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.
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.
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 Service
Co. v. Bernero, 207 Ill. App.3d 736, 566 N.E.2d 379, 384, 152
Ill.Dec. 692, 697 (1st Dist. 1990).
Following this initial determination, the Court must consider
whether the post-employment restrictive covenant not to compete
was "reasonably necessary to protect the interests of the
employer." Scherer, 766 F. Supp. at 604, quoting McRand, Inc. v.
van Beelen, 138 Ill. App.3d 1045, 486 N.E.2d 1306, 1311, 93
Ill.Dec. 471, 476 (1st Dist. 1985). The McRand court held that
a restrictive covenant's reasonableness is measured by its
hardship to the defendant, its effect upon the general public,
and the reasonableness of the time, territory, and activity
restrictions. McRand, 138 Ill. App.3d at 1056-57. In summary, a
covenant not to compete will be enforceable "if it is
reasonable in geographic and temporal scope and it is necessary
to protect a legitimate business interest of the employer."
Scherer, 766 F. Supp. at 604, quoting, Shapiro v. Regent
Printing Co., 192 Ill. App.3d 1005, 549 N.E.2d 793, 795, 140
Ill.Dec. 142, 144 (1st Dist. 1989).
In Illinois, the courts have found two situations where the
legitimate protectable interest of the employer exists: (1)
where, by nature of the business, the employer has a near
permanent relationship with its customers and but for his
employment the former employee would not have had contact with
them; or (2) where the former employee learned trade secrets or
acquired other confidential information through its employment
with the employer and subsequently attempted to use it for his
own benefit. Scherer, 766 F. Supp. at 605, quoting Label
Printers v. Pflug, 206 Ill. App.3d 483, 564 N.E.2d 1382, 1387,
151 Ill.Dec. 720, 725 (2nd Dist. 1991).
The facts on the issue of whether adequate consideration
exists are, in relevant part, undisputed. Curtis signed the
initial agreement more than three weeks following employment
and subsequent to receiving training in Atlanta, Georgia. The
contract provided for only one week's employment following
which Suess could be terminated without cause upon written
notice. The subsequent contracts included substantially the
same provision as the 1969 agreement.
Curtis argued that adequate consideration existed in this
case. Curtis cited to a line of case authority under Illinois
law supporting the proposition that continued employment for a
substantial period of time is sufficient consideration to
support an employment agreement. Suess and ABF, on the other
hand, cited to a line of case authority under Illinois law for
the proposition that the adequacy of consideration must be
determined as of the time of entering into the contract. Both
lines of cases have been shepardized by
the Court and are good law. Therefore, this Court has the
uncomfortable burden of deciding which line of cases to follow
based on the facts of this case.
A. The First Line of Cases
For reasons of simplification, the Court will label the first
line of cases the O'Neill line after O'Neill v. DeLaney,
92 Ill. App.3d 292, 415 N.E.2d 1260, 47 Ill.Dec. 947 (1st Dist.
In O'Neill, the defendant husband sold a painting to the
plaintiff for $10 and "other good and valuable consideration."
A written contract embodying the terms of the agreement was
prepared and signed by the two parties. Four years later, the
defendant wife filed for divorce and claimed "special equities"
in the painting and prayed for an equitable share. In an action
to enjoin her husband from transferring title to the painting,
the trial court found that the sale of the painting from the
husband to the plaintiff was void because of inadequate
consideration and lack of delivery. The First District of
Illinois affirmed holding that $10 for a painting worth at
least $100,000 at the time of transfer was grossly inadequate
consideration because it would reduce the consideration
requirement to a mere formality. O'Neill, 415 N.E.2d at 1266,
47 Ill.Dec. at 953.
In arriving at its holding, Justice Lorenz for the
O'Neill court, Justices Sullivan and Mejda concurring, held
that consideration to support a contract is any act or promise
which is of benefit to one party or disadvantage to the other.
O'Neill, 415 N.E.2d at 1265, 47 Ill.Dec. at 952. The O'Neill
court stated that "[t]he adequacy of consideration for a
contract is to be determined as of the time of entering the
contract." O'Neill, 415 N.E.2d at 1265, 47 Ill.Dec. at 952,
citing Elliott v. Northern Trust Co., 178 Ill. App. 439 (1913).
The court in O'Neill quoted Professor Corbin's treatise on
contracts stating that "[i]f it was not bargained for, it was
not a consideration, according to the definition that makes
agreed bargain the test." O'Neill, 415 N.E.2d at 1265, 47
Ill.Dec. at 952.
Eight years later, Justices Sullivan and Lorenz relied on the
rule of law in the O'Neill case in Adams v. Lockformer Co.,
167 Ill. App.3d 93, 520 N.E.2d 1177, 1181, 117 Ill.Dec. 826, 830
(1st Dist. 1988) that a determination on the adequacy of
consideration must be based upon what the consideration was at
the time of entering into the contract.
The Fifth District also relied on the O'Neill case for the
same rule of law. In Russell v. Jim Russell Supply, Inc.,
200 Ill. App.3d 855, 558 N.E.2d 115, 146 Ill.Dec. 152 (5th Dist.
1990), a trucking company sought to enjoin a supply company
from breach of a restrictive covenant not to compete. Bill and
Jim Russell were brothers whose family had been in the trucking
business since 1913. They bought the business from their father
in 1977, and in 1985, they mutually decided to dissolve the
partnership. Bill offered to buy out Jim according to their
partnership agreement. After deciding upon the terms, Bill
sought to include a provision proscribing Jim from going into
the trucking business. The restrictive covenant was
incorporated in the dissolution agreement.
The defendant argued that the covenant not to compete was an
after thought which lacked consideration. In finding adequate
consideration, the Russell court noted that the non-competition
clause appeared in the only draft of the dissolution agreement,
that the agreement was executed at a formal closing, and at
that closing, the cash was transferred and the deed to real
estate and assignment of titles to vehicles and the transport
authorities were signed. In setting forth the law in the case,
the Russell court stated that:
[v]aluable consideration for a contract consists
of some right, interest, profit or benefit
accruing to one party, or some forbearance,
detriment, loss or responsibility given, suffered
or undertaken by the other. [Citations omitted].
Adequacy of consideration for contract must be
determined as of the time of entering the
contract. Russell, 558 N.E.2d at 120, 146 Ill.Dec.
at 157, citing O'Neill.
Based on the facts, the Russell court held that, as of the date
the contract was executed, consideration was both existent and
adequate to support the contract which included
a covenant not to compete. Russell, 558 N.E.2d at 120, 146
Ill.Dec. at 157.
The O'Neill line of cases can be traced back to an early
First District case. In Elliott v. Northern Trust Co., 178 Ill. App. 439
(1st Dist. 1913), the First District stated that for a
contract to be enforceable:
it must be certain and definite in all of its
parts; it must be mutual and founded upon a
sufficient and fair consideration, and it must not
be unconscionable, inequitable or unjust.
Elliott, 178 Ill. App. at 445.
The Elliott court went on to state that:
[i]t will be found upon an examination of the
authorities that the fairness of the contract and
the adequacy of the consideration for it are [sic]
to be judged as of the time of entering into the
contract. This being true, it may be said also
that these questions should be considered and
decided solely with reference to the parties to
the contract,. . . .
Elliott, 178 Ill. App. at 446.