Midwest Lending Corp. v. John Horton & Primelending Co.

2023 IL App (3d) 220132

220 N.E.3d 422

468 Ill.Dec. 114

MIDWEST LENDING CORPORATION, Plaintiff-Appellant,

v.John HORTON and PrimeLending Company, Defendants-Appellees.

Appeal No. 3-22-0132

Appellate Court of Illinois, Third District.

Filed May 22, 2023

Richard M. Craig, of Law Offices of Richard M. Craig, P.C., of Chicago, for appellant.

Jeffrey L. Rudd and Daniel T. Corbett, of Jackson Lewis P.C., of Chicago, for appellees.

OPINION

JUSTICE McDADE delivered the judgment of the court, with opinion.

¶ 1 The parties entered into two agreements relating to the employment of defendant John Horton by plaintiff Midwest Lending Company (Midwest). The second agreement included a nonsolicitation provision. Seven months after he was hired, Horton's employment with Midwest was terminated, and he began working for a new firm. After Horton solicited another employee to leave Midwest and start work at his new firm, Midwest filed the first of three complaints alleging that he had breached the nonsolicitation provision.

¶ 2 In response to those complaints, Horton filed motions to dismiss pursuant to section 2-615 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-615 (West 2020) ), arguing that the complaints failed to establish the requisite consideration. The trial court granted those motions, ultimately dismissing Midwest's second amended complaint with prejudice. We now affirm the dismissal of that complaint.

¶ 3 I. BACKGROUND

¶ 4 Plaintiff Midwest entered into an at-will employment agreement with defendant John Horton on March 5, 2020. Under that agreement, Horton's base compensation was $100,000 per year, plus numerous benefits that were outlined. Although the agreement stated that Horton's starting date was "4/1/2019 (Adjustment as of 1/1/2020)", the parties agree that the stated year was incorrect and his actual start date was April 1, 2020. However, Horton was to receive compensation at his contracted salary rate starting January 1, 2020. On March 24, the parties entered into a "Confidentiality and Non-Solicitation Agreement," which stated in relevant part:

"Non-Solicitation. To the extent permitted by applicable law, during Employee's employment with the Company and for a period of twelve (12) months following the termination of Employee's employment for any reason (such period being referred to as the ‘Restricted Period’). Employee (i) will refrain from directly or indirectly employing, attempting to employ, recruiting or otherwise soliciting or inducing (or assisting others in soliciting, inducing or influencing) any employee, agent, or consultant of the Company or its affiliates with whom Employee had contact or of whom Employee became aware during his or her employment to leave employment with the Company and/or to terminate his or her remunerative relationship with the Company as an agent or consultant of/to the Company; *** or otherwise modify adversely its business relationship with the Company or its affiliates."

¶ 5 Horton's employment with Midwest was terminated on November 6, seven months after it began, and he subsequently began working for codefendant PrimeLending Company (PrimeLending). Subsequently, Horton successfully solicited a Midwest employee, Colleen Rudnick, to leave her employment with Midwest and start working at PrimeLending.

¶ 6 In February 2021, Midwest filed a two-count complaint in the Du Page County circuit court, alleging in count I that Horton breached his contract with his former employer by soliciting Rudnick to join PrimeLending. In count II, Midwest requested an accounting to determine the damages to be awarded for Horton's alleged breach. Horton filed a motion to dismiss the complaint pursuant to section 2-615 of the Code (id. ), arguing that the nonsolicitation agreement was unenforceable as a matter of law because it was not supported by adequate consideration. Horton asserted that Illinois case law requires "at least two years of continued employment following the execution of the restrictive covenant" or other consideration to enforce a restrictive covenant in an employment agreement. Axion RMS, Ltd. v. Booth , 2019 IL App (1st) 180724, ¶ 21, 434 Ill.Dec. 847, 138 N.E.3d 6. The trial court held a hearing on the motion and dismissed the complaint without prejudice, finding that it failed to identify any consideration.

¶ 7 Midwest filed a first amended complaint, which was identical to the original one except for the additional allegation in count I that Midwest paid Horton "a $25,000.00 signing bonus" that provided consideration for the parties’ employment agreement. Horton filed a section 2-615 motion to dismiss, again asserting that the nonsolicitation agreement was not supported by adequate consideration. After a hearing, the trial court granted Horton's motion to dismiss without prejudice, concluding that the amended complaint did not establish adequate consideration when it failed to allege that the "signing bonus" "was specifically in exchange for the non-compete, non-solicitation agreement."

¶ 8 On October 14, 2021, Midwest filed its second amended complaint. That complaint was substantially identical to its prior filings except for the addition in count I of the allegation that Horton's offer of employment by Midwest "provided for consideration in the amount of $25,000.00 in exchange for Defendant's acceptance of its terms and agreement of employment contract, including the signing of a non-solicitation agreement prior to the beginning of his term as Director of Strategic Growth." Horton filed a section 2-615 motion to dismiss, arguing that the second amended complaint continued to lack adequate consideration to support the enforcement of the nonsolicitation provision. After a hearing, the trial court dismissed Midwest's second amended complaint with prejudice, concluding that the supporting documents did not show "that the $25,000 signing bonus paid to defendant when he joined the company is consideration." Midwest filed a timely notice of appeal.

¶ 9 II. ANALYSIS

¶ 10 Midwest raises two issues on appeal: (1) whether the trial court erred by dismissing count I of its second amended complaint for want of consideration and (2) whether the trial court erred by dismissing count II based on its dismissal of count I. Because a motion to dismiss pursuant to section 2-615 of the Code ( 735 ILCS 5/2-615 (West 2020) ) attacks the legal sufficiency of Midwest's complaint, this court applies a de novo standard of review.

¶ 11 The consideration required for a valid and enforceable contract is a " ‘bargained-for exchange of promises or performances, and may consist of a promise, an act or a forbearance’ " ( Carter v. SSC Odin Operating Co. , 2012 IL 113204, ¶ 23, 364 Ill.Dec. 66, 976 N.E.2d 344 (quoting McInerney v. Charter Golf, Inc. , 176 Ill. 2d 482, 487, 223 Ill.Dec. 911, 680 N.E.2d 1347 (1997) )), that is " ‘of benefit to one party or disadvantage to the other.’ " Id. ¶ 23 (quoting Steinberg v. Chicago Medical School , 69 Ill. 2d 320, 330, 13 Ill.Dec. 699, 371 N.E.2d 634 (1977) ). Generally, courts will not consider the adequacy of the consideration exchanged, only its existence. Id. ¶ 24. That rule is modified, however, in the case of restrictive employment covenants because the benefit of continued at-will employment may be merely illusory. Prairie Rheumatology Associates, S.C. v. Francis , 2014 IL App (3d) 140338, ¶ 14, 388 Ill.Dec. 150, 24 N.E.3d 58.

¶ 12 Here, Midwest contends that the trial court's reliance on Axion was misplaced because the consideration asserted there "relie[d] exclusively on [the defendant's] continued employment after he executed [the employment agreement]." (Internal quotation marks omitted.) Axion , 2019 IL App (1st) 180724, ¶ 8, 434 Ill.Dec. 847, 138 N.E.3d 6. The outcome could have been different if the plaintiff had alleged other consideration as well. Id. ¶ 22. Midwest argues that this case is different because Horton was a new employee, not a continuing one, who received a $25,000 "signing bonus" before starting work "in exchange for agreeing to all of the employment terms, which included the Non-Solicitation Agreement." The "signing bonus" effectively meant that Horton would receive an extra three months’ salary regardless of how long he worked for Midwest, providing him with a benefit that was proportionally higher the earlier he left the company. Midwest also notes that the cases relied on by Horton and the trial court do not support the argument that the only way to establish adequate consideration for a nonsolicitation agreement is through 24 months of continued employment. See Prairie Rheumatology , 2014 IL App (3d) 140338, ¶ 17, 388 Ill.Dec. 150, 24 N.E.3d 58 (acknowledging that other forms of consideration aside from 24 months of employment could suffice to support a nonsolicitation agreement).

¶ 13 We agree with Midwest's explanation of the general legal principles that are at issue here. As the trial court noted, however, Midwest's second amended complaint failed to demonstrate that the $25,000 "signing bonus" was specifically provided in exchange for Horton's acceptance of the nonsolicitation agreement. In that complaint, Midwest simply alleges that its employment "[o]ffer provided for consideration in the amount of $25,000.00 in...