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Abc Trans Nat'l Transport v. Aero. Forwarders

OPINION FILED OCTOBER 31, 1980.

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. JUSTICE WILSON DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 31, 1980.

These consolidated appeals are taken from the lower court's orders which denied plaintiff's request for injunctive relief and which found defendant Weiss not liable to plaintiff. Plaintiff also appeals from the amount of damages that it was awarded. Cross-appellants defendants appeal from the adjudication of their liability to plaintiff. We affirm the judgment.

ABC Trans National Transport, Inc. (ABC-TNT), instituted this action on February 6, 1978, to enjoin defendants, who were key employees of plaintiff, from diverting plaintiff's personnel and customers to Aeronautics Forwarders, Inc. (Aeronautics), a competing firm. On January 31, 1978, over 30 of plaintiff's employees walked off the job and began working for Aeronautics. Over half of plaintiff's business was lost to Aeronautics immediately thereafter. Plaintiff's major allegation is that defendants conspired to effectuate the massive departure and the subsequent losses to ABC. Defendants are charged with breaching their fiduciary duties, fraud, and interfering with contractual relations.

This litigation was previously before this court on an interlocutory appeal. (ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1978), 62 Ill. App.3d 671, 379 N.E.2d 1228 (1978 ABC Opinion).) At that time the plaintiff appealed the trial court's denial of a preliminary injunction at the close of plaintiff's evidence. We found the ruling to be an abuse of discretion and remanded the cause for further proceedings. Subsequently, after a hearing on the merits, the lower court held all defendants except Weiss to be liable to plaintiff and awarded damages, but denied the permanent injunction.

FACTS

Plaintiff ABC-TNT is a private corporation engaged in transporting freight over land and by air. Its separately operated air freight division, ABC Air Freight (ABC), acts as an intermediary between customers, air carriers, and ground cartage companies. Nationwide there are approximately 250 companies competing in the air forwarding business. It is a highly competitive industry that puts a premium on aggressive salespersons who establish and maintain a personalized relationship with clients and customer service personnel.

In 1969, ABC was operating at a loss, and defendant Robert Agnes was hired as president of ABC. Agnes subsequently hired defendants Edward Brownstein, David Eades, Carl Cohen, Al Krause, and Bernard Marco. Just before this controversy arose, 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 the Los Angeles station. In addition to their supervisory roles, these men also solicited and maintained clients.

By 1973, ABC had become profitable. Pursuant to his contract with ABC, Agnes received 10% of the yearly profits. ABC-TNT withdrew the remaining 90%. This practice became a major point of contention between Agnes and ABC-TNT because Agnes believed that the 90% profits should be retained and invested by ABC so that his 10% share of the profits could be increased in succeeding years. At the end of September 1977, Agnes conditioned the renewal of his contract upon the funds being left in ABC. He thereupon tendered his resignation, which eventually was accepted by Leon Mitchell (president of ABC-TNT) and Arthur Brown (chairman of the board and owner of all ABC-TNT's stock).

On about January 24, 1978, Mitchell first learned from ABC employee Diane Virzi that defendants had organized a competing air forwarder, Aeronautics Forwarders, Inc. (Aeronautics), and planned to walk out en masse with other ABC personnel. On the 30th of that month, ABC-TNT supervisory personnel appeared at ABC offices in Philadelphia, Boston, Chicago, New York and Los Angeles. In Chicago, Brownstein was fired. At the other stations, each defendant vice president was asked to remain with ABC, but each refused and left ABC. The following day, more than one half the employees of the major ABC stations had resigned from ABC and joined Aeronautics. Simultaneously, fifty percent of ABC's business, including most of its major customers, switched over to Aeronautics. In addition, various items of personal property, such as customer files, had been removed. Thereafter, plaintiff took several measures to recapture its lost customers and business, including the filing of this action for injunctive relief.

In the summer of 1978, this court heard plaintiff's interlocutory appeal from the lower court's order which granted defendants' motion to deny the petition for a preliminary injunction. We held that plaintiff had established a prima facie case for a temporary injunction and that the lower court's ruling was an abuse of discretion. (1978 ABC Opinion, 62 Ill. App.3d 671, 686-87, 379 N.E.2d 1228, 1239.) On remand, defendants presented their case, and plaintiff offered rebuttal evidence. The parties stipulated that the 1979 hearing would constitute the trial on the merits.

The record before us is voluminous and the foregoing fact summary merely provides an overview of the circumstances of this case. For purposes of clarity, therefore, a more detailed description of the evidence is necessary. Based on all the evidence from the 1978 and 1979 hearings, we find that the chronology of events leading to the January 31 walkout may be summarized as set forth below.

In 1975, defendant Weiss began negotiations for the purchase of Aeronautics on behalf of Fifty States Freight Corp., formed by Perry and Mildred Zenlea. At the time, Weiss was an attorney for ABC. The purchase was consummated in March 1976.

In April of 1976, Larry Lindell, a principal of ABC's Los Angeles cartage agent, Zip Delivery, received a letter from Aeronautics, requesting his services. Zip Delivery was under exclusive contract to ABC. Lindell made a few deliveries for Aeronautics until mid-1977. Bernard Glazer, a commissioned salesman for ABC and part owner of Zip Delivery testified that defendant Marco intimated that "big things" were going to happen concerning another air forwarding company and that Zip Delivery would be the sole cartage agent for this company.

In 1976 and 1977, various defendants discussed Aeronautics with each other or with third persons. It was not until Agnes tendered his resignation in September of 1977, however, that Aeronautics' activities accelerated. Defendant Brownstein told Barbara Crane, an ABC saleswoman, that the move from ABC to Aeronautics was to take place in February of 1978 and that "there was no turning back now." In a meeting in St. Louis, several of the defendants met with Marty Kusman, the ABC vice president in St. Louis, to persuade him to join Agnes and the others in leaving ABC.

On September 30, 1977, Brownstein called together the Chicago customer service employees and swore them to secrecy. He told them of the planned walkout. Diane Virzi testified during the 1978 hearings that Brownstein told them that ABC-TNT was going out of business and that ABC was doomed; that Krause, Marco, and Agnes had invested in another air freight company that was already operating in Los Angeles, Boston, and Philadelphia; that certain ABC clients had been informed of the situation and had offered to do business with Aeronautics; that ABC employees across the country were being notified and that secrecy was important because Agnes was under contract and could get into trouble if ABC learned of the plan.

In late 1977, defendants began setting up the physical facilities of each of the Aeronautics stations, renting office space and installing telephones. In addition, Aeronautics arranged for financing and ordered air bills, envelopes and other printed matter. At about this time, Brownstein attempted to get ABC's Houston station manager to leave ABC. Arthur Brown and Leon Mitchell spoke to Brownstein, Marco, Krause, Eades, and Cohen to ask each of them what effect, if any, Agnes' departure from ABC would have and whether they would take over Agnes' position as president of ABC. Each declined the offer, citing personal reasons.

In December 1977, Brownstein met with ABC salespersons Crane, Don Spandoni, and Tony Ill and told them that the move to Aeronautics would occur in February or March. Crane testified at the 1979 hearings that defendant Brownstein said that "[t]he other cities, the other vice presidents, and most of the office personnel, were going to go along — go with Bob [Agnes] and all of us — when we left, * * * [that] when we all left ABC there would be no life left."

In mid-December of 1977 Krause and Marco met with Lindell and Glazer to discuss the cartage agents' switchover to Aeronautics. According to Glazer's and Lindell's testimony, they were offered shares of Aeronautics' stock. Glazer testified that Marco approached him after the meeting to tell him that Glazer's share of stock would be increased from 7,500 to 10,000 and that Marco would personally give Glazer an additional 5,000 shares from his own shares.

In January of 1978, Brownstein again met with Barbara Crane and Spandoni and Ill to discuss final preparations for the walkout. That same month, Barbara Crane noticed that cartons of air bills with Attorney Weiss' New York address on them were in Brownstein's office. At Brownstein's direction, Barbara Crane addressed over 2,000 Aeronautics air bills with ABC's addressograph machine and customer cards.

In Los Angeles, Marco and Krause told Melissa Walker, a customer service employee, about the new company and asked her to join them. They told her that if she decided to stay with ABC she could be their spy. One of ABC's Los Angeles salespersons told ABC account Teac, Inc.'s, traffic manager to give its business to Aeronautics and left airbills for his use.

During the first week of January 1978, Marco told Glazer that the walkout was planned for February 20, 1978. Later in the month Marco told Glazer that he had ordered shipping containers at ABC's expense and that he'd tell Glazer when to pick them up. Lindell picked up an Aeronautics' shipment originating in Chicago and delivered it to a Los Angeles customer. Krause told Glazer to begin switching ABC accounts to Aeronautics in late January 1978. Also in January, activities at the Philadelphia station increased, and Cohen ordered office furniture for Aeronautics' office there. Further, Brownstein renewed his efforts to switch ABC's Houston and Kansas City stations to Aeronautics. He failed to persuade the station managers in these two cities to leave ABC.

Diane Virzi, a customer service manager in ABC's Chicago office, who initially intended to leave with Brownstein and the others, decided to remain with ABC. She related this to Brownstein on January 23, 1978. Thereafter, Agnes telephoned her and cautioned her not to say anything about Aeronautics because to do so could hurt her friends.

On January 25, 1978, approximately one month after leaving ABC, Agnes purchased all the stock of Fifty States Freight Corp. from his friend, Mildred Zenlea, and thus became the owner of Aeronautics.

OPINION

Plaintiff ABC contends that (1) the trial court erred in refusing to enjoin defendants for two years from doing business with the 52 principal customers of plaintiff; (2) the trial court erred in its determination that defendant Weiss is not liable to plaintiff; and (3) the amount of damages awarded by the trial court is against the manifest weight of evidence. In addition, defendants-cross-appellants raise several points in their appeal from the judgment against them on the issue of their liability to plaintiff. We conclude that all defendants except Weiss are liable to ABC but that injunctive relief at this state is inappropriate. We also affirm the award of damages, with modification.

I.

All defendants except Weiss appeal from the judgment of their liability to ABC. Their major thesis is that the mass walkout of January 31, 1978, is not an actionable breach of fiduciary duty. They also assert that the plaintiff failed to ...


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