Agrimerica, Inc. v. Mathes

• Decision Date: 22 May 1990
• Docket Number: No. 1-89-0653,1-89-0653
• Citation: 557 N.E.2d 357,199 Ill.App.3d 435,145 Ill.Dec. 587
• Parties: , 145 Ill.Dec. 587 AGRIMERICA, INCORPORATED, Plaintiff-Appellant, v. Vernon L. MATHES and FMF International, Inc., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 357

557 N.E.2d 357

199 Ill.App.3d 435, 145 Ill.Dec. 587

AGRIMERICA, INCORPORATED, Plaintiff-Appellant, v. Vernon L. MATHES and FMF International, Inc., Defendants-Appellees.

No. 1-89-0653.

Appellate Court of Illinois,

First District, Second Division.

May 22, 1990.

Rehearing Denied Aug. 6, 1990.

Vedder, Price, Kaufman & Kammholz, Chicago (Richard F. Zehnle and Jeannine M. Pison, of counsel), for plaintiff-appellant.

Tenenbaum & Senderowitz, Chicago (Marvin Tenenbaum and Steven Daily, of counsel), Martin Cohn & Associates, Chicago (Randall Server, of counsel), and (David E. Stahl, of counsel), Marietta, Ga., for defendants-appellees.

Justice HARTMAN delivered the opinion of the court:

The circuit court found that defendants Vernon C. Mathes (Mathes) and FMF International, Inc., previously known as Far-Mor (Far-Mor), respectively, did not breach a restrictive covenant not to compete; did not induce a breach of the covenant; and denied plaintiff Agrimerica, Inc. (Agrimerica) injunctive and monetary relief. Agrimerica appeals, raising as issues whether the circuit court erred in finding that (1) the restrictive covenant was unenforceable; (2) Agrimerica breached its employment agreement with Mathes; (3) Mathes did not violate the restrictive covenant; (4) Far-Mor did not intentionally interfere with Mathes' contract with Agrimerica; and (5) Agrimerica did not prove that it suffered damages as a result of defendants' actions. Agrimerica also claims the circuit court abused its discretion in not entering an injunction prohibiting defendants from soliciting plaintiff's customers in the three state region covered in the restrictive covenant; and abused its discretion in not ordering an accounting of all sales made by defendants to Agrimerica customers in violation of the restrictive covenant. The case is on appeal for a second time (see 170 Ill.App.3d 1025, 120 Ill.Dec. 765, 524 N.E.2d 947). Only those record facts necessary for understanding and disposition will be repeated here.

Agrimerica produces "specialty" ingredients, flavoring additives, mold inhibitors and surfactants, which are not absolutely necessary for the growth of animals, but are designed to make animal feed more palatable and encourage better growth. Because specialty products are not yet widely accepted in the animal feed industry, new customers must be developed and persuaded of the need for them. Agrimerica utilized research and assistance to customers in achieving meaningful results. It spent over $700,000 on research and development toward these ends between 1985 and 1986.

On October 23, 1984, Agrimerica hired Mathes as its sales representative in the states of Florida, Georgia and Alabama. Never before had he sold flavoring additives, mold inhibitors or surfactants in this geographical area. Mathes was first trained by Agrimerica's sales manager before being allowed to call upon customers. Also, he was given the preceding year's call reports, prepared by Agrimerica's previous representative in the territory, which documented certain customer information for Agrimerica's use. When his training was completed, Mathes was accompanied on his sales calls in his assigned territory by Agrimerica's sales manager who introduced him to key personnel of existing and potential Agrimerica customers. Mathes also periodically received additional sales and technical training from Agrimerica personnel thereafter, assisting him to identify and correct problems with specialty products experienced by his customers.

Mathes did not sign the agreement embodying the restrictive covenant at issue here until December 17, 1984. The first copy, sent by mail, apparently was not received by him. The second copy was given to him for signature when he later came to Agrimerica's home office in Illinois for a sales meeting. The agreement contained the following covenant in which Mathes promised that:

"Following the termination of Employee's employment by Agrimerica for any reason (including resignation), for a period that is the lesser of 24 months he/she was employed by Agrimerica, Employee will not in any way, directly or indirectly (as detailed in the preceding paragraph), promote, sell or attempt to sell, in the Sales Region, any product or service that is in any way competitive with Agrimerica's Business to any person or entity that has been a customer of Agrimerica within two years prior to the date on which Employee's employment with Agrimerica terminated."

Mathes served as Agrimerica's salesman in the three state area until his termination on March 30, 1987, following a restructuring of the company's sales department. Although offered sales positions with six different companies, only one, Far-Mor, was involved in sales competition with Agrimerica in the same territory Mathes previously served. In fact, Mathes represented to Far-Mor's president, David Decker, that he had developed close personal relationships with some of Agrimerica's customers whom he had served and thought he could switch them over to Far-Mor. In late May 1987, Far-Mor hired Mathes to sell its products primarily in Georgia, Florida, Alabama, and Mississippi, in part because of customer contacts he developed during his employment with Agrimerica. Mathes thereafter solicited orders from certain customers he had serviced previously while employed by Agrimerica.

On July 20, 1987, Agrimerica filed a verified amended complaint and a separate motion for a temporary restraining order. The amendment iterated the allegations of its original complaint and expanded its requested relief to include (1) a temporary restraining order and both preliminary and permanent injunctions to enjoin Mathes from breaching the terms of his employment agreement and from disclosing confidential information learned while employed by Agrimerica; (2) an accounting; and (3) money damages. As to Far-Mor, Agrimerica sought (1) a temporary restraining order and both preliminary and permanent injunctions to enjoin Far-Mor from interfering with the employment agreement, inducing or encouraging Mathes to breach that agreement, and using any confidential information learned from Mathes regarding Agrimerica operations; (2) an accounting; and (3) money damages.

Far-Mor filed its answer to the amended complaint that same day, and admitted Mathes' hiring and his subsequent contacts with his former Agrimerica customers in his new capacity as a Far-Mor representative. Far-Mor denied, however, the existence of Agrimerica's alleged proprietary interest in its customers. It also raised several affirmative defenses, including (1) the amendment failed to state a claim for which relief could be granted; and (2) the employment agreement between Agrimerica and Mathes was unenforceable as against public policy. It did not raise a defense based upon justification. Far-Mor's response to the motion for a temporary restraining order repeated Far-Mor's answer and affirmative defenses and sought denial of the motion.

The circuit court denied the motion for a temporary restraining order and set a date for a preliminary injunction hearing on July 20, 1987. At the July 20 hearing, Mathes, a Georgia resident, moved unsuccessfully to quash the amended complaint for lack of personal jurisdiction. Mathes' answer, filed on August 4, 1987, denied the validity and the enforceability of the employment agreement; sought dismissal of the amended complaint; and raised several defenses and counterclaims.

Following an evidentiary hearing on August 19, 1987, the circuit court granted defendants' motion for a finding and entered an order denying the motion for a preliminary injunction. An appeal to this court followed, and the cause was reversed and remanded in an opinion filed on May 10, 1988. (170 Ill.App.3d 1025, 120 Ill.Dec. 765, 524 N.E.2d 947.) This court ruled that the evidence presented at the preliminary hearing was "more than adequate to raise a fair question as to the existence of a proprietary interest in Agrimerica's customers which may be subject to legal protection and a likelihood of success in seeking injunctive relief," and upon remandment, the circuit court was to continue the hearing so as to "allow defendants to offer evidence in their cases." (Emphasis added.) 170 Ill.App.3d at 1036, 120 Ill.Dec. 765, 524 N.E.2d 947.

All parties subsequently agreed to a trial on the merits of all Agrimerica's claims and Mathes' counterclaim. ¹ From November 16-18, 1988, the circuit court conducted the trial. It is important to note that the parties stipulated to incorporating testimony from the preliminary hearing conducted on August 19, 1987, as part of the 1988 trial evidence, and so advised the court. A substantial part of the evidence took the form of excerpts from depositions.

At the conclusion of the trial and upon consideration of the post-trial briefs, the circuit court issued a written opinion containing findings of fact, a memorandum of law, and its dispositive order. The court's findings of fact included the following: (1) The non-competition agreement was signed by Mathes without additional consideration. (2) The non-competition agreement was not ancillary to any other agreement. (3) Agrimerica did not have any legitimate protectable business interest or reason to require Mathes to sign the agreement. (4) Agrimerica did not have long term, near permanent relationships with its customers since the industry was "highly competitive" and customers were motivated by "price considerations" and "product quality" in determining purchases. (5) Agrimerica's claim to have had customers for as long as 30 years was not supported by "credible evidence." (6) Agrimerica did not lose business to Far-Mor as a result of any wrongful conduct by Far-Mor or Mathes. (7) Agrimerica's actual sales history supported a finding of lost profits. (8) Agrimerica's attempt to show lost profits through "projections" of future sales to four customers was ...