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Advent Electronics, Inc. v. Buckman

April 23, 1997

ADVENT ELECTRONICS, INC., PLAINTIFF-APPELLEE,

v.

BERNARD A. BUCKMAN AND BERNARD A. BUCKMAN ENTERPRISES, INC., FORMERLY KNOWN AS FINNIGAN ELECTRONICS, INC., DEFENDANTS-APPELLANTS.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 95 C 305 Marvin E. Aspen, Chief Judge.

Before COFFEY, RIPPLE, and MANION, Circuit Judges.

COFFEY, Circuit Judge.

ARGUED MAY 29, 1996

DECIDED APRIL 23, 1997

The Appellants, Bernard A. Buckman and Bernard A. Buckman Enterprises (collectively "Buckman"), appeal from the district court's January 2, 1996 minute order that adopted the preliminary injunction recommendation of the magistrate judge. The preliminary injunction enjoined Buckman from engaging in certain business practices that were in competition with the Appellee, Advent Electronics ("Advent"). The basis for the injunction was Buckman's alleged violation of restrictive covenants contained in agreements between the parties for Advent's purchase of Buckman's electronics business and Buckman's employment by Advent. On appeal, Buckman raises two issues. First, he argues that this court does not have jurisdiction over this appeal because the order entered by the district court on January 2, 1996, was not enforceable due to the district court's failure to comply with Federal Rules of Civil Procedure 58 and 65(d). Rule 58 requires that each judgment be set forth in a separate document and Rule 65(d) dictates that every order granting an injunction state the reasons for its issuance and the specific terms, without reference to another document. Second, in the event that we have jurisdiction to hear this case, Buckman argues that the injunction is against the manifest weight of the evidence and the district court erred in granting a preliminary injunction that prohibited Buckman from competing with Advent in the manufacture of electronic components. We have jurisdiction over this appeal and remand this case for a more detailed and specific injunction.

I. BACKGROUND

A. Facts

Advent is an Illinois corporation with warehouse facilities and sales offices in nine states. Advent provides electronic components and services to original equipment manufacturers. Prior to November 30, 1993, Buckman owned Finnigan Electronics, Inc. ("Finnigan"), *fn1 a Missouri company that engaged in the business of distributing and manufacturing wire, cable, and other electronic components.

On November 30, 1993, pursuant to an Asset Purchase Agreement, Advent bought substantially all of the assets owned by Finnigan. The agreement contained covenants that restricted Buckman for two years from directly or indirectly engaging in a business that competes with Advent's business and from soliciting orders for products substantially similar to those sold, manufactured, or distributed by Finnigan in its territory. *fn2 Advent and Buckman also entered into an Employment Agreement contemporaneously with the purchase agreement. Under this agreement, Buckman was made the general manager of the Missouri branch of Advent's operations with various responsibilities, including certain administrative, sales, and marketing duties. The Employment Agreement also restricted Buckman's ability, as an individual, to compete for Advent's customers while employed by Advent and for a period of two years following the termination of the agreement. *fn3

In December 1994, Advent terminated Buckman's employment pursuant to the Employment Agreement for the failure of Advent's Missouri branch to achieve the net sales requirement delineated in the agreement. (Appellants' App. at 178-81.) Following his termination, Buckman went into business as a distributor of electronic components, wire, cable, tubing, plastic connectors, and hardware under the name Buckman Wire and Cable Company. (R. 27 at 7; Appellants' App. at 195.) Advent claimed that in so doing, Buckman engaged in activities that were prohibited by the terms of the parties' agreements. Specifically, Advent claimed that Buckman and Buckman Wire and Cable made sales to several of Advent's Missouri customers, including its two largest customers.

B. District Court Proceedings

As a result of these events, on February 15, 1995, Advent filed its verified amended complaint against Buckman for a preliminary injunction prohibiting further violations of the restrictive covenants and for a declaratory judgment that the covenants are valid and enforceable. (R. 2; Appellants' App. at 8.) On March 2, 1995, Advent filed a motion and memorandum in support of a preliminary injunction to restrain Buckman from breaching the Asset Purchase and Employment Agreements. (Appellants' App. at 165 (Motion for Preliminary Injunction); R. 4 (Memorandum in Support).) On March 15, 1995, Buckman counterclaimed for declaratory judgment and damages alleging that the restrictive covenants were unenforceable because they were unlawful and unreasonable restraints on trade. (R. 17.) Buckman also stated that he should be relieved from the burdens of the covenants because Advent breached the Employment Agreement when it took away his administrative functions and hired a different general manager in August 1994. (Id.) Buckman further alleged that he was entitled to back salary, commissions, and bonuses. (Id.) Thereafter, the parties agreed to submit the matter to a magistrate judge on the written submissions and forego an evidentiary hearing. On August 11, 1995, the magistrate judge issued a report and recommendation stating that a preliminary injunction should be issued. (R. 27; Appellants' App. at 189.) Buckman filed timely objections to the magistrate judge's report and recommendation. *fn4 (R. 30; R. 31; Appellants' App. at 222.) The district court overruled Buckman's objections to the magistrate judge's report and on September 13, 1995, granted Advent's motion for a preliminary injunction in a minute order that only stated, "[d]efendants' objections to Magistrate Judge Guzman's Report and Recommendation of August 11, 1995, are overruled. Accordingly, plaintiff's motion for a preliminary injunction is granted." (R. 35.) Buckman timely appealed the district court's order.

While the appeal was pending, Advent submitted a proposed preliminary injunction to the district court judge, which was also referred to the magistrate judge. The defendant filed objections to this proposed order stating that while the proposed preliminary injunction would restrict Buckman from distributing or warehousing electrical components, it would also improperly restrict Buckman from manufacturing and assembling, two activities not engaged in by Advent. *fn5 (R. 43 at 6-7.) On November 9, 1995, the magistrate judge overruled Buckman's objections and issued a report recommending that the district court approve Advent's proposed preliminary injunction terms. *fn6 (R. 47; Appellants' App. at 333.) The magistrate judge found that Advent had shown a substantial likelihood of success in establishing that the terms in the agreements were not overly broad or oppressive. The judge further stated, that "the proposed injunctive order merely prohibits defendant from doing those things which it agreed it would not do in the covenants of the Asset Purchase Agreement and the Employment Agreement." (R. 47; Appellants' App. at 336-37.)

On November 17, 1995, Buckman filed objections to the magistrate judge's report, which specifically asserted that the proposed preliminary injunction's inclusion of a restriction on manufacturing made the proposal overly broad, oppressive, and unnecessary to protect Advent's legitimate business interests. (R. 51; Appellants' App. at 341.) On January 2, 1996, the district court judge overruled Buckman's objections and entered the preliminary injunction recommended by the magistrate judge. This entry was in the form of a minute order that failed to spell out the terms of the injunction and merely stated, "[t]he Court adopts Magistrate ...


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