Solicitation Can Occur Even If The Customer Makes The First Move (At Least, It Can In Central Illinois)
You (or your client) has signed a contract prohibiting solicitation of customers of the other party to the contract. One of those customers contacts you (or your client), and asks you/the client to business. You are in the clear with respect to the non-solicitation agreement, right? As ESPN College Football Analyst Lee Corso would say, “Not so fast, my friend.”
The Illinois Appellate Court for the Third District (the appellate district that covers Central Illinois) recently decided a case in which a transportation broker had entered into a contract with a trucker which contained a non-solicitation clause. The clause precluded the trucker from soliciting “traffic from any [s]hipper, consignor, consignee, or customer of Broker where (1) the availability of such traffic first become[s] known to CARRIER as a result of BROKER’s efforts, or (2) the traffic of the shipper, consignor, consignee or Customer of BROKER was first tendered to CARRIER by BROKER.” If the trucking company breached this provision, it would then be obligated to pay the broker a commission of 35% of the amount of the transportation revenue resulting from traffic transported for the customer. Quality Transportation Services, Inc. v. Mark Thompson Trucking, Inc., 2017 IL App (3d) 160761 (October 24, 2017).
The plaintiff, Quality Transportation Services (“QTS”) referred one of its customers, USS, to the defendant-trucker (“MTT”). At a party, an employee of USS happened to run into the President of MTT; the two had attended high school together, but had not kept in touch. The USS employee mentioned that USS needed trucks. Later, that employee called MTT’s President directly and set up a meeting to discuss USS’s trucking needs. MTT made a proposal to USS, but it was rejected on the basis that the cost was too high. Over a period of several months, multiple other, and progressively lower, quotes were provided by MTT until USS found a proposal to be acceptable to it, whereupon MTT began contracting directly with USS and terminated its contract with QTS.
QTS sued, alleging breach of the non-solicitation provision. MTT sought summary judgment – a judgment that is appropriate when facts are undisputed and the party requesting judgment has the right, based on those undisputed facts, to the entry of judgment in its favor. MTT argued that it was undisputed that USS had made the initial contact with MTT about having MTT haul for USS, so (according to MTT) it has not “solicited” USS and thus had not breached its agreement with QTS. The trial court agreed, but the Third District Appellate Court did not.
Even though it was undisputed that USS had made the first overture, the Quality Transportation Court ruled that “simply because MTT did not initiate the very first conversation with USS does not support an automatic conclusion that MTT’s subsequent communications with USS can never rise to the level of solicitation.” Relying on dictionary definitions under which “solicitation” is “[t]he act or an instance of requesting or seeking to obtain ‘something’” or an “[a]n attempt or effort to gain business” (quoting from Black’s Law Dictionary 1520 (9th ed. 2009), the Court determined that reasonable people could differ regarding whether the entire course of dealing between MTT and USS could be considered to be a “solicitation” that violated the QTS contract. Accordingly, the Court reversed the entry of summary judgment, and sent the case back to the trial court so the issue could be decided on the basis of a full trial.
As a secondary argument, MTT had argued in the trial court that the non-solicitation covenant was overly broad and unenforceable under Illinois law (an issue the trial judge did not decide). As previously reported on this blog, Illinois courts use a highly fact-intensive and nebulous multi-factor test to evaluate whether or not restrictive covenant contracts are valid and enforceable. See “The Seventh Circuit Decries the Lack of Predictability Regarding Enforcement of Restrictive Covenants Under Illinois Law”. Nevertheless, in this case, the Court had no trouble upholding the covenant at issue. It noted that “QTS has a legitimate interest in protecting its customer relationship with USS pertaining to a very finite number of routes MTT had driven on behalf of QTS”, and it the covenant were to be stricken, the business of transportation brokers like QTS would be completely undermined. Opinion at ¶31. QTS had a significant, longstanding business relationship with USS pertaining to the routes at issue, and the non-solicitation provision was narrowly tailored in that it had a time limit of one year after the termination of the MTT/QTS contract, and only precluded MTT for hauling for QTS’s customers with respect to the particular traffic that MTT had either previously hauled, or of which MTT became aware through QTS’s efforts. The agreement also allowed MTT to accept unsolicited business from USS. As such, the Quality Transportation Court concluded that the non-solicitation restriction did not undue hardship and was not injurious to the public.
The take-away is that merely because a customer makes the first call does not insulate a party from potential liability under a non-solicitation restriction. Instead, all of the circumstances will need to be considered – especially, as was the situation in Quality Transportation, how vigorously the party subject to the restriction responded to the customer’s initial overture.