Bergstein v. Technology Solutions Co.

654 N.E.2d 479, 274 Ill. App. 3d 689
CourtAppellate Court of Illinois
DecidedAugust 3, 1995
DocketNo. 1—94—3709
StatusPublished

This text of 654 N.E.2d 479 (Bergstein v. Technology Solutions Co.) 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
Bergstein v. Technology Solutions Co., 654 N.E.2d 479, 274 Ill. App. 3d 689 (Ill. Ct. App. 1995).

Opinion

JUSTICE CAHILL

delivered the opinion of the court:

This a dispute between Technology Solutions Company (TSC) and two former employees and officers, Melvyn Bergstein and Christopher Moffitt. Bergstein was also a director of the company. TSC is a computer consulting company.

Bergstein and Moffitt had employment contracts with TSC which contained two-year covenants not to compete. Bergstein and Moffitt, after tense departures from TSC which are the backdrop for this appeal, formed a competing business within two years.

Bergstein then sought a declaratory judgment that the restrictive covenants in his employment contract with TSC were void and unenforceable. TSC filed a counterclaim against Bergstein for a preliminary injunction and a declaratory judgment that Bergstein breached the restrictive covenants in his employment contract and also breached his fiduciary duties as a director of TSC. TSC also filed a third-party claim against Moffitt seeking a preliminary injunction and a declaratory judgment that Moffitt breached the restrictive covenants in his employment contract with TSC.

The trial court first found that TSC terminated Bergstein in breach of their employment contract. The court ruled that TSC’s breach precluded it from enforcing the restrictive covenants and granted Bergstein the relief he sought. Next, the court ruled that Bergstein owed TSC no fiduciary duty as a director because he was "de facto not a member of [TSC’s] board” from the date he was terminated as an employee. Finally, the court entered summary judgment for Moffitt, finding that TSC could not enforce the restrictive covenants in Moffitt’s employment contract because TSC had cancelled the contract. TSC appeals each of these findings. We affirm the court’s finding that TSC breached its contract with Bergstein. We reverse the court’s finding that Bergstein owed TSC no fiduciary duty because of a "de facto” dismissal from the Board. We reverse the court’s grant of summary judgment for Moffitt.

We first address TSC’s argument that the trial court’s finding that Bergstein was fired on September 7, 1993, is against the manifest weight of the evidence.

The trial court held a hearing on the issue of whether Bergstein was fired. Evidence was presented that Bergstein began working for TSC in September 1991 and was elected to the board of directors in October 1991.

Bergstein’s employment contract with TSC was for three years, ending on September 5, 1994. TSC could terminate the contract only for (1) death or disability, or (2) serious misconduct. Both parties agree none of these things happened. Bergstein’s contract prohibited him from coaxing TSC’s employees away from TSC or providing consulting services to TSC’s clients within two years after he left the company.

Bergstein testified that on September 7, 1993, he went to a TSC board meeting. At that meeting a director told him: "The board has decided unanimously that we are terminating your services as of today, including your directorship.” Four directors present at the meeting testified that Bergstein was "asked to resign.” TSC offered to pay Bergstein the salary remaining under his contract, to pay him the profits from his stock options, and to forgive a loan the company had made to him.

The evidence also showed that on September 8, 1993, TSC disconnected Bergstein’s voice mail system. He could not access the system to send messages to or receive messages from TSC’s employees, officers, or directors. TSC posted a security guard at the doors of TSC to prevent Bergstein from removing TSC property. TSC issued a press release on September 9, 1993, which stated:

"Technology Solutions Company (the 'Company’) announced today that its Board of Directors has approved in principle a restructuring of its senior management organization and the composition of the Board. *** As part of the restructuring, it is expected that [an employee] and Melvyn E. Bergstein, each a director and vice chairman, will vacate those positions.”

The next day, TSC deleted Bergstein’s name from the TSC telephone list. TSC rerouted his telephone calls to someone other than his secretary and his mail to the secretary of TSC’s counsel.

Bergstein did not tender a letter of resignation at this time or return to work. TSC paid Bergstein a salary until November 4, 1993, when it formally announced that Bergstein was terminated for failure to return to work. Bergstein tendered a letter of resignation in December 1993.

The trial court found this evidence showed that TSC terminated Bergstein’s employment on September 7, 1993, in violation of the employment contract. We review whether the court’s findings are against the manifest weight of the evidence. (Eastern Seafood Co. v. Barone (1993), 252 Ill. App. 3d 871, 876, 625 N.E.2d 664.) We find the evidence supports Bergstein’s contention that he was discharged on September 7, 1993. We are not persuaded by TSC’s argument that because the directors merely asked Bergstein to resign on September 7, 1993, he was not involuntarily terminated. (See Hinthorn v. Roland’s of Bloomington, Inc. (1988), 119 Ill. 2d 526, 519 N.E.2d 909.) The court in Hinthorn stated:

"There are no magic words required to discharge an employee: an employer cannot escape responsibility for an improper discharge simply because he never uttered the words 'you’re fired.’ So long as the employer’s message that the employee has been involuntarily terminated is clearly and unequivocally communicated to the employee, there has been an actual discharge, regardless of the form such discharge takes.” Hinthorn, 119 Ill. 2d at 531.

TSC’s conduct at the meeting on September 7, 1993, and later was a clear communication that it had involuntarily terminated Bergstein in breach of his employment agreement. We affirm the court’s ruling that TSC cannot enforce the restrictive covenants in that agreement. See McCormick v. Empire Accounts Service, Inc. (1977), 49 Ill. App. 3d 415, 418, 364 N.E.2d 420.

The trial court next dismissed TSC’s claim that Bergstein breached his fiduciary duties as a director and ruled that Bergstein was "de facto” not a director after September 7, 1993. The court based this conclusion on the previous finding that Bergstein was fired on September 7, 1993. But this finding and the evidence presented went to the issue of employment, not to Bergstein’s fiduciary duties as a director. TSC argues it should be allowed to present evidence that Bergstein remained a member of the board of directors, that he owed TSC fiduciary duties as a director until his self-proclaimed resignation in December 1993, and that he breached those duties. The court refused to allow evidence on these issues and TSC’s claim for a preliminary injunction. The trial court appeared to find a "de facto” termination of Bergstein’s directorship based upon the evidence that supported the conclusion that Bergstein was terminated as an employee. But the two roles are separate.

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Bluebook (online)
654 N.E.2d 479, 274 Ill. App. 3d 689, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bergstein-v-technology-solutions-co-illappct-1995.