Tyler Enterprises of Elwood, Inc. v. Shafer

573 N.E.2d 863, 214 Ill. App. 3d 145, 158 Ill. Dec. 50, 1991 Ill. App. LEXIS 1045
CourtAppellate Court of Illinois
DecidedJune 12, 1991
Docket3-91-0180
StatusPublished
Cited by16 cases

This text of 573 N.E.2d 863 (Tyler Enterprises of Elwood, Inc. v. Shafer) 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
Tyler Enterprises of Elwood, Inc. v. Shafer, 573 N.E.2d 863, 214 Ill. App. 3d 145, 158 Ill. Dec. 50, 1991 Ill. App. LEXIS 1045 (Ill. Ct. App. 1991).

Opinion

PRESIDING JUSTICE STOUDER

delivered the opinion of the court:

Plaintiff, Tyler Enterprises of Elwood (Tyler), brought an action in the circuit court of Will County against the defendants, Warren Shafer, James Lutz, and Shafer Enterprises. Tyler sought injunctive relief and damages from the defendants based on the following theories: (1) breach of a restrictive covenant; (2) tortious interference with business relations; (3) breach of fiduciary duty; and (4) defamation. The trial court granted the preliminary injunction and the defendants’ petition for this interlocutory appeal pursuant to Supreme Court Rule 307(a)(1) (134 Ill. 2d R. 307(a)(1)).

Tyler develops, markets, and sells various fertilizers and lawn care products. In early 1980, Tyler hired Shafer as its general sales manager. Shafer’s responsibilities included the development and production of products, advertising, the creation of a sales force, management of personnel, building a market base, customer relations, financial matters, and he was responsible for the day-to-day operations of the business. Lutz was hired by Tyler in 1984 as a sales representative.

A short time after beginning to work for Tyler, Shafer executed a stock option agreement which provided him with an option to purchase 200 shares of Tyler stock. The agreement also contained a restrictive covenant, which provides:

“4. As an inducement to the CORPORATION to enter into this Stock Option Agreement, SHAFER shall not for a period of three (3) years after his voluntary termination of employment with the CORPORATION or after the termination of his employment by the CORPORATION for cause, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation, or control of, or be employed or otherwise connected in any manner, with any business which directly or indirectly competes with the business of the CORPORATION within a radius of fifty (50) miles of Elwood, Illinois.”

In November 1988, while still employed by Tyler, Shafer and Lutz, along with Mark Remke, created a corporation known as Remke Enterprises (Remke). Shafer, Lutz, and Mark Remke each owned S8y3% of Remke. Remke was created to market fertilizers to nurseries, garden centers, and landscapers. At no time after creating Remke did Shafer or Lutz ever advise Jim Tyler, the president of Tyler, or any of the officers of Tyler of their ownership interest in Remke.

Shortly thereafter, an audit of Tyler uncovered Shafer’s dealings with Remke. A meeting was held at which Jim Tyler told Shafer and Lutz to cease all involvement with Remke and that they were to devote full time to Tyler. Shafer also was to provide an accounting for all of his dealings with Remke. As it turns out, Shafer never provided the accounting. On August 31, 1990, Tyler terminated Shafer’s employment.

On September 5, 1990, Shafer was given notice of Tyler’s intent to enforce the restrictive covenant. In spite of this, Shafer continued to organize his own fertilizer/lawn care products company, Shafer Enterprises, and continued soliciting the salesmen, material suppliers, and customers of Tyler. Tyler subsequently filed the instant action.

The trial court granted Tyler’s motion for an injunction restraining Shafer from violating the terms of the stock option agreement. This interlocutory appeal followed.

A preliminary injunction is an extraordinary remedy used only in situations where an extreme emergency exists and serious harm would result in the absence of the injunction. (Carbonic Fire Extinguishers, Inc. v. Heath (1989), 190 Ill. App. 3d 948, 547 N.E.2d 675.) The decision to grant or deny injunctive relief rests within the sound discretion of the trial court. (Southern Illinois Medical Business Associates v. Camillo (1989), 190 Ill. App. 3d 664, 546 N.E.2d 1059.) In order for a preliminary injunction to issue, the plaintiff must establish that: (1) he possesses a clear right or interest needing protection; (2) no adequate remedy at law exists; (3) irreparable harm will result if an injunction is not granted; and (4) there is likelihood of success on the merits of the case. Southern Illinois, 190 Ill. App. 3d 664, 546 N.E.2d 1059.

We find that under these circumstances the trial court did not abuse its discretion in determining that Tyler had met its burden of proof, and in granting the preliminary injunction.

The propriety of injunctive relief in the instant case depends upon the enforceability of the restrictive covenant contained in the stock option agreement signed by Shafer, and that determination is a question of law. (Reinhardt Printing Co. v. Feld (1986), 142 Ill. App. 3d 9, 490 N.E.2d 1302.) Covenants not to compete are, in effect, restraints on trade and will be carefully scrutinized to ensure that their intended effect is not to prevent competition per se. (Capsonic Group v. Swick (1989), 181 Ill. App. 3d 988, 537 N.E.2d 1378.) A restrictive covenant may be held enforceable only if the time and territorial limitations are reasonably necessary to protect a legitimate business interest of the employer, a determination which necessarily turns on the facts and circumstances of each case. Southern Illinois, 190 Ill. App. 3d at 672, 546 N.E.2d at 1059.

There are two general situations in which an employer’s legitimate business interests may be found for purposes of enforcing a covenant not to compete: (1) where, by the nature of the business, plaintiff has a near-permanent relationship with its customers and but for his employment, defendant would not have had contact with them; or (2) where the former employee learned trade secrets or acquired other confidential information through his employment with plaintiff and subsequently attempted to use it for his own benefit. (Shapiro v. Regent Printing Co. (1989), 192 Ill. App. 3d 1005, 549 N.E.2d 793.) In the instant case, the record shows that Tyler had a protectable business interest due to the near-permanent relationship it had with its customers.

Under Illinois law, a court may consider many objective factors when determining whether a near-permanent relationship exists between an employer and its customers. The number of years it takes the employer to develop the clientele indicates the parties’ intention to remain affiliated with the employer indefinitely. (McRand, Inc. v. van Beelen (1985), 138 Ill. App. 3d 1045, 486 N.E.2d 1306.) In the instant case, Shafer testified that in the fertilizer/lawn care products industry, it is particularly important to cultivate the loyalty of the customers. According to Shafer, Tyler’s customers were developed over a 10-year period and not merely by the ring of a doorbell.

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Bluebook (online)
573 N.E.2d 863, 214 Ill. App. 3d 145, 158 Ill. Dec. 50, 1991 Ill. App. LEXIS 1045, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tyler-enterprises-of-elwood-inc-v-shafer-illappct-1991.