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07/06/88 North American Paper v. Selwyn Unterberger

July 6, 1988

NORTH AMERICAN PAPER COMPANY, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT

v.

SELWYN UNTERBERGER, DEFENDANT AND COUNTERPLAINTIFF-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, THIRD DIVISION

526 N.E.2d 621, 172 Ill. App. 3d 410, 122 Ill. Dec. 362 1988.IL.1063

Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.

APPELLATE Judges:

JUSTICE RIZZI delivered the opinion of the court. McNAMARA and FREEMAN, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE RIZZI

Plaintiff, North American Paper Company , brought this action against its former employee, Selwyn Unterberger, to obtain an injunction and damages based upon a covenant (Agreement) not to compete or disclose information obtained during Unterberger's employment. Unterberger filed a counterclaim seeking a declaratory judgment that the Agreement was void. The trial court found that the Agreement is invalid and unenforceable, and entered summary judgment in favor of Unterberger. NAPCO appeals. We affirm.

NAPCO is engaged in the business of distributing and selling disposable paper and plastic goods, material handling equipment, printing and business forms, packaging products, disposable food service items, and chemical and janitorial maintenance supplies. The chemical and janitorial items that it sells are basic cleaning, maintenance, sanitizing and floor care products, commonly called chemical products. NAPCO does business in all 50 States of the United States.

Unterberger was employed continuously by NAPCO from May 1, 1979, until May 31, 1986, as the manager of NAPCO's chemical maintenance products and janitorial division, one of NAPCO's five divisions. Prior to working for NAPCO, Unterberger had been employed for 10 years by Jefco Laboratories, selling and supervising the sale of the same kinds of items, chemical products, that he was later hired by NAPCO to sell. Before he accepted employment with NAPCO, Unterberger disclosed that his agreement with Jefco prohibited him from soliciting Jefco customers, and he provided NAPCO with a copy of the agreement. After NAPCO contacted Jefco, NAPCO determined that it could hire Unterberger without violating the Jefco agreement.

Unterberger was hired by NAPCO to establish a new chemical division, to teach salesmen in other divisions of NAPCO to sell chemical products, and to teach NAPCO how to compete in the chemical products industry. When NAPCO hired Unterberger, it had only a few customers for its chemical products and virtually no confidential information relating to chemical products. Under Unterberger's direction, the yearly sales for NAPCO's chemical products increased over a period of about seven years from $50,000 to a projected $1.8 million for 1986.

Unterberger resigned from NAPCO effective May 31, 1986, and has been an employee of Interstate Paper Company, a competitor of NAPCO, since June 2, 1986. Interstate is located in Melrose Park, Illinois. NAPCO admits that Unterberger has not solicited business from any of NAPCO's customers; NAPCO has lost no customers or suppliers because of Unterberger; none of NAPCO's customers has ceased doing business with NAPCO because of Unterberger; NAPCO has suffered no monetary loss as a result of Unterberger's conduct; and Unterberger has not used or divulged any confidential information obtained from NAPCO. Also, NAPCO does not contend that Unterberger took customer lists, or any other property belonging to NAPCO. Unterberger's customer list was taken from him by NAPCO before he left NAPCO and "no one could hope to memorize the rather extensive list." In addition, according to NAPCO, although it is one of the largest distributors of its product line within a 200-mile radius of downtown Chicago, except for its few national accounts, NAPCO "cannot effectively compete beyond a 200-mile radius from its Chicago area offices."

When NAPCO hired Unterberger in 1979, Unterberger was required to sign the Agreement as a condition of employment. The Agreement, which was prepared by NAPCO, imposes no duties on NAPCO. Unterberger was hired as an employee at will, and he could have been terminated at any time after executing the Agreement, without notice or cause.

The Agreement reads, in part, as follows:

"Employee covenants, warrants and agrees that at no time during his employment with the Company, and during a period of two (2) years from the date of severance of his employment with the Company, without regard to the cause of such severance of employment, shall Employee become an employee, agent, officer, director, proprietor, partner, shareholder, consultant, advisor, or other affiliate of any organization, person, partnership, corporation, trade, business or entity which is engaged in or becomes engaged in competition, whether direct or indirect, with the Company, for a radius of 200 miles from the Company's office located at 330 South Wells Street, Chicago, Illinois, and also any other geographical area covered by the business activities of the Company in which Employee has rendered services directly or indirectly to the Company at any time."

As is apparent, the Agreement contains a 400-mile circular area (with downtown Chicago at the hub) as a specific non-competition zone. Within this non-competition zone, Unterberger is prohibited from associating with any competitor in any capacity whatsoever, even if Unterberger's job were merely menial and he had absolutely nothing to do with sales or purchasing. In addition to the specific noncompetition zone, the Agreement contains a nonspecific non-competition zone encompassing any other geographical ...


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