Egnell, Inc. v. Weniger

• Citation: 418 N.E.2d 915,94 Ill.App.3d 325,49 Ill.Dec. 895
• Decision Date: 16 March 1981
• Docket Number: No. 80-3162,80-3162
• Parties: , 49 Ill.Dec. 895 EGNELL, INC., Plaintiff-Appellee, v. Gotthilf WENIGER and Medela, Inc., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 915

418 N.E.2d 915 94 Ill.App.3d 325, 49 Ill.Dec. 895 EGNELL, INC., Plaintiff-Appellee,
v.
Gotthilf WENIGER and Medela, Inc., Defendants-Appellants. No. 80-3162. Appellate Court of Illinois, First District, First Division. March 16, 1981.

[94 Ill.App.3d 326]

Page 916

[49 Ill.Dec. 896] Norman J. Barry, Joseph P. Della Maria, Jr., Edward C. McCarthy (Rothschild, Barry & Myers, Chicago, of counsel), for defendants-appellants.

Mark S. Lieberman, Robert W. Dziubla, Rosenthal & Schanfield, Chicago, for plaintiff-appellee.

GOLDBERG, Presiding Justice:

Egnell, Inc. (plaintiff) brought this action against Gotthilf Weniger and Medela, Inc. (defendants) seeking injunctive relief and damages based upon claims of unfair competition, breach of contract and breach of fiduciary duty. After an evidentiary hearing, the trial court entered a preliminary injunction against both defendants. Defendants appeal.

To fully understand the details of this case, it is necessary to describe the corporations involved. Ameda AG (Ameda) is a Swiss corporation engaged in manufacturing and distributing medical equipment including the unpatented Egnell breast pump. Prior to the circumstances of this suit, Ollee Larsson (Larsson) was chairman of the board and managing director of Ameda. Werner Krahenbuhl (Krahenbuhl) was chief executive officer of Ameda until January 1980. The controlling interest in Ameda was represented by Holger Infeldt (Infeldt).

Until the circumstances of this suit occurred, the exclusive Swiss agent of Ameda with respect to the Egnell breast pump was Medela AG, a Swiss corporation. Larsson was chairman of the board of Medela AG, while Krahenbuhl was its chief executive officer.

Plaintiff was organized in 1975. Plaintiff is a wholly owned subsidiary of Ameda, and has been the American distributor of the Egnell breast pump since its inception. Larsson and Krahenbuhl were installed as directors of plaintiff with Larsson also acting as president.

Defendant Gotthilf Weniger (Weniger) was the organizer of plaintiff. Pursuant to his 1975 employment contract with plaintiff, Weniger initially held the position of vice-president thereof. Weniger's employment contract explicitly stated in paragraph 6 thereof:

"Weniger hereby agrees that througout (sic) the two-year period commencing on the termination of his employment hereunder for whatever reason he will not directly or indirectly, be or become engaged or financially interested in, or an officer or director, employee, consultant or advisor of or to, any business, firm or corporation which engaged anywhere in the United States or [94 Ill.App.3d 327] Canada in any business which competes in any way with Egnell in the conduct of any business conducted by Egnell at any time during the term of Weniger's employment hereunder * * *."

Weniger became president and treasurer of plaintiff in March 1979. In July 1979, Weniger contacted Elizabeth Lemon, a representative of La Leche League International, for purposes of marketing the Egnell breast pump in Canada. Mrs. Lemon met with Weniger and Krahenbuhl in September 1979 for further development of these plans.

On November 2, 1979, Krahenbuhl met with Weniger to discuss an Ameda management dispute between Larsson and Infeldt. Shortly thereafter, Weniger requested that an updated employment contract between himself and plaintiff be prepared without a restrictive covenant. A contract was so prepared, and was signed by Weniger in December 1979. Krahenbuhl and Larsson both signed the agreement as directors of plaintiff.

In January 1980, Larsson sold his Ameda stock and resigned from all positions with Ameda. On January 28, 1980, Krahenbuhl also resigned from both Ameda and plaintiff. Both men retained their positions with Medela AG.

On February 22, 1980, Weniger submitted his resignation from plaintiff, effective August 22, 1980. At approximately this time, Infeldt made inquiries to Weniger concerning plaintiff's plans for the Canadian market, but received no response.

Page 917

[49 Ill.Dec. 897] In April 1980, Krahenbuhl wrote to Mrs. Lemon on Medela AG stationery concerning "the rental of the Breast Pump in Canada." Subsequently, Krahenbuhl sought to hire Mrs. Lemon to distribute Medela AG's breast pump. It is unclear whether the severance of Medela AG from plaintiff and Ameda was explained to Mrs. Lemon, but Krahenbuhl reportedly told her to avoid communication with plaintiff.

Weniger continued to be employed as president of plaintiff until August 22, pursuant to his contract. However, in May 1980, Weniger signed contracts with Medela AG concerning the formation and operation of the defendant Medela Company, now known as Medela, Inc. by change of name, as a North American subsidiary of Medela AG. Weniger contributed funds towards capitalization of Medela, Inc. and received a seat on its board of directors. Weniger also made preliminary arrangements towards setting up the business of Medela, Inc. These arrangements included leasing office space, preparing budget and distribution plans, and submitting an application for approval of the Medela, Inc. breast pump with Underwriters Laboratories.

On May 30, 1980, Weniger wrote to Infeldt and indicated he would soon be working in competition with plaintiff. Weniger did not disclose his relationship with Krahenbuhl and Larsson. In July 1980, Infeldt [94 Ill.App.3d 328] personally contacted Mrs. Lemon concerning the Egnell breast pump. Mrs. Lemon is now an employee of Egnell Medical Incorporated, another Ameda subsidiary formed on August 15, 1980.

Weniger's employment with plaintiff terminated on August 22, 1980. Weniger began his employment with Medela, Inc. on September 1, 1980. On August 27, 1980, Mrs. Lemon was contacted by Kent DiVerde, a former employee of plaintiff now employed by Medela, Inc. He reportedly told her Medela, Inc. was the company of the future, as plaintiff was disintegrating. On August 8, 1980, Ameda sued Medela AG and Larsson in Switzerland. Plaintiff filed the instant complaint against Weniger and Medela, Inc. on September 11, 1980.

After an evidentiary hearing the trial court entered a preliminary injunction against both Weniger and Medela, Inc. The court found Weniger to be bound by the restrictive covenant in his 1975 employment contract, and enjoined him from "engaging in the sale or distribution of electric breast pumps and of accessories thereto, and from employment with any person or company engaged in such sale or distribution." The trial...