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Hilti, Inc. v. Griffith






Rehearing denied March 13, 1979.

Two appeals by the defendants are consolidated in this opinion. The first appeal is from a final order entered on May 12, 1976, finding a covenant not to compete contained in employment agreements signed by the defendants to be valid and enjoining the defendants from competing with their former employer, the plaintiff Hilti, Inc. (Hilti), in Cook County, Illinois and Lake County, Indiana, through December 16, 1976. Damages were not awarded. The second appeal is from a final order entered on March 21, 1977, denying the motion of the defendants to enjoin Hilti from pursuing arbitration for damages based upon the employment agreements which were the subject of the complaint and permanent injunctive relief resulting in the first appeal. The matter of the second appeal will be considered first.

On April 2, 1976, Hilti filed a complaint against Lawrence Griffith, Michael Reddy, and Gus Glaros seeking injunctive relief and liquidated damages according to the exact terms agreed to in the contracts, for the alleged breach by the defendants of the employment agreement each had entered into with Hilti. No mention was made in the complaint of Hilti's intent to pursue arbitration, and at no time during the hearing and trial did Hilti attempt to reserve the issue of liquidated damages for determination by an arbitrator. The language used in the prayer for damages was identical to that in the employment agreements themselves.

At a hearing on April 7, 1976, counsel for the defendants argued against the entry of any restraining or injunctive orders but also advised the court that the hearing for preliminary relief and a full hearing or trial on the merits should be consolidated, since a hearing for a preliminary injunction pending trial on the question of permanent injunctive relief would be duplicitous. On the basis of the complaint and the preceding argument the trial court took the matter under advisement and on the following day, April 8, 1976, entered a temporary restraining order against the defendants for a 10-day period stating that on the tenth day there would be a hearing on the merits. Counsel for Hilti made no objection to this procedure and acknowledged that the hearing that was about to commence was for a permanent injunction. He asked the court "if we are going to enter this TRO on one week from Monday, can we anticipate that on that day we will have a full hearing on our motion for a permanent injunction at that time?" The written order granting the temporary restraining order itself stated that a hearing on the permanency of the injunction would be set for Tuesday, April 20, 1976.

After a six-day trial, a judgment order was entered granting permanent injunctive relief against the defendants. The trial court made no formal ruling as to damages nor did it reserve the determination of damages for subsequent arbitration. In its oral decision prior to the issuance of the written judgment order, the trial court referred both to the permanency of the relief and to damages stating:

"You, Mr. Haber, told me at the commencement of this matter that the proof as submitted would be, in effect, the case in chief, so, therefore, it should be an injunction for the nine months.

The contract also calls for damages. There is a case — I don't recall by whom it was submitted or whether my additional research disclosed it — but there will be no penalty as to damages here."

The written judgment order itself is silent on the question of damages.

In June 1976 Hilti filed a demand for arbitration with the American Arbitration Association in Stamford, Connecticut. The demand was served upon the defendants and sought damages pursuant to the provision contained in the employment agreements which the defendants had executed with Hilti. The employment agreements provided that if a violation occurred, Hilti could seek injunctive relief and recover certain specified liquidated damages. Each of the agreements signed provided that "any controversy or claim arising out of or relating to the agreements or breach thereof shall be finally settled by arbitration * * *." The agreements further provided that the right to such liquidated damages shall be "in addition to any rights of the company to have violations of said paragraph 1 enjoined and shall not be construed to be a waiver of any remedies available to the company."

The defendants attempted to dismiss the arbitration proceedings before the arbitration panel but were unsuccessful. They filed a motion in the trial court on February 25, 1977, to enjoin the arbitration proceedings then pending. That motion was denied on March 21, 1977, and the order was certified as both final and appealable. A notice of appeal was filed on April 12, 1977, and upon the defendant's motion this court stayed Hilti from pursuing arbitration pending this appeal.

The defendants contend that Hilti is barred from recovering damages because the trial court proceeding determined the case on the merits and the employment contracts provide for separate remedies but only one cause of action. They argue (1) that Hilti waived its right to arbitration by commencing a suit in court and participating to judgment; (2) that all claims for relief arising out of the purported breach of the employment agreements merged into the final decree of the trial court; and (3) that the claim for liquidated damages which Hilti asserts in its demand for arbitration is barred by the final judgment.

• 1, 2 Under the doctrine of res judicata, a final judgment on the merits rendered by a court of competent jurisdiction operates as a bar to any subsequent litigation between the same parties or their privies on matters found to be part of the same cause of action before the same or a different tribunal. (Turzynski v. Liebert (1976), 39 Ill. App.3d 87, 90, 350 N.E.2d 76.) The cause of action merges into the judgment and that judgment is conclusive as to all matters which were litigated, which properly should have been litigated or might have been litigated in the original action. (City of Elmhurst v. Kegerreis (1945), 392 Ill. 195, 203, 64 N.E.2d 450; Prochotsky v. Union Central Life Insurance Co. (1971), 2 Ill. App.3d 354, 356, 276 N.E.2d 388.) The value of a plea of res judicata is not determined by the reasons given by a court in support of that judgment nor is it mitigated by the fact that it rests upon an erroneous view of law. Pierog v. H.F. Karl Constractors, Inc. (1976), 39 Ill. App.3d 1057, 1060, 351 N.E.2d 249; People v. Kidd (1947), 398 Ill. 405, 75 N.E.2d 851.

The court in Pierog described the criteria for determining whether a cause of action is the same as one previously litigated and therefore bars subsequent adjudication:

"A cause of action consists of a single group of facts which gives the plaintiff a right to seek redress for a wrong done by the defendant by which that right has been violated. (City of Elmhurst v. Kegerreis, 392 Ill. 195, 64 N.E.2d 450; Bridgeport Hydraulic Co. v. Pearson (1952), 139 Conn. 186, 91 A.2d 778.) The test generally employed to determine identity of causes of action for res judicata purposes is whether the evidence needed to sustain the second action would have sustained the first action. (Restatement of Judgments § 61 (1942); Melohn v. Ganley, 344 Ill. App. 316, 100 N.E.2d 780.) The identity of the causes of action may be determined from the record as well as from the pleadings found in both actions. (City of Elmhurst v. Kegerreis, 392 Ill. 195, 64 N.E.2d 450; Schoenbrod v. Rosenthal, 36 Ill. App.2d 112, 183 N.E.2d 188; Reno Club, Inc. v. Harrah (1953), 70 Nev. 125, 260 P.2d 304.) Although a single group of operative facts may give rise to the assertion of ...

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