Office Mates 5, North Shore, Inc. v. Hazen

• Decision Date: 03 August 1992
• Docket Number: No. 1-91-0284,1-91-0284
• Citation: 599 N.E.2d 1072,175 Ill.Dec. 58,234 Ill.App.3d 557
• Parties: , 175 Ill.Dec. 58 OFFICE MATES 5, NORTH SHORE, INC., Plaintiff-Appellant, v. Anne HAZEN, Deborah Greenberg, and Premier Personnel, Inc., an Illinois corporation, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 1072

599 N.E.2d 1072

234 Ill.App.3d 557, 175 Ill.Dec. 58

OFFICE MATES 5, NORTH SHORE, INC., Plaintiff-Appellant, v. Anne HAZEN, Deborah Greenberg, and Premier Personnel, Inc. an Illinois corporation, Defendants-Appellees.

No. 1-91-0284.

Appellate Court of Illinois First District, First Division.

Aug. 3, 1992.

Rehearing Denied Sept. 30, 1992.

Hamman & Benn, Chicago (Dawn M. Cassie, of counsel), for plaintiff-appellant.

Sheldon Schwartz, Buffalo Grove, for defendant-appellee Anne Hazen.

Beermann, Swerdlove, Woloshin & Barezky, Chicago (Alvin R. Becker, Timothy M. Kelly, of counsel), for defendant-appellee Deborah Greenberg.

No appearance for defendant-appellee Premier Personnel.

Presiding Justice BUCKLEY delivered the opinion of the court:

On December 24, 1990, plaintiff Office Mates 5, North Shore, Inc., an office support personnel placement agency, filed suit against defendants Anne Hazen (Hazen) and Deborah Greenberg (Greenberg), two of its previous employees, and defendant Premier Personnel, Inc. (Premier), a competing placement agency and current employer of Hazen and Greenberg. Plaintiff's suit alleges that Hazen's and Greenberg's employment with Premier violates restrictive covenants contained in employment agreements which Hazen and Greenberg executed as a condition to their employment; that all defendants are in violation of the Illinois Trade Secrets Act (the Act) (Ill.Rev.Stat.1989, ch. 140, par. 351 et seq.); and that defendant Premier has intentionally interfered with plaintiff's contractual relations.

Plaintiff subsequently obtained a temporary restraining order against defendants and moved for preliminary injunctive relief on all grounds alleged in the complaint. Following a hearing, the circuit court entered an order which denied plaintiff's request for preliminary injunctive relief and dissolved the temporary restraining order. On appeal, plaintiff alleges that its evidence raised a prima facie case demonstrating a fair question as to the near-permanency of its client relationships and confidentiality of its customer information. Plaintiff accordingly argues that the circuit court abused its discretion in denying it preliminary injunctive relief. We affirm.

Plaintiff is an Illinois corporation with its principal place of business located in suburban Northfield. Plaintiff is part of a nationwide franchise headquartered in Cleveland, Ohio. Plaintiff and its predecessor, Office Mates 5, Northfield, Inc., which plaintiff purchased in October 1988, have been in the personnel placement business since 1985.

Plaintiff's business consists of locating and placing office support personnel (candidates) with Chicagoland businesses (clients) having such a need. Plaintiff receives a fee for its services. The industry is highly competitive, as there are 100 similar agencies within a 50-mile radius of plaintiff's business.

Plaintiff principally conducts its business through individuals holding the title of account executive. An account executive's primary goal is to match a qualified candidate with the particular hiring needs of a client. An account executive's day-to-day duties are directed at achieving this goal. Plaintiff pays its account executives a commission for successful placements.

Defendants Hazen and Greenberg were employed as account executives with plaintiff from October 1986 through October 1990 and from July 1988 through October 1990, respectively. Neither Hazen nor Greenberg had worked for a placement agency prior to their job with plaintiff. On November 7, 1990, Hazen and Greenberg began working for defendant Premier in a similar capacity. Premier is in direct competition with plaintiff and is located approximately seven miles away.

As a prerequisite to employment with plaintiff's predecessor, Hazen and Greenberg were required to enter employment agreements containing restrictive covenants which individually required Hazen and Greenberg to: (1) refrain for one year after termination from providing placement services to, or communicating with, candidates or customers, wherever located, with whom she either had contact, knowledge, or access during a 12-month period prior to termination; (2) not engage in the personal placement business in any capacity for one year following termination within a 50-mile radius of plaintiff's business; and (3) never disclose following termination "any information of any kind, nature or description whatsoever concerning any matters affecting or relating to plaintiff's personnel placement business."

Following plaintiff's commencement of this action, the circuit court on December 28, 1991, temporarily restrained defendants Hazen and Greenberg from using or disclosing any records obtained by them in the course of their employment with plaintiff. On January 2, 1991, the court ordered further that Hazen and Greenberg return plaintiff's confidential materials and that all defendants refrain from initiating contacts with customers of plaintiff "with whom Hazen or Greenberg had contact, knowledge of, or access to during the twelve months immediately preceding their termination * * * and with whom plaintiff claims a 'near-permanent' relationship." Plaintiff attached a list of 260 companies to the order which plaintiff claimed satisfied the language of the order.

Defendants subsequently filed their verified answer to plaintiff's complaint and moved to dissolve the temporary restraining order. While defendants admitted executing their respective employment agreements, they denied the enforceability of the restrictive covenants and any breach thereof.

On January 16, 1991, the court held a hearing on the parties' respective motions. During this hearing, the court received testimonial and documentary evidence and, over defense objection, various affidavits. What follows is a summary of the evidence produced.

Lynne Goldberg, plaintiff's president and owner, testified at the hearing and by way of sworn affidavit that the process involved in placing a qualified candidate with a client first requires plaintiff to develop a ready supply of candidates. To accomplish this goal, plaintiff principally relies on newspaper and directory assistance advertisement to attract candidates although candidates also learn about plaintiff through referrals and cold calls. Goldberg reviewed records reflecting that plaintiff spent about $52,000 on advertising in 1989 and about $39,000 through the end of October 1990. Plaintiff also pays referral fees if a referred candidate is successfully placed.

Candidates who reply to plaintiff's advertisement are interviewed by plaintiff's account executives. Information from the candidate, such as employment and education history, references and desired position, are taken down onto a candidate's application form. When plaintiff receives a job order matching a candidate's qualifications, the account executives arrange interviews, prepare the candidate for the interview, debrief them afterward, relay and negotiate any offers, and then finalize the placement. Information learned in the process relative to the candidate and client is transferred into plaintiff's files.

Regarding client development, plaintiff requires its account executives to place 40 telephone calls a day. Plaintiff requires its account executives to place any information learned by the calls onto "pump" and "lead" cards. An initial call rarely results in a job order; rather, the majority of job orders require that additional contact be made through personal visits to the business and additional telephone calls. Most placements take six months to a year to occur.

Plaintiff bears the costs associated with client development. When plaintiff purchased its predecessor, part of the purchase price was apportioned to client good will and client information contained within the predecessor's files. To maintain and develop its clients, plaintiff pays for Christmas cards, lunches, gifts, telephone bills, brochures and literature. Plaintiff must also pay a national franchise fee.

Once a client decides to place a job order, the account executive completes a job order form. This form includes, inter alia, data about the job duties, the skills required and salary requirements. Additional time is taken to assure that the information within the order remains current. Every Monday, Wednesday and Friday, plaintiff holds office meetings during which account executives share job orders and candidate information to obtain a successful match.

Upon a successful placement, a job placement form is completed. Plaintiff pays a split-commission to the account executives who supplied the successful candidate and obtained the job order. After placement, account executives make additional contact with the client to promote a positive relationship and good-will. Over one-third of plaintiff's clients have used plaintiff's services for three years or more and 50% of plaintiff's revenues stems from customers who use plaintiff's services for multiple job placements.

Plaintiff considers confidential the information it acquires regarding its customers and candidates. Plaintiff maintains the confidentiality of this information as well as any customer lists by restricting access to its account executives on a "need to know" basis. Master copies of job orders and candidate applications are stored in a locked filing cabinet to which only plaintiff's president and her assistant have access. Additionally, plaintiff requires its account executives to execute confidentiality agreements and advises account executives of this confidentiality through training manuals and video tapes. A security guard protects plaintiff's premises after closing.

In addition to expenses associated with candidate and client development, plaintiff also incurs expenses when training its newly-hired account executives. Upon an account executive's hire, the executive views a series of videotapes purchased from the franchise...