McInnis v. Oag Motorcycle Ventures, Inc.

35 N.E.3d 1076

Chris McINNIS, Plaintiff–Appellee and Counterdefendant

v.OAG MOTORCYCLE VENTURES, INC., d/b/a city limits Harley–Davidson, Defendant–Appellant and Counterplaintiff and Third–Party Plaintiff–Appellant (Vroom Vroom, LLC, d/b/a Woodstock Harley Davidson Third–Party Defendant–Appellee).

No. 1–14–2644.

Appellate Court of Illinois, First District, Fourth Division.

June 25, 2015.

David G. Wix, Daniel W. Tarpey, and Kevin T. Mocogni, all of Tarpey Wix LLC, Chicago, for appellant.

Alan F. Block, of Block & Landsman, Chicago, for appellee.

OPINION

Justice COBBS delivered the judgment of the court, with opinion.

¶ 1 A former employee brought a complaint for declaratory relief seeking judicial determination that restrictive covenants in his employee agreement were unenforceable. The employer counterclaimed seeking injunctive relief against the employee and to enforce the restrictive covenants in the employment agreement The employer appeals from the order of the trial court denying its motion for a preliminary injunction.

¶ 2 BACKGROUND

¶ 3 Chris McInnis (plaintiff) was employed as a salesman by OAG Motorcycle Ventures, INC., d/b/a/ City Limits Harley–Davidson (defendant). Defendant is a Harley–Davidson motorcycle dealership located in Palatine, Illinois. Defendant sells new and used Harley–Davidson motorcycles, parts and accessories, as well as Harley–Davidson apparel and gifts. Defendant also has a service department, storage capabilities, rider training and a rental department. Anthony “Ozzie” Giglio is the owner and the chief executive officer of the Windy City American Motor Group (WCAMG), a consortium of four Harley–Davidson dealerships in the Chicagoland area, including defendant.

¶ 4 Plaintiff first began employment with defendant on August 25, 2009. At that time, plaintiff had no experience selling motorcycles and went through defendant's training program. Throughout plaintiff's employment with defendant there were regular meetings for the entire sales staff. Plaintiff became one of the top salesmen for defendant. His compensation was comprised of a base salary of $18,000 plus sales commission.

¶ 5 In October 2012, plaintiff informed defendant that he was leaving defendant to work for Vroom Vroom, LLC., d/b/a Woodstock Harley–Davidson (Woodstock). In late October 2012, plaintiff reported to work at Woodstock. After one day at Woodstock, plaintiff contacted defendant to find out if his old job was available. Plaintiff had not been taken off defendant's system for the one day he was gone. Giglio, concerned that plaintiff would leave again, informed plaintiff that as a condition of his employment, plaintiff was required to sign an employee confidentiality agreement (agreement) that included noncompetition clauses. Plaintiff signed the agreement on October 25, 2012.

¶ 6 The agreement states in pertinent part:

“1. Consideration.

Included in the mutual consideration acknowledged by the parties hereto, but without limitation, is an offer of employment with Company in an at-will employment relationship, and Employee's exposure to Company's and/or WCAMG's proprietary and confidential information as its employee.

* * *

4. Prohibitions Regarding Company's and/or WCAMG's Customers and Employees.

a. * * * Employee agrees that during the term of his employment and for a period of eighteen (18) months thereafter, he shall not, either for himself or as a member, partner stockholder, director, employee or agent of any other entity or organization:

(i) accept employment with, be engaged as an independent contractor or consultant for or otherwise perform any services for, any Harley–Davidson dealership located within a radius of twenty-five (25) miles of any retail location of (a) Company

* * *

(ii) directly or indirectly induce or influence any customer, supplier or other person that has a business relationship with Company and/or WCAMG to discontinue or reduce the extent of such relationship * * *.”

¶ 7 After signing the agreement, plaintiff was rehired and worked as a salesman for defendant from October 25, 2012, until he voluntarily resigned on May 1, 2014, a period of 18 months. Upon rehire, defendant waived the 90–day trial period for plaintiff that new hires are required to complete to be eligible for benefits. From 2009 until 2012 no salesmen were subject to a confidentiality or noncompetition covenant. In June 2013, defendant started a policy that every salesman had to sign a noncompetition restrictive covenant.

¶ 8 Every Harley–Davidson dealership is assigned a dealer assigned territory (DAT) by Harley–Davidson Motor Company (HDMC), the corporate entity in Milwaukee, Wisconsin. There is no restriction preventing a dealership from pursuing potential customers in another dealership's DAT.

¶ 9 All Harley–Davidson dealerships have a “Harley Owners Group” (HOG). This group consists of customers of that dealership. Doug Jackson, a member of Woodstock's HOG, testified that Woodstock's HOG information was disseminated to each group member and this included a roster of names and contact information. By contrast, Giglio testified that defendant kept its HOG information confidential.

¶ 10 Defendant's customer information includes names, telephone numbers and email addresses. This information is stored in defendant's password protected “Connect” computer system. Each salesperson has access to “Connect” for the customers with whom they have dealt; however, customer data is not shared with anyone outside of defendant's dealership. The customer information is used for staying in touch with customers through direct mailings and emails, to generate sales and referrals.

¶ 11 Plaintiff maintained contact with his clients and potential clients by various means. He met clients at the dealership, at events, through referrals and his own social contacts. Plaintiff gave his cell phone number to clients and prospective clients in order to be available. In the summer of 2013, plaintiff was involved in an accident and could not be present at defendant's dealership. He continued to sell motorcycles from his home utilizing his cell phone.

¶ 12 Defendant had a policy, disseminated to all employees, prohibiting cell phone use on the dealership floor during business hours. Plaintiff testified that he used his cell phone at the dealership on a frequent basis. He testified that he was never disciplined or warned against such practice. Tim Ryan, a former sales manager of defendant's, testified that cell phone use was a necessary tool to connect with clients and that there were legitimate reasons why a salesman would use his cell phone to contact his customers.

¶ 13 During plaintiff's employment from August 2009, to May 2014, he sold about 240 motorcycles per year. Over that five-year period plaintiff sold about 1,200 motorcycles. He retained 179 client names, phone numbers and emails in his cell phone. Two of the names had a reference to a style of motorcycle.

¶ 14 Prior to plaintiff's May 2014 departure from defendant's employment, he was in contact with Woodstock starting in November 2013. Woodstock presented plaintiff with an employment contract on March 2, 2014. Plaintiff did not resign from defendant until May 1, 2014, so that he could receive commissions owed him. He returned to Woodstock, commencing employment there on May 5, 2014. Plaintiff's compensation at Woodstock is a base salary plus a bonus based upon the dealership's overall performance. Plaintiff's employment agreement provides indemnification for him in any litigation with defendant, the exception being if plaintiff misappropriates any confidential information from defendant.

¶ 15 On May 2, 2014, plaintiff filed a complaint in the circuit court of Cook County for declaratory judgment pursuant to section 2–701 of the Code of Civil Procedure (Code) (735 ILCS 5/2–701 (West 2012) ). In his complaint plaintiff alleged that there was not adequate consideration to support the noncompetition agreements between him and defendant and sought a judicial determination regarding their enforceability. Subsequently, defendant filed its answer and a counterclaim against plaintiff and a third-party claim against Woodstock. On May 28, 2014, the trial court heard defendant's emergency motion for a temporary restraining order, which was denied. Thereafter, the parties engaged in expedited discovery in preparation for the hearing on defendant's motion for preliminary injunctive relief. The hearing was held on July 31 and August 1, 2014. In addition to the testimony of the witnesses, the parties submitted several exhibits to the trial court.

¶ 16 At the evidentiary hearing, the parties focused on plaintiff's cell phone, which contained 179 client contacts. Defendant maintained that the information was highly confidential. Evidence was also presented at the hearing about the buying habits of Harley–Davidson customers. It was adduced that customers are loyal to the Harley–Davidson brand and that they often shop at multiple dealerships.

¶ 17 After arguments by counsel, the trial court denied defendant's motion for a preliminary injunction and granted plaintiff's motion for declaratory judgement. The trial court specifically found that the “tenure [sic] of the testimony was that Harley is a Harley is Harley is Harley.” The court commented regarding the affinity that Harley–Davidson customers have for the Harley brand and their loyalty to Harley and Harley products. With respect to the issue of consideration as it relates to enforceability of restrictive covenants, the trial court offered the following:

“The general proposition of law in Illinois is that a restrictive covenant, to be valid and enforceable must be reasonable. That's the terminology. But before you consider whether it's reasonable the Court has to make two determinations. First, whether the restrictive covenant is ancillary to a valid contract; and then secondly, whether the restrictive covenant is supported by adequate consideration. Here the restrictive

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