The opinion of the court was delivered by: Mihm, District Judge.
Plaintiff Unisource Worldwide, Inc. (Unisource) has sought a
preliminary injunction in this case to prevent the Defendants from
breaching their covenants not to compete with Unisource and disclosing
Unisource's trade secrets and confidential information.
A preliminary injunction is warranted if the movant can demonstrate:
(1) a reasonable likelihood of success on the merits, (2) no adequate
remedy at law, (3) irreparable harm if preliminary relief is denied that
outweighs the irreparable harm the nonmoving party will suffer if the
injunction is granted, and (4) public interest. Mil-Mar Shoe Co., Inc.
v. Shonac Corp., 75 F.3d 1153, 1156 (7th Cir. 1996).
The Court finds that Unisource has not established a reasonable
likelihood of success on the merits. Therefore, the other factors are
moot, and the Motion for a Preliminary Injunction [#3-2] is DENIED, and
the Temporary Restraining Order previously entered by the Court is
Unisource is a national distributor of printing and imaging papers,
packaging, and facility supplies and equipment with over two hundred
locations. It operates a sales facility in Morton, Illinois, and a
customer service facility in St. Louis, Missouri.
The printing and paper products sales business is intensely
competitive. Many companies offer products and services similar to
Unisource. Unisource relies upon its sales force to provide face-to-face
service to its customers before and after the sale. Unisource's sales
representatives and customer service employees develop personal
acquaintances with Unisource's current and prospective customers. The
sales representatives analyze the customers' unique printing and paper
needs, and tailor their services to solve each individual customers
Defendants Chester Carrara (Carrara), Richard McCormick, and Michael
McCormick were Unisource sales representatives employed at Unisource's
Morton, Illinois facility. Their duties included soliciting existing and
prospective Unisource customers to determine their needs, generating new
sales opportunities, tracking customer purchasing over time to anticipate
customers' future requirements, and following up with customers after
Defendants David Schaidle (Schaidle) and Daniel Cady (Cady) were
Unisource customer service employees operating out of Unisource's St.
Louis, Missouri facility. They were responsible for executing orders
generated by Unisource's sales representatives. Unisource customers
frequently call customer service employees directly with their paper and
Defendant Jeffrey Lichtenberger (Lichtenberger) was a Unisource product
specialist operating out of Unisource's St. Louis, Missouri, facility. He
was responsible for dealing with the vendors from whom Unisource
purchased many of its products.
Defendant Paul Hetman (Hetman) was a Unisource packaging equipment
technician operating out of Unisource's Morton, Illinois, facility. His
primary responsibility was to visit Unisource customers to ensure that
their Unisource products were functioning properly.
Baker resigned from Unisource effective December 20, 2002. Carrara,
Richard McCormick, and Michael McCormick resigned from Unisource
effective December 31, 2002. Cady and Schaidle resigned from Unisource
effective January 3, 2003. Each of these Defendants subsequently
commenced working for Midland Paper Company — a competitor of
Unisource in Bloomington, Illinois — where at least some of the
Defendants, including Carrara, Michael McCormick, and possibly Richard
McCormick, began soliciting and calling upon customers they had worked
with while employed at Unisource.
Each of the Defendants had signed employment agreements with
Unisource. Four contained covenants not to compete. All eight contained
provisions restricting disclosure of Unisource' confidential information.
Two contained provisions prohibiting the Defendants from soliciting or
hiring Unisource employees.
Unisource asserts that the Defendants' conduct is in breach of their
respective employment contracts. Unisource also argues that all eight of
the Defendants were privy to confidential information and trade secrets
while employed at Unisource, which they are now misappropriating to
obtain the business of Unisource's former customers.
On January 21, 2003, this Court entered a temporary restraining order
prohibiting the Defendants from soliciting business or taking new orders
from certain customers. On February 11-12, 2003, the Court held a
preliminary injunction hearing. This Order follows.
I. Defendants' Employment Contracts with Unisource
The parties agree that Illinois law governs the contracts with
Carrara, Richard McCormick, David Schaidle, Daniel Cady, Jeff
Lichtenberger, and Paul Hetman. The parties agree that Missouri law
governs the contract with Michael McCormick. Finally, the parties agree
that Georgia law governs the contract with Baker.
Carrara and Michael McCormick each had an employment contract with a
company called Distribix, which subsequently merged with Unisource. They
argue that their contracts with Distribix were never assigned to
Unisource, and therefore that Unisource cannot enforce them.
The Court adopts the rationale regarding this issue applied in AutoMed
Techs, Inc. v. Eller, 160 F. Supp.2d 915, 924 (N.D. Ill. 2001). In that
case, Judge Moran noted that, since courts scrutinize restrictive
covenants closely and will uphold them only to the extent they are
reasonable and necessary to protect an employer's legitimate business
interest, an employee will not be prejudiced by having the contract
assigned to a successor business.
Furthermore, where an employment contract is silent on this issue
— as Carrara's and Michael McCormick's are — courts generally
find that an acquiring corporation can enforce the acquired company's
restrictive covenants. See Hexacombe Corp. v. GTW Enters, 875 F. Supp. 457,
464 (N.D. Ill. 1993). Therefore, the Court finds that Unisource can
enforce Carrara's and Michael McCormick's contracts with Distribix.
C. Enforceability of Covenants Not to Compete
The employment agreements of four Defendants — Carrara, Richard
McCormick, Michael McCormick, and Hetman — contain covenants not to
compete. As a general rule, restrictive covenants must be reasonable in
terms of time and scope in order to be enforceable. Eichmann v. Nat'l
Hosp. and Health Care Servs. Inc., 719 N.E.2d 1141, 1148 (Ill.App. Ct.
1999); Schmersahl, Treloar & Co. v. McHugh, 28 S.W.3d 345, 349 (Mo.
Ct. App. 2000). Furthermore, the essential terms of a contract must be
intelligible. Anderson v. Fel-Pro Chem. Prods., 1996 U.S. Dist. LEXIS
19551, *20-*21 (N.D. Ill. 1997); see ...