Disher v. Fulgoni

• Decision Date: 01 May 1984
• Docket Number: No. 83-2517,83-2517
• Citation: 124 Ill.App.3d 257,464 N.E.2d 639,79 Ill.Dec. 735
• Parties: , 79 Ill.Dec. 735 David C. DISHER, Plaintiff-Appellant, v. Gian M. FULGONI; William C. Walter; John L. Malec; and Information Resources, Inc., a Delaware corporation, Defendants-Appellees, and Gerald J. Eskin; Don Rydberg; Lin Stanley; George Garrick; James W. Fahey; Randall S. Smith; Darlene Liebrock; Edward N. Fares; Paul Chouinard; Della J. Garcia; and George E. Ryan, Nominal Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 639

464 N.E.2d 639

124 Ill.App.3d 257, 79 Ill.Dec. 735

David C. DISHER, Plaintiff-Appellant, v. Gian M. FULGONI; William C. Walter; John L. Malec; and Information Resources, Inc., a Delaware corporation, Defendants-Appellees and Gerald J. Eskin; Don Rydberg; Lin Stanley; George Garrick; James W. Fahey; Randall S. Smith; Darlene Liebrock; Edward N. Fares; Paul Chouinard; Della J Garcia; and George E. Ryan, Nominal Defendants-Appellees.

No. 83-2517.

Appellate Court of Illinois First District, Second Division.

May 1, 1984.

Rehearing Denied June 7, 1984.

Reuben & Proctor, Gary M. Elden, Daniel A. Edelman, Gerald F. Lutkus, Chicago, for plaintiff-appellant.

William E. Snyder, Chadwell & Kayser, Ltd., Chicago, for defendants-appellees.

DOWNING, Justice:

The issue in this case is whether, under Illinois law, an employee confidentiality agreement can be invalidated on the basis of being overly broad in scope and duration. Plaintiff, David C. Disher, contests the propriety of an order entered by the trial court denying his motion for preliminary injunctive relief. Plaintiff had sought, by virtue of this motion, to nullify or restrain enforceability of a confidentiality agreement executed by him while in the employ of Information Resources, Inc. ("IRI"), the corporate defendant in this action.

IRI is a marketing research company which designs, develops and maintains computer-based systems and services for the collection, as well as analysis, of market information on sales of packaged consumer goods. Essentially, IRI assists manufacturers of consumer goods in the testing and evaluation of their marketing plans for new products, media advertising, pricing and sales promotions.

In August 1981, plaintiff received an offer of employment from IRI, a Delaware corporation with its principal offices in Chicago. In order to commence working for IRI, plaintiff liquidated his marketing research business in Cincinnati, sold his home there and moved to Illinois. At the outset, plaintiff was employed by IRI as vice-president of operations; thereafter, he directed all market operations of "BehaviorScan," including market fieldwork, data input and in-market quality control. The "BehaviorScan" system measures the effect of different marketing strategies on product purchases and thereby enabled IRI to (1) target television advertisements over cable television to groups of pre-selected consumer panelists, (2) collect panelist purchase data through the use of supermarket "point-of-sale" scanners, and (3) analyze the effect of client advertising by means of IRI's computer systems.

At the time the instant action commenced, defendant Gian M. Fulgoni occupied the position of president and chief operating officer of IRI; defendant John L. Malec occupied the position of chairman of the board and chief executive officer of IRI; defendant William C. Walter occupied the position of vice-chairman of the IRI board; and the nominal defendants, joined so as to purportedly necessitate the determination of certain issues to be raised before the trial court, all occupied various positions as employees of IRI.

On January 19, 1982, plaintiff signed what was entitled an "Employee Confidentiality Agreement" ("the Agreement"). When first presented with the Agreement, plaintiff objected to being a signatory on the grounds of vagueness and overbreadth; however, after he was told that the Agreement was a non-negotiable condition of employment, plaintiff proceeded to sign it out of fear of losing his job.

Specifically, plaintiff agreed as signatory not to disclose, IRI's trade secrets and confidential information to any third party. The restricted subject matter included, but was not limited to, client lists, marketing and business plans, computer programs and systems, test designs, IRI television converter specifications and lists, ¹ panel household identifications, ² matching routines, ³ analytical models used for projecting data obtained from various stores, and financial data, generally referred to as proprietary information. The Agreement further precluded disclosure to any third party of confidential information and trade secrets belonging to IRI's clients. All inventions, discoveries and improvements relating to IRI's business, which were conceived by plaintiff in his individual capacity as an IRI employee, or in conjunction with other IRI employees, were also regarded as being confidential and thus subject to the non-disclosure commitment. Finally, the Agreement included this statement: "This agreement of confidentiality will survive my employment at IRI." (Emphasis supplied.)

On April 6, 1983, plaintiff was informed that his services were no longer needed at IRI, and that he could use the company's offices for 90 days in order to assist his transition to another job. Regarding such future employment, plaintiff was first told that the IRI executives preferred that he not work for the Burke Companies. By early June 1983, this preferential restriction was expanded to include the A.C. Nielsen Company as well as SAMI, ⁴ a division of Time, Inc. Subsequent thereto, plaintiff received from IRI a four-page draft "letter agreement," dated June 22, 1983, which, amongst other things, stated: "It is the Executive Committee's view that it would be impossible for [plaintiff] to work for certain competitors in the near term without unfairly using confidential information adverse to the company's best interest." The letter then provided that plaintiff "will be under an obligation of non-disclosure of confidential information to any third party indefinitely, until that information otherwise becomes publicly known through legitimate origins." A precise recitation of such confidential information was regarded by the executive committee as being "beyond the scope of this (or any) agreement * * *."

Following plaintiff's refusal to agree to the June 22 non-disclosure proposal, he received a Western Union mailgram on June 29, 1983 which ordered relinquishment of all IRI materials in his possession, denied him further access to IRI facilities and, for the second time, informed him that his employment with IRI was terminated.

Two interviews with the A.C. Nielsen Company resulted in an offer to plaintiff of employment as field operations manager; however, this offer was withdrawn on July 22, 1983 due to a letter sent by IRI's counsel, dated July 15, 1983, apprising A.C. Nielsen's general counsel of the existence and nature of the Agreement signed by plaintiff in 1982. This letter further indicated that IRI would enforce and maintain, to the fullest extent, its proprietary rights under the Agreement.

On July 27, 1983, plaintiff filed a verified complaint claiming, inter alia, tortious interference with prospective economic advantage. Injunctive relief was thus sought to restrain IRI and the individual defendants from enforcing the Agreement. On August 16, 1983, IRI filed a verified counterclaim requesting that plaintiff be enjoined from disclosing, or otherwise using, any trade secrets or other proprietary information received by plaintiff while in IRI's employ. This counterclaim further sought to preclude plaintiff from implementing any plans for the establishment of a competitive business.

On September 9, 1983, plaintiff agreed to a second employment offer from the A.C. Nielsen Company which was contingent on the entry, by October 15, 1983, of a declaratory judgment or an injunction invalidating or restraining enforcement of the Agreement. That same day, September 9, plaintiff filed an amended verified motion for preliminary injunctive relief which apprised the trial judge of the second employment offer. An evidentiary hearing on this motion commenced October 12, 1983. On October 14, 1983, following arguments by counsel, the trial court ruled that no basis existed by which it could grant injunctive relief. Acknowledging the novelty of plaintiff's theory, the court nonetheless found "confidential information of a substantial sort" so as to obviate any likelihood of invalidation when a ruling on the merits would later be made. The trial court also held that the contract was not so overly broad that it should be nullified as a matter of law. It is the propriety of this determination which plaintiff now contests on appeal.

I.

The sole issue raised by plaintiff on review is whether, under Illinois law, an employee confidentiality agreement can be invalidated on the basis of being overly broad in scope and duration. We answer this question, one of first impression in Illinois, in the affirmative.

A.

As a general rule, Illinois courts have sought to encourage fair competition in the business sector in order to avoid restriction of an employee's freedom to pursue a particular occupation. (Lincoln Towers Insurance Agency v. Farrell (1st Dist.1981), 99 Ill.App.3d 353, 355, 54 Ill.Dec. 817, 425 N.E.2d 1034; TAD, Inc. v. Siebert (1st Dist.1978), 63 Ill.App.3d 1001, 1004, 20 Ill.Dec. 754, 380 N.E.2d 963, appeal denied, 71 Ill.2d 621.) Since our free economy is based upon competition, one who has worked in a particular field cannot be compelled to erase from his mind all of the general skills, knowledge, acquaintances and overall expertise acquired during his tenure with the former employer. (Revcor, Inc. v. Fame, Inc. (2d Dist.1967), 85 Ill.App.2d 350, 357, 228 N.E.2d 742; see also, Schulenburg v. Signatrol, Inc. (1965), 33 Ill.2d 379, 387, 212 N.E.2d 865, cert. denied (1966), 383 U.S. 959, 86 S.Ct. 1225, 16 L.Ed.2d 302.) Our supreme court has held that where an employer seeks to enforce a palpably unfair and unconscionable agreement, there is no entitlement to the equitable remedies of injunction or specific performance. (Victor Chemical Works v. Iliff (1921), 299 Ill. 532, 551, 132 N.E. 806.) Consequently, "restraints have not been lightly placed upon an...