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Scott & Fetzer Co. v. Khan

OPINION FILED AUGUST 7, 1979.

THE SCOTT AND FETZER COMPANY, D/B/A FLEX-N-GATE DIVISION OF THE SCOTT AND FETZER COMPANY, PLAINTIFF-APPELLANT,

v.

SHAHID R. KHAN ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Champaign County; the Hon. HAROLD L. JENSEN, Judge, presiding.

MR. JUSTICE MILLS DELIVERED THE OPINION OF THE COURT:

Interlocutory appeal.

Denial of preliminary injunction.

The trial judge ruled no trade secrets and failure to show a probability of success on the merits.

He was right.

We affirm.

BACKGROUND

The facts are prolix, but they must necessarily be recited in detail. Flex-N-Gate, a division of Scott & Fetzer, is engaged in the business of manufacturing step and hitch bumpers for the pickup truck market. These bumpers have a one-piece shell construction signifying that the face bar, hitch area, and step are made from one continuous piece of metal.

In September of 1970, defendant Khan was employed by plaintiff's predecessor, Mobility Manufacturing Company, and continued to be employed by plaintiff until July 1978. In October 1973, shortly after Mobility merged with Scott & Fetzer, Khan signed an agreement which provided that in consideration of his continued employment with plaintiff, he agreed that "every invention, improvement, product, process, apparatus, or design" which he devised or conceived during his employment would belong exclusively to plaintiff. The agreement further provided that any such invention would be assigned to the company, and Khan agreed to disclose any such invention or confidential information to the company.

On April 27, 1977, the defendant signed a letter addressed to the board of directors of Scott & Fetzer which stated that he was not affiliated with any organization engaged in a business which was competitive with plaintiff or its subsidiaries, or which was a customer of plaintiff, or from which plaintiff purchased or rented materials, equipment, supplies or services. The letter also stated the defendant had no investment or financial interest in any such organization, and in it he agreed to advise plaintiff promptly of any changes which would qualify or nullify the statements made in the letter. The express purpose of this letter was to advise and assure plaintiff that the company's policy of prohibiting executives and other key employees from having interests which conflicted with those of plaintiff was being implemented.

In November or December of 1977, a representative of the company submitted to Khan additional documents similar to those signed in September 1970 and April 1977. However, Khan refused to sign these documents. The reason for this refusal is obvious. In July 1977, defendant Khan and Stephen Bonner, then operations manager of Flex-N-Gate, had a conversation in regard to the defendant's future employment status with the company. The substance of this conversation is disputed by the parties. Khan informed Bonner that he planned to leave the company and that he would continue to work for the company on a part-time basis. The testimony on the amount of time Khan would devote to plaintiff's business varied from 75 to 90%. Khan would remain at his present salary but he would not receive a raise that was then warranted.

Khan testified that he was to be free to conduct outside business and that he told Bonner of his "game plan." Khan stated that he was attempting to get a consulting contract and that he intended to solicit design work with the hope of getting O.E.M. (Original Equipment Manufacturer) manufacturing business in the automotive field whether it was making stampings, bumpers, or anything else. Bonner, however, testified that Khan told him that he had either acquired or was contemplating a consulting contract with General Motors regarding a door brace and that bumpers were never discussed. Bonner sent a memo concerning this conversation to a vice president of plaintiff and stated in the memo that Khan would not be giving his full time to plaintiff and that Khan would be leaving as soon as a new engineer could be found.

In July 1978, Khan terminated his employment with Flex-N-Gate. Prior to this, in September 1977, he had started defendant Bumper Works as an unincorporated business. Bumper Works was incorporated in April 1978 and began production of single-shell step and hitch bumpers in August 1978. In addition to Khan, the directors of Bumper Works include three persons who do chrome plating business in Detroit. These three persons also do chrome plating business for Flex-N-Gate, and it is through that arrangement that Khan became acquainted with them.

Khan had constructed a wooden bumper mockup in September 1977 for Bumper Works and had taken a sample to Chrysler in January 1978. Between July 1977 and July 1978, he contacted Chrysler, Datsun, and C. Itoh, in regard to O.E.M. sales by Bumper Works. These negotiations led to Bumper Works' acquisition of contracts with ...


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