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08/03/95 MELVYN E. BERGSTEIN v. TECHNOLOGY

August 3, 1995

MELVYN E. BERGSTEIN, PLAINTIFF-APPELLEE
v.
TECHNOLOGY SOLUTIONS COMPANY, INC., ET AL., DEFENDANT-APPELLANT. TECHNOLOGY SOLUTIONS COMPANY, INC., ET AL., COUNTERPLAINTIFF AND THIRD-PARTY PLAINTIFF-APPELLANT, V. MELVYN E. BERGSTEIN, COUNTERDEFENDANT-APPELLEE, AND CHRISTOPHER J. MOFFITT, THIRD-PARTY DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Edwin M. Berman, Judge Presiding.

Rehearing Denied September 8, 1995. Petition for Leave to Appeal Denied December 6, 1995.

The Honorable Justice Cahill delivered the opinion of the court: Hoffman, P.j., and S.m. O'brien, J., concur.

The opinion of the court was delivered by: Cahill

JUSTICE CAHILL delivered the opinion of the court:

This a dispute between Technology Solutions Company (TSC) and two former employees and officers, Melvyn Bergstein and Christopher Moffitt. Bergstein was also a director of the company. TSC is a computer consulting company.

Bergstein and Moffitt had employment contracts with TSC which contained two year covenants not to compete. Bergstein and Moffitt, after tense departures from TSC which are the backdrop for this appeal, formed a competing business within two years.

Bergstein then sought a declaratory judgment that the restrictive covenants in his employment contract with TSC were void and unenforceable. TSC filed a counterclaim against Bergstein for a preliminary injunction and a declaratory judgment that Bergstein breached the restrictive covenants in his employment contract and also breached his fiduciary duties as a director of TSC. TSC also filed a third party claim against Moffitt seeking a preliminary injunction and a declaratory judgment that Moffitt breached the restrictive covenants in his employment contract with TSC.

The trial court first found that TSC terminated Bergstein in breach of their employment contract. The court ruled that TSC's breach precluded it from enforcing the restrictive covenants and granted Bergstein the relief he sought. Next, the court ruled that Bergstein owed TSC no fiduciary duty as a director because he was "de facto not a member of [TSC's] board" from the date he was terminated as an employee. Finally, the court entered summary judgment for Moffitt, finding that TSC could not enforce the restrictive covenants in Moffitt's employment contract because TSC had cancelled the contract. TSC appeals each of these findings. We affirm the court's finding that TSC breached its contract with Bergstein. We reverse the court's finding that Bergstein owed TSC no fiduciary duty because of a "de facto" dismissal from the Board. We reverse the court's grant of summary judgment for Moffitt.

We first address TSC's argument that the trial court's finding that Bergstein was fired on September 7, 1993, is against the manifest weight of the evidence.

The trial court held a hearing on the issue of whether Bergstein was fired. Evidence was presented that Bergstein began working for TSC in September 1991 and was elected to the Board of Directors in October 1991.

Bergstein's employment contract with TSC was for three years, ending on September 5, 1994. TSC could terminate the contract only for (1) death or disability, or (2) serious misconduct. Both parties agree none of these things happened. Bergstein's contract prohibited him from coaxing TSC's employees away from TSC or providing consulting services to TSC's clients within two years after he left the company.

Bergstein testified that on September 7, 1993, he went to a TSC board meeting. At that meeting a director told him: "The board has decided unanimously that we are terminating your services as of today, including your directorship." Four directors present at the meeting testified that Bergstein was "asked to resign." TSC offered to pay Bergstein the salary remaining under his contract, to pay him the profits from his stock options, and to forgive a loan the company had made to him.

The evidence also showed that on September 8, 1993, TSC disconnected Bergstein's voice mail system. He could not access the system to send messages to or receive messages from TSC's employees, officers, or directors. TSC posted a security guard at the doors of TSC to prevent Bergstein from removing TSC property. TSC issued a press release on September 9, 1993, which stated:

"Technology Solutions Company (the "Company") announced today that its Board of Directors has approved in principle a restructuring of its senior management organization and the composition of the Board. *** As part of the restructuring, it is expected that [an employee] and Melvyn E. ...


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