Hayden's Sport Center, Inc. v. Johnson

• Decision Date: 01 November 1982
• Docket Number: No. 82-544,82-544
• Parties: , 65 Ill.Dec. 612 HAYDEN'S SPORT CENTER, INC., Plaintiff-Appellant, v. Edwin JOHNSON, Joseph S. Calcione and Pro-Quip, Inc., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 927

441 N.E.2d 927

109 Ill.App.3d 1140, 65 Ill.Dec. 612

HAYDEN'S SPORT CENTER, INC., Plaintiff-Appellant, v. Edwin JOHNSON, Joseph S. Calcione and Pro-Quip, Inc.,

Defendants-Appellees.

No. 82-544.

Appellate Court of Illinois,

Second District.

Nov. 1, 1982.

Alschuler, Putnam, McWethy, Funkey & Grometer, Sam Alschuler, Paul A. Lewis, Aurora, for plaintiff-appellant.

Stephen M. Cooper, Geneva, for defendants-appellees.

UNVERZAGT, Justice:

Plaintiff, Hayden's Sport Center, Inc., appeals from an interlocutory order of the circuit court of Kane County denying its motion for a preliminary injunction. Plaintiff's motion, filed with its complaint, seeks to enjoin defendants Edwin Johnson and Joseph S. Calcione from engaging in the sporting goods business until the court rules on the merits of the suit. Plaintiff alleges in its complaint that Johnson and Calcione breached the restrictive covenants in their employment contracts and their duties as agents not to disclose to third persons confidential matters when they resigned their positions as plaintiff's salesmen and began to work for a competitor, Pro-Quip, Inc. After a hearing on plaintiff's motion, the trial court denied the motion from which the plaintiff appeals.

Plaintiff sells sporting goods at retail and at wholesale to schools. Johnson began working for plaintiff in the fall of 1974, and Calcione began in September 1975. As plaintiff's salesmen, they worked out of a Rockford office concentrating on sales of sporting goods to schools. They resigned their positions within a month of each other and began to work for defendant Pro-Quip, Inc, around March or April of 1982. They presently engage in the same work in the same geographical area as when they worked for plaintiff.

Johnson and Calcione had signed identical employment contracts with plaintiff containing a covenant not to engage in the sporting goods business in the area of Illinois north of Interstate Route 74 for two years upon termination of their employment. The covenant further prohibited them from disclosing information obtained while employees of plaintiff. Calcione testified that he signed his employment contract a year after he began working for plaintiff and after he had received a $1,000 salary increase. At the time he received his salary increase there had been no discussion concerning a written contract and he received no extra money or benefits after signing the contract.

Johnson testified that he signed his employment contract without any objections, believing that if he had refused to sign it, his employment would have been terminated. Plaintiff's president, Ron Kruse, testified that Johnson signed the contract in May 1976 and had received his salary increase in March of 1976.

Calcione testified that plaintiff had not been doing any business in the area immediately north of Interstate Route 74 prior to the execution of his employment contract but that he later opened an office in that area. Plaintiff's president testified that plaintiff had been doing business with schools in the Champaign area and the southern counties prior to 1976. He testified that presently plaintiff has offices in Rockford and Champaign, Illinois, and has two salesmen working out of their homes in Arlington Heights and Morton, Illinois.

Defendants Calcione and Johnson, as well as their secretary, each received copies of plaintiff's "red book" while employees of plaintiff. They were the sole employees in the Rockford office. Although the secretary had a copy of the red book, she had never signed a written employment contract with plaintiff.

The red book contains a description of the products carried by plaintiff, their selling prices for schools, and plaintiff's actual cost for each item. The red book is a compilation of suppliers' catalogs and price lists for the product lines sold by plaintiff. The individual suppliers' catalogs and price lists are available to any wholesaler or retailer who wants to sell that product line. Once a wholesaler determines which product line to sell, a red book type of compilation can be assembled in around five hours. The plaintiff's cost was listed under a letter code rather than outright, so that a purchaser perusing the red book would not see plaintiff's cost. The actual cost of an item depends upon the quantity purchased from the supplier or manufacturer. All wholesalers are charged the same unit price for the volume purchased and those prices are set forth in the supplier's price list. The volume purchased by individual wholesaler or retailer, however, is not readily available to the general public or competitors.

The red book also contains information concerning plaintiff's "private label" goods. Private label goods are manufactured by a supplier who uses plaintiff's own labels. It allows plaintiff to be more competitive. When ordering items, schools usually specify items by brand names. Defendants knew the manufacturers of plaintiff's private label products, but it would be difficult, although not impossible for the public to find out the manufacturer of a private label good. An experienced sporting goods salesperson could discern the manufacturer of a private label good by examining it.

The red book serves as a useful and convenient sales item. It allows salesmen to have all the needed information in one book without having to carry each supplier's catalog on a sales call and allows the salesperson to determine plaintiff's cost in quoting a price to a purchaser. Plaintiff's sales people have discretion in setting prices and their determination is based on the unit cost found in the red book.

Price is a determining factor in making a sale. School districts look to price and quality in making a purchase, and salesmen attempt to sell at the lowest price needed to make a sale. A salesperson may be able to underbid another salesperson if he knows at what price the other salesperson is able to sell an item.

Prices for sporting goods change rapidly and Calcione testified that the information contained in the red book would be outdated after 30 to 45 days. The "Illinois school system" publishes a list of comparable items in given bids which is available to school coaches and salespeople. Furthermore, manufacturers publish lists comparing the standards for different lines of sporting goods.

Calcione testified that he did not take the red book with him when he resigned, that the last time he saw it was on the day he resigned, and that he did not copy it. Johnson admitted that he took a red book with him when he left and kept it for around three weeks. Plaintiff's president testified that when Johnson returned the red book, Johnson stated, "I won't be needing it any more, I know it by memory anyway." Calcione further testified that the red book would not be useful while working for Pro-Quip, Inc. because they sell different product lines. There was, however, contradictory testimony concerning the extent of the differences between the product lines sold by Pro-Quip, Inc. and plaintiff.

In addition to the red book, plaintiff maintains "dead files" which contain old orders of clothing or items of a special order-nature. These files were kept to resolve billing problems, record what items had been sold, service customers, and simplify the reordering of the same item. While an employee of plaintiff, Calcione used old records to determine what a school had purchased in previous years in order to improve his salesmanship. Both Calcione and Johnson testified that they did not take any dead files with them when they resigned. They testified that the information found in the dead files would not be useful to them because Pro-Quip, Inc. sold different product lines. Salespeople could examine and Calcione did, in fact, examine school districts' invoices to determine what items the school purchased in previous years.

Plaintiff also keeps a card system, started in 1959, containing customer names and contact persons. Computer print out sheets also exist which contain similar information. Defendants did not take any of these items when they resigned. Calcione testified that he did not know plaintiff maintained a customer list; Johnson testified that he knew every customer by memory.

Robert Hawkins, president of Pro-Quip, Inc., testified that he did not have a list of customers before he hired Johnson and Calcione but now he has a list: "what they brought." Pro-Quip, Inc. had zero percent of the market before it hired Johnson and Calcione. Plaintiff dominated the northern section of Illinois although it had around ten competitors. School districts who purchased from plaintiff were not plaintiff's exclusive customers.

Calcione testified that since beginning work for Pro-Quip, Inc., he uses an Illinois Coaches' Directory which lists all the schools and athletic directors. He has contacted those schools in the directory which he had dealt with while working for the plaintiff and has used contacts he made while working for the plaintiff. He further testified that he has obtained names of potential customers from telephone directories. Now, he deals mostly with the same people he dealt with when the plaintiff's employee. Johnson testified that the names of potential purchasers are generally available to those in the sporting goods business. Plaintiff's president testified that although it is no secret who its customers are, it takes a maximum amount of time to find out who purchases sporting goods for a school, the director or an individual coach. According to him, it takes around two or three telephone calls to determine the proper person to contact. Johnson testified that the total time involved in making such an inquiry is 10 to 30 minutes.

The trial court granted defendants' motion for a directed verdict on the issue of the enforceability of the restrictive covenant after plaintiff rested its case. The court found that the covenant failed because it lacked...