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SYSTEMAX, INC. v. SCHOFF

July 29, 1997

SYSTEMAX, INC., etc., Plaintiff,
v.
DONALD M. SCHOFF, et al., Defendants.



The opinion of the court was delivered by: SHADUR

 Donald Schoff ("Schoff") and Comark, Inc. ("Comark") have moved to dismiss Counts II, III and IV of the Complaint brought against them by Systemax, Inc. d/b/a Global Computer Supplies ("Global" *fn1" ) in this diversity of citizenship action. All three of the challenged counts hinge on the customer nonsolicitation and employee nonsolicitation covenants contained in the Employee Agreement Regarding Proprietary and Confidential Information, Patents and Trade Secrets ("Agreement") that Schoff had signed while he was with Global:

 
1. Count II is based on Schoff's claimed breach of the customer nonsolicitation covenant (Agreement P8).
 
2. Count III is based on Schoff's claimed breach of the employee nonsolicitation covenant (Agreement P7).
 
3. Count IV charges Comark with tortious interference with the Agreement (a claim that necessarily depends on the validity and enforceability of the Agreement itself).

 Based on the parties' submissions addressing defendants' motion, none of those three counts is dismissed on the basis of the Agreement's inherent unenforceability (that is, based on any claimed lack of consideration). Further briefing is called for, however, as to the other grounds advanced by defendants.

 Factual Matrix

 In this Fed. R. Civ. P. ("Rule") 12(b)(6) context, the Complaint's well-pleaded allegations are taken as gospel. Thus although defendants submit some documents in an effort to undercut Global's claims, this opinion will not take those into account as though Rule 56 rather than Rule 12(b)(6) were in issue (see, e.g., Doe v. First Nat'l Bank, 865 F.2d 864, 873 (7th Cir. 1989)). But the obvious corollary is that no inference should be drawn from the present ruling that what Global charges by way of Agreement-violative conduct is in fact accurate.

 Instead the only relevant facts as to the presence or absence of adequate consideration for the challenged covenants (or relatedly as to their ancillary character) are that Global employed Schoff from May 30, 1994 to April 18, 1997 (Complaint P6) and that the Agreement was not signed at the time of Schoff's hiring (which took place without the parties' entry into any agreement, and which was concededly an at-will employment). Instead it was something over six months after his initial hiring that Schoff signed the Agreement on December 16, 1994 (Complaint P24).

 Legal Matrix

 This question of the enforceability against an at-will employee of a post-hiring employee restrictive covenant is one as to which the parties agree that the Illinois Supreme Court has not spoken. Two recent Illinois Appellate Court decisions, emanating from different Districts, are 180 [degrees] out of phase with each other. Less than three years ago, Creative Entertainment, Inc. v. Lorenz, 265 Ill. App. 3d 343, 346-49, 638 N.E.2d 217, 219-22, 202 Ill. Dec. 571 (1st Dist. 1994)--with then Justice Blanche Manning, now a colleague of this Court on the federal bench, speaking for the court--refused to enforce a restrictive covenant signed by an at-will employee eight months after he began working because, as the court viewed it, such a covenant in an at-will employment relationship is an unenforceable "naked agreement" whose "sole purpose...was to restrain trade" ( id. at 348-49, 638 N.E.2d at 221). Then in the following year, another Appellate District Court in Abel v. Fox, 274 Ill. App. 3d 811, 813-21, 654 N.E.2d 591, 593-98, 211 Ill. Dec. 129 (4th Dist. 1995) criticized and refused to follow Creative Entertainment by holding that adequate consideration existed to render such an after-hiring restrictive covenant enforceable--at least where (as here) the employee has worked for a substantial period after signing the covenant.

 Although Illinois law for Erie v. Tompkins purposes is pronounced by the Illinois courts and not by what federal courts may say about it, two federal decisions in this area also bear mention both here and later in this opinion. Before either Creative Entertainment or Abel was decided, Curtis 1000 v. Suess, 24 F.3d 941, 944-47 (7th Cir. 1994) predicted that if the question were posed to the Illinois Supreme Court it would find adequate consideration to support enforceability if the employee continued to work for a "substantial" period after signing the restrictive covenant. Then post-Creative Entertainment and post-Abel, this Court's colleague Honorable Ruben Castillo adopted the same predictive stance and opted for the Abel approach in Applied Micro, Inc. v. SJI Fulfillment, Inc., 941 F. Supp. 750, 753-58 (N.D. Ill. 1996).

 Conflict Resolution

 In overruling a near century of federal judicial independence under Swift v. Tyson, 41 U.S. (16 Pet.) 1, 10 L. Ed. 865 (1842), Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938) held that the Constitution requires every federal court to adopt and apply the identical substantive standards that its state court counterpart would under like circumstances. Then although some of the early Erie progeny held that the controlling state law for that purpose could be found in decisions of state courts that ranked extraordinarily low on the jurisprudential totem pole, *fn2" there has been a pretty well universal shift by the federal judiciary to a hypothetical approach that seeks to predict what the highest state court would do with the problem if it were called on to decide the issue ( Curtis 1000, 24 F.3d at 945-47 is a good ...


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