In yet another reminder to employers that Illinois courts strictly construe noncompete agreements in favor of employees, the Illinois Appellate Court recently ruled that a trial court correctly declined to extend two employees’ noncompetition period beyond the nine months specified in their agreement with their former employer, because the agreement did not specifically provide for extension of the period in the event of a violation. Citadel Investment Group, LLC v. Teza Technologies LLC, Mikhail Malyshev and Jace Kohlmeier
Defendants Malyshev and Kohmeier worked for Citadel in the firm’s high frequency trading group since 2003 and 2004, respectively. Malyshev was involved in building the highly-proprietary IT infrastructure for the high frequency business, and Kohmeier reported to him. Both employees signed noncompete agreements that prohibited them from competing against Citadel for a period of nine months and from soliciting employees for a period of one year following their departure from Citadel.
Malyshev and Kohmeier resigned from Citadel in February 2009. By March 2009, they had formed the entity that would become Teza Technologies LLC, a Citadel competitor. When Citadel learned of the company in July 2009, it promptly filed a motion for a preliminary injunction to enforce the noncompetes. The trial court enjoined Malyshev, Kohmeier and Teza from engaging in competitive activity for a period of nine months from the date of Malyshev and Kohmeier’s resignations from Citadel, and from soliciting Citadel employees for one year from the date of resignation. The court also awarded sanctions against Malyshev for erasing data from his personal computer, apparently in an effort to hide evidence of misappropriation of his data.
Citadel appealed, arguing that the trial court should have extended the noncompetition period by counting the nine months from the date of the injunction rather than the former employees’ resignations. The appellate court affirmed the trial court’s holding. Specifically, the appellate court held that the agreements did not provide for any extension of the restrictive period beyond that bargained for, and the agreements would be enforced as written.
In light of this decision, employers who may wish to seek an extended injunction in the event that an employee violates a noncompete agreement should take care to specifically include a provision authorizing the extension in the agreement. This can be particularly important where, as in Citadel’s case, the noncompete agreement provides for only a limited noncompetition period, which may well expire before the employer can obtain an injunction.