Appeal from the Circuit Court of Cook County. Honorable Mary Jane Theis, Judge Presiding.
As Modified on Denial of Rehearing June 14, 1995. Rehearing Denied June 13, 1995. Released for Publication June 23, 1995.
The Honorable Justice Cerda delivered the opinion of the court: Greiman, P.j., And Tully, J., Concur.
The opinion of the court was delivered by: Cerda
JUSTICE CERDA delivered the opinion of the court:
Defendants, Mark May and Fred Moshier, appeal permanent injunctions under the Illinois Trade Secrets Act (ITSA) (765 ILCS 1065/1 et seq. (West 1992)) restraining them from doing business with any customer of plaintiff, Stampede Tool Warehouse, Inc. (Stampede) to whom they had access during their employment at Stampede. On appeal, defendants assert that (1) the trial court erred when it found that plaintiff's customer list is protectable as a trade secret under the ITSA; and (2) the scope and time of the permanent injunctions are overbroad.
Defendants worked for Stampede from October 1990 until May 1991. On July 24, 1991, the trial court entered a temporary restraining order enjoining defendants from misappropriating Stampede's trade secret customer list. Court hearings on Stampede's request for a preliminary injunction began in August 1991. The following testimony was heard.
Richard Kuhn, president of Stampede, testified that Stampede is a national distributor of automotive tools and equipment. Stampede buys tools and equipment from manufacturers, then sells them to automotive jobbers, which include service stations, tool dealers, and automotive stores. The jobbers then sell the tools to the end users, who are mechanics and homeowners.
There are over 20,000 independent jobbers nationwide. Of Stampede's 11,000 customers, 35% to 40% are currently buying from them. Stampede's customer list has been developed from prospecting, which is calling end users and asking them the name of their tool jobber. Kuhn stated that there is no available public source or book where automotive jobbers are listed. Kuhn testified that the cost of getting new customers is $50,000 per month, which includes salaries, phone bills, and overhead. Stampede's salesmen spend about 60 hours per month prospecting to find about 100 new customers, half of whom actually buy from Stampede. In addition to telephone solicitation, Stampede sends out 11,000 to 12,000 catalogues each quarter. The names for the catalogue list were gathered from years of prospecting and word of mouth.
Once a new customer is found, the information is kept confidential. The names are entered into a computer, which is accessed by a code that only Kuhn and Frank Penzo, Stampede's general manager, know. The hard copies are placed in a locked office, for which only Kuhn and Penzo have keys, or in Kuhn's basement at home. In addition, Kuhn checks the garbage every day. Stampede's salesmen work in confined areas and are not allowed to take their customer cards from the telemarketing room. At the end of the shift, their 3-ring binders and customer cards are locked up.
Although the salesmen do not sign restrictive covenants, Stampede's job application states that all information received on the job remains Stampede's property. When Kuhn noticed a large number of unauthorized photocopies being made after hours in April 1991, he installed security cameras. The cameras never filmed defendants taking any lists or other data from the office, and stopped working after three or four days.
After Moshier quit, he told Kuhn that he was setting up a company to broker out telemarketing services to warehouses. He said that he already had over 400 customers. Moshier suggested that Kuhn become one of the warehouses for which he would telemarket. Shortly after Kuhn agreed to do business with Moshier, he received three orders from Moshier via fax. Following an investigation, Kuhn determined that all three orders came from Stampede customers. Two of the customers were longstanding customers and the third was a new customer whom Moshier had found in January 1991 while working at Stampede. In the two years after defendants left Stampede, the company experienced a drop of one million dollars in sales.
Emile Merchand, a Stampede salesman, testified that he was hired at the same time as defendants. At that time, the names of current customers were supplied by Kuhn and prospective customers were developed through prospecting. Merchand went to the library and copied down names of service stations out of telephone books from around the country. In addition to getting the names of jobbers from end users, Merchand also got them from sales catalogues, telephone books, and car dealership catalogues. When a new customer was found through prospecting, Kuhn placed that information on Stampede's computer. The salesmen were not allowed to take the customer lists from the office. They were either left on the salesmen's desks or locked in Kuhn's steel cabinet at the end of the day. According to Merchand, Stampede's customers turn over every three to five years.
On May 5, 1991, Merchand, defendants, and three former Stampede salesmen met at Fox's Pub to discuss leaving Stampede and going to work for Micor, a competitor. At that meeting, Moshier stated that he would leave Stampede, but needed more time to get the rest of his customers' names and telephone numbers. Following the meeting, Merchant saw the list Moshier was compiling, which numbered 60 to 80 names, and a list that one of May's customers had sent him. Merchand also heard May state that he had his customers' names and telephone numbers.
Next, Mark May testified that he began working at Stampede on October 22, 1990. During his orientation, May reviewed and signed the employment application. He considered the statement about the confidentiality of customers a standard part of any application. When May started working at Stampede, the three-ring binders containing the customer cards were not locked up, but had to remain in the telemarketing room. Some time later, the binders were locked up at night. May stated that he had limited access to the computers and that Kuhn did not mention confidentiality in any sales meetings.
May explained that he got new customers by getting the names of service stations and tool dealers from telephone books in the library and from referrals by other tool dealers. As time went on, May contacted auto parts stores rather than tool dealers.
May denied discussing the customer lists at Fox's Pub in May 1991, and denied taking any names or addresses of customers when he left Stampede. He testified that he did not take his binders or any computer disks nor did he write down the names, addresses, or telephone numbers of any of his customers.
After resigning from Stampede on May 20, 1991, May became an independent contractor with Micor, where he contacted some of the same customers he had while at Stampede. After remembering their names and locations, May obtained their telephone numbers from directory assistance or telephone books. May explained that he remembered many of his customers because he worked with them over a period of time. When defense counsel named eleven different people, May described them, their work, their locations, and sometimes how he obtained their telephone number. May said that some of the jobbers reminded him to call others. Of the 500 customers he had at Stampede, he contacted 50, none of whom he knew before working at Stampede.
After leaving Micor a month later, May contacted two or three customers he had serviced while employed by Stampede. At that time, May believed that he had authorization to sell tools for Stampede pursuant to Moshier's agreement with Kuhn. May faxed an order to Stampede, who filled the order. He expected to get a five percent commission from the orders he faxed to Stampede after he left, but never received any payment.
May stopped selling tools on July 24, 1991, when the temporary restraining order was entered. He was aware, however, that Moshier continued to sell to tool jobbers under the name of "Teletool" or "Tool Plus." Although May had placed an order through Moshier for equipment for his own personal use, he denied having any tool-related business.
Frederick Weber, president and owner of Wholesale Tools Company, a Stampede competitor, testified that there are about 125 major manufacturers of automotive tools and equipment in the country and about 30 major and 40 minor wholesalers. According to Weber, he constantly updates his customer list because 10% of the ...