortino, from engaging in business in competition with plaintiff, and Duracrest Fabrics from continuing him in its employ.

In his answer defendant Fortino admitted execution of the employment contract and that he had been employed by plaintiff, but stated that prior to said employment he was engaged in a related business and was fully aware of the suppliers of grille cloth and its users. Defendant denied he was taught plaintiff's business or that because of said employment he became familiar with plaintiff's suppliers and customers, or that he was given an intimate knowledge of plaintiff's production methods. Defendant further stated that plaintiff does not produce merchandise, but acts merely as a broker. Defendant denied that he obtained or was given any intimate knowledge of any plans of plaintiff.

Defendant Fortino admitted being engaged in the selling of grille cloth in the Chicago area, but denied violation of the employment contract. Defendant further denied that he left plaintiff's employ voluntarily, or that plaintiff has suffered great and irreparable damage by reason of his conduct. Defendant then alleged that prior to his employment he had developed a knowledge of the uses of grille cloth and sources thereof, and the methods by which it might be sold; that the selling and dealing in grille cloth is his trade and profession, and that to prevent him from engaging in said activity would result in great and undue hardship to the defendant and cause him irreparable harm, and that the complaint should therefore be dismissed.

Defendant Duracrest Fabrics moved to strike the complaint, in which defendant Fortino subsequently joined, on the grounds that the agreement is void and contrary to public policy; that it shows on its face a lack of consideration in that it can be terminated at will, and that there is no understanding to pay anything pursuant to the contract; that it seeks to prevent employee from engaging in his trade or profession within the state; that the complaint does not state a cause of action in that it fails to allege acts by either defendant that would constitute a cause of action, and fails to allege any facts to show that an injunction is necessary for the protection of plaintiff's business. Defendants contended that the contract is unjust and inequitable, a restraint of competition per se and unenforceable in equity. Plaintiff argues, here, that if judged by its special circumstances, the restrictive covenant is reasonable.

On February 4, 1963 the court granted defendants' motion to strike. It further ordered that plaintiff's motion for permanent injunction be denied. On March 5, 1963, by stipulation of parties, a final and appealable order provision was entered, pursuant to sec 50(2) of the Civil Practice Act. Plaintiff elected to stand on its complaint and did not move to amend.

The general rule in Illinois with respect to enforcement of restrictive covenants in employment contracts is that where a covenant places restrictions upon an employee not to engage in a subsequent competitive employment or in a competitive line of trade, these restrictions must be reasonably related to safeguarding the employer without putting unreasonable restraints upon trade. An employee, after severing connections with his employer may compete with the former employer in his new position unless restricted by contract. While limitations may be placed upon an employee's freedom of action these limitations must conform to a test of reasonableness which will be stricter in the case of employment contracts. Parish v. Schwartz, ...


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