author: JUSTICE SCARIANO

text:
    PREFERRED MEAL SYSTEMS, INC., et al., Plaintiffs-Appellants, v. K. LEE GUSE et al., Defendants-Appellees.
    First District (2nd Division)
    Nos. 1—88—3335, 1—88—3498 cons.
    Opinion filed May 29, 1990.

      James A. Hardgrove, Kathleen C. Kauffman and Monica Rimai, all of Sidley & Austin, of Chicago, for appellants.
    Eugene E. Gozdecki and Howard A. Voeks, both of Gozdecki & Zido, of Chicago, for appellees.
   JUSTICE SCARIANO

delivered the opinion of the court:

Plaintiffs, Preferred Meal Systems, Inc. (Preferred), and its parent corporation TW Services, Inc. (TWS), brought suit to obtain equitable relief and monetary damages against the three highest-ranking former officers of Preferred, defendants Guse, Singer, and Reynolds. Plaintiffs charge that the individual defendants used their corporate offices with Preferred to establish a competing corporation, defendant Excel Systems, Inc. (Excel); that Guse violated an agreement not to compete contained in his employment contract; and that all three individual defendants breached their fiduciary duties to Preferred by wrongfully appropriating and using Preferred money, property and confidential information in order to compete with it, and by successfully soliciting its employees and customers in behalf of the new company, both prior to and after their departure from Preferred.

After hearing evidence and argument of counsel, the trial court on June 21, 1988, entered a temporary restraining order (TRO) enjoining defendant Guse from engaging in competition with Preferred or consulting in any way with Excel. The TRO also enjoined all defendants from using or disclosing confidential information obtained from Preferred and from soliciting additional Preferred employees.

Upon hearing Preferred’s evidence on its request for a preliminary injunction, the trial judge on October 12, 1988, declined to enjoin Singer, Reynolds and Excel from engaging in competition with Preferred, but kept in effect the order against them regarding confidential information, and continued the injunction against Guse pending further hearing. On November 16, 1988, at the close of the continued hearing, the court modified the previous order against Guse by permitting him to compete with Preferred for the business of all customers who contract pursuant to public bid. Plaintiffs appeal from the order denying full preliminary injunctive relief against Singer, Reynolds, and Excel, and from that portion of the modified injunction against Guse permitting him to compete with Preferred in instances where the award of a contract is based on competitive bidding. The case is brought here on interlocutory appeal pursuant to Supreme Court Rule 307(a)(1) (73 Ill. 2d R. 307(a)(1)), and the following issues are presented for review: (1) whether the trial court’s decision to modify the injunction against Guse, permitting him to compete with Preferred for the business of all customers who contract pursuant to public bid, was against the manifest weight of the evidence and contrary to law; and (2) whether the trial court’s decision to refuse to enjoin Reynolds, Singer and Excel from engaging in competition with Preferred was also in error.

The facts in this case, many of which are contained in documentary form, are essentially undisputed.

NATURE OF PREFERRED’S BUSINESS

Preferred furnishes “pre-plated” or “pre-portioned” meals to both private and public school districts, but since school consumption is limited to 175 pupil attendance days each year, Preferred has diversified its operations by catering to senior citizen nutritional programs and day care centers. With just under $40 million in annual sales, Preferred is not without competition in this $3 billion market.

PLAINTIFFS’ CONFIDENTIAL INFORMATION

Plaintiffs assert that their confidential information includes food formulas, customer lists, all costing and pricing information, standard costs, operating statements, bills for materials, and information relating to gross margin and returns; that hard copies of such confidential information were required to be kept under lock and key by Preferred managers in order to safeguard the information and names; that passwords were used to control computer access; and that Preferred made this information available only to select employees on a need-to-know basis.

DEFENDANTS’ POSITIONS WITH PREFERRED

Defendant Guse was president and a director of Preferred. Defendants Singer and Reynolds were vice-president in charge of sales and vice-president of administration, respectively. As sales vice-president, Reynolds was responsible for obtaining and maintaining clients. As administration vice-president, Singer had primary responsibility for Preferred’s financial operations, including the preparation of all major bids and contract renewals. The three individual defendants, together with Michael Alagna, operations vice-president, had almost total control over Preferred’s operations, had complete access to all of Preferred’s confidential financial and customer information, and knew Preferred’s customers, costs and bidding strategies. Together they operated Preferred on their own, without detailed direction from Canteen Company (Canteen), the division of plaintiff TWS responsible for Preferred. Defendant Excel is the corporation which defendants formed to compete with Preferred; Guse, Reynolds and Singer own all of its stock.

GUSE’S EMPLOYMENT CONTRACT

In his contract of employment with Canteen, Guse agreed that he would not at any time, either while employed or thereafter, disclose any of Preferred’s confidential information or trade secrets. The contract further provided that, for a period of one year after his termination, Guse would not

“directly or indirectly, as an officer, director, stockholder, partner, associate, employee, consultant, owner-agent, creditor, coventurer or otherwise, become or be interested in or be associated with any other corporation, firm or business engaged in any geographical area in which [Preferred] or any of its subsidiaries, affiliates or licensees is so engaged, in the same or any similar or competitive business with that of [Preferred] or any subsidiary, affiliate or licensee.”

THE EVENTS COMPLAINED OF

In January and February of 1987, Guse, Reynolds and Singer met with the accounting firm of McGladrey, Hendricksen & Pullen (McGladrey) to seek advice about the possibility of doing a leveraged buyout (LBO) of Preferred, the purpose of which was to make Preferred a minority business enterprise (MBE). At this time, defendants furnished certain information, which included balance sheets, costs and margins for Preferred’s top 20 accounts, to McGladrey. Defendants did not further pursue the concept of a LBO until December 1987, at which time they solicited Michael Alagna and Jose Seijo to join their management group, but they declined and chose to stay with Preferred. When defendants became concerned about the possibility of being discharged for their having suggested a LBO to plaintiffs, they developed a contingency plan under which they would form their own company should that event transpire; accordingly, they began planning for the new company while still employed by Preferred, using Preferred’s data and computers. Guse admits working on the contingency plan to start a new company in late January or early February of 1988, but maintains that it was shelved between mid-January 1988, when the Harris Bank declined to finance the new company, and May 18, 1988, when defendants began to leave Preferred. Certain versions of plans for a start-up company were found on Preferred computers with file generation or last revision dates of March 23, 1988, and May 17, 1988.

In January and February of 1988, Guse formalized an offer to his superiors at Canteen regarding a LBO of Preferred, making his initial presentation to the president of Canteen on February 11, 1988. In response to the proposal, Canteen sought a 40% equity ownership in the new company. However, Guse’s professional advisors expressed concern that such a percentage of ownership might result in the company’s not receiving MBE status in light of the fact that Canteen owned Preferred previous to the proposed buyout.

Defendants then made two offers, both of which were rejected as being too low and also because they failed to give Canteen any equity ownership. Soon after the second offer was rejected, defendants solicited certain of Preferred’s key managers on behalf of the new company. Michael Alagna was contacted for a second time, on May 6, 1988, by Guse and Singer, who told him that they planned on forming a company which would compete with Preferred, and that they wanted him to join them. Reynolds contacted Pat Costello, one of three regional sales managers and offered him a position with Excel. Guse contacted Jerry Feddor, a plant manager; Jose Seijo, plant engineer (the second such contact); and Nick Lindheim, a regional sales manager, offering each employment with the new corporation. Guse also offered other less prominent employees positions with the new company, including technical services director Fischer, senior nutritions program head Lykke, and material manager Steffens. In addition, the following employees left Preferred within days of defendants’ departures and became employees of Excel without any prior notice to Preferred: client service manager Rose, regional manager Williams, administrative assistant Schar, product development manager Reigler, and client service representative Reitz.

Defendants Guse and Singer left Preferred on May 18, 1988; on May 19, 1988, they began looking at temporary office space; and on May 20, 1988, Singer made a deposit on a two-room office with secretarial services in Itasca, Illinois. In early May 1988, Guse and Singer used Preferred funds to pay approximately $20,000 in fees to the law and accounting firms which rendered services in connection with their plans to buy out Preferred, despite the fact that TWS had specifically informed them that Preferred would not pay for these services. Guse and Singer also ordered, paid for with almost $10,000 in Preferred funds, and later took with them two Model 50 computers; Guse testified that he planned on keeping them only until he received the money due him from Preferred’s retirement fund. However, defendants returned this equipment on advice of their counsel shortly after this suit was filed. Defendants also caused a binding machine to be taken from Preferred and which was used by Excel, but defendants ultimately reimbursed Preferred for it.

Preferred employees Costello, Feddor and Fischer all testified that before leaving their employment, defendants had made statements that they had spoken with Preferred customers and that there were potential customers for the new corporation.

I

A

Plaintiffs argue that the trial court’s decision to modify the injunction against Guse, permitting him to compete with Preferred for the business of all customers who contract pursuant to public bid, was against the manifest weight of the evidence and contrary to law. In Dixon Association for Retarded Citizens v. Thompson (1982), 91 Ill. 2d 518, 524-25, 440 N.E.2d 117, our supreme court defined the role of our reviewing courts in considering appeals from decisions rendered in preliminary injunction cases as follows:

“The appellate court, in City of Chicago v. Airline Canteen Service, Inc. (1978), 64 Ill. App. 3d 417, summarized the role of the preliminary injunction and the nature of the review on appeal from an order issuing such an injunction when it stated:
‘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. [Emphasis in original.] 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. [Citation.]’ City of Chicago v. Airline Canteen Service, Inc. (1978), 64 Ill. App. 3d 417, 432-33.
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 524-25, 440 N.E.2d at 120.

Similarly, in the case at bar the transcript of the hearing on the motion for the preliminary injunction covers approximately 1,200 pages, the trial court heard from more than a dozen witnesses over parts or all of 10 different days, and considered 14 depositions, 6 affidavits, and 114 exhibits. Moreover, the parties thoroughly briefed the issues for the court. Therefore, as the supreme court did in Dixon Association, we consider the orders of the trial court in this case to be, in effect, decisions on the merits of the case, and the scope of our review will be so governed. (Accord Warrior v. Thompson (1983), 96 Ill. 2d 1, 449 N.E.2d 53; Witter v. Buchanan (1985), 132 Ill. App. 3d 273, 476 N.E.2d 1123.) Consequently, we are bound to the standard of determining whether the trial court’s findings are contrary to the manifest weight of the evidence and whether it has misconstrued or misapplied the pertinent law. Dixon Association, 91 Ill. 2d 518, 440 N.E.2d 117; Witter, 132 Ill. App. 3d 273, 476 N.E.2d 1123.

Our courts have uniformly and consistently held that in an action for preliminary injunctive relief, a plaintiff must show (1) a clear right or interest needing protection, (2) the absence of an adequate remedy at law, (3) irreparable harm if the injunction is not granted, and (4) a reasonable likelihood of success on the merits. McRand, Inc. v. Van Beelen (1985), 138 Ill. App. 3d 1045, 1050, 486 N.E.2d 1303; Cross Wood Products, Inc. v. Suter (1981), 97 Ill. App. 3d 282, 284, 422 N.E.2d 953, 956.

While it is true that ordinarily an employer has no proprietary interest in its customers (Instrumentalist Co. v. Band, Inc. (1985), 134 Ill. App. 3d 884, 892, 480 N.E.2d 1273, 1279; Packaging House, Inc. v. Hoffman (1983), 114 Ill. App. 3d 284, 448 N.E.2d 947), in the case of covenants not to compete Illinois courts will enforce a reasonable restriction on future competition by employees so long as the restriction is reasonably necessary to protect the interests of the employer; accordingly, a restrictive covenant is enforceable if either (1) the employer has a near-permanent relationship with its customers; and, but for the employment, the employee would not have had contact with the customers (McRand, 138 Ill. App. 3d at 1051, 486 N.E.2d at 1311), or (2) the employee has acquired confidential information in the course of his employment (Instrumentalist, 134 Ill. App. 3d at 892, 480 N.E.2d at 1279; Donald McElroy, Inc. v. Delaney (1979), 72 Ill. App. 3d 285, 292, 389 N.E.2d 1300, 1307).

The trial court found as to all defendants that plaintiffs satisfied the requirements for a preliminary injunction regarding irreparable injury, the likelihood of success on the merits, and the absence of an adequate remedy at law. The court further found that the restrictive covenant in Guse’s employment contract was reasonable in terms of geographic scope and duration, but it declined to enforce the clause for its full one-year term only because it found that the evidence did not establish Preferred’s protectable interest in either its public sector customers or its business information, although, as noted above, all defendants were enjoined, both after the TRO and the preliminary injunction hearings, from using or disclosing any confidential information obtained from Preferred. We hold, however, that the ruling with respect to a protectable interest as to Preferred’s public sector customers was in error as to both fact and law, for the undisputed evidence shows not only how Preferred obtained its customers, but also how it was able to retain them. In holding as a matter of law that a near-permanent relationship could not exist where awards of contracts are based on public bidding, the judge stated:

“And somehow, I just find foreign to the concept of protectable interest the situation where in order to be awarded the contract, you have to go through a competitive bidding process.”

The judge further noted:

“Certainly, I don’t know if I have any evidence of a, quote, near permanent relationship. To me a near permanent relationship, I don’t know how a near permanent relationship could coexist in a public bid situation because if, in fact, you, quote, have a near permanent relationship, then you may as well forget the fact that you have something up for public bid. *** So how you could have a near permanent relationship coexist in a public bid situation to me would mean that the public bid situation is not being run the way it should.”

The judge made these remarks largely in citing, sua sponte, and discussing the case of Service Systems Corp. v. Van Bortel (1988), 174 Ill. App. 3d 412, 528 N.E.2d 378, which cites McTaggart v. Service Systems Corp. (7th Cir. 1986), 785 F.2d 312. The trial court in Van Bortel denied plaintiff’s requests for a temporary restraining order and a preliminary injunction and dismissed its complaint. Plaintiff Service Systems was a corporation engaged in providing food management services to a variety of clients, including schools, businesses, and government institutions. Defendants were former officers and employees of plaintiff who had entered into covenants not to compete with plaintiff, which plaintiff sought to enforce. The appellate court in Van Bortel found the issue to have been decided in McTaggart, which, although involving the same company, was brought against a different employee under an identical covenant not to compete. And although it based its opinion on the doctrine of collateral estoppel, Van Bortel quoted the McTaggart court’s opinion, which declined to enforce the covenant not to compete on the basis that

“ ‘[gjiven the competitive bidding process by which defendant’s customers place their business, there is no indication that these customers do not rely solely on price. There is some evidence that non-price factors, such as customer service, play some role in the customer’s decision to accept the bid, though the significance of this factor is far from clear. But defendant has not shown that plaintiff developed an established relationship with a customer and learned about the customer’s particular needs to the degree that, but for his employment and the defendant plaintiff would be in no position to acquire these customers.’ ” (174 Ill. App. 3d at 417-18, 528 N.E.2d at 382, quoting McTaggart, 785 F.2d 312.)

The trial judge in the case at bar acknowledged that the holding in McTaggart can in no conceivable manner be interpreted as decreeing that business transactions based on competitive bidding can never lead to a near-permanent relationship, stating:

“Now I certainly agree that McTaggart does not stand for the proposition that under no set of circumstances can a protectable interest be had when you are dealing with a public bid situation.”

Thus the trial judge based his finding that plaintiffs had no legitimate interest requiring protection on a total rejection of the undisputed record and in favor of the court’s own “common ordinary sense” approach to a resolution of the issue. Although the judge conceded that the evidence was “that they spend years and years and years researching and getting to know their clients before they come up with a bid,” he dismissed it with the statement, “Why that’s the case, I don’t know,” despite the fact that the evidence as to why that was the case was more than ample and was presented by and through plaintiffs and defendants. And although the judge recognized the relative importance of service, reliability and a relationship of trust over price, he gave it no effect because he saw it as a symptom of a diseased process not within the appropriate cognizance of a court of equity, stating, “But, if in fact, you have a situation where a particular municipal entity chooses to violate the spirit of the competitive bidding statutes and ordinances and all other things being equal awards the contract to the highest bidder for no legitimate reason, I don’t know if the court of equity should further that practice by enjoining people from competing,” and “Now, if you are talking about all this work of putting yourself in a position to get to know the people who award these contracts, and therefore, be in a better position to receive consideration for things other than being the lowest bidder, again I don’t know if the court of equity would enforce.” We find such an allusion to impropriety to be without any support in the record; nor does it have any warrant as any sort of inference to be gleaned therefrom.

Illinois courts follow certain well-known criteria in determining whether or not an agreement not to compete involves longstanding customer relationships. These factors include: the amount of money involved in developing a clientele, the difficulty involved in the process of developing the clientele, the extent of client contact necessary for obtaining and retaining a client, the storehouse of intimate knowledge one must accumulate to acquire and maintain a client, and the continuity of the relationship with the client. (McRand v. Van Beelen (1985), 138 Ill. App. 3d 1045, 1051-52, 486 N.E.2d 1306, 1311-12.) The McRand court found a protectable interest to exist where to obtain a client the plaintiff must identify prospects out of a large number" of potential customers, develop in-depth information regarding that potential client’s specific needs, expend substantial time and money in promotional programs and proposed plans before securing the client; and provide the defendant employee with access to product information, customer needs, customer buying habits, purchasing requirements, profit margins, pricing analysis and future business plans in connection with servicing clients. McRand, 138 Ill. App. 3d at 1052, 486 N.E.2d at 1312.

The elements comprising a protectable interest identified in McRand are no different in the public sector than they are in the private business world; nor is there any plausible reason as to why they should be. The parties to the case at bar are in agreement that as to competitive bidding, the entity inviting the bids must determine who the lowest responsible bidder is. The parties are also in agreement that the lowest responsible bidder need not be the lowest bidder in terms of contract price.

The record in this case shows that plaintiffs were prodigal in clearly establishing a protectable interest under Illinois law; indeed, the record fairly shows that plaintiffs must have taken McRand as a guide and proved the ingredients of a protectable interest in their customers accordingly. The undisputed evidence shows that Preferred obtains 70% of its business from only 20 customers, with the Chicago public schools accounting for over 30% of that business. Of some 120 customers, approximately 55 have been Preferred’s clients since it began its business in the 1970’s and over 85 have been customers for more than five years. Some 70% to 80% of Preferred’s customers initially award their food contracts pursuant to competitive bidding, but once Preferred has won a bid and entered into a contract with a public school system, for example, the school district has the option of renewing its contract each year, or to require bidding. Non-bid renewals constitute over 50% of Preferred’s annual business, while 20% to 30% of its business for one reason or another is never subject to public bid.

It is uncontested, however, that a sale depends upon more than the bidding process alone. Personal contact with customers is a significant factor in developing and maintaining Preferred’s business: sales representatives spend about half of their time servicing existing clients; and in the last four years Preferred has devoted over $1 million per year to servicing existing clients and developing new sales. As stated in an intracompany memo authored by defendant Guse while he was still with Preferred:

“Sales to public institutions tend to take a long time before the bid solicitation is released, and a sale consummated. Public administrators work slowly to avoid waste of taxpayers’ money and to diminish personal risk in making unsound decisions, about which constituents may frown. The length of a typical school sale can be as long as two years after initial interest is shown by the buyer.”

Similarly, Excel’s Rose, formerly Preferred’s client service manager, testified that to successfully find six customers while at Preferred, he had to make over 100 unsuccessful sales calls. It is also undisputed that additional factors taken into account before a bid is awarded are quality of service, quality of product, past experience, prior performance, student satisfaction, attractiveness, nutritional value, sanitation, and reliable delivery. In fact, in another exhibit authored by Guse he states, “Lowest price isn’t always best value. Sometimes lowest price is not value.” As a result, contracts are not always awarded to the lowest bidder, as, indeed, was the case when defendant Excel won the contract for the schools of the Catholic Archdiocese of Philadelphia, although its bid was substantially higher than that of the lowest bidder.

Preferred also presented proof that it must search for those comparatively few interested schools among the tens of thousands of school districts that proliferate throughout the United States, and that once a seller establishes a customer relationship, the customer attaches little importance to the fact that the bid of a trusted seller is perhaps higher in price. Surely, the existence of Preferred’s longstanding customer relationships is forcefully demonstrated by defendants’ post-departure conduct of promptly and intensively going about calling on all of Preferred’s customers within two to three months, and submitting bids only to Preferred customers during that period-customers, not incidentally, with whom Preferred, doubtless through the efforts of the individual defendants themselves, had established a reputation for service, quality and reliability. In sum, the record is exceedingly clear in this case that the public bid process does not limit public bodies to spending the public’s money solely on the basis of a comparison of price, or on what amounts to an auctioning off of their contracts. The relationship between plaintiffs and their customers cannot be considered, in light of the evidence developed in this case, to be transitory or ephemeral. Moreover, none of the authorities holds that the customer relationship in these cases is required to be either perpetual or indissoluble, or both long term and exclusive to plaintiff (see Instrumentalist Co. v. Band, Inc. (1985), 134 Ill. App. 3d 884, 893, 480 N.E.2d 1273, 1280); nor does any of them require that a near-permanent relationship be established with each customer.

Accordingly, we find the record to be replete with unrefuted evidence firmly establishing a protectable interest in favor of the plaintiffs and, further, that the trial judge misconstrued the applicable law.

B

Guse also argues that his employment contract contains a restrictive covenant which is far from the ordinary, having been crafted so that it would not become operative unless he continually went counter to specific directions of the board of directors, and even then, only after written notice of such violations. He contends that there is no evidence that he ever violated any corporate personnel policies or that he was ever put under any warning or was ordered to remediate his conduct as an officer, director or employee of Preferred; consequently, he argues, there was no restrictive covenant to enforce. Guse advanced this theory in the trial court, but the judge held against him.

We need not, however, undertake any consideration of this contention, Guse having failed to cross-appeal from the judge’s adverse ruling. City of Wilmington v. Industrial Comm’n (1972), 52 Ill. 2d 587, 289 N.E.2d 418; Cleys v. Village of Palatine (1980), 89 Ill. App. 3d 630, 411 N.E.2d 1161; Village of Arlington Heights v. National Bank (1977), 53 Ill. App. 3d 917, 369 N.E.2d 502.

Consequently, we hold that the circuit court erred in not enjoining Guse from competing with Preferred in those instances where the awarding of contracts is pursuant to competitive bidding.

II

Plaintiffs argue that the trial court’s decision to refuse to enjoin defendants Guse, Reynolds, and Singer from engaging in competition with Preferred was against the manifest weight of the evidence, maintaining that they were entitled to an injunction against all three for having breached the fiduciary duties they owed to Preferred. Plaintiffs argue that Guse was the highest-ranking officer at Preferred, while Reynolds and Singer held two of the next three highest offices, and as such, it is beyond contention that they had an absolute legal obligation to conduct themselves as fiduciaries vis-a-vis Preferred. H. Vincent Allen & Associates, Inc. v. Weis (1978), 63 Ill. App. 3d 285, 291, 379 N.E.2d 765, 769-70.

Plaintiffs point out that corporate officers are liable for breaching their fiduciary duties where, while still employed by the company, the officer has: (1) failed to inform his employer that other employees were forming a rival company or engaging in other fiduciary breaches (Unichem Corp. v. Gurtler (1986), 148 Ill. App. 3d 284, 290, 498 N.E.2d 724, 728, appeal denied (1987), 113. Ill 2d 586, 505 N.E.2d 363); (2) solicited fellow employees to join a rival business (Unichem, 148 Ill. App. 3d 284, 498 N.E.2d 724); (3) solicited the business of a single customer before leaving his current employer (Smith-Shrader Co. v. Smith (1985), 136 Ill. App. 3d 571, 580, 483 N.E.2d 283, 289; Weis, 63 Ill. App. 3d at 291, 379 N.E.2d at 770); (4) used the company’s facilities or equipment to assist him in developing his new business, or appropriated its money or equipment for that purpose (ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1978), 62 Ill. App. 3d 671, 685, 379 N.E.2d 1228, 1237, appeal denied (1978), 71 Ill. 2d 616); (5) used the company’s confidential business information for the new business, either before or after his departure (Affiliated Hospital Products, Inc. v. Baldwin (1978), 57 Ill. App. 3d 800, 806, 373 N.E.2d 1000, 1005); or (6) orchestrated a mass exodus of employees shortly after defendant’s resignation from the company (Unichem, 148 Ill. App. 3d at 290, 498 N.E.2d at 728; ABC Trans National, 62 Ill. App. 3d at 685, 379 N.E.2d at 1237).

The trial court found that there was “no question that Mr. Guse breached the fiduciary duties he had over and over on many occasions in several ways.” And at another point in the handing down of his findings and rulings from the bench, the judge stated: “There is no doubt in my mind that the evidence, the breach of fiduciary obligation, is sufficient to warrant injunctive relief.” However, the court also remarked that since it was holding that there was no protectable interest in public sector customers justifying the enforcement of his covenant, Guse should not be enjoined for violating his fiduciary obligations. Be that as it may, this is another issue affecting Guse that we need not decide, having held that plaintiffs are entitled to injunctive relief against him based on Guse’s breach of his restrictive covenant.

As we have previously noted, the trial court found as to all defendants that plaintiffs satisfied the requirements for a preliminary injunction regarding irreparable injury, the likelihood of success on the merits, and the absence of an adequate remedy at law. As to Guse, as we have already shown, the court felt that the evidence did not establish Preferred’s protectable interest in its public sector customers or its business information. And although the court found that Singer and Reynolds had breached their fiduciary duty at least by not informing Preferred of “Guse’s and/or their own activities, I think the harm to the defendant [sic] far outweighs any benefits to the plaintiffs,” noting, at the same time, that “I have questions in any case with respect to the protectable interest in the extent to which the injunctive relief could be granted.” So, although the court’s ruling is not pinpoint clear, it appears that it also concluded as to Singer, Reynolds and Excel that the public bidding process supported the denial of an injunction. In any event, the basis of the court’s conclusion that in balancing the equities it should decline to enjoin Singer, Reynolds and Excel was that defendants had succeeded in contracting with only two of Preferred’s customers, the Camden public school district and the schools of the Philadelphia Archdiocese, both of which had been with Preferred for over 10 years. The court went on to hold that the balancing test applied also to Excel; relief was consequently denied as to that defendant as well. We note again, however, that the court did find that Preferred had certain customer and costing information that was confidential, which it enjoined all defendants from using or disclosing.

We hold that the trial judge erred in ruling that although the conduct of Singer and Reynolds in not informing Preferred of “Guse’s and/or their own activities” constituted a breach of their fiduciary duty, it was insufficient to justify the granting of any further equitable relief to Preferred because the “harm to the defendant [sic] far outweighs any benefits to the plaintiffs.” The judge was also in error in holding that Excel, the company organized and principally financed by Guse, should also be exempt from being enjoined, considering that it was the instrumentality employed by all three individual defendants in implementing and perfecting the breach of their duty to Preferred. Indeed, it would be fair to say that Excel is but a refraction of defendants’ wrongdoing.

It would constitute the sheerest form of tautology to reiterate here all of the facts that we have catalogued above under the caption “THE EVENTS COMPLAINED OF.” For the trial court to characterize Singer’s and Reynolds’ part therein as merely incidental or peripheral involvement in Guse’s scheme to form a rival business is to run impermissibly counter to the plethora of evidence presented by plaintiffs and to the applicable legal precedents.

And to view the harm to these defendants, if they were to be enjoined, as far outweighing any benefit to Preferred is to remain totally oblivious of the brutally glaring fact that the undisputed evidence demonstrates that regardless of who masterminded the plan to create a competing company, Guse would never have been able to establish overnight a formidable and successful competitor without Preferred’s major customer contact, Reynolds, or its financial expert, Singer. As a matter of fact, the presence of Reynolds was crucial to the venture’s plan of operating as a minority-owned business; indeed, Reynolds was made president of Excel. Moreover, there exists not the slightest bit of evidence that Guse ever gave any thought of organizing a company on his own, without the assistance of Reynolds and Singer.

It is, of course, not essential for all three individual defendants to have acted together at all times. It should surprise no one that Guse did most of the private cajoling of his employees to leave Preferred and that he personally obtained the funds to organize Excel. These facts, however, do not in any way relieve those who acted in concert with him of any responsibility, since each benefitted from the actions of the other. The three needed each other to execute their plan. In fact, the trial judge stated, in ruling on this case, that “he [Guse] obviously needed people to assist him in doing it,” and “I am sure he listened to them,” referring to the other individual defendants.

We are accordingly constrained to hold that the trial court abused its discretion in applying the equitable doctrine of balancing the equities and conveniences between the parties in denying to plaintiffs the injunctive relief they sought as to Singer and Reynolds, for it is well established in Illinois that the doctrine is inapplicable where a defendant’s actions are done with full knowledge of the plaintiff’s rights and with an understanding of the consequences which might ensue. (Gold v. Ziff Communications Co. (1989), 196 Ill. App. 3d 425; ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc. (1978), 62 Ill. App. 3d 671, 682-83, 379 N.E.2d 1228, 1236, appeal denied (1978), 71 Ill. 2d 616.) The trial judge in the case at bar, in holding that Singer and Reynolds breached their fiduciary duty to plaintiffs by not informing them of “Guse’s and/or their own activities,” recognized what those activities were and recognized also that both their carrying on of such actions and their refusal to inform their employer thereof were done with full knowledge of the plaintiffs’ rights and with an understanding of the consequences which might ensue. Moreover, injunctive relief against the three individual defendants without restraining the creature spawned by their wrongs would be completely without any force or effect; Excel, therefore, is also to be enjoined. Accordingly, having reversed the circuit court as to plaintiffs’ case against Guse, we reverse its judgment as to Singer, Reynolds and Excel as well. On remand the circuit court should consider the effect that the passage of time may have had upon the parties’ interests since the initial violation of Guse’s agreement and Singer’s and Reynold’s breach of fiduciary duty, having due regard for the period of time the TRO was in effect and the elements referred to in Agrimerica, Inc. v. Mathes (1990), 199 Ill. App. 3d 435.

This cause is reversed and remanded for further proceedings consistent herewith.

Reversed and remanded.

HARTMAN and BILANDIC, JJ., concur.

        McTaggart is an unpublished opinion which, under Rule 35 of the Rules of the United States Court of Appeals for the Seventh Circuit, is not to be cited as precedent. However, an unpublished opinion may, under Rule 35, be cited and discussed when the opinion is relied upon, as it was in Van Bortel, for its collateral estoppel effect.

      The parties do not rely on any State statute requiring competitive bidding on public contracts. Rather, their agreement is based on Congress’ mandating such bidding in connection with the federally subsidized school lunch program.


source: Caselaw Access Project

author: JUSTICE HARTMAN

license: Public Domain

text:
    JACKSON JORDAN, INC., Plaintiff-Appellant, v. LEYDIG, VOIT AND MAYER, Defendant-Appellee.
    First District (2nd Division)
    No. 1—89—0840
    Opinion filed May 29, 1990.

      Michael T. Hannafan & Associates, Ltd., of Chicago (Michael T. Hanna-fan and James M. Byrnes, of counsel), for appellant.
    Clausen, Miller, Gorman, Caffrey & Witous, P.C., of Chicago (James T.

      Ferrini, Gary Kostow, Douglas J. Palandech, Suanne P. Hirsehhaut, and Sonia V. Odarczenko, of counsel), for appellee.
   JUSTICE HARTMAN

delivered the opinion of the court:

The issue raised in this case is whether a plaintiff, who charges defendant law firm with legal malpractice in having given it an allegedly negligent legal opinion some 15 years before suit was filed, is barred as a matter of law by the statute of limitations from litigating its grievance. Plaintiff appeals from the circuit court’s grant of summary judgment for defendant to that effect.

Plaintiff, Jackson Jordan, Inc. (Jackson), an Illinois corporation located in Schaumburg, owns a manufacturing plant in Michigan, which produces and sells heavy duty railroad equipment, including a truss-tie tamping machine. This machine tamps the railroad ties onto the ballast, cross-leveling the track and realigning both ties and tracks onto, the road bed. Jackson has sold equipment to various railroad companies for the past 50 years throughout the United States. Its main competitors are Plasser American Corp. (Plasser American) and Canron, Inc. (Canron).

Defendant, Leydig, Voit & Mayer (Leydig), an Illinois law partnership located in Chicago, specializes in the practice of intellectual property law, including patents, trademarks and copyrights. Leydig also prosecutes patent applications with the United States Patent and Trademark office; issues opinions regarding the patentability of inventions; and engages in general patent infringement litigation. Leydig has represented Jackson in the patent area for many years, although not on a retainer basis. As part of its legal services rendered at Jackson’s request, Leydig continuously reviewed publications, reporting recent patents, and advised Jackson of those patents which might be of interest to Jackson. On April 30, 1970, Leydig sent Jackson a copy of United States Patent No. 3,494,297 (’297 patent), which was issued to Franz Plasser and Joseph Theurer for a “Mobile Track Maintenance Machine.”

In 1969, and again in 1973, Jackson asked Leydig for opinions as to whether its tamping machine and succeeding models were patentable, as well as whether the machines infringed upon any existing patents. Leydig issued two opinion letters, one dated December 11, 1969, and the other dated May 23, 1973, essentially informing Jackson that the machines were not patentable. Leydig also stated that the machines did not then infringe upon any unexpired patents.

The ’297 patent machine was manufactured and sold by Plasser American in competition with Jackson’s and Canron’s tamping machines since 1970. The features and operations of all three machines are substantially the same. Although Leydig informed Jackson of the ’297 patent during the course of its ongoing review of published recent patents mentioned above, the ’297 patent was not again mentioned to Jackson in Leydig’s 1973 letter. The ’297 patent expired February 10, 1987.

The 1973 Leydig opinion did note three patents which, it asserted, were “rather easily distinguishable from the proposed machine”; however, the Plasser American ’297 patent was not among them. Daniel J. Donahue, Jackson’s president, averred that the letter was influential in the company’s decision to produce its new model 6000 machine, which Jackson then began manufacturing.

In July 1975, Plasser American instituted proceedings against Canron for infringement upon the former’s ’297 patent. Jackson employees knew of the litigation, but not of its specific details. In April 1980, the United States District Court in South Carolina issued an opinion in favor of Plasser American. Plasser American Corp. v. Canron, Inc. (D.S.C. 1980), 546 F. Supp. 589.

Leydig sent Jackson a letter on July 15, 1980, explaining the details of the Canron litigation. In response to Jackson’s request, Leydig, on August 26, 1980, wrote an opinion letter analyzing the impact of the decision on a potential infringement claim and asserting that the ’297 patent was invalid. Leydig further advised that Jackson had two available defenses, laches and estoppel, if litigation ensued. Leydig also recommended that Jackson sue Plasser American.

Plasser American sent Jackson a letter, dated June 28, 1982, formally notifying Jackson of its possible infringement upon the ’297 patent, demanding a license fee, and threatening litigation if Jackson did not agree. On Leydig’s advice, Jackson thereafter sued Plasser American in Virginia, seeking declaratory relief. Plasser American counterclaimed for infringement. Although the district court found the ’297 patent invalid, ultimately it was upheld on review, found enforceable and infringed upon by Jackson. (Jackson Jordan, Inc. v. Plasser American Corp. (Fed. Cir. 1987), 824 F.2d 977.) In a letter dated September 16, 1987, Jackson informed Leydig that it intended to file a malpractice suit against the firm and offered to permit Leydig to participate in its settlement negotiations with Plasser American. Leydig declined and withdrew as counsel. On September 22, 1987, Jackson settled the pending lawsuit, agreeing to pay Plasser American $1.9 million.

On February 1, 1988, Jackson filed its instant legal malpractice complaint against Leydig, claiming that Leydig had a duty of bringing infringement violations to Jackson’s attention, which Leydig breached by negligently failing to reveal the ’297 patent in April 1970 and in its opinion letter of May 23, 1973, and by negligently failing to properly review the ’297 patent. Jackson asserted that, but for Leydig’s negligence, it would not have manufactured its tamping machine and would not have suffered damage. Jackson claimed as damages the $1.9 million settlement with Plasser American and $350,000 in attorney fees paid by Jackson to Leydig.

Leydig filed its answer and affirmative defense on March 11, 1988, denying all the material allegations of Jackson’s complaint. Leydig’s affirmative defense raised the five-year statute of limitations provided in section 13—205 of the Code of Civil Procedure (Ill. Rev. Stat. 1987, ch. 110, par. 13—205) (section 13—205), claiming the cause of action accrued at the time of breach and that Jackson was time barred.

Leydig moved for summary judgment, based upon the statute of limitations defense. Following its hearing on Leydig’s motion, the circuit court ruled that Jackson’s cause of action accrued when Plasser American sent its claim of infringement to Jackson on June 28, 1982. The court stated its analysis for the record:

“On June 28, 1982, when Plasser American said, ‘we’re going to go after you, Mr. Plaintiff.’ At that moment in time the plaintiff knew something was wrong. He knew that his lawyers goofed up. He also knew that he better hire counsel and he better get ready to defend this thing because he was going to get sued.
And from that moment on, in my opinion, a cause of action against his lawyers had accrued and the only thing we’re waiting around to see is how bad is this going to be.”

The court reaffirmed this ruling at a hearing held on March 15, 1989, and granted Leydig summary judgment. On March 22, 1989, Jackson filed its notice of appeal.

I

Jackson initially contends that its cause of action for legal malpractice did not accrue until it became obligated to pay the settlement damages' in September 1987, because prior to that time, not all the elements of the legal malpractice had materialized.

An action for legal malpractice must plead facts which establish the existence of an attorney-client relationship; the breach of a duty owed by virtue of that relationship; and that such negligence was the proximate cause of injury or of loss to the client. (Goldstein v. Lustig (1987), 154 Ill. App. 3d 595, 598, 507 N.E.2d 164; Shehade v. Gerson (1986), 148 Ill. App. 3d 1026, 1029, 500 N.E.2d 510; Cook v. Gould (1982), 109 Ill. App. 3d 311, 440 N.E.2d 448.) Such an action accrues when the attorney breaches its duty to act skillfully and diligently on behalf of its client. (Dolce v. Gamberdino (1978), 60 Ill. App. 3d 124, 376 N.E.2d 273; Maloney v. Graham (1912), 171 Ill. App. 409. Cf Tucek v. Grant (1984), 129 Ill. App. 3d 236, 472 N.E.2d 563; Kohler v. Woollen, Brown & Hawkins (1973), 15 Ill. App. 3d 455, 304 N.E.2d 677.) A client’s action against its attorney is one for damages; unless the client has suffered a monetary loss as the result of some negligent act on the part of the attorney there is no basis for the lawsuit. Chicago Red Top Cab Association, Inc. v. Gaines (1977), 49 Ill. App. 3d 332, 333, 364 N.E.2d 328; see also Bronstein v. Kalcheim & Kalcheim, Ltd. (1980), 90 Ill. App. 3d 957, 959, 414 N.E.2d 96.

Jackson urges that the date it became liable to Plasser American for its patent infringement is the first date it could accurately allege damages resulting from Leydig’s breach of duty, citing Bartholomew v. Crockett (1985), 131 Ill. App. 3d 456, 475 N.E.2d 1035, and other authorities. In those cases, however, plaintiffs-clients could not show that their attorneys’ negligence in underlying litigation management resulted in their loss of rights or incurrence of legal or other expenses. For example, in Bartholomew v. Crockett, plaintiff was required to plead and prove damages resulting from the attorney’s late filing of a worker’s compensation claim, which entailed establishing that, but for attorney’s negligence, the client would have prosecuted the compensation claim successfully. The attorney’s negligent conduct could result in actual damages only if plaintiff failed to recover on the underlying personal injury claim, the outcome of which was unknown. 131 Ill. App. 3d at 465.

In the case sub judice, Leydig told Jackson that there were no infringement problems in its letter of May 23, 1973. Subsequently, Jackson became susceptible to a patent violation suit, incurring monetary expense in order to defend itself. Jackson filed suit in the Federal court, incurring legal expenses, because it was concerned about its interest in the wake of the Plasser American/Canron litigation. The 1982 Plasser American letter informed Jackson of potential litigation. Although damages sustained by Plasser American were as yet unknown, Jackson already was sustaining money damages in the form of attorney fees incurred in order to contest the allegation of infringement. Jackson, in fact, was billed for legal services after receiving the 1982 Plasser American letter. Jackson concedes that these services constituted part of the $350,000 legal fee damages claimed by Jackson as a result of the asserted malpractice. Therefore, Leydig’s negligent 1973 opinion regarding potential patent infringement began to injure Jackson monetarily in 1982, which Jackson knew of by virtue of paying the legal fees. Damages are speculative only when uncertainty exists as to the fact of damage rather than uncertainty as to their amount. DeKoven Drug Co. v. First National Bank (1975), 27 Ill. App. 3d 798, 327 N.E.2d 378; 22 Am. Jur. 2d Damages §24 (1988).

Illinois courts have held that when wrongful acts of a defendant involve a plaintiff in litigation with third parties or require it to incur expenses to protect its interests, damages are then recoverable against the wrongdoer, measured by reasonable litigation expenses, including attorney fees. (National Wrecking Co. v. Coleman (1985), 139 Ill. App. 3d 979, 982, 487 N.E.2d 1164, citing Ritter v. Ritter (1943), 381 Ill. 549, 554, 46 N.E.2d 41; Sorenson v. Fio Rito (1980), 90 Ill. App. 3d 368, 413 N.E.2d 47.) Whether plaintiff incurs the expense in offensive or in defensive actions is of no consequence. National Wrecking Co. v. Coleman, 139 Ill. App. 3d at 983.

In his affidavit, James E. Anderson, Jackson’s project engineer and principal contact between Leydig and Jackson in 1973, averred that had Leydig informed the company of the patent in its May 23, 1973, letter opinion, the company’s engineers “including me at the time could have ‘designed around’ the tamping machine disclosed by the ’297 patent in order to avoid possible infringement problems.” The entire litigation and concomitant expenses might have been avoided if Leydig’s assertedly negligent advice had not been given.

The foregoing evidence supports the circuit court’s ruling that Jackson’s knowledge of Leydig’s legal malpractice commenced on June 28, 1982.

II

Jackson argues, alternatively, that the discovery rule should apply and that the circuit court erred in granting Leydig’s motion for summary judgment by finding no question of fact concerning what the company knew or should have known by June 28, 1982. The circuit court ruled that on June 28, 1982, Jackson knew or reasonably should have known of its injury and thereafter was bound to inquire as to whether the injury was wrongfully caused.

The purpose of the summary judgment procedure is not to try a question of fact, but to determine whether one exists. (Addison v. Whittenberg (1988), 124 Ill. 2d 287, 294, 529 N.E.2d 552; La Salle National Bank v. Illinois Housing Development Authority (1986), 148 Ill. App. 3d 158, 161, 498 N.E.2d 697; Montes v. Hawkins (1984), 126 Ill. App. 3d 419, 423, 466 N.E.2d 1271.) A motion for summary judgment should be granted only if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact. (Ill. Rev. Stat. 1985, ch. 110, par. 2—1005(c).) The pleadings, affidavits and depositions must be construed most strictly against the movant and most liberally in favor of the opponent. In re Estate of Whittington (1985), 107 Ill. 2d 169, 177, 483 N.E.2d 210; Aspegren v. Howmedica, Inc. (1984), 129 Ill. App. 3d 402, 403, 472 N.E.2d 822.

At bar, Jackson knew in 1980 that it was manufacturing tamping machines similar to the Canron machine found to have infringed upon the Plasser American patent; however, according to Jackson’s president, Donahue, it did not begin to believe Leydig was negligent until May 2, 1987. Significantly, however, in 1982, after receiving the letter from Plasser American, Jackson’s employees began meeting with Phillip Mayer of Leydig to discuss defenses calculated to defeat the claim of infringement.

The statute of limitations when applied in discovery situations starts to run when one knows or reasonably should know of its injury and also knows or reasonably should know that the injury was wrongfully caused. (Knox College v. Celotex Corp. (1981), 88 Ill. 2d 407, 415, 430 N.E.2d 976; Nolan v. Johns-Manville Asbestos (1981), 85 Ill. 2d 161, 169, 421 N.E.2d 864; Witherell v. Weimer (1981), 85 Ill. 2d 146, 156, 421 N.E.2d 869.) Such questions ordinarily are deemed genuine issues of fact to be determined by the finder of fact; however, where only a single conclusion can be drawn from the undisputed facts, the question becomes one for the court. Witherell, 85 Ill. 2d at 156.

Leydig maintains that Jackson’s various affidavits and depositions demonstrate sufficient knowledge of the injury or problem: both Anderson and Donahue were concerned in 1980 that Plasser American might try to sue them as it did Canron: both Anderson and Bruce Bradshaw, Jackson’s chief engineer, knew that Canron’s machine was similar to Jackson’s machine; and, in 1982, Jackson received the formal Plasser American letter asserting its patent rights and Jackson’s probable patent infringement. The circuit court correctly held summarily that this cumulative knowledge provided the requisite concurrence between knowledge of injury and its potentially wrongful causation which started the statute of limitations running upon the receipt of Plasser American’s letter of June 28,1982.

Jackson’s final argument, first raised in its reply brief, claims Leydig’s continuing advice and reassurance that “all was well” should be construed as an equitable estoppel, citing Witherell (85 Ill. 2d at 159-60). Points not argued in appellant’s principal brief “are waived and shall not be raised in the reply brief, [or] in oral argument.” (113 Ill. 2d R.341(e)(7).) Further, the theory of equitable estoppel not having been pleaded in Jackson’s complaint nor argued before the circuit court, prevents this court from considering that issue on appeal. Board of Education of Township High School District No. 211 v. Kusper (1982), 92 Ill. 2d 333, 342-43, 442 N.E.2d 179; United States Fidelity & Guaranty Co. v. Specialty Coatings Co. (1989), 180 Ill. App. 3d 378, 383, 535 N.E.2d 1071.

For the reasons described above, the circuit court’s grant of summary judgment for Leydig must be affirmed.

Affirmed.

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

      Patent ’297 subsequently was assigned to Plasser American.

      In patent law, actual damages must be shown by competent evidence; they are not implied by legal inference. Philp v. Nock (1873), 84 U.S. 460, 21 L. Ed. 679; 60 Am. Jur. 2d Patents §1076 (1987).


author: JUSTICE JOHNSON

text:
    JOSEPH VANCE, Plaintiff-Appellant, v. HUDSON GENERAL AVIATION SERVICE, Defendant-Appellee.
    First District (4th Division)
    No. 1—88—3557
    Opinion filed May 31, 1990.

      Constantine N. Dranias and Keith Harrington, both of Idarius, Dranias & Associates, of Chicago, for appellant.
    Linda B. Conway, of Pretzel & Stouffer, of Chicago (Robert Marc Chemers, of counsel), for appellees.
   JUSTICE JOHNSON

delivered the opinion of the court;

Plaintiff, Joseph Vance, appeals from an order of the circuit court of Cook County dismissing his amended complaint. The sole issue presented for review is whether plaintiff’s amended complaint relates back to the time the original complaint was filed, thereby avoiding the impact of the statute of limitations.

We reverse.

On October 24, 1984, plaintiff alleged that he sustained injuries when he slipped and fell from a vehicle that was maintained by defendant, Hudson General Aviation Service. Plaintiff notes, however, that the vehicle was owned by his employer, Dobbs House, Inc.

On April 10, 1986, plaintiff filed a one-count complaint, within the statute of limitations period for personal injuries, against defendant. Plaintiff alleged that defendant negligently serviced vehicle No. 336 and failed to maintain the truck so as to prevent dirt, oil, grease, fuel and other slippery materials from accumulating on the vehicle. Plaintiff further alleged that defendant’s negligence resulted in his slipping and falling from the right rear bumper of the vehicle as he attempted to board.

On July 20, 1987, defendant filed a summary judgment motion alleging that it was not responsible for maintaining the vehicle so as not to permit grease, oil or other slippery materials to remain on the vehicle. Defendant’s summary judgment motion was granted September 15, 1987. Plaintiff was not in court when defendant argued this motion.

Subsequently, plaintiff filed a motion to vacate the order granting defendant’s summary judgment motion. On December 22, 1987, plaintiff sought leave to file an amended complaint. The only change plaintiff made in the amended complaint was the correction of the location of the accident from vehicle No. 336 to vehicle No. 478. On May 4, 1988, the court entered an order denying plaintiff’s motion to vacate the order granting defendant’s summary judgment motion. However, the court granted plaintiff leave to file his amended complaint.

Defendant then filed a motion to dismiss the amended complaint on the ground that plaintiff set forth a new cause of action, by correcting the location of the incident, which is barred by section 2—616 of the Code of Civil Procedure. (Ill. Rev. Stat. 1987, ch. 110, par. 2—616.) On October 24, 1988, relying upon the Illinois Supreme Court decision in Zeh v. Wheeler (1986), 111 Ill. 2d 266, the court granted defendant’s motion and dismissed plaintiff’s amended complaint with prejudice. Plaintiff appeals from this court order.

Section 2—616(b) of the Code of Civil Procedure governs the general rule of relation back. The section provides, in pertinent part, as follows:

“(b) The cause of action *** set up in any amended pleading shall not be barred by lapse of time under any statute or contract prescribing or limiting the time within which an action may be brought or right asserted, if the time prescribed or limited had not expired when the original pleading was filed, and if it shall appear from the original and amended pleadings that the cause of action asserts *** in the amended pleading grew out of the same transaction .or occurrence set up in the original pleading, even though the original pleading was defective in that it failed to allege *** the existence of some fact or some other matter which is a necessary condition precedent to the right of recovery or defense asserted, if the condition precedent has in fact been performed, and for the purpose of preserving the cause of action *** set up in the amended pleading, and for that purpose only, an amendment to any pleading shall be held to relate back to the date of the filing of the original pleading so amended.” Ill. Rev. Stat. 1987, ch. 110, par. 2—616(b).

An amended complaint, therefore, may relate back to the time the original complaint was filed if (1) the original complaint was timely filed, and (2) the original and amended complaints indicate that the cause of action asserted in the amended complaint grew out of the same transaction or occurrence set up in the original complaint. There is no dispute that plaintiffs original complaint was filed within the two-year period for personal injury actions. The issue is whether the amendment grew out of the same transaction or occurrence set up in the original complaint.

“ ‘The purpose of section 2—216(b) is to prevent a person from losing a cause of action due to technicalities.’ ” (United Parcel Service v. Church’s Fried Chicken, Inc. (1988), 174 Ill. App. 3d 378, 380, quoting Peoples Gas Light & Coke Co. v. Austin (1986), 147 Ill. App. 3d 26, 33.) The modem approach to pleading is to resolve the litigation on the merits and avoid elevating questions of form over questions of substance. (Republic Steel Corp. v. Industrial Comm’n (1964), 30 Ill. 2d 311, 312-13.) Illinois courts are liberal in allowing amendments to pleadings after the statute of limitations has run. Zeh v. Wheeler (1986), 111 Ill. 2d 266, 278.

The trial court in the instant case found that the amended complaint was time barred since it did not relate back to the occurrence set forth in the original complaint. The court reasoned that the occurrence in the amended complaint was different because the accident was now alleged to have occurred on a different vehicle. The court analogized the instant case to Zeh v. Wheeler (1986), 111 Ill. 2d 266. Plaintiff, on the other hand, maintains that the early Illinois Supreme Court case of Chicago City Ry. Co. v. McMeen (1903), 206 Ill. 108, is more factually analogous to the instant case. We agree with plaintiff.

Zeh v. Wheeler was a premises liability case in which the plaintiff alleged in her original complaint that she sustained injuries when she fell while descending a common stairway of an apartment building located at 4400 South Wallace in Chicago. Plaintiff subsequently amended her complaint, after the expiration of the statute of limitations, correcting the address of the location of the incident to 4400 South Lowe in Chicago. Although the same management company was responsible for both of the named properties, the owners of the property at the Wallace address were not the same owners of the property at the Lowe address.

In finding that the amended complaint did not relate back to the original complaint, the court held that the change of location substantially changed the occurrence. (Zeh, 111 Ill. 2d at 271.) The court found that the change of address in plaintiff’s amendment “involves totally different conduct by different persons at a different time and at a different place.” Zeh, 111 Ill. 2d at 275.

In the instant case, however, the parties are the same, the incident was within the same time frame, and the same duty of care was owed to plaintiff. The amendment did not change any of the parties or the duties owed. The only deviation from the original complaint was that a different vehicle number was named. We find this correction be a nonessential element to the cause of action under the circumstances of this case.

Defendant argues that pursuant to Zeh v. Wheeler (1986), 111 Ill. 2d 266, 275, although the duty owed to plaintiff is of the same general character in both the original and amended complaints, the vehicle, as distinguished by its number, would define the degree of care owed. We do not find, however, that the principle enunciated in Zeh should have general application to all slip-and-fall cases.

Zeh was a premises liability case. In Illinois, the degree of care owed by a landowner is determined, to an extent, by the common law distinctions made among the various classes of entrants on the land. (See Gartley v. Chicago Housing Authority (1975), 28 Ill. App. 3d 705.) The status of the parties may vary depending upon the situs of the incident. The location of the incident, therefore, may in fact define the degree of care owed in premises liability cases.

The instant case, however, is not, characteristically, a premises liability case nor does it involve two different parcels of land. We are not persuaded that the principle in Zeh should be applied to the instant case nor do we find any indication that the Zeh court intended that this principle should have blanket application to all slip-and-fall cases.

We also note that the Zeh court applied the reasoning of the early Illinois Supreme Court case of Gillmore v. City of Chicago (1906), 224 Ill. 490. (Zeh, 111 Ill. 2d at 275.) Gillmore was also a premises liability case in which the court held that the plaintiff’s amended counts did not relate back to plaintiff’s original complaint. The court found that failure to maintain the sidewalk at one place is not the same as failure to maintain the sidewalk at another place. “The act of negligence charged by the original and additional counts in the case at bar is a different act of negligence from that charged by the amended counts.” (Gillmore, 224 Ill. at 494; see also Zeh, 111 Ill. 2d at 275, quoting Gillmore, 224 Ill. at 494.) We are not, however, persuaded that in the instant case the negligence alleged in the original complaint is different from the negligence alleged in the amended complaint.

Moreover, Gillmore distinguished Chicago City Ry. Co. v. McMeen (1903), 224 Ill. 108, the case upon which plaintiff relies, on the facts. The Gillmore court found the allegation of negligence in failing to properly manage and control a certain train of streetcars in McMeen was different from that of the Gillmore plaintiff’s allegation of negligence in a municipality’s failure to maintain a sidewalk. “Neglect to keep a sidewalk in repair at one place is not the same wrong as neglect to keep a sidewalk in repair at another place, and this case is therefore readily distinguished from the McMeen case.” (Gillmore, 224 Ill. at 494.) We find McMeen to be more congruous with the instant case.

In McMeen, the plaintiff charged the defendant railway company with failing to maintain and control a certain train of streetcars so as to prevent one of its cars from running into the car on which plaintiff was a passenger. In plaintiff’s original complaint, he alleged that the incident occurred on the State Street line, on State Street, at a point between 38th and 39th Streets in Chicago. After the statute of limitations had run, plaintiff amended his complaint to allege that the incident took place on the Cottage Grove Avenue line, on Cottage Grove Avenue, at a point between 38th and 39th Streets.

The Illinois Supreme Court found that a new cause of action had not been stated when plaintiff changed the name of the streetcar line involved and the location of the incident in the amended complaint. The court held that under these circumstances, particularizing the location was not essential or necessary to maintaining a cause of action against the defendant. McMeen, 206 Ill. at 116.

The court applied the following test in determining whether an amendment states a new cause of action.

“Did an amendment substituting one unnecessary and non-essential allegation for another just as unnecessary and just as non-essential to the cause of action introduce a new and distinct cause of action? We think the answer is clear that it did not. The right, duty, injury and liability are all precisely the same. It sets up the same right of the plaintiff to be secure from injury, the same duty of the defendant to observe that right, and, in the same words, the same breach of that duty and the same violation of that right.” McMeen, 206 Ill. at 118.

Similarly, in the instant case, the amended complaint did not introduce a new and distinct cause of action. Plaintiff’s right to be secure from injury, defendant’s duty to observe that right, defendant’s alleged breach of that duty, and the alleged violation of plaintiff’s right to be secure from injury did not vary in the amended complaint. We, therefore, find that plaintiff’s amended complaint did relate back to the original complaint and, thus, was not barred by the statute of limitations.

Defendant also maintains that prejudice would enure to it in investigating and defending this case if plaintiff were permitted to amend his complaint. We disagree. “The basic policy of [the statutes of limitation] is to afford a defendant a fair opportunity to investigate the circumstances upon which liability against him is predicated while the facts are accessible.” (Geneva Construction Co. v. Martin Transfer & Storage Co. (1954), 4 Ill. 2d 273, 289-90.) We do not find that by the filing of the amended complaint the facts became any less accessible to defendant as defendant possesses the records for the vehicles it services.

Prejudice may not be claimed as the result of filing an amendment if the party’s attention is directed, within the time prescribed or limited, to the facts that form the basis for the asserted claim. (United Parcel Service v. Church’s Fried Chicken, Inc. (1988), 174 Ill. App. 3d 378, 381.) We are not persuaded that defendant was not on notice as to the basic facts which formed the basis of this negligence action. We find, therefore, that defendant did not suffer prejudice as a result of plaintiff’s amended complaint.

For the foregoing reasons, the judgment of the circuit court is reversed and the cause is remanded for further proceedings.

Reversed and remanded.

McMORROW, P.J., and LINN, J., concur.


author: JUSTICE LORENZ

text:
    CLARINE EGGLESTON, Plaintiff-Appellant, v. THE DEPARTMENT OF EMPLOYMENT SECURITY et al., Defendants-Appellees.
    First District (5th Division)
    No. 1—88—2848
    Opinion filed June 1, 1990.
    Barry A. Schultz, of Schultz & Winick, of Chicago, for appellant.
    Neil F. Hartigan, Attorney General, of Springfield (Robert J. Ruiz, Solicitor General, and Diane Curry Grapsas, Assistant Attorney General, of Chicago, of counsel), for appellees.
   JUSTICE LORENZ

delivered the opinion of the court:

Plaintiff, Clarine Eggleston, sought administrative review in the circuit court of Cook County from a decision of the Board of Review (Board) which denied her claim for unemployment compensation. The circuit court confirmed the Board’s determination, and on appeal plaintiff contends that the circuit court erred.

Plaintiff submitted an application for unemployment insurance benefits, but a claims adjudicator determined from plaintiff’s application that plaintiff was ineligible for unemployment insurance benefits under section 601(A) of the Unemployment Insurance Act (Act) (Ill. Rev. Stat. 1987, ch. 48, par. 431(A)). Plaintiff was then granted a further administrative hearing where she testified that she was employed as an office manager of the Norrell Health Company from March 1986 until October 27, 1987. Plaintiff’s employment required substantial telephone duty. Plaintiff explained that she left her job because she had a personality conflict with her branch manager, Rick Wallace. Plaintiff felt that the conflict created stress which manifested itself as ringing sounds in her ears, severe headaches, faintness and dizziness. Plaintiff submitted a prescription from her physician dated September 21, 1987, stating that she “need[ed] a telephone headset at work because her poor posture necessited [sic] by use of a hand set is causing chronic muscular pain.” Plaintiff testified that she informed the branch manager of her medical problems and the need for a headset. Plaintiff stated that her manager promised to purchase the headset. Shortly thereafter plaintiff was hospitalized.

Plaintiff submitted a disability certificate written by Dr. Neal on October 24, 1987. The certificate stated that plaintiff “was totally incapacitated from October 9, 1987, to October 26, 1987, due to nervous anxiety and transient ischemic attack.” Dr. Neal instructed plaintiff to return to work on October 26, 1987. Plaintiff returned to work as instructed but then presented her employer with her letter of resignation. Plaintiff’s letter of resignation stated:

“In order to generate productivity and quality of service there must be some form of mistrust [sic] and unity between the developers, these things I find totally lacking in my assigned area, being that they are necessary and vital but non-existing, I can no longer function in the capacity in which I am capable, for these reasons effective November 9, 1987, I hereby resign my position as service director for Norrell Health Care, Branch 373, Territory 51.”

Plaintiff admitted that she failed to inform her employer that she was leaving because of health-related reasons. She stated that she feared being labeled disabled if she was unable to perform her job duties due to health-related reasons. On November 9, 1987, plaintiff completed an application form for unemployment compensation wherein she stated that she left her employment due to “[injcompatibility with the branch manager. Under stress created continuous ringing in her ears, severe headaches, and was hospitalized for one week for conditions and went through a number of test[s].” The form required the name and address or telephone number of her doctor. It also asked for the nature of the illness and the date the doctor advised the applicant to quit working. Plaintiff did not provide the requested information. Plaintiff did list “Health reasons” as the basis she gave to her employer for quitting her job. Plaintiff responded “no” to the question “Do you think it was necessary for you to quit?” On January 5, 1988, Dr. Neal wrote a letter to “Whom it may Concern” which stated: “Clarine Eggleston on 10-20-87 suffered a transient ischemic attack presumably secondary to tension and stress on her job. For these reasons I suggested removal from her employment at Norrell Health Care.”

Rick Wallace, a district manager employed by Norrell Health Care, testified on behalf of his employer. He stated that plaintiff never gave him a doctor’s note, although she did inform him that she needed a telephone headset to minimize the ringing in her ears. Wallace stated that he gave plaintiff the authority to purchase a headset and informed her that she would be reimbursed for the cost. He further stated that plaintiff explained that she was resigning because of a personality conflict.

After considering all of the evidence presented at the administrative hearing, the referee stated in his findings of fact that plaintiff left her employment because of work-related stress which caused health problems. However, plaintiff did not inform her employer that she was leaving due to health problems; instead, she stated that she was leaving due to personality conflicts. The referee concluded that plaintiff did not qualify for unemployment insurance benefits because she voluntarily left work without a showing of good cause attributable to the employer. The referee concluded that since plaintiff left her job for health reasons but did not inform her employer of her reasons for leaving, she was voluntarily unemployed without good cause attributable to her employer and therefore was ineligible for benefits under the Act. The Board affirmed this decision.

Opinion

At issue is whether plaintiff was involuntarily unemployed, so as to qualify for unemployment benefits when plaintiff left work for health reasons but failed to inform her employer of her reasons for leaving.

Section 601(A) of the Act provides, as relevant to this case:

“An individual shall be ineligible for benefits for the week he has left work voluntarily without good cause attributable to the employing unit ***.” (Ill. Rev. Stat. 1981, ch. 48, par. 431(A).)

There are five exceptions to this section, none of which apply here.

To qualify as involuntarily unemployed, plaintiff must (1) offer competent testimony that adequate health reasons existed to justify termination at the time of termination; (2) have informed the employer of the health problem; and (3) be available where reasonable accommodation is made by the employer for work which is not adverse to the employee’s health. (Burke v. Board of Review, Illinois Department of Labor (1985), 132 Ill. App. 3d 1094, 477 N.E.2d 1351.) These three factors must be supported by medical evidence concerning the alleged health problems, and the failure to satisfy any one of the factors will bar a claim for unemployment compensation. 132 Ill. App. 3d at 1102.

In the present case, plaintiff merely notified her employer that she was resigning because she was unable to function in an environment which lacked trust and unity. Plaintiff did not report any specific medical conditions as related to the job, nor did she provide her employer with any documentation from her treating physicians. Plaintiff did submit medical documentation at the administrative proceedings, but plaintiff stated that she did not give the documentation to her employer for fear of being labeled disabled. Dr. Neal’s disability statement advised plaintiff to return to work on October 26, 1987. On that very day she submitted her letter of resignation. Two months passed before Dr. Neal wrote a letter advising of his suggestion that plaintiff discontinue her employment. Plaintiff offered no explanation for the inconsistencies in the two documents. Based on these circumstances plaintiff was unable to support a claim that adequate health reasons existed to justify her leaving employment at that time. Plaintiff did not demonstrate that she informed the employer of her health problems. Therefore plaintiff cannot qualify as involuntarily unemployed and is ineligible for unemployment insurance benefits.

Additionally, plaintiff had the burden of establishing that her employment was terminated for good cause attributable to her employer. (Ill. Rev. Stat. 1987, ch. 48, par. 431(A).) The statute does not define “good cause.” Consequently, the Illinois courts have sought guidance in interpreting “good cause” from other jurisdictions which have similarly worded unemployment compensation statutes. (See, e.g., Popoff v. Department of Labor (1986), 144 Ill. App. 3d 575, 494 N.E.2d 1266.) In Taylor v. Unemployment Compensation Board of Re view (1977), 474 Pa. 351, 358-59, 378 A.2d 829, 832-33, for example, the Pennsylvania Supreme Court held that “ ‘good cause’ for voluntarily leaving one’s employment (i.e., that cause which is necessitous and compelling) results from circumstances which produce pressure to terminate employment that is both real and substantial, and which would compel a reasonable person under the circumstances to act in the same manner.” (Finik v. Department of Employment Security (1988), 171 Ill. App. 3d 125, 132, 524 N.E.2d 1148.) Plaintiff’s refusal to purchase the headset after being informed that she would be reimbursed for the cost did not meet the standard of ordinary reasonableness. Therefore plaintiff failed to establish that her employment was terminated for good cause.

When reviewing an administrative decision, a court cannot reweigh the evidence, but it can determine if the decision is against the manifest weight of the evidence. (Jackson v. Board of Review of the Department of Labor (1985), 105 Ill. 2d 501, 475 N.E.2d 879.) We agree with the circuit court that the Board’s finding was not contrary to the manifest weight of the evidence. Therefore, we affirm the circuit court’s judgment.

Judgment affirmed.

COCCIA, P.J., and MURRAY, J., concur.