United States District Court, N.D. Illinois, Eastern Division
JAMES TURNELL AND WINDWARD ROOFING & CONSTRUCTION, INC., Plaintiffs,
CENTIMARK CORPORATION, Defendant.
MEMORANDUM OPINION AND ORDER
VIRGINIA M. KENDALL, District Judge.
Centimark Corporation seeks a preliminary injunction that prohibits former employee James Turnell from working for Windward Roofing & Construction, Inc. pending a trial on the merits. The parties' dispute concerns an employment agreement between Centimark and Turnell that contains several restrictive covenants. Turnell opposes Centimark's motion for a preliminary injunction. This Court held an evidentiary hearing on Centimark's motion on February 11, 2014. For the reasons stated herein, this Court grants Centimark's motion.
This Court makes the following findings for purposes of deciding Centimark's motion for a preliminary injunction. This Court makes these findings based on the evidence received during its hearing on Centimark's motion and in the pleadings and exhibits submitted in connection with Centimark's motion.
Centimark and Turnell entered an employment agreement on May 1, 1988. (Dkt. No. 34-3.) Article IV of the Centimark-Turnell Agreement contains several covenants and agreements concerning the non-disclosure of confidential information (Dkt. No. 34-3 at § 4.01), the return of materials (Dkt. No. 34-3 at § 4.04), restrictions on competition (Dkt. No. 34-3 at § 4.05), the solicitation of customers and suppliers (Dkt. No. 34-3 at § 4.06), and the solicitation of employees (Dkt. No. 34-3 at § 4.07). Turnell entered the Centimark-Turnell Agreement after having worked full-time at Centimark for about ten years. (Dkt. Nos. 79-80, Hr'g Tr. at 113:6-7 (Feb. 11, 2013).) After entering the Centimark-Turnell Agreement, Turnell worked for Centimark for another twenty-five years until Centimark fired him on January 8, 2013. (Hr'g Tr. at 113:8-12.) Centimark purportedly fired Turnell for misappropriation or theft. (Hr'g Tr. 58:17-59:9, 123:10-13.) In his thirty-five years at Centimark, a commercial roofing business (Hr'g Tr. at 39:14-24), Turnell worked in the roofing industry as a laborer, foreperson, manager (Hr'g Tr. at 145:5-10), and in sales (Hr'g Tr. at 147:14-18).
Shortly after Centimark fired him, Turnell agreed to work for Windward. (Hr'g Tr. at 123:17-25, 126:1-13.) Windward is a small company that provides several services in the Chicagoland area that includes commercial roofing, which comprises nearly half of Windward's business. (Hr'g Tr. at 126:17-22, 173:3-14, 175:19-176:20.) At Windward, Turnell has worked in roofing sales since starting there around March 1, 2013. (Hr'g Tr. at 112:18-23.) His job at Windward requires him to find new customers. (Hr'g Tr. at 131:10-14.) In fact, Turnell cannot solicit business from existing Windward customers. (Hr'g Tr. at 131:15-25.) In his time at Windward, Turnell has called on Centimark's customers (Hr'g Tr. at 167:15-17) using techniques similar to those employed by Centimark and has submitted bids to existing and potential Centimark customers (Hr'g Tr. at 135:12-137:3). As of February 11, 2014, Centimark has lost at least one job to Windward. (Hr'g Tr. at 91:13-18, 161:7-10.)
"[A] preliminary injunction is an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Goodman v. Illinois Department of Financial and Professional Regulation, 430 F.3d 432, 437 (7th Cir. 2005) (quoting Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)) (alteration and emphasis in Goodman ). The movant must show a likelihood of success on the merits, that no adequate remedy at law exists, that it will suffer irreparable harm absent injunctive relief and that the harm outweighs any harm to the non-movant should an injunction issue, and that an injunction will not harm the public interest. Id. When considering whether to issue a preliminary injunction, courts must weigh these factors using a sliding scale approach such that the greater the movant's likelihood of success on the merits the less the balance of harms need favor the movant and vice versa. Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., 549 F.3d 1079, 1086 (7th Cir. 2008).
Here, the Centimark-Turnell Agreement includes a choice of law provision that identifies Pennsylvania law as the governing law. Although disfavored as a restraint on trade, restrictive covenants such as non-compete agreements are enforceable in equity under Pennsylvania law. Zambelli Fireworks Mfg. Co., Inc. v. Wood, 592 F.3d 412, 424 (3d Cir. 2010). One can enforce a non-compete agreement under Pennsylvania law when the restrictive covenant is incident to an employment relationship between the parties, is reasonably necessary for the employer's protection, and is reasonably limited in duration and geographic scope. Id. A restriction is reasonably necessary for the employer's protection when tailored to protect the employer's legitimate business interests. Id. The party challenging the restriction must prove its unreasonableness, Victaulic Co. v. Tieman, 499 F.3d 227, 236 (3d Cir. 2007), which is a fact-intensive inquiry, id. at 237.
A. Centimark's Likelihood of Success on the Merits
"Pennsylvania enforces restrictive covenants that are reasonably necessary for the protection of the employer's protectable business interests' such as trade secrets and other confidential information, if the restrictions are reasonably limited in duration and geographic extent.'" CertainTeed Corp. v. Williams, 481 F.3d 528, 529 (7th Cir. 2007) (quoting Hess v. Gebhard & Co., 570 Pa. 148, 162, 157 (2002)). Examples of legitimate business interests include trade secrets, confidential information, goodwill, unique or extraordinary skills, and specialized training that would benefit competitors. Zambelli, 592 F.3d at 424.
1. Protectable Business Interests
Centimark claims that the restrictive covenants at issue are necessary to prevent Turnell from using Centimark's customer lists, strategic plans, discounts, pricing practices, and product margins against Centimark when soliciting business for Windward. Even though Turnell claims to only have a vague understanding of Centimark's pricing system ( see, e.g., Hr'g Tr. at 159:7-20), he has some understanding of how Centimark prices jobs and knows what profit margins result from Centimark's pricing system (Hr'g Tr. at 157:15-158:11). As he acknowledged in the Centimark-Turnell Agreement, Turnell understood that Centimark considered such information confidential. (Dkt. No. 34-3 at p.4.) This confidential information concerning Centimark's pricing system and profit margins qualifies as a protectable business interest. The same is true for any goodwill Turnell established with customers while ...