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01/14/94 A. J. DRALLE v. AIR TECHNOLOGIES

January 14, 1994

A. J. DRALLE, INC., PLAINTIFF-APPELLEE,
v.
AIR TECHNOLOGIES, INC., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Du Page County. No. 93-CH-0240. Honorable Bonnie M. Wheaton, Judge, Presiding.

Rehearing Denied February 23, 1994. Released for Publication February 23, 1994.

Colwell, McLAREN, Bowman

The opinion of the court was delivered by: Colwell

JUSTICE COLWELL delivered the opinion of the court:

Defendant, Air Technologies, Inc. (ATI), brings this interlocutory appeal from an order of the circuit court of Du Page County granting the issuance of a preliminary injunction preventing ATI from contacting any customers of plaintiff, A.J. Dralle, Inc. (Dralle). The order also restricts prices on products sold by ATI to those Dralle customers that directly contact ATI. We reverse.

ATI is a Kansas corporation that manufactures paint overspray filters and other air filter products. Keith Gutreuter (Keith) is president of ATI and his wife, Sharon, is vice-president of sales and marketing. Dralle, an Illinois corporation, previously acted as distributor of ATI products. James Dralle (James) is president of Dralle.

Keith met James in 1978 when Keith was the national sales manager for Glassfloss Industries. James' company at that time, Valley Environmental, acted as the distributor of products manufactured by Glassfloss. In 1987, Keith and Sharon started up ATI with James and James' wife, Ann. The Gutreuters owned 51% of ATI stock and the Dralles owned 49%. Dralle acted as distributor of ATI products. Initially, no written distributorship agreement existed between the two companies.

The Gutreuters and the Dralles began discussing the expansion of ATI facilities in 1990. The Gutreuters suggested expansion through the use of industrial revenue bonds during a board meeting in April 1992. James and his wife did not approve of the industrial revenue bond proposal. As a result of their disagreements, the parties began Discussion of ATI's purchase of the Dralles' stock pursuant to a stock agreement. The closing date for the bond issue was June 23, 1992; however, the stock purchase agreement had not been finalized by that date.

James also proposed drafting a distributorship agreement (Agreement) between Dralle and ATI. Since the terms had not been finalized by June 23, the parties signed a memorandum of agreement. The Agreement was finally signed in September 1992 and gave Dralle the exclusive right to sell ATI products in Illinois, Wisconsin, and Indiana for a four-year period.

ATI learned in the fall of 1992 that Dralle had allegedly begun selling products which competed with ATI products. ATI sent a letter to Dralle on December 9, 1992, requesting that the Agreement be terminated. ATI brought in a new salesman in February 1993 to sell ATI's products in the territory previously held by Dralle.

Dralle filed a complaint for injunction and other relief on March 12, 1993, alleging that ATI, through its agents and employees, had approached and solicited persons and companies known by ATI to be long-time customers of Dralle. Dralle alleged that ATI utilized Dralle's business information in connection with its solicitation of Dralle clients in violation of the Agreement. The trial court conducted an evidentiary hearing commencing on March 23, 1993.

Dralle submitted as evidence a list entitled "A.J. Dralle's 1992 Customers" and a second list entitled "A.J. Dralle Drop Ship Customers By 1992 Sales Volume." Keith Gutreuter testified that he never made a list of Dralle customers after June 23, 1992, the date the Dralles resigned from ATI. Keith denied that he or anyone at ATI developed a strategy to target sales to Dralle customers. He denied performing an analysis of Dralle accounts or gathering Dralle data regarding the pricing of products to enable ATI to sell at a lower price than Dralle. He also denied telling anyone he intended to solicit Dralle clients. Sharon's testimony basically corroborated that of her husband.

Keith testified that he noticed in September 1992 that orders placed through ATI a few months earlier were being cancelled. He called James to inquire about the orders but James never got back to him. Keith also noticed a substantial drop in ATI sales from August through September 1992. James never responded to Keith's inquiry as to the drop in sales. Keith later learned that Dralle was manufacturing and selling filters other than ATI filters.

Rex Franklin Powell testified that he had been employed as a general manager at ATI from January 1992 until he was fired on January 8, 1993. Powell said he attended an executive planning meeting at ATI on December 16, 1992, where he presented to the Gutreuters a document outlining initiatives to ensure ATI's survival. He testified that one of the sales initiatives discussed was ATI's "overarching strategy to move into certain markets that A.J. Dralle, Inc., dominated." Powell stated that the Gutreuters talked about this strategy numerous times and had put the plan together over a period of weeks. Keith discussed putting together a list of Dralle accounts by sales volume and using people in the industry to approach these accounts. Keith also talked about pricing strategies to undersell the Dralle account in certain marketing areas. Keith told Powell he was able to get a concession from ATI's supplier, Cumulus Fibers, in order to reduce ATI's cost and still make a profit.

Powell testified that Keith wanted to use third parties to target Dralle accounts as a low-risk approach because the Gutreuters feared the threat of litigation. Keith wanted to be very careful about acquiring Dralle accounts because of the Agreement between ATI and Dralle. Powell testified that Keith wanted to develop a business relationship with Terry Rueckert, a sales representative for Dralle, because Rueckert had a firm grip on A.J. Dralle customers. Keith also wanted to develop a relationship with Chuck Rankin, owner of Air Filter Engineers and a competitor of ATI, in order to expand ATI sales in the Dralle territory.

Powell said he had reviewed Dralle accounts and put them in a sales volume listing prior to the December 16, 1992, meeting in order to determine the most valuable accounts. He wrote the information in a handwritten document. Powell testified that, during the December 16 meeting, the parties decided that a Dralle customer list would be put together. Powell and Sharon instructed Wanda Gavel, a sales clerk, on putting together the list. Powell said the list was completed about a week after the meeting and included the identity of the Dralle ...


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