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H&M Commercial Driver Leasing, Inc. v. Fox Valley Containers

February 20, 2004

[5] H&M COMMERCIAL DRIVER LEASING, INC., APPELLEE,
v.
FOX VALLEY CONTAINERS, INC., APPELLANT.



[6] The opinion of the court was delivered by: Justice Freeman

[7]  Docket No. 96057-Agenda 16-November 2003.

[8]  Plaintiff, H&M Commercial Driver Leasing, Inc. (H&M), filed an action for breach of contract against defendant, Fox Valley Containers, Inc. (Fox Valley), in the circuit court of Cook County. The circuit court granted H&M judgment on the pleadings (735 ILCS 5/2-615(e) (West 2000)), and the appellate court affirmed (No. 1-01-2831 (unpublished order under Supreme Court Rule 23)). We granted Fox Valley leave to appeal (177 Ill. 2d R. 315(a)) and now affirm.

[9]  Background

[10]   H&M is an Illinois corporation in the business of leasing truck drivers and related personnel. On January 10, 2000, H&M and Fox Valley entered into an agreement in which H&M agreed to furnish Fox Valley licensed truck drivers, and Fox Valley agreed to pay H&M on a per-hour basis for the drivers. The parties' agreement contains the following provision (hereinafter referred to as paragraph 13), which is the genesis of this lawsuit:

[11]   "[Fox Valley] agrees that it will not hire any of the drivers and other personnel that [H&M] furnishes to [Fox Valley] for a period one (1) year from the termination date of this Agreement. However, [Fox Valley] may hire any driver and other personnel whose employment with [H&M] terminated at least one year prior to being hired by [Fox Valley]. In the event that [Fox Valley] does hire any driver or other personnel [sic] will be in violation of the terms of this Agreement, then [Fox Valley] shall pay to [H&M] for each driver and other personnel hired in violation of this agreement $15,000 as liquidated damages, plus all costs and expenses, including attorney's fees, incurred by [H&M] in enforcing the provisions of this Agreement, including injunctive relief. [H&M] and [Fox Valley] agree and acknowledge that the liquidated damages set forth in this paragraph are a reasonable estimate of the damages which would result from a breach of this paragraph, that actual damages from such a breach would be difficult to ascertain, and that the liquidated damages are an alternative to performance and not a penalty."

[12]   The parties' contract length was indefinite until cancelled by either party upon written notice.

[13]   During the course of the agreement, H&M leased to Fox Valley a truck driver named James Booker. On February 11, 2000, Fox Valley hired Booker as a truck driver. After learning of Booker's hiring by Fox Valley, H&M filed a complaint for breach of contract in the circuit court. H&M alleged that by hiring Booker, Fox Valley breached paragraph 13 of the parties' agreement, under which Fox Valley agreed not to hire any of the drivers provided by H&M under the contract for one year following the termination of the contract. H&M sought damages as provided in paragraph 13.

[14]   Fox Valley moved to dismiss the complaint pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2000)). In the motion, Fox Valley pointed out that Booker did not have a written employment agreement with H&M, Booker terminated his employment with H&M of his own accord, and Booker solicited Fox Valley for new employment. In an affidavit attached to H&M's motion, Booker averred that his motivation for leaving H&M was the lack of regular work. Fox Valley maintained that H&M's complaint failed to state a cause of action because paragraph 13 was unenforceable as a matter of law due to the fact that it adversely affected Booker's right to free employment.

[15]   The circuit court denied Fox Valley's motion. Fox Valley then requested certification of the question to the appellate court pursuant to Supreme Court Rule 308. The circuit court denied the request.

[16]   In its answer, Fox Valley admitted all relevant facts contained in H&M's complaint. However, Fox Valley denied that it committed any breach of contract. Fox Valley contended that its hiring of Booker did not violate paragraph 13 of the agreement because the paragraph is "violative of public policy as it is a restraint of trade on a third party."

[17]   H&M thereafter moved for judgment of the pleadings. The circuit court granted the motion and entered judgment for H&M in the amount of $18,747, inclusive of attorney fees and costs.

[18]   On appeal, Fox Valley argued that the circuit court erred in finding a breach of contract because the written agreement unreasonably restricted free trade and was thus unenforceable as a matter of public policy. Fox Valley noted that Booker had terminated his employment with H&M of his own accord and had solicited Fox Valley for employment. The appellate court rejected these arguments, holding that paragraph 13 does not violate public policy because it did not unduly place restraints on free trade. Rather, paragraph 13 merely placed restrictions on Fox Valley's ability to hire drivers from H&M, restrictions to which Fox Valley had agreed.

[19]   Analysis

[20]   Fox Valley contends that paragraph 13 acts as a restrictive covenant on third parties without their consent and is thus unenforceable as a matter of public policy. As a result, Fox Valley argues that the circuit court's entry of judgment on the pleadings, as affirmed by the appellate court, was in error.

[21]   Judgment on the pleadings is properly entered in instances where no genuine issue of material fact exists and the movant is entitled to judgment as a matter of law. M.A.K. v. Rush-Presbyterian-St. Luke's Medical Center, 198 Ill. 2d 249, 255 (2001). Only those facts apparent from the face of the pleadings, matters subject to judicial notice, and judicial admissions in the record may be considered. Moreover all well-pleaded facts and all reasonable inferences from those facts are taken as true. M.A.K., 198 Ill. 2d at 255. On appeal, the reviewing court must determine whether any issues of material fact exist and, if not, whether the movant was, in fact, entitled to judgment as a matter of law. M.A.K., 198 Ill. 2d at 255. The standard of review is de novo. M.A.K., 198 Ill. 2d at 255.

[22]   Traditionally, this court, in keeping with the principle of freedom of contract, has been reluctant to invoke its power to declare a private contract void as contrary to public policy. We have previously recognized that, in considering the question,

[23]   "it should be remembered that it is to the interests of the public that persons should not be unnecessarily restricted in their freedom to make their own contracts. Agreements are not held to be void, as being contrary to public policy, unless they be clearly contrary to what the constitution, the statutes or the decisions of the courts have declared to be the public policy or unless they be manifestly injurious to the public welfare." Schumann-Heink v. Folsom, 328 Ill. 321, 330 (1927).

[24]   Whether an agreement is contrary to public policy depends on the particular facts and circumstances of the case. O'Hara v. Ahlgren, Blumenfeld & Kempster, 127 Ill. 2d 333, 341-42 (1989).

[25]   Fox Valley submits that this case is controlled by Szabo Food Service, Inc. v. County of Cook, 160 Ill. App. 3d 845 (1987). There, the plaintiff, Szabo, a food management service, contracted with the defendant, Cook County, to provide it with food managers for the county jail. The contract contained a provision in which the county agreed that it would not hire any of Szabo's employees for six months after the termination of the contract and would not permit former Szabo employees to be employed within the county. After the contract was terminated, the county entered into a contract with one of Szabo's rivals, Canteen. Canteen had hired four workers who had previously worked for Szabo, and those four ultimately were assigned to the county jail food operations.

[26]   Szabo filed suit against the county for breach of contract and sought an injunction to prevent Canteen from employing the four workers in question. The circuit court denied injunctive relief and found the provision to be unenforceable. Szabo, 160 Ill. App. 3d at 846-47. The appellate court affirmed the decision, ruling that the clause was unenforceable because its effect was to restrict the right of Canteen, a corporation not a party to the agreement, to hire former managers of the plaintiff to work for its operations at the jail. Szabo, 160 Ill. App. 3d at 848-49. The court held that the provision created "an unreasonable restriction on the freedom of contract of members of the public (i.e., of persons who are not parties to the contract containing the covenant), and therefore the covenant is not enforceable." Szabo, 160 Ill. App. 3d at 849.

[27]   A careful review of Szabo reveals the case is not squarely on point with the case at bar. The contract provision there essentially placed restrictions on the hiring practices of a third company, Canteen, which was not a party to the agreement. In this case, Fox Valley is a party to the contract which contained the provision restricting its ability to hire former H&M employees.

[28]   We note that in distinguishing Szabo on similar grounds and in upholding the enforceability of paragraph 13, the appellate court in this case relied upon American Food Management, Inc. v. Henson, 105 Ill. App. 3d 141 (1982). There, the plaintiff, American Food, was a corporation which provided food services to facilities such as college dormitories. American Food entered into a contract with the owner of Stevenson Hall in Carbondale, Illinois. The parties agreed that Stevenson would not hire American Food employees for a period of one year after the termination of the contract. Meanwhile, American Food employed Wesley Henson while he was a student in Missouri and ultimately offered him a permanent job. The new job required Henson to relocate to Kansas. Henson accepted American Food's verbal offer and relocated. One week after his move, he received a written contract of employment from American Food. The written contract contained a clause which provided that Henson, upon termination of his job, would not work for any American Food competitor within a 25-mile radius of any dormitory unit at which he had worked for American Food. Henson signed the agreement. Eventually, Henson was transferred to Wilson Hall in Carbondale, Illinois. Henson later quit American Food's employ and found work at Stevenson Hall. American Food sued both Henson and the owner of Stevenson Hall on theories of breach of contract. The circuit court ruled in favor of American Food against both Henson and the owner of Stevenson. American Food Management, 105 Ill. App. 3d at 142-43.

[29]   The appellate court reversed the finding for American Food with respect to Henson. The court held that the 25-mile restrictive covenant between the two constituted a contract of adhesion because Henson was never told about the provision prior to his relocation to Kansas. American Food Management, 105 Ill. App. 3d at 146-47. Relevant to our discussion here is the court's treatment of a secondary issue, i.e., the validity of the contractual provision between American Food and the owner of Stevenson Hall. The appellate court first noted that the validity of the ...


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