author: JUSTICE SCARIANO

text:
    HAMER HOLDING GROUP, INC., et al., Plaintiffs, v. STEPHEN C. ELMORE, Defendant-Appellee (First United Property Management, Inc., Plaintiff-Appellant).
    First District (2nd Division)
    No. 1—89—0288
    Opinion filed August 14, 1990.
    Rehearing denied October 9, 1990.

      Marshall N. Dickler, Ltd., of Chicago (S. Keith Collins and Marshall N. Dickler, of counsel), for appellant.
    Nisen & Elliott, of Chicago (Michael J. Daley, of counsel), for appellee.
   JUSTICE SCARIANO

delivered the opinion of the court:

Plaintiff First United Property Management, Inc., brings an interlocutory appeal pursuant to Supreme Court Rule 307(a)(1) (107 Ill. 2d R. 307(a)(1)) from an order denying its motion for a preliminary injunction seeking to enforce a restrictive covenant against defendant Stephen C. Elmore and to obtain relief under the Illinois Trade Secrets Act (Ill. Rev. Stat. 1989, ch. 140, par. 351 et seq.). Specifically, plaintiff seeks to enjoin defendant from competing in the business of managing certain types of real estate for a period of three years within a 75-mile radius of downtown Chicago.

Plaintiff presents two issues for our review: (1) whether the circuit court erred in its determination that defendant’s covenant not to compete was ancillary to his employment contract rather than to the sale of his business, a decision which led the court to apply a stricter test of enforcement and consequently to deny a preliminary injunction; and (2) whether the circuit court erred in deciding that plaintiff’s customer list was not a trade secret under the Illinois Trade Secrets Act (Ill. Rev. Stat. 1989, ch. 140, par. 351 et seq.). Defendant raises yet a third issue, urging us to forego construing his restrictive covenant altogether and to hold that the assignment by which plaintiff succeeded to the employment agreement containing the covenant was invalid and thereby failed to confer upon plaintiff standing to sue for injunctive relief.

I. BACKGROUND

Defendant Stephen C. Elmore (Elmore) was the sole owner and chief executive officer of AMCO Realty and Management Company (AMCO), engaged in the business of managing condominium and homeowners’ associations, from its incorporation in Illinois in 1979. Among AMCO’s clients dating back to 1979 and 1980 were Cress Creek Condominium Association (Cress Creek), North Yalley-Lo Condominiums (Valley-Lo), and Piers Condominiums (Piers).

On March 15, 1984, as president of AMCO, Elmore signed a contract with First Eagle Holding Company, Inc. (Holding Group), for the sale of AMCO. Under the contract, entitled “Acquisition Agreement,” AMCO conveyed to the Holding Group all of its assets, including customer lists and business records, goodwill and going concern, employment and other service contracts, and the corporate name “AMCO Realty and Management Company.” Paragraph 24 of the acquisition agreement contained a clause permitting its assignment. Paragraph 2(a) provided that the aggregate purchase price of the acquired assets would be $886,000, and the value assigned to each individual category of assets was as follows: computer equipment $40,000; leasehold improvements $5,000; equipment $15,000; receivables $25,000; contracts $795,000; goodwill and going concern $5,000; trade names $1,000.

Paragraph 3(a)(iv) stated that as a condition precedent to the obligations of the parties, Elmore was to execute and deliver an employment agreement, attached to the acquisition agreement as an exhibit, on or before the date of closing, March 30, 1984. Paragraph 8 required the seller to produce the executed employment agreement at the closing as a necessary document. Paragraph 15 contained a set-off provision whereby in the event Elmore terminated his employment with the buyer before the employment agreement expired, the buyer reserved the right to reduce the aggregate purchase price by $3,000 for every month of employment remaining under the terms of the employment agreement. Finally, paragraph 16 incorporated by reference all exhibits and attachments and provided that all agreements executed by the parties in connection with the acquisition agreement would constitute the entire agreement.

On March 26, 1984, four days prior to the closing of the acquisition agreement between AMCO and the Holding Group, the Holding Group assigned the acquisition agreement to its wholly owned subsidiary, First United ICI, Inc. (First United I). Thus, the parties to the closing on March 30, 1984, were AMCO (seller) and First United I (buyer). The parties to the employment agreement, which was executed that same day, were Elmore (employee) and First United I (employer). The employment agreement, as it existed on March 15, 1984, in the form of an unexecuted document attached as an exhibit to the acquisition agreement, already set forth First United I as the employer.

The employment agreement contained, among others, the following terms. In paragraph 1, Elmore agreed to be “responsible for management services rendered to condominiums and cooperative associations and rental apartment units.” Paragraph 2 stated that the agreement covered Elmore’s employment for a term of one year, from March 30, 1984, to March 30, 1985. Under Paragraph 3, Elmore was to receive a salary of $2,000 per month. Paragraph 9B permitted the transfer of all rights and duties under the agreement to “the heirs, executors, assigns, transferees, and successors in interest of the parties, notwithstanding the reorganization, merger, consolidation or change in personnel of Employer.”

Contained in the employment agreement was a covenant not to compete, which stated:

“7. Covenant Not to Compete
Employee agrees that during the term of this Agreement he will not directly or indirectly consult with, or render services for or in any manner engage in a business competing with the business of Employer anywhere within a seventy-five (75) mile radius of Monroe and Dearborn Streets, Chicago, Illinois (Restricted Area). Employee further agrees that for a period of three (3) years following the termination of his employment with Employer he will not directly or indirectly consult with or render services for clients of Employer whether or not such clients became clients of Employer through efforts made by or on behalf of Employee or in any manner engage in a business competing with the business of Employer anywhere in the Restricted Area.
Employee agrees that during the term of this Agreement and for a period of three (3) years following the termination of his employment with Employer, he shall not consult with, render services for or in any manner engage in a business compet- ■ ing with the business of Employer within the Restricted Area with regard to any person, persons or companies that had been contacted by Employee for the purpose of securing such parties as clients of Employer. In the case of termination, such covenant for such three year period following termination shall be with regard to all such parties contacted by Employee or on behalf of Employer by Employee during the previous 12 month period preceding termination.
If, at the time of enforcement of this paragraph 8 [sic], a court shall hold that the duration, scope or area of restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area. This covenant on the part of Employee shall be construed as a covenant independent of any other provisions of this Agreement, and the existence of any claim or cause of action of Employee against Employer whether predicted [sic] on this Agreement or otherwise shall not constitute a defense to the enforcement by Employer of this covenant.
In the event of the breach of Employee of this paragraph 8 [sic], Employer, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief in order to enforce or prevent any violation of the provisions hereof.”

With regard to confidentiality, the employment agreement stated:

“8. Confidentiality
Employee recognizes that certain knowledge and information which might be obtained by him in the course of his employment hereunder with respect to the conduct and details of Employer’s business are of a confidential nature. Employee agrees that he will not disclose any information which he has learned of by virtue of his employment by Employer either directly or indirectly, or use of any such information in any way either during the term of this Agreement or at any time thereafter. All files, records, documents, data, equipment, experiments, lists and similar items relating to the business of Employer, whether prepared by Employee or otherwise coming into his possession, shall remain the exclusive property of Employer and shall not be used by Employee or removed from the premises where the work of Employer is. being carried on, except at the direction of Employer, or in the course of the performance of Employee’s regular duties for Employer. However, such material may be used and removed by Employee with prior written consent of Employer. In the event that this paragraph 9 [sic] is breached, Employer may, in addition and supplementary to other rights and remedies existing in his favor, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof.”

After acquiring AMCO, First United I assumed the management of Cress Creek, Yalley-Lo and Piers. In addition to continuing AM-CO’s business, First United I also engaged in the management of town homes and some commercial property. Elmore continued in his position as the company’s chief executive officer and remained in charge of its condominium and homeowners’ association management business until he chose to terminate his employment on March 1, 1988.

On October 31, 1988, First United I sold its assets, its business and its name to Studio 2, Inc., which later became First United Property Management, Inc. (First United II). The employment agreement between Elmore and First United I, assignable by its own terms, was one of the assets specifically transferred to First United II in the contract of sale. First United II has since continued the business of First United I without interruption, including the management of Cress Creek, Valley-Lo and Piers.

The president of First United II is Mark Maute, who was previously employed by AMCO and who worked with Elmore from 1979 until Elmore sold AMCO to First United I in 1984. Maute joined First United I in 1987 as its marketing director, and when Elmore resigned on March 1, 1988, Maute took over Elmore’s responsibilities, which included the development of new condominium and homeowner association clients.

During the 30-day period of negotiations which took place before the October 31, 1988, closing of the sale to First United II, Elmore’s attorney contacted Christopher Picone, senior vice-president of the Holding Group, to discuss the possibility of the Holding Group’s releasing Elmore from certain portions of his employment agreement. The matter was never resolved.

On or about November 1, 1988, Elmore spoke to Maute, and, according to Elmore’s own testimony, told Maute he wanted to be released from any potential liability under the employment agreement with respect to four properties being serviced by First United II. Those properties included Cress Creek, Valley-Lo and Piers, which, as noted above, Elmore had managed personally, and each of which was within the 75-mile geographical area specified in the restrictive covenant.

Picone also received a letter from Elmore’s attorney dated November 2, 1988, in which he expressed Elmore’s intent to create a new business offering real estate management services in Du Page County, Illinois. Du Page County is within the 75-mile radius prescribed in Elmore’s restrictive covenant.

Marshall Dunlop, president of Cress Creek, testified that in the latter part of November 1988 Elmore made a proposal to him to take over the management of Cress Creek, which at that time was under the management of First United II. Elmore followed up with a written proposal on November 21, 1988, which he presented to the association’s board later that week. Two or three days thereafter, Dunlop advised Elmore that the board had accepted his proposal. Cress Creek then notified First United II that it was terminating its services effective December 31, 1988.

Maute testified to a telephone conversation between himself and Elmore on November 30, 1988, two days before the instant lawsuit was instituted. During that conversation Elmore warned Maute that if he prevented him from managing Cress Creek he was “prepared to go down in flames and take everyone else with him.” Elmore also threatened that he would send a letter to all of the client associations in Maute’s current portfolio, alleging specific breaches of fiduciary duties by the company towards its clients. Elmore testified that after this suit was filed he withdrew his proposal and forewent the opportunity to manage Cress Creek.

Maute also testified to the efforts which First United I expended in developing and guarding the customer information plaintiff seeks to protect under the Illinois Trade Secrets Act. Maute stated that the client information consists primarily of the names, home addresses, and home and work telephone numbers of the officers and directors of First United I’s homeowners’ and condominium association accounts.

The process of developing new clients begins with reviewing a list of not-for-profit corporations available from the Illinois Secretary of State. A list of target customers is distilled manually by geographic target area, then put into usable form for mail solicitation purposes. Because the information from the Secretary of State is not always current or complete, it requires updating and identifying telephone numbers of board members for the purpose of personally following up on responses to the mail solicitations.

Under Maute’s direction, First United I did two mass mailings in 1987 to market its services to new clients. Together, the mailings included about 4,500 individual names and produced eight new accounts. Maute estimated that each account cost from $8,000 to $10,000 to develop, an expense that included marketing salaries and the cost of redacting and formatting the information from the Secretary of State, mailing solicitations and preparing proposals and presentations.

The actual client list containing the names of board directors and their contact information is not computerized; rather, it is maintained at a central location in a single three-ring binder which is not under lock and key because of the need to use it daily as a ready reference.

Elmore testified that as chief executive officer of First United I he regularly provided other, noncompeting subsidiaries of the Holding Group with information regarding First United I’s clients. Maute testified that, after Elmore left First United I, Maute handled the client information requests from other subsidiaries, and because they sought the identities of property owners rather than board members, Maute did not divulge any of the board member information that plaintiff seeks to protect.

Maute testified further about the importance of client longevity. He stated that effective management of a real estate enterprise requires the manager to become intimately familiar with the physical characteristics of the property, the unique internal operational needs of the client, the personalities of the board of directors and the individual manner in which the board wishes to conduct the association’s activities. In the hands of a competitor, this knowledge would be very valuable, because otherwise the competitor “would have to learn all that information from ground one.” Furthermore, extensive interpersonal contact with board members as well as property - owners is of the utmost importance. Finally, Maute testified that Elmore had this type of intimate knowledge and personal contact and rapport with the clients of AMCO and later with those of First United I. Elmore testified that he had been personally involved with Cress Creek, Valley-Lo and Piers for almost nine years, “so I had known those condominiums very well and they had known me very well and on a personal basis.”

Plaintiffs Holding Group (Hamer Holding Group, Inc.), First United I (First United Property Management Company, Inc.) and First United II (Studio 2, Inc.) filed a complaint on December 2, 1988, seeking preliminary and permanent injunctive relief to enforce Elmore’s restrictive covenant and to enjoin the misappropriation of trade secrets under the Illinois Trade Secrets Act. On the same day, the parties filed an agreed order in which Elmore agreed not to engage in competitive activities with the plaintiffs during the pendency of the preliminary injunction proceedings in the trial court. The circuit court heard evidence on December 16, 21 and 29, 1988. At the hearing on December 21, 1988, the defense made an oral motion to dismiss all three plaintiffs for lack of standing, arguing that none of the plaintiffs established irreparable injury, because none had adequately shown ownership of Elmore’s employment agreement containing the restrictive covenant. After going over with counsel the chain of ownership from AMCO to First United I to First United II, the trial court granted the motion as to the Holding Group (Hamer Holding Group, Inc.) and First United I (First United Property Management Company, Inc.) but denied the motion as to First United II (Studio 2, Inc., which pursuant to a name change on December 5, 1988, three days after the complaint was filed, became known as First United Property Management Company, Inc.).

At the close of the final day of hearing evidence, the court found that the restrictive covenant itself was “clear and unambiguous” and reasonable with respect to time and geographical area; however, relying on Lawter International, Inc. v. Carroll (1983), 116 Ill. App. 3d 717, 451 N.E.2d 1338, the judge held that any special circumstances which would permit enforcement were lacking. Specifically, the court found that the covenant was not ancillary to the sale of Elmore’s business, because (1) the acquisition agreement did not list Elmore’s employment agreement as an asset, (2) the two agreements were executed at two different times, and (3) the consideration for the covenant was inadequate in that the acquisition agreement assigned a value of only $5,000 to goodwill, an amount less than 1% of the total purchase price.

The court also found the covenant unenforceable as ancillary to an employment agreement, because plaintiff failed to establish a near-permanent relationship with its customers or the existence of trade secrets. The customer relationships were transitory, the court held, because the accounts could be terminated in 30 or 60 days, and the customer list did not constitute a trade secret, because (1) the original list from the Secretary of State was accessible to anyone, and (2) distillation of the list did not require any intensive effort or a considerable expenditure of time and money. Finally, the court found that even if plaintiff had a proprietary interest in the customer list, it was abandoned. Although releasing the information to noncompetitive members of the Holding Group did not amount to abandonment, the easy access to the list by a vast number of individuals destroyed its confidentiality. On December 30, 1988, the trial court denied plaintiff’s motion for a preliminary injunction, and on January 6, 1989, plaintiff filed its notice of interlocutory appeal.

II. STANDING

Elmore contends that the trial court erred in denying his motion to dismiss plaintiff for lack of standing; more particularly, he asserts that plaintiff failed to establish a valid assignment of rights in his employment agreement and therefore failed to show any irreparable injury to a protectable property interest which would entitle it to redress.

A careful review of the record supports plaintiffs claim that as the only plaintiff to survive defendant’s motion to dismiss, it is the legal holder as assignee of the agreement and was such at the time the complaint herein was filed. As noted above, the agreement was executed on March 30, 1984, between Elmore as employee and First United I as employer. Paragraph 9B of the agreement states that it “shall be binding upon and shall inure to the benefit of the heirs, executors, assigns, transferees, and successors in interest of the parties, notwithstanding the reorganization, merger, consolidation or change in personnel of Employer.” Received in evidence were resolutions adopted by the boards of directors of the Holding Group and First United I on October 28, 1988, wherein the boards “approved, directed and authorized” the sale of certain assets of First United Property Management, Inc. (First United I), and other entities collectively identified as “Sellers” to Studio 2, Inc. (First United II), and other entities collectively identified as “Buyers.” Finally, redacted portions of the October 31, 1988, contract of sale received in evidence pointedly identify defendant’s employment agreement as one of the assets which “Sellers” agree to transfer and assign to “Buyers.” Defendant’s arguments notwithstanding, we find that this evidence conclusively establishes a valid assignment of the agreement from First United I to First United II. Accordingly, we hold that First United II has standing to seek enforcement of the agreement and the restrictive covenant contained therein.

III. STANDARD OF REVIEW

Plaintiff contends that Elmore’s covenant not to compete was ancillary to the sale of Elmore’s business to First United I and is therefore subject to a less restrictive test for enforcement. However, before entering into a discussion of this issue, we must first determine the proper scope of our review.

Classically, the decision to grant or deny preliminary injunctive relief lies within the sound discretion of the trial court, and a reviewing court’s role is therefore limited to determining only whether the trial court abused that discretion. (Southern Illinois Medical Business Associates v. Camillo (1989), 190 Ill. App. 3d 664, 672, 546 N.E.2d 1059, 1064; Witter v. Buchanan (1985), 132 Ill. App. 3d 273, 279, 476 N.E.2d 1123, 1128-29.) However, elaborating on the standard of review of cases in which a preliminary injunction is sought, our supreme court stated in Dixon Association for Retarded Citizens v. Thompson (1982), 91 Ill. 2d 518, 524-25, 440 N.E.2d 117, 120, quoting from City of Chicago v. Airline Canteen Service, Inc. (1978), 64 Ill. App. 3d 417, 432-33, 380 N.E.2d 1106, 1118:

“ ‘It is well established that a hearing on a motion for a preliminary injunction does not determine any factual issue. A preliminary injunction is issued to preserve the status quo until the trial court may consider the merits of the case. In ruling on a motion for such relief, controverted facts or the merits of the case are not decided. In reviewing the discretion exercised by the trial court, an appellate court may decide only whether the petitioner has demonstrated a prima facie case that there is a fair question as to the existence of the rights claimed; that the circumstances lead to a reasonable belief that they probably will be entitled to the relief sought, if the evidence sustains the allegations of the petition; and that matters should be kept in status quo until the case can be decided on its merits. In sum the only question before us is whether there was a sufficient showing to sustain the order of the trial court.’ ” (Emphasis in original.)

Confronted with the considerable record before it, however, the court continued as follows:

“In this case we do not feel limited by the traditional scope of review of an order issuing a preliminary injunction. Although the order in this case purports to be a preliminary injunction and many references are made in the order to the fact that the court is only preserving the status quo until there can be a hearing on the merits, this order is, in effect, a decision on the merits of the case. It should be noted that the transcript of the hearing on the motion for the preliminary injunction is in excess of 4,000 pages. Approximately 28 witnesses testified and more than 80 exhibits were introduced. The hearing lasted approximately 15 days.” (91 Ill. 2d at 525, 440 N.E.2d at 120.)

Here, although the hearing spanned only three days and took up 370 pages of transcript, only five witnesses testified, and only 17 exhibits were admitted into evidence, we do not believe that the enormity of the record presented on appeal in Dixon Association was the determining factor in the court’s selection of the standard of review it would employ in reaching its result. To the contrary, the scope of the hearing there was a sufficient indication to the supreme court that the trial court had heard a sufficient amount of evidence to resolve conclusively the factual issues bearing on the merits of the case, and that therefore the trial judge’s decision to grant the preliminary injunction was “in effect” a decision on the merits. Relying on Dixon Association, this court reached the same conclusion in Preferred Meal Systems, Inc. v. Guse (1990), 199 Ill. App. 3d 710.

In the case sub judice we note that prior to setting forth his reasons for denying plaintiff’s request for preliminary injunctive relief, the judge reminded the plaintiff that its burden was to prove the four elements of a preliminary injunction “by the preponderance of the evidence” and that “regrettably” it had failed to do so. The judge then recited in detail his findings of fact and conclusions of law with respect to each element. As our supreme court stated in Buzz Barton & Associates, Inc. v. Giannone (1985), 108 Ill. 2d 373, 386, 483 N.E.2d 1271, 1277, “[t]he purpose of a preliminary injunction is not to determine controverted rights or to decide controverted facts or the merits of the case.” (108 Ill. 2d at 386, citing Lonergan v. Crucible Steel Co. of America (1967), 37 Ill. 2d 599, 611, 229 N.E.2d 536, 542; see also Chessick v. Sherman Hospital Association (1989), 190 Ill. App. 3d 889, 894, 546 N.E.2d 1153, 1156.) In our opinion, the court’s use of the “preponderance of the evidence” standard and not only its willingness but its very ability to make explicit findings and conclusions indicate that it felt that it possessed all of the evidence necessary to render, in effect, a fully informed decision on the merits. (Dixon Association, 91 Ill. 2d 518, 440 N.E.2d 117.) Our scope of review is governed accordingly, and we must now determine whether the decision of the trial court to deny plaintiff injunctive relief contrary to the manifest weight of the evidence or whether the court erred as to the applicable law or both. See Warrior v. Thompson (1983), 96 Ill. 2d 1, 15, 449 N.E.2d 53, 59; Witter v. Buchanan (1985), 132 Ill. App. 3d 273, 279,476 N.E.2d 1123, 1128.

IV. THE VALIDITY OF THE RESTRICTIVE COVENANT

It is well settled that a party seeking to preserve the status quo indefinitely by means of a permanent injunction must show that it possesses a clear, protectable interest for which there is no adequate remedy at law and that irreparable injury will result if the relief is not granted. (Buzz Barton & Associates, Inc. v. Giannone (1985), 108 Ill. 2d 373, 386, 388, 483 N.E.2d 1271, 1277, 1278; Shapiro v. Regent Printing Co. (1989), 192 Ill. App. 3d 1005, 1010, 549 N.E.2d 793, 795; American National Bank & Trust Co. v. Carroll (1984), 122 Ill. App. 3d 868, 881, 462 N.E.2d 586, 595.) The burden of proof is heavier for obtaining permanent, as compared to preliminary, injunctive relief. (Buzz Barton & Associates, 108 Ill. 2d at 386, 483 N.E.2d at 1277; Shapiro, 192 Ill. App. 3d at 1010, 549 N.E.2d at 795.) Unless there exist special circumstances warranting protection, a business entity has no protectable interest in its clientele. (Lawter International, Inc. v. Carroll (1983), 116 Ill. App. 3d 717, 727-28, 451 N.E.2d 1338, 1345-46.) In the case of covenants not to compete, special circumstances may exist on two separate planes, distinguishable by the type of agreement in which the covenant is anchored. If the covenant is ancillary to the sale of a business by the covenantor to the covenantee, then all the covenantee must show is that the restriction is reasonable as to time, geographical area and scope of prohibited business activity. If, however, the covenant is ancillary only to an employment agreement, the covenantee must show additional special circumstances, such as a near-permanent relationship with his employer’s customers and that but for his association with the employer, the former employee would not have had contact with the customers (PCx Corp. v. Ross (1988), 168 Ill. App. 3d 1047, 1057, 522 N.E.2d 1333, 1339) or the existence of customer lists, trade secrets or other confidential information (Lawter International, Inc., 116 Ill. App. 3d at 727, 451 N.E.2d at 1345). Illinois courts have historically distinguished between the two types of covenants, based on the unique interest which each seeks to protect. Whereas a covenant ancillary to an employment contract shields the employer from the possibility of losing his clientele to an employee who appropriates propriety customer information for his own benefit, and also shields him from the possibility of losing customers with whom he enjoys a near-permanent relationship, a covenant ancillary to the sale of a business ensures the buyer that the former owner will not walk away from the sale with the company’s customers and goodwill, leaving the buyer with an acquisition that turns out to be only chimerical. (Hydroaire, Inc. v. Sager (1981), 98 Ill. App. 3d 758, 767, 424 N.E.2d 719, 726; O’Sullivan v. Conrad (1976), 44 Ill. App. 3d 752, 755, 358 N.E.2d 926, 930.) “[I]n the sale of a business the interest to be protected is the value of the goodwill that is purchased. In protecting the goodwill sold, the courts consider the fact that the bargaining position is not uneven, as it is generally in an employer/employee relationship, and that the courts are less likely to declare the sale of a business post-employment restraint invalid.” Stamatakis Industries, Inc. v. King (1987), 165 Ill. App. 3d 879, 888, 520 N.E.2d 770, 776, citing Dryvit System, Inc. v. Rushing (1985), 132 Ill. App. 3d 9, 447 N.E.2d 35; Russell v. Jim Russell Supply, Inc. (1990), 200 Ill. App. 3d 855.

Although Illinois courts have not concretely delineated a test for determining whether a restrictive covenant is ancillary to the sale of a business, the few decisions dealing with this precise issue have considered facts bearing on the intent of the parties to protect the integrity of a sale. (See Boyar-Schultz Corp. v. Tomasek (1981), 94 Ill. App. 3d 320, 418 N.E.2d 911; O’Sullivan, 44 Ill. App. 3d 752, 358 N.E.2d 926.) In the present case, the acquisition agreement between AMCO and First United I explicitly required the execution and delivery of Elmore’s employment agreement, containing the covenant not to compete, on or before the date of closing as a “ConditionQ Precedent to Obligations of the Parties.” Another provision in the acquisition agreement identified the employment agreement as a necessary closing document. Finally, the acquisition agreement incorporated by reference all exhibits and attachments referred to in that document and provided that all agreements executed by the parties in connection with the acquisition agreement would constitute the entire agreement. One of the attached exhibits was the yet unexecuted employment agreement.

The very fact that the execution and delivery of Elmore’s employment agreement were a condition precedent to the sale of AMCO underscores the supreme importance of the agreement: unless Elmore agreed to work for First United I under the terms of the agreement, it would not proceed with the sale. Thus, it is clear from plaintiff’s position that it deemed Elmore’s services an indispensable asset. Not only did First United I seek to secure those services, but it also sought to ensure that once Elmore terminated his employment, he would not use his well-established customer contacts and expertise to make First United I’s acquisition an illusory one. In view of these factors, the circumstance that the acquisition agreement did not identify the employment agreement as an asset becomes an unimpressive one, for the transaction as a whole is profoundly charged with the singular importance attached to the covenant by its signatories.

Consequently, we cannot agree with the circuit court’s conclusion that the disproportionately small consideration signified in the agreement as goodwill precludes the characterization of the restrictive covenant as being ancillary to the sale of AMCO. Whether $5,000 or $500,000, and whether or not there be a tax advantage to account for it, as long as it is bargained for, the amount the parties assign to a particular asset constitutes legally adequate consideration. (See Restatement (Second) of Contracts §§71, 79, comment c, at 201 (1981) (“To the extent that the apportionment of productive energy and product in the economy are left to private action, the parties to transactions are free to fix their own valuations”).) And so courts generally will not inquire into the adequacy of consideration (Sta-Ru Corp. v. Mahin (1976), 64 Ill. 2d 330, 356 N.E.2d 67), nor, in this case, will we, especially in view of the fact that Elmore was not a novitiate in the business world and was doubtless fully aware of the nature of the transaction into which he was entering.

Having determined that Elmore’s restrictive covenant was ancillary to the sale of a business, we must next consider whether the covenant was a reasonable restriction on trade. The inquiry into reasonableness is composed of three parts: the restriction must not be greater than necessary to protect the buyer, oppressive to the seller or injurious to the general public. (Russell v. Jim Russell Supply, Inc. (1990), 200 Ill. App. 3d 855, 867; Boyar-Schulz Corp., 94 Ill. App. 3d at 323, 418 N.E.2d at 913; O’Sullivan, 44 Ill. App. 3d at 756, 358 N.E.2d at 929.) The circuit court in this case found that the restriction in the covenant for a 75-mile radius for a period of three years was entirely reasonable in terms of geographical area and duration, and we find no reason to disagree.

However, Elmore argues that the covenant is unduly broad in that it provides that he may not “in any manner engage in a business competing with the business of Employer anywhere in the Restricted Area,” but fails to describe the nature and scope of that business. Although the enforceability of a restrictive covenant is a question of law which depends on the reasonableness of its terms, such a determination depends on the unique circumstances of each case. (Glass Specialty Co. v. Litwiller (1986), 147 Ill. App. 3d 653, 498 N.E.2d 876.) The parties in the instant case argued the question of the reasonableness of the scope of restricted activity in the trial court, but the judge did not resolve the issue in light of his ruling that plaintiff could not establish a protectable interest in the covenant not to compete. Nor did the court reach the issue of the nature and scope of the business in which Elmore may not engage, a factual question intimately connected to the enforceability of the restraint. As a reviewing court, we may not pass upon these issues, the resolution of which rests in the first instance with the trier of fact. But we do address the related legal inquiry as to the time frame to which the parties were referring in the clause “the business of Employer.” The trial court found the terms of the employment agreement to be clear and unambiguous. We agree. A plain reading of the covenant establishes that the parties intended that Elmore be restricted from engaging in whatever business First United I was conducting at the time he terminated his employment with the company. (Reynolds v. Coleman (1988), 173 Ill. App. 3d 585, 527 N.E.2d 895 (clear and unambiguous terms shall be given their natural and ordinary meanings), appeal denied (1988), 123 Ill. 2d 566, 535 N.E.2d 410); for to read it otherwise, one would be obliged to add “as the said business existed at the time Employer acquired it” or words to that effect and thereby do violence to the plain meaning of the restriction (Michigan Avenue National Bank v. Evans, Inc. (1988), 176 Ill. App. 3d 1047, 531 N.E.2d 872 (reformation proper only on showing of mutual mistake)). Having held above that plaintiff possesses a protectable interest in the noncompetition agreement as a matter of law, we remand the cause to the trial court for a determination based on the record of (1) the nature and scope of plaintiff’s business as of the time that Elmore left his employment and, assuming that the record contains sufficient evidence upon which the trial court can resolve that issue, (2) whether the restraint on Elmore’s activity in that business would be a reasonable one.

V. ILLINOIS TRADE SECRETS ACT

We turn next to plaintiff’s contention that the customer list is a trade secret warranting protection under the Illinois Trade Secrets Act (Act) (Ill. Rev. Stat. 1989, ch. 140, par. 351 et seq.). Section 2 of the Act provides in pertinent part as follows:

“(d) ‘Trade secret’ means information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that:
(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and
(2) is the subject of efforts that are reasonable under the circumstances to maintain.its secrecy or confidentiality.” Ill. Rev. Stat. 1989, ch. 140, par. 352(d).

Section 3 provides in part:

“(a) Actual or threatened misappropriation may be enjoined.” Ill. Rev. Stat. 1989, ch. 140, par. 353(a).

Plaintiff maintains that its customer list meets the three-part definition of “trade secret” under the Act. It argues that (1) the Act expressly provides that “a list of actual or potential customers” can be a trade secret; (2) the uncontroverted testimony of Maute established that the customer list had economic value from its not being generally known to persons who could obtain economic value from its use or disclosure; and (3) Maute’s testimony further established that both First United I and First United II made efforts to protect the confidentiality and secrecy of the customer list.

Interpreting the new Illinois Trade Secrets Act in the recent case of Service Centers of Chicago, Inc. v. Minogue (1989), 180 Ill. App. 3d 447, 453, 535 N.E.2d 1132, 1136, this court held that “[t]he focus of both the common law and the Act is on the secrecy of the information sought to be protected.” In Service Centers, the court found that a pricing formula for the storage of medical records did not meet the statutory criteria for secrecy, because the formula was “within the realm of general skills and knowledge” in the medical records storage industry. (180 Ill. App. 3d at 454-55, 535 N.E.2d at 1137.) Furthermore, there was no evidence in the record reflecting the amount of time, expense and effort expended in compiling survey questions for determining customer requirements. 180 Ill. App. 3d at 454, 535 N.E.2d at 1136.

In the present case, although Maute testified that distilling the prime customer list from the Secretary of State’s list cost approximately $60,000, we agree with the circuit court that anyone having access to the Secretary’s information could have easily duplicated the same process of “distillation.” Anyone equipped with a public telephone directory could have collected the contact information for board members which plaintiff seeks to protect.

Plaintiff points out that, by eliminating from the definition of “trade secret” the qualifying clause “not being readily ascertainable by proper means by others,” the drafters of the Act intended to eliminate the defense available under the Uniform Act that the information could be developed legally through other means. (See Jager, Illinois Returns to the Mainstream of Trade-Secret Protection, Chi. B. Rec., October 1988, at 18, 20.) Plaintiff’s argument is unpersuasive, however, because the key to “secrecy” is the ease with which information can be developed through other proper means: if the information can be readily duplicated without involving considerable time, effort or expense, then it is not secret. Conversely, information which can be duplicated only by an expensive and time-consuming method of reverse engineering, for instance, could be secret, and the ability to duplicate it would not constitute a defense. (Cf. ILG Industries, Inc. v. Scott (1971), 49 Ill. 2d 88, 96, 273 N.E.2d 393, 396 (although ability to lawfully duplicate a design by reverse engineering was not a defense, the time it would take to independently duplicate the design was an appropriate length of time for injunction).) For the foregoing reasons, we agree with the trial court and affirm its holding that since plaintiff’s customer list could be easily duplicated, it does not qualify as a “trade secret” under the Illinois Trade Secrets Act (Ill. Rev. Stat. 1989, ch. 140, par. 352(d)).

VI. CONCLUSION

As we have determined above, plaintiff established a protectable interest in the goodwill of the business it acquired from Elmore. To obtain injunctive relief, plaintiff must further show the absence of an adequate remedy at law and irreparable injury if the relief is not granted.

No adequate remedy at law exists where there is evidence that the plaintiff will be subject to constant and frequent transgressions of a continuing nature. (Lawter International, Inc. v. Carroll (1983), 116 Ill. App. 3d 717, 731, 451 N.E.2d 1338, 1348.) Irreparable injury exists where it is difficult to assign pecuniary value to the injury suffered. (116 Ill. App. 3d at 731, 451 N.E.2d at 1348.) We find that plaintiff meets both of these requirements as well.

Accordingly, with respect to the parties’ agreement not to compete, we hold that the trial court’s determination that plaintiff failed to establish a protectable interest in the restrictive covenant was against the manifest weight of the evidence and contrary to law; we affirm its finding that the covenant is reasonable with respect to geographical scope and duration; and we remand for a determination based on the record of the nature and scope of plaintiff’s business as of the time Elmore terminated his employment and, in light of such determination, the reasonableness of the covenant as a restraint on trade. With respect to plaintiff’s customer list, we affirm the trial court’s finding that the list does not meet the criteria of a trade secret warranting protection under the Illinois Trade Secrets Act.

Affirmed in part; reversed in part and remanded for further proceedings consistent with this opinion.

DiVITO, P.J., and BILANDIC, J., concur.

      Incorporated on March 30, 1983, First Eagle Holding Company adopted the assumed name of Hamer Holding Group, Inc., on May 11, 1984; reverted to First Eagle Holding Company on December 10, 1985; and again changed its name to Hamer Holding Group, Inc., on December 13, 1985.

      Incorporated on January 12, 1979, First United ICI, Inc., adopted the name First United AMCO Realty and Management Company on May 4, 1984, then changed its name to First United Property Management, Inc., on January 23, 1986.

      Studio 2, Inc., was incorporated in Illinois on October 25, 1988. To reflect the acquisition of its rights to the seller’s corporate name Studio 2, Inc., adopted the name of First United Property Management, Inc., on December 5,1988.

      In using the singular term “plaintiff” throughout this opinion, we are of course referring to plaintiff First United Property Management, Inc. (First United II), the only survivor of defendant’s motion to dismiss.

      Elmore properly raises this issue in his appellate brief without cross-appealing. See Material Service Corp. v. Department of Revenue (1983), 98 Ill. 2d 382, 386-87, 457 N.E.2d 9, 12; Koeller v. Cook County (1989), 180 Ill. App. 3d 425, 430-31, 535 N.E.2d 1118,1121.


source: Caselaw Access Project

author: JUSTICE LINN

license: Public Domain

text:
    SALARIED EMPLOYEES OF NORTH AMERICA (SENA), Division of United Steelworkers of America, AFL-CIO, CLC, Petitioner-Appellant, v. THE ILLINOIS LOCAL LABOR RELATIONS BOARD et al., RespondentsAppellees (American Federation of State, County, and Municipal Employees, Council 31, AFL-CIO, Intervenor-Appellant).
    First District (4th Division)
    Nos. 1—88—2761,1—88—2764 cons.
    Opinion filed August 30, 1990.
    Rehearing denied October 2, 1990.

      Jacobs, Burns, Sugarman & Orlove, of Chicago (Joseph M. Jacobs and Richard M. Stanton, of counsel), for petitioner.
    Cornfield & Feldman, of Chicago (Jacob Pomeranz and Daniel I. Koen, of counsel), for intervenor.
    Neil F. Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Ann Plunkett-Sheldon, Assistant Attorney General, of Chicago, of counsel), for respondent Illinois Local Labor Relations Board.
    Kelly R. Welsh, Corporation Counsel, of Chicago (Ruth M. Moscovitch and David A. Johnson, Assistant Corporation Counsel, of counsel), for respondent City of Chicago.
   JUSTICE LINN

delivered the opinion of the court:

Petitioner, Salaried Employees of North America, and intervenor, American Federation of State, County, and Municipal Employees (referred to jointly as the Unions), bring this appeal seeking reversal of a ruling made by the Illinois Local Labor Relations Board (the Board). In its decision, the Board held, inter alia, that all of the attorneys with the City of Chicago’s Department of Law (the Law Department) were excluded from coverage of the Illinois Public Labor Relations Act (the Act) (Ill. Rev. Stat. 1989, ch. 47, par. 1601 et seq.). The Board determined that all of the Law Department attorneys were excluded because they were managerial employees under the Act and that certain Law Department attorneys were also excluded from the Act’s coverage because they functioned as either confidential employees or supervisory employees.

The Unions now appeal, contending: (1) public policy does not require that the Law Department’s attorneys be excluded from collective bargaining; (2) the Board’s decision to exclude all Law Department attorneys is not supported by the Act, relevant case law or the evidence; and (3) the Board’s decision that certain Law Department attorneys were confidential employees and/or supervisory employees was improper.

For the reasons set forth below, we affirm the Board’s decision.

Background

There is no dispute as to the material facts. These facts were set forth in the written decision of the Labor Board’s hearing officer after several months of testimony.

The Law Department is the legal arm of the City of Chicago and represents the city in all of its legal business. The Law Department attorneys provide guidance and litigation service to the mayor, the city council and all of the city’s departments. The Law Department attorneys are responsible for drafting the city’s rules and regulations and must be available at all times to give legal advice and assistance to the mayor, the city council and the other city departments.

As licensed attorneys, the Law Department attorneys are subject to, and bound by, the Illinois Code of Professional Responsibility. In addition, the Law Department attorneys are subject to the confidentiality requirements of the Department of Law Attorney’s Manual issued by the City of Chicago.

All Law Department attorneys have access to all files and records maintained by the Law Department. No permission is required before an attorney may have access to a file. The only restricted files are the individual personnel files of each attorney.

All of the Law Department attorneys participate in the recruitment of new attorneys and while attorneys are sometimes hired for a specific division within the Law Department, attorneys are generally hired under the premise that they may work in several departments within the Law Department.

There are 16 divisions within the Law Department. Each division has a chief assistant and a deputy corporation counsel who are responsible for the smooth operation of the division. The divisions, however, are not completely separate and distinct. Attorneys often transfer from one division to another and are sometimes “loaned” from one division to another for special projects. In addition, the divisions each have separate responsibilities although there is a great deal of overlap in the day-to-day operation and function of the divisions.

The appeals division, for example, is responsible for the city’s appellate practice. In 1987, the city was involved in excess of 120 appeals. Thirty-four percent (34%) of those appeals were labor related.

As a result of this appellate practice, recommendations and suggestions are sometimes made that result in a change in the city’s policies and procedures.

The legal counseling division is primarily responsible for drafting ordinances, rules and regulations. It also acts as legal advisor to the other divisions of the Law Department and to the various city departments on the interpretation of various city ordinances, rules and regulations. Legal counseling attorneys are present on the floor of the city council during city council meetings to advise and assist the mayor and the aldermen regarding legal issues. The legal counseling division is also responsible for preparing city council agendas, and all ordinances introduced into the city council have been drafted by, or approved by, the attorneys in the legal counseling division.

The legal counseling division reports to the labor relations division on ordinances and actions relating to employees’ terms and conditions of employment. In addition, legal counseling attorneys are involved in the city’s budgetary process.

The labor relations division is responsible for collective bargaining negotiations and collective bargaining contract administration. The attorneys in this division also advise every city department on issues pertaining to the terms and conditions of employment. There is a great deal of interaction between this division and the other attorneys in the Law Department. Attorneys from other divisions are often called to assist the labor relations division on specific projects, cases or issues. The labor relations attorneys and the attorneys from the labor and personnel division interact on many issues relating to the terms and conditions of employment.

The labor and personnel division is responsible for all non-union-related employment litigation involving the city. All of the cases handled by this division involve employees of the city. The attorneys of this division are also responsible for drafting personnel rules and ordinances. A major distinction between this division and the labor relations division is that the labor relations division is responsible for the traditional union-management labor relations functions such as collective bargaining, grievances, arbitrations, and unfair labor practice charges. Attorneys in the labor and personnel division are responsible for all other labor matters. If an attorney from another division comes across an issue involving labor-related issues, that attorney first contacts the labor and personnel division for advice and assistance.

The revenue division is responsible for collecting the city’s money. As with the attorneys in the other divisions, attorneys in the revenue division interact with attorneys for the other divisions on many different issues. Attorneys from this division are often assigned to other divisions to provide short-term assistance, and attorneys from other divisions are sometimes assigned to the revenue division to provide assistance.

The affirmative litigation division handles all of the city’s complicated plaintiff litigation including anti-trust, civil rights and public employee fraud. These cases are complex and sensitive. The work performed by these attorneys has affected the city’s budget. The issues that this division has handled include employee wages, hours, and terms and conditions of employment. In addition, these attorneys have been involved in pension issues.

The general litigation division handles the defense of all of the city’s cases except those involving personal injury. As is true with other divisions in the Law Department, general litigation attorneys have contact and work with the attorneys from other divisions. The attorneys from this division often work with attorneys from the legal counseling division, the labor relations division and the appeals division. General litigation attorneys sometimes make suggestions and recommendations regarding changes in contract language use in the city’s labor contracts.

The public utilities division is primarily responsible for all matters relating to public utilities affecting the city and its citizens. This division works closely with the City’s Planning Department. They often testify at public hearings regarding public utility issues. They work closely with the mayor and his or her staff regarding public utility law and procedures.

The municipal prosecutions division enforces all of the city’s ordinances and acts in an advisory capacity to the city’s operating departments. The attorneys of this division recommend changes in the city’s licensing procedures and policies. On an “as-needed” basis, the attorneys from this division will assist attorneys from other divisions and the attorneys from other divisions will assist the municipal prosecutions division.

The building and housing division enforces the city’s building code, fire ordinances and zoning regulations. The attorneys from this division often work jointly or in consultation with the attorneys from the other divisions.

The traffic enforcement division enforces the city’s traffic laws. In addition, the attorneys from this division have assisted in the formulation of various city policies involving such matters as handicapped parking, the administrative adjudication process for traffic violations and certain issues relating to Wrigleyville parking.

The torts division, as the title suggests, handles all of the personal injury claims brought against the city. On occasion, as the work demands, attorneys from the torts division have performed duties for other Law Department divisions including the labor relations division. Also, torts division attorneys have worked jointly or in consultation with the labor and personnel division.

The finance and economic development division provides legal advice to the city for its financial and commercial business affairs. This division is responsible for reviewing all commercial and personal service contracts. This division has been involved with formulating the city’s regulations concerning minority set-aside programs and the Woman’s Business Enterprise Program. It also works to carry out the mayor’s executive orders in these areas. Like the attorneys in the other divisions, attorneys in this division assist, consult and work jointly with attorneys from other divisions.

The real estate and land use division provides legal assistance to the city for its development and execution of major real estate development enterprises. The attorneys in this division provide assistance to the Zoning Board of Appeals, the Chicago Planning Commission, the Commercial District Development Commission, the Chicago Commission on Historical Landmarks, and the city council’s zoning commission. These attorneys also draft and interpret the rules and regulations for these boards and commissions. As with other divisions, attorneys from the real estate division may be assigned to work on matters from other divisions on an as-needed basis.

The legal investigations division is responsible for making on-the-scene accident investigations and witness interviews. The attorneys from this division also take photographs and make sketches. This division works closely with the other divisions on all litigation issues. In addition, this division performs investigations for the labor and personnel divisions.

All of the evidence set forth above was presented to the hearing officer. Thereafter, the hearing officer issued a written decision in which the hearing officer held that the attorneys of the Law Department are “public employees” within the purview of the Act and that they are entitled to form collective bargaining units. However, as part of her decision, the hearing officer accepted the stipulations entered into by the parties.

The parties stipulated that the following attorneys were excluded from coverage by the Act because they were either managerial, confidential or supervisory employees as defined by the Act; corporation counsel, deputy corporation counsel, first assistant corporation counsel, office administrator and director of legal investigations.

In addition, the parties agreed that the following attorneys were confidential employees and excluded by the Act: All attorneys within the labor relations division, administrative assistant to the corporation counsel and the administrative assistant to the deputy corporation counsel. Also, the following employees were stipulated as being managerial employees: chief assistant corporation counsel, assistant director of legal investigations and law librarian.

The Board subsequently reviewed the hearing officer’s decision and recommendations. The Board accepted the hearing officer’s findings of fact but rejected several of the hearing officer’s conclusions of law. Significantly, the Board ruled that because of their roles as attorneys, their relationship to the city, and the unique makeup of the Law Department, all of the Law Department attorneys fell within the Act’s definition of “managerial employee.” Consequently, all of the Law Department attorneys were excluded from collective bargaining. The Board also ruled that certain Law Department attorneys functioned as either “confidential employees” or “supervisory employees” as defined by the Act and were thus also excluded on those bases.

The Unions took exception to the Board’s ruling and brought this appeal.

Opinion

In an appeal from an agency such as the Board, the function of the reviewing court is to determine whether the agency’s findings are against the manifest weight of the evidence. (Board of Education of Plainfield Community Consolidated School District No. 202 v. Illinois Educational Labor Relations Board (1986), 143 Ill. App. 3d 898, 493 N.E.2d 1130.) A court may not substitute its judgment for the agency’s judgment. (Gilliland v. Board of Education (1977), 67 Ill. 2d 143, 365 N.E.2d 322.) Although a reviewing court is not bound by an agency’s interpretation of the law, where administration of a broad statutory standard has been delegated to an agency’s discretion, the court should rely upon the agency’s interpretation where there is reasonable debate as to the statute’s meaning. Plainfield, 143 Ill. App. 3d at 907, 493 N.E.2d at 1136; NLRB v. Hendricks County Rural Electric Membership Corp. (1981), 454 U.S. 170, 70 L. Ed. 2d 323, 102 S. Ct. 216; Bruns v. Department of Registration & Education (1978), 59 Ill. App. 3d 872, 376 N.E.2d 82.

In addition, courts give substantial weight and deference to the interpretation of a statute by the agency charged with the administration and enforcement of that statute. (Ellinois Consolidated Telephone Co. v. Ellinois Commerce Comm’n (1983), 95 Ill. 2d 142, 447 N.E.2d 295.) A significant reason for this deference is that courts appreciate that agencies such as the Board can make informed judgments based upon their experience and expertise. (Illinois Consolidated Telephone, 95 Ill. 2d at 153, 447 N.E.2d at 300.) Interpretations by administrative agencies express an informed source for ascertaining legislative intent. Ellinois Consolidated Telephone, 95 Ill. 2d at 153, 447 N.E.2d at 300; Adams v. Jewel Cos. (1976), 63 Ill. 2d 336, 348 N.E.2d 161.

Where a determination involves a mixed question of law and fact, the Board’s resolution of such questions is to be upheld if reasonable, consistent with the Act, and based on findings supported by substantial evidence. Rockford Township Highway Department v. Ellinois State Labor Relations Board (1987), 153 Ill. App. 3d 863, 506 N.E.2d 390.

The theory underlying these principles is that “the officers charged with the duty of carrying new laws into effect are presumed to have familiarized themselves with all the considerations pertinent to the meaning and purpose of the new law, and to have formed an independent, conscientious, and competent expert opinion thereon.” Ellinois Consolidated Telephone, 95 Ill. 2d at 154, 447 N.E.2d at 301.

The resolution of the case at bar involves a determination of the scope and meaning of section 3(j) of the Act. That provision defines a “managerial employee” as being:

“[A]n individual who is engaged predominantly in executive and management functions and is charged with the responsibility of directing the effectuation of such management policies and practices.” Ill. Rev. Stat. 1989, ch. 48, par. 1603(j).

The Act does not define what constitutes “executive and management functions.” In addition, a review of relevant case law reveals that there is no hard and fast rule regarding what duties and responsibilities qualify an employee as a “managerial employee.” However, the judicial decisions construing the Act and the NLRA do provide some general guidelines.

Managerial employees are those involved in the direction of the governmental enterprise or a major unit thereof who possesses authority to broadly affect its mission or fundamental methods. (General Service Employees Union, Local 73, AFL-CIO, 2 Pub. Employees Rep. (Ill.) par. 3020, case No. L—RC—86—10 (LLRB Aug. 26, 1986).) However, an employee need not participate actively in the formulation or effectuation of management’s labor relations policies in order to be deemed “managerial.” (Board of Regents of the Regency Universities System v. Illinois Educational Labor Relations Board (1988), 166 Ill. App. 3d 730, 520 N.E.2d 1150.) In addition, managerial status is not limited to those at the very highest level of the governmental entity, for it is enough if the functions performed by the employee sufficiently align him with management such that the employees “should not be in a position requiring them to divide their loyalty to the administration *** with their loyalty to an exclusive collective-bargaining representative.” Board of Regents, 166 Ill. App. 3d at 742-43, 520 N.E.2d at 1158.

Turning to the facts of the case at bar, we are compelled to affirm the Board’s decision. We believe that the record fully supports the Board’s conclusion that all of the attorneys employed by the Law Department constitute managerial employees and are therefore excluded from the Act’s coverage.

To begin, there are no reported judicial or administrative decisions dealing with the collective bargaining rights of attorneys employed by large municipalities. The two decisions that involve facts most analogous to the case at bar are the Supreme Court’s decision in NLRB v. Yeshiva University (1980), 444 U.S. 672, 63 L. Ed. 2d 115, 100 S. Ct. 856, and our recent decision in Board of Regents.

In Board of Regents, this court ruled that the center directors for certain universities constituted managerial employees within the meaning of the Act. The center directors were responsible for the day-to-day functioning of the centers. The directors were involved in hiring personnel, possessed the responsibility to insure that projects were carried out, and were able to change the focus of a center. We held, based on these facts, that the center directors were managerial employees as a matter of law. Board of Regents, 166 Ill. App. 3d at 743, 520 N.E.2d at 1159.

In rendering that decision, we emphasized that the managerial exclusion is not limited to “very high positions.” (166 Ill. App. 3d at 742, 520 N.E.2d at 1158.) Instead, we held that the key inquiry is whether the duties and responsibilities of the employees in question are such that the employees should not be placed in a position requiring them to divide their loyalty between the employer and the collective bargaining unit. 166 Ill. App. 3d at 743, 520 N.E.2d at 1158.

Likewise, in Yeshiva, the Supreme Court held that the key concern underlying the managerial exclusion (in NLRB cases) is “[t]hat an employer is entitled to the undivided loyalty of its representatives.” (Yeshiva, 444 U.S. at 682, 63 L. Ed. 2d at 125, 100 S. Ct. at 862.) Yeshiva involved the issue of whether an entire college faculty could be considered within the NLRB’s managerial exclusion. According to the Supreme Court, the goal in applying the managerial exclusion is to ensure that employees who exercise discretionary authority on behalf of the employer will not divide their loyalty between the employer and the union. Where the professional interests of the employee cannot be separated from those of the employer, the employees can be properly considered as “managerial employees.” (444 U.S. at 688, 63 L. Ed. 2d at 129, 100 S. Ct. at 865.) Based on these facts, the Yeshiva Court held that all of the faculty members could be considered managerial employees.

In the case at bar, we believe, based on the record before it, that the Board could certainly rule that all of the Law Department attorneys fell within the managerial exclusion set forth in the Act.

First, the organization of the Law Department does not square with the traditional authority structures contemplated by the Act. The record is replete with continuous references to the collegial nature of the Law Department. Although divisions exist, it is clear that all of the attorneys work in multiple areas and that the demands of the client (i.e., the City of Chicago) are such that an attorney may be assigned to the torts division on one day and the labor and personnel division the next. The makeup of the Law Department inescapably leads to the conclusion that the Law Department necessarily functions as a single cohesive unit in which tasks are assigned in a team fashion without any concern for, or recognition of, a formal management/union division between attorneys.

That being the case, it is impossible to determine how the Law Department could efficiently operate if it was to be divided into union/nonunion attorneys. The Board’s decision that certain attorneys were, in addition to being managerial, also confidential and/or supervisory employees demonstrates the multifaceted roles performed by the individual Law Department attorneys. This fact is further borne out by the stipulations of the parties. The parties stipulated that whole divisions (i.e., labor relations division) of the Law Department were excluded from collective bargaining by the Act. Yet, the facts are clear that attorneys from other divisions regularly provide assistance to, and consult with, the attorneys in that excluded division. To permanently divide the Law Department (into union and nonunion sectors) would necessarily lessen the effectiveness of the Law Department’s attorneys and would undermine the duties that they owe to their single and sole client, the City of Chicago.

Second, all of the Law Department attorneys have the authority to recommend changes in the manner in which the city operates. Indeed, the record reveals that the city depends on the recommendations from the Law Department attorneys to function on a day-today basis. The Law Department attorneys review all legislation voted upon by the city council, assist alderman and city departments on rules and regulations, draft personnel ordinances for city employees, carry out the mayor’s executive orders regarding hiring quotas, takes measures to increase revenues for the city budget, recommend changes in the city’s labor contracts with outside unions, alter the city’s licensing policies and practices, and review and modify all of the personal service contracts executed by the city.

Put simply, the Law Department attorneys constitute an inherent part of the city and cannot be permitted to be placed in a position “requiring them to divide their loyalty” to the city “with their loyalty to an exclusive collective-bargaining representative.” (Board of Regents, 166 Ill. App. 3d at 743, 520 N.E.2d at 1158.) There is simply no reasonable means of separating the Law Department attorneys from the City of Chicago without destroying their ability to perform the necessary and important functions delegated to them.

Third, the Law Department attorneys exercise a tremendous amount of discretion on behalf of the city and we do not believe the city should be forced to bear the divided loyalty that often follows unionization. (Accord, Yeshiva, 444 U.S. at 682, 63 L. Ed. 2d at 125, 100 S. Ct. at 862.) This is especially so where, as here, the interests of the employees are identical to, and cannot be separated from, those of the employer. Yeshiva, 444 U.S. at 688, 63 L. Ed. 2d at 129, 100 S. Ct. at 865.

We must emphasize, however, that the facts of this case are most unique. The Law Department functions similarly to the university in Yeshiva; although there are senior members (i.e., supervisors), all of the attorneys exercise managerial discretion on behalf of the city. All of the attorneys are involved in hiring, have access to all files, and may be assigned to labor-related matters. The authority structure within the Law Department is diffused rather than rigid. And, all of the attorneys may, at any time, be assigned to work closely with the mayor or his advisors on special projects vitally important to the interests of the city.

In sum, the unique organization and division of responsibilities within the Law Department deary support the Board’s determination that all of the Law Department attorneys constitute managerial employees within the meaning of the Act. Accordingly, we affirm the Board’s decision.

In light of our decision, we need not address the other issues raised by the parties as our resolution of the managerial employee issue is determinative of this appeal.

For the foregoing reasons, the Board’s decision is affirmed.

Affirmed.

McMORROW, P.J., and JIGANTI, J., concur.