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Donald Mcelroy, Inc. v. Delaney





APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding.


This is an action to enforce post-employment restrictive covenants. Plaintiff, Donald McElroy, Inc. (McElroy), instituted this suit in the circuit court of Cook County to enjoin defendant, John F. Delaney, a former employee of plaintiff, and defendants, Spiral Metal Co., Inc., (Spiral) and Industrial Silver Co. (Industrial), Delaney's present employers, from violating certain nonsolicitation and nondisclosure covenants. After hearing evidence, the trial court granted plaintiff's amended motion for a preliminary injunction to prevent violation of the restrictive covenants. On appeal, defendants contend: (1) that plaintiff failed to establish a legitimate business interest protectible by restrictive covenant; (2) that the restrictive covenants sued upon are unreasonable in terms of time, area and scope; (3) that plaintiff has not shown threatened irreparable injury; (4) that the preliminary injunction granted by the trial court is an invalid attempt to reform an otherwise unenforceable covenant; and (5) that the preliminary injunction order is indefinite and not subject to enforcement.

We affirm the trial court.

Plaintiff McElroy is an Illinois corporation engaged in the business of recovering silver from photographic waste material. It is undisputed that defendant Spiral, through its subsidiary, Industrial, competes with McElroy in the silver recovery business.

Photographic wastes are commonly supplied by hospitals, clinics, radiologists, lithograph printers and industrial X-ray houses. There are two forms of photographic waste material from which silver is extracted. Exposed photographic film is purchased in bulk from the suppliers and shipped to a refinery for the purpose of extracting the silver content. The amount of silver extracted during this refining process is called the "yield." Photographic fixer solution provides silver flake, a light sensitive material containing silver which is removed from film during the developing process. Silver recovery companies obtain the silver content of the fixer solution either by purchasing the used solution from the supplier and then extracting the silver through a refining process or by purchasing the silver flake which had already been extracted by the supplier on site through use of reclaiming equipment which is physically attached to the photographic equipment. These reclaiming units are sold or leased to the supplier by the silver recovery company.

In April 1970, defendant Delaney was hired by McElroy to work as its purchasing manager. Delaney orally agreed to certain nondisclosure and nonsolicitation covenants as a condition of his employment. Sometime after Delaney commenced his employment with McElroy, he signed a written employment agreement which contained restrictive covenants. There is some dispute concerning the exact content of that written agreement. At trial, McElroy submitted a document purporting to be the written agreement signed by Delaney. However, the signature page had been removed from the copy submitted. Delaney admittedly signed some form of agreement containing restrictive covenants, but contends the one submitted by McElroy is not an exact copy of that agreement. Delaney was unable to produce any other agreement.

For the purpose of the preliminary injunction, the trial court found that the agreement containing the restrictive covenants sued upon by McElroy was executed by Delaney. After reviewing the record, we find sufficient evidence to support the trial court's finding on this matter. The restrictive covenants contained in that agreement stated in pertinent part:

"Employee agrees that he shall not at any time (whether during or subsequent to his employment hereunder), without the prior written consent of the Company, disclose to any person or entity: (a) the identity of, or any other information concerning, any such source of supply with whom Employee may have had contact during his employment with the Company; or (b) any other secret or confidential information of the Company divulged to Employee in confidence during his employment hereunder.

Within the 1095-day period next following the termination of Employee's employment hereunder, Employee shall not engage in any purchasing activity (whether or not leading to a consummated purchase and sale) which concerns materials of the sort purchased by Employee on behalf of the Company hereunder and which involves either of the following:

(a) negotiations with a prospective seller with whom Employee has had contact concerning actual or proposed purchases on behalf of the Company during his employment hereunder; or

(b) negotiations with a prospective seller from whom the Company has, at any time within the 365-day period prior to the termination of Employee's employment hereunder, purchased salvageable materials."

During the first five years of his employment with McElroy as its purchasing manager, Delaney was responsible for sales, marketing and purchasing. His responsibilities included soliciting purchases from suppliers, training sales representatives and developing a territory consisting of the eastern two-thirds of the United States. In 1975, Delaney was named McElroy's executive vice-president. In this position, Delaney devoted most of his time to administrative and supervisory tasks, rather than solicitation of customer accounts. As executive vice-president, Delaney negotiated agreements with other McElroy employees containing restrictive covenants similar to the ones in question and instituted actions to enforce compliance with these restrictions.

Delaney remained in the employ of McElroy for seven years, until March 2, 1977. On April 5, 1977, Delaney began employment with defendants Spiral and Industrial. Shortly after joining Spiral and Industrial, Delaney called upon several of McElroy's suppliers. Within a matter of weeks after Delaney joined Spiral and Industrial, McElroy initiated this action to enforce the restrictive covenants.

At the hearing on plaintiff's motion for preliminary injunctive relief, the following evidence was produced in addition to the facts set out above. Hundreds of companies participate in the competitive market for recovering silver from photographic waste material. Possible sources of supply, such as hospitals and X-ray companies, are easily ascertainable from listings in telephone directories and specialized ...

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