CertainTeed Corp. v. Williams, __ F. Supp.2d __, 2007 WL 1297165 (N.D. Ill. Apr. 3, 2007) (Holderman, C.J.).

Pursuant to a remand and forthwith mandate from the Seventh Circuit, Chief Judge Holderman preliminarily enjoined defendant, Williams, from continued employment by plaintiff’s competitor, IKO Industries, Inc. ("IKO"), based upon a non-compete agreement ("Agreement") defendant signed with his previous employer, CertainTeed Corp. ("CT").  But the Court made clear that the preliminary injunction violated defendants’ right to due process and violated the Erie doctrine.  When Williams began working for CT, he signed the Agreement which required, among other things, that for one year after working for CT, Williams not perform work:  (i) regarding any product, process or service that is competitive with or similar to any product, process or service Williams was involved with at CT; or (ii) regarding any product, process or service of CT’s for which Williams had access to CT’s confidential information during his employment.  After leaving CT’s employ, Williams took a position with IKO.  Based upon that employment, CT sued Williams and sought a preliminary injunction to prevent Williams’s continued employment by IKO.

In its original analysis, applying Pennsylvania law per the Agreement, the Court struck clause (i) as an unreasonable restraint upon Williams ability to earn a living.  The Court then held a hearing on CT’s motion for a preliminary injunction to prevent Williams’ continued employment by IKO.  After prehearing discovery, CT conceded that it had no evidence that Williams used CT’s confidential information while working for IKO.  The Court, therefore, denied CT’s motion for a preliminary injunction without hearing Williams’s defense.  The Court found that CT had not shown a likelihood of proving that Williams violated the Agreement.  The Court held that Williams could work for IKO "as long as he complies with the . . . Agreement . . . ."

CT appealed the Court’s ruling to the Seventh Circuit, which held that the Agreement would be violated if a former employee was "tempted" to use CT’s trade secrets, even if the former employee had not used them.  Based upon that analysis, the Seventh Circuit remanded the case to the Northern District and required that a preliminary injunction be entered.

The Court entered the preliminary injunction as required by the Seventh Circuit.  The Court also provided a detailed explanation of how the injunction violated Williams’s due process rights by granting an injunction against him without giving Williams the opportunity to present evidence in his defense. 

Additionally, the Court explained that the Seventh Circuit violated the Erie doctrine by extending beyond the rulings of the Pennsylvania Supreme Court on the issue of non-compete agreements without citing any case law to support its view of how the Pennsylvania Supreme Court would decide the issue.

Finally, the Court explained that it had no choice, but to enter the injunction:

Regardless of the Seventh Circuit’s mandated due process deficiency and the Seventh Circuit’s prediction regarding the way the Supreme court of Pennsylvania would have decided the outcome, this court is powerless to do anything but abide by the Seventh Circuit’s remand order and mandate.