Tradesmen International, Incor v. John Black
2013 U.S. App. LEXIS 16043
7th Cir.2013Background
- Four former Tradesmen managers (Black, Walker, Boyer, Ellis) formed Professional Labor Support (PLS) after resigning; they had signed covenants not to compete (CNTCs) with geographic and confidentiality limits.
- Tradesmen sued the four and PLS in 2010 for multiple counts (trade-secret misappropriation, breach of CNTCs, injunctive relief, etc.). Ellis filed for bankruptcy and proceedings as to him were stayed.
- The district court granted summary judgment for Black, Walker, Boyer, and PLS on all counts (Ellis stayed) and denied permanent injunctive relief to Tradesmen; it also denied defendants’ motion for attorneys’ fees under the Illinois Trade Secrets Act (ITSA).
- On appeal, the Seventh Circuit held it lacked §1291 jurisdiction over most of Tradesmen’s appeal because the case remained pending against Ellis, but had interlocutory jurisdiction under §1292(a)(1) to review denial of permanent injunctive relief; it also exercised pendent appellate jurisdiction over defendants’ cross-appeal on attorneys’ fees.
- On the merits the court affirmed denial of permanent injunctive relief (Tradesmen failed to show irreparable harm or lack of adequate legal remedy and CNTC terms were unreasonable) but reversed the denial of attorneys’ fees, holding ITSA’s “made in bad faith” covers claims brought or maintained in bad faith and remanded for reconsideration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Appellate jurisdiction under 28 U.S.C. §1291 | Magistrate-judge judgment + parties’ consent made decision final and appealable | Kimbrell controls: consent cannot create finality while claims against a stayed defendant remain pending | No §1291 jurisdiction for most claims; only §1292(a)(1) for injunction count was available |
| Interlocutory jurisdiction under 28 U.S.C. §1292(a)(1) | District court’s denial of permanent injunction is reviewable and thus entitles review of related summary-judgment rulings | Defendants argued limited interlocutory scope; fee cross-appeal separate | Court had §1292(a)(1) jurisdiction only over denial of permanent injunctive relief; other counts must await finality against Ellis |
| Permanent injunctive relief (irreparable harm; adequacy of legal remedy) | Injunctive relief appropriate because damages difficult to quantify and harm ongoing from competition and use of proprietary info | Defendants complied largely with CNTCs, geography/time terms unreasonable, plaintiff offered no reliable damages proof | Affirmed denial: Tradesmen failed to show irreparable harm or inadequate legal remedy; CNTC confidentiality and geographic terms unreasonable under Ohio law |
| Choice of law for CNTCs | CNTCs select Ohio law; Ohio law should govern | Defendants accepted Ohio choice; forum (Illinois) will enforce choice where not contrary to public policy | Court applied Ohio law (choice respected under Illinois choice-of-law rules) to assess CNTC enforceability |
| Attorneys’ fees under ITSA ("made in bad faith") | "Made in bad faith" means only initiated in bad faith; fees improper because claim not initiated in bad faith | "Made in bad faith" covers claims brought or maintained in bad faith; fees may be appropriate if suit maintained to harass | Reversed: "made in bad faith" includes bringing or maintaining a claim in bad faith; remanded to determine if claim was maintained in bad faith |
Key Cases Cited
- Kimbrell v. Brown, 651 F.3d 752 (7th Cir. 2011) (a nonfinal district-court judgment while other claims remain pending is not appealable under §1291)
- McCarter v. Retirement Plan for District Managers of Am. Family Ins. Grp., 540 F.3d 649 (7th Cir. 2008) (attorneys’-fees award is appealable only after it is independently final)
- Raimonde v. Van Vlerah, 325 N.E.2d 544 (Ohio 1975) (CNTCs enforceable only to the extent reasonable: temporal, geographic, and protection of legitimate employer interests)
- Lake Land Emp. Grp. of Akron, LLC v. Columber, 804 N.E.2d 27 (Ohio 2004) (CNTCs must contain reasonable geographical and temporal restrictions; adequate legal remedy and damages estimate affect injunctive relief)
- Rankin-Thoman, Inc. v. Caldwell, 329 N.E.2d 686 (Ohio 1975) (injunctions should prevent irreparable harm when essential)
- Shaffer v. Globe Protection, Inc., 721 F.2d 1121 (7th Cir. 1983) (§1292(a)(1) is a narrow exception to final-judgment rule and should be construed narrowly)