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LOEWEN GROUP v. HABERICHTER

January 9, 1996

THE LOEWEN GROUP, INC., Plaintiff,
v.
WILLIAM J. HABERICHTER, Defendant.



The opinion of the court was delivered by: ASPEN

 MARVIN E. ASPEN, Chief Judge:

 Plaintiff Loewen Group International, Inc. ("Loewen") brings this four-count complaint against William J. Haberichter for breach of contract (Count I), breach of a covenant not to compete (Count II), breach of fiduciary duty (Count III), and injunctive relief against future violations of the covenant not to compete (Count IV). *fn1" Presently before this court is the plaintiff's motion for a preliminary injunction, which for the reasons set forth below we refer to Magistrate Judge Rosemond for an evidentiary hearing.

 I. Background

 Loewen is a Delaware corporation involved in, among other things, the ownership and operation of funeral homes and cemeteries. In an Asset Purchase Agreement dated December 5, 1991, Loewen purchased the funeral home business of Donovan and Schaer Funeral Homes, P.C. ("D&S") from its principals Robert E. Schaer, Donald R. Hartman, and Lee J. Schlegal. D&S consisted of two funeral homes: Oehler Funeral Home ("Oehler") in Des Plaines, Illinois, and Lauterburg & Oehler Funeral Home ("L&O") in Arlington Heights, Illinois. In exchange for the purchase price paid by Loewen, D&S and its principals agreed to transfer the businesses to Loewen and refrain from participating in any competing business within fifty miles of either funeral home for a period of ten years. Purchase Agreement P 11.

 At the time of the sale, Haberichter was the assistant manager at L&O, and had been employed by D&S for approximately thirty years. Pursuant to the Purchase Agreement, Loewen was obligated to offer continuing employment to Haberichter provided that he entered into a non-competition agreement similar to the one required of the principals of D&S. Purchase Agreement P 12-13. If, however, Haberichter chose not to enter into an employment agreement with Loewen, then the company would not be obligated to provide him with any employment. Id. P 13.

 On February 11, 1992, the day on which D&S and Loewen closed the sale of D&S, Haberichter signed an Employment Agreement with Loewen for a period of five years. *fn2" This document stated that Loewen "has agreed to acquire a funeral home business located at Des Plains, Illinois (the 'Chapel') ... . [and] agrees to employ [Haberichter] and [Haberichter] agrees to accept employment as the Assistant Manager of Chapel." Employment Agreement at 1. In addition, the employment agreement contained the following covenant not to compete:

 Employment Agreement at 5-6, P 19(a). The agreement also provided for Haberichter to be paid $ 75,000 for this covenant, *fn3" as well as $ 52,000 per annum for his services. Employment Agreement at 6, P 19(b); id. at 3, P 8.

 However, soon after signing the Employment Agreement Haberichter began making plans to set up a competing funeral home. Beginning in late 1992, he started negotiating with the owner of a parcel of real property at 3615 Kirchoff Road in Rolling Meadows, Illinois. Haberichter intended this parcel, which is 7.5 miles from Oehler in Des Plains and 3 miles from L&O in Arlington Heights, *fn4" to be the site of his future funeral business. In July 1993, Haberichter's financial consultant prepared a business plan for the defendant's new funeral business, and surreptitiously presented it to several banks in order to obtain financing for the operation. Loewen contends that the defendant also began screening its "pre-need" customers, *fn5" and using this information to assist him in the preparation of the business. Loewen eventually learned that its employee was planning to start a competitor, and when confronted with this information in November 1993, Haberichter tried to tender his resignation and request his severance benefits. Instead, Loewen refused to permit Haberichter to resign and terminated him for cause effective November 9, 1993. The instant lawsuit was filed on December 9, 1993, seeking compensatory damages and injunctive relief for Haberichter's breach of his employment contract, his covenant not to compete, and his fiduciary duty to Loewen. Loewen maintains that even since the filing of its complaint, Haberichter has continued to breach the covenant not to compete by participating in another funeral business and continuing to develop his competing facility in Rolling Meadows.

 We granted summary judgment to Haberichter on August 22, 1994, finding that Loewen's state law claims were preempted by the LMRA. Loewen maintains that after we handed down this decision the defendant began building the "Meadows Funeral Home" at 3615 Kirchoff Road in Rolling Meadows, notwithstanding the fact that Loewen had appealed our ruling. On September 18, 1995, the Court of Appeals for the Seventh Circuit reversed our decision, concluding that Loewen's claims were not preempted. On or about October 13, 1995, Loewen learned that the Meadows Funeral Home was operational, and that it was scheduled to hold a service for one of Loewen's pre-need customers, Ms. Elsa Eck. Loewen subsequently learned of others who planned to have their funeral arrangements and services performed at Meadows. On November 1, 1995, Loewen filed the instant motion for a preliminary injunction, seeking to prevent Haberichter from operating the Meadows Funeral Home for a three year period.

 II. Motion for Preliminary Injunction

 A preliminary injunction may be granted if the movant demonstrates "(1) that the case has some likelihood of success on the merits; (2) that no adequate remedy at law exists; and (3) that the party seeking relief will suffer irreparable harm if the injunction is not granted." Duct-O-Wire Co. v. U.S. Crane, Inc., 31 F.3d 506, 509 (7th Cir. 1994) (citing Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 313-14 (7th Cir. 1994)). Once the movant satisfies these three threshold requirements, the court then balances the harm to the non-movant if the injunction is granted against the harm to the movant if the injunction is denied. Vencor, Inc. v. Webb, 33 F.3d 840, 845 (7th Cir. 1994). This balancing is conducted on a sliding scale: "the greater the moving party's chance of success on the merits, the less strong a showing must it make that the balance of harms is in its favor; conversely, the less likely it is that the moving ...


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