## Facts

- Foodcomm International imported chilled Australian beef and sold substantial quantities to Empire Beef Company, a major customer.
- Patrick James Barry and Christopher Paul Leacy were senior sales representatives, among Foodcomm’s highest-paid employees, with exclusive control over Foodcomm’s purchasing and sales of Australian chilled beef, including the Empire account.
- After negotiations between Foodcomm and Empire deteriorated, Leacy learned from Empire that it would not continue doing business with Foodcomm but did not disclose this to Foodcomm and continued to assure Foodcomm he was “smoothing things over.”
- Foodcomm’s business with Empire sharply declined.
- While still employed, Barry and Leacy approached Empire about working with it and, at Empire’s request, prepared a business plan for a new company, Outback Imports, to import Australian beef for Empire.
- Barry and Leacy used Foodcomm computers and personal digital assistants to prepare the plan and did not inform Foodcomm of their competing plans.
- Outback was incorporated while Barry and Leacy were still employed; after resigning, they operated Outback in connection with Empire.
- Foodcomm sued Barry, Leacy, Outback, and Empire in federal district court, alleging breach of fiduciary duty and seeking a preliminary injunction.
- The district court granted a preliminary injunction barring Barry and Leacy from providing services to Outback or Empire pending final resolution.

## Issues

1. Whether senior employees with substantial discretionary authority owed fiduciary duties of loyalty to their employer and likely breached those duties by secretly organizing a competing enterprise with a key customer while still employed.
2. Whether the requirements for a preliminary injunction were met, including likelihood of success on the merits, irreparable harm and no adequate remedy at law, and a balance of harms and public interest favoring injunctive relief.

## Decision

- The Seventh Circuit affirmed the preliminary injunction.
- The court held the district court did not abuse its discretion in finding Foodcomm showed a likelihood of success that Barry and Leacy owed and breached fiduciary duties by covertly competing and using Foodcomm resources while still employed.
- The court agreed that Foodcomm lacked an adequate remedy at law and faced irreparable harm from the disruption and loss of a major customer relationship and the continued exploitation of the alleged wrongful advantage.
- The court concluded the balance of harms and public interest supported limited injunctive relief because Barry and Leacy were not barred from the industry generally, only from servicing Empire or Outback during the litigation.

## Legal Principles

- Under Illinois law, employees who occupy positions of trust and exercise significant discretionary authority may owe fiduciary duties of loyalty to their employer even if they are not officers or directors.
- Employees may make certain preparations to compete after leaving employment, but may not secretly compete, divert business opportunities, misuse employer resources, or mislead the employer while still employed.
- Loss or threatened loss of a major customer relationship and resulting harm to business goodwill can constitute irreparable harm and support preliminary injunctive relief when damages are difficult to quantify.
- Appellate review of a preliminary injunction is for abuse of discretion; factual findings are reviewed for clear error and legal conclusions de novo.

## Conclusion

The Seventh Circuit upheld preliminary injunctive relief where senior sales employees, entrusted with control over a key customer relationship, likely breached fiduciary duties by concealing critical information and developing a competing venture with that customer while still employed, creating non-quantifiable harm not adequately remedied by damages.


Foodcomm Int’l v. Barry, 328 F.3d 300 (7th Cir. 2003)