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Reed v. Getco, LLC

Court of Appeals of Illinois, First District, Fifth Division

September 30, 2016

ZACHARIAH REED, an individual, Plaintiff-Appellee,
v.
GETCO, LLC, an Illinois limited liability company, Defendant-Appellant.

         Appeal from the Circuit Court of Cook County No. 13 CH 17892 Honorable James E. Snyder, Judge Presiding.

          JUSTICE REYES delivered the judgment of the court, with opinion. Presiding Justice Gordon and Justice Hall concurred in the judgment and opinion.

          OPINION

          REYES JUSTICE

         ¶ 1 Defendant Getco, LLC, a proprietary trading and financial services firm, appeals an order of the circuit court of Cook County granting summary judgment in favor of and awarding $1 million to plaintiff Zachariah Reed, a former employee. On appeal, defendant argues the circuit court erred in: (1) finding defendant did not properly waive the noncompete provision in defendant's employment agreement with plaintiff; (2) interpreting the language of the employment agreement which granted defendant the sole and absolute discretion to modify plaintiff's noncompete restrictions; and (3) finding plaintiff did not have a duty to mitigate damages. For the following reasons, we affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 On October 12, 2005, plaintiff began working for defendant as a developer/technical trader, pursuant to an employment agreement. Approximately 15 months later, defendant requested its employees, including plaintiff, to sign a new employment agreement ("the agreement"). The initial draft of the agreement had new terms and conditions, including in relevant part: (1) an exclusivity clause; (2) restrictive covenants (non-competition); (3) ownership of intellectual property developments; (4) mandatory alternative dispute resolution procedures for certain types of disputes; and (5) indemnification conditions.[1]

         ¶ 4 After negotiation between the parties, the agreement was revised. Section 6 of the agreement included the noncompetition provisions. Subsection 6(a) provides that plaintiff "agree[s] not to, directly or indirectly, alone or in association with or on behalf of any other person, engage in any competitive activity" during his employment and for a period of six months after the termination of his employment, regardless of the reason for his departure. Section 6(b) was a provision unique to plaintiff's agreement and provides, "[defendant] will pay [plaintiff]" $1 million or an amount based on a set formula. Subsection 6(b) further provides, "these payments will stop if [defendant] determines that I have violated any provision of this Agreement or if a court determines that any provision of this Section 6 is unenforceable." Subsection 6(d) reads, in relevant part, "if [plaintiff] believe[s] in good faith that the restrictions in this Section 6 will prevent [him] from obtaining a new job, [plaintiff] may notify [defendant] in writing, providing reasonable details about the proposed responsibilities of the new job ***. [Plaintiff] will discuss with [defendant] whether appropriate accommodations can be made to protect [defendant's] interests while allowing [plaintiff] to take the new job and any appropriate adjustments to the payments provided for in Section 6(b). [Defendant] shall be under no obligation to modify the restrictions in this Section 6, but may do so in its sole and absolute discretion." (Emphases added.) In addition, section 9 was entitled "Intellectual Property Developments." Section 9 provides that plaintiff "irrevocably sell[s], assign[s] and transfer[s] to [defendant] all of [his] right[s], title[s] and interests" in intellectual property developments conceived by plaintiff, during his employment or for six months after the termination of his employment, regardless of the reason for his departure. Further, section 13 was entitled "Miscellaneous, " and provides that subsection 13(j) governs all waivers and modifications of any provision in the agreement. Subsection 13(j) states that no waiver or modification of any provision in the agreement would be effective "unless made pursuant to a writing signed by the party against whom the waiver or modification is enforced."

         ¶ 5 On January 19, 2007, the parties signed the agreement. Six years later, on July 11, 2013, plaintiff resigned. A little over a week thereafter, on July 19, 2013, plaintiff received an email from defendant stating, "The Company hereby notifies you that the Restricted Period will be zero (0) months and/or is waived. You will not receive any Non-compete payments. For the avoidance of doubt, you may begin working for any employer immediately following your Separation Date." After his resignation, plaintiff received offers of employment from defendant's competitors. Plaintiff, however, did not accept any offers until the restricted period ended. On March 31, 2014, he began working for one of defendant's competitors.

         ¶ 6 On July 30, 2013, plaintiff filed a three-count verified complaint against defendant, alleging specific performance (count I), breach of contract (count II), and fraud, in the alternative (count III). In count II, plaintiff claimed defendant breached the noncompete provision in the agreement in its failure to pay plaintiff $1 million after the termination of his employment.

         ¶ 7 In response, defendant filed affirmative defenses claiming: (1) plaintiff had no cause of action because defendant had the sole and absolute discretion to modify the restrictions in section 6; (2) plaintiff is estopped from obtaining relief because he resigned and failed to mitigate his damages; and (3) plaintiff is barred from recovery because he contributed to his own damages by resigning when he knew defendant could not waive the restricted period.

         ¶ 8 On January 8, 2015, plaintiff filed a motion for summary judgment on count II of the verified complaint, i.e., breach of contract. Plaintiff argued he had affirmatively established: (1) the agreement was valid and enforceable; (2) plaintiff performed all his obligations pursuant to the agreement; (3) defendant breached the agreement; and (4) plaintiff suffered damages as a result of defendant's breach. Plaintiff also moved for summary judgment on defendant's affirmative defenses.

         ¶ 9 On the same day, January 8, 2015, defendant also filed a motion for summary judgment on plaintiff's breach of contract claim. In its motion, defendant argued: (1) defendant properly waived plaintiff's noncompete restrictions in the agreement because the restrictions were exclusively for defendant's benefit; (2) defendant properly exercised its discretion to modify the noncompete restrictions, under subsection 6(d) of the agreement, which provides, "[defendant] shall be under no obligation to modify the restrictions in this Section 6, but may do so in its sole and absolute discretion"; and (3) even if defendant had breached the agreement, plaintiff failed to mitigate his damages.

         ¶ 10 On May 20, 2015, the trial court entered an order finding in favor of plaintiff. The trial court stated, the rule that a party to a contract may unilaterally waive provisions contained in the contract for its sole benefit cannot apply in the instant case because "Section 13(j) prohibits any waiver or modification that is not in writing and signed by the party to be charged."

         ¶ 11 In addition, the trial court further found the sentence in subsection 6(d) did not grant defendant with absolute discretion to modify the noncompete provision in section 6, because the sentence in subsection 6(d) "does not stand alone." The trial court noted the sentence in subsection 6(d) "follows plain language" that contemplates a situation where plaintiff could request relief from the noncompetition provisions if he found other employment he believed could violate his noncompete restrictions. The trial court explained that subsection 6(d) allows defendant to reject in its sole and absolute discretion such a request by plaintiff, but does not permit defendant to unilaterally waive or modify section 6 as a whole.

         ¶ 12 Further, the trial court found plaintiff had no duty to mitigate damages because the terms of the agreement: (1) obligated plaintiff to refrain from engaging in competitive activity for a set period of six months after he left defendant; and (2) in exchange, defendant agreed to pay plaintiff. The trial court reasoned that, "[a] breach of this - or any - provision in the [a]greement was not a condition precedent to [defendant's] obligation to pay [plaintiff]. Rather, [plaintiff] and [defendant] negotiated and agreed that [plaintiff] would be paid a sum *** if and when he left [defendant]." This appeal followed.

         ¶ 13 II. ANALYSIS

         ¶ 14 On appeal, defendant argues the trial court erred in: (1) finding defendant did not properly waive the noncompete provision in the agreement; (2) interpreting the language in subsection 6(d) of the agreement; and (3) finding plaintiff did not have a duty to mitigate ...


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