Appeal from the Circuit Court of Cook County; the Hon. James
C. Murray, Judge, presiding.
JUSTICE LORENZ DELIVERED THE OPINION OF THE COURT:
Plaintiff brought this action to enjoin defendant from using and enjoying the benefits of an alleged protectable business interest. After conducting a hearing on the matter, the trial court found that plaintiff's customer expiration lists, which were confidential in nature, constituted a protectable trade secret under the laws of this State, and that defendant had wrongfully misappropriated one of said lists in breach of his fiduciary duty. As a result of these findings, the court enjoined defendant from soliciting plaintiff's accounts for a period of one year. On appeal defendant alleges that: (1) absent a confidentiality or non-competition covenant agreement, plaintiff's customer expiration lists do not qualify as a trade secret; (2) the finding that a misappropriation of a customer expiration list had occurred was against the manifest weight of the evidence; (3) plaintiff failed to show the prerequisites for the granting of preliminary injunctive relief; and (4) the preliminary injunction order was overly broad in scope.
For the following reasons we affirm.
Plaintiff is an insurance agency specializing in general aviation insurance. It has rendered a full line of insurance services to the aviation industry since 1939. The defendant was employed by plaintiff for approximately seven years during which time he was promoted from the position of salesman to that of vice-president and agency manager in charge of operations.
Plaintiff services around 1,600 customers. As part of its business, plaintiff maintains and periodically compiles what is known in the trade as a customer expiration list. Aside from containing such pertinent information as the account's name, number, type of policy, insurance carrier, amount of premium, salesperson in charge, and billing procedure, the list gives advance notice of all accounts due to expire in a certain period, a data considered of extreme importance in the insurance business. The value of knowing a policy's expiration date, according to defendant, lies in the well-proven fact that a competitor stands a greater chance of winning over an account if contact with the customer is made a month or two prior to renewal rather than immediately after renewal.
As an agency operations manager, the defendant routinely received each month from plaintiff's parent company a partial expiration list covering exclusively those accounts handled by his particular agency. It was defendant's duty thereafter to distribute to salespersons working under his supervision only that portion of the list containing renewal information relating to accounts for which that particular individual was responsible. Since expiration lists are considered to be primary tools in soliciting customers for renewal business, only employees whose jobs required them to refer to this information were given limited access to the lists.
In the course of his employment with plaintiff corporation, defendant compiled an extensive handwritten list of hundreds of plaintiff's customers, gathering said information from the company's expiration lists, computer, and files. Defendant's list contained pertinent information on each of the accounts, including the policies' expiration dates. When James Flanagan, the owner of plaintiff's parent company, discovered the list quite by accident and confronted defendant with it, the latter explained that the list had been compiled because he was afraid of being terminated by plaintiff. Defendant conceded the list would have served to facilitate the solicitation of plaintiff's customers for defendant's own business when he left the company's employ, whether by choice or by force. After being reminded by Flanagan that plaintiff's expiration list was a company asset, confidential and that no copies should be made, defendant promised that he would not make any such list in the future. The handwritten list was thereafter torn by Flanagan and placed in the wastebasket.
Approximately three months after the aforementioned incident took place, defendant voluntarily left the employ of plaintiff without giving his superiors any advance formal notice. Defendant allegedly left the company because he was unhappy with the compensation. Shortly thereafter defendant opened his own aviation insurance agency. By defendant's own admission, his agency was in direct competition with plaintiff corporation. It is undisputed that the majority of defendant's accounts during his first month in business, including the larger policies, were prior customers of plaintiff's. The evidence adduced at the hearing on plaintiff's motion for injunctive relief further showed that most of these accounts were up for renewal the same month that defendant's agency came into existence.
Defendant, while conceding that he solicited customers whom he had personally come in contact with over a period of years at plaintiff corporation, categorically denies having used an expiration list to obtain any of the accounts. Rather, he maintains that he was able to recall the names of customers whom he previously serviced at plaintiff corporation, either from memory or by reviewing the publicly available list of owners of registered aircraft. The accounts lured away from plaintiff were thus either close friends or business partners, obtained through brokers or by means of using the aforementioned public lists.
Plaintiff contends that it is impossible through normal attrition and loss of business to competitors to lose so many customers and accounts to one agent in a 30-day period. According to plaintiff, defendant would have had to require a copy of plaintiff's expiration lists to successfully solicit that number of accounts. Convinced that defendant had misappropriated the company's customer expiration lists and was using said lists to compete with his former employer, plaintiff instituted this action. On December 28, 1984, the trial court granted plaintiff's motion for injunctive relief finding, among other things, that defendant had wrongfully taken customer lists whose confidentiality plaintiff had taken precaution to guard.
The question of whether injunctive relief should be allowed to prevent a former employee from using information obtained during his employment or from soliciting the employer's customers for his benefit has been addressed by a number of Illinois decisions. The context in which this question has risen has been that of an employer seeking either to enforce a non-competition or restrictive covenant agreement or to prevent the use of a customer list for solicitation purposes on the basis that a trade secret is involved. The fundamental issue in all such cases is whether the party seeking injunctive relief has a certain and clearly ascertainable property right or business interest which needs protection.
• 1 Although the policy of Illinois courts has generally been to encourage competition in the business sector in order to avoid the restriction of any employee's freedom and the possibility of industrial servitude (ILG Industries, Inc. v. Scott (1971), 49 Ill.2d 88, 273 N.E.2d 393), they have found it equally imperative to recognize a protectable business interest where a trade secret exists and either a restrictive covenant agreement has been executed or a breach of confidentiality by an employee has occurred in the course of his employment. (Revcor, Inc. v. Fame, Inc. (1967), 85 Ill. App.2d 350, 228 N.E.2d 742.) The general rule emerging from these cases is that while an employee, at the termination of his employment, can take with him general skills and knowledge acquired during the course of his employment, he may not take confidential particularized information disclosed to him during the time the employer-employee relationship existed which are unknown to others in the industry and which give the employer advantage over his competitors. Schulenburg v. Signatrol, Inc. (1965), 33 Ill.2d 379, 212 N.E.2d 865; Armour & Co. v. United American Food Processors, Inc. (1976), 37 Ill. App.3d 132, 345 N.E.2d 795.
• 2 Adherence to these principles requires that we determine first whether plaintiff's customer expiration list constituted a trade secret, and second, whether defendant wrongfully misappropriated the trade secret in breach of his confidential relationship with plaintiff.
Generally, a trade secret has been defined as, "[A] plan or process, tool, mechanism or compound known only to its owner and those of his employees to whom it is necessary to confide it." (Schulenburg v. Signatrol, Inc. (1965), 33 Ill.2d 379, 385, 212 N.E.2d 865, 868; Victor Chemical Works v. Iliff (1921), 299 Ill. 532, 545-46, 132 N.E.2d 806, 811.) However, because it is difficult in most cases to extract from such a broad definition the possible objects of trade secrecy, the courts have found it useful, in determining whether a certain plan, process, or informational data qualifies as a bona fide protectable business interest, to analyze the matter in terms of the following: (1) the extent to which the information is known outside the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and his competitors; (5) the amount of effort or money expended by the employer in developing the ...