A recent Illinois federal court decision has called into question the much begrudged holding from the Illinois Appellate Court for the First District, First Division, in Eric Fifield and Enterprise Financial Group, Inc. v. Premier Dealer Services, Inc., 373 Ill. Dec. 379, 993 N.E. 2d 938 (Ill. App. Ct. June 24, 2013).
The Fifield Decision
In Fifield, the Illinois Appellate Court heard an appeal from the Circuit Court of Cook County, which had granted a motion for declaratory relief filed by plaintiffs, an employee and current employer, against the defendant former employer. The Cook County Court held the nonsolicitation and noncompetition provisions of the employment agreement were unenforceable as a matter of law for lack of adequate consideration. The Appellate Court, assessing the issue of consideration for post-employment restrictions, concluded, “there must be at least two years or more of continued employment to constitute adequate consideration in support of a restrictive covenant” – even in the case where the employee received an offer of employment, contingent on his agreement to the nonsolicitation and noncompetition provisions and the employee voluntarily resigned. Id. at 944. As Plaintiff had worked for defendant Premier far less than the two-year threshold, the Appellate Court affirmed the judgment of the Cook County court.
This holding was somewhat radical given the employee had received a conditional offer of employment and voluntary resignation, but the consideration was still insufficient to enforce the agreement. Despite the stir caused by this decision, the Illinois Supreme Court declined to review it.
A Recent Federal Court Departure from Fifield
At least one federal judge does not agree with the Fifield decision. Recently, the Northern District of Illinois decided Montel Aetnastak, Inc. and Montel Inc. v. Krstine Miessen a/k/a Kristine N. Schneider, Bradford Systems Corporation and Space Saver Corporation , No. 13 C 3801, 2014 U.S. Dist. LEXIS 11889 (N.D. Ill. Jan. 28, 2104), which is a departure from the holding in Fifield. As to the issue of whether a fifteen month employment was sufficient consideration, Judge Ruben Castillo, stated that “Illinois law does not, however, provide a clear rule to apply in this instance.” Judge Castillo cited to Fifield and agreed the former employee needed a “substantial period” of employment to generate consideration, but he also referenced other Illinois appellate court cases in which employment for a year was considered a “substantial period” of employment. As such, Judge Castillo concluded, “Both the length of her term of employment, along with her voluntary resignation, led the Court to conclude that she was provided with a ‘substantial period’ of employment. Therefore, Miessen was provided adequate consideration to support the enforceability of the employment agreement.” Id. at *46.
The law in Illinois remains unsettled. It is unclear if or when the Illinois Supreme Court will ever rule on this issue. In the wake of these decisions, we are reminded that drafting a favorable forum provision and selecting the right courthouse venue may prove to be the critical difference until this issue is resolved.