Cumulus Radio Corp. v. Olson
2015 WL 643345, 80 F. Supp. 3d 900, 2015 U.S. Dist. LEXIS 18354 (2015)
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Rule of Law:
Under Illinois law, an at-will employee's 21 months of voluntary employment can constitute adequate consideration to enforce post-employment restrictive covenants, as courts apply a fact-specific approach rather than a rigid two-year bright-line rule for continued employment.
Facts:
- Cumulus Radio Corporation (Plaintiff) operates several radio stations in Peoria, Illinois, generating revenue from selling advertising time and online media.
- On March 23, 2013, Cumulus offered Joseph Olson an account executive position, which he accepted, with employment commencing on April 1, 2013.
- As a condition of his employment, Olson entered into an agreement that included a 60-mile, 6-month post-employment non-compete clause, a 12-month non-solicitation clause for customers he contacted, and a 12-month non-disclosure clause for confidential information.
- Olson voluntarily ended his employment with Cumulus on January 7, 2015, after approximately 21 months.
- Two days later, on January 9, 2015, Olson began working as an account executive for Defendant Alpha Media, LLC, a direct competitor of Cumulus, operating less than one mile from Cumulus's office.
- Alpha Media was aware of Olson's employment contract with Cumulus when it hired him.
- Olson allegedly began soliciting Cumulus's customers with whom he had contact during his employment, including Taxes Now and Synergy Healthcare, on behalf of Alpha Media.
Procedural Posture:
- Cumulus Radio Corporation filed a Verified Complaint against Joseph Olson and Alpha Media, LLC in the U.S. District Court for the Central District of Illinois, alleging breach of contract, tortious interference with a contract, and misappropriation of trade secrets.
- Cumulus simultaneously filed a Motion for a Temporary Restraining Order (TRO), seeking to enjoin Olson from working for competitors, soliciting customers, and disclosing confidential information, and to enjoin both defendants from using or disclosing trade secrets.
- The District Court received written submissions from all parties and heard oral argument on Cumulus's TRO motion on February 12, 2015.
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Issue:
Does an at-will employee's 21 months of voluntary employment constitute adequate consideration to enforce post-employment restrictive covenants, such as non-compete and non-solicitation clauses, under Illinois law, particularly given conflicting appellate court interpretations?
Opinions:
Majority - Joe Billy McDade
Yes, an at-will employee's 21 months of voluntary employment does constitute adequate consideration to enforce post-employment restrictive covenants under Illinois law, rejecting a rigid two-year bright-line rule. The Court predicted that the Illinois Supreme Court would adopt a fact-specific approach to determining adequate consideration for restrictive covenants in at-will employment, aligning with its precedent in Reliable Fire Equip. Co. v. Arredondo for assessing the reasonableness of covenants. The Court found the two-year bright-line rule, as articulated in Fifield v. Premier Dealer Servs., Inc., to be overly protective of employees and prone to rendering restrictive covenants illusory for employers, as employees could unilaterally void such agreements by voluntarily resigning before the two-year mark. Given Olson's 21 months of employment and voluntary resignation, the Court concluded that adequate consideration was present. Furthermore, the Court found that Cumulus demonstrated a likelihood of success on the merits for its breach of contract claim regarding the reasonableness of the covenants' scope (60-mile radius, 6-month non-compete, 12-month non-solicitation limited to contacted customers), citing Cumulus's legitimate business interest in near-permanent customer relationships, supported by Midwest Television, Inc. v. Oloffson. However, the Court found a low likelihood of success on the trade secret misappropriation claim under the Illinois Trade Secrets Act because Cumulus failed to demonstrate sufficient efforts to maintain the secrecy of the alleged trade secrets. The Court also determined that Cumulus lacked an adequate remedy at law and faced irreparable harm due to the difficulty of quantifying business losses from competition, and that the balance of harms favored granting injunctive relief related to the breach of contract claims.
Analysis:
This case significantly clarifies the adequate consideration requirement for post-employment restrictive covenants in at-will employment under Illinois law. By rejecting the rigid two-year bright-line rule, the court provides greater enforceability for employers' restrictive covenants, particularly when employees voluntarily resign close to the two-year mark. This decision protects employers' legitimate business interests, preventing employees from easily circumventing contractual obligations, but may also introduce a degree of uncertainty for employees as courts now weigh a broader set of factors beyond mere duration of employment to determine consideration adequacy. The ruling further highlights the importance of demonstrating robust measures to protect alleged trade secrets for successful claims under the Illinois Trade Secrets Act.
