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CURTIS 1000, INC. v. SUESS

February 1, 1994

CURTIS 1000, INC., PLAINTIFF,
v.
ROY H. SUESS, AND AMERICAN BUSINESS FORMS, INC., DEFENDANTS.



The opinion of the court was delivered by: Mihm, Chief Judge.

  MEMORANDUM OPINION

On November 2, 1993, Plaintiff Curtis 1000, Inc. filed an Amended Complaint bringing an action against Defendant Roy H. Suess for breach of contract, trade secret misappropriation, and tortious interference with prospective business advantage and against Defendant American Business Forms, Inc. [ABF] for trade secret misappropriation, tortious interference with prospective business advantage and tortious interference with contract. Curtis brought this action in federal court based on the diversity jurisdiction statute, 28 U.S.C. § 1332.

On November 4, 1993, Curtis filed an Amended Motion for Preliminary Injunction to enjoin Suess and ABF from violating Suess's agreement with Curtis, from further misappropriation of Curtis's trade secrets, from further inferring with Curtis's prospective business advantage, and from further interfering with Curtis's agreement with Suess.

On December 22, 1993, following a two day evidentiary hearing, this Court denied Curtis's Motion for Preliminary Injunction. This written Memorandum Opinion supplements the Court's findings of fact, conclusions of law, and ruling following the evidentiary hearing of December 22, 1993.

STATEMENT OF FACTS

Curtis sells customized stationery, forms and other office products to business customers. In the first week of May 1969, Curtis employed Suess as a sales representative. Curtis immediately commenced training Suess in Atlanta, Georgia. The training took approximately three weeks.

On May 29, 1969, following training, Suess signed his initial employment contract with Curtis. The contract provided that Suess would be Curtis's sales representative for the Rock Island County, Illinois and Scott County, Iowa area. The contract also provided under the heading entitled "General Terms," in pertinent part, that:

  (c) The Salesman agrees to keep confidential such
  information as the Company may, from time to time,
  impart to him regarding its business affairs
  (including the names of customers), agrees that he
  will not at any time disclose said information in
  whole or in part to any person not in the employ
  of the Company. . . . the Salesman covenants and
  agrees that, during his employment with the
  Company and for two years next following the
  termination thereof, he will not directly or
  indirectly, either on his own behalf or for
  others, take or solicit orders for printing,
  envelopes or other products marketed by the
  Company in any territory in which he has solicited
  business for the Company or from anyone from whom
  he has solicited such business.
  (d) Either the Company or the Salesman may
  terminate the employment of the Salesman
  hereunder, upon giving one week's written notice.

Suess continued to work for Curtis for over 24 years. During that time, Suess signed superseding employment contracts on July 15, 1977, February 11, 1981, and October 23, 1985, containing substantially identical provisions to those quoted above.

Suess testified that he decided to leave Curtis because he thought he was going to be fired. In mid to late August, Suess contacted four former Curtis representatives who were working for ABF. Suess then contacted Larry Zavadil, ABF's founder and president. On September 15, 1993, effective September 17, 1993, Suess resigned his employment with Curtis and took a position with ABF shortly thereafter.

ABF conducts the business of marketing substantially similar or competitive products to many of those marketed by Curtis. At an exit interview, Curtis collected certain materials from Suess and reminded him of his covenant not to compete with Curtis and his obligations regarding Curtis's confidential and proprietary information. Curtis also contacted Suess by telephone on October 7, 1993, and by letter on October 11, 1993, re-emphasizing the post-employment activity restrictions. On November 2, 1993, Curtis filed this action.

CHOICE OF LAW

The May 29, 1969, employment agreement provides for the laws of Illinois to control the restrictive covenant provision. The laws of Georgia, however, were expressly agreed upon as the controlling law in the July 15, 1977, and February 11, 1981, contracts. In the latest contract, however, October 23, 1985, the parties agreed that the laws of Delaware would govern all matters pertaining to the validity, construction, interpretation, and effect of the Agreement.

In determining whether an express choice of law provision is to be given effect in Illinois, this Court must apply Illinois conflict of law rules. Sarnoff v. American Home Products Corp., 798 F.2d 1075, 1080 (7th Cir. 1986).

Under Illinois law, express choice of law provisions will be given effect subject to two limitations. Potomac Leasing Company v. Chuck's Pub, Inc., 156 Ill. App.3d 755, 509 N.E.2d 751, 753, 109 Ill.Dec. 90, 92 (2nd Dist. 1987). First, Illinois will give effect to laws of a chosen state "where it is not dangerous, inconvenient, immoral, nor contrary to the public policy of the local government." Potomac, 509 N.E.2d at 753, 109 Ill.Dec. at 92, quoting McAllister v. Smith, 17 Ill. 328, 334 (1856). Second, Illinois will give effect to an express choice of law provision where "there be some relationship between the chosen forum and the parties or the transaction." Potomac, 509 N.E.2d at 754, 109 Ill.Dec. at 93, citing Mell v. Goodbody & Co., 10 Ill. App.3d 809, 295 N.E.2d 97 (1st Dist. 1973). In Potomac, the court stated that the "purpose of this requirement is to preclude parties from arbitrarily selecting the laws of some jurisdiction which has no relation to the matter in controversy."

Illinois law disfavors private covenants restraining trade and requires the courts to carefully scrutinize such covenants to insure that they are reasonable and not contrary to public policy. Peterson-Jorwic Group, Inc. v. Pecora, 224 Ill. App.3d 460, 586 N.E.2d 676, 677, 166 Ill.Dec. 718, 719 (1st Dist. 1991). In Illinois, "[a] restrictive covenant will be enforced only if the time and territorial limitations are reasonable and the restrictions imposed by the covenant are necessary to protect a legitimate business interest." Peterson-Jorwic, 586 N.E.2d at 677, 166 Ill.Dec. at 719. Preliminary injunctions to enjoin a violation of a restrictive covenant will not be granted unless there is an extreme emergency and the threat of serious harm that would result in the absence of an injunction. Tyler Enterprises of Elwood, Inc. v. Shafer, 214 Ill. App.3d 145, 573 N.E.2d 863, 865, 158 Ill.Dec. 50, 52 (3rd Dist. 1991).

The parties do not dispute that, unlike Illinois law, a post-employment restrictive covenant under Delaware law does not require an employer to establish a legitimate protectable interest. Illinois has a legitimate policy interest in controlling trade in the state and the legitimate protectable interest requisite to an enforceable non-compete covenant was deemed necessary because such covenants restrict competition. The fact that Delaware law does not provide for this requirement and that covenants not to compete go directly to Illinois's ability to control trade in the state, this Court finds that Delaware law is repugnant to Illinois law.

This Court also finds that Illinois law should apply based on the relationship test. The Court finds that the parties, the transactions, and the occurrences in this case have no relationship with Delaware. Curtis is a Georgia corporation doing business in Illinois. Suess is an Illinois resident. All of the transactions forming the basis of Curtis's Complaint occurred in Illinois. ABF is a Minnesota corporation. Therefore, this Court finds no relationship between the parties to this action and the State of Delaware.

PRELIMINARY INJUNCTION

In Abbott Laboratories v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992), the Seventh Circuit set forth the legal framework for analyzing preliminary injunctive relief. In an opinion written by Circuit Judge Flaum, the Seventh Circuit stated the following:

  a party seeking a preliminary injunction must
  demonstrate (1) some likelihood of succeeding on
  the merits, and (2) that it has "no adequate
  remedy at law" and will suffer "irreparable harm"
  if preliminary relief is denied. (Citations
  omitted). If the moving party cannot establish
  either of these prerequisites, a court's inquiry
  is over and the injunction must be denied. If,
  however, the moving party clears both thresholds,
  the court must then consider: (3) the irreparable
  harm the non-moving party will suffer if
  preliminary relief is granted, balancing that harm
  against the irreparable harm to the moving party
  if relief is denied; and (4) the public interest,
  meaning the consequences of granting or denying
  the injunction to non-parties. (Citations
  omitted).

Abbott Laboratories, 971 F.2d at 11-12.

In the reasonable likelihood of success on the merits prong of this analysis, the applicant must demonstrate a better than negligible chance of prevailing. Omega Satellite Products Co. v. City of Indianapolis, 694 F.2d 119, 123 (7th Cir. 1982). The applicant must, at minimum, present a prima facie case, but need not show a certainty of winning.

THE CONTRACT CLAIM

Under Illinois law, the Court must address two preliminary considerations before reaching the analysis of the enforceability of a post-employment covenant not to compete. The covenant must (1) be ancillary (subordinate to or attendant upon) to a valid contract, and (2) be supported by adequate consideration. Scherer v. Rockwell Int'l Corp., 766 F. Supp. 593, 604 (N.D.Ill. 1991), quoting Millard Maintenance ...


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