The opinion of the court was delivered by: CASTILLO
Plaintiff Applied Micro, Inc. brought suit in this Court claiming that its former customer, SJI Fulfillment, Inc. (SJI), and former employee, Janice Schmitt, breached their respective contracts with AMI when Schmitt left the company to work for SJI. Schmitt's employment with SJI allegedly violated her covenant not to compete with AMI by soliciting its customers. Conversely, in employing Schmitt, SJI allegedly breached its written agreement to refrain from hiring AMI employees. The gist of AMI's claim is that it spent time and money training Schmitt to program computers using a specialized language, reposed trust in her as its sole employee proficient in that language, and executed two contracts to protect its investment, only to lose Schmitt when its customer, SJI, transformed AMI's temporary assignment into SJI's permanent employment. Minus Schmitt, AMI has allegedly been unable to provide computer support to customers that purchased programs using the specialized language. As a result, AMI claims, it has lost a substantial chunk of business.
Currently before this Court is defendant Schmitt's motion to dismiss, which targets only Count Two. Schmitt contends that this count is deficient because the restrictive covenant on which it is based is unenforceable. Her objection to the covenant rests on the sole ground that it is not ancillary to a valid employment contract and, therefore, serves only the impermissible purpose of restraining trade. For the reasons discussed below, we find that the covenant withstands this attack.
Accordingly, defendant Schmitt's motion to dismiss is denied.
Schmitt began working for AMI as a computer systems programs analyst on March 30, 1987. Compl. P 3. About a month later, on April 27, Schmitt signed an "Employee Noncompete Agreement." Id. P 4. The agreement prohibited Schmitt from soliciting any customers or accounts that belonged to AMI at the time she worked there, for a period of one year following her termination. Id. Ex. A. Other than the restrictive covenant, no written employment agreement governed the terms and conditions of Schmitt's employment; her relationship with AMI was purely at-will.
Shortly after Schmitt executed the covenant not to compete, AMI allegedly trained her, at its own expense, in programming using a specialized computer language called "Progress" and its corresponding application, "Varnet." Id. P 5. Schmitt was subsequently designated AMI's sole Progress/Varnet programmer, allegedly generating over $ 200,000 each year in Progress/Varnet sales and service. Id. PP 6-7. For the next five years, Schmitt remained AMI's lone Progress/Varnet-literate employee. Id. P 24; Pl. Resp. Mot. Dismiss at 2. She focused primarily on writing individualized programs in the Progress language for AMI customers and providing them the necessary support services. Id.
In May of 1992, AMI executed a sales agreement with SJI to develop for it a customized computer program using Progress/Varnet. Compl. P 8 & Ex. B. In addition to setting forth the parties' obligations with respect to AMI's computer services, the agreement prohibited SJI from offering jobs to AMI employees for two years following its execution. Id. P 9 & Ex. B P 11.
Schmitt was immediately assigned to the SJI project. Later that month, she began working on-site at SJI's offices in St. Louis during part of each week to implement the computer system. Id. PP 10-11. This arrangement continued for several months. Id. P 12. But on November 16, before Schmitt had completed the project, SJI offered her a full-time job. Id. PP 13-14. One month later, Schmitt accepted the position with SJI, where she remains today. Id. PP 14, 17. All told, Schmitt worked at AMI for five-and-a-half years. Id. PP 3, 14.
AMI claims that by accepting employment with SJI, Schmitt breached her obligation under the noncompete agreement to refrain from soliciting AMI's customers. Schmitt rejoins with the argument that she cannot be held to the noncompete because it is unenforceable under Illinois law. The remainder of this opinion is dedicated to resolving this solitary dispute.
Schmitt filed her motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which requires the Court to accept all well-pleaded allegations as true, and draw all reasonable inferences in favor of the plaintiff, AMI. Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1429 (7th Cir. 1996). We are not to dismiss a complaint for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim warranting relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957); R.E. Davis Chem. Corp. v. Diasonics, Inc., 826 F.2d 678, 684-85 (7th Cir. 1988). At this early stage in the litigation, these standards guide us in determining the enforceability of Schmitt's covenant not to compete.
The validity of a restrictive covenant is a question of law, and more particularly, of state law. Agrimerica, Inc. v. Mathes, 199 Ill. App. 3d 435, 441, 557 N.E.2d 357, 362, 145 Ill. Dec. 587 (1st Dist. 1990); Corroon & Black, Inc. v. Magner, 145 Ill. App. 3d 151, 162, 494 N.E.2d 785, 791, 98 Ill. Dec. 663 (1st Dist. 1986). The appropriate state law is determined by reference to Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938), which mandates that federal courts sitting in diversity, as ...