Meyer Technology Solutions, LLC v. Kaegem Corp.
ORDER Signed by the Honorable Harry D. Leinenweber on 10/10/2017: Counter-Defendants' Motion to Dismiss Counterclaims 24 is granted in part and denied in part. Status hearing set for 12/7/2017 at 09:00 AM. Mailed notice(wp, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
MEYER TECHNOLOGY SOLUTIONS,
17 C 281
Judge Harry D. Leinenweber
MEYER TECHNOLOGY SOLUTIONS,
LLC and MICHAEL MEYER,
No. 24] is granted in part and denied in part.
When Defendant allegedly ceased paying for certain upgrades to
the GCT software, Plaintiff filed this lawsuit for breach of
software upgrades, it learned in December 2014 that Meyer had
accessed GCT accounts without authorization and removed certain
determining that Meyer was at fault, Defendant’s insurer paid a
information and belief that Meyer continued in this manner to
access its software and client information as recently as April
Plaintiff and Meyer have moved to dismiss Defendant’s
counterclaims under FED. R. CIV. P. 12(b)(6).
The Court takes
each counterclaim in turn, assuming the truth of well-pleaded
Collegiate Athletic Ass’n, 843 F.3d 285, 289-90 (7th Cir. 2016).
Plaintiff and Meyer under the Computer Fraud and Abuse Act, 18
U.S.C. § 1030 et seq., and the Stored Communications Act, 18
plaintiff commence its action within 2 years of discovering the
damage from the unauthorized access.
See, 18 U.S.C. § 1030(g)
(requiring a civil suit to be brought “within 2 years of the
date of the act complained of or the date of the discovery of
the damage”) (emphasis added); 18 U.S.C. § 2707(f) (“A civil
action under this section may not be commenced later than two
years after the date upon which the claimant first discovered or
Here, Defendant learned of the unauthorized
access in December 2014, notified its clients of the breach in
However, Defendant first filed its counterclaims on June 8, 2017
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– well over two years after it discovered the damage flowing
from the unauthorized access, and thus outside the statute of
See, Sewell v. Bernardin, 795 F.3d 337, 340-42 (2d
That Meyer may have continued accessing certain of
Defendant’s business information housed on the GCT platform in
the same fashion as recently as April 2016 is irrelevant for
The “continuing violation” exception to
federal statutes of limitations only allows suit to be delayed
insufficient – and indeed the “cumulative effect” of a series of
acts is necessary – to make out an actionable claim.
Dev. Corp. v. Village of Lemont, Ill., 520 F.3d 797, 801 (7th
Such is not the case here, meaning that Defendant’s
counterclaims under the Computer Fraud and Abuse Act and the
Stored Communications Act must be dismissed as time-barred.
Defendant’s third counterclaim charges Plaintiff and Meyer
Defendant asserts that the information accessed by
Plaintiff and Meyer was “database information of clients and
lists, that gave Plaintiff and Meyer an economic advantage in
the marketplace and that Defendant took reasonable efforts to
counterclaim and the Confidentiality provision in the contract,
Defendant’s identification of general categories of information
and allegation of reasonable efforts to maintain confidentiality
Thus, the Motion to Dismiss is denied in
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relevant part, although at the merits stage Defendant will need
to identify with specificity its allegedly misappropriated trade
Fourth, Defendant brings its own claim against Plaintiff
provide Defendant with the entire right, title, and interest to
the GCT software despite Defendant’s payment for all services
(other than upgrades) pertaining to GCT software.
argues for dismissal based on Defendant’s admission that it did
not pay for all upgrades to the software and the indiscriminate
language of the contract, which obligated Plaintiff to transfer
title only once it was “paid for services.”
Without any other
guidance to interpreting the contract – and in light of its lack
of an integration clause – the Court finds that Defendant has
position that Plaintiff was obligated to transfer title to the
initial, paid-up version of the GCT software is at least as
plausible as Plaintiff’s reading of the contract, which holds
that Defendant was only entitled to ownership of the paid-up GCT
subsequent upgrade it developed for the platform.
months allegedly passed between Defendant’s payment in full for
determine whether the contract shows unambiguously on its face
that the relief prayed for is not warranted, LaSalle Nat’l Bank
Plaintiff’s Motion to Dismiss is denied in relevant part.
Defendant’s fifth counterclaim alleges that Meyer, who owns
15,000 shares of Defendant’s closely held common stock, breached
his fiduciary duty to Defendant.
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Meyer argues that Defendant
fails plausibly to allege that he owed Defendant a fiduciary
duty, because the percentage of his stock ownership is unclear
and the work he performed for Defendant was as an independent
Interpreting Illinois law, the Seventh Circuit has
held that “a shareholder in a close corporation owes a duty of
loyalty to the corporation and to the other shareholders” and
that “[m]inority shareholders have an obligation as de facto
partners in the joint venture not to do damage to the corporate
Rexford Rand Corp. v. Ancel, 58 F.3d 1215, 1218-19
(7th Cir. 1995).
Meyer cites no authority to establish that a
indeed such a contention seems irreconcilable with the facts and
logic of Rexford.
Thus, Defendant has alleged a plausible claim
that Meyer breached his fiduciary duty to Defendant by disabling
company software, accessing company email accounts, and causing
the loss of Defendant’s clients.
In response to the Motion to Dismiss, Defendant requests
leave to amend its sixth and seventh counterclaims for tortious
with prospective economic advantage, respectively, to allege the
required action directed toward a specific third party.
Boffa Surgical Group LLC v. Managed Healthcare Assocs., Ltd., 47
Meyer appears to oppose amendment, and the Court accordingly
grants Defendant leave to amend these two counts.
Defendant’s eighth counterclaim invokes Illinois conversion
law and avers that Plaintiff unlawfully retained possession and
control of Defendant’s GCT software – presumably by accessing
software or “tender the access code.”
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Plaintiff contends that
software is intangible property not amenable to conversion.
a matter of Illinois law, the Court agrees.
See, First Nat’l
Bank of Springfield v. Dept. of Revenue, 421 N.E.2d 175, 177
Whatever the wisdom of expanding the sweep of the
characterized Illinois law as refusing to “recognize an action
for conversion of intangible rights.”
Am. Nat’l Ins. Co. v.
Citibank, 543 F.3d 907, 910 (7th Cir. 2008); accord, Joe Hand
Promotions, Inc. v. Lynch, 822 F.Supp.2d 803, 809 (N.D. Ill.
2011) (“The Seventh Circuit thus agrees that Illinois courts
have not expanded the tort of conversion, which should remain
tethered to its common law roots requiring tangible property or
some connection to a tangible document.”).
Defendant has not
alleged facts suggesting that its rights to the software merged
into something tangible that was itself converted, nor can its
remaining in Plaintiff’s possession.
See, David Mizer Enters.,
Defendant charges Plaintiff with assuming unauthorized control
Illinois Trade Secrets Act preempts Defendant’s currently pled
conversion counterclaim inasmuch as it may implicate tangible
Techs., Inc. v. Eller, 160 F.Supp.2d 915, 922 (N.D. Ill. 2001).
The Court therefore dismisses this count, but the dismissal is
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Defendant has agreed to dismiss its final counterclaim for
invasion of privacy, as corporations have no right to seclusion
that is protected by tort law.
See, e.g., American States Ins.
Co. v. Capital Assocs. of Jackson Cnty., Inc., 392 F.3d 939, 942
Campaign Comm., Inc., No. 08 C 4345, 2009 WL 635457, at *2 (N.D.
Ill. Mar. 11, 2009).
For all the above reasons, Counter-Defendants’ Motion to
Dismiss Counterclaims is granted in part and denied in part.
Harry D. Leinenweber, Judge
United States District Court
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