Hamer Holding Group, Inc. v. Elmore

• Decision Date: 16 March 1993
• Docket Number: No. 1-92-2337,1-92-2337
• Citation: Hamer Holding Group, Inc. v. Elmore, 244 Ill.App.3d 1069, 613 N.E.2d 1190, 184 Ill.Dec. 598 (Ill. App. 1993)
• Parties: , 184 Ill.Dec. 598 HAMER HOLDING GROUP, INC., First United Property Management Company, Inc., and Studio 2, Inc., 1 Plaintiffs-Appellants, v. Stephen C. ELMORE, Defendant-Appellee.
• Court: Appellate Court of Illinois

Page 1190

613 N.E.2d 1190

244 Ill.App.3d 1069, 184 Ill.Dec. 598

HAMER HOLDING GROUP, INC., First United Property Management Company, Inc., and Studio 2, Inc.,¹Plaintiffs-Appellants, v.Stephen C. ELMORE, Defendant-Appellee.

No. 1-92-2337.

Appellate Court of Illinois First District, Second Division.

March 16, 1993.

Marshall N. Dickler, Ltd., Arlington Heights (Shelley R.Z. Barnett and Marshall N. Dickler, of counsel), for plaintiffs-appellants.

Nisen & Elliott, Chicago (Michael J. Daley, of counsel), for defendant-appellee.

Justice SCARIANOdelivered the opinion of the court:

Plaintiff appeals, pursuant to Supreme Court Rule 307(a)(1)(134 Ill.2d R. 307(a)(1)), from the circuit court's denial of a preliminary injunction after remandment of the cause by this court in a previous appeal.(Hamer Holding Group, Inc. v. Elmore(1990), 202 Ill.App.3d 994, 148 Ill.Dec. 310, 560 N.E.2d 907(hereinafter Hamer I ).)In Hamer I, we remanded the action for a determination of the scope of plaintiff's business at the time defendant left its employ and whether, based on that finding, defendant's covenant not to compete, the enforceability of which was the core issue in Hamer I, as it is here, unreasonably restrained his activity in that business.

On remand, the trial court first found that when defendant voluntarily terminated his employment relationship on March 1, 1988, plaintiff was engaged in the real estate management business for condominium and homeowner associations.As to the second aspect of this court's mandate, the court ultimately denied plaintiff's injunction, believing that to issue it would be merely "vindictive."

Plaintiff appeals, asserting multiple grounds which can be summarized to include: (1)The trial court generally erred by failing to issue the injunction; (2)the court erred when it determined that the scope of plaintiff's business included only management services offered solely to condominium and homeowner associations; (3)the court violated this court's mandate on remand by considering matters beyond the record on appeal; and (4)the court erred by balancing the equities when this court's mandate did not authorize it.

In 1979, AMCO Realty and Management Company was incorporated in Illinois for the purpose of providing management services to condominium and homeowner associations.DefendantStephen Elmore was its sole shareholder and served as its chief executive officer.On March 15, 1984, Elmore, in his capacity as CEO of AMCO, entered into a contract with First Eagle Holding Company, Inc.(First Eagle) wherein AMCO agreed to convey to First Eagle all of its corporate assets, including its good will.

In order to ensure the value of the good will, paragraph 3 of the sales contract, which was made a condition precedent to the contract, obligated Elmore to enter into an employment contract with First Eagle prior to the closing date, March 30, 1984, a condition he satisfied in a timely manner.On March 26, 1984, First Eagle, as permitted by the sales contract, assigned to a subsidiary, First United ICI, Inc.(First United I), its right to purchase AMCO including Elmore's now-executed employment contract.

Under the employment agreement, Elmore would be "responsible for management services rendered to condominiums and cooperative associations and rental apartment units;" the term of the agreement was to be one year; and in return Elmore would receive $2,000 a month as compensation.It also contained the covenant not to compete referred to above, which stated:

"7.Covenant Not to Compete

Employee agrees that during the term of this Agreement he will not directly or indirectly consult with, or render services for or in any manner engage in a business competing with the business of Employer anywhere within a seventy-five (75) mile radius of Monroe and Dearborn, Chicago, Illinois (Restricted Area).Employee further agrees that for a period of three (3) years following the termination of his employment with Employer he will not directly or indirectly consult with or render services for clients of Employer whether or not such clients became clients of Employer through the efforts made by or on behalf of Employee or in any manner engage in a business competing with the business of Employer anywhere in the Restricted Area.

Employee agrees that during the term of this Agreement and for a period of three (3) years following the termination of his employment with Employer, he shall not consult with, render services for or in any manner engage in a business competing with the business of Employer within the Restricted Area with regard to any person, persons or companies that had been contacted by Employee for the purposes of securing such parties as clients of Employer.In the case of termination, such covenant for such three year period following termination shall be with regard to all such parties contacted by Employee or on behalf of Employer by Employee during the 12 month period preceding termination."

After First United I's acquisition of AMCO, it assumed the responsibility of acting as the manager for the condominium associations of AMCO's former clients.It also served as manager of townhouse associations and oversaw a few parcels of commercial properties as well.Elmore served as CEO of First United I, a position he occupied until he decided to end his relationship with it on March 1, 1988.Subsequently, on October 31, 1988, First United I sold its assets including Elmore's employment agreement to Studio 2, Inc., the remaining plaintiff in this action and now designated First United Property Management, Inc.("First United II").First United II's president and CEO, Mark Maute, had worked under Elmore at AMCO.While Maute was negotiating to purchase the assets of First United I, Elmore's attorney contacted him and sought a release of his client from the covenant.Elmore also contacted Maute and admitted that he wanted once again to service properties he had managed while at AMCO, which properties implicated the covenant as they were well within its 75-mile geographic scope.

In November 1988, only six months into the three-year timeframe of the covenant, Elmore contacted his former clients, offering them his managerial services.When Maute learned of Elmore's overtures to former clients, he telephoned Elmore and during their conversation, Elmore cautioned Maute that if he was not released from the covenant, he"was prepared to go down in flames and take everyone else with him."He also threatened to spread false rumors to his former clients concerning First United II's ability to manage properties.

Immediately thereafter, First United II brought this action seeking, inter alia, preliminary and permanent injunctive relief to enjoin Elmore from violating his covenant not to compete.The court held evidentiary hearings on whether it should issue a preliminary injunction and found that the restraint was reasonable in its geographic scope and duration, but held that plaintiff had no protectible interest to be safeguarded by the covenant.As a result, it denied plaintiff injunctive relief, which then filed an interlocutory appeal.

On appeal, we reversed the trial court's finding that plaintiff could assert no protectible interest, holding instead that the covenant was ancillary to the sale of AMCO and therefore plaintiff had a legitimate interest in AMCO's good will which could be properly sheltered by the covenant.We found that the reasonableness of the restraint could not be determined, however, because the record was devoid of evidence concerning the scope of the activity to be restrained.To that end, we remanded the case to the trial court for a determination of the scope of plaintiff's business at the time Elmore left its employ, and also instructed the trial court to then determine, in view of the scope of activity, whether the restraint was reasonable.

Elmore petitioned for a rehearing, which we denied on October 9, 1990; he then sought leave to appeal to the supreme court which was denied as well on February 6, 1991.Although the mandate of this court was filed with the trial court on March 19, 1991, it was not until August 29, 1991, that plaintiff initiated proceedings, seeking direction as to how to comply with our remand order.The court ordered the parties to brief the issue and also to discuss whether the injunction should issue at all, emphasizing the length of time that had elapsed since the original breach of the covenant and, more important, that the temporal extent of the restraint (three years) had expired while the case was on appeal.

The parties filed their briefs on the issues indicated, and the court held a conference on September 19, 1991, at which it expressed its concern over the issue of enforcing the restraint against Elmore at such a late date.It also ordered plaintiff to designate which portions of the record the court should consider while determining the scope of plaintiff's business at the time Elmore left its service and went on to set an evidentiary hearing for February 19, 1992, to examine the question of whether changed circumstances prevented the issuance of the injunction.Meanwhile, on October 21, 1991, plaintiff filed an amended verified complaint, which continued to seek the injunctive relief it requested in the original complaint, but also added counts seeking damages for Elmore's breach of the covenant in addition to an accounting and disgorgement action.Plaintiff's multiple actions for damages are pending in the trial court, awaiting the outcome of this interlocutory appeal.

In compliance with the court's September 19, 1991 order, the parties designated the record and submitted briefs on the subject of plaintiff's business at the time Elmore left its employ, and a hearing was held on February 18, 1992.On March 10, 1992, the court issued a memorandum of opinion in which it found that the scope of plaintiff's business extended only...