Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.


December 2, 2004.

SCOTT VENDER, et al., Defendants.

The opinion of the court was delivered by: JOAN GOTTSCHALL, District Judge


Before this court is the motion of Credit Suisse First Boston, LLC ("CSFB") for a temporary restraining order against defendants Scott Vender, William Thoms and Roger Veome. For the reasons set forth herein, the motion is granted in part and denied in part.


  Defendants are securities brokers who were formerly employees of CSFB but who now work for Jefferies & Co., Inc. ("Jefferies"), a competing firm. Each defendant was working for Donaldson, Lufkin & Jenrette, Inc. ("DLJ") when that firm merged with CSFB in 2000. During the course of the merger, each defendant entered into a loan agreement with CSFB whereby CSFB provided defendants with a combined total of $885,000 and agreed to forgive each loan if the recipient remained an employee of CSFB through July 1, 2004. The agreement also required that defendants provide 30 days' notice of intent to terminate employment and prohibited their engaging in "competitive activity" or "solicitation" for an additional 30 day period following termination. Competitive activity is broadly defined by the agreement to prohibit any affiliation with any other business entity that is engaged in the same activities as CSFB, and the prohibition on solicitation in the agreement forbids "enticing away" both CSFB employees and clients.

  Defendants terminated their employment with CSFB on November 19, 2004 without providing the required 30 day notice and began employment with Jefferies. Around this time, defendants began sending out materials to CSFB clients with whom they had relationships. These packages included forms enabling the clients to transfer their accounts to Jefferies. CSFB brought this motion on November 29, 2004, seeking a temporary restraining order ("TRO"), pending arbitration, barring defendants from competing with CSFB by, among other things, doing work independently or on behalf of another firm that competes with CSFB, soliciting employees of CSFB, soliciting clients of CSFB or otherwise making use of CSFB client lists.


  A party seeking a temporary restraining order must demonstrate as a threshold matter that (1) its case has some likelihood of succeeding on the merits; (2) no adequate remedy at law exists; and (3) it will suffer irreparable harm if preliminary relief is denied. Abbott Laboratories v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992). If the moving party meets this burden, the court must weigh these factors along with any irreparable harm the non-moving party will suffer if preliminary relief is granted, balancing that harm against the irreparable harm to the moving party if relief is denied. Id. Finally, the court must consider the public interest served by granting or denying the injunction, including the effects of the injunction on non-parties. Id.

  CSFB argues that this is a simple case of breach of a clear non-compete agreement by former employees for which injunctive relief should issue. Defendants respond that the TRO should not issue because certain provisions of the agreement are unenforceable under Illinois law and because CSFB possesses an adequate remedy at law for breach of the agreement.*fn1 A. Likelihood of Success.

  The parties do not appear to dispute that defendants' termination of employment without notice, immediate commencement of employment with a competitor and solicitation of their former clients violated the terms of their agreements with CSFB. Rather, defendants maintain that CSFB has failed to demonstrate a protectible interest sufficient to enforce a restrictive covenant under Illinois law. Employers have protectible business interests in their clients that justify enforcement of restrictive covenants only when 1) by the nature of the business, the customer relationship is near-permanent and longstanding; and 2) but for his or her association with the employer, the employee would not have contact with the clients. Nationwide Advertising Service, Inc. v. Kolar, 28 Ill. App. 3d 671, 673, 329 N.E.2d 300 (1st Dist. 1975). Defendants maintain that they do not intend to contact clients with whom they would not have had a relationship "but for" CSFB, but are focusing instead on clients with whom defendants developed relationships on their own, and who did not have a longstanding relationship with CSFB.

  This argument fails at the TRO stage. As an initial matter, CSFB presumably has a claim to the clients with whom defendants were working at DLJ, as CSFB is DLJ's successor-in-interest. CSFB will likely be able to show a longstanding relationship with its clients, as "a near-permanent relationship with clients is inherent in the provision of professional services[.]" Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc., 292 Ill. App. 3d 131, 142, 685 N.E.2d 434 (2d Dist. 1997). In addition, the court credits CSFB's contention that its resources and goodwill were necessary to support and enable defendants' relationship with their clients. Without the investment of the employer in office resources, prestige, insurance, back room support and research capabilities no broker could operate effectively — i.e., it is unlikely that each defendants' client relationships could have been initiated and sustained had defendants been operating out of Vender's garage. See, e.g., Outsource Int'l, Inc. v. Barton, 192 F.3d 662, 668 (7th Cir. 1999). The court concludes that CSFB has some likelihood of success in demonstrating an adequate business interest with respect to the customers in question.

  Defendants also maintain that the 60 day time period during which the restrictions in the agreement are imposed on defendants is unreasonable. With limited exceptions described below, the court disagrees. Courts have routinely upheld restrictive covenants of much longer duration. See, e.g., Business Records Corp. v. Lueth, 981 F.2d 957 (7th Cir. 1992) (upholding two year restriction). The 60 day restricted period provides CSFB with an opportunity to cement its relationships with the customers formerly serviced by defendants while defendants are still employed (and presumably with their reasonable cooperation) and to continue to work with the clients for an additional 30 days after the defendants' departure without having to deal with competition from their former employees. However, the court finds the agreement's 60 day prohibition on "any affiliation" with a competitor, defined as "any direct or indirect interest" with the competitor as an employee, consultant, promoter, agent, or otherwise, is unreasonable. This prohibition means that, until the entire 60 day non-compete period expires, a broker who wishes to leave CSFB is barred from arranging for employment with a competing firm, even for the period after his non-compete period expires. Few rational actors with any choice will leave one job without assurance of another. More important, CSFB's broad prohibition on "affiliation" is unnecessary to serve CSFB's legitimate interest in preventing its former employees from soliciting its customers or competing with it for 60 days. In short, the blanket prohibition on any affiliation contemplated by the loan agreement unreasonably restricts an employee's freedom to seek employment of his or her choice. See, e.g., Sheehy v. Sheehy, 299 Ill. App. 3d 996, 1007, 702 N.E.2d 200 (1st Dist. 1998) ("Although defendant is not . . . competing with [plaintiff], plaintiff still seeks to restrain his employment. In our view, such restriction is unreasonable and a violation of public policy."). Therefore, the court finds that, while CSFB has some likelihood of success in enforcing the 60 day non-solicitation provision and the prohibition on going to work for a competing firm, it has failed to meet that burden with respect to the broad non-affiliation portion of the non-compete restriction.

  Finally, defendants argue that because CSFB is a member of the National Association of Securities Dealers ("NASD"), a private organization providing regulatory services to the securities industry, and the NASD requires mandatory arbitration, likelihood of success for TRO purposes means likelihood of success in front of the NASD. This argument fails. A court's determination of likelihood of success for purposes of preliminary injunctive relief is a determination of the probable success of the movant's claims at trial. See Abbott Labs., 971 F.2d at 13. Even if this were not the case, the court is ill-equipped to speculate as to the result of a private arbitration.

  The court therefore finds that CSFB has made its threshold showing with respect to likelihood of success as to the non-solicitation and portions of the ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.