Lincoln Towers Ins. Agency v. Farrell, 81-287

• Court: United States Appellate Court of Illinois
• Writing for the Court: CAMPBELL
• Citation: 425 N.E.2d 1034,99 Ill.App.3d 353,54 Ill.Dec. 817
• Parties: , 54 Ill.Dec. 817 LINCOLN TOWERS INSURANCE AGENCY, an Illinois Corporation, Plaintiff-Appellant, v. Charles FARRELL, Defendant-Appellee.
• Docket Number: No. 81-287,81-287
• Decision Date: 10 August 1981

Page 1034

425 N.E.2d 1034 99 Ill.App.3d 353, 54 Ill.Dec. 817 LINCOLN TOWERS INSURANCE AGENCY, an Illinois Corporation,
Plaintiff-Appellant,
v.
Charles FARRELL, Defendant-Appellee. No. 81-287. Appellate Court of Illinois, First District, First Division. Aug. 10, 1981.

Page 1035

[54 Ill.Dec. 818] Morris A. Haft, Fisch, Lansky & Greenburg, Chicago, for plaintiff-appellant.

Martin M. Mussar and Kurt M. Penn, Chicago, for defendant-appellee.

[99 Ill.App.3d 354] CAMPBELL, Presiding Justice:

The present appeal arises from an action in the Chancery Division of the circuit court of Cook County wherein the plaintiff Lincoln Towers Insurance Agency, sought injunctive relief to require the defendant, Charles Farrell, to turn over a customer list which he acquired while employed as a salesman by plaintiff and to restrain defendant from soliciting certain of plaintiff's customers. The trial court initially granted a temporary restraining order but later vacated that order and denied plaintiff's motion for a preliminary injunction. On appeal, plaintiff alleges that the trial court erred in vacating the temporary restraining order and denying the preliminary injunction. Plaintiff argues that it was entitled, even absent a noncompetition or restrictive covenant agreement, to recover the confidential customer list as a form of trade secret and to enjoin defendant from soliciting certain of its customers.

For the following reasons we affirm.

The facts pertinent to the disposition of this appeal follow. Plaintiff is a Chicago insurance agency which sells, among other insurance lines, credit life insurance to Chicago area automobile dealers. Credit life insurance provides full payment of the amount due on an automobile's purchase price in the event of the death or disability of the purchaser. The defendant was employed by plaintiff for approximately three years during which time he acted as plaintiff's salesman of credit life insurance. In the course of defendant's employment with plaintiff he developed a record book which contained a list of plaintiff's credit life insurance customers and pertinent information pertaining to them including the amount given to each dealer for handling their insurance line. According to defendant, copies of these records were provided to plaintiff's president, the president's secretary, and various sales personnel during defendant's term of employment.

Defendant terminated his employment with plaintiff on or about October 6, 1980, and shortly thereafter commenced employment for another Chicago based insurance company which also sells credit life insurance. Subsequent to his termination with plaintiff insurance agency, defendant was requested to return his customer records. When defendant failed to return the records, plaintiff instigated this action. On October 10, 1980, the trial court granted a temporary restraining order. This was vacated and defendant's motion for a preliminary injunction was denied on January 7, 1981, with the preliminary injunction denied nunc pro tunc to October 27, 1980. The January 7th order required defendant to supply photocopies of his records to plaintiff and it appears from the record that plaintiff complied with this order. Additionally, the trial court's findings concluded that the defendant had not executed a contract not to compete against plaintiff, and that plaintiff had no protectable interest in the [99 Ill.App.3d 355] customer list and no exclusive right to deal with plaintiff's customers. It is from this order that plaintiff brings the present appeal.

On a petition for a preliminary injunction, the trial court is concerned with maintaining the status quo between the parties until a full hearing on the merits can be held. (ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1978), 62 Ill.App.3d 671, 20 Ill.Dec. 160, 379 N.E.2d 1228; Armour & Co. v. United American Food Processors, Inc. (1976), 37 Ill.App.3d 132, 345 N.E.2d 795.) The grant or denial of temporary injunctive relief is based on the circumstances at the time the relief is requested. In order to prevail on a

Page 1036

[54 Ill.Dec. 819] motion for a preliminary injunction a plaintiff must prove that: (1) a clearly ascertained right exists which needs protection; (2) irreparable injury will occur without the protection of an injunction; (3) the remedy at law is inadequate; and (4) there is a likelihood of success on the merits of the case. (Midwest Micro Media, Inc. v. Machotka (1979), 76 Ill.App.3d 698, 32 Ill.Dec. 241, 395 N.E.2d 188; Image Supplies, Inc. v. Hilmert (1979), 71 Ill.App.3d 710, 28 Ill.Dec. 86, 390 N.E.2d 68.) In meeting this burden the party seeking a preliminary injunction must raise a fair question as to the existence of the right claimed and that he probably will be entitled to the requested relief if he proves his allegations. (Morrison Metalweld Process Corp. v. Valent (1981), 97 Ill.App.3d 373, 52 Ill.Dec. 825, 422 N.E.2d 1034; ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. ) In analyzing the propriety of a denial of a preliminary injunction, a reviewing court is limited to determining whether the trial judge correctly exercised his broad discretionary powers. Egnell, Inc. v. Weniger (1981), 94 Ill.App.3d 325, 49 Ill.Dec. 895, 418 N.E.2d 915; Image Supplies, Inc. v. Hilmert; ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc.

A number of Illinois decisions have addressed the issue of whether injunctive relief should be allowed to prevent an ex-employee from using materials or information obtained during his employment or from soliciting the employer's customers. These cases arise either in the context of an employer seeking to enforce a non-competition or restrictive covenant agreement or where an employee seeks to prevent the use of a customer list or solicitation of an employer's customers on the basis that a trade secret is involved. In either instance, the plaintiff must establish the basis for the injunctive relief sought and, therefore, the same legal considerations prevail. The pivotal question in all such cases is whether the party seeking injunctive relief has a certain and clearly ascertainable right which needs protection or in other words a "protectable business interest."

In their decisions in this area, Illinois courts generally have sought to encourage competition in the business sector in order to avoid the restriction of an employee's freedom and the possibility of industrial servitude. (ILG Industries, Inc. v. Scott (1971), 49 Ill.2d 88, 273 N.E.2d 393; Schulenburg v. Signatrol, Inc. (1965), 33 Ill.2d 379, 212 N.E.2d 865, cert. denied 383 U.S. 959, 86 S.Ct. 1225, 16 L.Ed.2d 302; Image [99 Ill.App.3d 356] Supplies, Inc. v. Hilmert (1979), 71 Ill.App.3d 710, 28 Ill.Dec. 86, 390 N.E.2d 68; TAD, Inc. v. Siebert (1978), 63 Ill.App.3d 1001, 20 Ill.Dec. 754, 380 N.E.2d 963.) Therefore, restraints have not been lightly placed upon an employee's right to compete in a field in which he is most familiar. ILG Industries, Inc. v. Scott.

In Schulenburg v. Signatrol, Inc., the Illinois Supreme Court announced the general rule that at the termination of his employment an employee can take with him general skills and knowledge acquired; however, he cannot take confidential particularized processes or information disclosed while an employer-employee relationship existed, which are unknown to others in the industry and which give an advantage to an employer's competitors. Accordingly, a protectable business interest will be found where a trade secret or a near-permanent customer relationship exists which an employee learned of through his employment and either a "reasonable" restrictive covenant agreement has been executed or a breach of confidentiality has occurred. (See, Morrison Metalweld Process Corp. v. Valent (1981), 97 Ill.App.3d 373, 52 Ill.Dec. 825, 422 N.E.2d 1034; TAD, Inc. v. Siebert (1978), 63 Ill.App.3d 1001, 20 Ill.Dec. 754, 380 N.E.2d 963; Midwest Micro Media, Inc. v. Machotka (1979), 76 Ill.App.3d 698, 32 Ill.Dec. 241, 395 N.E.2d 188.) As there is no allegation here that a near-permanent customer relationship existed between plaintiff and its customers, or that the defendant executed a restrictive covenant agreement, it...