AMP Inc. v. Fleischhacker

823 F.2d 1199
CourtCourt of Appeals for the Seventh Circuit
DecidedJuly 16, 1987
DocketNos. 86-1573, 86-1635
StatusPublished
Cited by60 cases

This text of 823 F.2d 1199 (AMP Inc. v. Fleischhacker) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
AMP Inc. v. Fleischhacker, 823 F.2d 1199 (7th Cir. 1987).

Opinion

CUMMINGS, Circuit Judge.

Plaintiff appeals the district court’s entry of final judgment in favor of the defendants after a bench trial. We affirm.

The plaintiff, AMP Incorporated, brought this action against a former employee, James Fleischhacker, and one of its competitors, Molex, alleging unfair competition and misappropriation of trade secrets. AMP is the world’s leading producer of electrical and electronic connection devices. It is by far the largest company in the connector industry, with over 21,000 employees and 1983 reported sales of over one-and-one-half billion dollars and net income of about $163 million. AMP’s Components & Assemblies Division, headquartered in Winston-Salem, North Carolina, is one of its major divisions, generating in excess of $100 million in gross sales per year.

Molex is a principal competitor of AMP’s Components & Assemblies Division and has its principal place of business in Lisle, Illinois. Molex’s^ annual sales are in excess of $250 million, with foreign sales accounting for over half of that total. A significant portion of Molex’s total sales is attributable to products that compete directly with products manufactured by AMP’s Components & Assemblies Division.

The present controversy involves the 1984 hiring by Molex of defendant James Fleischhacker, formerly the Division Manager of AMP’s Components & Assemblies Division, to fill the position of Director of Marketing for Molex’s Commercial Products Division. Mr. Fleischhacker, who holds a Bachelor of Science degree from the University of Minnesota and a Master’s degree from the Massachusetts Institute of Technology, joined AMP in 1973. He rapidly advanced through the corporation and in 1982 was named Manager of the Components & Assemblies Division, the position he held until he resigned in 1984. As Division Manager, Mr. Fleischhacker supervised approximately 1200 people who were responsible for the manufacture and sale of 10,000 different component parts. His duties as Division Manager included reviewing and approving business programs, interfacing with group management, implementing strategic policies and plans, and developing personnel. His primary energies, however, were devoted to motivating and coordinating the efforts of others. His ability and performance at AMP were rated as exceptional and he was told that he had the potential of rising higher within AMP’s corporate structure and even of becoming president of the corporation. His honesty, integrity, loyalty, discretion, and judgment while employed by AMP were consistently rated as good to excellent in formal evaluations and by the testimony of his co-workers.

In 1982 Molex decided to create a new’ position, Director of Marketing, in its Commercial Products Division. An executive search firm directed Molex to Mr. Fleisch-[1201]*1201hacker, whom Molex found to be a desirable and highly qualified candidate for the position as a result of his background, education, skill, and ability, including demonstrated product management capabilities, and especially because of his knowledge of the connector industry. Molex made a written offer of employment to Mr. Fleisch-hacker at the end of 1983, which he accepted in February 1984.

AMP has alleged that Molex’s hiring of Mr. Fleischhacker is part of a larger pattern of conduct by Molex involving the misappropriation and threatened misappropriation of AMP’s trade secrets and other confidential information, and the solicitation and hiring of AMP personnel. Given the nature of the competition between Mo-lex and AMP, the nature of the respective positions held by Mr. Fleischhacker at AMP and Molex, and an alleged propensity on the part of Molex to misappropriate AMP’s internal information without regard to its proprietary nature, AMP maintains that it is inevitable that Mr. Fleischhacker and other AMP personnel hired by Molex will use and disclose AMP trade secrets and confidential information for the benefit and unjust enrichment of Molex. AMP therefore initiated this litigation in an effort to obtain both legal and equitable relief for the alleged misappropriation of its trade secrets and confidential information which will result if Mr. Fleischhacker is allowed to continue in his position as Director of Marketing for Molex’s Commercial Products Division. In addition, AMP sought legal and equitable relief against Molex as a result of its pattern of unfair competition involving the solicitation of AMP personnel to obtain AMP trade secret and other confidential information.

After a trial on the merits, the district court entered judgment in favor of the defendants, denying injunctive relief and damages against Molex for unfair competition, and denying injunctive relief against Molex and Mr. Fleischhacker to prevent trade secret misappropriation. In its judgment order and subsequent order clarifying the original order, the district court explained that because of their relatively simple design and the ease with which they could be copied, the products manufactured by AMP’s Components & Assemblies Division did not constitute protectible trade secrets. The district court also held that although AMP had established the existence of protectible business information, it had failed to show any likelihood that Mr. Fleischhacker would compromise any confidential information known to him. AMP appeals the district court’s judgment.

Resolution of the issues presented by this appeal requires an analysis of the Illinois law of trade secrets.1 We must first take note of the distinction drawn by Illinois law between the protection afforded an employer who has bound his employee by an enforceable post-employment restrictive covenant not to compete and one who relies exclusively upon common law restrictions against disclosure of confidential information. To our considerable dismay, this distinction is one which the parties have chosen largely to ignore. While an enforceable restrictive covenant may protect material, such as confidential information revealed to an employee during the course of his employment, which does not constitute a trade secret, an employer’s protection absent a restrictive covenant is narrower and extends only to trade secrets or near-permanent customer relationships. See Cincinnati Tool Steel Co. v. Breed, 136 Ill.App.3d 267, 274, 90 Ill.Dec. 463, 467, 482 N.E.2d 170, 174 (2d Dist.1985); Smith Oil Corp. v. Viking Chemical Co., 127 Ill.App.3d 423, 427, 82 Ill.Dec. 250, 253, 468 N.E.2d 797, 800 (2d Dist.1984); Tower Oil & Technology Co. v. Buckley, 99 Ill.App.3d 637, 644, 54 Ill.Dec. 843, 849, 425 N.E.2d 1060, 1066 (1st Dist.1981) (“[Njeither the existence nor misuse of a trade secret is required to enforce a restrictive covenant.”).

Thus the initial question to be resolved is whether Mr. Fleischhacker was [1202]*1202bound by a valid and enforceable restrictive covenant or was merely restricted by common law principles. The record indicates that he was not bound by a restrictive covenant not to compete. He did, however, sign a confidentiality agreement when he first became employed at AMP whereby he agreed inter alia:

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823 F.2d 1199, Counsel Stack Legal Research, https://law.counselstack.com/opinion/amp-inc-v-fleischhacker-ca7-1987.