Illinois Court Sanctions Former Employee for Violating Preliminary Injunction

Posted: Tuesday, March 24, 2009

By: Joshua C. Dickinson

Topic: Agreements

   By Pat McLaughlin & Laura Hughes

On January 7, 2009, the Northern District of Illinois found a company’s former employee to have violated a non-solicitation agreement using an Illinois choice of law analysis.  The Court sanctioned the defendant for violation of the preliminary injunction by extending the restrictive covenant to run for two years from the date of the court order, but awarded only nominal damages for the breach of the covenant.  Brown & Brown, Inc. v. Ali, 592 F.Supp.2d 1009 (N.D. Ill. 2009).

Ali, an Illinois resident, was a high-level executive at Brown & Brown, a Florida insurance company.  As a condition of his employment, Ali signed an Employment Agreement that included customer non-solicitation, employee no-hire, and confidentiality provisions.  As Ali made plans to leave Brown, he notified clients of his departure and ran a data destruction program on his company laptop; after he left, he continued to work on accounts prohibited by Brown’s preliminary injunction. 

Citing Brown & Brown v. Mudron, 887 N.E.2d 437 (Ill. App. 2008), an Illinois appellate court case that explored the same employment agreement, the Northern District of Illinois concluded that, as in Mudron, it would apply Illinois law as a matter of public policy despite the agreement’s Florida choice of law provision, because Illinois law allows courts to consider the hardship to the employee in deciding whether to enforce a restrictive covenant.  Florida law prohibits such a consideration. 

Finding that Ali had breached the non-solicitation, confidentiality, non-compete provisions of his Employment Agreement, the Court rejected Brown’s claim for $570,000 in lost revenue damages, as Brown had not called a damages expert at trial, and had not established evidence of its losses.  The Court awarded only $1 in nominal damages for Ali’s violation of the Employment Agreement. 

Finally, the Court found Ali in contempt for violating the terms of the preliminary injunction; it extended the restrictive covenant to run from two years of the court’s order.  Expressing frustration by the lack of an appropriate monetary penalty for Ali’s egregious conduct, the Court referred to the U.S. Attorney’s Office a perjury investigation for Ali’s testimony.

Bottom line:  Courts might be willing to punish egregious violations of restrictive covenants with large monetary damages awards, if the evidence is supported by a damages expert at trial.