Lee/O'Keefe Ins. Agency, Inc. v. Ferega

• Decision Date: 03 December 1987
• Docket Number: No. 4-87-0334,4-87-0334
• Parties: , 114 Ill.Dec. 919 LEE/O'KEEFE INSURANCE AGENCY, INC., Plaintiff-Appellant, v. Michael FEREGA, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1313

516 N.E.2d 1313

163 Ill.App.3d 997, 114 Ill.Dec. 919

LEE/O'KEEFE INSURANCE AGENCY, INC., Plaintiff-Appellant, v. Michael FEREGA, Defendant-Appellee.

No. 4-87-0334.

Appellate Court of Illinois Fourth District.

Dec. 3, 1987.

Charles J. Gramlich, Daniel C. Lanterman, Gramlich Law Offices, P.C., Springfield, for plaintiff-appellant.

Alfred B. LaBarre, Ensel, Jones, Blanchard & LaBarre, Springfield, for defendant-appellee.

Justice SPITZ delivered the opinion of the court:

This action was instituted in the circuit court of Sangamon County by an employer, Lee/O'Keefe Insurance Agency, Inc. (Lee/O'Keefe), seeking injunctive relief against a former employee, Michael Ferega, based upon two restrictive covenants contained in an employment contract entered into by the parties. The trial court issued a temporary restraining order without a hearing. Subsequently, a hearing was held on Lee/O'Keefe's request for a preliminary injunction and testimony was presented on the issues raised in Lee/O'Keefe's complaint. Following the hearing, the trial court dissolved the temporary restraining order and denied Lee/O'Keefe's request for a preliminary injunction, finding the terms of the restrictive covenants were unreasonable and unenforceable. Lee/O'Keefe now appeals from the trial court's order denying further injunctive relief and from the denial of his motion for reconsideration.

The record reveals that Michael Ferega became employed with Lee/O'Keefe as an insurance salesman on September 1, 1980. Lee/O'Keefe has one office, located in Springfield, Illinois. During the first year of his employment with Lee/O'Keefe, Ferega had no employment contract. On May 4, 1981, Ferega was asked to sign an employment contract which contained the following provisions:

"7. Disclosure of Information. The Employee recognizes and acknowledges that the list of the Employer's customers, as it may exist from time to time, is a valuable, special and unique asset of the Employer's business. The Employee will not, during or after the term of his employment, disclose the list of the Employer's customers or any part thereof to any person, firm, corporation, association or other entity for any reason or purpose whatsoever. The Employee will not during or after the term of his employment use the list of the Employer's customers or any part thereof for any business purpose other than those business purposes of the Employer. In the event of a breach or threatened breach by the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction restraining the Employee from disclosing, in whole or in part, the list of the Employer's customers, or from rendering any services to any person, firm, corporation, association or other entity to whom such list, in whole or in part, has been disclosed or is threatened to be disclosed. Nothing herein shall be construed as prohibiting the Employer from pursuing any other remedies available to the Employer for such breach or threatened breach, including the recovery of damages from the Employee.

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13. Restrictive Covenant. For a period of five years after the terms of this agreement, the Employee will not, within a radius of 100 miles from the present place of business for the Employer directly or indirectly, own, manage, operate, control, be employed by, participate in or be connected in any manner with the ownership, management, operation or control of any business soliciting the type of business from the customers of the Employer. In the event of an actual or threatened breach by the Employee of the provisions of this paragraph, the Employer shall be entitled to an injunction restraining the Employee from owning, managing, operating, controlling, being employed by, participating in, or being in any way so connected with any business similar to the type of business conducted by the Employer at the time of termination of this agreement. Nothing herein stated shall be construed as prohibiting the Employer from pursuing any other remedies available to the Employer for such breach or threatened breach, including the recovery of damages from the Employee."

The 100-mile radius restriction contained in paragraph 13 covers 60 counties in Illinois, and the city of St. Louis, Missouri.

According to Ferega, after reading the contract, he expressed his concern that the terms of the contract prohibited him from doing insurance business for five years within 100 miles in any capacity. Ferega testified that William Collins, an officer of Lee/O'Keefe, informed him that all the contract did was prevent Ferega from doing business in a 100-mile radius for five years with those people Lee/O'Keefe considered to be their clients. He further testified that Collins informed him that he probably would not get paid if he refused to sign the contract. According to Ferega, he then signed the contract with the reservation that he and Collins disagreed as to its interpretation.

On January 21, 1987, Ferega tendered his resignation to Lee/O'Keefe. According to Ferega, during the course of his employment he did not have access to Lee/O'Keefe's computer or its master list of customers. Ferega did maintain 3 x 5 cards on his own customers which he took with him when he left. Ferega testified that he could duplicate this list from memory with the assistance of a telephone book. Ferega also kept some copies of old policies, applications, logbooks and calendars.

After leaving Lee/O'Keefe, Ferega became employed with T.J. Nicoud & Company in Springfield, Illinois, one of Lee/O'Keefe's competitors. Ferega wrote letters to the persons named on his 3 x 5 cards advising them of his departure from Lee/O'Keefe, informing them he was employed with T.J. Nicoud & Company and that their account would continue to be serviced by Lee/O'Keefe. The persons were advised that if they had any questions they could call Ferega. Counsel for Lee/O'Keefe then wrote Ferega advising him that his employment contract with Lee/O'Keefe prohibited him from accepting employment with T.J. Nicoud & Company.

On February 4, 1987, Lee/O'Keefe filed a motion for a temporary restraining order and a complaint in the circuit court of Sangamon County. The motion requested the court enter a temporary order restraining Ferega from violating the terms of the aforementioned employment contract. The complaint alleged that Ferega had violated the terms of the employment contract by: (1) advertising in the Illinois State Journal Register that he had become associated with T.J. Nicoud & Company; (2) sending communications directly to his former customers, informing them of his new association; and (3) copying confidential information about Lee/O'Keefe's customers without authorization shortly before he resigned. The complaint further alleged that three of Lee/O'Keefe's customers had transferred their insurance policies to T.J. Nicoud & Company. The complaint sought the issuance of a preliminary injunction, prohibiting Ferega from using Lee/O'Keefe's customer lists and other information and prohibiting Ferega from soliciting its customers located within a 100-mile radius of Springfield, Illinois, for a period of five years.

On February 5, 1987, without a hearing, the trial court issued a temporary restraining order, based upon the allegations of Lee/O'Keefe's verified complaint. The order enjoined and restrained Ferega from using Lee/O'Keefe's customer lists and all other information he obtained about its customers and prohibited him from soliciting Lee/O'Keefe's customers.

On February 17, 1987, Ferega filed his answer to Lee/O'Keefe's complaint and affirmative defenses. Ferega alleged that the restrictive covenants contained in paragraphs 7 and 13 of the employment contract were unenforceable and illegal as a matter of law. Specifically, Ferega alleged that the contract was lacking in consideration, that the temporal and geographical restrictions contained in the employment agreement were unreasonable, and that Lee/O'Keefe had no protectable business interest.

A hearing on Lee/O'Keefe's request for a preliminary injunction commenced on February 20, 1987. The testimony presented at the hearing will be discussed where relevant to the issues presented. On April 6, 1987, the court entered its memorandum opinion dissolving the temporary restraining order and denying any further injunctive relief. The court found that the restrictive covenant contained in paragraph 13 of the employment contract was unreasonable and unenforceable, as worded, and "effectively prohibits [Ferega] from engaging in his occupation and prohibits him from earning a livelihood." Regarding paragraph 7, the court found the terms of that restrictive covenant were also unreasonable and unenforceable. In addition, the court found that the telephone book kept by Ferega, containing the telephone numbers of customers Ferega had serviced while employed with Lee/O'Keefe, was not a protectable business interest. The opinion indicated that a written order would follow. Lee/O'Keefe's subsequent motion for reconsideration was denied. On April 24, 1987, the court entered its written judgment order summarizing its rulings as set forth in the memorandum opinion. In addition, the trial court declined to modify or amend the restrictive provisions of paragraph 13 of the employment contract "as these provisions are unreasonable and unenforceable."

Lee/O'Keefe now appeals from the order of the trial court denying injunctive relief and from the denial of its motion for reconsideration.

Lee/O'Keefe contends, on various grounds, that the trial court's findings are contrary to the manifest weight of the evidence and that a preliminary injunction should have been entered. Ferega contends that the trial court correctly found the restrictive covenants were unreasonable and, therefore, the preliminary injunction was properly denied.

Initially, we note that a preliminary injunction is a...