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Abc Trans Nat'l v. Aeronautics Forwarders

OPINION FILED JULY 7, 1978.

ABC TRANS NATIONAL TRANSPORT, INC., D/B/A ABC AIR FREIGHT, PLAINTIFF-APPELLANT,

v.

AERONAUTICS FORWARDERS, INC., ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. RAYMOND K. BERG, Judge, presiding.

MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

This is an interlocutory appeal raising an issue as to whether the trial court abused its discretion in denying a preliminary injunction by which plaintiff sought to restrain defendants from soliciting or servicing its former customers and the return of its personal property.

During the course of a hearing on the motion for a preliminary injunction, the following was revealed: Plaintiff ABC Trans National Transport, Inc. (ABC-TNT), a privately owned corporation, is generally engaged in freight forwarding via land transportation but also has a separately operating division which forwards freight by air known as ABC Air Freight (ABC). ABC acts as an intermediary between those who wish to ship via air and the air carriers and ground cartage companies. Throughout the country, approximately 250 companies compete in the air forwarding business — all of whom employ salesmen to solicit clients and personnel to service them. Salesmen often expend considerable time and effort with prospective clients in order to learn the identity of those responsible for choosing their company's air forwarder, to ascertain their specialized needs regarding air freight and to demonstrate that such needs would be serviced to their satisfaction. Once obtained, a client is then dealt with by the customer service personnel who use information recorded by the salesman on customer cards and rolodex files. The industry is competitive and, to be successful, a salesman must establish and endeavor to maintain a highly personalized relationship with his clients and the customer service personnel. Because these relationships are important, air forwarders aggressively seek out successful salesmen in their field in the knowledge that if they were to change forwarders, their clients and skilled customer service personnel might in time follow. While such salesmen are lured from one forwarder to another by assurances of higher compensation, such changes generally occur only if the new forwarder is able to deliver the same or better facilities and service.

In 1969, ABC was operating at a loss, so ABC-TNT hired defendant Robert Agnes to act as president of ABC and to exclusively exercise his best efforts on its behalf. Thereafter, Agnes hired defendants Edward Brownstein, David Eades, Carl Cohen, Al Krause, and Bernard Marco — who, along with other ABC personnel, made it a profitable operation in the following major cities Chicago, Philadelphia, Boston, New York, St. Louis, Kansas City, Houston, Los Angeles and Salt Lake City. By 1977, Brownstein was the regional vice president in charge of ABC stations in Chicago, Boston, Kansas City, and Houston; Eades was vice president in charge of the New York station; Cohen was vice president in charge of Philadelphia; and Krause and Marco were vice presidents in charge of Los Angeles. Each of these men, in addition to the supervision of salesmen, district managers and service personnel, also performed some sales functions in soliciting and maintaining clients — particularly those who shipped in volume so that the cheaper airline container rates could be utilized.

In his contract, Agnes received a salary and 10% of ABC's profits, if any. By 1973, ABC did become profitable and a practice soon developed whereby Agnes withdrew his 10% and ABC-TNT withdrew its 90% of the profits after the audit of the preceding year was completed. Agnes, however, objected to ABC-TNT's withdrawal of 90% of the profits on the basis that if such funds were retained by ABC, they could be invested and their earnings would thereby increase his 10% share of profits in succeeding years. In October 1977, he conditioned the renewal of his contract upon the funds being left in ABC and tendered his resignation in the event Leon Mitchell (president of ABC-TNT) and Arthur Brown (owner of a corporation which in turn owned all of ABC-TNT's stock) would not agree to this condition.

At the hearing on the motion for preliminary injunction, Mitchell testified that Brown rejected the demand of Agnes who then indicated that his decision to resign was final; that at the same time, Agnes asked "What if I am not situated or ready to leave on December 31?" — to which Brown said he would keep an open mind; that after Agnes said he had informed the vice presidents about his contract negotiations, he (Mitchell) told Agnes the corporation also had a right to communicate with those vice presidents — to which Agnes replied, "It's your ball game"; and that during the negotiations Agnes did not complain of a lack of operating capital or of any deficiency in employee benefits. Thereafter, beginning in the second week of October, Oitchell and Brown spoke to each of the vice presidents in terms of filling Agnes's position. Eades, Brownstein and Cohen each assured Mitchell that Agnes's resignation would have no effect on ABC operations in his area, and each stated he was capable of filling Agnes's position but could not do so for personal reasons. On December 14, 1977, Agnes sent a letter to Mitchell confirming his resignation. Subsequently, on January 3, 1978, Mitchell determined that an agreement could not be reached to retain Agnes.

On January 25, 1978, Mitchell was first notified by an ABC employee, Diane Virzi, that defendants and some of their subordinates had set up a competing air forwarder (Aeronautics Forwarders, Inc.) and would walk out en masse. On January 30, 1978, ABC-TNT personnel arrived at the nine major stations; whereupon, Brownstein was fired and Eades, Cohen, Krause and Marco resigned. By the next day, ABC lost 40% of its work force from stations in Chicago, New York, Boston and Los Angeles (the employees at the Philadelphia station remained until February 3, 1978), 50% of its business, and certain of its personal property to Aeronautics.

The chronology of events leading up to this result is as follows: In mid-1976, Marco requested Larry Lindell (who delivered freight exclusively for ABC in the Los Angeles area) to consider delivering freight for Aeronautics. With the approval of Marco and Krause, Lindell made deliveries until mid-1977 for Aeronautics, whose customers were the same as those shipping with ABC, and kept such activities secret, per Marco's request. Lindell was notified concerning such deliveries by a phone installed under the direction of Marco and at ABC's expense in the Los Angeles office of ABC.

In July 1977, Aeronautics's operating authority was revoked by the C.A.B.; however, it was subsequently reinstated through the efforts of defendant Franklin Weiss, who was also retained as ABC's attorney.

Virzi, an ABC employee in the Chicago office, testified that on September 30, 1977, she and two co-workers (Peggy Smith and Georgette Danza) were called into Brownstein's office and, after committing them to secrecy, he told them that ABC-TNT was going out of business; that because ABC-TNT had taken funds from ABC, it too was doomed; that a request of Agnes to give the employees severance pay was denied by Brown; that an alternative company invested in by Krause, Marco and Agnes had already begun in Los Angeles, Boston and Philadelphia and would absorb displaced ABC employees; that Weiss had connections with a New York bank which would provide financing; that Flying Tigers Airlines had promised a line of credit; that ABC clients such as American Hospital Supply, Texas Instruments, Combined Insurance Co., Max Factor in Salt Lake City, and Polaroid in Boston had been informed of the situation and had agreed to switch to the new company; and that ABC employees across the country were being notified; but because Agnes was under contract, the matter had to be kept secret or he would be in trouble. Brownstein also stated that each employee had to make his or her own decision but that anyone staying is "not going to make it." Moreover, he noted that for those who did stay, it wouldn't "hurt to mess up a few routings of shipments."

About this same time, Marco contacted Lindell and told him that Agnes was going to quit ABC if Brown did not allow Agnes to take over ABC in exchange for 25% of the profits. Marco thereby secured Lindell's promise to resume deliveries for Aeronautics once Agnes and Marco left ABC. Meanwhile, Agnes informed Martin Kusman (ABC's vice president in charge of Missouri) that ABC-TNT was bleeding ABC dry. Kusman testified that Agnes, Brownstein and Krause flew to St. Louis to meet with him. At this meeting, Agnes told him that because of ABC's financial problems he (Agnes) was seeking more control and better employee benefits from Brown during his contract negotiations; that if Brown rejected these demands, he would start up a new company; and that he had amassed $180,000 in cash and secured loan commitments against the new company's accounts receivable.

On October 1, 1977, Brownstein directed Virzi to make a list of ABC's customers and to title it "Christmas List" to avoid questions if anyone passed her desk and took note of this activity. Also, in the month of October, Brownstein asked one of his salesmen, Donald Spadoni, to come into his office and, after requesting that their conversation be kept secret, he told Spadoni that ABC was being grossly mismanaged by ABC-TNT; that ABC-TNT had drained one million dollars per year for three years from ABC; that, as a result, ABC would soon be insolvent; and that it would be in the best interests of the entire ABC staff to join a new freight corporation begun with the personal savings of Agnes, Eades, Cohen, Marco, Krause and himself. In this conversation, Brownstein also said:

"[T]hat in addition to the $155,000 that they had in cash, they had a commitment from a bank in New York that they could go to with the first four weeks of accounts receivable and they would be guaranteed or had a guarantee that they could get up to $450,000 or 70 percent of the first four weeks' accounts receivable at a rate of interest three percent above prime, up to $450,000.

He also mentioned or said to me — I believe at that point I asked him what the legal repercussions would be, knowing Bob Agnes was on a contract. I can't think of the right word, where he could be penalized or some legal action could be taken against Bob Agnes.

He said they had an attorney in New York by the name of Franklin Weiss who had been working with them. He had covered everything that was involved, and there was absolutely no way that there could be any legal repercussions to Robert Agnes.

* * * There was no way that * * * any legal means could be taken to stop them and apparently myself and with you, and the other people. That we were all free to leave. There was no way the law could come back, you know, where we would suffer legally. He went on to say that everyone had been talked to and given a firm commitment that they would leave ABC Air Freight and go to work for the new company.

He stressed — this is the important thing of it all — we had to shut down ABC Air Freight by leaving, one day 100 percent throughout the country. This would just destroy ABC Air Freight.

He used the phrase, `There would be no life left in ABC Air Freight. Nothing left to stay for.'"

Finally, when assured by Brownstein that the benefits would be the same, Spadoni agreed to switch to Aeronautics.

In November 1977, when Kusman telephoned Brownstein in an attempt to talk him out of the plan, the latter replied that he owed loyalty to Agnes and was committed to the plan.

In December of 1977, Marco again requested Lindell (still under contract to ABC) to handle a delivery for Aeronautics. This particular shipment originated in Chicago and, when Lindell arrived to pick it up, it was missing. After telephone calls to the homes of Marco and Krause, he was referred to Brownstein who traced the shipment for him. The next day, another Aeronautics shipment was traced for Lindell by personnel from Brownstein's office. Shortly thereafter, Marco and Krause met with Lindell, promising him Aeronautics stock in exchange for his promise to make deliveries for Aeronautics.

Sometime early in December, Brownstein asked Charles Burgess, district manager for ABC's Houston station, to set up a facility for Aeronautics in Houston as an alternative should negotiations between Agnes and Brown fail. Burgess expressed doubt about the security of such a venture but was assured by Brownstein that "everything had been prearranged. There was no cause for concern in that sense, that all the major accounts that had been the basic support for ABC up until that time were going to convert to Aeronautics. Mr. Hesner [Texas Instruments, Chicago] was mentioned because it did relate to Texas Instruments in Houston. Eddie said that Hesner had agreed to it, wanted to know if I could get ...


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