Smith v. Chemical Personnel Search, Inc.

• Decision Date: 28 June 1991
• Docket Number: No. 1-90-2080,1-90-2080
• Citation: 159 Ill.Dec. 671,215 Ill.App.3d 1078,576 N.E.2d 340
• Parties: , 159 Ill.Dec. 671 Richard SMITH, Plaintiff/Counter-defendant/Appellee, v. CHEMICAL PERSONNEL SEARCH, INC., Defendant/Counter-plaintiff/Appellant.
• Court: United States Appellate Court of Illinois

Page 340

576 N.E.2d 340

215 Ill.App.3d 1078, 159 Ill.Dec. 671

Richard SMITH, Plaintiff/Counter-defendant/Appellee, v. CHEMICAL PERSONNEL SEARCH, INC. Defendant/Counter-plaintiff/Appellant.

No. 1-90-2080.

Appellate Court of Illinois First District, Second Division.

June 28, 1991.

Rivkin, Radler, Bayh, Hart & Kremer, Chicago (Irving B. Levinson and Mary F. Licari, of counsel), for defendant/counter-plaintiff/appellant.

Walters & Walters, Chicago (Carol A. Walters and Garry H. Walters, of counsel), for plaintiff/counter-defendant/appellee.

Justice HARTMAN delivered the opinion of the court:

Defendant, Chemical Personnel Search, Inc. (CPS), appeals the dismissal of its counterclaim, which sought injunctive relief for plaintiff's alleged breach of covenants not to compete. The issues presented on appeal are whether (1) plaintiff's motion to dismiss the counterclaim was improperly brought under section 2-619 of the Code of Civil Procedure (Code) (Ill.Rev.Stat.1989, ch. 110, par. 2-619); (2) CPS was collaterally estopped from seeking the relief outlined in its counterclaim; (3) CPS' counterclaim failed to set forth a cause of action for injunctive relief; and (4) CPS should be granted leave to amend its counterclaim. We reverse and remand, for reasons which follow.

CPS is an Illinois corporation engaged in the business of recruiting prospective employees for placement with prospective employers. Plaintiff, Richard Smith, had been employed by CPS from 1982 to 1990. Smith left his employment with CPS in January 1990 and conducted business as a sole proprietor under the name ExecuTec Resources.

On March 2, 1990, Smith filed a complaint for declaratory relief against CPS, seeking nullification of a document entitled "Letter Agreement," which Smith had signed on September 8, 1987. In consideration of Smith's continued employment with CPS, the agreement provided generally that, for a one-year period following termination of employment, the former employee was prohibited from disclosing information about CPS' clients and customers, hiring other CPS employees, and competing with the corporation within a 35-mile radius of the CPS office in which the employee last worked. By its terms, if the agreement was violated, CPS could seek injunctive relief against the employee, who would be liable for liquidated damages in the amount of $25,000. Smith also received $500 as consideration for signing the agreement.

On May 8, 1990, CPS filed a counterclaim against Smith, which sought injunctive relief and liquidated damages, and moved for a preliminary injunction. The counterclaim alleged that "(a) Smith has transacted employment agency business on behalf of ExecuTec with prospective employees and prospective employers with whom Smith had transacted such business on behalf of CPS.

(b) Smith has disclosed to ExecuTec and other third parties both the names of prospective employees and prospective employers with whom Smith had transacted employment agency business on behalf of CPS.

(c) Smith communicated, divulged and/or used for the benefit of ExecuTec, information, both oral and written, concerning CPS' prospective employees and prospective employers to ExecuTec, and other third parties."

These acts were all alleged to have occurred within 35 miles of the CPS office in which Smith had worked. CPS claimed that it had already and would continue to suffer irreparable injury unless Smith was enjoined from further such acts.

On May 30, 1990, pursuant to section 2-619 of the Code (Ill.Rev.Stat.1989, ch. 110, par. 2-619), Smith filed a motion to dismiss the counterclaim, with a supporting memorandum but no affidavits, alleging generally that the counterclaim failed to state a cause of action; the Letter Agreement was overly broad and unduly restrictive; enforcement of the Letter Agreement was barred by collateral estoppel; and the liquidated damages clause was unenforceable because it constituted a penalty.

At the hearing on the motion to dismiss, the circuit court dismissed the counterclaim "on the basis of collateral estoppel as well as other [sic] stated in court's oral opinion." The court indicated:

"[w]hile I agree that I cannot say based on these pleadings that the geographical limitation is over broad and unduly restrictive, I can and I do find that propiretary [sic] information allegedly which gave rise to this agreement and the allegations contained in the complaint are woefully inadequate and unsatisfactory and unacceptable to the Court."

CPS appeals the dismissal of its counterclaim.

I.

CPS argues that Smith's section 2-619 motion to dismiss improperly attacked the sufficiency of the allegations in the counterclaim. Section 2-619 authorizes dismissal of a complaint where it is barred by any of the grounds set forth therein, or by any other affirmative matter which defeats the claim. Ill.Rev.Stat.1989, ch. 110, par. 2-619(a).

Smith maintained generally that the counterclaim failed to state a cause of action and was barred by collateral estoppel. He also asserted in the supporting memorandum that the restrictive covenant was overly broad and unduly burdensome. The allegations pertaining to failure to state a cause of action should have been raised pursuant to section 2-615 of the Code. (Ill.Rev.Stat.1989, ch. 110, par. 2-615; see Sutton v. Mytich (1990), 197 Ill.App.3d 672, 676, 144 Ill.Dec. 196, 555 N.E.2d 93.) Collateral estoppel is a matter properly raised under section 2-619 (see Ill.Rev.Stat.1989, ch. 110, par. 2-619(a)(4)), as is the overbreadth as to time or location in a restrictive covenant (see Ill.Rev.Stat.1989, ch. 110, par. 2-619(a)(9); Glass Specialty Co. v. Litwiller (1986), 147 Ill.App.3d 653, 655, 101 Ill.Dec. 552, 498 N.E.2d 876). These types of "hybrid" procedures, which combine separate motions for joint analysis and determination, have been expressly disapproved and are discouraged. (See Janes v. First Federal Savings & Loan Association (1974), 57 Ill.2d 398, 406, 312 N.E.2d 605; Sutton, 197 Ill.App.3d at 676, 144 Ill.Dec. 196, 555 N.E.2d 93.) ¹ In the interests of judicial economy, however, and if the respondent is not prejudiced by the improper combination of motions, reversal is not automatically required and the matter will be considered on its merits. (Mohr v. Arachnid, Inc. (1990), 201 Ill.App.3d 984, 988, 147 Ill.Dec. 758, 559 N.E.2d 1098; Sutton, 197 Ill.App.3d at 676, 144 Ill.Dec. 196, 555 N.E.2d 93.) Where prejudice is found, it usually occurs because the procedural confusion has prevented the respondent from submitting counter-affidavits or other material to contest a movant's affirmative defenses. (R. Michael, Illinois Practice: Civil Procedure Before Trial § 41.2, p. 299 (1989); see Downers Grove Associates v. Red Robin International, Inc. (1986), 151 Ill.App.3d 310, 314, 104 Ill.Dec. 393, 502 N.E.2d 1053.) CPS suffered no such prejudice in this case. The corporation had the opportunity to file counter-affidavits, and did in fact contest the merits of Smith's motion by filing a response. We do not approve of Smith's "hybrid" motion; nevertheless, in the absence of prejudice and to avoid delay in this case, we will consider each of the issues presented.

II.

The circuit court dismissed the counterclaim on the basis of collateral estoppel, concluding that the post-employment covenants in the Letter Agreement had been the subject of previous litigation.

The record contains two documents which relate to that determination. The first is an order entered in Chemical Personnel Search, Inc. v. Doyle (Cir.Ct.Cook Co.), No. 87-CH-1966, dated April 29, 1987. That case, however, allegedly involved another employment agreement, entitled "Information Protection Agreement." The second document is an order from Chemical Personnel Search, Inc. v. Lee (Cir.Ct.Cook Co.), No. 82-CH-1915, dated May 24, 1982. The order attached in that case simply denied rehearing and transferred the cause for reassignment. The record contains no other orders or transcripts from the previous two actions.

The doctrine of collateral estoppel prevents the litigation of the same issue twice. Under that doctrine, a former judgment bars only those questions actually decided in the prior suit. (Decatur Housing Authority v. Christy-Foltz, Inc. (1983), 117 Ill.App.3d 1077, 1082, 73 Ill.Dec. 519, 454 N.E.2d 379.) It is essential that there shall have been a finding of a specific fact in the prior judgment or record that is material and controlling in the pending case. It must also conclusively appear that the matter of fact was so in issue that it was necessarily decided by the court rendering the judgment. If there is any uncertainty because more than one distinct issue of fact was presented, collateral estoppel will not apply. (Case Prestressing Corp. v. Chicago College of Osteopathic Medicine (1983), 118 Ill.App.3d 782, 785, 74 Ill.Dec. 382, 455 N.E.2d 811; Decatur Housing Authority, 117 Ill.App.3d at 1082, 73 Ill.Dec. 519, 454 N.E.2d 379.) The party asserting the preclusion bears the heavy burden of showing with clarity and certainty that the identical issue was decided in the prior case. Best Coin-Op, Inc. v. Paul F. Ilg Supply Co. (1989), 189 Ill.App.3d 638, 661, 136 Ill.Dec. 957, 545 N.E.2d 481.

The orders entered in No. 87-CH-1966 and No. 82-CH-1915, upon which Smith relies, contain no specific findings regarding the matters contested therein. The pronouncement in No. 87-CH-1966 did not, as Smith claims, relate to the nature and validity of the employment contract. The order simply disposed of a prior complaint for injunctive relief on the grounds of collateral estoppel. Similarly, there is no indication as to the issues that were decided in No. 82-CH-1915. The order, which was presented as evidence of a former adjudication, does not refer to an employment contract or a restrictive covenant. Further, the contract allegedly involved in those two cases, although similar, is not identical to the Letter...