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NATURE HOUSE, INC. v. SLOAN

May 5, 1981

NATURE HOUSE, INC., AN ILLINOIS CORPORATION, PLAINTIFF,
v.
RICHARD SLOAN, DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

Plaintiff, Nature House, Inc. ("Nature House"), an Illinois corporation, filed this action for injunctive and monetary relief against defendant, Richard Sloan ("Sloan"), an Arizona resident, seeking to enforce two restrictive covenants that purport to bar Sloan (1) from painting or drawing any species of bird if such bird previously had been the subject of a painting Sloan did for Nature House or its predecessor, Trio Manufacturing Co. ("Trio"), and (2) from producing directly or indirectly prints or reproductions of such paintings without the consent of Nature House or Trio. Plaintiff also seeks to recover monies allegedly due and owing on a loan it supposedly made to Sloan and to recover excess royalties allegedly received by Sloan under his contract with Nature House. Jurisdiction is founded upon diversity of citizenship pursuant to 28 U.S.C. § 1332 and the amount in controversy is alleged to be in excess of $10,000 exclusive of interest and costs.

This matter is presently before the Court on Sloan's motion to dismiss the complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). Sloan contends that the restrictive covenants are void as a matter of Illinois law, that his contract with Nature House expressly provided that he did not have to return excess royalty payments, and that the complaint is fatally defective with regard to the alleged loan. As the parties rely on matters outside the pleadings in connection with the motion as directed to the restrictive covenants, the Court will treat it as a motion for summary judgment under Fed.R.Civ.P. 56 to this extent. Grafon Corp. v. Hausermann, 458 F. Supp. 91, 92 (N.D.Ill. 1978).

The facts in this case are relatively uncomplicated. In November, 1967, Sloan, reputedly one of North America's finest painters of bird and other wildlife subjects, entered into an employment agreement in Illinois with Nature House, then doing business as Trio Manufacturing Company, pursuant to which Sloan agreed to paint a series of 50 bird subjects which Trio-Nature House would then market to wildlife art afficionados individually or as a complete set. Included within the series of 50 paintings were to be 28 birds representing the state birds of all 50 states. The prices of the prints range from $50 to $400 and the complete set of 50 is available for $5,125. Under the terms of the employment agreement, Sloan was to be paid an annual salary of $9,600 plus a 5% royalty on the net selling price of the paintings. The agreement was renewable at the option of Trio-Nature House for periods of one year for up to a total of five years.

In July, 1969, the parties executed a "Supplement To Employment Agreement" wherein they agreed to extend Trio's option to renew for two more years or for a total of seven years. The supplemental agreement also contained a restrictive covenant providing as follows:

    14. SLOAN agrees that after termination of this
  contract for any reason, he shall be free to
  paint or render in any medium any drawing of a
  bird or animal subject from a species of bird or
  animal which has been painted or rendered for
  TRIO under said EMPLOYMENT AGREEMENT provided
  that neither SLOAN nor any assignee nor other
  person deriving an interest in said drawing shall
  have the right to produce prints or reproductions
  thereof except with the written consent of TRIO
  or its successors or assigns first obtained.
  However, it is agreed that SLOAN can paint or
  render

  any drawing of a bird or animal subject from a
  species of bird or animal subject which he has
  not painted or rendered for TRIO under said
  EMPLOYMENT AGREEMENT after termination of the
  Agreement for any reason. For the purpose of
  interpretation of the foregoing provisions where
  SLOAN has painted or rendered a drawing of a
  purple martin bird subject for TRIO, SLOAN agrees
  not to paint or render another drawing using a
  purple martin bird except where suitable
  precautions and care is taken to prevent
  reproductions or prints of said drawing from
  being made. Further, SLOAN can paint or render a
  drawing using a woodpecker bird subject without
  qualification under the provisions of this
  paragraph where he has not painted or rendered a
  drawing using a woodpecker bird subject for TRIO.

The parties modified the agreement once again in June, 1971, effective in November, 1972, by providing that it would extend through November 14, 1980. This "Modification of Employment Agreement" also provided that Sloan's annual salary would be increased from $9,600 per year to $24,000 per year commencing in November, 1974, and that he would be entitled to a minimum guaranteed royalty of $600 per month:

  payable upon SLOAN's signing all of the
  collector's prints of a particular bird subject
  as presented to him by TRIO. Said minimum
  guaranteed royalty shall be treated as an advance
  payment of royalty which may become due and
  payable by TRIO . . . and TRIO agrees that SLOAN
  shall not be required to refund to TRIO any
  monies advanced to SLOAN as said guaranteed
  royalty.

The modification also contained a restrictive covenant as follows:

  3.0 During the term of this EMPLOYMENT AGREEMENT
  and at any time after termination thereof, SLOAN
  agrees not to paint any drawing of a bird subject
  that already has been rendered by him for TRIO
  [now Nature House] and for which he has been
  compensated under the terms of this Agreement.
  SLOAN agrees that he will not render a drawing of
  such a previously rendered bird subject
  regardless of the medium or artistic technique
  used.

Sloan has fulfilled his obligations under the contract with Trio-Nature House and he has been compensated in accordance with the terms of the agreement.*fn1 The contract having expired in November, 1980, pursuant to the modification executed in 1971, Sloan is no longer employed by Nature House. Since 1976, however, Sloan has admittedly painted or reproduced many of the same birds that he originally painted for Trio-Nature House and has sold these reproductions or paintings himself or through dealers located in Tennessee and Illinois. Such paintings, reproductions, and sales would appear to violate the restrictive covenants contained in paragraph 14 of the supplemental agreement executed in July 1969, and paragraph 3.0 of the modification executed in June, 1971. Sloan contends, however, that these restrictive covenants are void and unenforceable as a matter of law and public policy.

I.

THE RESTRICTIVE COVENANTS

In order to determine whether a restrictive covenant is enforceable under Illinois law, a court must consider "whether enforcement will be injurious to the public or cause undue hardship to the promisor, and whether the restraint imposed is greater than is necessary to protect the promisee." J.D. Marshall International, Inc. v. Fradkin, 87 Ill. App.3d 118, 42 Ill.Dec. 509, 512, 409 N.E.2d 4, 7 (1st Dist. 1980); House of Visions, Inc. v. Hiyane, 37 Ill.2d 32, 225 N.E.2d 21, 24 (1967). Restrictive covenants have been enforced in Illinois only if the time limit and geographical scope are reasonable; trade secrets or other confidential information is involved; and the restriction is reasonably necessary for the protection of a legitimate business interest. Central Building and ...


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