United States District Court, C.D. Illinois, Springfield Division
MYERSCOUGH, UNITED STATES DISTRICT JUDGE
cause is before the Court on the Motion for Preliminary
Injunction (d/e 4) filed by Plaintiff Stonhard, a division of
Stoncor Group, Inc. (Stonhard). Because Stonhard has not
shown a reasonable likelihood of success on the merits, the
motion is DENIED.
January 10, 2019, Stonhard filed a Complaint for Injunctive
and Other Relief (d/e 1). Count I of the Complaint asserts a
claim for breach of contract against Defendant Ronald E.
Gabriel (Gabriel), a former employee of Stonhard. Stonhard
alleges that Gabriel breached the noncompete provision of the
employment agreement Gabriel entered into with Stonhard by
obtaining employment with, and becoming a shareholder of,
Central Illinois Coatings, Inc. (CIC), a direct competitor of
Stonhard in central Illinois. Count II of the Complaint is a
tortious interference claim against CIC in which Stonhard
alleges that CIC has continued to employ Gabriel despite
having knowledge of the employment agreement Gabriel entered
into with Stonhard. Stonhard seeks monetary damages as well
as preliminary and permanent injunctions against Gabriel and
January 14, 2019, Stonhard filed its Motion for Preliminary
Injunction. Stonhard asks the Court to preliminarily enjoin
Gabriel from performing services for CIC in any capacity;
performing activities that compete with Stonhard in Illinois,
Wisconsin, Michigan, Minnesota, Missouri, Indiana, Iowa,
Ohio, and parts of Kentucky; and using or disclosing any
non-public information that was entrusted to Gabriel by
Stonhard or to which Gabriel had access by virtue of his
employment with Stonhard. See Proposed Order (d/e
6), ¶¶ 1-2; Transcript (d/e 24), at 15
(Stonhard's counsel noting that Iowa should have been
included in the proposed order but was not). Stonhard also
asks the Court to enjoin CIC from employing Gabriel,
receiving services from Gabriel in any capacity, and using
any non-public information belonging to Stonhard that was
disclosed to CIC by Gabriel. See Proposed Order,
January 25, 2019, Gabriel filed his Memorandum of Law in
Response to Plaintiff Request for Preliminary Injunction (d/e
20). Gabriel argues that Stonhard cannot establish
irreparable harm, claiming that he does not possess
Stonhard's confidential information and will not, while
the noncompete provision remains in effect, contact or
solicit Stonhard customers that Gabriel contacted while
working for Stonhard. Response (d/e 20), at 11. Gabriel also
argues that the harm he will suffer if the Court issues the
preliminary injunction requested by Stonhard weighs heavily
against the issuance of the preliminary injunction.
Id. at 14-15.
evidentiary hearing held on January 29, 2019, the Court heard
testimony from Gabriel; Reed Goodwin, Stonhard's National
Linings Manager; and Matthew Connelly, Stonhard's Area
Manager for the Great Lakes West region. The Court also
admitted several exhibits tendered at the hearing by Stonhard
and Gabriel. No. one attended the hearing on behalf of CIC.
manufactures and installs epoxy, polyurethane, and methyl
methacrylate (MMA) floors, walls, and lining systems.
Connelly Certification (d/e 5-1), ¶ 4; Goodwin Affidavit
(d/e 5-2), ¶ 3. Unlike some other companies in this
industry, Stonhard manufactures its own materials to be used
during the installation process. Transcript, at 182.
Stonhard's products are installed by third-party
contractors who install only Stonhard's products.
Id. at 26, 131-32.
significant amount of Stonhard's business is obtained
through a competitive bidding process in which potential
customers solicit bids from various companies for a project
before awarding that project to a particular company.
Transcript, at 68. A customer's decision on which company
to award a project to is based on pricing, goodwill, and the
relationship between the customer and each company that
submits a bid. Id. at 68-69.
November 4, 2013, Gabriel began his employment with Stonhard
as a Territory Manager assigned to central Illinois.
Id. at 27. Gabriel and Stonhard entered into an
employment agreement that contained the following provisions:
5.1 I recognize that Stonhard will necessarily share with me
various kinds of Stonhard's Confidential Information. I
further recognize that I will be using this Confidential
Information in the course of performing my duties of
employment for Stonhard. I also recognize that this
Confidential Information would be of value to any business
entity competing with Stonhard. I further recognize that I
may receive training in the performance of my Stonhard
employment duties and/or relating to Stonhard's products,
which training would make me of value to a business entity
competing with Stonhard. I still further recognize that such
training and the Stonhard Confidential Information I will be
receiving collectively represent a significant dollar expense
and investment by Stonhard. Accordingly:
5.1.1 During my employment with Stonhard, and for a period of
two (2) years subsequent to termination of my employment,
regardless of the reason for such termination, I shall not
compete with Stonhard by engaging in any activity similar to
the activities I undertake during the course of my employment
with Stonhard. I further agree that during such two-year
period subsequent to termination of my employment, I shall
not, directly or indirectly, solicit any Stonhard employee to
work for me, for my employer or for any Stonhard competitor.
5.1.2 I acknowledge and agree that the geographic scope of
this Covenant shall include any assigned territory in which I
worked while employed by Stonhard.
Ex. A, ¶¶ 5.1, 5.1.1, 5.1.2. The employment
agreement defined “Classified Information” to
include any version or edition, in any form or format, of
Stonhard's SFA,  Stonhard's P-File,  and
Stonhard's Price Guide as well as any raw data used to
prepare any such version or edition and any data items
contained in any such version or edition. Id. ¶
2.2. The employment agreement defined “Confidential
Information” to include, in addition to
“Classified Information, ” the following:
[A]ll of Stonhard's other proprietary, non-public
information, including operating plans, prices, pricing
policies, customer lists and identities, supplier lists and
identities, installer lists and identities, raw and purchased
material specifications, product and equipment
specifications, reports, records, memoranda, notes, sales
training materials, sales and marketing strategies and
business practices, techniques and plans for Stonhard,
including its operating units, groups and regions.
Id. ¶ 2.3. With the exception of raw material
specifications, Gabriel had access to all “Confidential
Information” that did not meet the definition of
“Classified Information.” Transcript, at 48-50.
Gabriel agreed to refrain from using any “Confidential
Information” other than “for Stonhard's
benefit in the course of performing [Gabriel's]
employment duties for Stonhard.” Complaint, Ex. A,
duties as a Territory Manager included pursuing and
generating sales leads, developing relationships with
customers and general contractors, and negotiating contract
terms with Stonhard's customers and prospective
customers. Connelly Certification, ¶ 11. As a Territory
Manager, Gabriel prepared proposals to submit to
Stonhard's customers or prospective customers.
Transcript, at 28. These proposals included price terms for
Stonhard's products and installation, the latter of which
included labor overhead. Id. at 29. As a Territory
Manager, Gabriel had the ability to increase or decrease the
price of a particular project, although the approval of an
Area Manager would have been needed during Gabriel's
first year with Stonhard (and potentially even after that,
depending on the size of the project and the products
involved). Id. at 194-96.
duties as a Territory Manager also included overseeing the
installation of Stonhard's products, which entailed
coordinating material delivery, negotiating with
subcontractors to perform installation work, and analyzing
the cost and overhead of various projects. Connelly
Certification, ¶ 12; Transcript, at 43-44. As part of
Gabriele's training as a Territory Manager, he learned
about Stonhard's sales techniques and sales strategies.
Transcript, at 56. Prior to obtaining employment with
Stonhard, Gabriel knew nothing about pricing epoxy or MMA
floors and had not received training on the different
materials that Stonhard sells. Id. at 45.
his employment with Stonhard, Gabriel was introduced to
Stonhard's customers and prospective customers in the
geographic regions to which he was assigned. Connelly
Certification, ¶ 13. Throughout his employment with
Stonhard, Gabriel developed and maintained relationships with
Stonhard's customers. Id. Of the Stonhard
customers Gabriel worked with, an overwhelming majority were
customers that Gabriel first met while working for Stonhard.
Transcript, at 45-46.
Stonhard employee, Gabriel had access to customer lists,
customer contact information, sales leads, information on
customer needs and requirements, and discounts and other
contractual terms pertaining to particular customers.
Connelly Certification, ¶ 14. Gabriel also had access to
Stonhard's confidential pricing information and
Stonhard's method for pricing materials and installation
services. Id. At no time did Gabriel have access to
the profit margin for any particular project. Gabriel
Affidavit (d/e 20-1), ¶ 11. Stonhard does not disclose
profit margin to its Territory Managers. Transcript, at 194.
takes steps to prevent the disclosure of confidential
information to the public, including Stonhard's
competitors. Gabriel Affidavit, ¶ 15. The identity of
Stonhard's customers, the contact information for those
customers, the nature and terms of Stonhard's business
relationships, and Stonhard's pricing formulas are not
known by Stonhard's competitors and cannot be determined
through public sources. Goodwin Affidavit, ¶ 4.
employed by Stonhard, Gabriel had access to Stonhard's
SFA, a computer application Gabriel accessed with a username
and password specific to him. Transcript, at 29-30; Gabriel
Affidavit, ¶ 10. The SFA, which Gabriel used to price
projects, contains customer contact information, a history of
communications with customers or potential customers, quotes
provided to customers, and notes about customer needs or
preferences. Id. at 30-31. After speaking with a
customer or potential customer, Gabriel would enter notes in
the SFA about the conversation. Id. at 31.
also contains detailed information on projects that Stonhard
bid on and was awarded, including customer contacts and
information on pricing, labor costs, and material costs.
Id. at 31-32, 134. Information in the SFA on a
customer's previous projects can assist a Territory
Manager in preparing a quote for another project that the
customer would find acceptable. Id. at 39. The
information in Stonhard's SFA is not available to
Stonhard's competitors. Id. at 35.
Territory Manager, Gabriel had access to certain SFA
information for all of Stonhard's customers and potential
customers in central Illinois. Id. at 36. Gabriel
had access to information on labor charges, labor overhead,
material list prices, material quotes, and miscellaneous
charges, but he did not have access to information on cost of
sales percentages, material costs, estimated use taxes, or
gross profit percentages. Id. at 41-43. Gabriel, as
a Territory Manager, did not have access to SFA information
for any territory other than the territory assigned to
Gabriel. Id. at 121.
about September 1, 2017, Stonhard promoted Gabriel to the
position of Regional Linings Manager. Goodwin Affidavit,
¶ 7; Transcript, at 138. While still responsible for
business development, Gabriel's focus as a Regional
Linings Manager shifted from all of Stonhard's products
to Stonhard's Stonchem line of products. Goodwin
Affidavit, ¶ 9; Transcript, at 139. Due to his
promotion, Gabriel's assigned territory expanded to
include the states of Illinois, Wisconsin, Michigan,
Minnesota, Missouri, Iowa, Indiana, Ohio, and areas of
Kentucky that included the cities of Lexington and
Louisville. Goodwin Affidavit, ¶ 9; Transcript, at 15.
Accordingly, as a Regional Linings Manager, Gabriel had
access to SFA information for all of Stonhard's customers
and potential customers in 26 territories. Transcript, at 36,
56, 121. During his time as a Regional Linings Manager,
Gabriel reported to Reed Goodwin (Goodwin). Id. at
November 7, 2017, Gary Zimmerman (Zimmerman) initiated a
conversation with Gabriel about purchasing CIC's assets.
Transcript, at 76, 142-43. Over the next several months,
while Gabriel was employed by Stonhard, Gabriel and Zimmerman
had extensive business discussions and exchanged information.
Id. at 85, 89-90, 143. Gabriel indicated that he
could take over Zimmerman's role of pricing jobs for
CIC's customers. Id. at 86.
2018, Coatings of Illinois, Inc. (Coatings of Illinois), was
incorporated in the State of Illinois. Transcript, at 63, 76;
Pl. Ex. 8. In August 2018, Gabriel and Zimmerman's two
sons signed an agreement on behalf of Coatings of Illinois
through which Coatings of Illinois purchased ...