Marketing Werks, Inc. v. Fox et al
Filing
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Enter MEMORANDUM, OPINION AND ORDER: For the reasons stated in open court and herein, this Court denies Marketing Werks motion for a TRO. This is the written opinion for the oral ruling on 10/10/2013. Signed by the Honorable Virginia M. Kendall on 10/11/2013.Mailed notice(tsa, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
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MARKETING WERKS, INC.,
Plaintiff,
v.
BRIAN FOX and FOXSANO MARKETING,
INC.,
13 C 7256
Judge Virginia M. Kendall
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff Marketing Werks, Inc. filed a five-count verified complaint against Defendants
Brian Fox and Foxsano Marketing on October 9, 2013. According to the complaint, Marketing
Werks is a Chicago-based marketing firm that specializes in event production for clients.
Marketing Werks employed Fox as a senior account executive. In this role, Fox was primarily
responsible for Marketing Werks’ Indy Racing League (“IRL”) account and had access to
Marketing Werks’ confidential information and trade secrets related to the IRL account. On
August 4, 2013, Fox left his job as a senior account executive at Marketing Werks. After leaving
Marketing Werks, Fox continued to access his Marketing Werks email account. Although Fox
told his employer and colleagues that he was leaving Marketing Werks to work for a vendor, Fox
formed his own company, Foxsano, and submitted a bid for the IRL account. Both Marketing
Werks and Foxsano are final contenders for the 2014 preferred marketing contract from IRL,
which Marketing Werks expects IRL to award on October 11, 2013.
Marketing Werks alleges that Fox and Foxsano used Marketing Werks’ confidential
information and trade secrets in their effort to secure the IRL account. Marketing Werks’
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complaint alleges that: (1) Fox violated the Stored Communications Act; (2) Fox and Foxsano
violated the Illinois Trade Secrets Act; (3) Fox and Foxsano tortiously interfered with Marketing
Werks’ business expectations; (4) Fox breached his fiduciary duty to Marketing Werks; and (5)
Fox and Foxsano conspired to interfere with and steal the IRL account. On October 10, 2013,
Marketing Werks moved for a temporary restraining order (“TRO”) against Fox and Foxsano.
Marketing Werks relies on Fox’s violation of the Stored Communications Act, Fox and
Foxsano’s violations of the Illinois Trade Secrets Act, and Fox’s breach of his fiduciary duty in
its motion for a TRO. After hearing arguments from counsel for each side, this Court denied
Marketing Werks motion for a TRO.
LEGAL STANDARD
The standard for the issuance of a TRO is the same as that required to issue a preliminary
injunction. See Crawford & Co. Med. Ben. Trust v. Repp et al., No. 11 C 50155, 2011 WL
2531844, at *1 (N.D. Ill. June 24, 2011). One must demonstrate a likelihood of success on the
merits, that he or she will suffer irreparable harm absent injunctive relief, and that he or she has
no adequate remedy at law to obtain a preliminary injunction. Incredible Techs., Inc. v. Virtual
Techs., Inc., 400 F.3d 1007, 1011 (7th Cir. 2005). If the party seeking the TRO meets these
requirements, then this Court must balance the harm that party will suffer against the harm the
other party will suffer should this Court grant the TRO. See id. This Court must also consider the
public interest in granting or denying an injunction. See Ty, Inc. v. The Jones Group, Inc., 237
F.3d 891, 895 (7th Cir. 2001).
DISCUSSION
Marketing Werks has shown a likelihood of success on the merits of its Illinois Trade
Secrets Act claim. But the harm to Marketing Werks if it loses the IRL account to Foxsano is not
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irreparable. Nor is Marketing Werks without an adequate remedy at law. Consequently,
Marketing Werks has not shown that a TRO is appropriate in this case. Moreover, having
considered the balance of harms between the parties as well as the public interest, this Court
finds that the equitable considerations counsel against a TRO.
I.
Likelihood of Success on the Merits
A.
The Stored Communications Act
The Stored Communications Act makes it an offense to intentionally access “without
authorization a facility through which an electronic communication service is provided” to obtain
“access to a wire or electronic communication while it is in electronic storage in such system.”
18 U.S.C. § 2701(a). The Stored Communication Act permits a civil action in cases where the
offender acts with a knowing or intentional state of mind in view of Fox’s alleged purpose. 18
U.S.C. § 2707(a). Here, Marketing Werks has shown that Fox likely accessed Marketing Werks
server after August 4, 2013. What Marketing Werks has not shown, however, is that Fox
accessed any specific information that would suggest a knowing or intentional state of mind.
Marketing Werks also has not shown that Fox did not have authorization to access Marketing
Werks’ server. In short, Fox’s password still worked. Despite Marketing Werks claim that it
made a mistake when it failed to shut down Fox’s password after he left Marketing Werks, that
argument does not create a likelihood of success on the merits because there is no indication that
Marketing Werks rescinded its authorization.
B.
The Illinois Trade Secrets Act
The Illinois Trade Secrets Act protects information that “is sufficiently secret to derive
economic value . . . from not being generally known to other persons who can obtain economic
value from its disclosure or use and is the subject of efforts that are reasonable under the
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circumstances to maintain its secrecy or confidentiality.” 765 ILCS 1065/2(d). The Illinois Trade
Secrets Act protects against the actual or threatened misappropriation of trade secrets. PepsiCo,
Inc. v. Redmond, 54 F.3d 1262, 1267 (7th Cir. 1995). A plaintiff must prove the existence of a
trade secret and that the defendant misappropriated it. Id. at 1268. Here, Marketing Werks has
shown that its IRL account strategy for the 2014 contract year, which includes information
related to its pricing, budgets, market and consumer research, data, designs, plans, and materials,
is likely a trade secret similar to the trade secret recognized in PepsiCo. Marketing Werks has
also shown that it had policies in place prohibiting Marketing Werks’ employees from disclosing
information such as this.
In PepsiCo, a strategic plan that detailed plans to compete, financial goals, and strategies
for manufacturing, production, marketing, packaging, and distribution for the next three years
qualified as a trade secret. See id. at 1265, 1270. Therefore, an employee with knowledge of this
strategic plan could not work for a competitor because the employee would inevitably disclose
that strategic plan in the course of his duties, which would provide a substantial advantage to the
competitor. Id. at 1270. Here, Fox likely had similar information related to Marketing Werks’
2014 IRL account strategy. And Fox and Foxsano likely used that information to bid for the IRL
account despite Marketing Werks’ confidentiality policy. Therefore, Marketing Werks is likely
to prevail on its Illinois Trade Secrets Act claim.
C.
Breach of Fiduciary Duty
“To succeed in a claim for breach of fiduciary duty, a plaintiff must prove the following
elements: (1) a fiduciary duty exists; (2) the fiduciary duty was breached; and (3) the breach
proximately caused the injury of which the plaintiff complains.” Ball v. Kotter, 723 F.3d 813,
826 (7th Cir. 2013). A fiduciary relationship “may arise as a matter of law, such as between an
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agent and principal, or it may be moral, social, domestic, or personal.” Id. Here, Marketing
Werks has not shown that Fox solicited the IRL account before August 4, 2013. Marketing
Werks also has not shown that Fox owed Marketing Werks a fiduciary duty after Fox left
Marketing Werks. Therefore, Marketing Werks has not shown that it is likely to succeed on the
merits of its breach of fiduciary duty claim.
II.
Irreparable Harm
This dispute concerns the IRL account for 2014. At argument, Marketing Werks
explained that IRL has awarded its account to Marketing Werks for the past three years.
Marketing Werks also explained that Fox was primarily responsible for that account. Currently,
Marketing Werks and Foxsano are two of three firms vying for the 2014 IRL account. Because
there is a third company in play, it is not certain that either Marketing Werks or Foxsano will
receive the 2014 IRL account. Moreover, because IRL awards the account annually, Marketing
Werks will have to submit another bid next year. By then, the information Fox has will likely be
outdated. Consequently, any harm to Marketing Werks likely does not extend beyond one year.
Moreover, Marketing Werks has not shown that the IRL account is so large that its loss will
significantly affect Marketing Werks’ revenues. And to the extent that IRL prefers to deal with
Fox based on its dealings with him during the last three years, Fox has already left Marketing
Werks and no further harm can result in this regard. For these reasons, this Court finds that
Marketing Werks has not shown that it will suffer irreparable harm if this Court does not enjoin
Fox and Foxsano.
III.
Adequate Remedy at Law
This dispute concerns a fixed-length contract. Marketing Werks has at least three years of
data that shows the value of the IRL account to Marketing Werks. Should IRL award its account
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to Foxsano, the parties will know the value of the 2014 IRL account. To the extent that the value
of the IRL account to Foxsano differs to that of Marketing Werks, Marketing Werks’
confidential information at issue here will likely permit an expert to predict what the value of the
2014 IRL account to Marketing Werks would have been. For these reasons, this Court finds that
there is an adequate remedy at law.
IV.
Other Considerations
Even if Marketing Werks had met the threshold requirements for a TRO, other
considerations counsel against a TRO. In balancing the harm between the parties, this Court
applies a sliding scale approach in that the greater the likelihood of success on the merits, the less
the balance of harms need favor the plaintiff. See Ty, Inc. 237 F.3d at 895. This Court must
weigh all factors “sitting as would a chancellor in equity” to determine whether a TRO is
appropriate. See id. at 895-96. Here, the monetary loss to Marketing Werks will likely be a small
portion of its annual revenues. In contrast, Foxsano is a new enterprise whose continued
existence likely depends on the IRL account. But Marketing Werks’ likelihood of success on its
Illinois Trade Secrets Act claim mitigates any harm to Fox and Foxsano.
That said, other considerations counsel against a TRO. To be clear, the manner in which
Fox formed Foxsano and then bid for the IRL account, at least according to Marketing Werks, is
questionable. Yet Marketing Werks is not blameless as it failed to implement stronger
protections for its confidential information and trade secrets. Moreover, Marketing Werks failed
to restrict or investigate Fox’s computer use until it learned that Fox was going to be a
competitor.
Marketing Werks also delayed in seeking emergency relief. According to its pleadings,
Marketing Werks learned that Foxsano was a final contender for the 2014 IRL account on or
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about September 23, 2013, and started investigating Fox’s access to the Marketing Werks’ server
on or about September 25, 2013. On September 26, 2013, counsel for Marketing Werks sent a
letter to Fox demanding that Fox withdraw Foxsano’s IRL account bid. Marketing Werks then
chose to wait until the day before IRL was to award the 2014 account to seek a TRO. On
balance, the events leading up to this motion and the effects they have had or will have do not
warrant a TRO.
CONCLUSION
For the reasons stated in open court and herein, this Court denies Marketing Werks’
motion for a TRO.
________________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: October 11, 2013
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