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United Travel Service, Inc. v. Weber

MAY 13, 1969.




Appeal from the Circuit Court of Sangamon County; the Hon. CREEL DOUGLASS, Judge, presiding. Reversed and remanded with directions.


Defendant-appellant, Virginia Weber, then aged 18 years, and still in high school, was employed — initially on a part-time basis — by United Travel Service, Inc., a travel agency in Springfield. After she had been with United for about two and one-half months, she was asked to prepare and sign a contract which provided that in consideration of her employment and training by United, appellant agreed that at such time as she may sever her connections with United for any cause she would not engage in the travel-service business either individually or in the employment of any other travel service in any capacity in either Decatur, Illinois, or Springfield, Illinois, or within a radius of 60 miles from Decatur or Springfield, for a period of two years thereafter. The contract, by its terms, further provided that she would not disclose the names of clients with whom she had dealt for the agency nor attempt to divert any of the clients from the agency.

The contract was dated August 13, 1965. After the execution of the contract the defendant continued her employment with United. Defendant submitted her letter of resignation on March 20, 1968, to be effective April 20, 1968. Other employees of United likewise submitted resignations at about this same time. Those employees had not signed a contract, although an oral contract was alleged. The defendant and the other employees, together with other persons unrelated to the United operation, had formed Europa Travel Inc., a corporation, to engage in the travel-agency business. The defendant was its president, a director, and apparently one of its principal movers.

There is no controversy but that the defendant secured her training and knowledge of the travel business while employed by United. This training consisted of on-the-job training, and while so employed and as part of her training she engaged in some travel through arrangements by United, and in certain instances United paid all or part of the tab.

Europa Travel was incorporated on March 12, 1968. Its office is in Springfield, some mile and a quarter from the United office. The evidence is rather clear that at least on one occasion the defendant or her associates, now engaged in Europa, solicited a client known to be a client of United. The effort to obtain the travel-tour business of that client was unsuccessful. Europa also, by its advertising, solicited persons who were or at least had been clients of United.

In January of 1968, United filed a complaint for injunction and for damages. The defendant, as well as two former employees of United, all of whom are now officers and directors of Europa, were named as defendants. As to the defendant, the plaintiff asserted the violation of the terms and provisions of the agreement of the employment contract. Plaintiff sought a preliminary and permanent injunction against all of the defendants, seeking to terminate their travel-agency business within 60 miles of Decatur and Springfield until the two-year period had expired, and seeking to enjoin the solicitation of any clients who had dealings with the plaintiff while the defendant was in its employ. Damages to cover loss of profits were also sought by the complaint.

At the close of the plaintiff's evidence, the trial court dismissed the action as to all defendants except Virginia Weber. Ultimately, a permanent injunction was issued enjoining the defendant from continuing as an officer or director of Europa, or from entering into the travel-agency business either on her own account or in the employment of any other travel service in any capacity for a period of two years within the territory specified in the agreement. The injunction also prohibited solicitation of clients of plaintiff. No damages were assessed.

This appeal is from the permanent injunction. There is no cross-appeal as to the issue of damages nor as to the action regarding the other defendants.

In Central Keystone Plating of Illinois, Inc. v. Hutchison, 62 Ill. App.2d 188, 210 N.E.2d 239 (4th Dist 1965), we had occasion to review a case involving a contract restraining an employee from competition with his employer after the termination of the employment. In that case the employee was a sales person or sales manager who traveled an extensive area soliciting customers. The trial court had dismissed the action holding the contract to be unenforceable and invalid. We reversed and remanded for a hearing on the merits. We there stated (at 191-192 (210 N.E.2d at 241-242)):

"Covenants ancillary to an employment contract restricting employees or agents from unreasonable competition with a former employer are permissible. They are not per se contrary to public policy and therefore void. House of Vision, Inc. v. Hiyane, 58 Ill. App.2d 431, 208 N.E.2d 390. 313-15 Restatement of Contracts. See also 43 ALR2d 93. The rule in this state, as well as most jurisdictions, is that the covenant must be reasonable as to the employee, the employer and the public. Reasonableness is to be determined from the facts and circumstances of each case, and of necessity varies as to area, time and the respective interests of the parties, as well as the degree of fiduciary or confidential relationship existing between them.

"The cases collected in the cited annotation, however, almost uniformly hold that excluding service occupations from an entire state by such a covenant is unreasonable. Territorial restrictions, as to salesmen or route men, greater than the area that was served by them on behalf of the former employer are held unenforceable. 43 ALR2d 118. The rationale of the collected cases is that the employee should be excluded only from territory in which, as a result of his employment, he was able to establish a certain relationship with the employer's customers.

"Where there are special circumstances, such as customer lists, customer contacts, trade secrets or other confidential information, there is a greater willingness to restrain competition. Solar Textiles Co. v. Fortino, 46 Ill. App.2d 436, 196 N.E.2d 719 (1964); Smithereen Co. v. Renfroe, 325 Ill. App. 229, 59 N.E.2d 545 (1945)."

In the Central Keystone Plating case there was an allegation of the existence of special circumstances and that allegation would, of course, stand as being admitted by the motion.

Subsequent to our opinion in that case, the Illinois Supreme Court, in House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 225 N.E.2d 21 (1967), considered a similar covenant ancillary to an ...

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