In the
United States Court of Appeals
For the Seventh Circuit
Nos. 11-3715, 12-2032
TRADESMAN INTERNATIONAL, INC.,
Plaintiff-Appellant,
Cross-Appellee,
v.
JOHN BLACK, et al.,
Defendants-Appellees,
Cross-Appellants.
Appeals from the United States District Court for the
Central District of Illinois.
No. 2:10-cv-02098-DGB — David G. Bernthal, Magistrate Judge.
ARGUED SEPTEMBER 25, 2012 — DECIDED AUGUST 1, 2013
Before KANNE, TINDER, and HAMILTON, Circuit Judges.
TINDER, Circuit Judge. John Black, Todd Walker, Ryan Ellis,
and Ryan Boyer all held upper-level management positions at
Tradesmen International, Inc., a construction staffing company,
when they first began to discuss forming their own competing
company in August 2009. Over the course of twelve years at
2 Nos. 11-3715, 12-2032
Tradesmen, Ellis had risen from an entry-level field representa-
tive position to become the Area Manager of the Ohio Valley;
Black, Walker, and Boyer had risen from entry-level field
representative positions to become the General Managers of
three Tradesmen Indiana field offices over the course of two,
four, and eight years, respectively. When Black resigned from
Tradesmen on October 5, 2009 after refusing to accept a
demotion, the discussions among the four men became “more
specific.” Soon after, their new company, Professional Labor
Support (PLS), was born.
On May 5, 2010, Tradesmen filed suit against Black, Walker,
Ellis, Boyer, and PLS alleging ten counts: breach of contract,
misappropriation of trade secrets, misappropriation of confi-
dential information, a declaratory judgment with respect to the
enforceability of the defendants’ covenants not to compete
(CNTCs) with Tradesmen, permanent injunctive relief, breach
of the duty of loyalty, tortious interference with contractual
relations, tortious interference with business expectancy,
conversion, and civil conspiracy. Six months into the lawsuit,
on November 11, 2010, defendant Ellis filed for Chapter 7
bankruptcy, and all proceedings against Ellis were stayed. The
lawsuit continued on for the remaining defendants, however,
and on November 7, 2011, the district court granted summary
judgment to Black, Walker, Boyer, and PLS on all counts except
the declaratory judgment count. With respect to the declara-
tory judgment count, the district court found it moot since all
of the defendants’ CNTCs had already expired. The district
court also denied permanent injunctive relief to Tradesmen.
The remaining defendants subsequently filed a motion for
Nos. 11-3715, 12-2032 3
attorneys’ fees, which the district court denied on April 13,
2012.
Tradesmen filed a timely notice of appeal of the November
7, 2011 summary judgment order; however, Tradesmen never
sought certification under Fed. R. Civ. P. 54(b), even though
the November 7, 2011 order did not end the action as to all of
the parties. (The claim against Ellis remains pending to this
day.) Black, Walker, Boyer, and PLS filed a timely cross-appeal
in return on the attorneys’ fees issue. Unlike Tradesmen,
however, Black, Walker, Boyer, and PLS were concerned about
whether the Seventh Circuit had jurisdiction to hear the appeal
since the action was still pending against Ellis, and they
successfully obtained Rule 54(b) certification for their cross-
appeal. Because the November 7, 2011 summary judgment
ruling is not a final decision under Kimbrell v. Brown, 651 F.3d
752, 758 (7th Cir. 2011), we lack jurisdiction to hear Trades-
men’s appeal under 28 U.S.C. § 1291. We do, however, have
jurisdiction to hear Tradesmen’s appeal with respect to the
district court’s denial of injunctive relief (Count V of the
complaint) under 28 U.S.C. § 1292(a)(1), which allows us to
hear appeals from “[i]nterlocutory orders of the district courts
… refusing … injunctions.” Therefore, Tradesmen must wait
to appeal the other nine counts in its complaint until its claims
against Ellis are resolved. With respect to the district court’s
denial of injunctive relief—the only part of Tradesmen’s appeal
that we have jurisdiction to hear—we affirm the district court
because Tradesmen has failed to show that it suffered any
harm at all, let alone irreparable harm, from the remaining
defendants’ actions. With respect to the remaining defendants’
cross appeal on attorneys’ fees, we have jurisdiction to hear the
4 Nos. 11-3715, 12-2032
appeal under McCarter v. Retirement Plan for District Managers
of American Family Insurance Group, 540 F.3d 649, 654 (7th Cir.
2008) (holding that an “appeal may be taken from an award of
attorneys’ fees only after that award is independently
final—which means, after the district judge had decided how
much must be paid.”). We find that the district court used the
incorrect standard in its decision to deny attorneys’ fees, so we
reverse and remand the attorneys’ fees issue with instructions
to the district court on the correct standard to apply.
I
After Black’s resignation from Tradesmen, the defendants
moved quickly to establish their new company, PLS. On
October 27, 2009, less than a month after his resignation from
Tradesmen, Black organized PLS as an Illinois limited liability
company. Only a few weeks afterward, on November 19, 2009,
Black, Walker, and Boyer signed an office lease. By January 12,
2010, Black, Walker, Boyer, and Ellis had all left their jobs at
Tradesmen, and by March 2010, PLS had made its first sale.
Despite their haste in establishing PLS, the defendants were
generally “very careful” during the startup process, as their
counsel pointed out in oral argument. Black, Walker, Boyer,
and Ellis had all signed CNTCs during their employment with
Tradesmen, and the defendants attempted to abide by their
terms. Because the defendants had different jobs that serviced
different areas, the geographic restrictions in each defendant’s
CNTC were different. Black, Boyer, Walker, and Ellis were
explicitly prohibited from interfering with Tradesmen’s
business in certain Indiana counties. Walker was also prohib-
ited from interfering with Tradesmen’s business in three Ohio
Nos. 11-3715, 12-2032 5
counties. All defendants were prohibited from soliciting
construction staffing business within one hundred miles of a
Tradesmen field office and within twenty-five miles of any
location at which Tradesmen provided services. As a result, the
defendants decided to establish PLS in Mahomet, Illinois
because Tradesmen had no local presence there. Beginning in
January 2010, the four men “lived several days a week in an
apartment … away from their wives and children in Indiana”
as they endeavored “to start … without soliciting business
from its Members’ old Tradesmen accounts and contacts.”
The only exceptions to the general care that the defendants
took when establishing PLS are the emails that Boyer and
Walker sent during their last month of employment at Trades-
men. Between December 4, 2009 and January 4, 2009, these two
defendants sent emails to their personal email accounts and to
Black with attachments that included Tradesmen’s workers’
compensation rates, manager compensation rates, marketing
materials, and potential customer reports purchased from Dun
& Bradstreet. The defendants presented unrebutted evidence
that they never used any of these email attachments in starting
PLS; still, the defendants’ attorney admitted at oral argument
that the email attachments “are the worst facts in the case for
us.”
Otherwise, the defendants appeared to have tried to abide
by the terms of the CNTCs throughout their durations. The
duration of Black, Boyer, and Walker’s CNTC was eighteen
months from the time that they left Tradesmen; the duration of
Ellis’s CNTC was only twelve months. The first CNTC to
expire was Ellis’s on January 12, 2011; the last was Walker’s on
July 12, 2011. While their CNTCs were in effect, PLS did not
6 Nos. 11-3715, 12-2032
work for any of the defendants’ previous customers at Trades-
men; in fact, PLS actually turned down work from previous
customers who contacted the defendants at PLS. (The one
exception is Ellis, the defendant who is not a party to this
appeal. Because Ellis’s CNTC expired before the other
defendants’ CNTCs, Ellis completely relinquished his member-
ship in PLS in January 2011 and formed his own company, PLS
of Indiana, which has apparently worked for Ellis’s previous
customers at Tradesmen.)
Nonetheless, Tradesmen was upset by the defendants’
actions (and apparent ability to build a successful new busi-
ness), and Tradesmen filed suit against Black, Ellis, Boyer,
Walker, and PLS. In granting summary judgment to Black,
Boyer, Walker, and PLS (since the action against Ellis was
stayed), the district court focused on Tradesmen’s failure to
prove damages—even with regards to the improper emails
that the defendants sent in December 2009 and January 2010.
Tradesmen, which sought injunctive relief, lost profits, and
compensatory damages from the defendants, submitted only
two pieces of evidence to establish its damages: (1) Trades-
men’s gross sales figures for clients that PLS had allegedly
solicited in violation of the defendants’ CNTCs, and (2) PLS’s
gross sales figures. Many of the documents with Tradesmen’s
gross sales figures did not contain a company name. Moreover,
Tradesmen never made clear how the court was supposed to
interpret these documents. Perhaps Tradesmen expected the
court to assume that PLS’s overall gross sales figures repre-
sented the amount of business that Tradesmen lost to PLS
(which would have been a terrible assumption given that
Tradesmen had no local presence in Mahomet, Illinois). Nor
Nos. 11-3715, 12-2032 7
were Tradesmen officials any help in interpreting these
documents for damage purposes; Tradesmen’s Fed. R. Civ. P.
30(b)(6) designee testified in his deposition as follows:
Q. What’s the company’s position on how
these two documents support its claim for lost
business damages?
A. What was the question again? … I don’t
know.
Q. Do these two documents show a computa-
tion of any lost business damages that Trades-
men is claiming against Professional Labor
Support or any of the defendants?
A. I don’t know.
On all accounts, Tradesmen left the district court to
speculate both whether the defendants had harmed it and how
the defendants had harmed it. Yet even Tradesmen admits in
its brief that it was obligated to prove damages with “reason-
able certainty” and “without speculation.” The district court
found that, given the incomprehensible collection of docu-
ments that Tradesmen had provided, any determination of
harm from these documents would be “unduly speculative.”
Consequently, the district court granted summary judgment to
all defendants except Ellis on all claims (except Count IV, the
declaratory judgment action, which it dismissed as moot since
the CNTCs had all expired). The district court further denied
permanent injunctive relief to Tradesmen.
Nine days after prevailing on the merits of the case, Black,
Boyer, Walker, and PLS filed a motion to recover attorneys’
8 Nos. 11-3715, 12-2032
fees under the Illinois Trades Secrets Act (ITSA), claiming that
Tradesmen had “maintained its trade secrets misappropriation
claim in bad faith.” The relevant language of ITSA, contained
in 765 Ill. Comp. Stat. 1065/5, provides, “If (i) a claim of
misappropriation is made in bad faith, … the court may award
reasonable attorney’s fees to the prevailing party.” Here, the
remaining defendants pointed to Tradesmen’s overall lack of
evidence on damages and Tradesmen’s wholly uninformed
Fed. R. Civ. P. 30(b)(6) witness as evidence that Tradesmen had
“made” its claim against them in bad faith. On April 13, 2011,
the district court denied the remaining defendants’ motion for
attorneys’ fees. Interpreting the ITSA “made in bad faith”
language for the first time, the district court decided that a
claim made in bad faith must be “initiated” in bad faith at the
time of filing. Because the district court was “unwilling to
conclude that Plaintiff’s [Tradesmen’s] trade secrets claim was
initiated in bad faith,” the district court found that Tradesmen
had not “made” its claim against the remaining defendants in
bad faith, and consequently, denied the defendants’ motion for
attorneys’ fees.
The district court’s rulings on summary judgment, perma-
nent injunctive relief, and attorneys’ fees are all before this
court now on appeal. Each ruling in this case carries a different
appellate review standard. We review a district court’s grant
of summary judgment de novo, “construing all facts and
drawing all inferences in the light most favorable to the non-
moving party,” which, here, is Tradesmen. Lagestee-Mulder, Inc.
v. Consol. Ins. Co., 682 F.3d 1054, 1056 (7th Cir. 2012). We
review a district court’s denial of permanent injunctive relief
under the abuse of discretion standard. 3M v. Pribyl, 259 F.3d
Nos. 11-3715, 12-2032 9
587, 597 (7th Cir. 2001). Finally, although we review a district
court’s denial of attorneys’ fees for abuse of discretion, BASF
Corp. v. Old World Trading Co., 41 F.3d 1081, 1099 (7th Cir.
1994), we review a district court’s interpretation of any statute
(including an attorneys’ fees statute) under a de novo standard,
Storie v. Randy’s Auto Sales, LLC, 589 F.3d 874, 876 (7th Cir.
2009). Before we can proceed with any appellate review,
however, we must clarify the elements of the district court’s
ruling for which we have jurisdiction to conduct appellate
review. We turn to a clarification of our jurisdiction now.
II
Tradesmen asserts two alternative jurisdictional grounds
for this court to hear its appeal from the district court’s
summary judgment and injunctive relief rulings at the present
time. First, Tradesmen argues that we have jurisdiction to hear
its appeal under 28 U.S.C. § 1291 because “the parties con-
sented in writing to the entry of a final judgment by Magistrate
Judge David G. Bernthal.” Second, Tradesmen argues that we
have jurisdiction under 28 U.S.C. § 1292(a)(1) because the
district court order denied it permanent injunctive relief. We
will address each of Tradesmen’s argument in turn.
Tradesmen’s first jurisdictional argument completely
ignores our recent case, Kimbrell v. Brown, 651 F.3d 752 (7th Cir.
2011). In Kimbrell, the victim of a motor-vehicle accident
brought a personal injury suit against both the truck driver
who hit him and the truck driver’s employer. The truck driver
filed for bankruptcy, and the district court stayed the proceed-
ings against him. Subsequently, the District Court granted the
employer’s motion to dismiss and “terminated” the case with
10 Nos. 11-3715, 12-2032
respect to the employer. Id. at 754. When the plaintiff at-
tempted to appeal the district court’s decision with respect to
the employer, we dismissed the appeal for lack of jurisdiction.
We held, “Kimbrell’s case remains ‘open,’ ‘unfinished,’ and
‘inconclusive’ in the district court, so there was no final
judgment.” Id. at 758 (quoting Wingerter v. Chester Quarry Co.,
185 F.3d 657, 661 (7th Cir. 1998)). In issuing this decision, we
distinguished a Third Circuit case, Robison v. Canterbury Village,
Inc., 848 F.2d 424 (3d. Cir. 1988), which allowed a plaintiff to
appeal a judgment against one defendant when the case
remained stayed against another defendant who had filed for
bankruptcy. The plaintiff in Robison had obtained certification
under Fed. R. Civ. P. 54(b) from the District Court before
appealing. Kimbrell, in contrast, “made no attempt to obtain a
Rule 54(b) certification.” Kimbrell, 651 F.3d at 758.
Like Kimbrell, Tradesmen made no attempt to obtain Rule
54(b) certification, nor could Tradesmen explain at oral
argument why it had not obtained Rule 54(b) certification.
Another option for Tradesmen would have been to seek relief
from the bankruptcy stay; again, Tradesmen had no answer at
oral argument as to why it had not pursued this relief. Indeed,
Tradesmen conceded at oral argument that it had no answer to
Kimbrell. The fact that the parties “consented in writing to the
entry of a final judgment” is not enough for jurisdiction under
28 U.S.C. § 1291. As we have repeatedly stated, “the parties
cannot consent to this court's jurisdiction; we must satisfy
ourselves that appellate jurisdiction is secure.” Gen. Ins. Co. of
Am. v. Clark Mall Corp., 644 F.3d 375, 378 (7th Cir. 2011).
Consent or no consent, Magistrate Judge Bernthal’s order was
Nos. 11-3715, 12-2032 11
not a final judgment, and as a result, this court does not have
jurisdiction to hear Tradesmen’s appeal under 28 U.S.C. § 1291.
Tradesmen’s second jurisdictional argument, based on 28
U.S.C. § 1292(a)(1), fares better than its first. Because the
district court refused to grant permanent injunctive relief
(Count V of Tradesmen’s complaint), we have jurisdiction
under 28 U.S.C. § 1292(a)(1) to review this refusal. Because we
have jurisdiction to hear Tradesmen’s appeal of Count V,
Tradesmen argues that we have jurisdiction to hear Trades-
men’s appeal of the other nine counts because the district
court’s grant of summary judgment on eight counts and
dismissal on one count are “inextricably bound” with its ruling
on Count V. Schirmer v. Nagode, 621 F.3d 581, 584 (7th Cir.
2010). Tradesmen misreads our case law. Schirmer holds that
when a “district court’s grant of summary judgment [i]s
‘inextricably bound’ to the injunction, we have limited jurisdic-
tion to review that grant of summary judgment as well, to the
extent necessary. Id. (emphasis added). As we held in Shaffer v.
Globe Protection, Inc., 721 F.2d 1121, 1124 (7th Cir. 1983),
“[b]ecause § 1292(a)(1) is an exception to an otherwise funda-
mental rule of federal appellate jurisdiction, its scope should be
construed with great care and circumspection.” Therefore, 28
U.S.C. § 1292(a)(1) gives us jurisdiction to review the district
court’s denial of permanent injunctive relief to Tradesmen, but
it does not give us jurisdiction to review the district court’s
decision on the other nine counts. Therefore, Tradesmen’s
appeal is limited to Count V of its complaint, and Tradesmen
must wait to appeal the other nine counts until its claims
against Ellis are resolved.
12 Nos. 11-3715, 12-2032
In addition to our jurisdiction over Tradesmen’s appeal on
Count V, we also have jurisdiction over the defendants’ cross-
appeal on attorneys’ fees. As the defendants correctly point out
in their brief, jurisdiction over “PLS’ cross-appeal depends on
the Court’s jurisdiction over Tradesmen’s appeal.” If we lacked
jurisdiction over all parts of Tradesmen’s appeal, then we
would also lack jurisdiction to hear the defendants’ cross-
appeal (even though the defendants obtained Fed. R. Civ. P.
54(b) certification). In Mulay Plastics, Inc. v. Grand Trunk
Western Railroad Co., 742 F.2d 369, 370 (7th Cir. 1984), we held
that an award of attorneys’ fees “usually does not … inflict
irreparable harm on the party.” Therefore, an appeal concern-
ing attorneys’ fees alone does not meet the requirements of 28
U.S.C. § 1292(a)(1), and we lack jurisdiction to hear it.
Nevertheless, we do have jurisdiction to hear the defen-
dants’ appeal regarding attorneys’ fees under the doctrine of
pendent appellate jurisdiction. Pendent jurisdiction has been
generally disfavored since Swint v. Chambers County Commis-
sion, 514 U.S. 35, 49-50 (1995) (expressing “concern … that a
rule loosely allowing pendent appellate jurisdiction would
encourage parties to parlay … collateral orders into multi-issue
interlocutory appeal tickets”). Moreover, our court held in
McCarter, 540 F.3d at 654, that we lack pendent appellate
jurisdiction “to entertain an appeal from an un-quantified
award of attorneys’ fees.” Nevertheless, we do have pendent
appellate jurisdiction to entertain an appeal from an award of
attorneys’ fees that “is independently final—which means,
after the district judge ha[s] decided how much must be paid.”
Id. Here, the district judge has decided how much must be
paid: $0. There is nothing left for the district court to do
Nos. 11-3715, 12-2032 13
regarding the award of attorneys’ fees, making the award
independently final. Therefore, we have pendent appellate
jurisdiction to hear the defendants’ cross-appeal regarding
attorneys’ fees. Now that we have explained our statutory
basis for reviewing the district court’s rulings on Count V and
on attorneys’ fees, we turn to a substantive review of the
district court’s ruling on Count V.
III
Count V of Tradesmen’s complaint seeks permanent
injunctive relief against PLS, Black, Walker, Ellis, and Boyer,
asking the court to compel them to comply with the obligations
of their CNTCs by enjoining them from disclosing or using
confidential information and trade secrets, enjoining them from
soliciting Tradesmen customers, and enjoining them from
competing with Tradesmen for eighteen additional months
(since Tradesmen believes that the defendants did not comply
with their CNTCs during the eighteen months after they left
Tradesmen). Awards of permanent injunctive relief in diversity
cases are governed by the forum state’s choice-of-law rules.
Dunkin’ Donuts, Inc. v. N.A.S.T., Inc., 428 F. Supp. 2d 761, 775
(N.D. Ill. 2005). Consequently, before we can review the district
court’s refusal to grant this relief to Tradesmen, we must first
clarify which state’s law is controlling in this case. Three states
appear to be viable candidates. Tradesmen is an Ohio corpora-
tion. Black, Walker, Ellis, and Boyer are Indiana residents who
worked in Tradesmen’s Indiana offices. PLS is an Illinois
corporation, and Illinois is the forum state for this action.
Fortunately, the CNTCs contain a choice-of-law clause,
designating that all CNTC disputes will be resolved under
14 Nos. 11-3715, 12-2032
Ohio law. Illinois, whose choice-of-law rules govern in this
case, generally “respects a contract’s choice-of-law clause as
long as the contract is valid and the law chosen is not contrary
to Illinois’s fundamental public policy.” Thomas v. Guardsmark,
Inc., 381 F.3d 701, 705 (7th Cir. 2004). Since the parties do not
dispute the CNTCs’ formation, consideration, or conditions
surrounding their signing, there do not appear to be any public
policy concerns surrounding the CNTCs’ choice-of-law
provision. Therefore, we will analyze Tradesmen’s permanent
injunctive relief claims regarding the enforcement of the
CNTCs under Ohio law.
The Ohio Supreme Court has declared that “the power to
grant injunctive relief … should be exercised when essential to
prevent irreparable harm to a contesting party.” Rankin-
Thoman, Inc. v. Caldwell, 329 N.E.2d 686, 441 (Ohio 1975).
Moreover, “[i]t is well settled [under Ohio law] that an
injunction will not issue where there is an adequate remedy at
law.” Mid-America Tire, Inc. v. PTZ Trading Ltd., 768 N.E.2d 619,
630 (Ohio 2002). In order for a remedy at law to be adequate,
it must be “of such a nature that full indemnity may be
recovered without a multiplicity of suits” and be “as practical,
and as efficient to the ends of justice and its prompt adminis-
tration as the remedy in equity.” Id. at 631-32 (quotations and
citations omitted). The “adequacy of the putative legal remedy
is also dependent upon whether ‘damages might be reasonably
estimated.’” Id. at 632 (quoting Fuchs v. United Motor Stage Co.,
Inc., 21 N.E.2d 669, 675 (Ohio 1939)). Thus, if a plaintiff fails to
demonstrate either irreparable harm or lack of an adequate
legal remedy, the plaintiff’s claim for injunctive relief fails.
Nos. 11-3715, 12-2032 15
Tradesmen emphasized at oral argument that “in these
types of cases, it often is extremely difficult to pinpoint exact
damages.” For this reason, Tradesmen believes that it lacks an
adequate remedy at law, making permanent injunctive
appropriate here. Nevertheless, Tradesmen still has to demon-
strate irreparable harm in order to gain injunctive relief. We
believe that Tradesmen has failed to show harm at all—let
alone irreparable harm. Therefore, Tradesmen’s claim for
permanent injunctive relief must fail.
We note at the outset that Tradesmen failed to seek prelimi-
nary injunctive relief against the defendants. Preliminary
injunctions are an ideal remedy for plaintiffs whose damages
are ongoing and difficult to pinpoint. Even though Tradesmen
argues that its damages are ongoing and difficult to pinpoint,
the company admitted at oral argument that it deliberately
“chose not to” seek preliminary injunctive relief. That choice
alone suggests that Tradesmen has not suffered irreparable
harm. In fact, the Ohio Supreme Court made a similar finding
in Sternberg v. Board of Trustees of Kent State University, 308
N.E.2d 457, 460 (Ohio 1974) (per curiam). The plaintiff in
Sternberg brought an action to enjoin the termination of an
experimental high school program at Kent State University.
During the proceedings at the state trial court, the plaintiff
never sought a temporary restraining order or a preliminary
injunction against Kent State, and as a result, Kent State
“implemented their plan to terminate the high school program
and proceeded to dismantle and redistribute the existing
facilities.” Id. at 459. When the matter came before the Ohio
Supreme Court two years later, the court denied the plaintiff
16 Nos. 11-3715, 12-2032
permanent injunctive relief against Kent State because the
plaintiff
made no attempt to preserve the status quo by
application for temporary or preliminary injunc-
tive relief. The high school program has been
terminated and the facilities redistributed. To
grant the relief sought would require a costly
reversal of the process. Not only would this
create a hardship upon appellees, but the public
would be injuriously affected by the diversion of
resources to a program which would be short
lived and not necessary to the maintenance of
the university.
Id. at 460. Like the defendants in Sternberg, the defendants here
would suffer a “costly reversal of the process” of building their
business, PLS, if we were to extend the terms of their CNTCs
by eighteen additional months, as Tradesmen urges us to do.
If Tradesmen wanted to extend the terms of the CNTCs, it
should have moved for this relief earlier in the form of a
preliminary injunction.
Indeed, Tradesmen’s deliberate choice to seek an injunction
later, rather than sooner, appears to be a strategic choice to
inflict maximum harm on its new competitors. And while
Tradesmen claimed at oral argument that Ohio law permits
employers to “control competition” through the use of CNTCs,
Tradesmen did not cite a single Ohio case to support this
proposition other than Raimonde v. Van Vlerah, 325 N.E.2d 544
(Ohio 1975). What Raimonde actually held is the following:
Nos. 11-3715, 12-2032 17
a covenant not to compete which imposes unrea-
sonable restrictions upon an employee will be
enforced to the extent necessary to protect the
employer’s legitimate interests. A covenant
restraining an employee from competing with
his former employer upon termination of em-
ployment is reasonable if it is no greater than is
required for the protection of the employer, does
not impose undue hardship on the employee,
and is not injurious to the public. Courts are
empowered to modify or amend employment
agreements to achieve such results.
Id. at 547. While Raimonde allows employers to implement
protections against enterprising former employees, it only
allows these protections up to the point that they do “not
impose undue hardship on the employee[s].” The protections
that Tradesmen asks this court to enforce would undoubtedly
impose an undue hardship on the defendants, and as a result,
are not enforceable under Ohio law.
Turning to the specifics of these protections, the CNTCs
prohibit former employees from “ever” using or disclosing
Tradesmen’s “proprietary information.” Arguably, defendants
Boyer and Walker disclosed Tradesmen’s proprietary informa-
tion when they sent emails from their work accounts to their
personal accounts with information about Tradesmen’s
workers’ compensation rates, manager compensation rates,
marketing materials, and potential customer reports purchased
from Dun & Bradstreet. Tradesmen does not present any
evidence, however, that suggests the defendants actually used
this emailed information in establishing PLS. Tradesmen also
18 Nos. 11-3715, 12-2032
did very little—if anything—to keep the proprietary informa-
tion that the defendants emailed themselves confidential.
Moreover, Tradesmen admitted at oral argument that the
proprietary information acquired by the defendants at Trades-
men and later used by the defendants in establishing PLS fell
short of a trade secret.
The proprietary information used by the defendants in
establishing PLS also fell short of goodwill. Although Trades-
men claims that PLS performed work for a few Tradesmen
clients before the defendants’ CNTCs had expired, Tradesmen
does not dispute that these mutual clients were unknown to
the defendants before they started PLS. Tradesmen also does
not dispute the defendants’ claim that they turned down
business from their former clients at Tradesmen before their
CNTCs had expired. Still, Tradesmen argues that the defen-
dants violated the terms of their CNTCs by using “information
about how [to] do business [and] how [to] approach custom-
ers” in establishing their new business. But Tradesmen cannot
point to a single case in which an Ohio court has upheld a
CNTC restricting this kind of proprietary information.
Like Tradesmen, we are unable to locate an Ohio case that
upholds a CNTC protecting proprietary information that
constitutes something less than either trade secrets or goodwill.
But we do know from the Ohio case law that its courts will
enforce CNTCs only to the extent that they are “reasonable.”
Rogers v. Runfola & Assocs., Inc., 565 N.E.2d 540, 543 (Ohio
1991). In determining whether a CNTC is reasonable, Ohio
courts consider the following factors:
Nos. 11-3715, 12-2032 19
the absence or presence of limitations as to time
and space; …[w]hether the employee represents
the sole contact with the customer; whether the
employee is possessed with confidential informa-
tion or trade secrets; whether the covenant seeks
to eliminate competition which would be unfair
to the employer or merely seeks to eliminate
ordinary competition; whether the covenant
seeks to stifle the inherent skill and experience of
the employee; whether the benefit to the em-
ployer is disproportional to the detriment to the
employee; whether the covenant operates as a
bar to the employee’s sole means of support;
whether the employee’s talent which the em-
ployer seeks to suppress was actually developed
during the period of employment; and whether
the forbidden employment is merely incidental
to the main employment.
Raimonde, 325 N.E.2d at 547 (quoting Extine v. Williamson
Midwest, Inc., 200 N.E.2d 297, 299 (Ohio 1964)).
Considering these factors, we believe that the proprietary
information that Tradesmen seeks to protect is unreasonable.
The only training that Tradesmen provided the defendants on
how to do business and how to approach customers consisted
of a “five-day general sales presentation on how to sell.” In
addition, most of the documents that the defendants emailed
themselves were publicly available. Even the Dun & Bradstreet
reports—the only emailed proprietary information that
Tradesmen had purchased—were subject to virtually no
confidentiality protections at Tradesmen. This proprietary
20 Nos. 11-3715, 12-2032
information is not the kind that would provide an “unfair”
advantage to the defendants; rather, it seems much closer to
general know-how. As a result, Tradesmen’s attempt to
prohibit the defendants from using this proprietary informa-
tion at PLS appears to be nothing but “merely seek[ing] to
eliminate ordinary competition.” Raimonde, 325 N.E.2d at 547.
Even if the proprietary information terms of the CNTCs
were reasonable under Ohio law, the geographic restrictions
imposed by the CNTCs are not. Ohio law unequivocally
requires that CNTCs “contain reasonable geographical and
temporal restrictions.” Lake Land Emp. Grp. of Akron, LLC v.
Columber, 804 N.E.2d 27, 30 (Ohio 2004). If a CNTC contains
unreasonable restrictions, the Ohio courts will not enforce
these restrictions (although Ohio courts may re-write the
restrictions to make them reasonable or enforce them only to
the extent they are reasonable). Raimonde, 325 N.E.2d at 546-47.
Here, Tradesmen asks us to enforce restrictions that effectively
prohibit the defendants from working anywhere in the United
States. The CNTC prohibits the defendants from working
within one-hundred miles of any Tradesmen field office—not just
the field offices for which the defendants worked—even
though Tradesmen has field offices in every state of the United
States. Remarkably, the defendants appear to have complied
with the one-hundred mile restriction since the initial PLS
office was in Mahomet, Illinois, and Mahomet, Illinois is at
least one-hundred miles from Lafayette, Indiana, where
Tradesmen has its nearest field office. Google Maps,
http://www.maps.google.com (last visited July 10, 2013).
Nos. 11-3715, 12-2032 21
As if this one-hundred mile geographic term were not
restrictive enough, the CNTC contains an additional geo-
graphic term that prohibits the defendants from working
within twenty-five miles “of any location at or to which the
Company is providing its services.” If we were to enforce this
geographic term as written, the defendants would have never
been able to comply with it as long as they performed work
anywhere in the United States. Both Tradesmen and PLS
supply skilled labor to their customers in one of two ways: by
sending laborers to work for the customer on-site, or by
sending labor to work for the customer’s customer on-site. By
prohibiting the defendants from working in locations contain-
ing both Tradesmen’s customers and Tradesmen’s customer’s
customers, this restriction effectively prohibits the defendants
from working anywhere within the United States. Here, the
defendants already moved to another state to start their own
business, but that was not good enough for Tradesmen.
Apparently, Tradesmen wanted the defendants to move to
another country.
We are not aware of any Ohio case upholding such a
geographic restriction in a CNTC, and in fact, we are aware of
two Ohio cases that limit overbroad geographic restrictions in
a CNTC. See Rogers, 565 N.E.2d at 544 (modifying a county-
wide restriction in a CNTC down to a city-wide restriction);
Century Bus. Servs., Inc. v. Urban, 900 N.E.2d 1048, 1056 (Ohio
Ct. App. 2008) (modifying a restriction prohibiting competition
in any county where the employer did business to one prohib-
iting competition in any county where the employer’s custom-
ers were located).
22 Nos. 11-3715, 12-2032
In sum, the defendants’ CNTCs contain both unreasonable
proprietary information terms and unreasonable geographic
terms. Nevertheless, the defendants appear to have complied
with almost all of the terms of their CNTCs during the eighteen
months after they left Tradesmen, and they certainly complied
with all of the reasonable terms of their CNTCs. As a result, we
find no evidence of any harm to Tradesmen by the defendants’
actions, and we certainly find no evidence of the irreparable
harm required for injunctive relief. The district court correctly
denied permanent injunctive relief to Tradesmen.
IV
Turning now to the cross-appeal, the defendants sought
attorneys’ fees in the district court under ITSA after the district
court granted summary judgment to the defendants and
denied Tradesmen permanent injunctive relief. In support of
their attorneys’ fees’ claim, the defendants argued that
[t]he result of this long litigation odyssey was
predictable. From the beginning, it was plainly
apparent Tradesmen never suffered any harm
from the establishment of the Defendants’ start-
up business in Central Illinois where Tradesmen
has no presence at all. Further, Tradesmen knew
then, and knows now, that the Defendants never
used any alleged trade secrets to compete with it
because the Defendants never solicited or ser-
viced Tradesmen’s customers. Still, Tradesmen
pressed on and forced its much-smaller counter-
part to spend a large amount of legal fees on the
claim asserted in the Complaint. The Court
Nos. 11-3715, 12-2032 23
should find that Tradesmen maintained its trade
secrets misappropriation claim in bad faith.
Without any Illinois case law for guidance, the district court
was forced to interpret the language in 765 Ill. Comp. Stat.
1065/5, which allows a prevailing party to collect attorneys’
fees if “a claim of misappropriation is made in bad faith.” The
district court concluded that the defendants had “not ade-
quately supported the proposition that the statute authorizes
attorney’s fees when a suit is maintained in bad faith,” instead
concluding that a suit could only be “made in bad faith” if it
“was initiated in bad faith.” Because the district court found
that Tradesmen had not initiated the suit in bad faith in light of
the emails the defendants sent themselves before leaving
Tradesmen, the district court denied the defendants’ motion
for attorneys’ fees. The defendants now appeal the district
court’s interpretation of 765 Ill. Comp. Stat. 1065/5, claiming
that the statute allows a prevailing party to collect attorneys’
fees when a suit is either initiated in bad faith or maintained in
bad faith.
As both parties point out in their briefs, there is no Illinois
case law on how “made” should be interpreted in this section
of ITSA. Consequently, both parties cite California decisions
that interpret the “made in bad faith” language (since it is the
same language used in the widely adopted Uniform Trade
Secrets Act) to support their positions. After reviewing the
California cases, including SASCO v. Rosendin Elec., Inc., 143
Cal. Rptr. 3d 828, 835 (Ct. App. 2012) (requiring “bad faith in
bringing or maintaining the claim”) and JLM Formation, Inc. v.
FORM+PAC, No. C 04-1774 CW, 2004 WL 1858132, at *1 (N.D.
Cal. Aug. 19, 2004) (interpreting made as “bringing and
24 Nos. 11-3715, 12-2032
maintaining”), we conclude that “made in bad faith” is
correctly interpreted as either bringing or maintaining a suit in
bad faith. In addition to the California case law, common sense
supports such an interpretation. Regardless of her intentions at
the time of filing, surely a plaintiff makes a claim in bad faith
if she continues to pursue a lawsuit—even after it becomes
clear that she has no chance to win the lawsuit—in order to
cause harm to the defendant.
Consequently, we find that the district court erred in
determining that a claim “made in bad faith” must be “initiated
in bad faith.” A claim is made in bad faith when it is initiated
in bad faith, maintained in bad faith, or both. Because the
district court incorrectly interpreted 765 Ill. Comp. Stat. 1065/5,
we reverse the district court’s denial of attorneys’ fees to the
defendants, and we remand this issue back to the district court.
The district court already determined that Tradesmen did not
initiate its claim against the defendants in bad faith; it now
needs to determine whether Tradesmen has maintained its
claim against the defendants in bad faith.
V
For the foregoing reasons, we AFFIRM the district court’s
denial of permanent injunctive relief to Tradesmen. We
REVERSE the district court’s denial of attorneys’ fees to the
defendants, and we REMAND the issue back to the district court
for reconsideration of the defendants’ motion in light of this
opinion.
Nos. 11-3715, 12-2032 25
HAMILTON, Circuit Judge, concurring. I join the court’s
opinion in full. I write separately to emphasize both the
importance of the choice-of-law issues in covenant-not-to-
compete litigation and the under-appreciated consequences of
courts’ willingness in many states to rewrite unreasonable
covenants so as to enforce a reasonable but fictional covenant,
one that the parties might have made but did not actually
make.
At a superficial level, many states adopt the same broad
principles in deciding whether and how to enforce an em-
ployee’s covenant not to compete with a prior employer. Such
contracts are considered to be in restraint of trade but will be
enforced if they are reasonable in scope and protect a former
employer’s legitimate interests. See generally Norman D.
Bishara, Fifty Ways to Leave Your Employer: Relative Enforcement
of Covenants Not to Compete, Trends, and Implications for Employee
Mobility Policy, 13 U. Penn. J. Bus. L. 751, 754 (2011) (“most
states will moderately enforce noncompetes using the standard
reasonableness test”). But even a gentle tap on that fragile
surface of similarity shows important differences from state to
state. See generally Brian M. Malsberger, et al., Covenants Not
to Compete: A State-by-State Survey (8th ed. 2012); Viva R.
Moffat, Making Non-Competes Unenforceable, 54 Ariz. L. Rev.
939, 943–52 (2012) (summarizing major variations among
states); Gillian Lester & Elizabeth Ryan, Choice of Law and
Employee Restrictive Covenants: An American Perspective,
31 Comp. Lab. L. & Pol’y J. 389, 392 (2010) (“states vary widely
in their friendliness to employee non-compete agreements”);
Cynthia L. Estlund, Between Rights and Contract: Arbitration
Agreements and Non-Compete Covenants as a Hybrid Form of
26 Nos. 11-3715, 12-2032
Employment Law, 155 U. Penn. L. Rev. 379, 391–96 (2006)
(summarizing variations among states). For a convenient and
detailed treatment of the subject state-by-state, see the
Malsberger book cited above.
These wide variations mean that in cases that go to court,
a court’s choice of law will often be decisive. See, e.g., Curtis
1000, Inc. v. Suess, 24 F.3d 941, 947–48 (7th Cir. 1994) (affirming
denial of preliminary injunction; refusing to honor covenant’s
selection of governing state law where chosen state had
minimal connection to parties’ relationship). The variations
also mean that when parties are considering whether to sue,
uncertainty about choice of law will be a powerful factor in
calculating risks and benefits of litigation, and the eventual
choice of forum may well prove to be critical. See David A.
Linehan, Due Process Denied: The Forgotten Constitutional Limits
on Choice of Law in the Enforcement of Employee Covenants Not to
Compete, 2012 Utah L. Rev. 209, 210–11 (2012).
The parties in this case have proceeded on the basis that
Ohio law, chosen in the covenants drafted by the Ohio-based
employer, controls the covenants. In light of our court’s
decision in Curtis 1000, that was a reasonable choice, for in that
case we disagreed with a district court’s conclusion that Illinois
courts would refuse to enforce a covenant that was enforceable
under another state’s law chosen in the covenant itself, but
repugnant to the public policy of Illinois. See 24 F.3d at 948
(disagreeing with Curtis 1000, Inc. v. Suess, 843 F. Supp. 441,
446 (C.D. Ill. 1994), on this point, but affirming denial of
injunction on other grounds); see also Vencor, Inc. v. Webb,
33 F.3d 840, 844–45 (7th Cir. 1994) (affirming denial of injunc-
Nos. 11-3715, 12-2032 27
tion but applying Illinois choice-of-law principles to apply
covenant’s choice of Kentucky law). The extent to which state
courts would refuse to enforce covenants not to compete on the
basis of their own public policy remains a matter of state law,
however. We should not discount too quickly the force of that
public policy, which gives state courts considerable latitude.
This question is especially pointed where, as in this case, an
employer has drafted a broad and unenforceable covenant, but
then seeks to take a more moderate position in court, asking a
court to enforce the broad covenant only to a “reasonable”
extent. The potential for misuse of this approach has long been
recognized. See Harlan M. Blake, Employee Covenants Not to
Compete, 73 Harv. L. Rev. 625, 682–84 (1960). The basic problem
is that if courts are willing to rewrite overly broad covenants
for the sake of being reasonable, employers have a powerful
incentive to draft oppressive, overly broad covenants. In the
many cases that will never get to court, or where employees
will be deterred even from trying to leave, the employer
benefits from the in terrorem effects of the oppressive and
overly broad covenants. Then, in the few cases that go to court,
the employer can retreat to a reasonable position without
suffering any penalty or disadvantage for its oppressive
drafting. This potential abuse may well persuade state courts
to refuse to honor parties’ contractual choices of other states’
laws, particularly where the forum state’s public policy is to
protect employees from overly broad covenants.
In the Seventh Circuit, for example, Wisconsin has a statute
that prohibits enforcement of unreasonable covenants “even as
to any part of the covenant or performance that would be a
reasonable restraint.” Wis. Stat. § 103.465. On the basis of that
28 Nos. 11-3715, 12-2032
statute, Wisconsin courts refuse to honor contractual choices of
law that would evade it. See Beilfuss v. Huffy Corp., 685 N.W.2d
373, 377 (Wis. App. 2004) (reversing injunction by relying on
Wisconsin public policy to refuse to apply Ohio law, which
would allow judicial modification of unreasonable covenant
and enforcement to reasonable extent); General Medical Corp. v.
Kobs, 507 N.W.2d 381 (Wis. App. 1993) (relying on Wisconsin
public policy to refuse to apply Virginia law, which would
allow judicial modification of unreasonable covenant).
Indiana is not quite as strict as Wisconsin about rewriting
overbroad covenants, but it enforces a fairly narrow version of
the “blue-pencil” doctrine. That doctrine allows a court to
strike out specific provisions that are overly broad where the
covenant is clearly divisible, but not to add language that
might be used to make a covenant enforceable. See Dicen v.
New Sesco, Inc., 839 N.E.2d 684, 687 (Ind. 2005) (stating general
rule and holding that overly broad employment covenant
barring competition in entire United States could not be edited
to impose reasonable limit); Licocci v. Cardinal Associates, Inc.,
445 N.E.2d 556, 562 (Ind. 1983) (applying doctrine to enforce
severable covenants); Donahue v. Permacel Tape Corp., 127
N.E.2d 235, 241 (Ind. 1955) (reversing injunction where
geographic limits of covenant were not severable); see gener-
ally JAK Productions, Inc. v. Wiza, 986 F.2d 1080, 1087 (7th Cir.
1993) (applying Indiana blue-pencil doctrine). One district
court has predicted that Indiana courts would invoke that
public policy to reject a covenant’s choice of another state’s law
that would have allowed an employer to enforce an unreason-
able covenant to only a reasonable extent. Dearborn v. Everett J.
Prescott, Inc., 486 F. Supp. 2d 802, 815–20 & n.5 (S.D. Ind. 2007);
Nos. 11-3715, 12-2032 29
cf. Zimmer, Inc. v. Sharpe, 651 F. Supp. 2d 840, 851–52 (N.D. Ind.
2009) (applying Indiana law as not contrary to Louisiana public
policy on covenants not to compete).
Illinois law reflects a fairly strong reluctance to salvage
unreasonable covenants by judicial modification, though the
case law seems to allow a fair amount of room for equitable
judgment that can make it difficult for parties to foresee
potential modifications in litigation. In House of Vision, Inc. v.
Hiyane, 225 N.E.2d 21, 25 (Ill. 1967), the Illinois Supreme Court
reversed an injunction issued after a trial court had modified
an overly broad covenant, explaining: “To stake out unrealistic
boundaries in time and space, as the employer did in this case,
is to impose upon an employee the risk of proceeding at his
peril, or the burden of expensive litigation to ascertain the
scope of his obligation. While we do not hold that a court of
equity may never modify the restraints embodied in a contract
of this type and enforce them as modified, the fairness of the
restraint initially imposed is a relevant consideration to a court
of equity.” Accord, e.g., Pactiv Corp. v. Menasha Corp., 261 F.
Supp. 2d 1009, 1015–17 (N.D. Ill. 2003) (summarizing Illinois
law and declining to modify overly broad covenant);
Eichmann v. National Hosp. & Health Care Svcs., 719 N.E.2d 1141,
1149 (Ill. App. 1999) (declining to modify overly broad cove-
nant). Thus far, however, we have predicted that Illinois courts
would be more willing than courts in Wisconsin or Indiana to
allow avoidance of these doctrines of Illinois law through a
choice-of-law clause, at least if the choice has a reasonable
connection to the contract. See Curtis 1000, 24 F.3d at 948.
Whether the Illinois courts will ultimately agree with that
prediction remains to be seen. Cf. Cambridge Engineering, Inc. v.
30 Nos. 11-3715, 12-2032
Mercury Partners 90 BI, Inc., 879 N.E.2d 512, 529–30 (Ill. App.
2007) (stating that “allowing extensive judicial reformation of
blatantly unreasonable posttermination restrictive covenants
may be against public policy,” but deciding case on other
grounds).