Hydroaire, Inc. v. Sager

• Decision Date: 17 July 1981
• Docket Number: No. 81-423,81-423
• Citation: 53 Ill.Dec. 928,98 Ill.App.3d 758,424 N.E.2d 719
• Parties: , 53 Ill.Dec. 928 HYDROAIRE, INC., a Delaware corporation, successor to Hydroflo Manufacturing Corporation, an Illinois corporation, Plaintiff-Appellant, v. Thomas SAGER and Chicago Seal Products Corporation, an Illinois corporation, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 719

424 N.E.2d 719

98 Ill.App.3d 758, 53 Ill.Dec. 928

HYDROAIRE, INC., a Delaware corporation, successor to Hydroflo Manufacturing Corporation, an Illinois corporation, Plaintiff-Appellant, v. Thomas SAGER and Chicago Seal Products Corporation, an Illinois corporation, Defendants-Appellees.

No. 81-423.

Appellate Court of Illinois, First District, Fifth Division July 17, 1981.

Vedder, Price, Kaufman & Kammholz, John A. Relias, and Richard F. Zehnle, Chicago, for plaintiff-appellant.

Kirkland & Ellis, David W. Slaby, and Stanley L. Ferguson, Chicago, for defendants-appellees.

SULLIVAN, Presiding Justice:

Plaintiff ¹ brings this interlocutory appeal from an order of the trial court dissolving a temporary restraining order and denying its motion for the issuance of a preliminary injunction preventing defendant Thomas Sager (hereafter Sager) ² from soliciting and taking orders from its customers. It is contended that the trial court abused its discretion in refusing to issue the injunction because Sager breached (1) his duty of loyalty as plaintiff's employee and (2) a covenant not to compete, as part of his employment contract with plaintiff.

Plaintiff sought to enjoin Sager from soliciting or accepting any business or orders for industrial sealing devices from plaintiff's customers with whom Sager had dealt on plaintiff's behalf as its employee. On November 25, 1980, a temporary restraining order was entered prohibiting such activity.

The record discloses that both plaintiff and Chicago Seal Products Corporation (hereafter CSPC) are engaged in the sale and repair of industrial sealing devices, in which mechanical seals and other related products are used in pumps and associated machinery to block or restrict the flow of liquids moved by such machinery. Although plaintiff's business includes the designing, selling and repair of pumps and air pressure systems, over 95% of its activities concerns pumps.

Diedrick Brinkman, plaintiff's vice president and general manager, testified at the preliminary injunction hearing that Sager had spent most of his career in the sale and repair of seals and sealing devices, particularly in the Chicago area "after-market," which is the most profitable aspect of the business and includes replacement parts for pumping machinery and services to maintain the original equipment; and that plaintiff offered him employment in the summer of 1979 because of his expertise in the mechanical seals and packing after-market, his knowledge of customers and because of plaintiff's desire to expand its after-market business.

Sager began receiving compensation in September 1979 but, due to personal injuries, was unable to begin work on a regular basis until December 1979 or January 1980. In October 1979 he signed an employment agreement with plaintiff which included the non-competition provision in question and, after returning to work, he proposed that plaintiff become more involved in the seal and packing after-market by establishing a separate division with a marketing program which required purchasing new tooling and hiring new personnel. Plaintiff acted on Sager's proposal by investing between $30,000 and $50,000 in the new division and by hiring George Gregorowicz who also had expertise in the field. Sager believed the new division would be profitable because he would attract the customers he had serviced before employment with plaintiff, and when the new division began operation defendant was assigned those customers. The new division was profitable only in June, its sales steadily declining thereafter until defendant notified Brinkman on October 3, 1980, of his intention to leave plaintiff's employment. He then agreed to stay only if plaintiff established a separate corporation with 60% ownership in plaintiff and 40% in Sager and if plaintiff put the new facility in a separate location. Plaintiff accepted defendant's demands with the reservation that a separate location for the new corporation would not be established at that time because of the cost. Sager then rejected plaintiff's offer and informed plaintiff that he was going with his own company. ³

Sager testified that he was president of CSPC; that prior to resigning his relationship with plaintiff, he accepted orders from customers of plaintiff and filled them himself; that during his employment several businesses were customers of plaintiff and also of CSPC; and that he sent several seal repair orders to another company, Redeseal Corporation (Redeseal), instead of turning them over to plaintiff.

Certain business records of CSPC, admitted by stipulation, indicated that Sager received and filled for himself orders from companies which plaintiff alleges were its customers. It was further stipulated that while Gregorowicz was employed by plaintiff, he too caused several of plaintiff's orders to be filled by CSPC; that Arthur Arnzen of the Sherwin-Williams Company would testify that in June of 1980, he gave three orders to Sager for the purchase and repair of seals by plaintiff and that in July 1980 in conjunction with Sager, he cancelled those orders and reordered through CSPC; that Dennis Offerman of Stepan Chemicals Corporation would testify that on February 28, 1980, he released certain seals to defendant for repair or replacement by plaintiff but that Stepan Chemical received an invoice for repair from Redeseal; and that Edward Pine of the Kitchens of Sara Lee would testify that in August of 1980, Sara Lee gave Sager an order for the purchase of several seals from plaintiff, but that order was filled by CSPC.

The trial court granted defendant's motion to deny the injunction, holding inter alia that while Sager owed plaintiff a duty of loyalty as its employee and admitted taking orders from plaintiff's customers, an injunction based on breach of loyalty would be inconsistent with its finding that the restrictive covenant was an unenforceable per se covenant against competition.

OPINION

A preliminary injunction is a provisional remedy (Spunar v. Clark Oil & Refining Corp. (1977), 53 Ill.App.3d 477, 11 Ill.Dec. 382, 368 N.E.2d 990; Kraft v. Solon (1975), 32 Ill.App.3d 557, 336 N.E.2d 577) granted before the hearing of a case on its merits in order to preserve the status quo (Cook County v. Rosen & Shane Wine & Spirits, Inc. (1978), 58 Ill.App.3d 744, 16 Ill.Dec. 63, 374 N.E.2d 838; Armour & Co. v. United American Food Processors, Inc. (1976), 37 Ill.App.3d 132, 345 N.E.2d 795; Frederick Chusid & Co. v. Collins Tuttle & Co., Inc. (1973), 10 Ill.App.3d 818, 295 N.E.2d 74). The status quo preserved thereby has been defined as the last, actual, peaceable uncontested status which preceded the pending controversy. Summit Electric Co. v. Mayrent (1974), 17 Ill.App.3d 545, 308 N.E.2d 313; Duval v. Severson (1973), 15 Ill.App.3d 634, 304 N.E.2d 747.

In order that a preliminary injunction may issue, the plaintiff must establish by a preponderance of the evidence that (1) a certain and clearly ascertained right needs protection, (2) irreparable injury will occur without the injunction, (3) no adequate remedy at law exists, and (4) there is probability of success on the merits of the case. (U-Haul Co. of Central Illinois v. Hindahl (1980), 90 Ill.App.3d 572, 45 Ill.Dec. 854, 413 N.E.2d 187; ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1978), 62 Ill.App.3d 671, 20 Ill.Dec. 160, 379 N.E.2d 1228; Stocker Hinge Mfg. Co. v. Darnel Industries, Inc. (1978), 61 Ill.App.3d 636, 18 Ill.Dec. 489, 377 N.E.2d 1125.) In addition to its consideration of those criteria, the trial court also must balance the equities or relative inconvenience to the parties and determine thereby whether a greater burden will be imposed on the defendant by granting the injunction than on the plaintiff by denying it. (ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc.; Booth v. Greber (1977), 48 Ill.App.3d 213, 6 Ill.Dec. 477, 363 N.E.2d 6.) Finally, the sole question on review is whether the trial court abused its discretion in granting or denying the injunction. (Wessel Co., Inc. v. Busa (1975), 28 Ill.App.3d 686, 329 N.E.2d 414; Schlicksup Drug Co., Inc. v. Schlicksup (1970), 129 Ill.App.2d 181, 262 N.E.2d 713), and the trial court's findings will not be disturbed unless against the manifest weight of the evidence (Booth v. Greber ).

In the instant case plaintiff initially contends that the breach by an employee of the duty of loyalty owed the employer creates an independent basis for injunctive relief, which thereby prohibits the employee from soliciting the employer's customers on behalf of another or from performing acts in direct competition with the employer during the term of employment. We do not think, however, that the cases upon which plaintiff relies support its contention.

In ABC Trans National, Inc. v. Aeronautics Forwarders, Inc., 40% of plaintiff's employees were persuaded to leave at least five of its offices. Plaintiff's customer cards, addressograph plates, rolodex files and directories were fraudulently requisitioned for defendants and paid for by plaintiff before defendants' departure. Air bills were pre-stamped by defendants using plaintiff's equipment. There was also direct evidence that defendants conspired to destroy plaintiff's business, whereby defendants informed plaintiff's customers and employees that plaintiff was insolvent. Finally, the court determined that as a result of defendants' actions, plaintiff was unable to serve its remaining customers as effectively or to win back lost business and that plaintiff's ability to compete in the future was adversely affected thereby. In the present case, by contrast, only Gregorowicz left plaintiff's employ and there was no showing that Sager appropriated any customer list or other business property of plaintiff or conspired against it. Moreover, plaintiff fails to explain how its ability to compete effectively was to any significant...