McInnis v. OAG Motorcycle Venturs, Inc.
2015 IL App (1st) 142644
Ill. App. Ct.2015Background
- McInnis, a top motorcycle salesman, was rehired by City Limits Harley‑Davidson (City Limits) on October 25, 2012 and, as a condition of rehiring, signed an employee confidentiality agreement containing an 18‑month postemployment noncompetition/nonsolicitation clause covering dealerships within 25 miles.
- McInnis had previously worked for City Limits (beginning 2009), briefly left for Woodstock Harley‑Davidson for one day, then sought rehiring; City Limits waived its normal 90‑day trial period when rehiring him.
- McInnis remained employed at City Limits for 18 months after signing the agreement and then voluntarily resigned in May 2014 to work for Woodstock; he maintained 179 client contacts in his personal cell phone.
- City Limits sued for a preliminary injunction to enforce the restrictive covenants; McInnis sought declaratory judgment that the covenants were unenforceable for lack of adequate consideration. The trial court denied injunctive relief and granted declaratory judgment for McInnis.
- On interlocutory appeal, the appellate court reviewed whether continued employment plus any additional consideration was sufficient to support the restrictive covenant; the court affirmed, holding the postemployment covenants unenforceable for lack of adequate consideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the postemployment restrictive covenants are supported by adequate consideration | McInnis: his continued employment after signing (18 months) is insufficient; no other additional consideration was provided | City Limits: rehiring, waiver of 90‑day trial period, access to confidential customer leads and benefits to top salesmen constitute adequate consideration under a fact‑specific analysis | Held: covenant unenforceable – continued employment under two years alone is inadequate and court found no additional consideration beyond employment |
| Whether courts should apply a bright‑line two‑year rule for adequate consideration | McInnis: two years is the generally recognized substantial period; less is inadequate absent other consideration | City Limits: two‑year rule should not be rigid; totality of circumstances (including rehiring, waiver of trial period) can make <2 years sufficient | Held: appellate court accepts two‑year benchmark as generally controlling but allows other consideration to suffice; here no such additional consideration was proven |
| Whether preliminary injunction was properly denied | McInnis: City Limits cannot show likelihood of success on merits because covenants lack adequate consideration | City Limits: likely to succeed because covenants protect legitimate business interests and were supported by consideration | Held: denial affirmed because City Limits failed to show likelihood of success on merits (inadequate consideration) |
| Whether trial court erred by considering fact‑specific evidence (e.g., resignation vs termination, waiver of trial period) | McInnis: trial court properly examined whether any additional consideration existed and found none | City Limits: trial court misapplied Fifield and should have weighed facts to find adequate consideration despite <2 years | Held: trial court’s fact‑specific inquiry was appropriate; its findings (no additional consideration) were upheld |
Key Cases Cited
- Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871 (Ill. 2011) (supreme court rejects rigid formulas and endorses totality‑of‑circumstances reasonableness analysis for restrictive covenants)
- Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724 (Ill. App. Ct. 2008) (post‑employment covenant unsupported where short post‑covenant employment and alleged additional benefits were not shown with specificity)
- Lawrence & Allen, Inc. v. Cambridge Human Resource Group, Inc., 292 Ill. App. 3d 131 (Ill. App. Ct. 1997) (continued employment for more than two years held sufficient consideration)
- Mid‑Town Petroleum, Inc. v. Gowen, 243 Ill. App. 3d 63 (Ill. App. Ct. 1993) (adequacy of consideration for covenant is a question of fact; seven months post‑covenant employment found insufficient)
- Prairie Eye Center, Ltd. v. Butler, 305 Ill. App. 3d 442 (Ill. App. Ct. 1999) (courts scrutinize restraints on trade and apply reasonableness test to restrictive covenants)