Allied Benefit Systems, Inc. v. Ramirez
Filing
28
Enter MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 9/2/2015. Mailed notice (jdh)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ALLIED BENEFIT SYSTEMS,
INC.,
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)
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Plaintiff,
v.
DENNIS RAMIREZ,
Defendant.
No. 15 C 1909
MEMORANDUM OPINION AND ORDER
Dennis Ramirez (“Ramirez”) has moved to dismiss this breach
of contract suit by his former employer, Allied Benefit Systems,
Inc. (“Allied”), on the ground that the amount in controversy is
less than the $75,000 statutory minimum for invoking a federal
court’s diversity jurisdiction.
See 28 U.S.C. § 1332(a).
Because Ramirez has challenged Allied’s factual allegations
relating to the amount in controversy, Allied must “prove those
jurisdictional facts by a preponderance of the evidence.”
Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir.
2006); see also Back Doctors, Ltd. v. Metro. Prop. and Casualty
Ins. Co., 637 F.3d 827, 829-30 (7th Cir. 2011).
For the reasons stated below, I find that neither Allied’s
complaint nor its affidavits establish that the amount in
controversy exceeds $75,000.
I therefore grant Ramirez’s motion
to dismiss.
1
I.
Allied is a third party administrator of health and welfare
plans.
Allied hired Ramirez in 2003 and promoted him several
times within the company’s billing department.
1 at Ex. B (“Edders Declar.”) at ¶ 13.
See Dkt. No. 23-
Ramirez received
extensive training on how to generate client reports from
“thirty-five highly specialized databases” created by
integrating the QicLink software suite with Microsoft Access.
Id. at ¶¶ 6-7.
Allied’s director of billing estimates that she
spent “hundreds of hours” training Ramirez during his tenure
with the company.
Id. at ¶ 16.
In September 2014, Allied promoted Ramirez to a supervisory
position in the billing department.
Id. at ¶ 17.
In this new
position, Ramirez was responsible for (1) preparing, auditing,
and posting client statements; (2) generating customized client
invoices and reports; (3) resolving billing-related issues; (4)
posting accounts receivable; and (5) ensuring that Allied’s
databases remained integrated and up to date.
Id. at ¶ 18.
Ramirez had access to “confidential information” about
Allied’s clients, their plan members, and how to create
databases and generate client reports.
Id. at ¶ 19.
Because of
Ramirez’s access to this information, Allied required him to
sign a Confidentiality, Non-Solicitation, Intellectual Property
and Computer Security Agreement (“Agreement”).
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Am. Compl. at ¶
21.
Among other restrictions, the Agreement prohibited Ramirez
from working for Valence Health or any of its related companies
for six months after leaving Allied.
Id.
Valence Health is one
of Allied’s direct competitors and allegedly has a history of
poaching Allied employees after they have been trained.
¶ 23.
Id. at
The Agreement also prohibited Ramirez from disclosing or
using any of Allied’s “confidential information”--a
contractually defined term--for any reason unrelated to his
employment with Allied.
Id. at ¶ 24.
In January 2015, Ramirez resigned from Allied and began
working for Valence Health in an unspecified capacity.
25, 27.
Id. at ¶
Allied notified Ramirez in writing that his employment
with Valence Health violated the Agreement.
Ramirez did not respond.
Id. at ¶ 28.
Id. at ¶ 28.
In its first amended complaint, Allied contends that
Ramirez’s employment with Valence Health violates an express
prohibition in the Agreement and will inevitably result in the
disclosure and/or use of “confidential information” in further
violation of the Agreement.
Id. at ¶¶ 32-33.
II.
“[A] proponent of federal jurisdiction must, if material
factual allegations [relating to the amount in controversy] are
contested, prove those jurisdictional facts by a preponderance
of the evidence.”
Meridian, 441 F.3d at 543; see also Enbridge
3
Pipelines (Ill.) LLC v. Moore, 633 F.3d 602, 605 (7th Cir. 2011)
(noting that a “bare denial” of jurisdictional facts is
sufficient to “put the plaintiff to his proof”).
Allied must
support contested factual allegations relating to the amount in
controversy with “admissible evidence,” such as affidavits.
Meridian, 441 F.3d at 542-43; see also McMillian v. Sheraton
Chicago Hotel & Towers, 567 F.3d 839, 845 (7th Cir. 2009)
(dismissing case for lack of subject matter jurisdiction where
“plaintiffs rest[ed] their entire argument concerning amount in
controversy on the allegations contained in their complaint” and
did not submit “competent proof”).
“Although the proponent of jurisdiction may be called on to
prove facts that determine the amount in controversy...once
these facts have been established the proponent's estimate of
the claim's value must be accepted unless there is ‘legal
certainty’ that the controversy's value is below the threshold.”
Id. at 541 (quoting St. Paul Mercury Indemnity Co. v. Red Cab
Co., 303 U.S. 283, 289 (1938)).
Allied argues that the stakes in this case are at least
$75,000 because (1) Allied has lost the value of Ramirez’s
training and experience and must hire a replacement; (2) Ramirez
will inevitably disclose Allied’s confidential information
during his employment with Valence Health; and (3) enjoining
Ramirez from working at Valence Health and disclosing or using
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any confidential information is worth at least $75,000 standing
on its own.
A.
Allied’s first argument about its lost investment in
Ramirez and the cost of replacing him is a non-starter.
Allied
would have suffered the same losses and incurred the same
replacement costs upon Ramirez’s departure from the company even
if he had complied with every term of the Agreement.
See
Integrated Genomics, Inc. v. Kyrpides, No. 06 C 6706, 2008 WL
630605, at *6 (N.D. Ill. Mar. 4, 2008) (Lefkow, J.) (“damages
that would have resulted from [employee’s] departure to work at
McDonald's [rather than for a competing genome research company]
cannot establish the amount in controversy against her for the
claims at issue in this case”).
Allied makes a related argument that Valence Health gained
a competitive advantage when it hired Ramirez because he is an
experienced employee who did not need extensive training.
This
argument is based on two assumptions with no evidentiary support
in Allied’s complaint or affidavits: (1) that Ramirez holds a
job at Valence Health that allows him to draw on his previous
work experience at Allied and obviated or reduced the need for
new employee training and (2) that Valence Health has realized
at least $75,000 in cost savings because of Ramirez’s prior
experience.
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B.
Allied has not identified any “confidential information”
that Ramirez has actually disclosed or used in violation of the
Agreement.
Instead, Allied argues that Ramirez will inevitably
disclose and/or use some of the “confidential information” he
learned during his employment with Allied in a way that will
cause at least $75,000 in damage.
Allied relies on PepsiCo, Inc. v. Redmond, 54 F.3d 1262
(7th Cir. 1995), in support of its inevitable disclosure or use
argument.
In that case, the Seventh Circuit affirmed the entry
of a preliminary injunction against a former high-ranking
PepsiCo employee, William Redmond (“Redmond”), who had accepted
a position with Quaker, one of PepsiCo’s competitors in the
beverage market.
The district court did not abuse its
discretion in concluding that Redmond would inevitably disclose
and use PepsiCo’s trade secrets--including its marketing and
distribution plans--during his employment with Quaker in a way
that would allow Quaker to stay one step ahead of its
competitor.
Id. at 1271.
Neither Allied’s complaint nor its evidentiary submissions
establish that Ramirez and Redmond are similarly situated.
PepsiCo demonstrated that Redmond had accepted a job at Quaker
where his knowledge of PepsiCo’s marketing and distribution
plans would allow Quaker to gain a strategic advantage in the
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beverage market.
In contrast, Allied has not established what
position Ramirez currently holds at Valence Health.
Without
knowing anything about Ramirez’s current job at Valence Health,
I cannot say that he poses a strategic threat to Allied who will
inevitably disclose and/or use Allied’s confidential
information.
Assuming for the sake of argument that Ramirez works in
Valence Health’s billing department in a job similar to the one
he held at Allied, I would still need more factual support
before relying on the inevitable disclosure doctrine to
determine the amount in controversy.
“[T]he mere fact that a
person assumed a similar position at a competitor does not,
without more, make it ‘inevitable that he will use or disclose
... trade secret information[.]’”
Id. at 1269 (quoting AMP,
Inc. v. Fleischhacker, 823 F.2d 1199, 1207 (7th Cir. 1987)).
Allied’s vague references to “confidential information”
that Ramirez might exploit at Valence Health also stands in
stark contrast to the evidence that PepsiCo presented about
Redmond’s access to a veritable “playbook” about how the company
intended to market and distribute its products.
Id. at 1270.
Ramirez’s knowledge of how to use two integrated databases and
generate customized client reports falls in the category of
“general skills and knowledge acquired during his tenure with
[Allied]” that he is “free to take with him” to another
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employer.
AMP, 823 F.2d at 1202 (applying Illinois common law).
The only confidential information that Ramirez had access to and
might conceivably exploit at Valence Health are Allied’s billing
rates and other “sensitive client and employee/member data.”
Edders Declar. at ¶ 8.
Once again, however, I cannot say that
Ramirez will inevitably use or disclose this information--much
less that such use or disclosure will harm Allied or benefit
Valence Health to the tune of $75,000 or more--without knowing
anything about Ramirez’s job at Valence Health.
In sum, Allied has neither alleged nor proved that Ramirez
will inevitably disclose or use Allied’s confidential
information during his employment with Valence Health in a way
that will be worth at least $75,000 to either company.
C.
The parties’ dispute over subject matter jurisdiction boils
down to whether the injunctive relief Allied seeks against
Ramirez is worth at least $75,000, measured from the perspective
of either party.
See In re Brand Name Prescription Drugs
Antitrust Litigation, 123 F.3d 599, 609 (7th Cir. 1997) (value
of injunction may be measured from plaintiff’s or defendant’s
standpoint for purposes of determining whether amount in
controversy exceeds statutory threshold).
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Allied seeks to enjoin Ramirez from (1) working at Valence
Health for six months and (2) using and/or disclosing Allied’s
confidential information.
See Am. Compl. at 7.
The value of enjoining Ramirez from working at Valence
Health for six months is unknown because Allied has not said
anything in its complaint or affidavits about his current salary
at Valence Health or his ability to find employment elsewhere. 1
“[I]t is entirely speculative that [Ramirez] would be out of
work long enough to deprive him of more than $75,000 of
anticipated income from [Valence Health]” if I were to enjoin
him from working there for six months.
Open Text, Inc. v.
Ackerman, 02 C 6092, 2002 WL 31748839, at *4 (N.D. Ill. Dec. 9,
2002) (Kennelly, J.); see also Kohler Co. v. Albright, No. 3:03CV-0609 RM, 2003 WL 22697213, at *4 (N.D. Ind. Nov. 12, 2003)
(dismissing breach of contract suit where former employer “only
offer[ed] speculation” about income former employee would lose
if court granted injunctive relief).
Allied’s only remaining hope of establishing subject matter
jurisdiction turns on the value--measured from either party’s
1
Allied has submitted evidence that Ramirez’s salary at the time
of his resignation was $48,000. Nicholas Declar. at ¶ 8. The
value of enjoining Ramirez from working at Valence Health for
six months would exceed $75,000 only if (1) his salary had more
than tripled to $150,000 per year and (2) he could not find
other employment while the injunction was in place. Allied has
not provided support for either assumption.
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perspective--of enjoining Ramirez from using and/or disclosing
confidential information.
Allied says that it has invested more
than $500,000 developing its databases and generated more than
$20 million in revenue in 2014.
See Edders Declar. at ¶¶ 11-12.
The amount of money Allied spent developing its databases is a
red herring.
The issue is whether Allied will incur at least
$75,000 in lost revenue--or Valence Health will realize at least
$75,000 in cost savings--if Ramirez discloses and/or uses the
confidential information stored in Allied’s databases to which
he had access and committed to memory.
The qualifier “committed
to memory” is necessary because Allied has not alleged that
Ramirez made a copy of any confidential information before his
resignation.
A bare statement about Allied’s revenues in 2014 is not
enough to infer that Ramirez retained enough confidential
information in his memory to cause a $75,000 drop in Allied’s
revenues or Valence Health’s costs.
After all, Allied has not
even identified what job Ramirez holds at Valence Health--let
alone how he could exploit Allied’s confidential information in
a way that causes $75,000 in lost revenues or cost savings.
III.
Ramirez’s motion to dismiss is GRANTED for the reasons
stated above.
Allied has already filed one amended complaint
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attempting to cure jurisdictional defects.
This case now
belongs in state court.
ENTER ORDER:
_____________________________
Elaine E. Bucklo
United States District Judge
Dated: September 2, 2015
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