Appelbaum v. Appelbaum

823 N.E.2d 1074, 355 Ill. App. 3d 926, 291 Ill. Dec. 488, 2005 Ill. App. LEXIS 61
CourtAppellate Court of Illinois
DecidedFebruary 1, 2005
Docket1-04-2627
StatusPublished
Cited by11 cases

This text of 823 N.E.2d 1074 (Appelbaum v. Appelbaum) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Appelbaum v. Appelbaum, 823 N.E.2d 1074, 355 Ill. App. 3d 926, 291 Ill. Dec. 488, 2005 Ill. App. LEXIS 61 (Ill. Ct. App. 2005).

Opinion

JUSTICE WOLFSON

delivered the opinion of the court:

This is the second case we have been asked to decide regarding members of the Appelbaum family and their disputes over the family’s frozen shrimp business, Penguin Frozen Foods, Incorporated (Penguin Foods). Our decision in this case is confined to the preliminary injunction entered in the trial court.

It all started when William Appelbaum (William) filed a complaint against his siblings and other members of Penguin Foods’ board of directors, alleging several causes of action arising from the termination of his employment. See Appelbaum v. Appelbaum, No. 1—03—0221 (2003) (unpublished order under Supreme Court Rule 23). Penguin Foods filed a countercomplaint against William and John W. Appelbaum (J.W.) alleging breach of contract and tortious interference with a contract. The contract at issue is a restrictive covenant signed by J.W when he worked for Penguin Foods.

In this interlocutory appeal, counterdefendants William and J.W. contend the trial court improperly granted counterplaintiff Penguin Foods a preliminary injunction, enjoining them from contacting several of Penguin Foods’ customers and suppliers based on the restrictive covenant J.W. signed. We conclude the preliminary injunction is too broad and must be substantially modified.

FACTS

Penguin Foods, a Delaware corporation, is owned and operated by Jonathan, Daniel, and Andrea Appelbaum in Northbrook, Illinois. William Appelbaum is their brother. Since 1950, Penguin Foods has been buying and selling seafood products, primarily domestic frozen shrimp harvested from the Gulf of Mexico. Penguin Foods purchases almost all of its shrimp inventory between May and December of each year, the high season for catching shrimp in the Gulf of Mexico. Penguin Foods stores the frozen shrimp and uses it to fill sales orders throughout the year.

In September 2001, Jonathan terminated William’s employment with Penguin Foods. William is now vice-president and secretary of Worldwide Shrimp (Worldwide). Like Penguin Foods, Worldwide buys and sells domestic shrimp from the Gulf of Mexico.

J.W. is William’s cousin and worked as a salesman at Penguin Foods for 18 years, beginning in 1986. On May 22, 1991, J.W signed a restrictive postemployment covenant (the Covenant) with Penguin Foods. The Covenant included a nonsolicitation clause:

“Employee covenants and agrees that, for a period of [24 months] following the termination of Employee’s employment with the Company for any reason, Employee shall not, as principal, agent, owner, partner, stockholder, officer, director or participant, independent contractor, or employee (either with or without compensation) or in any individual or representative capacity whatsoever, directly or indirectly, contact, call upon, purchase from, solicit business from, sell, or buy, or contract to sell to or buy from, any Customer or Supplier of the Company any Product which is the same as or similar to any Product bought or sold by the Company, and Employee shall not, directly or indirectly, aid or assist any other person, firm or corporation in doing any of the aforesaid acts.”

The Covenant defined “Customer”:

“those customers of [Penguin Foods]
(1) that Employee contacted or serviced during the [12] month period immediately preceding the termination of Employee’s employment, and
(2) that contracted with [Penguin Foods] for the purchase of Products or to whom [Penguin Foods] sold Products during the [12] month period immediately preceding the termination of Employee’s employment.”

According to the Covenant’s definition, “suppliers” were those that J.W. “contacted or dealt with *** and that contracted with the company to sell and deliver Product to [Penguin Foods] during the [12] month period immediately preceding the termination of [J.W.’s] employment.”

While at Penguin Foods, J.W. was the top salesman, bringing in 40% to 50% of its sales. His duties included servicing accounts: managing shipping, controlling inventory, negotiating prices, and approving credit for customers. In return, Penguin Foods paid J.W over $7 million in salary and bonuses from 1991 to 2003.

J.W. left Penguin Foods in January 2004 and formed Worldwide with William a few months later. J.W. serves as the president and treasurer of Worldwide. J.W., William, and William’s two children are Worldwide’s shareholders.

On May 5, 2004, Penguin Foods filed a third-party complaint against J.W., alleging he breached the Covenant. Penguin Foods also amended its counterclaim against William, adding a claim of tortious interference for inducing J.W. to breach the Covenant and moved for a temporary restraining order and preliminary injunction. Penguin Foods submitted a list of its 48 suppliers (Exhibit 24) and 494 customers (Exhibit 25). In Exhibit 24, Jonathan wrote “PC” or “SC” by the suppliers’ names if J.W. was their primary or secondary contact. In Exhibit 25, Jonathan wrote “PC,” “SC,” or “S” next to some of the names to indicate J.W. was their primary or secondary contact or had serviced those customers. Jonathan also noted which customers had been ordering from Penguin Foods for approximately 3, 5, 10, or over 20 years. Penguin Foods requested the court enjoin J.W. and William from contacting those customers and suppliers for the duration of the 24-month period required by the Covenant. There was no attempt to file the customer and supplier lists under seal.

At the hearing on Penguin Foods’ motion, J.W testified that after leaving Penguin Foods he had not contacted any of the customers on Penguin Foods’ list and had told several of his former customers he could not sell to them due to the Covenant. When asked to review Jonathan’s notations in Exhibit 25, J.W. agreed he was the primary contact for all but one of the “PC” customers. He agreed he had contact with all of the “SC” customers, but denied any contact with the customers with an “S” appearing next to their names. JW denied he was the secondary contact for the “SC” suppliers as noted in Exhibit 24.

JW testified Worldwide had three employees: William, JW, and Mr. Zibinski, who helped with the computers. J.W. said he did not assist William in contacting Penguin Foods’ customers or suppliers. William would go to a separate office when communicating with customers he and J.W. believed were covered by the Covenant. If JW’s former customers contacted him, JW told them he could not sell to them due to the Covenant. J.W. admitted he still was able to make a living in the seafood industry despite the covenant’s limitations.

William testified J.W. gave him permission to use his name in Worldwide’s business plan before JW left Penguin. If suppliers asked, William told them JW was his partner at Worldwide. William admitted that during his 20 years at Penguin Foods, he purchased from only one supplier and could not remember the supplier’s name. He agreed he was responsible for only 1% of Penguin Foods’ sales.

Jonathan testified Penguin Foods required key employees of the company to sign postemployment covenants.

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Bluebook (online)
823 N.E.2d 1074, 355 Ill. App. 3d 926, 291 Ill. Dec. 488, 2005 Ill. App. LEXIS 61, Counsel Stack Legal Research, https://law.counselstack.com/opinion/appelbaum-v-appelbaum-illappct-2005.