2015 IL App (1st) 141863
Ill. App. Ct.2016Background
- Plaintiffs sue Schmitt for breach of the SMA restrictive covenants: confidentiality, noncompetition, and nonsolicitation.
- The SMA was signed after AssuredPartners acquired Jamison and ProAccess; it runs four years with post-termination restraints.
- Schmitt allegedly used confidential information and customer contacts to solicit and divert business after resignation.
- The circuit court granted summary judgment on counts I and III (breach of contract and injunctive relief) as to the SMA, but refused summary judgment on tortious interference (count II) and would not modify the covenants.
- Plaintiffs sought to file three new claims in a second amended complaint; the court denied leave to amend, finding the proposed counts rephrased versions of previously decided claims.
- On appeal, plaintiffs challenge enforceability of the covenants, any judicial modification, and the denial of amendment; the court affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the noncompetition provisions enforceable under the rule of reasonableness? | AssuredPartners argues 3(a) protects a legitimate interest (customer expiry list) and is narrowed enough. | Schmitt argues 3(a) is overbroad and unreasonable as to geography and scope. | Overbroad and unenforceable. |
| Is the nonsolicitation provision enforceable? | AssuredPartners contends 3(b) protects customer relationships developed by Schmitt. | Schmitt contends 3(b) extends to all potential targets and is broader than necessary. | Overbroad and unenforceable. |
| Is the confidentiality provision enforceable? | AssuredPartners asserts 2(a) protects confidential information and trade secrets. | Schmitt argues 2(a) is standard; plaintiffs overbroadly seek to bar usage of all knowledge. | Unenforceable as overly broad restraint on post-employment activity. |
| Should the court modify the covenants to conform with Illinois law under section 3(c)? | Parties consented to judicial modification to the maximum reasonable scope. | Modification would amount to drafting a new agreement; covenants are too overbroad for modification. | Court declined modification; should not judicially modify those covenants. |
| Did the court abuse its discretion in denying leave to amend the complaint to add new counts? | Amendment would narrow covenants and enforce protectable interests. | Proposed amendments merely rephrase existing claims; no cure for overbreadth. | No abuse; amendment denied. |
Key Cases Cited
- North American Paper Co. v. Unterberger, 172 Ill. App. 3d 410 (Ill. App. 1988) (overbroad confidentiality restraints invalid)
- Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871 (Ill. 2011) (fact-specific reasonableness for covenants)
- Cambridge Engineering, Inc. v. Mercury Partners 90 BI, Inc., 378 Ill. App. 3d 437 (Ill. App. 2007) (nonsolicitation scope must be narrowly tailored)
- Eichmann v. National Hospital & Health Care Services, Inc., 308 Ill. App. 3d 337 (Ill. App. 1999) (modification of covenants may be appropriate in some cases)
- Arcor, Inc. v. Haas, 363 Ill. App. 3d 396 (Ill. App. 2005) (employment covenants must be narrowly tailored to protect interests)
- Northwestern Podiatry Ctr., Ltd. v. Ochwat, 2013 IL App (1st) 120458 (Ill. App. 2013) (courts will not read qualifiers to salvage overbroad covenants)