Midwest Lending Corp. v. Horton

2023 IL App (3d) 220132

• Court: Appellate Court of Illinois
• Decided: May 22, 2023
• Docket: 3-22-0132
• Status: Published

Opinion

2023 IL App (3d) 220132

Opinion filed May 22, 2023 ____________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

THIRD DISTRICT

MIDWEST LENDING CORPORATION, ) Appeal from the Circuit Court ) of the 18th Judicial Circuit, Plaintiff-Appellant, ) Du Page County, Illinois. ) v. ) Appeal No. 3-22-0132 ) Circuit No. 21-L-209 ) JOHN HORTON and PRIMELENDING ) The Honorable COMPANY, ) David W. Schwartz, ) Judge, Presiding. Defendants-Appellees. ) ____________________________________________________________________________

JUSTICE McDADE delivered the judgment of the court, with opinion. Presiding Justice Holdridge and Justice Albrecht concurred in the judgment and opinion. ____________________________________________________________________________

OPINION

¶1 The parties entered into two agreements relating to the employment of defendant John

Horton by plaintiff Midwest Lending Company (Midwest). The second agreement included a

nonsolicitation provision. Seven months after he was hired, Horton’s employment with Midwest

was terminated, and he began working for a new firm. After Horton solicited another employee

to leave Midwest and start work at his new firm, Midwest filed the first of three complaints

alleging that he had breached the nonsolicitation provision. ¶2 In response to those complaints, Horton filed motions to dismiss pursuant to section 2-

615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2020)), arguing that the

complaints failed to establish the requisite consideration. The trial court granted those motions,

ultimately dismissing Midwest’s second amended complaint with prejudice. We now affirm the

dismissal of that complaint.

¶3 I. BACKGROUND

¶4 Plaintiff Midwest entered into an at-will employment agreement with defendant John

Horton on March 5, 2020. Under that agreement, Horton’s base compensation was $100,000 per

year, plus numerous benefits that were outlined. Although the agreement stated that Horton’s

starting date was “4/1/2019 (Adjustment as of 1/1/2020)”, the parties agree that the stated year

was incorrect and his actual start date was April 1, 2020. However, Horton was to receive

compensation at his contracted salary rate starting January 1, 2020. On March 24, the parties

entered into a “Confidentiality and Non-Solicitation Agreement,” which stated in relevant part:

“Non-Solicitation. To the extent permitted by applicable law, during

Employee’s employment with the Company and for a period of twelve

(12) months following the termination of Employee’s employment for any

reason (such period being referred to as the ‘Restricted Period’).

Employee (i) will refrain from directly or indirectly employing, attempting

to employ, recruiting or otherwise soliciting or inducing (or assisting

others in soliciting, inducing or influencing) any employee, agent, or

consultant of the Company or its affiliates with whom Employee had

contact or of whom Employee became aware during his or her

employment to leave employment with the Company and/or to terminate

2 his or her remunerative relationship with the Company as an agent or

consultant of/to the Company; *** or otherwise modify adversely its

business relationship with the Company or its affiliates.”

¶5 Horton’s employment with Midwest was terminated on November 6, seven months after

it began, and he subsequently began working for codefendant PrimeLending Company

(PrimeLending). Subsequently, Horton successfully solicited a Midwest employee, Colleen

Rudnick, to leave her employment with Midwest and start working at PrimeLending.

¶6 In February 2021, Midwest filed a two-count complaint in the Du Page County circuit

court, alleging in count I that Horton breached his contract with his former employer by

soliciting Rudnick to join PrimeLending. In count II, Midwest requested an accounting to

determine the damages to be awarded for Horton’s alleged breach. Horton filed a motion to

dismiss the complaint pursuant to section 2-615 of the Code (id.), arguing that the nonsolicitation

agreement was unenforceable as a matter of law because it was not supported by adequate

consideration. Horton asserted that Illinois case law requires “at least two years of continued

employment following the execution of the restrictive covenant” or other consideration to

enforce a restrictive covenant in an employment agreement. Axion RMS, Ltd. v. Booth, 2019 IL

App (1st) 180724, ¶ 21. The trial court held a hearing on the motion and dismissed the complaint

without prejudice, finding that it failed to identify any consideration.

¶7 Midwest filed a first amended complaint, which was identical to the original one except

for the additional allegation in count I that Midwest paid Horton “a $25,000.00 signing bonus”

that provided consideration for the parties’ employment agreement. Horton filed a section 2-615

motion to dismiss, again asserting that the nonsolicitation agreement was not supported by

adequate consideration. After a hearing, the trial court granted Horton’s motion to dismiss

3 without prejudice, concluding that the amended complaint did not establish adequate

consideration when it failed to allege that the “signing bonus” “was specifically in exchange for

the non-compete, non-solicitation agreement.”

¶8 On October 14, 2021, Midwest filed its second amended complaint. That complaint was

substantially identical to its prior filings except for the addition in count I of the allegation that

Horton’s offer of employment by Midwest “provided for consideration in the amount of

$25,000.00 in exchange for Defendant’s acceptance of its terms and agreement of employment

contract, including the signing of a non-solicitation agreement prior to the beginning of his term

as Director of Strategic Growth.” Horton filed a section 2-615 motion to dismiss, arguing that the

second amended complaint continued to lack adequate consideration to support the enforcement

of the nonsolicitation provision. After a hearing, the trial court dismissed Midwest’s second

amended complaint with prejudice, concluding that the supporting documents did not show “that

the $25,000 signing bonus paid to defendant when he joined the company is consideration.”

Midwest filed a timely notice of appeal.

¶9 II. ANALYSIS

¶ 10 Midwest raises two issues on appeal: (1) whether the trial court erred by dismissing count

I of its second amended complaint for want of consideration and (2) whether the trial court erred

by dismissing count II based on its dismissal of count I. Because a motion to dismiss pursuant to

section 2-615 of the Code (735 ILCS 5/2-615 (West 2020)) attacks the legal sufficiency of

Midwest’s complaint, this court applies a de novo standard of review.

¶ 11 The consideration required for a valid and enforceable contract is a “ ‘bargained-for

exchange of promises or performances, and may consist of a promise, an act or a forbearance’ ”

(Carter v. SSC Odin Operating Co., 2012 IL 113204, ¶ 23 (quoting McInerney v. Charter Golf,

4 Inc., 176 Ill. 2d 482, 487 (1997))), that is “ ‘of benefit to one party or disadvantage to the

other.’ ” Id. ¶ 23 (quoting Steinberg v. Chicago Medical School, 69 Ill. 2d 320, 330 (1977)).

Generally, courts will not consider the adequacy of the consideration exchanged, only its

existence. Id. ¶ 24. That rule is modified, however, in the case of restrictive employment

covenants because the benefit of continued at-will employment may be merely illusory. Prairie

Rheumatology Associates, S.C. v. Francis, 2014 IL App (3d) 140338, ¶ 14.

¶ 12 Here, Midwest contends that the trial court’s reliance on Axion was misplaced because

the consideration asserted there “relie[d] exclusively on [the defendant’s] continued employment

after he executed [the employment agreement].” (Internal quotation marks omitted.) Axion, 2019

IL App (1st) 180724, ¶ 8. The outcome could have been different if the plaintiff had alleged

other consideration as well. Id. ¶ 22. Midwest argues that this case is different because Horton

was a new employee, not a continuing one, who received a $25,000 “signing bonus” before

starting work “in exchange for agreeing to all of the employment terms, which included the Non-

Solicitation Agreement.” The “signing bonus” effectively meant that Horton would receive an

extra three months’ salary regardless of how long he worked for Midwest, providing him with a

benefit that was proportionally higher the earlier he left the company. Midwest also notes that the

cases relied on by Horton and the trial court do not support the argument that the only way to

establish adequate consideration for a nonsolicitation agreement is through 24 months of

continued employment. See Prairie Rheumatology, 2014 IL App (3d) 140338, ¶ 17

(acknowledging that other forms of consideration aside from 24 months of employment could

suffice to support a nonsolicitation agreement).

¶ 13 We agree with Midwest’s explanation of the general legal principles that are at issue

here. As the trial court noted, however, Midwest’s second amended complaint failed to

5 demonstrate that the $25,000 “signing bonus” was specifically provided in exchange for

Horton’s acceptance of the nonsolicitation agreement. In that complaint, Midwest simply alleges

that its employment “[o]ffer provided for consideration in the amount of $25,000.00 in exchange

for Defendant’s acceptance of its terms and agreement of employment contract, including the

signing of a non-solicitation agreement prior to the beginning of his term as Director of Strategic

Growth.” (Emphasis added.) The offer letter signed by Horton on March 5 that contains that

alleged consideration does not use the term “signing bonus.” Moreover, even if the three-month

retroactive salary adjustment could be properly construed as a “signing bonus,” the offer letter

did not mention either the “Confidentiality and Non-Solicitation Agreement” that Horton signed

nearly three weeks later on March 24, nor the nonsolicitation provision contained in it that is at

the heart of this case.

¶ 14 Nonetheless, Midwest asks this court to consider the March 5 and March 24 agreements

in tandem so that the offer letter and “Confidentiality and Non-Solicitation Agreement”

constitute two parts of a single comprehensive employment package. In support, it contends that

the opposite construction would create absurd results because the integration provision in the

“Confidentiality and Non-Solicitation Agreement” would invalidate all the terms previously

agreed to in the offer letter but not reiterated in the later agreement. Those terms included critical

subjects of the employment contract, such as Horton’s salary and work benefits.

¶ 15 The integration provision states that “[the Confidentiality and Non-Solicitation]

Agreement constitutes the entire agreement between the parties, contains all of the agreements

between the parties with respect to the subject matter hereof and supersedes any and all other

agreements, either oral or written, between the parties with respect to the subject matter hereof.”

The portion of the provision that is italicized shows the error in Midwest’s analysis. The

6 language adopted by the parties expressly limits the intended scope of the “Confidentiality and

Non-Solicitation Agreement” “to the subject matter hereof.” Midwest’s suggestion that the two

agreements should be read together is contrary to the language the parties adopted in the

integration provision.

¶ 16 As Midwest recognizes in its brief, the subject matters of the “Confidentiality and Non-

Solicitation Agreement” and the offer letter differ substantially. The offer letter does not discuss,

or even hint at, the matters addressed in the “Confidentiality and Non-Solicitation Agreement,”

and the reverse is also true. Thus, we reject Midwest’s argument that absurdity would result if

the two documents were not read together. The integration provision requires the

“Confidentiality and Non-Solicitation Agreement” to be read as a separate document that

contains the entirety of the parties’ agreement on the unique matters addressed in it. See Axion,

2019 IL App (1st) 180724, ¶ 23 (construing a similarly worded integration clause when

affirming the dismissal of a complaint for an insufficient showing of consideration). It does not

invalidate the other terms and conditions of employment enumerated in the offer letter

previously agreed to by the parties.

¶ 17 Under our case law, an enforceable complaint must specify the consideration being

exchanged to support the agreement. In Axion, 2019 IL App (1st) 180724, ¶ 22, the court upheld

the dismissal of a complaint alleging the breach of a noncompete agreement when, apart from at-

will continued employment, it “did not allege any additional consideration given to [the

defendant] in exchange for him signing the noncompete clause.” (Emphasis added.) Id.

Similarly, in Brown & Brown, Inc. v. Mudron, 379 Ill. App. 3d 724, 729 (2008), this court

rejected the plaintiff’s claim that an employee had

7 “received additional employee benefits as consideration for the restrictive

covenant [when] no evidence was presented to establish with specificity

what those benefits were or how they differed from the benefits [the

worker] was already receiving as an employee of JMI. Thus, [the court]

conclude[d] that the employment agreement [was] not supported by

adequate consideration and that the restrictive covenant, therefore, [was]

unenforceable ***.” (Emphasis added.)

¶ 18 Applying that rationale here, Midwest’s second amended complaint failed to establish

any consideration specifically exchanged between the parties to support the “Confidentiality and

Non-Solicitation Agreement.” Indeed, the integration clause in the “Confidentiality and Non-

Solicitation Agreement” refutes Midwest’s contention that the $25,000 “signing bonus”

allegedly included in the offer letter was intended, at least in part, to be consideration for

Horton’s acceptance of the later nonsolicitation agreement. The integration clause affirmatively

establishes that the entirety of the parties’ agreement addressing the nonsolicitation provision

was contained within the four corners of that document. Nowhere in the “Confidentiality and

Non-Solicitation Agreement” is a “signing bonus” or retroactive payment mentioned.

Accordingly, we reject Midwest’s argument that the “signing bonus” in the offer letter provided

adequate consideration for Horton’s later agreement to the nonsolicitation provision. We hold

that the trial court properly dismissed Midwest’s second amended complaint for want of an

adequate showing of consideration.

¶ 19 Therefore, we need not address the second issue Midwest advances on appeal. That issue

addresses the propriety of dismissing Midwest’s request in count II for an accounting to aid it in

ascertaining the damages it incurred from Horton’s alleged contractual breach. Because that

8 issue is directly tied to the validity of the court’s dismissal of the breach allegation in count I,

which we now affirm, it is unnecessary to review the dismissal of count II.

¶ 20 III. CONCLUSION

¶ 21 For the reasons stated, we affirm the judgment of the circuit court of Du Page County.

¶ 22 Affirmed.

9 Midwest Lending Corp. v. Horton, 2023 IL App (3d) 220132

Decision Under Review: Appeal from the Circuit Court of Du Page County, No. 21-L- 209; the Hon. David W. Schwartz, Judge, presiding.

Attorneys Richard M. Craig, of Law Offices of Richard M. Craig, P.C., of for Chicago, for appellant. Appellant:

Attorneys Jeffrey L. Rudd and Daniel T. Corbett, of Jackson Lewis P.C., for of Chicago, for appellees. Appellee: