In a somewhat unusual move, the state of Illinois has filed a complaint against Check Into Cash of Illinois, Inc., on behalf of the citizens of the state, seeking a declaration that the non-competition covenants that the company requires its employees to sign are unenforceable and violate the Illinois Freedom to Work Act, 820 ILCS 90/1.
An Illinois federal judge’s recent decision continues a trend toward supporting a “totality of the circumstances” approach to the enforcement of restrictive covenants.
In Stericycle, Inc. v. Simota, et al., 2017 WL 4742197, the defendants moved to dismiss plaintiff’s breach of contract claims arguing that 13 months of continued employment was inadequate consideration to enforce certain restrictive covenants. Following the majority of federal judges that have considered this issue in Illinois, Judge John J. Tharp found that if confronted with the issue, the Illinois Supreme Court would reject a bright line rule of two years of continued employment and apply a fact-specific approach in assessing consideration. Using this approach, Judge Tharp found that 13 months of continued employment was adequate consideration to support the enforcement of the restrictive covenants.
Illinois courts have long recognized that an insolvent corporation’s creditors have standing to bring a derivative action on behalf of the corporation against its officers and directors. On June 24, 2016, in a case of first impression in Illinois, the Illinois Appellate Court, First District, in Caulfield v. The Packer Group, Inc. held that shareholders have standing to pursue a shareholder derivative suit against an insolvent corporation. This development offers a means for a corporation to recoup — for the benefit of its shareholders and creditors — assets lost as a result of management’s waste and fiduciary breaches.
A recent decision from the Northern District of Illinois favors the “totality of circumstances” approach to evaluating the sufficiency of consideration necessary to support a restrictive covenant
Another judge from the Northern District of Illinois has thrown his hat into the ring in the debate over what is required to make a non-compete agreement enforceable in Illinois.
In Deere Employees Credit Union v. Smith, an Illinois court recently refused to enforce a restrictive covenant in an employment agreement, finding that it was overly broad. Reference to the terms of that agreement and the court’s finding offer reminders of traps to be mindful of in drafting restrictive covenants, as well as in evaluating restrictions and exposure presented by potential new hires.
To some it may seem obvious, but before a business can take reasonable steps to protect its trade secrets, it must be able to identify which of its intellectual assets are protectable as trade secrets. A business may not differentiate between trade secrets and confidential information, but there is a difference and a business should differentiate between the two (see our previous post on the differences here). A business may believe that whatever steps it takes to protect its confidential information will be sufficient to protect all of its trade secrets. However, that approach can prove harmful in practice, as the practical measures to protect the intellectual assets may differ depending on the nature of the assets.
The following is a non-exhaustive checklist of steps that a business might take to protect information it considers to be a trade secret. While these steps will provide a good overview, it is highly recommended that any business consult with an attorney familiar with litigating trade secret matters to develop a robust plan to protect trade secrets that will work for your business.
In all but three states, trade secrets are defined under some variant of the Uniform Trade Secrets Act (UTSA)1. Trade secret information is a subset of confidential information. All information that qualifies for trade secret protection is confidential information. But not all “confidential information” falls within the coverage of the UTSA.
A recent Illinois Appellate Court decision serves as a good reminder that when it comes to restrictive covenants, one size does not fit all. A consistent theme in recent court decisions has been that “form” employment agreements with overly broad restrictions not anchored to the employee’s job responsibilities and related to the employer’s protectable interests will not be enforced.
A recent Illinois appellate court decision illustrates that a policyholder can compel its insurance carrier to provide it with a defense even when it is clear from extrinsic facts that the insurer will not ultimately have an obligation to indemnify the policyholder against a judgment.
Given the high cost of defending against even baseless claims, compelling the insurer to pay the defense costs even though it will not have to fund a judgment is not an empty victory. As illustrated by the recent appellate decision in Illinois Tool Works, Inc. v. Travelers Casualty and Surety, the policyholder may need to push the insurer to focus on the facts as pled and not the facts as “known” to force its insurance carrier to defend the claim. Policyholders themselves should not focus on the facts as known but on potential liability, assuming the claimant could actually prove the claims — regardless of how factually baseless they may be — in assessing whether it has coverage for defense costs.