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The Instrumentalist Co. v. Band

OPINION FILED JUNE 28, 1985.

THE INSTRUMENTALIST COMPANY, PLAINTIFF-APPELLEE,

v.

BAND, INC., ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County; the Hon. Anthony J. Scotillo, Judge, presiding.

JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT:

Defendants, Band, Inc. (Band), and Kenneth L. Neidig (Neidig) bring this interlocutory appeal from the issuance of a preliminary injunction restraining them until further order of the court from competing with plaintiff in violation of a restrictive covenant in an employment agreement between plaintiff and defendant, Neidig.

As alleged in its amended complaint for injunctive relief, plaintiff is the publisher of The Instrumentalist, a monthly magazine directed toward school band and orchestra directors and music teachers. The Instrumentalist has been in publication continuously since 1946 and currently has more than 19,000 paid subscribers throughout the United States and in numerous foreign countries. Band, a Michigan corporation chartered in June 1984, is the publisher of Band Magazine, a bimonthly periodical distributed free of charge to essentially the same market as The Instrumentalist. Neidig was employed by plaintiff as editor and advertising manager of The Instrumentalist from June 1970 to June 1984, throughout which period the terms and conditions of his employment were governed by an employment contract which was renegotiated and renewed periodically. The agreement at issue in this case, executed in March 1981 but made retroactively effective as of July 1, 1979, contained inter alia, the following covenant:

"5. Neidig agrees that for a period of two years following the termination of his employment with Company, he will not be employed by, consult for, accept compensation for, own, operator, manage or in any other way work for any of the following listed publications or business entities: a) Music Educators National Conference; b) The School Musician Director and Teacher; c) Woodwind World Brass and Percussion; d) Music Journal, or e) any other business entity or person engaged in the business of publishing, selling, or distributing a magazine or other periodical directed to or primarily used by band or orchestra directors, piano or organ teachers or junior or senior high school instrumental musicians in the United States of America. During such two year period, Company shall have first right of refusal on any articles Neidig may prepare for publication in a national music magazine. Specifically excluded from the restrictions of this paragraph 5, and thereby available employment to Neidig after the term of his employment with Company, is employment related to the publication of a `house organ' or any magazine published by a company in the music industry, provided that magazine is distributed without any charge to each subscriber."

In June 1984, Neidig voluntarily terminated his employment with plaintiff, and became a principal shareholder in Band and editor of Band Magazine, the first issue of which was published in September of that year. Plaintiff thereafter filed a complaint for preliminary and permanent injunctive relief seeking to restrain Neidig from working for Band in violation of the terms of the restrictive covenant.

At the preliminary injunction hearing, James Rohner, plaintiff's president and an attorney, testified that he had drafted each of the four employment contracts executed by plaintiff and Neidig over the course of the latter's employment with The Instrumentalist. As originally submitted to Neidig, the contract at issue contained either a three-year or 30-month non-competition clause, which Neidig rejected, counterproposing a 12-month restriction and voluntary relinquishment of the entire exclusionary clause allowing him to work for "house organs" or magazines published by companies in the music industry — described by Rohner as journals published by companies wishing to promote their own music-related products — in exchange for a clause permitting him to start a new magazine after that one-year period. Eventually, after nearly 21 months of periodic negotiations, Neidig agreed to a two-year restriction in return for various modifications of other terms, including elimination of some post-employment proscriptions contained in the three previous contracts and increased compensation.

Rohner further testified that throughout the 14 years of his employment with plaintiff, Neidig was both editor and advertising manager of The Instrumentalist. As editor, he was responsible for soliciting and editing articles submitted by music experts and educators and generally preparing the magazine for publication. Between 1970 and 1979, he also had near-exclusive responsibility for soliciting advertisements for The Instrumentalist, as well as for Clavier and Accent, two other music magazines published by plaintiff. Although Will Garvey was hired as assistant advertising manager in 1979, Neidig continued to exercise full decisional authority as to the division of responsibility for soliciting and contacting existing and potential advertisers. Neidig compiled a list entitled "KLN [Kenneth L. Neidig] Close Contacts" of the top 30 to 40 advertisers — most of whom had been advertising in The Instrumentalist for 15 to 30 years and together accounted for approximately one-half of its advertising volume and revenue — with directions to Garvey and the other staff members that the companies thereon were his exclusive accounts with whom no one else was allowed contact without his permission. In addition, Neidig had complete discrection to contact any of the more than 100 smaller advertisers, including those assigned to Garvey. Several times a year, Neidig travelled, at plaintiff's expense and with its encouragement, to music conventions and to the offices of the firms which advertised in plaintiff's magazines and thereby developed personal and, in some cases, social relationships with the persons in those firms responsible for making advertising purchases.

As presiding of The Instrumentalist, Rohner's duties were primarily administrative, and while he sometimes made suggestions to Neidig concerning the servicing of their advertising customers, he rarely had personal contact therewith.

Neidig submitted his resignation on February 28, 1984, to be effective upon the expiration of the contract — on June 30, 1984 — at first stating, when asked, that he had no future plans and later refusing to disclose them. When he reminded Neidig of the post-employment agreement and expressed his hope that there would be no disputes thereabout, Neidig replied, "No, I can read." In late July, after learning of Neidig's plans to publish a new magazine and that he had been soliciting authors and advertisers with whom he had developed close relationships while working for plaintiff, to write for and advertise therein, plaintiff's counsel wrote to Band in Michigan, advising that company of the restrictive covenant and its intention to enforce the terms thereof. The first issue of Band Magazine, published in September 1984, was nearly identical to The Instrumentalist in appearance and content, its exclusion of editorial material relating to orchestras and the fact that it was distributed without cost being the only two substantive differences. Forty-two of the 45 advertisers in the first issue of Band Magazine and 45 of 45 in the second issue were firms which regularly purchased advertising space in The Instrumentalist and several of them ceased to do so, or significantly reduced the quantity of their advertising in the January and February 1985 issues thereof. In fact, a review of plaintiff's company records indicated that advertising inches and revenue declined approximately 35% in January and 15% in February 1985 from the same months a year earlier.

Neidig testified, as an adverse witness, that he was active in the music field for several years prior to his employment with plaintiff. Between 1962 and 1970, he wrote a book entitled The Band Director's Guide, worked as a band director at a school in Kentucky and served as managing editor of the Bluegrass Music News, a journal published by the Kentucky Music Education Association. During the course of these endeavors, he had occasion to meet and work with several of the same persons with whom he later had contacts in his capacity as editor and advertising manager of The Instrumentalist.

In 1970, Traugott Rohner, founder and then-president of The Instrumentalist Company, wrote a letter offering him the position with plaintiff and enclosed therewith an employment contract which had been drafted by his son, James, containing a four-year non-competition clause. Although he signed that first contract without objection or change, because he believed he had no choice but to do so, over the next several years he became increasingly concerned about the post-employment restrictions and, in subsequent contract-renewal negotiations, expressed that concern to James Rohner, who had succeeded his father as plaintiff's president. Rohner would not agree to their removal, however, acquiescing only to a time reduction thereof from four years to 30 months in the second and third contracts, executed in 1973 and 1976 respectively, and to two years in the contract at issue. Neidig acknowledged that during his tenure with plaintiff he had primary responsibility and authority for soliciting and servicing advertisers and that in the course thereof he developed close, personal relationships with some of the officers of those firms. Although at some point after Will Garvey was hired as assistant advertising manager, he (Neidig) compiled the "KLN Close Contacts List" of the top 30 or more advertisers — most of whom also advertised in other music journals and whose names, addresses and telephone numbers were readily obtainable by potential competitors — they were not his "exclusive" accounts, the advertising department responsibilities having been shared by him and Garvey under Rohner's supervision. He conceded, however, that Rohner's and Garvey's contacts with those advertisers were minimal and that Garvey seldom contacted any of them without his prior knowledge and approval.

Will Garvey, who succeeded Neidig as advertising manager of The Instrumentalist, testified that before he joined the staff, Neidig informed him that he had developed close personal relationships with many of the 40 or 50 major advertisers named in a list he compiled, almost all of whom were long-term advertisers in plaintiff's magazines; that he wished to retain responsibility for contacting and servicing them; and that any contacts made by him (Garvey) were to be made only with his prior permission. Following the publication of Band Magazine several major advertisers either ceased placing, or reduced the quantity of, their advertising in The Instrumentalist.

After arguments by counsel, the trial court granted plaintiff's motion for preliminary injunction restraining Neidig from continuing his employment with Band Magazine until further order, and this interlocutory appeal, brought pursuant to ...


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