Statistical Tabulating Corp. v. Hauck

293 N.E.2d 900, 10 Ill. App. 3d 50, 1973 Ill. App. LEXIS 2575
CourtAppellate Court of Illinois
DecidedFebruary 7, 1973
Docket57414
StatusPublished
Cited by6 cases

This text of 293 N.E.2d 900 (Statistical Tabulating Corp. v. Hauck) 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
Statistical Tabulating Corp. v. Hauck, 293 N.E.2d 900, 10 Ill. App. 3d 50, 1973 Ill. App. LEXIS 2575 (Ill. Ct. App. 1973).

Opinion

Mr. JUSTICE GOLDBERG

delivered the opinion of the court:

Statistical Tabulating Corporation (plaintiff) brought action against John G. Hauck, doing business as Office Skills (defendant), seeking injunctional enforcement of a restrictive covenant. The trial court entered judgment on the pleadings granting enforcement of the covenant as modified by the court. Defendant appeals. A factual statement is required before stating the contentions of the parties.

Since judgment was entered on the pleadings (Ill. Rev. Stat. 1971, ch. 110, par. 45(5)), the facts must be gleaned from the pleadings themselves without evidence. (Vogelsang v. Credit Life Insurance Co., 119 Ill.App.2d 67, 73, 255 N.E.2d 479.) Plaintiff’s business consists primarily of supplying data processing and temporary office help to other companies and organizations. Its offices are located in Chicago but it has branch activities in other portions of the country. Defendant was employed by plaintiff commencing October 7, 1963. He was a sales representative in Chicago until June, 1966; sales manager until April, 1967 and national sales manager until his employment terminated on November 19, 1971. Plaintiff alleged that defendant was a divisional vice president for the last year of his employment but defendant denied this and alleged that, although he had this title, he had no duties or salary commensurate with tire office.

On June 1, 1967, plaintiff and defendant executed an agreement cast in the form of a letter from defendant to plaintiff. The record does not show who prepared this agreement. In this letter, defendant stated his understanding that he was “* # * likely to become familiar with secret or confidential information of the corporation.” Defendant then stated that “* * * in consideration of my employment by the corporation, I agree that during my employment and after the termination of my employment for any cause * * *” he would not divulge, use or sell business or trade secrets, customer lists or any other secret or confidential information of plaintiff. Defendant further agreed “* * * in consideration of my employment by the corporation * # *” that upon termination of his employment for any cause whatsoever he would not for two years thereafter, directly or indirectly, engage in a business similar or competitive to that of plaintiff within 100 miles from the city in which he was then employed; within a radius of 100 miles from any part of 19 other designated cities in various parts of the United States from California to New York (Atlanta, Boston, Dallas, Los Angeles, San Francisco, etc.) or within a radius of 100 miles from any part of any city in which plaintiff or an affiliated company was operating at the time his employment was terminated.

It is undisputed that defendant’s employment was terminated on November 19, 1971. It is also undisputed that defendant violated the negative covenant by organizing his own business known as Office Skills which competed with the business of plaintiff in Chicago. The trial court granted plaintiffs motion for judgment on the pleadings and defendant was permanently enjoined and restrained from operating his business of Office Skills or any related business in violation of the agreement in competition with plaintiff and also from acting in any manner to operate or engage in the business of supplying or furnishing temporary office help until November 19, 1973. The judgment also provided * * that the aforesaid contract of June 1, 1967 is hereby modified to reduce the geographical area as prescribed therein to an area equivalent to a radius of 25 miles of Chicago, Illinois.”

Defendant contends that the restrictive covenant is not based upon a sufficient consideration because it is not ancillary to another contract and sets forth no additional consideration. Defendant also contends that the covenant is invalid because it is unreasonable in terms of its effect upon the parties thereto and the public. Plaintiff urges that continued employment of defendant was a sufficient consideration for validity of the covenant and that the covenant was reasonable and enforceable so that defendant, having accepted the benefits of continued employment, should be required to bear the burdens thereof.

We first consider the issue of validity of the covenant. It is a sound and accepted principle in Illinois that the enforceability of this covenant # * in restraint of competition is conditioned upon its reasonableness in terms of its effect upon the parties to the contract and the public.” (House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 37, 225 N.E.2d 21.) It is only in situations in which the limitations in the covenant as to time and territory are not unreasonable that a contract of this type in restraint of trade will be enforced. (Canfield v. Spear, 44 Ill.2d 49, 50, 51, 254 N.E.2d 433.) “Whether the contract under consideration is reasonable or contrary to public policy is a question of law.” Barrington Trucking Co. v. Casey, 117 Ill.App.2d 151, 156, 253 N.E.2d 36, citing Tarr v. Stearman, 264 Ill. 110, 118, 119, 105 N.E. 957.

Testing the covenant in the case at bar as originally: drafted against this standard, the conclusion of unreasonability is manifest. The necessity of restricting defendant’s activities within a radius of 100 miles from the city of Chicago does not appear from any allegation of the complaint. The unreasonability of the restriction appears patent and conceded because of the reduction of the distance to 25 miles in the judgment order appealed from. Similarly, no justification appears for the harsh restriction against defendant’s activities within a radius of 100 miles from so many enumerated cities. This restriction covers a substantial area of the entire country. The conclusion, therefore, is readily reached that the covenant in its original form could not be the subject of injunctional enforcement.

We consider next whether the court properly modified this covenant; or, to state the matter differently, whether the court properly elected partially to enforce the covenant in an effort to obtain reason-ability. The principle has been stated that in a situation of this type, “* * * the fairness of the restraint initially imposed is a relevant consideration to a court of equity.” (House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 39, 225 N.E.2d 21.) Basically, it appears that there is some division in legal thought regarding solution of this problem. Some courts have modified and then enforced negative covenants which restrain competition. Other courts will do so only in cases involving protection of goodwill in sale of a business, secret processes or trade secrets. (See House of Vision, Inc. v. Hiyane, 37 Ill.2d 32, 39, 225 N.E.2d 21). In House of Vision, Inc., the covenant as originally written into an employment contract contained no time limitation and was operative within a range of 30 miles from any office of the employer or any office from which the employee had rendered services during his employment.

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Bluebook (online)
293 N.E.2d 900, 10 Ill. App. 3d 50, 1973 Ill. App. LEXIS 2575, Counsel Stack Legal Research, https://law.counselstack.com/opinion/statistical-tabulating-corp-v-hauck-illappct-1973.