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Nationwide Advertising Service v. Kolar

SEPTEMBER 20, 1973.

NATIONWIDE ADVERTISING SERVICE, INC., PLAINTIFF-APPELLANT,

v.

MARTIN J. KOLAR ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. CHARLES R. BARRETT, Judge, presiding.

MR. JUSTICE MCGLOON DELIVERED THE OPINION OF THE COURT:

This is an action to enforce an employee's covenant not to compete with his employer. The plaintiff instituted this action to enjoin the defendant, Martin J. Kolar, a former employee of the plaintiff, and defendant, Bentley, Barnes & Lynn, Inc., Kolar's present employer, from soliciting or accepting business relating to recruitment advertising for personnel from certain of plaintiff's past customers. After hearing evidence, the trial judge denied plaintiff's motion for a temporary injunction. In this appeal the plaintiff contends (1) that the trial judge erred in not recognizing that the plaintiff's interest in its customers is a legitimate interest which reasonably requires the protection of a restraint on former employees, and (2) that the restrictive covenant that is the subject of this suit is reasonable in scope.

We affirm.

The plaintiff, an Ohio corporation registered to do business in Illinois, is engaged in the business of solicitation and placement of recruitment advertising for personnel. Basically, this service consists of composing and placing in local newspapers advertisements for jobs or positions available in private industry. In December, 1969, defendant Kolar entered into the employment of the plaintiff at its Chicago office. Shortly thereafter Kolar signed an employment contract, dated January 12, 1970, which contained the restrictive covenant that is the subject of this action. The contract identified the parties, established that Kolar's services were to be performed in Chicago, the amount of his salary and that the term of his employment was to be indefinite. It then provided:

"6. Employee acknowledges the following:

(a) That Nationwide's business is based largely on information recorded on various customers lists and statistical data, and other records acquired, collected and classified as the result of substantial outlay in establishing its business in various places in the United States, including the city of Chicago, State of Illinois;

(b) That the trade and good will of Nationwide in said place and vicinity with its customers has been established at substantial cost and effort, and that irreparable damage will result Nationwide if such lists, records or information are obtained or used by any other person or competitor of Nationwide, or if said good will is diverted from Nationwide;

(c) That the giving of such employment affords Employee opportunity of favorable relations with Nationwide's customers and access to such confidential lists, records, and information concerning Nationwide's business in consideration thereof;

Employee therefore separately and specifically covenants that for one year after his employment with the company ceases he will not directly or indirectly solicit, circularize or aid in soliciting or circularizing (generally or specifically) any business relating to solicitation or placement of recruitment advertising for personnel from any customer or customers and will not deal with or make sales regarding solicitation or replacement of recruitment advertising for personnel to any customers who have within one year prior to the cessation of his employment been customers of Nationwide at its office located at the aforesaid place."

Kolar remained in the plaintiff's employ, eventually becoming the regional manager of the Chicago office, until January 1, 1973, at which time he resigned. In the same month, Kolar became associated with the defendant, Bentley, Barnes & Lynn as a commissioned salesman of recruitment advertising. It is undisputed that the defendant Bentley, Barnes & Lynn is also engaged in the recruitment advertising business in Chicago and is a competitor of the plaintiff.

Shortly after joining Bentley, Barnes & Lynn, Kolar solicited a number of business firms which had been customers of the plaintiff's Chicago office in the year prior to January 1, 1973. Kolar solicited those firms for sales of recruitment advertising on behalf of his new employer.

On January 17, 1973, the plaintiff filed a suit for an injunction against Kolar in order to prevent him from soliciting any business relating to recruitment advertising for personnel from any firm that, within one year prior to January 1, 1973, had done business with the plaintiff and to prevent him from disclosing the names of plaintiff's customers to any of plaintiff's competitors. The plaintiff also sought to enjoin the defendant Bentley, Barnes & Lynn from employing Kolar for this purpose for one year.

At the hearing on plaintiff's motion for a temporary injunction, the plaintiff presented, through its witnesses, the facts that are set out above. In their defense the defendants presented certain witnesses, among which the most important was Lehman M. Brauer. Brauer testified that he was the vice president of Worldwide Agency, a firm also engaged in the business of recruitment advertising for personnel, and a direct competitor of both the plaintiff, Nationwide Advertising, and the defendant, Bentley, Barnes & Lynn. He further testified as to the nature of the recruitment advertising business and estimated that there were well over fifteen such firms in the Chicago area. Brauer had been associated with Worldwide for over five years and had been the regional vice president for the Chicago area. Brauer explained that in the recruitment advertising business there was no secret as to which of the various firms in the area were placing advertising for a certain customer. He stated that there were various ways that this information could be ascertained; the newspaper which carried the ads would tell an interested party which advertising firm was placing a particular advertisement, or a competitor could simply call a customer and inquire who was doing their recruitment advertising. He further stated that the appearance of an ad itself often times indicated which advertising firm had placed it as many firms had their own specific style that was not commonly used by others. In short, he agreed that it was "pretty general knowledge as to who your competitor is doing business with." He further testified to the nature of the customer relationship in the industry. He stated that in a normal year about 20 to 25 per cent of his business was not business he had the preceding year. One of the reasons for this is that the individual employee of a customer company who is responsible for the placing of that company's recruitment advertising will leave his present employer and find similar employment with a new company. In that situation the employee would contact the same advertising agency on behalf of his new employer and the advertising agency would lose the individual's old employer as a customer. A fair characterization of Brauer's testimony would be that as a general rule an advertising agency's relationship with its customers is transitory and not permanent.

On the basis of all the evidence adduced during the hearing, the trial judge denied the plaintiff's motion for a temporary injunction finding that the plaintiff did not have such a proprietary interest in its customers as would reasonably warrant the protection of restraining a former employee from competing with it. In this appeal the plaintiff argues that the trial judge erred in that finding because Illinois courts have long recognized that an employer, such as the plaintiff, has a legitimate interest in its customers that is subject to protection by the enforcement of an employee's covenant not to compete. We disagree ...


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