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Tower Oil & Technology Co. v. Buckley

OPINION FILED AUGUST 12, 1981.

TOWER OIL & TECHNOLOGY CO., INC., PLAINTIFF-APPELLEE AND CROSS-APPELLANT,

v.

RICHARD BUCKLEY ET AL., DEFENDANTS-APPELLANTS AND CROSS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. JAMES A. GEROULIS, Judge, presiding.

MISS JUSTICE MCGILLICUDDY DELIVERED THE OPINION OF THE COURT:

The plaintiff, Tower Oil & Technology Co., Inc. (Tower), brought this action for damages against its former employee, Richard Buckley, for breach of a restrictive covenant contained in his employment contract. This action was also against Tri-State Industrial Lubricants, Inc. (Tri-State), Buckley's new employer, and Brian Davies, Tri-State's general manager and principal shareholder, for inducement and conspiracy in connection with the alleged breach. Counts of the complaint alleging breach of an agreement prohibiting trade secret disclosure and unfair competition were subsequently dismissed with prejudice on the motion of Tower.

Tower and the defendants filed opposing motions for summary judgment. In ruling on the motions, the trial court held that although there were disputed issues of fact concerning Tower's damage claim for breach of the covenant, the covenant itself was valid and enforceable. The court also rejected the defendants' affirmative defense of laches and granted summary judgment in favor of Tower on the defendants' counterclaim for violation of the Illinois Antitrust Act.

The case proceeded to trial before a jury, which returned a verdict of $14,700 in compensatory damages against all defendants and $53,200 in punitive damages against Tri-State and Davies. The defendants appeal and the plaintiff cross-appeals.

The affidavits for summary judgment and the depositions and documents filed in support thereof reveal the following undisputed facts.

Buckley was employed in 1961 by Tower as an industrial lubricant salesman. As a condition of his employment, Buckley was required to execute an agreement which provided, in pertinent part, that:

"In the event of termination of my association with the Tower Oil Company for any reason, I shall not directly or indirectly solicit, contact or otherwise engage in the sale of like or similar products to any Tower Oil Company customers or prospects as shown by its records, for three (3) years thereafter, * * *."

Buckley voluntarily left his position at Tower on June 30, 1971. He worked for approximately four weeks as an industrial chemical salesman. On August 1, 1971, Buckley became a lubricant salesman for Tri-State under the supervision of Davies, who was recovering from a serious accident.

Buckley subsequently contacted and sold lubricants to five customers of Tower. In May of 1972 Tower's attorneys notified Buckley and Tri-State that Buckley was in direct violation of the covenant. Harry Simon, Tower's vice president, spoke to Buckley who assured Simon that he would not solicit Tower's customers. Buckley admitted in his deposition that although he and Davies discussed Tower's threat of legal action, they did not take it too seriously because they had little involvement at that time with Tower's customers. Tower subsequently discovered that Buckley had violated his promise. Tower filed its complaint in February of 1974.

Buckley admitted in his deposition that he possessed little knowledge of the lubricant industry when he was hired by Tower. During his training he learned how to solve the lubrication problems of his customers. At company meetings held twice a month, salesmen exchanged ideas concerning the servicing of their customers and discussed new products and their proper application.

In his affidavit, George Spehn, president of a competing company, stated that there were approximately 50,000 lubricant customers in the Chicago area. He asserted that customers in the industry are extremely stable.

Al Simon, Jr., Tower's president, asserted in his affidavit, that at the time Buckley left his position at Tower, Tower had less than 1200 customers and prospects.

Affidavits of several lubricant customers revealed that because of the expense and inconvenience of testing lubricants, it is very difficult for a competitor to acquire new business from a company which has a satisfactory supplier.

The affidavits of the five customers involved in this litigation explained that one of the reasons they replaced Tower products with Tri-State products was because they were less expensive.

After the trial court's rulings on the motions for summary judgment, this matter proceeded to trial at which Tower attempted to prove that it lost the business of the five customers as a result of Buckley's solicitation and sales during the covenant period.

Tower presented three letters to the customers sent by Tri-State over Buckley's signature, in which he solicited their business. In addition, Tower offered into evidence Tri-State's invoices to the five customers during the covenant period. On most of the invoices, Buckley's initials appeared in a box reserved for the name of the salesman.

Al Simon, Jr., Tower's president, testified concerning Tower's loss of business. He calculated the average annual sales for each of the five customers prior to Buckley's alleged breach of covenant. Simon multiplied this figure by the number of years Tower was without the particular customer's business during the covenant period. Simon computed total lost sales in the amount of $36,800 and testified that 40% of this amount ($14,720) was Tower's loss of profits during the covenant period.

Florence Meisner, Tri-State's secretary, was called as an adverse witness. She testified that she prepared Tri-State's invoices for its customers. Each invoice contained a box for the name of the salesman. Meisner stated that she did not always put the actual salesman's initials into the box. When asked if she had testified at her deposition that the initials indicated the person actually calling on the customer, she stated that if her deposition revealed that statement, she must have made it.

Brian Davies was also called as an adverse witness. Davies was questioned concerning Tri-State's failure to list Buckley as the salesman of products to the five customers in its answers to interrogatories. Davies testified that although Buckley often drove him to the offices of the customers, Buckley had nothing to do with initiating sales. Davies maintained that Buckley was a serviceman who would examine problems such as rusting, staining and delivery. Although Davies asserted that the five customers were Tri-State customers prior to the employment of Buckley, he admitted that Tri-State sold less than $5,000 in products to these customers in the three-year period prior to Buckley's association with Tri-State. During the three-year covenant period Tri-State's sales to the five customers exceeded $100,000.

Davies also admitted that he wrote a letter to the employer of George Spehn of Stuart Oil Company. Spehn had filed an affidavit on behalf of Tower in this matter. In the letter Davies threatened legal action against Stuart Oil Company if Spehn testified against Tri-State.

Richard Buckley also testified as an adverse witness. He stated that while employed by Tower, he sold lubricants to four of the five customers. He also admitted that at his deposition he stated that he was the salesman of Tri-State products to the five customers.

At this point the trial court excluded the expert testimony of Walter Bissell concerning the diminution in value of Tower's business at the end of the covenant period. In an offer of proof Bissell testified that the value of Tower's business was diminished by $5,000 for each $1,000 in lost sales (less direct costs) sustained by Tower.

Florence Meisner testified on behalf of the defendants that Tri-State's log books revealed that Tri-State sold products to the customers during the period of 1965-1971. She stated that after his employment, Buckley was the service representative on these accounts.

Brian Davies also testified that Buckley was the service representative to the five customers during the covenant period. He asserted that Buckley had nothing to do with the customer's decisions to purchase products from Tri-State.

Mike Brandson of Semrow Products testified that Semrow decided to purchase products from Tri-State because of its lucrative prices. He denied that Buckley influenced this decision. On cross-examination he admitted that in 1973 Buckley solicited Semrow to purchase industrial lubricants and related products from Tri-State.

Bill LaFave of Aetna Bearing testified that he started purchasing products from Tri-State after a discussion with Davies. He stated that Buckley ...


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