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Panduit Corp. v. All States Plastic Mfg. Co.





APPEAL from the Circuit Court of Cook County; the Hon. JOSEPH M. WOSIK, Judge, presiding.


Defendant, All States Plastic Manufacturing Company, Inc., brought this interlocutory appeal under Supreme Court Rule 307(a)(1) (Ill. Rev. Stat. 1977, ch. 110A, par. 397(a)(1)), asking this court to set aside a preliminary injunction entered in the circuit court of Cook County. Subsequent to the taking of the appeal, the preliminary injunction expired on its own terms on January 10, 1980. Our analysis of the factual matters presented in the record and the applicable law compels the conclusion that this appeal must be dismissed since the underlying questions have become moot. We set forth the basis for our conclusion.

Plaintiff, Panduit Corporation, is a Delaware corporation registered and doing business in Illinois. Panduit manufactures a product known as a cable-tie, a molded self-locking plastic strap used for bundling together electrical wires so that the wiring can be mounted on a wall. Panduit sells this product throughout many parts of the world. All States is an Illinois corporation with offices in Chicago. All States manufactures and sells cable-ties in competition with Panduit. Defendant, James Hood, has at various times been an employee of both Panduit and All States, and this controversy arose as a result of this employment.

In 1961, Hood began working for Panduit as a molding machine operator and continued working for Panduit until June 1977. During the time of this employment, Hood was promoted to foreman, to production supervisor, and finally to vice president in charge of production at Panduit's Illinois plant.

In June 1977, Hood terminated his employment with Panduit and remained unemployed for six months thereafter. At the time, he was bound under a one-year post-employment restrictive covenant contained in his employment agreement with Panduit that prevented Hood from working for businesses that competed with Panduit. This covenant expired in June 1978 and is not involved in this case.

On January 3, 1978, Hood was rehired by Panduit with the understanding that he would be made manager of cable-tie production at Panduit's new plant in West Germany. The new plant was to produce a new kind of cable-tie called a Uni-Ty. As a condition of this employment, Hood was required to sign a new employment contract which also contained a restrictive covenant. Under that covenant, Hood promised not to reveal any trade secrets that he learned while working for Panduit. He also promised not to render services directly or indirectly to any "conflicting business" for a period of two years following the termination of his employment with Panduit. The contract defined "conflicting business" as one that produced a conflicting product. A conflicting product was defined as one that was the same as, or similar to, or competed with a product, or process upon which Hood worked or would work during the last two years of his employment by Panduit. There was no specific geographical limitation contained in the employment contract. On January 10, 1978, seven days after resuming employment, Hood again terminated his employment with Panduit because of what Hood considered to be a conflict between another employee and him.

In August 1978, Hood went to work for Republic Molding Company in Niles, Illinois, at a salary substantially less than the $40,000 per year salary he had earned with Panduit. He worked for Republic for four months. This employment appears to have resulted from several letters sent by Hood to a number of companies, including All States, seeking employment. Republic does not produce cable-ties.

After a series of contacts with All States, Hood was hired by All States in January 1979. At the time, All States knew of the restrictive covenant in Hood's employment contract with Panduit but hired Hood anyway, promising him to pay all of his legal fees if litigation regarding the restrictive covenant followed. Hood was hired to be manager of All States' production of cable-ties. His salary was set at $40,000 per year.

On February 26, 1979, Panduit filed its action against All States and Hood. The complaint, later amended, asked for both injunctive and pecuniary relief, and also for punitive damages. Panduit alleged that Hood was revealing trade secrets to All States and All States was incorporating these trade secrets into its production system. Panduit sought to enforce the two-year restrictive covenant, which would expire on January 10, 1980, against Hood and to prevent All States from interfering with Panduit's contract with Hood. Panduit also sought damages for the alleged use of its trade secrets.

At the same time as it filed its complaint, Panduit filed a motion for a temporary restraining order against both defendants. Both All States and Hood received notice of this motion. At a hearing in which attorneys for Panduit and All States were present, the trial judge concluded that it should issue the temporary restraining order and also set a hearing to determine whether a preliminary injunction should issue. The temporary restraining order went into effect on February 27, 1979, following Panduit's posting of a $50,000 bond. Under the terms of the temporary restraining order, Hood was enjoined from working for All States and from revealing any trade secrets to All States. All States was enjoined from employing Hood and from using or disclosing any trade secrets it may have acquired through Hood.

On March 5, 1979, both defendants moved to dissolve the temporary restraining order. At the same time, both defendants filed their answers to the complaint, denying most of the substantive allegations in the complaint and setting up various affirmative defenses. Panduit then filed its reply to the defenses and its motion for a preliminary injunction.

On March 15, 1979, defendants' motion to dissolve the temporary restraining order was denied. Thereafter, the temporary restraining order was extended several times so that the parties could take what discovery they needed in preparation for a hearing on the preliminary injunction. After several days of hearings, the preliminary injunction was issued on May 15, 1979. The preliminary injunction enjoined the defendants in the same manner as the temporary restraining order except that Hood was enjoined from working for All States and All States was enjoined from employing Hood until January 10, 1980, the day the two-year restrictive covenant would expire. Neither defendant moved to dissolve the preliminary injunction.

Exactly 30 days after the issuance of the preliminary injunction, on June 14, 1979, both defendants filed their notice of interlocutory appeal from the order granting the preliminary injunction. After several delays effected by defendants and Panduit, oral argument was heard by this court on April 3, 1980, almost three months after the preliminary injunction expired by its own terms. Prior to oral argument, Panduit and defendant Hood entered into a settlement agreement, and Hood is now working again for Panduit and no longer challenges the terms of the injunction or the restrictive covenant.

On appeal, All States has attempted to have us review both the validity of the order granting the temporary restraining order and the order granting the preliminary injunction. All States' main contentions are that no restraining order or injunction could have been issued because (1) the restrictive covenant is void on its face because it lacks a geographical limitation, and (2) the trial court abused its discretion in issuing the temporary restraining order and the preliminary injunction because Panduit failed to make a sufficient showing that irreparable injury would occur to ...

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