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Frank B. Hall & Co. v. Payseur

OPINION FILED AUGUST 6, 1981.

FRANK B. HALL & CO., INC., ET AL., PLAINTIFFS-APPELLEES,

v.

JAMES C. PAYSEUR ET AL., DEFENDANTS-APPELLANTS.



APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR L. DUNNE, Judge, presiding. MR. JUSTICE JOHNSON DELIVERED THE OPINION OF THE COURT:

Rehearing denied October 2, 1981.

This matter arose out of an action for declaratory judgment, injunctive relief, and damages for violation of a covenant not to compete signed by James C. Payseur, defendant, former officer-employee of plaintiffs, Frank B. Hall & Co., Inc., and Frank B. Hall & Co. of Illinois, Inc. (Hall of Illinois). Bayly, Martin & Fay of Illinois, Inc. (Bayly of Illinois), was also named as a defendant. On August 7, 1978, the trial court issued a preliminary injunction against defendants. We affirmed the granting of that preliminary injunction. Frank B. Hall & Co. v. Payseur (1979), 78 Ill. App.3d 230, 396 N.E.2d 1246.

On May 16, 1979, while the prior appeal was pending, plaintiffs commenced contempt proceedings against defendants for violating the temporary restraining order and the preliminary injunction. Defendants, on September 15, 1979, filed their verified answer denying the material allegations in plaintiffs' petition. The proceedings began on November 19, 1979, and closed on December 11, 1979. The trial court, on February 20, 1980, entered its order holding Payseur and Bayly of Illinois in contempt for violating the injunctive order, and fined Payseur and Bayly of Illinois each $5000. On February 15, 1980, plaintiffs petitioned the trial court for attorneys' fees and costs totaling $48,564. On June 16, 1980, the trial court granted an award of attorneys' fees to plaintiffs in the amount of $45,555.

On March 4, 1980, defendants filed their notice of appeal from the contempt order. Subsequently, on July 15, 1980, defendants filed their notice of appeal from the award of attorneys' fees and costs. The two appeals were consolidated on August 1, 1980.

Defendants presented the following issues for review: (1) whether the trial court erred in finding defendants in contempt and (2) whether the trial court erred in assessing compensatory damages, excessive fines, and attorneys' fees and costs against defendants. We affirm.

Payseur was a director and vice president of Hall of Illinois and was in charge of the Des Plaines office. Payseur resigned his positions at Hall of Illinois in May 1978. He is the founder, chief executive officer, and 50 percent shareholder of Bayly of Illinois. In June 1978, Bayly of Illinois opened for business with Payseur as its president. Another employee, Lorraine Grenvich, resigned from Hall of Illinois in June 1978 and agreed to work for Payseur at Bayly of Illinois. During the first and second weeks of June 1978, Bayly of Illinois sent out mailings to park districts and laundromats requesting that they appoint Bayly of Illinois as their broker of record. Plaintiffs learned of these activities and filed suit against Payseur for breach of the covenant not to compete. (Hall v. Payseur, at 233.) On June 27, 1978, a temporary restraining order was issued enjoining Payseur from contacting any Hall of Illinois customers in order to induce them to transact their business with Bayly of Illinois.

The evidence at the contempt proceeding revealed that between July 13, 1978, and August 15, 1979, Hall of Illinois lost approximately 61 laundromat insurance customers and 1 park district customer to Bayly of Illinois. Plaintiffs had filed and served a computer listing of their customers protected by the preliminary injunction.

Payseur testified that some of the park districts purchased insurance with effective dates after the issuance of the temporary restraining order. He also indicated that Bayly of Illinois received broker of record letters from former customers of Hall of Illinois after June 27, 1978.

Plaintiffs' witness, Fred Bergman, who is the profit center manager of the Des Plaines office, testified that the broker of record letters did not constitute sales of insurance because additional contact with each customer was required to determine limits of liability, accuracy of coverage, and acceptability of the premium. Bergman also testified that laundromats that renewed with Payseur and Bayly of Illinois were former customers of Hall of Illinois. The park districts of Deerfield, Rockford and Downers Grove had policies with Hall of Illinois during the 6-month period before and after Payseur resigned from Hall of Illinois. Deerfield renewed with Bayly of Illinois on June 17, 1979.

James L. Stone, an employee of Bayly, Martin & Fay, Inc. (not Bayly of Illinois), testified on behalf of the defendants. He was the former president of Hall of Illinois until December 1978 when he resigned to become president and chief executive officer of Bayly, Martin & Fay, Inc. According to Stone, a broker of record letter authorizes the broker to be an insured's exclusive representative on the insurances in force and the placement of additional insurances in the insurance marketplace. Stone indicated that a customer is lost when the insured instructs the broker not to renew a policy, tells a broker to cancel policies or issues a broker of record letter to another broker.

On cross-examination, Stone testified that the broker of record letter in defendants' exhibit did not constitute the sale of an insurance policy. He also indicated that the client or the broker could reject a broker of record letter within a reasonable time.

The trial judge found and ruled that 61 laundromats and 1 park district insurance customer switched their insurance business from Hall of Illinois to Payseur and Bayly of Illinois by renewing or purchasing their insurance through the defendants. Each of these customers was contained in the Hall of Illinois customer list which previously had been served upon defendants. Further, each customer possessed, both during the period 6 months before and after Payseur resigned, as well as the time Payseur and Bayly of Illinois contacted such customer, a policy which had been brokered by and purchased through Hall of Illinois. Such customer continued to possess that policy until it was renewed by Payseur and Bayly of Illinois.

The trial court fined Payseur and Bayly of Illinois $5000 each, payable to the Cook County General Fund, and required Payseur and Bayly of Illinois to remit to Hall of Illinois all commissions received for sale or renewal of policies to any of the customers or store locations listed in the order after February 1, 1980. Further, the trial court assessed plaintiffs' reasonable attorneys' fees and costs against Payseur and Bayly of Illinois, jointly and severally.

Defendants contend the court erred in finding them in contempt; in holding that defendants violated the orders prohibiting them from inducing Hall's customers to switch their business; and in finding that the execution of ...


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