Elizabeth Berg v. CI Investments, Inc

Filing 128

MEMORANDUM Opinion: CI's motion for partial summary judgment on Counts IV and V of Berg's Second Amended Complaint is granted. CI's motion to strike the affidavit of Hamilton and additional statements 46-48, which rely on the affidavit, is also granted. All other motions are denied. It is so ordered. Status hearing set for 5/2/2017 at 9:30 AM. Signed by the Honorable Charles P. Kocoras on 4/7/2017. Mailed notice(vcf, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ELIZABETH BERG as trustee for the )
bankruptcy estate of John Wiesner,
)
)
Plaintiff,
)
)
v.
)
)
CI INVESTMENTS, INC.,
)
)
Defendant.
)

15 C 11534
Judge Charles P. Kocoras

MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
Now before the Court is Defendant CI Investments, Inc.’s (“CI”) motion for
partial summary judgment on Counts IV-V of Plaintiff Elizabeth Berg’s (“Berg”)
Second Amended Complaint pursuant to Federal Rule of Civil Procedure 56; Berg’s
motion to strike certain paragraphs of Claudio Bufi’s (“Bufi”) Declaration pursuant to
Federal Rule of Civil Procedure 12(f); CI’s motion to strike Berg’s Local Rule 56.1
Materials pursuant to Federal Rule of Civil Procedure 12(f); and CI’s motion to strike
the affidavit of Ian Hamilton (“Hamilton”) and additional statements 46-48, which
rely on the affidavit pursuant to Federal Rule of Civil Procedure 12(f). For the
following reasons, the Court grants in part and denies in part the motions presented.

BACKGROUND
The following facts taken from the record are undisputed, except where
otherwise noted. CI, a Canadian corporation, runs one of the largest investment fund
companies in Canada. In 2009, CI began developing a new line of funds called the
G5|20 mutual funds which were the first mutual funds of their type in Canada. The
G5|20 funds were unique because they guaranteed to pay out for twenty years and that
guarantee was backed by the Bank of Montreal (“BMO”). To reduce the cost of
obtaining the guarantee from BMO, CI decided to contract with a third party to
provide risk management overlay services (“hedging services”). This reduced the risk
that the fund’s net assets would decline to such an extent due to market volatility so as
to trigger a transfer of the fund’s assets from CI to a protection portfolio managed by
BMO. The head of the G5|20 fund project was Claudio Bufi, Vice President of
Product Development and management at CI. Bufi began discussions in 2009 with
Charles Gilbert (“Gilbert”), founder and co-owner of Nexus Risk Management, Inc.
(“Nexus”), regarding the possibility of engaging Nexus to provide hedging services
for the G5|20 fund.

In 2011, Nexus made several presentations at CI’s offices

regarding its ability to provide the hedging services for the G5|20 fund and in late
2011, CI decided to go forward with Nexus. At the time CI decided to go forward
with Nexus, Nexus’s risk management hedging strategy was not tailored to the G5|20
fund’s requirements and required extensive modification. The first G5|20 fund went

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live on October 1, 2013. The G5|20 fund that launched October 1, 2013, was the first
fund in the G5|20 fund series. A new fund in the series was created each quarter.
A.

Wiesner’s Involvement with Nexus
Gilbert met John Wiesner (“Wiesner”) in late 2008 or in 2009. At the time,

Wiesner was a risk management strategist for the Chicago Board Options Exchange
(“CBOE”). On March 17, 2010, Nexus contacted Wiesner for his expertise on an
hourly payment basis as an independent contractor. Parties dispute when Wiesner
became a Nexus employee. According to CI, Wiesner became a Nexus employee in
November 2010.

However, Berg contends that Wiesner was an independent

contractor for Nexus from March 2010, until August 24, 2012, and did not become an
employee until August 24, 2012 – when Wiesner signed an employment contract with
Nexus. Berg further claims that Wiesner stopped working for Nexus and focused only
on his work as an independent contractor for the CBOE in late October or in early
November 2012. According to Berg, Wiesner returned to his employment at Nexus
on February 28, 2013. CI disputes Berg’s timeline, and maintains that Wiesner was
an employee from November 2010 until his termination from Nexus on November 12,
2013.
Wiesner had many different duties at Nexus and he worked on various software
programming projects for several Nexus clients, including CI. Some of the duties
Wiesner engaged in, aside from programming, included preparing presentations for
potential clients, and creating materials for hedging and risk management courses that
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Nexus taught.

Wiesner, as president of Nexus’s Chicago office and managing

director, negotiated, drafted, and signed several contracts on behalf of Nexus
including the lease for Nexus’s Chicago office, errors and omissions insurance (“E&O
contract”), and contracts with data providers.

Parties disagree over Wiesner’s

involvement in negotiating and drafting contracts between Nexus and CI, such as the
January 2013 Loan Agreement and the parties’ June 2013 Sub-Advisory Agreement.
B.

Development of the Hedging Strategy and Nexus Software
From 2011 through October 2013, Wiesner worked to develop the hedging

strategy and software. Wiesner was joined in his efforts by various Nexus employees
including Gilbert, Jonathan Hede, Patrick Dunham, and Gilbert LaCoste.

CI

employees Bufi, Ryan Son-Kee, and John Murray also worked on the project. The
parties dispute the type of software created and when it was created. CI claims
Nexus, including Wiesner, created software that consisted of a C++ software program
and several Excel spreadsheets known as the “Giant Spreadsheet,” the “Realized
Historical VIX,” the “Weez-a-Tron,” the “Validation Tool,” and the “Live Trading
Sheet” (the C++ program and spreadsheets are referred to collectively as the “Nexus
Software”). According to CI, the Giant Spreadsheet was created in March 2011. It
contained the hedging strategy for the G5|20 fund and served as the first prototype of
the Nexus Software. Beginning sometime between March 2011 and June 2012 and
continuing until the launch of the G5|20 fund, CI received a prototype of the Nexus
Software. Nexus would make changes to the software based on CI’s response and
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send it back to CI for further testing and feedback. Nexus and CI employees held
telephonic or in-person meetings nearly every week to discuss the software and the
changes needed to make the hedging strategy useable. Wiesner worked on the CI
project at Nexus’s offices at least part of the time and communicated with CI through
his Nexus email account.
In June 2013, CI and Nexus executed the Sub-Advisory Agreement which
memorialized the terms of CI’s engagement of Nexus and set forth each party’s
obligations and representations. The parties spent more than six months negotiating
and drafting the agreement. While the parties dispute Wiesner’s involvement in
drafting and negotiating the Sub-Advisory Agreement, it is not disputed that Wiesner
signed the Sub-Advisory Agreement on Nexus’s behalf.

The Sub-Advisory

Agreement expressly represented that Nexus owned the Nexus Software. CI contends
that the agreement also discussed the parties’ Software License Agreement, which
granted CI a license to use the software. Berg disagrees.

In addition to executing

these documents, CI received a copy of the Nexus Software source code. Providing
CI with the software license was meant to prevent interruption in hedging services and
ensure that the G5|20 would continue to receive such services if Nexus was unable to
provide them in the future. CI argues that Wiesner raised no objections to these
documents or providing the source code to CI.
In August 2013, Wiesner prepared and delivered the final pieces of the Nexus
Software to CI in the form of two Excel spreadsheets known as the “Validation Tool”
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and “Live Trading Sheet.” CI claims the Validation Tool’s only use occurred in
August 2013 when Wiesner used it to identify differences between the hedging trades
called for by the C++ program and those called for by the Giant Spreadsheet.

Nexus

used the Live Trading Sheet in conjunction with the C++ program to verify the trades
it made each day. Nexus would send a copy of the Live Trading Sheet to CI each day
after the G5|20 fund went live so that CI could verify that Nexus had properly
executed the hedging strategy.
C.

Wiesner Terminated From Nexus
Wiesner and Gilbert’s relationship began to deteriorate in the latter part of 2012

and ultimately resulted in Nexus terminating Wiesner in November 2013. In late
2012, Wiesner sought to renegotiate his terms with Nexus. The parties disagree as to
the terms of any deal they reached during their business relationship. According to
Berg, on July 9, 2013, Wiesner, Gilbert, and Hede executed a “Memorandum of
Understanding” under which Wiesner would receive 20% ownership in Nexus in
exchange for the use of his intellectual property. In contrast, CI claims that in early
2012, Gilbert, Hede, and Wiesner had negotiated an agreement to make Wiesner a
20% co-owner of Nexus in exchange for his sweat equity and any intellectual property
he owned that Nexus used in its business. CI further claims that Wiesner opted to
receive options for his 20% of Nexus instead of an immediate ownership interest for
tax purposes. By taking options, he could delay paying taxes on the ownership
interest until Nexus began earning fees from CI after the launch of the G5|20 fund.
6

According to CI, by September 2013, Wiesner had unilaterally decided to form
his own company and reclaim his intellectual property from Nexus. Wiesner then
drafted a purported license agreement licensing his intellectual property to Nexus for a
fee.

He signed the purported license agreement for both Nexus and himself.

However, Gilbert never agreed to the license agreement that Wiesner signed on his
behalf. CI maintains they were unaware of Wiesner’s claim to own part of the Nexus
Software at this time. CI argues that the first time they learned Wiesner claimed to
own any part of the Nexus Software was on September 19, 2013, in an email Wiesner
sent to Bufi. This email came a year after delivering the first prototype of the
software to CI and a month after delivering the final pieces of the software. On
November 12, 2013, Gilbert terminated Wiesner.
D.

CI Terminates Nexus
CI and Nexus’s relationship also began to strain. In January 2013, CI made a

$500,000 loan to Nexus so Nexus could pay its employees and overhead costs to
finish developing the hedging strategy and software. In January 2014, CI made a
$1.75 million purchase of Nexus stock to allow Nexus to remain viable. During this
time, the quality of Nexus’s services declined and CI became doubtful that Nexus
could remain solvent. For that reason, CI decided to replace Nexus. In November
2014, CI terminated Nexus’s services for the G5|20 fund.
As part of the termination, and in addition to the monthly risk management fees
that CI paid Nexus, CI paid Nexus a $100,000 termination fee. CI also acquired the
7

Nexus Software as part of the termination, in part, for accounting purposes so that CI
could treat its $2.25 million financing of Nexus (the $500,000 loan and $1.75 million
stock purchase) as an asset purchase to be amortized over a period of ten years—
instead of recognizing the entire $2.25 million as a loss in the fourth quarter of 2014.
At the same time, CI licensed the software back to Nexus for $1.
LEGAL STANDARD
I.

Motion to Strike
A motion to strike is governed by Federal Rule of Civil Procedure 12(f). Under

Rule 12(f), upon a motion by a party a court may strike from any pleading “any
insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.”
Granting a motion to strike is a drastic measure. McDowell v. Morgan Stanley & Co.,
645 F. Supp. 2d 690, 693 (N. D. Ill. 2009). Furthermore, a motion to strike at the
summary judgment stage is disfavored and generally unnecessary, because the Court
may only consider admissible evidence when ruling on a motion for summary
judgment. Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009). For those reasons,
Courts generally do not grant motions to strike unless the defect in the pleading causes
some prejudice to the party bringing the motion. See Affiliated Capital Corp. v. Buck,
No. 1994 WL 691189, at *4 (N. D. Ill. Dec. 2, 1994).

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II.

Summary Judgment
A motion for summary judgment requires the Court to construe all facts and to

draw all reasonable inferences in favor of the non-movant. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). 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). A genuine issue of
material fact arises where a reasonable jury could find, based on the evidence of
record, in favor of the non-movant. Anderson, 477 U.S. at 248. In ruling on a motion
for summary judgment, the Court considers the whole record. See Id. at 255–56.
Northern District of Illinois Local Rule 56.1 requires the “party moving for
summary judgment to include with that motion ‘a statement of material facts as to
which the moving party contends there is no genuine issue and that entitles the
moving party to a judgement as a matter of law.’” Ammons v. Aramark Unif. Servs.,
Inc., 368 F.3d 809, 817 (7th Cir. 2004) (quoting N.D. Ill. R. 56.1(a)(3)). “The movant
bears the initial burden of showing that no genuine issue of material fact exists.”
Genova v. Kellogg, 2015 WL 3930351, at *3 (N.D. Ill. June 25, 2015). “The burden
then shifts to the nonmoving party to show through specific evidence that a triable
issue of fact remains on issues on which the movant bears the burden of proof at
trial.” Id. The non-moving party must respond to the movant’s Local Rule 56.1(a)(3)
statement and may not rest upon mere allegations in the pleadings or upon conclusory
statements in affidavits. N.D. Ill. R. 56.1(b); see Celotex Corp. v. Catrett, 477 U.S.
9

317, 324 (1986). The non-movant must support her contentions with documentary
evidence of specific facts that demonstrate that there is a genuine issue for trial.
Celotex, 477 U.S. at 324.
DISCUSSION
I.

Motions to Strike
We first address the various motions to strike, as their resolutions will affect the

universe of facts available for our consideration.
A.

Berg’s Motion to Strike Certain Paragraphs of Claudio Bufi’s Declaration
Berg moves to strike paragraphs 4, 11, 12, 13, 15, 16, 17, 24, 26, 28, 29, 30, 31,

32, 33, 34, 35, 38, and 44 from Bufi’s Declaration. According to Berg, this Court
should strike these paragraphs because they: (i) contradict Bufi’s deposition
testimony; (ii) state legal conclusions by referring to Wiesner as a Nexus employee; or
(iii) constitute conclusory opinions. As stated at the December 22, 2016 motion
hearing, Bufi’s two varying statements create a “credibility issue” for the Court.
Instead of striking Bufi’s statements, the appropriate course of action is for the Court
to examine the evidence and make a determination “whether or not one or another is
true or whether they are incompatible or compatible.” Additionally, while Berg
disagrees with Bufi’s categorization of Wiesner’s employment status, she has had an
opportunity to challenge those assertions in her response brief and Local Rule 56.1
materials. The Court will examine the facts presented and decide if Bufi’s statements
regarding Wiesner’s employment status are supported or contradicted by the record.
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Because these are not circumstances that merit the drastic relief that Berg seeks, the
motion to strike is denied.
B.

CI’s Motion to Strike Berg’s Local Rule 56.1 Materials
CI requests this Court to disregard Berg’s Local “Rule 56.1 materials entirely

and decide the motion on CI’s statement alone.” CI contends, “Berg denies facts
without properly supporting the denials with evidence and relies on legal conclusions
and misstatements of evidence to support her additional ‘facts.”’ CI is correct that
Local Rule 56.1 is designed to assist the Court in deciding a motion for summary
judgment by requiring the parties to identify undisputed facts, organize the evidence,
and demonstrate specifically how each side proposes to prove disputed facts using
record evidence. Bordelon v. Chi. Sch. Reform Bd. of Trustees, 233 F. 3d 524, 527
(7th Cir. 2000). However, the Seventh Circuit has repeatedly held that courts are
allowed “considerable deference” in interpreting local rules. See Stevo v. Frasor, 662
F.3d 880, 887 (7th Cir. 2011). While we agree that Berg could have written with
more clarity and organization, we do not find that reason enough to impose the
extreme sanction CI is requesting. Therefore, CI’s motion to strike Berg’s Local Rule
56.1 Materials is denied.
C.

CI’s Motion to Strike the Affidavit of Ian Hamilton and Additional
Statements 46-48, which Rely on Affidavit
CI argues this Court should disregard Hamilton’s affidavit because Berg did

not previously disclose Hamilton’s opinion, in violation of Rule 26. Under Rule

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26(a)(2), a party cannot rely on an undisclosed expert opinion to oppose summary
judgment. Mannoia v. Farrow, 476 F.3d 453, 456 (7th Cir. 2007). Furthermore,
“Rule 37 provides that “[i]f a party fails to provide information or identify a witness
as required by Rule 26(a) or (e), the party is not allowed to use that information or
witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure
was substantially justified or is harmless.” Fed. R. Civ. P. 37(c)(1).”
Berg contends that its disclosure was not untimely because there was no date
set to disclose experts due to the parties entering into an abnormal discovery schedule.
The Agreed Order signed by Magistrate Judge Cole on January 28, 2016 clearly states
that “the parties have opted out of Rule 26 disclosure requirements.” For that reason,
Berg and CI had no duty to exchange Rule 26(a) disclosures as CI now claims.
CI also argues we should strike Hamilton’s affidavit because it fails to meet the
requirements of an expert opinion.

Specifically, CI maintains that Hamilton’s

affidavit “offers only vague opinions without explaining the bases or methodology
used to arrive at them.” We agree. The Seventh Circuit has “said over and over that
an expert’s ipse dixit is inadmissible.” Wendler & Ezra, P.C. v. Am. Int’l Grp., Inc.,
521 F.3d 790, 791 (7th Cir. 2008). Rule 56(e) of the Rules of Civil Procedure
provides that affidavits supporting and opposing motions for summary judgment must
do more than present something that will be admissible into evidence.

Expert

affidavits must “set forth facts” and a process of reasoning leading to the experts
conclusion. Mid-State Fertilizer Co. v. Exch. Nat. Bank of Chicago, 877 F.2d 1333,
12

1339 (7th Cir. 1989).

‘“It will not do to say that it must all be left to the skill of

experts. Expertise is a rational process and a rational process implies expressed
reasons for judgment.”’ Id. (quoting FPC v. Hope Natural Gas Co., 320 U.S. 591, 627
(1944)). “An expert who supplies nothing but a bottom line supplies nothing of value
to the judicial process.” Mid–State Fertilizer Co. v. Exch. Natl. Bank, 877 F.2d 1333,
1339 (7th Cir. 1989); see Story v. Latto, 702 F. Supp. 708, 709 (N.D. Ill. 1989)
(“[A]n opinion, even if rendered by an expert, does not create a genuine issue of
material fact unless the expert sets forth specific facts to support his opinion.”).
Here, Hamilton’s affidavit simply states that, based on the review of undefined
“source material” and “intellectual property created by John Wiesner,” he “concluded
that the material produced by CI Investments, Inc. contains a Skewed Volatility
Formula that is substantially similar to a Skewed Volatility Formula identified by
John Wiesner as being created by him in 2001.” Hamilton fails to identify any of the
specific facts or steps in his reasoning that led him to the conclusion. He does not
identify the “source material” he reviewed. He does not articulate how the two
formulas were alike or what degree of similarity was necessary to deem them
“substantially similar.” Berg attempts to preserve Hamilton’s affidavit by imploring
the Court to consider Hamilton’s experience, not his findings. Offering up Hamilton’s
curriculum vitae rather than specific facts depicting how Hamilton arrived at his
conclusions will not suffice. For that reason, the affidavit and related statements 4648 are stricken.
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II.

Summary Judgment
A.

Count IV – Copyright Infringement
1.

Work For Hire

CI contends that Berg does not own a copyright in the Giant Spreadsheet under
the “work made for hire” theory. According to CI, since Wiesner was an employee of
Nexus when the Giant Spreadsheet was created, he cannot claim ownership of that
property. In contrast, Berg claims that the evidence shows that Wiesner was not a
Nexus employee during the entirety of the development of the Giant Spreadsheet.
Thus, Nexus cannot claim ownership under the work made for hire theory.
Generally, copyright ownership initially vests in the author or authors of the
work. 17 U.S.C. § 201(a). “In the case of a work made for hire, the employer or
other person for whom the work was prepared is considered the author of this title,
and, unless the parties have expressly agreed otherwise in a written instrument signed
by them, owns all of the rights comprised in the copyright.” Id. at § 201(b). The
creator of the property is the owner, unless he is an employee creating the property
within the scope of his employment. Schiller & Schmidt, Inc. v. Nordisco Corp., 969
F.2d 410, 413 (7th Cir. 1992). To determine whether a work was made within the
scope of employment, a court must apply the general law of common agency.
Community for Creative Non-Violence v. Reid, 490 U.S. 730, 751 (1989). Under the
general common law of agency, the court should consider the hiring party’s right to
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control the manner and means by which the product is accomplished. Id. Additional
facts relevant to this inquiry include: the skill required to create the work; the source
of the instrumentalities and tools; the location of the work; the duration of the
relationship between the parties; whether the hiring party has the right to assign
additional projects to the hired party; the extent of the hired party’s discretion over
when and for how long to work; the method of payment; the hired party’s role in
hiring and paying assistants; whether the work is part of the regular business of the
hiring party; whether the hiring party is in business; the provision of employee
benefits; and the tax treatment of the hired party. Id. at 751-52. None of these factors
alone are determinative. Id.
Both parties agree that Wiesner was a Nexus employee from August 24, 2012
to October 2012 and from February 28, 2013 until his termination on November 12,
2013.

However, the parties disagree about Wiesner’s employment status from

November 2010 until August 24, 2012 and October or early November 2012 until
February 28, 2013.
CI maintains Wiesner was a Nexus employee beginning in November 2010. In
support of its claim, CI directs this Court to an email from November 17, 2010 with
the subject line “New Nexus Team Member.” In the email, Gilbert, writing to Nexus
staff members, states “that John Wiesner ha[d] joined Nexus effective immediately.”
By the end of November Nexus had provided Wiesner with a computer, a Nexus
email account, and access to Nexus’ computer network. Wiesner received a Nexus
15

business card in January 2011. During this period, Wiesner was also provided with
software, and subscriptions to Bloomberg Terminal and Active Financial. Nexus
listed Wiesner as “President and Managing Director, Nexus Risk Management LLC
(Chicago)” in a written presentation and business plan provided to CI in December,
2011. Also, in December 2011Wiesner signed a lease on behalf of Nexus for office
space in Chicago.
In contrast, Berg asserts that Wiesner was an independent contractor for Nexus
from November 2010 until August 24, 2012. Berg, like CI, directs this Court to
emails from November 2010 to explain the parties’ business relationship.

On

November 16, 2010, Gilbert and Wiesner discussed Wiesner’s role within Nexus. In
the emails, Wiesner states that he “work[s] for Nexus on [c]ontract.” The emails
further state that Wiesner is a “shared resource by CBOE and Nexus.”

When

discussing Wiesner’s pay, Wiesner told Gilbert that “[h]aving some assurity of a
minimum of $60k decreases my need to find other outside consulting work.” In
response, Gilbert writes that Nexus “guarantee[s] a minimum of 12 weeks per year at
USD 5,000 per week.” Furthermore, the emails show that Wiesner, not CI, had
control over when and for how long to work. For example, Gilbert writes to Wiesner
asking if Nexus would like more of Wiesner’s time:
[s]ay one month we want more of your time but you can only give us one full
dedicated week. Can we pay you 10,000 for that month with the understanding
you will be doing a total of 2 weeks work spread out over the month –
1 week blocked off and the other week as you are able to find the time?

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Additionally, while CI claims that Wiesner being provided with a computer, email
address, and business card shows thst Wiesner was an employee, the emails between
Gilbert and Wiesner paint a different picture. Gilbert simply asks Wiesner if he
wanted a “@nexusrisk.com email account and business cards.” Wiesner was not
required to use these resources, and was free to turn them down. Further establishing
that Wiesner could have been an independent contractor is the fact that during 2010
and 2011 Nexus did not provide Wiesner with health insurance or a W-2 form.
Based on the above facts, there is a genuine issue of material fact that cannot be
answered based solely on the evidentiary material set forth by the parties. Therefore,
CI’s motion for summary judgment on this ground is denied.
2.

Implied License to Use the Copyrighted Materials
According to CI, Wiesner’s actions, and inactions, granted CI an implied

license to use Wiesner’s intellectual property. Berg argues that an implied license did
not exist between Wiesner and CI because CI did not request the creation of
Wiesner’s intellectual property. Additionally, Berg asserts that even if an implied
license existed between Wiesner and CI, there is a genuine factual dispute as to if and
when that license was revoked.
A copyright owner may transfer his exclusive rights in a copyright only in
writing. 17 U.S.C. § 204(a). Only nonexclusive licenses may be transferred without
being reduced to writing. 17 U.S.C. § 101. An exclusive license permits the licensee
to use the copyright protected material for a specific use while at the same time
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promising that permission will not be given to others. Muhammad Ali v. Final Call,
Inc., 832 F. 3d 755, 762 (7th Cir. 2016). An implied nonexclusive license does not
transfer ownership of the copyright to the licensee. Id. Rather, the copyright owner
simply permits the use of a copyrighted work in a specific manner. Id.
An implied license is found to be granted when (i) a person (licensee) requests
the creation of work; (ii) the creator (licensor) makes that particular work and delivers
it to the licensee; and (iii) the licensor intends that the licensee-requestor copy and
distribute his work. Id. Berg only contests the first element of an implied license.
Berg argues Wiesner did not create the copyrighted works at CI’s request
because CI never expressly requested creation of the Copyrighted Spreadsheets. We
disagree. CI needed a hedging service created for their G5|20 fund. CI specifically
contracted with Nexus to provide such a platform. Wiesner either as an employee or
an independent contractor was paid to help Nexus create the Nexus Software for CI’s
requested need. Wiesner testified at his deposition that the Giant Spreadsheet was
created “specifically for the Nexus project with CI.” In addition, Wiesner helped
create the other elements of the software at issue for CI. Wiesner created a Modified
Black-Scholes formula similar to the one in the Weeza-tron for the software. Wiesner
also created a table of closing prices of the VIX and SPX indices similar to the one
found in the Realized Historical VIX spreadsheet.

While Wiesner may have

borrowed ideas from these Copyrighted Spreadsheets, the evidence suggests that the

18

actual formula and table of closing prices in the Nexus Software were created
specifically for the CI project.
Additionally, the Seventh Circuit has “recognized that a nonexclusive license
may be implied from conduct.” I.A.E., Inc. v. Shaver, 74 F.3d 768, 775 (7th Cir.
1996). Here, Wiesner never objected to CI’s use of the software during the two years
of its development and even participated in Nexus’s licensing the software to CI. Id.
(“[L]ack of objection is also equivalent to a nonexclusive license.”). On June 28,
2013, Nexus, by Wiesner, and CI signed a Sub-Advisory Agreement which licensed
the software created by Nexus to CI. The Sub-Advisory Agreement represented that
Nexus owned the Nexus Software. Additionally, and contrary to Berg’s assertions,
the overwhelming evidence shows that Wiesner did not hold out to CI that he owned
any part of the software until after its creation and delivery. Wiesner even suggested
in an email to Gilbert and Hede that Nexus should charge CI a fee to license the
software.

The facts demonstrate that, at the time the software was created and

delivered, Wiesner did not intend for CI to secure any additional license to use the
software. Therefore, CI has an implied license to use the copyrighted materials.
Berg argues that even if CI did have an implied license, it was revoked.
According to Berg, the implied license was revoked because: (i) any implied license
included a condition precedent that was never satisfied, and (ii) Wiesner’s letters to CI
after his termination served as revocation of the implied license. We agree with CI
that “[n]either argument has any merit.”
19

First, use of the copyrighted material was not subject to any condition
precedent. Berg’s contention that a condition precedent existed finds no support in
the record. A condition precedent is something “which must occur or an act which
must be performed by one party to an existing contract before the other party is
obligated to perform.” Beal Bank Nev. v. Northshore Ctr. THC, LLC, 64 N.E.3d 201,
207 (Ill. App. 2016) (citation omitted). They “are disfavored and will not be read into
a contract unless required by plain, unambiguous language.” I.A.E., 74 F.3d at 778
(citation omitted); See Navarro v. F.D.I.C., 371 F.3d 979, 981 (7th Cir. 2004)
(“Conditions precedent are generally disfavored” while interpretations that do not
include them are favored.). “In Illinois, the courts do not construe a contract to have a
condition precedent unless there is language in the instrument that is unambiguous or
the intent to create such a condition is apparent from the face of the agreement.”
Homeowners Choice, Inc. v. Aon Benfield, Inc., 938 F. Supp. 2d 749, 758 (N. D. Ill.
2013), aff’d 550 F. App’x 311 (7th Cir. 2013) (citation omitted). The party alleging a
condition precedent “bears the burden of establishing that the parties intended to
create a condition at the time the contract was made.” Id. (quoting MCM Partners,
Inc. v. Andrews–Bartlett & Assocs., Inc., 161 F.3d 443, 447 (7th Cir. 1998)).
Here, Berg has not shown that a condition precedent existed, or that Nexus
unambiguously intended to make it part of their agreement. The emails discussing the
agreement do not mention any such condition precedent. Likewise, the July 2013
memorandum of understanding, which modified the original agreement, contains no
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such condition precedent. Homeowners, 938 F. Supp. 2d at 758 (proponent of
condition precedent must establish an unambiguous intent to create the condition
precedent at the time of contracting). And despite knowing that CI and Nexus were
using the software throughout its development, there is no evidence Wiesner ever told
anyone at CI that such use was unauthorized because he had not yet received his 20%
interest in Nexus. See, e.g., I.A.E., 74 F.3d at 778 (rejecting condition precedent
because “nothing in the contract or in [plaintiff’s] later letter indicates that full
payment was a condition precedent to the use of his drawings.”). The facts, including
Wiesner’s own words, show Wiesner opted to take options for his 20% stake in Nexus
– seemingly for tax purposes. In emails, the E&O application, and in his deposition,
Wiesner admits that he had “warrants on 20% of Nexus, Inc.”

Furthermore,

Wiesner’s decision to wait until after the G5|20 fund was launched to exercise his
option is reflected in emails and the memorandum of understanding. Therefore,
Berg’s argument is not only unsupported by facts, but it is contradicted by Wiesner’s
admissions.
Berg’s second argument is that Wiesner’s letters to CI after his termination
served as revocation of the implied license. However, a review of those letters and
Wiesner’s testimony refute this argument. In his letters, Wiesner threatens to revoke
Nexus and CI’s ability to use his supposed intellectual property if the parties do not
work out a deal to compensate him. While the letters threaten revocation, they did not
actually revoke the implied license. Berg offers no evidence that Wiesner ever took
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future action after sending the emails.

Additionally, Wiesner testified at his

deposition that he never attempted to revoke acceptance in writing and could not
identify any attempt to do so orally. For example,
Q: And when did you revoke and take your IP out of the partnership? When
did you revoke that and take your IP out?
A: I did not take it out yet.
Q: What?
A: I have not taken it out yet. They still have it.
Q: Did you ever tell [CI] that you had revoked the IP?
A: I don’t think so.
Thus, there is no evidence that Wiesner revoked the implied license. For that reason,
the motion for summary judgment on Count IV is granted.
Count V- Unjust enrichment
CI argues this Court should enter summary judgment in CI’s favor on Berg’s
unjust enrichment claim because it is preempted by the Copyright Act and the Illinois
Trade Secrets Act (the “ITSA”). In response, Berg claims that CI has been unjustly
enriched by receiving the benefits of Wiesner’s intellectual property without proper
compensation.
The purpose of the ITSA was to codify the various common law remedies for
theft of ideas. Learning Curve Toys, L.P. v. Playwood Toys, Inc., 1999 WL 529572,
at *3 (N.D. Ill. July 20, 1999). For that reason, the ITSA ‘“abolished all common law
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theories of misuse of . . . information.”’ Id. (quoting Composite Marine Propellers,
Inc. v. Van Der Woude, 962 F.2d 1263, 1265 (7th Cir. 1992)). Thus, the ITSA
preempts Berg’s unjust enrichment claims. See Spitz v. Proven Winners N. Am.,
LLC, 759 F.3d 724, 733 (7th Cir. 2014).
Similarly, Section 301(a) expressly preempts state common law claims based
upon subject matter and rights equivalent to those addressed in the Copyright Act. 17
U.S.C. § 301(a). A state law claim may be equivalent to a copyright claim even if it
requires additional elements, if the additional elements do not differ in kind from
those necessary for the copyright claim. Baltimore Orioles, Inc. v. Major League
Baseball Players Ass’n, 805 F.2d 663, 677–78 (7th Cir. 1986). To avoid preemption,
a state law claim must allege conduct that is qualitatively different from that governed
by federal copyright law. Toney v. L’Oreal USA, Inc., 406 F.3d 905, 910 (7th Cir.
2005). Berg has failed to do that. To the contrary, Berg expressly incorporated her
copyright infringement claims into her unjust enrichment claim.

The only new

allegation she brings forth under Count V is that CI was unjustly enriched because it
“undervalue[ed] and underpay[ed] for Wiesner’s work.” However, Berg offers no
evidence that CI determined Wiesner’s compensation.

As CI correctly notes,

“Wiesner’s belief that he was undercompensated for his work has nothing to do with
CI; it is an issue between him and his former employer, Nexus.” Therefore, Count V
is preempted by the Copyright Act and the ITSA.

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CONCLUSION
For the aforementioned reasons, CI’s motion for partial summary judgment
on Counts IV and V of Berg’s Second Amended Complaint is granted. CI’s
motion to strike the affidavit of Hamilton and additional statements 46-48, which
rely on the affidavit, is also granted. All other motions are denied. It is so
ordered.

Dated: 4/7/2017

_____________________________________
Charles P. Kocoras
United States District Judge

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