Tradesmen International, Inc. v. Professional Labor Support, LLC et al

Filing 85

ORDER entered by Magistrate Judge David G. Bernthal on 11/7/11. Defendants' 62 Motion for Summary Judgment is granted in part and denied in part. The Court grants Motion with respect to all counts, with the exception of Count IV. Count IV is dismissed as moot. The Clerk of Court is directed to enter judgment in favor of the moving defendants and against plaintiff. Defendants' 79 Motion to Deem Certain Facts Admitted is denied as moot. See written Order. (KM, ilcd)

E-FILED

Monday, 07 November, 2011 09:54:20 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
Urbana Division

TRADESMEN INTERNATIONAL, INC.,
Plaintiff,
v.
JOHN BLACK, et al.,
Defendants.

)
)
)
)
)
)
)

Case No. 10-2098

ORDER
Plaintiff Tradesmen International, Inc. filed a First Amended Complaint (#35) against
Defendants in September 2010. Defendants are Professional Labor Support, LLC, and
John Black, Todd Walker, Ryan Ellis, and Ryan Boyer. Plaintiff brought ten counts against
Defendants, alleging breach of contract, misappropriation of trade secrets, and other related
claims. Federal jurisdiction is based on diversity of citizenship pursuant to 28 U.S.C. § 1332.
The parties have consented to the exercise of jurisdiction by a United States Magistrate Judge.
In June 2011, Defendants filed a Motion for Summary Judgment (#62).1 In July 2011,
Plaintiff filed Plaintiff’s Response in Opposition to Defendants’ Motion for Summary Judgment
(#66). Defendants filed Defendants’ Reply Memorandum in Support of Motion for Summary
Judgment (#78). After reviewing the parties’ pleadings, memoranda, and submitted evidence,
this Court hereby GRANTS Defendants’ Motion for Summary Judgment (#62) in part and
DENIES the motion in part. For the reasons explained below, the Court grants Defendants’
motion for summary judgment with respect to all counts, with the exception of Count IV.
Count IV is dismissed as moot.

I. Background
The following background information is taken from the undisputed facts, as well as
evidence submitted to the Court.

1

Defendant Ellis did not join in this motion, and the proceedings against him are stayed.
Where the Court refers to “Defendants,” it only refers to the Defendants participating in this
motion.

Plaintiff Tradesmen International, Inc. is a construction labor support company with a
corporate office in Macedonia, Ohio. It hires and directly employs field employees in skilled
trades. Tradesmen leases these employees to clients in temporary need of skilled labor. (#62,
¶¶ 1-2). Tradesmen has offices located throughout the country.

Each of the individual Defendants is a former employee of Tradesmen. Each Defendant
began his career at Tradesmen as a Field Representative, and each Defendant eventually became
a General Manager. (#62, ¶¶ 12, 20, 27). Defendants Black, Boyer, and Walker worked for
Tradesmen for two, eight, and four years, respectively. (#62, ¶¶ 10, 18, 25). Each Defendant
signed a covenant not to compete (hereinafter “CNTC”) before or shortly after commencing his
employment with Tradesmen. The contracts provide that, for 18 months after the end of their
employment with Tradesmen, the Defendants would not compete in a certain geographically
restricted area. That area was defined in three respects: (a) certain identified counties, (b)
within 100 miles of any Tradesmen field office, (c) within 25 miles of any location where
Tradesmen “is providing its services.” (#62, ¶ 39). The contract also provided that, within the
geographically restricted area, Defendants would not transact business with Tradesmen
customers or prospective customers, would not interfere with customers or prospective
customers, and would not solicit or hire Tradesmen employees. (#62, ¶¶ 48-56; #62-4, Exs. 1113). Finally, the contract provided that the Defendants would not disclose or use any of
Tradesmen's proprietary information for any reason other than to benefit Tradesmen. (#62-4,
Exs. 11-13).

The trouble here began in October 2009. Tradesmen asked Black to take a demotion,
from General Manager to Project Coordinator. Because Black was not willing to accept the
demotion, he either resigned or was terminated. (#62, ¶¶ 16-17). Defendants admit that from
October 2009 to January 2010, Defendants prepared to open a business providing some of the
same services as Tradesmen. In November 2010, Defendants went so far as to sign an office and
apartment lease for their new business. (#66, ¶¶ 197-200; 201-15). In January 2010, Tradesmen
discovered Defendants' plan, and Defendants Walker and Boyer either were terminated or
resigned from Tradesmen. (#62, ¶¶ 24-25).
2

Before leaving Tradesmen, on January 4, 2010, Defendant Walker sent five e-mails with
“Modified D&B Reports” attached to his personal e-mail account. This action is the basis for a
number of claims against all Defendants. However, it is unclear if or when the other Defendants
knew of this action. At some point in late January, either Defendant Black or Defendant Walker
deleted these e-mails, at Defendant Black's suggestion. (#62, ¶¶ 129-44; 147-53). These
“Modified D&B Reports” are used by Tradesmen to identify potential customers. They are
broken down by zip code. Tradesmen gets D&B Reports for various areas on a regular basis,
and often modifies them in-house to narrow the pool of prospective clients to solicit. (#62-3, Ex.
5, p. 18-20.)

In October 2009, the Defendant Black officially formed a new business, Professional
Labor Support, LLC (hereinafter PLS), a Defendant in this case. (#62, ¶ 66). Defendants Boyer
and Walker joined PLS in January 2010, after their employment with Tradesmen ended (#62,
¶¶ 67, 69; #66, ¶ 67 [partially disputed]).2 The idea, according to Defendants, was to compete
with Tradesmen in a manner that would not violate the CNTCs. (#62, ¶¶ 74-75; #66, ¶¶ 74-75
[disputed]). Defendants opened PLS in Mahomet, Illinois, more than 100 miles away from any
Tradesmen field office. (#62, ¶ 75; #66, ¶ 75; #62-2, Ex. 4; but see also #66, ¶¶ 243-44).
Defendants turned down several opportunities to do business with clients they first encountered
through their work at Tradesmen. (#62, ¶¶ 79-86).

Around March 2010, PLS became fully operational. It started making sales, recruiting
field employees, and actively conducting business. (#62, ¶ 71). PLS indisputably provided
services to at least one Tradesmen client, TCR Systems, LLC. (#62, ¶ 94, #66, ¶¶ 280).3
However, on February 7, 2011, in response to discovery in this case, Tradesmen provided

2

Throughout this opinion, where the Court makes reference to a fact that is in dispute, it
cites to Defendants’ motion and Plaintiff’s response with respect to that fact.
3

In its complaint, Plaintiff also identified Motorsport Construction as a “stolen” client.
However, Plaintiff has admitted that no one at PLS ever solicited or sought any business from
Motorsport. (#62, ¶¶ 103-06).
3

Defendants a list of customers “we believe are covered by the restrictions at issue” (hereinafter
the “Restricted Client List”). (#62, ¶ 91; #62-6, Ex. 24). This list contains over 2,600 customers
or prospective customers. (#62, ¶ 93). On the same date, Plaintiff provided a list of its “specific
offices covered by Defendants' Non-Compete Agreements” (hereinafter the “Restricted Office
List.”) (#62, ¶ 89; #62-6, Ex. 24). TCR Systems is not on the Restricted Client List. (#62, ¶ 96).
It does not appear that any of PLS's customers are on the Restricted Client List.

The plot thickens in January 2011. In January 2011, Defendant Ellis's term for his CNTC
expired. Defendant Ellis organized a separate limited liability company in Indiana called PLS of
Indiana, LLC (hereinafter “PLS Indiana”). (#66, ¶ 265). When Defendant Black's CNTC term
expired in April 2011, he left PLS, gave up his interest, and joined PLS Indiana (#66, ¶ 269).
Plaintiff notes that Defendant Boyer also considered leaving PLS to join PLS Indiana as soon as
the term for his CNTC expired, in July 2011. (#66, ¶ 270). PLS Indiana has clients in common
with Tradesmen, including Stickle Steam, Biehle Electric, and Forrester Electric (#66, ¶ 287;
#62, ¶¶ 124-28; #66, ¶¶ 124-28 [disputed as to whether these clients are also clients of PLS]).

Based on these events, Plaintiff brings ten counts against Defendants: (1) breach of
contract, (2) misappropriation of trade secrets, (3) misappropriation of confidential information,
(4) declaratory judgment regarding enforceability of the CNTCs, (5) permanent injunctive relief,
(6) breach of the duty of loyalty, (7) tortious interference with contractual relations, (8) tortious
interference with business expectancy, (9) conversion, and (10) civil conspiracy.
II. Standard
Summary judgment is appropriate if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P.
56(a). In ruling on a motion for summary judgment, the Court must decide, based on admissible
evidence, whether any material factual dispute exists that requires a trial. Waldridge v. Am.
Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994). A factual dispute is material only if its
resolution might affect the outcome of the suit under governing law. Id. The party seeking
summary judgment bears the initial burden of showing that no such issue of material fact exists.
4

Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Furthermore, the Court must draw all
inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd.
v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). However, the nonmoving party may not rest
upon mere allegations in the pleadings or upon conclusory statements in affidavits; rather, he
must go beyond the pleadings and support his contentions with proper documentary evidence.
Celotex, 477 U.S. at 322-23.
III. Discussion
In the following discussion, the Court will first address several preliminary issues:
choice of law, preemption, and whether there are genuine issues of material fact precluding
summary judgment. Then, the Court will address Defendants’ arguments presented in its motion
for summary judgment.

A. Preliminary Issues
As a preliminary matter, this Court will address choice of law issues and preemption.
Parties did not raise these matters, but the Court nevertheless considers them to ensure that the
proper law is followed, and the relevant public policy is not circumvented. Additionally, the
Court will consider whether any genuine issues of material fact preclude summary judgment.

1. Choice of Law
First, the Court will address choice of law. The parties do not explicitly discuss choice of
law, though both parties predominantly cite Ohio authority. The CNTCs contain a forum
selection clause, expressing that the contracts are to be governed by Ohio law. Nevertheless,
despite the presence of a forum selection clause in the contract, the Court must consider which
state has the most significant relationship to Plaintiff’s tort claims.4 See Robinson v. McNeil
Consumer Healthcare, 615 F.3d 861, 865 (7th Cir. 2010) (stating that Illinois, the forum state,
uses the “most significant relationship” test to determine choice of law for tort claims). For torts,

4

The relevant contract provision merely states “The Agreement shall be deemed to be
made under and shall be construed in accordance with the laws of the State of Ohio.” (#62-4,
Exs. 11-13). It has no bearing on the tort claims.
5

the state with the most significant relationship to a claim is presumably the state where the injury
occurred. Id. In cases involving misappropriation of confidential information or trade secrets,
Illinois applies the law of the state “where the alleged wrong was committed or the benefit was
obtained.” Maine v. Standard & Poor’s Corp., 918 F.2d 959 (7th Cir. 1990) (citing Goldberg v.
Medtronic, Inc., 686 F.2d 1219, 1225 (7th Cir. 1982)).5

Here, Plaintiff is an Ohio corporation, Defendants primarily worked for Plaintiff in
Indiana, and then Defendants opened a new business in Illinois. The tort claims in this case are
mainly related to misappropriation of trade secrets and confidential information, specifically
involving a Defendant, while employed in Indiana by Plaintiff, allegedly e-mailing himself
proprietary information to benefit his new business, operating in Illinois. The Court notes that,
under these facts, Illinois is the state where any benefit of Defendants’ misappropriation was
obtained. In any event, choice of law does not affect the outcome of this motion. The states of
Illinois, Indiana, and Ohio have each adopted the Uniform Trade Secrets Act, which guides the
Court’s determination of Plaintiff’s tort claims. 765 ILCS 1065; Indiana Code § 24-2-3; Ohio
Revised Code § 1333.61. Where there is no conflict of law, the law of the forum state may be
applied. Sphere Drake Ins. Ltd v. Am. Gen. Life Ins. Co., 376 F.3d 664, 671 (7th Cir. 2004). For
these reasons, this Court applies Illinois law to Plaintiff’s tort claims.

2. Preemption
Second, the Court will consider whether any or all of Plaintiff’s common law tort claims
are preempted by the Illinois Trade Secrets Act. The Court has requested supplemental briefing
on this issue, which the parties have submitted (#83, #84).6

5

In Maine and Goldberg, the Seventh Circuit elected to use the law of the state where the
defendant based the competing business.
6

Regrettably, the Court determined that Illinois law should apply to the tort claims after
requesting supplemental briefing from parties with respect to preemption under Ohio law.
Nevertheless, parties’ analysis regarding the preemption issues is still largely valid, as the law
under both states establishes that common law claims are preempted to the extent they are based
solely on allegations of misappropriation of trade secrets or other confidential information.
6

The Illinois Trade Secrets Act provides that the statute displaces conflicting tort,
restitutionary, and other laws providing civil remedies for misappropriation of a trade secret.
765 ILCS 1065/8(a). This provision does not affect contractual remedies, other civil remedies
that are not based on misappropriation of a trade secret, or criminal remedies. 765 ILCS
1065/8(b). As a result of this provision, claims are foreclosed when they rest on the conduct that
is said to constitute misappropriation of trade secrets. Hecny Transp., Inc. v. Chu, 430 F.3d 402,
404-05 (7th Cir. 2005). However, the provision does not preempt duties imposed by law that are
not dependent upon the existence of competitively significant secret information, such as an
agent’s duty of loyalty. Id.

Plaintiff’s claim for misappropriation of trade secrets is based on harm resulting from
Defendant Walker e-mailing himself Plaintiff’s proprietary D&B Reports. (#62, ¶ 129).
Plaintiff has admitted that this group of reports is the only trade secret at issue in this case. (#62,
¶ 129). Several of Plaintiff’s common law tort claims are based, in whole or in part, on this same
injury. Specifically, Plaintiff has alleged that Defendants breached their duty of loyalty “by
misappropriating confidential business information during their employment in order to compete
with Tradesmen.” (#35, p. 20, ¶ 91). In Plaintiff’s response brief, Plaintiff further relies on the
theory that Defendant Walker breached a duty of loyalty by e-mailing himself D&B Reports.
Similarly, in Plaintiff’s claim for conversion, Plaintiff alleges that the Defendants “wrongfully
and without authorization removed information from Tradesmen’s computers that constitutes
intellectual property of Tradesmen.” (#35, p. 22, ¶ 105). Last, in Plaintiff’s claim for civil
conspiracy, one basis for this claim is the allegation that Defendants conspired to
“misappropriate . . . confidential and proprietary business information.” (#35, pp. 22-23, ¶ 108).

Based on the forgoing, the Court concludes that several of Plaintiff’s claims are at least
partially preempted by the Illinois Trade Secrets Act. Plaintiff’s claim for conversion is entirely
based on the same conduct as the alleged misappropriation of trade secrets, and so the Court

Compare Rogers Indus. Prods. Inc. v HF Rubber Mach. Inc., 936 N.E.2d 122, 130 (Ohio Ct.
App. 2010); Hecny Transp., Inc. v. Chu, 430 F.3d 402, 404-05 (7th Cir. 2005).
7

holds that Count IX is preempted in its entirety. The Court grants Defendants’ motion for
summary judgment as to Count IX. Plaintiff’s claims for misappropriation of confidential
information, breach of duty of loyalty, and civil conspiracy are based in part on the same conduct
as the alleged misappropriation of trade secrets. The Court holds that these claims are preempted
only to the extent they rely on the misappropriation of trade secrets. The Court will return to
these claims below.

3. Genuine Issues of Material Fact
Parties largely agree on material facts of this case. However, there are three topics on
which parties dispute material facts. First, parties dispute whether Defendant Boyer’s job
responsibilities at Tradesmen involved service to Central Illinois. (#62, ¶¶ 22-23; #66, ¶¶ 2223). Second, parties dispute the nature of the relationship between Defendant PLS and PLS of
Indiana. Plaintiff contends that the entities share clients, such that any clients of PLS Indiana
may be considered clients of Defendant PLS in determining whether Defendants have breach
their CNTCs. (#62, ¶¶ 4, 6, 113-14, 124-28; #66, ¶¶ 4, 6, 113-14, 124-28). Third, parties
dispute the nature of PLS’s interaction with Stickle Steam and TCR Systems, Inc., two clients
that Defendants allegedly diverted from Plaintiff in violation of their CNTCs. (#62, ¶¶ 97, 99,
115, 118-20; #66, ¶¶ 97, 99, 115, 118-20). Plaintiff further argues that summary judgment is not
appropriate in this case because the circumstances of this case call for a finder of fact to assess
the credibility of certain evidence presented.

All of these material disputed facts, and determination that may entail assessment of
parties’ credibility, concern whether Defendants breached their CNTCs. This Court does not
reach the issue of whether Defendants breached their CNTCs, for the reasons discussed below.
Therefore, these genuine issues of material fact do not preclude summary judgment.
B. Arguments
Having addressed the preliminary issues, the Court now turns to the arguments raised by
the parties. The Court will first address Defendants’ arguments that relate to Plaintiff’s contract
claims, including Count I for breach of contract, Count V for injunctive relief, and Count IV for
8

declaratory judgment. Then, the Court will address Defendants’ arguments that relate to
Plaintiff’s remaining tort claims.
1. Damages
Defendants argue that they are entitled to summary judgment in their favor on all of
Plaintiff’s claims for which proof of damages is an essential element. Defendants argue that
Plaintiff has failed to disclose any computation of damages, and that throughout discovery they
have not provided evidentiary support of damages.

In Tradesmen’s Rule 26 disclosures, Tradesmen stated that its damages include
(1) salaries and benefits paid to Defendants while they were in breach of their duty of loyalty to
Tradesmen, (2) compensatory damages in the value of business lost because of the Defendants’
breach of contract and tortious activities, (3) compensatory damages equal to the amount
expended by Tradesmen in developing confidential trade secret information that lost its value
because of Defendants’ misappropriation, and (4) punitive damages. (#62-13, Ex. 43). Here, the
Court will assess the adequacy of Plaintiff’s evidence establishing compensatory damages.

First, Plaintiff seeks compensatory damages for the value of business lost due to
Defendants’ breach of contract and tortious activities. Proof of damages is an essential element
of a claim for breach of contract. Jarupan v. Hanna, 878 N.E.2d 66, 73 (Ohio Ct. App. 2007).
Proof of resulting damages is also an essential element of Plaintiff’s burden of proof for claims
for tortious interference with contractual relations and tortious interference with a business
expectancy. Allstar Music, Inc., v. Eckhoff, 629 N.E.2d 816, 821 (Ill. App. Ct. 1994); Botvinick
v. Rush Univ. Med. Cntr., 574 F.3d 414, 417 (7th Cir. 2009) (citing Fellhauer v. City of Geneva,
568 N.E.2d 870, 878 (Ill. 1991)).

As evidence of lost profits, Plaintiff has submitted gross sales figures for certain clients
that Plaintiff claims Defendants solicited and provided services to in violation of their CNTCs.
(#66, ¶¶ 294-95). Plaintiff has also submitted sales figures for Defendant PLS. (#66, ¶¶ 284-85,
290, 292). Defendants argue that these gross figures are not adequate to establish lost profits.
9

[I]n order for a plaintiff to recover lost profits in a breach of contract action, the
amount of lost profits, as well as their existence, must be demonstrated with
reasonable certainty . . . . Lost profits may be established with reasonable certainty
either directly or through an expert witness. Proof with mathematical precision is not
required, nor need the proof be clear and irrefutable, but profit loss cannot be left to
mere conjecture and must be capable of measurement based upon known reliable
factors without undue speculation.
Cobblestone Square II Co., Ltd. v. L&B Food Servs. Inc., No. 95968, 2011 WL 4389918, *5
(Ohio Ct. App., Sept. 22, 2011) (quoting Gahanna Eastgate Props., Inc., 521 N.E.2d 814 (Ohio
1988) and Mich. Millers Mut. Ins. Co. v. Christian, 794 N.E.2d 68 (Ohio Ct. App. 2003)).

The evidentiary issues with respect to Plaintiff’s claim for lost profits are highlighted by
the deposition of Plaintiff’s Rule 30(b)(6) designee. A relevant portion of the deposition
transcript reads as follows:
Q: And are these two documents (referring to exhibits with gross sale for two clients)
something on which Tradesmen would rely to claim or compute its lost business
damages from Professional Labor Support or the defendants in this case?
A: Yes.
...
Q: What’s the company’s position on how these two documents support its claim for
lost business damages?
...
A: I don’t know.
Q. Do these two documents show a computation of any lost business damages that
Tradesmen is claiming against Professional Labor Support or any of the defendants?
A. I don’t know.
(#62-3, Ex. 5, p. 10). In continued questioning, Plaintiff’s Rule 30(b)(6) designee could not
explain the relevance of documents produced by Plaintiff in discovery, could not offer any
explanation for how its evidence would enable Plaintiff to compute lost business damages, and
could not identify any other documents which had not yet been provided in discovery that could
support a claim against any of the defendants in this case for lost business damages. (#62-3,
Ex. 5, p. 10-12; see also #62, ¶¶ 160, 170-75; 177-82).

10

This Court concludes that Plaintiff’s evidence on lost profits is insufficient to carry
Plaintiff’s burden of proof on damages. Extrapolating lost profits from Plaintiff’s evidence,
which details only gross sales to certain clients, would require undue speculation. Profit loss
cannot be left to mere conjecture and must be capable of measurement based upon known
reliable factors. Cobblestone Square II Co., 2011 WL 4389918, at *5. Plaintiff has not provided
any method of measuring lost profits, and has not identified any known reliable factors which
may be used to extrapolate lost profits from gross sales figures submitted in evidence. This
Court therefore concludes that Plaintiff is unable to prove lost profits.

Second, Plaintiff seeks compensatory damages equal to the amount expended by
Tradesmen in developing confidential trade secret information that lost its value because of
Defendants’ misappropriation. Under the Illinois Trade Secrets Act, Plaintiff may recover “both
the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation
that is not taken into account in computing actual loss.” 765 ILCS 1065/4. Or, in lieu of these
damages, a plaintiff may seek a royalty in an amount that is equitable under the circumstances.
Id.

In the circumstances of this case, Plaintiff is unable to prove actual loss caused by
misappropriation for the same reason it is unable to show lost profits. The misappropriated trade
secret, in this case, concerns Defendants’ alleged misappropriation of “Modified D&B Reports,”
which are used by Plaintiff to identify, solicit, and establish new clients. Plaintiff alleges that the
Modified D&B Reports lost value due to Defendants’ misappropriation because it enabled
Defendants to steal potential clients, and thus steal profits, from Tradesmen. However, where
any evidence as to claimed lost profits is too speculative to support an award, a plaintiff seeking
damages for misappropriation of trade secrets may be limited to the remedy of an equitable
royalty. Nilssen v. Motorola, Inc., No. 93 C 6333, 1998 WL 513090, *15 (N.D. Ill. Aug. 14,
1998) (citing Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142 (2d Cir. 1996)); see also
Hours, Inc. v. Swartz, No. L-06-1077, 2007 WL 867103, *6 (Ohio Ct. App. Mar. 6, 2007)
(stating “the award [for misappropriation of trade secrets] cannot be based on a gross revenue
amount.”). As such, showing actual loss caused by misappropriation would require the same
11

type of evidence as what would be needed to show lost profits. As this Court has already noted,
Plaintiff has only provided gross sale figures. Furthermore, Plaintiff has admitted that it does not
know the amount of any lost development costs, and it does not know the basis for computing
development costs associated with the Modified D&B Reports. (#62, ¶¶ 184-85). The Court
finds that extrapolating actual loss caused by misappropriation from gross sale figures would be
unduly speculative.

Because this Court has concluded that Plaintiff cannot prove its damages for lost profits
or for actual loss caused by misappropriation, the Court holds that Plaintiff has not established
that it has suffered consequential damages. Summary judgment is the ‘put up or shut up’
moment in a lawsuit, when a party must show what evidence it has that would convince a trier of
fact to accept its version of the facts. Johnson v. Cambridge Indus. Inc., 325 F.3d 892, 901 (7th
Cir. 2003). Due to Plaintiff’s failure to provide evidence establishing consequential damages,
Defendants are entitled to summary judgment on every count for which resulting damages is an
essential element.

As such, this Court grants summary judgment in favor of Defendants with respect to
Count I for breach of contract, Count VII for tortious interference with contractual relations, and
Count VIII for tortious interference with a business expectancy.

2. Injunctive Relief
In its request for permanent injunctive relief, Plaintiff asks the Court to impose the
following orders on Defendants: (1) compel them to comply with their obligations under the
CNTCs; (2) enjoin them from disclosing confidential and proprietary information; (3) enjoin
them from soliciting Plaintiff’s customers; (4) enjoin them from competing with Plaintiff for
18 months from the date of the Court’s order; and (5) enjoin them from disclosing trade secrets.
In essence, Plaintiff asks the Court to grant it injunctive relief enforcing the terms of the CNTCs.
Plaintiff argues that “this Court’s equitable power to enjoin Defendants from engaging in
conduct that violates the terms of their non-compete agreements does not end” merely because
the 18-month term of Defendants’ CNTCs has expired in the course of this litigation. (#66, p.
12

25). Plaintiff cites Rogers v. Runfola & Assocs., Inc., 565 N.E.2d 540, 544 (Ohio 1991) for the
proposition that a court may impose injunctive relief enforcing terms from a covenant not to
compete even though the restrictive period, by its own terms, has expired.

An award of a permanent injunction in a diversity case is governed by the appropriate
state’s substantive law. Dunkin’ Donuts, Inc. v. N.A.S.T., Inc., 428 F.Supp.2d 761, 775 (N.D. Ill.
2005). Under Ohio law, a plaintiff seeking injunctive relief must demonstrate that there is no
adequate remedy at law. Mid-America Tire, Inc. v. PTZ Trading Ltd., 768 N.E.2d 619, 631
(Ohio 2002). An adequate remedy at law “means that the legal remedy must be as efficient as
the indicated equitable remedy would be; that such legal remedy must be presently unavailable
in a single action; and that such remedy must be certain and complete. Id. at 632 (citing Fuchs v.
United Motor Stage Co., Inc., 21 N.E.2d 669 (Ohio 1939)). Furthermore, to obtain permanent
injunctive relief, a plaintiff must demonstrate that failure to issue the injunction is likely to result
in irreparable harm. United States v. Miami Univ., 294 F.2d 797, 816 (6th Cir. 2002).

Defendants argue that Plaintiff is not entitled to injunctive relief because Plaintiff has not
identified any contractual or tort injury, much less one that is a continuing or irreparable harm.
Defendants additionally argue that, even if Plaintiff has identified such an injury, Plaintiff has
not shown that a legal remedy is inadequate. Indeed, in Plaintiff’s brief in response to
Defendants’ motion for summary judgment, Plaintiff makes no effort to argue that a legal
remedy is inadequate. Plaintiff never indicates it will suffer an irreparable harm, apart from
ongoing competition with PLS Indiana. However, PLS Indiana is not a Defendant in this suit,
and individual Defendants did not become involved with PLS Indiana until after the expiration
of their CNTCs.

In this Court’s opinion, Plaintiff has had an adequate remedy at law for addressing any
breach of contract in bringing this suit. Plaintiff’s cited authority, Rogers, does not indicate
otherwise. In Rogers, the court found that the plaintiff had no adequate legal remedy where a
trial court had erroneously found covenants not to compete unenforceable, and defendants had
then formed a competing business. Here, no such error has deprived Plaintiff of the benefit of its
13

contract. This litigation has provided a fair and efficient opportunity for Plaintiff to show injury
as a result of Plaintiff’s breach of contract and be appropriately compensated. As discussed
above, Plaintiff failed to produce adequate evidence of damages. Furthermore, Plaintiff’s
request asking the Court to enforce the CNTCs going forward would create a burden on judicial
resources that is not warranted by the circumstances of this case. Finally, even if Plaintiff had
argued it lacks an adequate remedy at law, this Court does not believe that permanent injunctive
relief is appropriate because Plaintiff has not established it will suffer irreparable harm.

For these reasons, this Court grants Defendants’ motion for summary judgment with
respect to Count V.

3. Declaratory Judgment
Defendants argue that they are entitled to summary judgment on Plaintiff’s claim for
declaratory judgment and their counterclaim for declaratory judgment. Both parties seek
declaratory relief with respect to the enforceability of the CNTCs. Defendants previously filed a
motion for partial summary judgment on this issue. (#49). This Court held that the contracts
were facially valid. (#58). The Court did not reach the issue of whether the CNTCs were
reasonable as applied to these Defendants under the circumstances, because discovery had not
yet closed. Now, the 18-month term on each individual defendant’s CNTC has expired.

Declaratory relief is appropriate where “the facts alleged, under all the circumstances,
show that there is a substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 113, 127 (2007). When a claim for injunctive
relief is barred but a claim for damages remains, a declaratory judgment as a predicate to a
damages award can survive. Crue v. Aiken, 371 F.3d 668, 677 (7th Cir. 2007). Furthermore, the
Declaratory Judgment Act gives the district court the discretion to declare the rights of the

14

litigants, but does not create a duty to grant such relief. Med. Assur. Co, Inc. v. Hellman,
610 F.3d 371, 377-78 (7th Cir. 2010) (citing Wilton v. Seven Falls Co., 515 U.S. 277, 288
(1995)).7

Here, the CNTCs have expired, and so there is no purpose in determining the
enforceability of the contracts with respect to these Defendants, other than to award damages or
injunctive relief based on breach of the contract. This Court has already granted summary
judgment to Defendants on Plaintiff’s breach of contract claim in light of Plaintiff’s insufficient
proof of damages. The Court has also granted summary judgment to Defendants on Plaintiff’s
claim for permanent injunctive relief stemming from the contract. As such, the court declines to
settle the parties’ dispute regarding enforceability of the contract. Defendants’ motion for
summary judgment with respect to Count IV is denied, as the question of the enforceability of
the CNTCs with respect to these Defendants is moot. Count IV is dismissed.

4. Misappropriation of Trade Secrets
Having addressed all of Defendants’ arguments that pertain to Plaintiff’s contract claims,
the Court will now consider Defendants’ arguments that pertain to Plaintiff’s remaining tort
claims.8

Defendants argue that the Court should grant summary judgment in its favor on
Plaintiff’s count for misappropriation of trade secrets because Plaintiff has failed to establish that
the Modified D&B Reports constitute a “trade secret.” Defendants’ alleged misappropriation of
the Modified D&B Reports is the only basis for Plaintiff’s trade secrets claim. (#62, ¶ 129).

7

See also Cornucopia Inst. v. U.S. Dep’t of Agric., 560 F.3d 673, 676 (7th Cir. 2009)
(stating the Declaratory Judgment Act is a procedural statute). Because the Act is procedural,
this Court applies this statute, rather than state substantive law. See Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938).
8

As discussed above, the Court analyzes these arguments under Illinois law, though the
parties have briefed them under Ohio law.
15

A “trade secret” is statutorily defined as “information . . . that is sufficiently secret to
derive economic value . . . from not being generally known to other persons . . . and is the
subject of efforts that are reasonable under the circumstances to maintain its secrecy or
confidentiality.” 765 ILCS 1065/2(d). It is undisputed that some affirmative step must be taken
by a plaintiff to maintain a trade secret. Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1002
(1984); Gillis Assoc. Indus., Inc. v. Cari-All, Inc., 564 N.E.2d 882, 885-86 (Ill. App. Ct. 1990).
The issue here is whether Plaintiff’s affirmative steps to protect the secrecy of the Modified
D&B Reports were “reasonable under the circumstances” to maintain the confidentiality of those
reports.

Plaintiff took two main precautions to protect the secrecy of the Modified D&B Reports.
First, it entrusted a specific employee to distribute the reports, via e-mail, to the appropriate sales
manager. (#62, ¶ 134). In theory, a sales manager was supposed to receive D&B Reports that
corresponded with his geographic sales territory, and no other territories.9 Second, Plaintiff had
all employees that handled the Modified D&B Reports sign CNTCs that stated the employees
agreed never to use or disclose Tradesmen’s proprietary information. (#62-4, Exs. 11-13.)

On the other hand, Plaintiff failed to take certain precautions that Defendants argue were
reasonable under the circumstances. First, no one at Tradesmen informed Defendant Walker that
the Modified D&B Reports were confidential or proprietary to Tradesmen. (#62, ¶ 138).
Second, the Modified D&B Reports were not protected by Tradesmen’s PICK System, a
computer system that required an employee login and password. (#62, ¶ 140). Plaintiff had no
written policy relating to an employee’s use of the Modified D&B Reports, no documented
process for maintaining the secrecy of the reports, and the reports were never stamped or labeled
“Confidential” prior to this litigation. (#62, ¶¶ 141-43).

9

Defendants note that Plaintiff failed to follow even this precautionary measure on at
least one occasion. (#62, ¶¶ 135-37).
16

In Arcor, Inc. v. Haas, 842 N.E.2d 265, 270-71 (Ill. App. Ct. 2005), an Illinois appellate
court summarizes several cases dealing with the issue of what steps are reasonable under the
circumstances to maintain confidentiality of trade secrets. It is not sufficient for an employer to
rely solely on confidentiality agreements with employees to maintain confidentiality of trade
secrets. Id. Similarly, where an employer sent electronic copies of customer information to
employees on a need-to-know basis, but took no other steps to protect the information (including
no confidentiality agreement with employees), the employer’s steps were not sufficient to
maintain the confidentiality of the information. Id. (citing Liebert Corp. v. Mazur, 827 N.E.2d
909, 924-25 (Ill. App. Ct. 2005)). However, if an employer takes both of these precautions in
combination, Illinois courts have found that these steps are reasonable under the circumstances
to protect a trade secret. Id. (citing Multiut Corp. v. Draiman, 834 N.E.2d 43, 50 (Ill. App. Ct.
2005) (holding that the trial court’s ruling in this respect was not against the manifest weight of
the evidence)).

This discussion illustrates that Plaintiff’s relatively limited efforts to ensure the secrecy
of their Modified D&B Reports makes this a close call. Nevertheless, Plaintiff did limit the
distribution of the Modified D&B Reports and required employees to sign confidentiality
agreements. Similar steps were found sufficient in Draiman, 834 N.E.2d at 50. For the
remainder of this discussion, the Court will assume without deciding that the Modified D&B
Reports constituted a trade secret.

However, even assuming that the Modified D&B Reports are a trade secret, parties agree
that Defendant Boyer knew nothing about the misappropriated Modified D&B Reports until this
litigation began, and Defendant Black’s only alleged involvement was to tell Defendant Walker
to delete reports. (#62, ¶¶ 146-47; #66, ¶ 146). Defendants’ motion for summary judgment with
respect to Count II is therefore granted with respect to Defendant Boyer and Defendant Black.

Furthermore, as the Court noted previously, Plaintiff has not offered sufficient evidence
of actual damages, and so its remedy is limited to a reasonable royalty for the misappropriator’s
unauthorized use or disclosure of the trade secret. 765 ILCS 1065/4(a). Here, because
17

Defendants deleted the misappropriated Modified D&B Reports within weeks of
misappropriating them, and Plaintiff submits no evidence that Defendants profited from their
misappropriation, the Court finds that there is no basis for awarding a royalty. (See U.S. Gypsum
Co v. LaFarge N. Am., Inc., 508 F.Supp.2d 601, 627 (N.D. Ill. 2007) (finding no basis for
awarding a royalty where a defendant deleted misappropriated files within six weeks, and did not
use or disclose the information in the files)).

The Court concludes that, even if Defendants misappropriated a trade secret, there is no
basis for an award to Plaintiff. As such, the Court grants Defendants’ motion for summary
judgment with respect to Count II with respect to Defendant Walker and Defendant PLS.
5. Misappropriation of Confidential Information
Plaintiff brings a count for misappropriation of confidential information under Ohio Rev.
Code § 1333.81. Defendants seek summary judgment for Plaintiff’s Count III for
misappropriation of confidential information on several theories, including lack of proof of
damages and preemption.

The Court begins by noting that, although Plaintiff has alleged misappropriation of
confidential information under an Ohio statute, the Court will analyze the claim under Illinois
law. The factual basis for Plaintiff’s misappropriation of confidential information claim is
somewhat broader than its claim for misappropriation of trade secrets. In its response brief,
Plaintiff notes that Defendants Boyer and Walker sent confidential information to their home email and to Black while they were still employed by Tradesmen. The Court infers that Plaintiff
refers to incidents where Defendant Walker e-mailed Defendant Black Tradesmen’s workers’
compensation rates, district manager compensation rates, and various marketing materials. (#66,
¶¶ 256-58). Defendants admit these facts, but argue they are immaterial because Plaintiff has not
introduced any evidence showing such information is proprietary or confidential to Tradesmen.

Defendants argue that Plaintiff’s claim for misappropriation of confidential information
is preempted by the Trade Secrets Act. Among states that have adopted the Uniform Trade
18

Secrets Act, courts have come to different conclusions regarding the preemptive effect of the
statute, specifically whether the statute displaces the tort of misappropriation of confidential
information. See Burbank Grease Srvcs., LLC v. Sokolowski, 717 N.W.3d 781 (Wis. 2006)
(discussing conclusions reached in various jurisdictions).

In applying Illinois law, the Seventh Circuit has noted the paucity of Illinois case law on
the subject, and cautioned against reading ITSA’s preemption clause too broadly. Hecny
Transp., Inc. v. Chu, 430 F.3d 402, 404-05 (7th Cir. 2005) (stating “Illinois courts have had very
little to say about the effect of [ITSA’s preemption clause], perhaps because it is unimaginable
that someone who steals property, business opportunities, and the labor of the firm’s staff would
get a free pass just because none of what he filched is a trade secret.”). On the other hand, the
Seventh Circuit has also stated, with respect to a claim for use of secret information, “Illinois has
abolished all common law theories of misuse of such information . . . . Unless defendants
misappropriated a (statutory) trade secret, they did no legal wrong.” Composite Marine
Propellers, Inc v. Van der Woude, 962 F.2d 1263 (7th Cir. 1992).

A recent Illinois case brings some clarity to the issue. In Lawlor v. N. Am. Corp., 949
N.E.2d 155 (Ill. App. Ct. 2011), a company brought suit against a former employee for providing
confidential information to a competitor while still employed with the company. This
information included sales and profit information. However, rather than casting the claim as one
for misappropriation of confidential information, the claim was brought for breach of
confidentiality, and analyzed as a claim for breach of a fiduciary duty. The court noted that
“Illinois recognizes that an employee can be liable for a breach of fiduciary duty to her employer
when she discloses confidential business information to a competitor while still employed with
her employer.” Id. at 172. The court further differentiated this type of claim from one for
misappropriation for trade secrets: “While an enforceable restrictive covenant may protect
material which does not constitute a trade secret, an employer’s protection absent a restrictive
covenant is narrower and extends only to trade secrets . . . or near-permanent customer
relationships.” Id. (citing Cincinnati Tool Steel Co v. Breed, 482 N.E.2d 170 (Ill. App. Ct.
1985)). As such, where there is no fiduciary relationship, an employer cannot recover for
19

misappropriation of confidential information that does not amount to a trade secret. Where there
is a fiduciary relationship, arising from a restrictive covenant, an employer may be successful in
a claim for disclosure of confidential information under a theory of breach of fiduciary duty,
even if the information does not constitute a trade secret.

The facts of this case are largely analogous to the Lawlor case. As in Lawlor, individual
defendants transmitted information that did not rise to the level of a trade secret to a future
employer while still employed by Plaintiff. As such, under the facts of this case, it is
unnecessary for this Court to determine whether misappropriation of confidential information is
still a cognizable claim in Illinois. Here, the facts underlying Plaintiff’s claim for
misappropriation of confidential information give rise to a fiduciary claim, as the same factual
scenario was framed in Lawlor. This is especially appropriate in light of the Court’s earlier
finding that Plaintiff cannot establish consequential damages, and is only left with its damages
claim for salary forfeiture.

Therefore, the Court grants Defendants’ request for summary judgment with respect to
Count III. The Court will further consider the factual issues underlying Count III in its
discussion of Count VI.

6. Breach of Duty of Loyalty
Plaintiff brings a claim for breach of duty of loyalty, alleging that the individual
Defendants, while still employed by Plaintiff, competed with Plaintiff, diverted business
opportunities, and solicited customers away from Plaintiff. Additionally, as discussed above,
Plaintiff alleges that individual Defendants breached their duty of loyalty by misappropriating
trade secrets and confidential business information. Defendants respond that they did not
compete while still employed by Plaintiff, but only prepared to compete, which is not a breach of
any fiduciary duty. Defendants additionally argue that Plaintiff has not offered adequate proof of
damages. Plaintiff seeks forfeiture of Defendants’ salary and benefits for the time they competed
with Plaintiff.
20

To state a cause of action for breach of fiduciary duty, a plaintiff must allege and
ultimately prove (1) a fiduciary duty on the part of the [employee], (2) a breach of that duty,
(3) an injury, and (4) a proximate cause between the breach and the injury. Lawlor v. N. Am.
Corp. of Illinois, 949 N.E.2d 155, 172 (Ill. App. Ct. 2011) (quoting Alpha Sch. Bus Co. v.
Wagner, 910 N.E.2d 1134 (Ill. App. Ct. 2009)).

With respect to breach, an employee who attempts to solicit an employer’s customers for
a competing entity can be in breach of a duty of loyalty to the employer. Lawlor v. N. Am. Corp.
of Illinois, 949 N.E.2d 155, 172 (Ill. App. Ct. 2011). Additionally, an employee can be liable for
breach of fiduciary duty to his employer when he discloses confidential business information to a
competitor while still employed by her employer. Id. However, an employee may legitimately
go so far as to form a rival corporation and outfit it for business while still employed by the
prospective competitor. Cross Woods Prods., Inc. v. Suter, 422 N.E.2d 952, 957 (Ill. App. Ct.
1981).

With respect to injury and proximate cause, a plaintiff must show that a defendant’s
breach was a substantial factor leading to an injury. FDIC v. Bierman, 2 F.3d 1424, 1434 (7th
Cir. 1993). There must be a direct relation between the injurious conduct and the injury asserted.
Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 268 (1992) (discussing common law
proximate cause).

If a plaintiff establishes all the elements of a claim for breach of fiduciary duty, it may
seek complete forfeiture of any salary paid by the corporation to its fiduciary during a time when
the fiduciary was breaching his duty to the corporation. Levy v. Markal Sales Corp., 643 N.E.2d
1206, 1219 (Ill. App. Ct. 1994). Forfeiture is limited to the time of the wrongdoing. Gross v.
Town of Cicero, 619 F.3d 697, 712 (7th Cir. 2010).

Here, with respect to breach, the Court agrees with Defendants’ argument that there is no
evidence that Defendants breached a duty of loyalty by competing with Plaintiff while still
21

employed by Plaintiff. Defendants did not begin operating their competing business until
March 2010, several months after they left employment at Tradesmen. (#62, p. 11, ¶¶ 70-72
(undisputed facts)). However, Defendants Boyer and Walker each sent various e-mails with
Plaintiff’s confidential business information to themselves and to Defendant Black while still
employed by Plaintiff. (#66, ¶¶256-58). These documents included information regarding
workers’ compensation rates, district manager compensation rates, and marketing materials.
This constitutes a breach of their fiduciary duty as employees. Lawlor,
949 N.E.2d at 172.

However, Plaintiff has failed to advance any argument establishing that Defendants’
breach proximately caused an injury. Plaintiff has a burden to show that Defendants’ injurious
conduct, namely Defendants’ use of confidential information, was a substantial factor
contributing to an economic injury to Plaintiff, such as loss of business. The Court
acknowledges that it is possible that Defendants’ breach did cause an injury, given the
circumstances of this case; but, Plaintiff has simply failed to offer argument or evidence
establishing these essential elements of a claim for breach of duty of loyalty.

Because this Court finds that Plaintiff has failed to satisfy its burden to prove that it
suffered an injury proximately caused by Plaintiff’s breach of fiduciary duty, the Court grants
Defendants’ motion for summary judgment with respect to Count VI.

7. Civil Conspiracy
To succeed in a claim of civil conspiracy under Illinois law, the plaintiff must establish at
least one tortious act by one of the alleged co-conspirators in furtherance of the agreement that
caused an injury to plaintiff. Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 509 (7th
Cir. 2007). Plaintiff has not established tort liability for any of the Defendants for any count. As
such, this Court grants Defendants’ motion for summary judgment with respect to Count X.

22

IV. Summary
For the reasons discussed above, this Court hereby GRANTS Defendants’ Motion for
Summary Judgment (#62) in part and DENIES the motion in part. The Court grants Defendants’
motion for summary judgment with respect to all counts, with the exception of Count IV.
Count IV is dismissed as moot. The Clerk of the Court is directed to enter judgment in favor of
the moving Defendants and against Plaintiff on Plaintiff’s Complaint. Defendant’s Motion to
Deem Certain Facts Admitted (#79) is denied as MOOT.
ENTER this 7 th day of November, 2011.
s/ DAVID G. BERNTHAL
U.S. MAGISTRATE JUDGE

23