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