Polyone Corporation v. Lu et al
Filing
43
MEMORANDUM Opinion and Order. Signed by the Honorable Manish S. Shah on 6/25/2015: Defendant Nantong Polymax's motion to dismiss for improper service 24 is denied. Defendants' motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim 27 is denied. [For further detail see attached order.] Notices mailed by Judicial Staff.(psm, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
POLYONE CORP.,
Plaintiff,
No. 14 CV 10369
v.
Judge Manish S. Shah
YUN MARTIN LU, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiff, an American plastics manufacturer, claims defendants conspired
with plaintiff’s former employee in an illegal effort to compete with plaintiff in the
manufacture and sale of TPEs—a soft plastic. Plaintiff’s five-count amended
complaint alleges state-law claims for misappropriation of trade secrets, tortious
interference with contract, tortious interference with prospective business relations,
and civil conspiracy. Plaintiff also claims multiple violations of the federal
Computer Fraud and Abuse Act.
Defendants have moved to dismiss (1) for improper service, (2) for lack of
subject matter jurisdiction, and (3) for failure to state a claim. For the following
reasons, all three motions are denied.
I.
Legal Standard
Federal courts are courts of limited jurisdiction; “they have only the power
that is authorized by Article III of the Constitution and the statutes enacted by
Congress pursuant thereto.” Transit Express, Inc. v. Ettinger, 246 F.3d 1018, 1023
(7th Cir. 2001) (internal quotation omitted). The burden of establishing that a
district court has proper jurisdiction lies with the plaintiff. Id. A defendant arguing
that a plaintiff has not met this burden may move for dismissal under Federal Rule
of Civil Procedure 12(b)(1). When reviewing a 12(b)(1) motion, “[t]he district court
may properly look beyond the jurisdictional allegations of the complaint and view
whatever evidence has been submitted on the issue to determine whether in fact
subject matter jurisdiction exists.” Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191
(7th Cir.1993) (internal quotation omitted).
“A motion under Rule 12(b)(6) tests whether the complaint states a claim on
which relief may be granted.” Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir.
2012). Under Rule 8(a)(2), a complaint must include “a short and plain statement of
the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). The
short and plain statement under Rule 8(a)(2) must “give the defendant fair notice of
what the claim is and the grounds upon which it rests.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007) (quotation omitted). Under the federal notice
pleading standards, a plaintiff’s “[f]actual allegations must be enough to raise a
right to relief above the speculative level....” Twombly, 550 U.S. at 555. Put
differently, a “complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 570). “In reviewing the sufficiency of a
complaint under the plausibility standard, [the court] accept[s] the well-pleaded
2
facts in the complaint as true....” Alam v. Miller Brewing Co., 709 F.3d 662, 665–66
(7th Cir. 2013).
II.
Background
Plaintiff PolyOne is one of the world’s leading providers of specialized
polymer materials, services, and solutions. [22] ¶ 12. Among its products are socalled TPEs—a type of soft plastic used in a variety of applications, including
toothbrush grips, synthetic wine corks, and cap liners. Id. ¶ 13. Plaintiff’s TPE
formulations are closely-guarded trade secrets. Id.
In 2005, defendants Tie-Liang Tyler Xu and Yun Martin Lu—a former
PolyOne employee—started a competing TPE company in China called Polymax
Nantong. Id. ¶¶ 14, 16. They were later joined by another former PolyOne
employee, defendant Thomas Castile. Id. ¶ 15.
In 2008, Lu began having conversations with non-party Joseph Kutka about
expanding Polymax to the United States and Europe. Id. ¶ 18. Kutka was a
PolyOne employee and thus subject to a non-compete agreement. Id. ¶ 19. Kutka’s
lawyer advised him that, if he were to leave PolyOne, the agreement would ban him
from working in the TPE area in North America for at least a year. Id. ¶ 19. Kutka
continued to develop his relationship with Lu and Polymax and later began to
actively help the company establish its American presence. Id. ¶ 20.
In 2010, Kutka, Castile, Lu, and Xu began conspiring to steal a large
customer away from PolyOne in the hopes of establishing Polymax’s foothold in the
United States. Id. ¶¶ 24–26. Castile contacted the customer and obtained a sample
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of PolyOne’s confidential pellets for analysis, even though agreements between
PolyOne and the customer prohibited such disclosure. Id. ¶ 30. Defendants
eventually persuaded the customer to do business with them instead of PolyOne. Id.
¶ 36.
By May 2013, Kutka had decided to leave PolyOne for Polymax TPE (the
American Polymax entity). Id. ¶ 48. In order to help his new company, Kutka
decided to download tens of thousands of PolyOne files, which contained
confidential trade secrets and other proprietary information. Id. Around this same
time, Kutka installed a document destruction program called CCleaner (though
plaintiff does not allege that Kutka ever used it). Id. ¶ 49.
Kutka left PolyOne in late 2013. Id. ¶ 61. PolyOne sued him and, on
February 27, 2015, a jury in the Northern District of Ohio returned a verdict finding
Kutka liable for breach of his employment agreement, breach of the duty of loyalty,
and spoliation of evidence. Id. ¶ 64. The defendants in this case—Lu, Castile, Xu,
Polymax TPE, and Nantong Polymax—were originally named in the Ohio action,
but later dismissed with the understanding that the case against them would be
refiled in the Northern District of Illinois. See [40-1].
Plaintiff’s five-count amended complaint alleges misappropriation of trade
secrets, tortious interference with contract, tortious interference with prospective
business relations, civil conspiracy, and violations of the Computer Fraud and
Abuse Act. Plaintiff suggests the CFAA claim gives this court federal-question
jurisdiction, and that, alternatively, jurisdiction arises from the parties’ diverse
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citizenships. See 28 U.S.C. §§ 1331–32. Defendants deny that subject matter
jurisdiction exists.
III.
Analysis
A.
Motion to Dismiss for Improper Service
Defendant Nantong Polymax has separately moved under Rule 12(b)(5) to
dismiss the amended complaint against it on the basis that it was not properly
served. Rule 4 provides two ways to serve a business. First, a plaintiff may
“deliv[er] a copy of the summons and of the complaint to an officer, a managing or
general agent, or any other agent authorized by appointment or by law to receive
service of process . . . .” Fed. R. Civ. Pro. 4(h)(1)(B). Second, a plaintiff may serve by
following state law, which in Illinois means “leaving a copy of the process with its
registered agent or any officer or agent of the corporation found anywhere in the
State . . . .” 735 ILCS 5/2-204.
Here, plaintiff purported to serve Nantong Polymax by serving Yun Martin
Lu. Nantong Polymax contends this attempt did not accomplish service, however,
because—though Lu is a member of Nantong Polymax’s Board of Directors—he is
not (1) “an officer, a managing or general agent,” or (2) “an officer or agent.” While
the company admits Lu was a founder of Nantong Polymax and serves as its
“Technology VP,” [41-1] ¶¶ 6–7, they insist he “is not an officer,” [41] ¶ 7.
Whether someone fits the roles at issue comes down to whether “it is
reasonable to assume that he or she will transmit notice of the commencement of an
action to his or her superiors.” 62B Am. Jur. 2d § 246 (2015); see also People v.
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Beaulieu Realtors, Inc., 144 Ill.App.3d 580, 507 (1st Dist. 1986); United Bank of
Loves Park v. Dohm, 115 Ill.App.3d 286, 291 (2d Dist. 1983). A person who founds a
company and then continues to be paid for serving as its Technology VP satisfies
this test. Not only was it probable that Lu would get the summons to the correct
people within the organization—that in fact happened.
Defendant Nantong Polymax’s motion to dismiss for improper service is
denied.
B.
Motion to Dismiss for Lack of Subject Matter Jurisdiction
Defendants say subject matter jurisdiction does not arise under 28 U.S.C.
§ 1332 because not all of the parties’ citizenships are diverse. Specifically, they
contend that Xu is domiciled in China and, as a result, is not a citizen of any
American state. See 28 U.S.C. § 1332(a)(3) (“The district courts shall have original
jurisdiction of all civil actions . . . between citizens of different States and in which
citizens or subjects of a foreign state are additional parties”) (emphasis added).
Defendants also believe that Polymax TPE is “stateless” because two of its
members, Xu and Robert Xinhai Hou, are domiciled in China. See Cosgrove v.
Bartolotta, 150 F.3d 729, 731 (7th Cir. 1998) (“the citizenship of an LLC for
purposes of the diversity jurisdiction is the citizenship of its members”); Dakuras v.
Edwards, 312 F.3d 256, 258 (7th Cir. 2002) (“Citizenship for purposes of the
diversity jurisdiction is domicile”).
Domicile has two elements: (1) physical presence or residence, and (2) an
intent to remain in the state. Midwest Transit, Inc. v. Hicks, 79 Fed. App’x 205, 208
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(7th Cir. 2003). “This test works well for cases in which both elements naturally
coincide, but it is becoming increasingly outdated as more people buy second or even
third residences in different states; in these situations, the test can turn into a
complex, even arbitrary, inquiry into an individual’s intent.” Id. “In more complex
cases, courts have tried to glean intent from the following factors: current residence,
voting registration and voting practices, location of personal and real property,
location of financial accounts, membership in unions and other associations, place of
employment, driver’s license and automobile registration, and tax payments.” Id.
The party seeking to establish jurisdiction bears the burden of proof. Id.
Here, everyone agrees Xu was domiciled in Illinois at least until he moved to
China in 2005, but the sides disagree about Xu’s status after that. The record
contains evidence favorable to both sides’ positions. On the one hand, Xu has
resided in China from 2005 to the present; he says it was his intention when he
moved “to make a home for [himself] in Ningbo City and stay there for a long period
of time in order to work [on] the business”; he purchased a residence in Nantong
City in 2008; his wife followed him to China in 2011; he does not own a car or any
personal property in the United States; he rents out the only American real estate
he owns; he has a Chinese driver’s license; and he says he has no present plans to
return to the United States. [28-1] ¶¶ 3, 5, 8, 11, 14, 28. All of these factors militate
in favor of Xu being domiciled in China.
At the same time, a number of factors cut in favor of Xu being domiciled in
Illinois. When he left in 2005, his wife and daughter remained living in the family
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home in Woodridge, Illinois; Xu still owns that home and continues to claim the
Illinois Homestead Exemption on it; when they were apart, Xu would return to visit
his family quarterly; he has not taken any steps to renounce or abandon his United
States citizenship; he has done nothing toward becoming a Chinese citizen (he is in
the country on a work visa); he files taxes in Illinois; he has an Illinois driver’s
license; he has a bank account in Illinois; he has medical insurance through the
Affordable Care Act and says he would return to the United States if he developed
health problems; and Xu would like to retire in three to five years and return to the
United State to be near his daughter (who lives in Chicago). Id. ¶¶ 2, 6, 7, 13, 15,
17, 22, 24, 25, 28, 29; [36] at 15.
Weighing these factors, the preponderance of the evidence shows that Xu
never intended to relocate to China permanently or indefinitely. Xu has always
planned to return to the United States—likely Illinois—for one reason or another.
Xu affirmatively stated he would like to move back in as few as three years when he
retires. By the same token, Xu has taken no steps toward becoming a Chinese
citizen and it is therefore unclear how he could remain once he stops working. Xu
has continuously maintained a presence in Illinois such that he would be able to
relocate back to the United States with ease. Although it is a close call, the weight
of the evidence favors finding Xu to be domiciled in Illinois.
Turning to Hou, defendants offer one paragraph from Lu’s affidavit in
support of the argument that Hou is domiciled in China ([28-4] ¶ 27]):
Polymax TPE has another member, Robert Xinhai Hou, who I
understand is a United States citizen domiciled in China. Hou was
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working for the Ford Motor Co. and living with his family in Michigan
until approximately 2009. He was transferred by Ford and moved to
Shanghai, China in 2009, with his family. He had a home in Michigan,
which he rented out when he moved. Hou remains in China with his
family. My understanding is that he anticipates that he may be
transferred by Ford to return to the United States and possibly
Michigan sometime in 2016, but he has no present plans or instruction
from Ford to move from Shanghai. For a United States address, he
uses his brother’s address in Massachusetts, but he does not live there.
I am unaware that he has any place in the United States to live.
To be admissible, an affidavit must be based on personal knowledge. FDIC v.
Oaklawn Apts., 959 F.2d 170, 175 & n. 6 (10th Cir. 1992) (holding that Rule 56
requirements of personal knowledge, competency and admissible facts apply to
affidavits submitted in support of or in opposition to motions to dismiss on
jurisdictional grounds). As plaintiff notes, Lu’s affidavit provides no foundation for
his ability to swear to facts about Hou’s domicile. The only connection Lu appears to
have to Hou is that both are associated with Polymax TPE. But that alone does not
support the conclusion that Lu has personal knowledge of Hou’s work arrangement
with his employer. Nor does Lu otherwise claim to have ever discussed Hou’s
intentions with him. Defendants have therefore offered no evidentiary basis—as
concerns Hou—to reject the amended complaint’s allegation that Polymax’s
members “are citizens either of foreign states or US states other than Ohio.” [22]
¶ 9.
Moreover, even if Paragraph 27 of Lu’s affidavit were based on personal
knowledge, the facts set forth show that Hou remained domiciled in Michigan. All
we know is that Hou was moved to China by his employer (an American company),
his family accompanied him, he kept his home in Michigan, and he may be
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transferred back to Michigan in 2016. These facts do not support the conclusion that
Hou intended or expected to abandon his domicile in Michigan and remain in China
permanently or indefinitely. See King v. Cessna Aircraft Co., 505 F.3d 1160, 1172–
73 (11th Cir. 2007) (noting rule that a citizen of a state does not lose his domicile
when his employer sends him abroad).
Defendants’ motion to dismiss for lack of subject matter jurisdiction is
denied.
C.
Motion to Dismiss for Failure to State a Claim
1.
Computer Fraud and Abuse Act
In Count V, plaintiff claims Kutka violated the Computer Fraud and Abuse
Act and that defendants are jointly liable as his co-conspirators. As a preliminary
matter, defendants say plaintiff is barred from bringing this claim because—in the
Northern District of Ohio action against Kutka—plaintiff voluntarily withdrew a
CFAA claim in response to Kutka’s pretrial motion for judgment on the pleadings.
Defendants believe this prior withdrawal should be construed as a dismissal with
prejudice under Rule 41. Plaintiff disagrees, suggesting instead that its prior
withdrawal was an implicit amendment under Rule 15(a). In support of this
position, plaintiff cites Hells Canyon Preservation Council v. United States Forest
Service, in which the Ninth Circuit held that an oral withdrawal of a claim in the
face of summary judgment was best understood as an oral amendment not resulting
in a final judgment on the merits (so long as the other side did not object to the
withdrawal and the court did not grant the motion as to the claim). 403 F.3d 683,
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685–90 (9th Cir. 2005). Hells Canyon rejected the argument that Rule 41 controlled
the situation, reasoning that it (at least Rule 41(a)) applies to entire actions—not
individual claims. Id. at 687–88. And even though the district court in Hells Canyon
did not explicitly say it was permitting a Rule 15(a) amendment, the Ninth Circuit
said the lower court had made clear that the claim was no longer before it when it
denied the motion as moot. Id. at 689–90.
The Seventh Circuit appears not to have addressed this issue, and Hells
Canyon is more persuasive than defendants’ distinguishable cases, in which (1)
plaintiffs attempted to bring suit against the same defendants, (2) plaintiffs
voluntarily dismissed claims after other claims had been rejected on the merits, (3)
courts dismissed entire actions under Rule 41, or (4) courts misapplied Rule 41(a) to
individual claims. See [38] at 6–8. None of these scenarios fits the case at bar.
Plaintiff’s unopposed prior withdrawal of its CFAA claim was an amendment under
Rule 15(a) and thus it was not a preclusive dismissal with prejudice.
To state a claim for a violation of the Computer Fraud and Abuse Act, a
plaintiff must allege (1) damage or loss; (2) caused by; (3) a violation of § 1030; and
(4) conduct involving one of the factors in § 1030(c)(4)(A)(i)(I)–(V). 18 U.S.C.
§ 1030(g). The statute defines “damage” as “any impairment to the integrity or
availability of data, a program, a system, or information.” Id. § 1030(e)(8). Courts in
this district have consistently interpreted this to mean “the destruction, corruption,
or deletion of electronic files, the physical destruction of a hard drive, or any
diminution in the completeness or usability of the data on a computer system.” See,
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e.g., Farmers Ins. Exch. v. Auto Club Grp., 823 F.Supp.2d 847, 852 (N.D. Ill. 2011)
(collecting cases). Downloading and emailing trade secrets, by contrast, does not
amount to “damage” under the CFAA. Id.
“Loss” is defined as “any reasonable cost to any victim, including the cost of
responding to an offense, conducting a damage assessment, and restoring the data,
program, system, or information to its condition prior to the offense, and any
revenue lost, cost incurred, or other consequential damages incurred because of
interruption of service.” 18 U.S.C. § 1030(e)(11).1 District courts in this circuit have
construed the term “loss” in different ways. Compare Farmers Ins. Exch., 823
F.Supp.2d at 854 (“[A] plaintiff can satisfy the CFAA’s definition of loss by alleging
costs reasonably incurred in responding to an alleged CFAA offense, even if the
alleged offense ultimately is found to have caused no damage as defined by the
CFAA.”) (citations omitted), with Von Holdt v. A–1 Tool Corp., 714 F.Supp.2d 863,
875–76 (N.D. Ill. 2010) (requiring “damage to the computer or computer system”
before a plaintiff can prove “loss” under the CFAA). The Seventh Circuit has not
addressed this question.
Plaintiff alleges Kutka caused it “damage” under the CFAA by engaging in
spoliation and installing a program called CCleaner on one of PolyOne’s protected
computers. [36] at 5. The amended complaint states only that, “On February 27,
2015, a jury in the Northern District of Ohio returned a verdict finding Kutka liable
for breach of his Employee Agreement with PolyOne, breach of his duty of loyalty to
The loss must be at least $5,000 in value for plaintiff to maintain a civil action under the
statute. 18 U.S.C. § 1030(g). The other factors of § 1030(c)(4)(A)(i) are not at issue here.
1
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PolyOne, and spoliation of evidence.” [22] ¶ 64. The pleading does not mention
spoliation anywhere else, giving no indication of how, if at all, the conduct
underlying the spoliation verdict related to Kutka’s downloading of plaintiff’s
confidential trade secrets in 2013. Plaintiff alleges nothing to support an inference
that Kutka’s litigation misconduct “impaired the integrity or availability of data, a
program, a system, or information” in connection with the downloads. See 18 U.S.C.
§ 1030(e)(8). Likewise, although plaintiff does allege Kutka installed a document
destruction program called CCleaner, it never alleges that Kutka actually used it to
destroy any files. This case thus differs from those in which courts found the use of
document destruction programs to constitute “damage” under the CFAA. See, e.g.,
International Airport Centers LLC v. Citrin, 440 F.3d 418, 421 (7th Cir. 2006);
Mobile Mar, Inc. v. Pakosz, 2011 WL 3898032 at *1 (N.D. Ill. Sept. 6, 2011).
Accordingly, plaintiff has not pled “damage.”
Still, the CFAA claim may survive if plaintiff sufficiently alleged “loss.”
Plaintiff says it satisfied this requirement with the following language: “As a result
of Kutka’s unauthorized access, PolyOne conducted internal examinations of its
computer systems and has hired an external computer forensic consultant to assess
what files were taken, an assessment of whether files were deleted, whether
computer ‘wiping’ software was used, and Kutka’s usage history of PolyOne’s
computers.” [22] ¶ 103. Plaintiff also alleges that it suffered losses in excess of
$5,000. Id. at ¶ 104.
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“Loss” includes the cost of “responding to an offense,” and the alleged offense
here was Kutka’s unauthorized access of PolyOne’s computers. See 18 U.S.C.
§ 1030(a)(2). I am persuaded that at the pleadings stage, it is sufficient for a
plaintiff to allege that it responded to an offense by examining its computer systems
and it incurred at least $5,000 in costs associated with that examination. See
Motorola v. Lemko Corp., 609 F.Supp.2d 760, 768 (N.D. Ill. 2009); Farmers Ins.
Exchange, 823 F.Supp.2d at 854. The facts may belie plaintiff’s claim—e.g., plaintiff
may have hired its consultant only for litigation—(and there are categories within
the statutory definition of loss that do require impairment to data or interruption of
service, allegations that are lacking here), but the complaint adequately puts
defendants on notice as to both the facts and legal theory plaintiff intends to prove.
Defendants argue for the first time in their reply brief that “[w]ithout direct
allegations of conduct that Defendants violated [the] CFAA, there is no civil claim
under [the] CFAA.” [38] at 8. But the case on which defendants rely did not involve
a civil conspiracy claim or allegations that the employee violated the CFAA in
furtherance of a conspiracy with the new employer. See Sysco Corp. v. Katz, 2013
WL 5519411 at *3 (N.D. Ill. Oct. 3, 2013). More to the point, plaintiff has not had an
opportunity to respond to this argument so I decline to dismiss Count V on that
basis.
Finally, defendants say it was insufficient for plaintiff to generally plead (1)
that it incurred more than $5,000 in losses, and (2) the tasks its consultant
performed. However, taking paragraphs 103 and 104 together, it is clear that
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plaintiff alleges it spent more than $5,000 on a consultant who “asses[ed] what files
were taken, . . . whether files were deleted, whether computer ‘wiping’ software was
used, and Kutka’s usage history of PolyOne’s computers.” [22] ¶¶ 103–04. These
allegations suffice.
On Count V, defendants’ motion to dismiss is denied.
2.
Civil Conspiracy
In Count IV, plaintiff claims defendants committed the tort of civil conspiracy
by agreeing with Kutka “to establish Polymax in the United States and allow it to
unfairly compete with PolyOne through unlawful means.” [22] ¶ 92. More
specifically, plaintiff alleges that “Defendants and Kutka orchestrated a scheme
where Kutka would breach his duty of loyalty to PolyOne, be hired by Polymax in
violation of his non-compete obligations with PolyOne, Kutka would stand aside and
not inform PolyOne of Polymax’s efforts to solicit and obtain PolyOne customers,
and Kutka would provide confidential information to Polymax regarding PolyOne’s
products and customers.” Id. Plaintiff claims defendants also undertook overt acts
in furtherance of this conspiracy, including planning the creation of Polymax in the
United States, encouraging Kutka to breach his duty of loyalty, and communicating
with Kutka about obtaining business from the customer it eventually stole. Id. ¶ 95.
To state a claim for civil conspiracy, a plaintiff must allege “(1) an agreement
between two or more persons for the purpose of accomplishing either an unlawful
purpose or a lawful purpose by unlawful means; and (2) at least one tortious act by
one of the co-conspirators in furtherance of the agreement that caused an injury to
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the plaintiff.” Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502, 509 (7th Cir.
2007). Defendants offer two arguments for dismissing this count. First, citing
Borsellino, they say plaintiff failed to plead conspiracy with the particularity
required by Rule 9(b). However, conspiracy need not be pled with particularity.
Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 26 n.4 (2d Cir. 1990). Rule
9(b) applied in Borsellino, not because a conspiracy was alleged, but because a
conspiracy to commit fraud was. See Borsellino, 477 F.3d at 509. No fraud is alleged
here.
Defendant next argues that under Illinois law, there can be no civil
conspiracy between a principal and an agent. See Buckner v. Atlantic Plant
Maintenance, Inc., 182 Ill.2d 12, 24 (1998). Since plaintiff alleges an agency
relationship between Kutka and defendants, the argument goes, the civil conspiracy
claim fails as a matter of law. Defendants acknowledge that plaintiff “fail[ed] to
allege when the damage occurred and whether [Kutka] was an agent or employee of
Polymax TPE at such times.” [28] at 9. Although this admission would seem to
dispose of defendants’ argument by permitting an inference that Kutka was not
plaintiff’s agent or employee, defendants suggest that since the CFAA claim invokes
the Pinkerton theory of liability, see Pinkerton v. United States, 328 U.S. 640 (1946),
it necessarily follows that plaintiff’s amended complaint pleads an agency
relationship.
Pinkerton liability is a type of vicarious liability based on agency principles,
see United States v. Manzella, 791 F.2d 1263, 1267 (7th Cir. 1986), but a complaint
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that alludes to a Pinkerton theory does not necessarily plead an intracorporate
conspiracy that is prohibited by Illinois law. In theory, an individual who is not
employed by a company as its agent can conspire with that company and then, as a
matter of conspiracy law, become vicariously liable for the acts committed by coconspirators.2 If Kutka was defendants’ agent, then the civil conspiracy claim will
fail. At this stage, however, the allegations of the complaint do not preclude the
possibility that a conspiracy existed at a time when Kutka was not defendants’
agent. Defendants are sufficiently on notice that plaintiffs are pursuing a theory of
conspiracy, one that necessarily will require plaintiff to prove that Kutka was not
defendants’ agent (in the corporate sense).
Defendants point to a number of other allegations they believe show that
Kutka was defendants’ agent. But, as they initially noted, it is not apparent from
the face of the amended complaint that Kutka was their agent at the time the
alleged overt acts occurred. Construing this ambiguity in the light most favorable to
plaintiff, dismissal is unwarranted.
On Count IV, defendants’ motion to dismiss is denied.
This assumes that Pinkerton liability is an available theory of liability for civil actions—
under Illinois law, the civil conspiracy tort effectively accomplishes the same result by
requiring some tortious overt act to have been committed in furtherance of the conspiracy.
See Adcock v. Brakegate, Ltd., 164 Ill.2d 54, 63 (2009) (the gist of a civil conspiracy claim is
not the agreement itself, but the tortious acts performed in furtherance of the agreement).
Extending Pinkerton to civil causes of action may be unnecessary.
2
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IV.
Conclusion
Defendant Nantong Polymax’s motion to dismiss for improper service [24] is
denied. Defendants’ motion to dismiss for lack of subject matter jurisdiction and for
failure to state a claim [27] is denied.
ENTER:
___________________________
Manish S. Shah
United States District Judge
Date: 6/25/15
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