Trade Secrets & Noncompete Blog

Trade Secrets & Noncompete Blog

News & Updates On Developments in the Law of Restrictive Covenants, Unfair Competition & Trade Secrets

Tag Archives: Illinois

Federal District Judges In Chicago Are Now Split Over Whether To Follow The Illinois Appellate Court’s Landmark Fifield Decision

Federal district judges in Chicago are now split over whether to follow the Illinois appellate court’s landmark non-compete decision, Fifield v. Premier Dealer Services, Inc., 373 Ill. Dec. 379, 993 N.E. 2d 938 (Ill. App. 1st Dist. 2013).

In the summer of 2013, long held beliefs about the required consideration for a restrictive covenant under Illinois law were thrown a curve when the Illinois Appellate Court for the First District (i.e., Cook County) held in Fifield that, absent other consideration, two years of employment is required for a restrictive covenant to be deemed supported by adequate … Continue Reading

California Resident Forced To Litigate Non-Compete And Trade Secrets Case In Illinois

A threshold tactical decision in virtually every non-compete and trade secret case is where to file the suit. This decision is particularly important when a non-compete dispute has a California angle, because non-compete agreements are generally void as against public policy in California. Not surprisingly, employers seeking to enforce non-compete agreements try to stay away from the Golden State, while those seeking to avoid enforcement find it welcoming.

That scenario was recently faced by a federal judge in Chicago, where a California resident (Jon Thorsell) was sued by his former employer (Brunswick Corporation, which is headquartered in Illinois) for allegedly … Continue Reading

Chief Federal District Judge In Chicago Declines To Follow Illinois Appellate Court Holding That, Absent Other Consideration, Two Years Of Employment Is Required Consideration For A Restrictive Covenant

Judge Ruben Castillo, the Chief Judge for the United States District Court for the Northern District of Illinois, recently declined to follow a widely publicized Illinois Appellate Court decision in which the Appellate Court held that, absent other consideration, two years of employment is required consideration for a restrictive covenant in Illinois.

Background

In the summer of 2013, long held beliefs about the required consideration for a restrictive covenant under Illinois law were thrown a curve when the Illinois Appellate Court for the First District (i.e., Cook County) held that, absent other consideration, two years of employment is … Continue Reading

Chicago Federal Court Holds That A Contractual Limitation On A Corporation’s Ability To Compete Should Not Be Analyzed Like An Employer/Employee Non-Compete

A federal judge in Chicago recently held that when a corporation enters into a contract with another corporation under which it agrees not to engage in certain competitive activities, that agreement not to compete should not be analyzed like an employer/employee non-compete. Owens Trophies, Inc. f/k/a R.S. Owens and Company, Inc. v. Bluestone Designs & Creations, Inc. and Society Awards (N.D. Ill. January 14, 2014). Rather, the Court held that because there is no imbalance of power between the parties in that situation, the enforceability of the contract should be analyzed like any other arms-length transaction, and the employer-employee restrictive … Continue Reading

Seventh Circuit Holds That Maintaining A Trade Secrets Suit In Bad Faith Can Subject The Plaintiff To An Award Of Attorneys’ Fees

The Uniform Trade Secrets Act, which has been adopted in some form in every state except New York, Massachusetts, and North Carolina, provides that if “a claim of misappropriation is made in bad faith . . . the court may award reasonable attorney’s fees to the prevailing party.” Uniform Trade Secrets Act, § 4 (emphasis added). One question under this provision is whether it only applies to lawsuits filed in bad faith, or whether it also applies to lawsuits that are maintained in bad faith (i.e., lawsuits that continue to be prosecuted – even after it becomes clear that there … Continue Reading

Illinois Court Holds That, Absent Other Consideration, Two Years Of Employment Is Required Consideration For A Restrictive Covenant

In Fifield v. Premier Dealer Services, Inc., an Illinois Appellate Court recently held that, absent other consideration, two years of employment is required for a restrictive covenant to be deemed supported by adequate consideration – even where the employee signed the restrictive covenant as a condition to his employment offer – and even where the employee voluntarily resigned.

This case involved an individual, Eric Fifield, whose employment was terminated as a result of the sale of his employer to Premier Dealership Services (“PDS”).

PDS offered to employ Fifield – but only if he agreed to sign a two-year, post-employment … Continue Reading

Doctor Non-Solicitation Agreement Not Supported By Legitimate Business Interest

Lawyers and clients alike often believe that it is easier to enforce a non-solicitation agreement than a non-competition agreement. Sometimes, that’s true. However, that does not mean that companies can do so without demonstrating a legitimate business interest in the enforcement of that non-solicitation agreement. The recent Illinois Appellate Court decision in Gastroenterology Consultants of the North Shore, S.C. v. Meiselman (2013 Il. App. 1st 123672) highlights this point.

In that case, a doctor named Meiselman left Gastroenterology Consultants (referred to here as GC for short) to work for NorthShore University HealthSystem Medical Group. In his new position, Meiselman treated … Continue Reading

Illinois Appellate Court Holds That Only Material Breaches Justify Nonperformance of Restrictive Covenants

Addressing an argument frequently encountered in restrictive covenant litigation, an Illinois Appellate Court recently reiterated that only a material breach of a contract containing a restrictive covenant will relieve the other party of its contractual obligation to abide by the restrictive covenant.

In the case InsureOne Indep. Ins. Agency v. Hallberg, the plaintiffs purchased assets of several insurance companies owned or controlled by James Hallberg, and subsequently hired Hallberg to become the company’s new president. Hallberg’s employment agreement – as well as the Asset Purchase Agreement (APA) that governed the original sale of assets – contained noncompetition and nonsolicitation … Continue Reading

Download Our Updated Guide to Non-Compete Laws in Illinois

We are pleased to announce that an updated version of our guide, “Non-Compete Laws: Illinois,” is now available in PDF format. The updated guide reflects the recent decision of the Illinois Supreme Court in Reliable Fire Equipment Company v. Arredondo, et al., which resolved several years of confusion over the appropriate standard for enforcing non-compete agreements in Illinois. The guide is part of a series of guides written and published by our firm, EpsteinBeckerGreen, and the Practical Law Company.… Continue Reading

Illinois Supreme Court Clarifies Standard for Enforcing Non-Compete Agreements

On December 1, 2011, the Illinois Supreme Court issued its opinion in Reliable Fire Equipment Company v. Arredondo, et al., which resolved several years of confusion over the appropriate standard for enforcing non-compete agreements in Illinois.

The Confusion

For years, Illinois courts consistently explained that they would only enforce a non-compete agreement if: it was no more restrictive than necessary to protect an employer’s legitimate business interests; enforcement would not impose an undue burden on the employee; and enforcement would not injure the public. As a result, substantial case law focused on what would, and what would not, constitute … Continue Reading

EpsteinBeckerGreen Contributes to the Practical Law Company’s “Labor and Employment”

Several attorneys from the national law firm of EpsteinBeckerGreen contributed to the December 2011 issue of the Practical Law Company’s “Labor and Employment.” In that periodical’s “State Q&A” section, addressing the reasonable duration and geographic scope of non-compete agreements in various states, Peter A. Steinmeyer and David J. Clark authored the section regarding Illinois and George B. Breen, Frank C. Morris, Jr., and Casey M. Cosentino authored the section regarding Virginia.… Continue Reading

Update on the Confusion in Illinois Non-Compete Law

Illinois’ appellate courts are divided into five districts. Illinois’ lower (or trial) courts typically follow the decisions of the appellate district in which they are located. Unfortunately for employees and employers alike, those districts currently disagree about the appropriate standard for enforcing non-compete agreements. As a result, the enforceability of non-compete agreements in Illinois currently depends in part on where a lawsuit is filed.

The most recent appellate case that added to this confusion was the Illinois Court of Appeals for the Second District’s December 2010 opinion in Reliable Fire Equipment Company v. Arredondo, which we blogged about hereContinue Reading

Another Illinois Appellate Court Shows Greater Receptivity Toward No-Competes In Illinois

Readers of this blog know that, in October 2009, in Sunbelt Rentals, Inc. v. Ehlers, 333 Ill.Dec. 791, 915 N.E.2d 862 (Ill. App. Ct. 2009), an Illinois appellate court reexamined and rejected over thirty years of well-established precedent regarding the enforceability of restrictive covenants. Specifically, it rejected the “legitimate business interest” test long applied as a threshold issue by Illinois courts when deciding the enforceability of a restrictive covenant (i.e., before an Illinois court will address the reasonableness of a restrictive covenant, the employer must first establish that it is supported by a “legitimate business interest” – … Continue Reading

Even When Drafting Confidentiality Agreements, There Are Limits On The Extent Of Permissible Restrictions

* Co-Authored by Christie O. Tate.

When drafting employee confidentiality agreements, there is a tendency to think that no restriction can be too tight. However, a recent decision by the Illinois Appellate Court, The Town of Cicero v. Wayne A. Johnson, held that a confidentiality provision in a separation agreement was so onerous that the entire provision was unenforceable.

Wayne A. Johnson served as the Inspector General and Superintendent of Police for the Town of Cicero, Illinois from February 2003 to April 2005. On April 12, 2005, Johnson and Cicero entered into a “Confidential Severance Agreement and General Release,” which … Continue Reading

Update on the Limited Impact of the Illinois Appellate Court’s Sunbelt Rentals Decision

As we noted in a blog post in October 2009, in Sunbelt Rentals, Inc. v. Ehlers, 333 Ill.Dec. 791, 915 N.E.2d 862 (Ill. App. Ct. 2009), an Illinois appellate court reexamined and rejected over thirty years of well-established precedent regarding the enforceability of restrictive covenants. Specifically, it rejected the “legitimate business interest” test long applied as a threshold issue by Illinois courts when deciding the enforceability of a restrictive covenant. At the time, we noted that the court either isolated itself from every other Illinois appellate court or took the first step in decreasing the traditional hostility with which Illinois … Continue Reading

Drafting Enforceable Non-Competition Agreements in Illinois

Peter A. Steinmeyer and Jake Schmidt recently published an updated and expanded guide to drafting enforceable non-competition agreements in Illinois. The article, which was first published by the Illinois State Bar Association’s publication "The Corporate Lawyer," can be downloaded by clicking here. As updated, it addresses the Illinois Appellate Court’s Sunbelt Rentals decision and the proposed "Illinois Covenants Not to Compete Act."… Continue Reading

Drafting Enforceable Noncompetition Agreements in Illinois

States vary widely in their willingness to enforce noncompetition agreements. Some states, such as California, are openly hostile and will not enforce them, while others will do so so, subject to varying degrees of judicial scrutiny.

My home state of Illinois, for example, will enforce a noncompetition agreement, but only after fairly rigorous judicial scrutiny. Notwithstanding such scrutiny, Illinois employers can draft enforceable noncompetition agreements. The attached article that I published in the April 2009 Illinois Bar Journal offers practical guidance on how to do so.
 … Continue Reading

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