Allied Waste Services of North America, LLC v. Tibble

Filing 27

MEMORANDUM OPINION AND ORDER:Signed by the Honorable Harry D. Leinenweber on 4/7/2016. MAILED notice(ks, )

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@^A IN THE T'NITED STATES DISTRICT COT'RT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION ALLIED I'IASTE SERVICES OF NORTH AUERICA, LLC, PJ.aintiff, Case No. 16 C 1650 Judge Harry D. Leinenweber v. BRIAT,I TIBBLE, Defendant. MEMORANDI'M OPINION A}ID ORDER Before the Court is Defendant Brian Tibble's Motion to Dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b) (6) tECF No. 161. For the reasons stated herein, the Motion is denied. r. Plaintiff, Allied BACKGROI'IID Waste Services of North America ("Al1ied"), is a non-hazardous recycling and waste management company. Compl. fl 1. On Eebruary 15, 2070, A11ied hired Defendant, Brian Tibbl-e ("Tibble"), as a Major Account Executive for the Chicago metro area. Comp1. $ 19. Tibble had no experience in this industry. Prior to his hire, Id. As a Major Account Executive, Tibble was responsible for business retention and business growth for his assi-gned customer portfolio. ti 20. Comp1. After three years in this position, Tibble was promoted to Regional National Account Executive and became responslble for growing and retaining the business of Alfied's customers in his regj-on, which included the Midwest from Minnesota to Missouri. Compl. tI1I 2!, 22. Tibb1e was the face of the company for these customers and was invol-ved in aI1 aspects of the business, including setting up accounts and building financial models for pricing. In this roIe, Tibbte had access to confidential information, and as such, as a condition of the promotion, Tibble signed a Confidentiallty, Non-solicitation and Non- Competition Agreement. Compl. tltl 22, 27. On July 28, 2074, AIlied agaj-n promoted Tibble, this tlme to the position of Sal-es Manager. Compl. 9t 23 . In this posj-tion, he was responsible for boarding new business maintaining encompassed existing business in his territory, which the western suburbs of Chicago. CompI. 9[ 24. afso managed a1l- aspects of Allied's revenue for his including managing all of their contracts. Id. and He team, This meant that Tibble approved every contract and, in doing so, received j-nf ormation about aIl of the customers serviced by the sal-es representatives on his team, such as the names of decisionmakers, contract history, pricing information, particular service issues, schedufed rate i-ncreases, contract expiration dates, and open pricing terms. -2 Compl. tl 25. He was also involved in Allied's to AIlied's 2076 budget process, which gave him access highly confidential financial- information including every customer's contract expiration date by month for the next three years wlth their exact pricing p1an. Compl. fl 25. With the promotion, Allied changed Tibbl_e's compensatlon his wages no longer incl-uded commission. Comp1. 5I so 23. Instead, Tibble received a $33,575 increase in his base salary. Allied also increased his bonus potential by 252. Id. T) iu. But in order to receive the promotion and raise, ofl July 28, 2014 - the date of his promotion Tibble signed an updated NonCompetition, Non-Solicitation and Confidentiality Agreement (the "Agreement"). Comp1. fl 30. Pursuant to the Agreement, Tibb1e agreed not to render a range of services on behal_f of any of Al-l-ied's competitors within Tibbfe's area of responsibility for a period of twel-ve (12) months after termination of with Al-lied. Ex. A to Comp]., 5I 3.2. use or discl-ose All-ied' s conf employment Tibble al-so agreed not to idential inf ormation f or f ive (5 ) years following the end of his employment. Id. at tl 2.2. Tibble voluntarily ended his employment in November 2015, approximatery 15 months after he signed the Agreement. compI. $ 34. Shortly thereafter, Tibble began working for Lakeshore Recycling Services ("Lakeshore"). Compl. $ 35. Lakeshore j_s recycli-ng and waste services provlder and is engaged in the busj-ness as Al-l-ied. Comp1. $ 36 -3- Lakeshore and Allied a same are two of just six major waste management companies competing in the Chicagoland area. Id. Tibble is working as a Sal-es Manager for Lakeshore out of Lakeshore's Morton Grove office, which is Iocated in the area of responsibility he had when he resigned from Al1ied. position Id. with Two weeks Allied, prior to Tibble resigning from his he emailed Allied's confidential information to his personal email address, j-ncluding pricing information, container sizes, and service days for one of All-ied's customers. Comp1. II. tl 33. LEGAI STA}IDARD A moti-on to dismiss for failure to state a clalm under Rule 2(b) (6) challenges the 1ega1 sufficiency of a complaint. Hal-finan v. Fraternal- Order of Chi. Lodge l/o. 7, 570 E.3d 811, 820 (7th Cir. 2009) . When considering a Rule dismiss, a court must accept the plaintiff's true, and view them in the light plaintiff. 12 (b) (6) motion to allegations as most favorable to the See, Ashcroft v. Iqbal, 555 U.S. 662, 678 (2009). But where a plaintiff's cause of action arises out of a contract that is attached to the complalnt as an exhibit, the Court independently examine and form its own opinlons about the document." Forrest v. Universal- Sav. Bank, F.A., 507 F.3d 542 (7th Cir. 2001) . -4 "may 540, III. AI{ATYSIS Tibbl-e seeks dismlssal of Affied' s breach of contract cl-aim for two reasons: (1) the contract not supported by was adequate consideration; and (2) the contract is unenforceable as a matter of 1aw. Additionally, Tibble argues that Allied has failed to state a claim for misapproprlation of trade secrets. The Court will- address each argument in turn. A. Count I: Breach of Contract Postemployment restrictive scrutinized under Illinols restrictions on trade . covenants are carefully 1aw because they operate as partial Fifiefd v. Premier Deafer Services, Inc., 993 N.E.2d 938, 942 (I11. App. Ct. 2013). fn order for restrictive a covenant to be val-id and enforceable, the terms of the covenant must be reasonabl-e in geographic and temporal scope and necessary to protect an employer's legitimate business interest. Prairie RheumatoTogy Assocs. v. Francis,24 N.E.3d 58, 62 (I11. App. Ct. restrictive 2074). covenant 1s determined The reasonableness of in factors and circumstances of the case. light of a the unique MifLard Maintenance Serv. Co. v. Bernero, 566 N.E.2d 379, 384 (I11. App. Ct. 1990). But before even considering whether a restrictj-ve covenant is reasonable, the court must make two determinations: whether the restrictj-ve covenant is ancillary (1) to a valid contract; and (2) whether the restri-cti-ve covenant is supported -J- tr by adequate consi-deration . Fifield, 993 N. E. 2d at 942. Il-l-inois courts consider the adequacy of consideration in this context in recognition of the reality that "a promise of continued employment may be an illusory employment is at-wiIl-. " Id. restrictive covenant benefit where the Absent adequate consideration, though otherwise reasonable a is not enforceable. Id. The parties do not dispute that the Agreement was ancillary to Tibbl-e's employment. Instead, Tibble argues that the Agreement is unenforceabl-e because it adequate consideration. Agreement was only was not supported Specifj-ca1Iy, he argues that supported by the promise of by the at-wil-l- employment, and his employment wlth Al-l-ied f or 15 months af ter the Agreement was executed was not lengthy enough to serve as adequate consideration. Allied employment is to serve as adequate consideration. Further, it sufficient argues that counters that 15 months of the Agreement was supported additional- considerati-on beyond Tibble's at-wi11 by employment, including his promotion and raise, and his access to Al-l-ied's conf idential inf ormati-on. 7. Adequacyr of Consideration Il-l-inois courts have hefd that "continued employment for substantial period" following covenant may provide sufficient -6- execution of a a restrictive consideration to support the covenant. See, Brown and Brown, Inc. v. Mudron, 887 N.E.2d 440 (I11. App. Ct. 2008). "I1linois 431, courts have generally held that two years or more of continued employment constitutes adequate consideration." Id. Recent IIlinois appellate court opinj-ons have gone a step further and suggested a bright-line rul-e under which at-wil-1 employment is adequate consideration only it an employee has worked with the employer for at least two years. See, e.g., RheumatoTogy FifieTd, Assoc.,24 N.E.3d at 993 N.E.2d at 943; Prairie 62. Tibble relies on the Erie doctrine to argue that this Court must follow the Il-linols appellate courts' bright-line approach and conclude that his continued at-w11I employment did not constitute adequate consideration because it did not last for two years. Specifically, he contends that, under Erie, the rol-e of a federal- court sitting in diversity is to apply state substantive 1aw, and that where the only exposition of state law in the j-ntermediate or Iower courts is not in conflict, a federal- court is not at liberty to reject those decisions merely because it does not agree with their reasoning. See, Fidelity Union Trust Co. v. FieJ-d, 311 U.S. 769, 719 (1940). As the United States Supreme Court has hel-d a state appellate court holding "is a datum for ascertaining state law," and is "not to be disregarded by a federal court unless it is convinced by other persuasj-ve data that the highest court of the state would -1 decide otherwise. " West v. Anl. TeJ-. & Tel_ . Co. , 311 U. S. 223 , 237 (1940). Tibbl-e's assessment of this Court's rol-e is accurate, but incomplete. Because the Illinois Supreme Court has not spoken on this issue, this Court is also faced with the task of making "a predictive judgment as to how the Supreme Court decide the matter 1f it tribunal." . would were presented presently to the Al-l-state Ins. Co. v. Menards, Inc., 285 F.3d 630, 635 (7th Cir. 2002) (*[T]he duty of the federal court, sitting in diversity, is to determine the content of state law as the highest court of the state woul-d interpret it." (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 18 (1938))). Of the five federal courts in the Northern District of IlJ-inois to have considered this issue, four have predicted that the I1l-inois Supreme Court wil-1 re j ect the Il-Iinois appellate courts' bright-rine approach in favor of a more fact-specific approach. Compare/ R.J. O'brien & Assoc., LLC v. WiTTiamson, 2016 WL 930628, at *3-4 (N.D. I1l-. Mar. 10, 2076); Traffic Tech, Inc. v. Kreiter,2015 WL 9259544, at *5 (N.D. I11. Dec. 18, 2075); Bankers Life & Cas. Co. v. Miller,2075 WL 515965, at *3- 4 (N.D. I11. Feb. 6, 2015); Montel_ Aetnastak, Inc. v. Missen, 998 E. Supp.2d 694, 1]-6 (N. D. I11. 2014) ; with Instant TechnoTogy, LLC v. DeFazio,40 E.Supp.3d 989,1010 (N.D. III. 20L4) . Judge Joe Bi1]y McDade, in the central District -B of Il-l-inois, reached the same concl-usion analysis of the case }aw. af ter extensive an Radio Corp. v. Ofson, Cumul-us 80 E.Supp.3d 900, 905-09 (c.p. I11. 2015). This Court is likewise not convi-nced that the Illinois Supreme Court would adopt the state appellate courts'brlght- line approach. It is true that generally, Illinois courts have held that contj-nued employment for two years or more constitutes adequate consideration. But saying that courts have generally found this "to be sufficient is very different than saying that anything -Less than two years is automaticaTTy insufficient." Mclnnis v. OAG MotorcycJe Ventures, Inc., 35 N.E.3d 1016, (I11. App. Ct. 2075) (El-l-is, J., dissenting) . The point of requiring adequate consj,deration for a restrictive to prevent an employer from locking an at-will covenant is employee into restrictive covenant and then firing thereafter, rendering the consideratlon of future "illusory. " See, Brown & Brown, BB7 N. 1089 a that employee shortly employment E.2d 43'l , 440 (I11. App. Ct. 2008); Curtis 7000, Inc. v. Suess, 24 F.3d 947, 946 (7th Cir. 7994) . But this goal may be accomplished through 15 months or two years of continued employment depending upon the other circumstances surrounding the employee's signing of the covenant, the conditions of the continued employment, and the termination of the employment relationship. nothing particularly significant -9- In short, "there is about the term of 24 months that should elevate it to a per se minimum requirement. " Mclnnis, 35 N.E.3d at 1089 (E11is, J., dissentlng). Although 1n recent years Tllinois embraced the two-year bright-line appellate courts have prior the rule, to pronouncement of the rule in Fifiel_d, the courts took a more fact-specific approach. For example, in McRand, Inc. v. van Beel-en, the court did not constrain itsel-f by applying a bright- Iine test, but rather considered the employees' raises bonuses, voluntary resignatj-on, responsi-bil-ities they received af ter and the and increased signing a restricti_ve covenant. McRand, Inc. v. van BeeJen, 486 N.E.2d 1306, 7374 (I11. App. Ct. 1985). Another court went so far as to state that case law did not "limit[] the courts'review to a numerical formula for determining what constitutes substantial continued employmertL." Woodf iel-d Grp. , Inc. v. DeLisf e, 693 N. E.2d 464 , 469 (I11. App. Ct. 1998). Other factors, "such as whether the employee or the employer terminated employment, may need to be consldered to properly review the issue of consideration." Id. The Court reads littl-e Supreme Court has into the fact that the IIIinois twice refused to grant petitions for feave to appeal on this issue. See, Mclnnis,35 N.E.3d at 7016, Teave to appeal denied, 39 3d 1003 ( I11. N. E. 2075) at 938, l-eave to appeal denied, 996 N. ; Fifield, 993 E.2d 12 (III. N. E.2d 2073) Mcrnnis involved an interlocutory appear from a denial- of - 10 . a motion for injunctive relief. Mclnnis, 35 N.E.3d at 1081. the two-year bright-1ine rule was not necessary to the And outcome of FifieJd, because the approximately three months of postcovenant employment fefl far short of any possible articulation of a "substantial period of time" required by the case Iaw. Fifield, 993 N.E.2d at 940. Moreover, where the Il-linois Court has spoken on covenants - addressing whether the terms of covenant are reasonable the court affirmatively rejected a Supreme restrictive rigid, See, (I1I. bright-Iine Ref test in favor of a case-by-case analysis. iabl-e Fire Equipment Co. v. Arredondo, 965 N. E. 2d 2071) . a 393 In Rel-iabl-e Fire, the court overruled appellate declsions that had taken a more rigid approach, and reemphasized its commitment to a test circumstances." Id. "grounded in the totality of the It is probable, that if confronted with the question of the adequacy of consideration, the court would Iikewise avoid the appellate courts'bright-1j-ne test in favor of a more flexible case-by-case determination, considering the totality of the circumstances. Applying this more fl-exible test, Complaint alleges sufficiently that the Court finds the there was consideration to support the enforceability of the Specifically, adequate Agreement. the circumstances surrounding the signing of the Agreement (Tibble's promotion and increase in pay) and his - 11 apparentl-y vol-untary resignation are rel-evant to the analysis and weigh in favor of requiring covenant employment. a shorter length of post- But whether 15 months is adequate turns disputed and yet-to-be explored facts, and appropriate for determination at this stage i_n on is therefore not the proceedings. The Court denies Tlbble's Motion to Dismiss for l-ack of adequate consideration. 2. Tibbl-e next argues that the because it in Reasonab1eaess Sc,ope Agreement is unenforceable is overly broad with respect to its prohibition against competition and its prohibition on discl-osure and use of confldential information. if it A restrj-ctive covenant is only valid is reasonable, and is reasonabl-e only 1f the covenant: (1) is no greater than is required for the protection of legitimate business interest a of the employer; (2) does not impose undue hardship on the employee, and (3) is not injurious to the pubric. Rel-iabl-e Fire, 965 N.E.2d at 396. The extent of the employer's legiti-mate business interest may be limited type of activity, geographical area, and time. Id. at 396-91. The reasonabl-eness of a restrictive "based on the totality covenant is determined of the facts and circumstances of the individuar case." rd. at 403. patently by Thus, unress the covenant is unreasonabre, the parties must be given a opportunity to develop the necessary evidentiary record. -12 f ul-l- see, Tech, 20L5 WL 9259544, at *5; Hafferkamp v. Lforca, 20L2 WL 6965102, at *5 (I11. App. Ct. Feb. 3, 2012); see e.g., Traffic also, Nortek Products (Taicang) Ltd. v. FNA Grp., Inc., 2017 WL 2110043, at *4 (N.D. I11. May 24, 2077) (* [W]hether such restrict j-ons are reasonabl-e in this case requires the Court to make a fact-based determination that is not appropriate at the motion-to-dismiss stage."). The Court will discuss the validity of each aspect of the Agreement in turn. Prohibition against Competition The Agreement prohibits Tibble, for 72 months after his employment ends, from competing with Allied within his area of responsibility competitor. and from rendering services on behalf of Tibble's area of responsibility geographic regions, areas, markets, districts, counties, parishes or other l-ocations" for incfudes "any territories, which he responsible, or performed duties, oo behalf of Allled during l-ast 12 months of his employment. Ex. A to Comp1., The Agreement prohibits any 9I was t.he 3.1(f) . Tibble from, among other things, "performing any kind of services, functions, duties or actions (including, but not limited to, sal-es, marketing, brokering, supervision and/or management) related to Non-hazardous Solid Waste ManagemenL. " Id. at tl 3. t . Allied's competitorsr ds defined by the Agreement, include "any public or private business that provides Non-hazardous Solid Waste Management in - 13 - any state, territory or other location conducts business. " Id. at $ 3.1 (b) . in which [AIlied] Moreover, Tibble's and obligations under the Agreement were duties owed not only to Allied, but also to its parent, subsidiary, related or successor companies. Id. at 91 1. TibbIe argues that this prohibition is invalid because 1t is unreasonably overbroad. Specifically, under the Agreement he is effectively Tibble contends that barred from having any association whatsoever with a competitor of A11ied or its affil-iates. Although the Court is sympathetic to Tibble's argument regarding the breadth of the definition services, " the prohibition for "rendering is limited both in duration and geographic range, which weighs in favor of its enforceability. In this Iight, the restriction it is not unreasonable on its face; woul-d be inappropriate to wi-thout considerlng all determine its reasonableness the surrounding facts potentially rel_evant facts, of and circumstances. Among many other reasonableness of the restriction w111 depend on the a determination of Tibbl-e's area of responsibillty and his duties during his employment with Al1ied. Moreover, the Court has l-ittle information thus far regarding the number and size of that fall- within the definition companies of "competi-Lor" under the Agreement or the size of the waste management industry as -74 a whof e. Al-Iied contends that the Agreement prohibits working for 5-1 companj-es. Whether this is Tibbl-e f rom an unreasonable restrictlon depends largely on the size of the industry and the number of companies that fall within the geographic l-imitations of the Agreement. Because the facts of the case are of importance to thj-s issue, the Court does not find prohibition against competition to be patently unreasonabfe such the and decl-ines to make a determination as to the enforceability of the provision at this stage in the proceedings. b. Prohibition on DiscLosure and use of Confidential- Information The Agreement also prohibits Tibble from using or disclosing confidential information for fj-ve years following the end of his employment. Ex. A to Compl., 5I 2.2. confidential ft defines information as the proprietary information of Aflied and its affiliates, including, but not l-imited to: II]nformation that would qualify as a trade secreti customer l-ists and agreements; customer service information; names of customer contacts and the identities of decision-makers; marketing plans; development plans; formulas; price data; cost data; price and fee amounts; pricing and billing policies; quoting procedures; marketing techniques; forecasts and forecast assumptions and volumes; non-pub1ic information regarding Company, s actual- or potential customers, suppliers or other vendors; non-publ_ic information about Company's routes, territories or target markets; Company's internal- personnel- and fi-nancial information, including purchasing and internal- cost inf ormation and i_nf ormation about the profitability of partj-cu1ar operations; internal sal-es, service and operational manuals, policies and - 15 - procedures; non-public information regarding the manner and methods of conducting Company's business; non-public information about Company's future plans, potential acquis j-tion, di-vestiture and other strategies; non-public information about Company's l-andfill development p1ans, landfill capacities, special projects and the status of any permitting process or investigat j-on; non-publ j-c inf ormation that gives Company some competitive business advantage, or the opportunity of obtaining such an advantage, or the discl-osure of which coul-d be detrimental to Company's interests; and other information that is not generally known outside Company. Id. at 91 2.7. Tibble argues that this prohibition is overbroad because it prohibits the use or disclosure of any information obtained by him during the course of his employment with Al-Ij-ed concerning the business or affairs of Allied and 1ts Affiliates counters that the def i-nition of Conf identlal- AIlied Information set forth in the Agreement is reasonably limited to specific items t.hat provide Allied with generally known Conf idential- competitive edge and that are not outside the company. Tibb1e's to Contrary a Information set forth [A11ied] . " became aware 5I 31. the definition assertion, broad, does not incl-ude "virtually that ITibbIe] Compl l_n the Agreement, though every Iitem of information] of during the time he was employed Rather, the definition IS explicitly that some of Ex. A to Compl., $ 2.! this non-public information - 16 - by l-imited to "non-public information" and "j-nformation that woul-d qualify a trade secret." of S It may prove true does not merit protection under a confidentiality provision, but that determination is a factuar one which can only be made after the partles have engaged in discovery. Tibble also argues that the confidentiality unenforceabl-e because it extends for f provision is 1ve years after Tibbl-e's employment ends and covers "any person or entity either inside or outside" of A1lied and its States or any other territory its affiliates affiliates "within the United or location in which" Al_lied and do business. The Court agrees that the provision facks any reasonable durational and geographic limitations. But this does not render the provision automatically unenforceabl-e. WhiIe it is true that a valid confidentiality contai-n durational and geographic limitations, provislon must Cincinnati Tool- SteeL Co. v. Breed, 482 N.E.2d 170, 715 (I1f . App. Ct. 1985), this requj-rement does not extend to trade secrets. packaging v. Hein, 2075 WL 6164957, at *6 (N.D. I11. Oct. 20, 20L5). Thus, in order for the Court to determine the enforceability of the confidentiality provision, 1t will need to determine whether the information covered by the provision constitutes trade secrets. This will- require discovery. B. Count II: Misappropriation of Trade Secrets To establ-ish a cl-aim for misappropriation of trade secrets under the Ill-inois Trade Secrets Act ("ITSA"), a plaintiff show must that (1) a trade secret existed; (2) it was misappropriated -71 through improper acquisition, disclosure, or use; misappropriation damaged the trade secret's Corp. v. Mazur, 821 N.E.2d 909, 925 (I11 (3) the and Liebert owner. App. Ct. 2005); 165 ILCS 1065/2. A trade secret is: []lnformation, including but not l-imited to, technical non-technical data, pattern, a formula, compi-1ation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or supplj-ers, that: ( 1 ) is sufficiently secret to derive economic va1ue, actual or potenti-al, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonabl-e under the circumstances to maintain its secrecy or confidentiality. or 76s rLCS 106s/2(d). Trade secrets include "customer lists are not readily marketing p1ans, information. " pricing, ascertainable, and sales data distribution, that and market analysis and MintteL lntern. Grp., Ltd. v. Neergheen, 2070 WL 145186, at *11 (N.D. I11. Jan. 12,2010) A11i-ed bases its ITSA claim on theory of inevitable SpecificalIy, it alleges that Tibble knew Allied's financial- and operational strategy for 2016 j-n an industry wlth disclosure handful of only competitors, that he emailed Allied's confidential informatlon to his personal email- address shortly before his employment one of All-ied's responsibilities ended, main at that he now works for Lakeshore competitors, Lakeshore confidential- informati-on inevitabl-e. - 18 make CompI and that his disclosure of $1[ 26,33,56. job this In seeking to dismi-ss this claim, Tibble argues that Allied must "pIead something more than its mere fear" of discl-osure of confidential- information. dlsclosure, a plaintiff But under a theory of inevitabl-e need not point to concrete evidence of He must merely a11ege that the misappropriation. employee "cannot operate without inevitably disclosing the confidential j-nformation. " Complete Bus. 290!96, at *6 (N. Allied D. II1. SoLs . , Inc. v. Mauro, 2001 Mar. 76, 200L) (emphasis has done at least this much. WL added) . Therefore, the Court declines to dismiss Allied's ITSA cl-aim. IV. CONCTUSION For the reasons stated herein, Tibbl-e's Motion to Dismiss IECF No. 161 is denied. IT IS SO ORDERED. Harry D. Leinenweber, Judge United States District Court Dated , $Pu'' 7' La/a - 19 -

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