Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

GORMAN PUB. CO. v. STILLMAN

October 21, 1980

GORMAN PUBLISHING COMPANY, PLAINTIFF,
v.
THOMAS R. STILLMAN ET AL., DEFENDANTS.



The opinion of the court was delivered by: Decker, District Judge.

    MEMORANDUM OPINION AND ORDER

On May 1, 1974, Gorman Publishing Company ("Gorman"), agreed to employ Thomas R. Stillman as "publisher" of Canner/Packer, a magazine it had just acquired. This agreement contained a covenant restricting Stillman from working for any competitive magazine for a period of two years following termination of his employment with Gorman. Stillman resigned his position as publisher on January 6, 1976, but signed a new agreement with Gorman to work as a salesman for three months. Stillman signed yet another agreement with Gorman on April 8, 1976, under which he would be paid for three more months. In both of these agreements, Stillman reaffirmed his intention not to compete with Gorman. In June of 1976, Stillman accepted employment with Fairchild Electronic News, a magazine not competitive with Canner/Packer. He resigned from this position in July of 1977, and accepted employment with the Chilton Company, to work on Food Engineering magazine. Gorman brought this action against both Stillman and Chilton claiming that Stillman's employment with Chilton violated his agreement not to compete. A trial was held before this court on June 4-9, 1980. The court hereby enters the following findings of fact and conclusions of law.

The non-compete covenant in the May 1, 1974, agreement between Gorman and Stillman provides as follows:

    "It is expressly agreed that at no time during
  the term of this Agreement, or for a period of
  two (2) years immediately following the
  termination of the employment, if the termination
  was initiated by Employee or initiated by Gorman
  `for cause,' as is herein defined in this
  Agreement, will Employee, for himself, or on
  behalf of any other person, firm, partnership, or
  corporation, directly or indirectly, engage in a
  business directly competitive with Company
  anywhere in the United States or the foreign
  areas where the Company has done business or has
  planned or scheduled business."

The agreement provides for liquidated damages of $500 per day in the event of a breach of this covenant. These provisions of the agreement were the subject of negotiation between the parties' attorneys, and Stillman himself made objections to some of them. Stillman was thus fully aware of their import.

Matters came to a head in December, 1975. At the Gorman Christmas party, Stillman again expressed to William Gorman his dissatisfaction with the amount of responsibility he was given. There is a conflict in the testimony as to whether Stillman told William Gorman that he intended to resign, or merely stated that "it may be in the best interest [of everyone], because of the way things were going, that I should resign." Stillman went on vacation, and following his return, met with William and John Gorman on January 6, 1976, at the Drake Hotel in Chicago. Stillman testified that the Gormans told him to resign at this meeting. William Gorman testified that it was Stillman who stated that he had finalized his decision to resign. On that same date, Stillman prepared a resignation letter which read in part as follows:

    "Effective today . . . I do formerly [sic]
  resign from my position at Gorman Publishing
  Company as Publisher of CANNER/PACKER Magazine.
    "Please understand that I have no intention of
  associating myself with, or engaging in
  employment with, any trade journal directly or
  indirectly competative [sic] to CANNER/PACKER
  Magazine without written permission from one or
  more officers of Gorman Publishing Company.
    "It is with deep regret that I submit this
  resignation, however, I feel it is in the best
  interests of both Gorman Publishing Company and
  my own personal requirements."

This letter, which was also signed by John and William Gorman, further provided that Stillman would receive full salary and earned commission for the following three-month period.

Stillman made only a few sales calls for Gorman in the three months following his resignation as publisher. In March of 1976, Stillman informed William Gorman that he had tentatively accepted a position with the Putnam Publishing Company. This company published a magazine serving the food industry, but Stillman proposed that he would work only with a chemical magazine also published by Putnam. William Gorman objected to this employment, and offered to employ Stillman as an "independent consultant" for three additional months. On April 8, 1976, Stillman signed a letter sent to John and Bill Gorman which read in part as follows:

  "This is to further supplement my letter of
  resignation dated January 6, 1976, in connection
  with the May 1, 1974 employment agreement.
  "I agree that for two years after my final
  separation from Gorman Publishing Company I will
  not, directly or indirectly, work for or be
  associated with in any capacity any company or
  business which owns or publishes, directly or
  indirectly, any business or trade journal or
  magazine, directly or indirectly, competitive
  with CANNER/PACKER or BAKERY PRODUCTION AND
  MARKETING magazine including, but not limited to,
  the following companies: Putnam, Chilton,
  Sosland.
  "I reaffirm my agreement to be bound by all the
  terms of the May 1, 1974 employment agreement
  particularly the noncompetitive paragraphs 5 and
  6 as they are found on pages 4 and 5 of that
  agreement which I agree shall run for two years
  from the date of my final separation from Gorman
  Publishing Company and shall cover the above
  mentioned competitive businesses and magazines.
  "You have agreed to employ me as an independent
  consultant for a period of three months from the
  date of this letter at a fee of $1650.00 per
  month. . . ."

Stillman performed no consulting services for Gorman under this agreement.

In June or July of 1976, Stillman began working for Fairchild Electronic News, a magazine not competitive with Canner/Packer, in Los Angeles, California. In July, 1977, Stillman met with Tom Morie, publisher of Food Engineering, of the Chilton Company to discuss possible employment with Chilton. Stillman resigned from Fairchild on July 25, 1977, and the next day sent a telegram to Morie, indicating his willingness to work for Chilton. In August of 1977, Stillman attended a sales meeting of Food Engineering salesmen. Also, in that month, Chilton was informed by attorneys for Gorman that their proposed hiring of Stillman would violate his agreements with Gorman "and would require action by Gorman against all parties including those who would employ him and engaged in the `tortious interference of contract.'" To avoid such problems, Stillman called William Gorman and offered to postpone his employment with Chilton until January 6, 1978. This offer was not accepted. Chilton also considered employing Stillman in ways that might not be considered competitive with Gorman until the Gorman contract ran out.

On October 3, 1977, Stillman began his employment with Chilton as National Sales Manager for Food Engineering Magazine and Food Engineering Master, a catalog. Chilton sent Stillman a letter, which he signed, informing him of the possible legal consequences of his employment. This letter provided in part:

  "You [Stillman] hereby agree that if as a
  consequence of your employment with Chilton,
  Chilton becomes involved, directly or indirectly,
  in any law suit or other action brought by Gorman
  or any other party, claiming a violation by you
  of any of the foregoing agreements or otherwise
  acting wrongfully by employing you, Chilton may
  discharge you forthwith, if in its sole judgment
  it considers itself to be running an unacceptable
  risk of damages or loss or of incurring
  substantial legal fees or expenses. . . .
  "Chilton hereby agrees to pay any legal fees and
  expenses, including personal expenses reasonably
  incurred by you, in preparation for the defense
  of any law suit or threatened action by Gorman
  prior to the date Chilton, if it so elects,
  terminates your employment hereunder. In
  addition, Chilton will indemnify and hold you
  harmless against any monetary judgments rendered
  or court costs assessed against you. . . ."

In September, 1978, following the death of Tom Morie, Stillman became the publisher of Food Engineering and Food Engineering Master.

I. Breach of the Non-Compete Covenant

As the foregoing discussion of the facts shows, there can be no question in this case that Stillman signed the three non-compete agreements with his eyes open, and that Gorman made clear to him from the beginning that a major concern of theirs was that he might work for a competitor in the future. It is equally clear that Stillman and Chilton were fully aware at the time Stillman began his employment with that company, that this employment violated the letter of Stillman's agreement with Gorman. For these reasons, the major issue in this case has not been the breach, but has rather been the reasonableness of the non-compete agreement. Nevertheless, defendants advance several arguments that the non-compete agreement was never breached.

Defendants contend that the non-compete covenant in the May 1, 1974, agreement never became operative, because it only applies if the termination was initiated by Stillman or if it was initiated by Gorman "for cause." There is no dispute that the termination was not initiated "for cause." Stillman contends that because he was told to resign by the Gormans, he did not initiate his termination. The court must find otherwise. Although there is a dispute as to whether Stillman told William Gorman in December, 1975, that he would resign, or whether he was merely considering resignation, there is no dispute that Stillman initiated the discussions of his resignation. In January, the Gormans may have suggested that Stillman should resign, although William Gorman denies making such a suggestion. In any event, the resignation letter submitted by Stillman states that his resignation was voluntary. Stillman chose to submit a letter in this form, rather than risk discharge, and must accept the consequences of his decision. One of those consequences is that he is not released from his non-compete agreement.

Defendants further argue that the termination was initiated by Gorman because Stillman was "constructively discharged" from his position as publisher. The constructive discharge is said to have arisen from the Gormans' failure to give Stillman the responsibilities that should have been associated with his position. Defendants rely upon Brock v. Mutual Reports, Inc., 397 A.2d 149, 152 (D.C.App. 1979), where the court stated that "when an employee contracts to fill a particular position any material change in duties or significant reduction in rank will constitute a constructive discharge which, if unjustified, is a breach of contract." This case is distinguishable from Brock in two respects. First, Stillman was not actually demoted; rather, he was given less responsibility than he would have liked. In fact, it appears that Stillman's authority increased while he worked for Gorman, albeit not as quickly as he would have liked. Second, the job of publisher was not so well defined either within the industry or between the parties, that it can be said that Gorman's failure to give Stillman the authority he hoped for amounted to a constructive discharge. The court concludes that Stillman's termination was not initiated by Gorman, that it was initiated by Stillman, and therefore, that the non-compete clause is operative.

Finally, defendants argue that Stillman's employment with Chilton did not violate the non-compete covenant because the magazines Food Engineering and Canner/Packer are not "directly competitive." This argument flies in the face of much of the evidence presented at trial, which showed that at least to some extent, the magazines serve similar markets, and that both Chilton and Gorman considered their magazines to be competitors. The court must conclude, therefore, that Stillman's employment with Chilton, which the court finds began on October 3, 1977, violated the terms of the May 1, 1974, employment agreement signed by Stillman.

II. Validity of the Non-Compete Covenant

Under Illinois law, a covenant not to compete, such as the one at issue in this case, is not enforceable unless the employer can demonstrate that a "protectible interest" justifies it, and that it is reasonably limited in scope. See, e.g., House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 225 N.E.2d 21 (1967). Though the defendants have raised some objections to the scope of this covenant, these objections are not well taken. The covenant only bars Stillman from employment with Gorman's competitors. This provision was certainly reasonable insofar as Gorman had interests that required protection, and it was not unduly burdensome, as is witnessed by the fact that, prior to working for Chilton, Stillman was able to find work with a magazine that did not violate the covenant's terms. In view of the limited number of jobs to which the covenant applied, the temporal and geographic restrictions must also be viewed as imposing only an insignificant burden. Moreover, the fact that the covenant applied nationwide was justified by the nationwide ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.