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12/16/88 Radiac Abrasives, Inc., v. Diamond Technology

December 16, 1988

RADIAC ABRASIVES, INC., PLAINTIFF-APPELLANT

v.

DIAMOND TECHNOLOGY, INC., A/K/A STANDARD DIAMOND PRODUCTS COMPANY, ET AL., DEFENDANTS-APPELLEES



Before resigning from Radiac on March 15, 1988, defendants leased a building on January 15, 1988; began negotiations in December 1987 and obtained financing from a local bank in February 1988 in the amount of $30,000 to $40,000 term loan; made a $1,000 deposit in February 1988 for a computer-assisted lathe; began test marketing for their new company consisting of pricing flyers and telephone calls; began manufacturing diamond grinding wheel products; sold some of those products to Radiac customers; and spent some of their time at Radiac making or engraving products for sales by and for the benefit of Diamond Technology.

APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

532 N.E.2d 428, 177 Ill. App. 3d 628, 126 Ill. Dec. 743 1988.IL.1824

Appeal from the Circuit Court of Kane County; the Hon. Michael J. Colwell, Judge, presiding.

APPELLATE Judges:

JUSTICE INGLIS delivered the opinion of the court. WOODWARD, J., concurs. PRESIDING JUSTICE LINDBERG, specially Concurring.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE INGLIS

This is an interlocutory appeal brought pursuant to Supreme Court Rule 307 (107 Ill. 2d R. 307) for refusal to grant a preliminary injunction. Plaintiff's action was based on breach of fiduciary duty, conspiracy, conversion, and interference with contractual relations. Plaintiff's motion for preliminary injunction requested an order barring Javier Munoz from serving in any capacity as an employee or agent of defendants. It is notable that Javier Munoz has not been made a party to this action.

Plaintiff contends that the trial court erred in denying its petition for a preliminary injunction and additionally contends that the trial court erred in barring it from compelling defendants and their trial counsel to testify regarding communications between defendants and their counsel. We affirm.

Defendant Peter C. Mertens is president of defendant Diamond Technology. Mertens had previously worked for plaintiff as the general manager of plaintiff's Aurora plant from October 1985 until his resignation on March 15, 1988. As general manager, Mertens was the highest ranking official of plaintiff's Aurora plant., Defendant Wesley W. Lindquist was an employee of plaintiff at plaintiff's Aurora plant until his resignation on March 15, 1988., Defendant Bernard F. Brady also worked for plaintiff at plaintiff's Aurora plant, where he served as chief salesman until his resignation on March 15, 1988.

Neither Mertens, Lindquist, nor Brady was a director or officer of Radiac.

Starting in late October or early November of 1987, Mertens, Lindquist, and Brady began discussing with one another their mutual dissatisfaction with plaintiff. These Discussions included the possibility of forming a competing company.

On or about December 18, 1987, Lindquist with the approval of Mertens sold certain used Radiac equipment and machinery to Robert Richmond Machinery Company. Defendants later repurchased five or six pieces of this machinery from Richmond for use at their company. This occurred prior to their resignations from Radiac. At no time did defendants advise any of their supervisors at Radiac of their repurchase of the machinery for their company.

Brady testified that defendants made no definite decision with respect to forming a competing company until they sought advise of counsel as to the legal ramifications of their proposed course of conduct. Defendants met with attorney Calvin Thelin at his law office prior to December 29, 1987. On December 29, 1987, Thelin filed Diamond Technology's articles of incorporation with the Illinois Secretary of State. All defendants concede that Diamond Technology is a competitor of Radiac.

The articles of incorporation revealed that Thelin served as incorporator of Diamond Technology and as its registered agent. All defendants are presently being defended by attorney Bruce Brown, a member of Thelin's law firm.

On March 8, 1988, Mertens awarded Javier Munoz a $500 bonus. Marge Zuspann, an employee of Radiac, testified that Mertens had advised her that February 1988 had been a record month and ordered Zuspann to draw a $500 bonus check payable to Javier Munoz during the next pay period. Zuspann testified that in her nine years as controller of the Aurora plant, no bonuses had been paid prior to the close of Radiac's fiscal year on March 31. Zuspann also stated that at no other time had an hourly employee been singled out for a special bonus. Nevertheless, Zuspann obeyed Mertens' order and issued a directive that Javier Munoz' bonus be included in his next paycheck.

Howard Roquet, president of Radiac, testified that he accepted the resignations of Mertens, Lindquist, and Brady on March 15, 1988. Defendants had met a few days before this meeting and had reached an agreement to tender their resignations simultaneously.

In speaking with Zuspann on March 15, 1988, Roquet learned for the first time about the Javier Munoz bonus. Roquet immediately countermanded the bonus award and advised Javier Munoz of his decision later that day. Roquet testified that Mertens was not authorized to make the bonus offer. Munoz testified that he was upset over Roquet's decision. Munoz never received the $500 bonus. Mertens stated that the reason he had given the $500 bonus was because Munoz was more productive in manufacturing superabrasive wheels than other Radiac employees. Evidence showed that Munoz was not using ...


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