Meyer Technology Solutions, LLC v. Kaegem Corp.
Filing
48
For the reasons stated in the attached memorandum opinion and order, Meyer's motion to dismiss is granted in part and denied in part 38 . Counts V and VI are dismissed with prejudice. Enter Memorandum Opinion and Order. Status hearing set for 4/10/18 at 9:00 a.m. Signed by the Honorable Harry D. Leinenweber on 3/22/2018:Mailed notice(maf)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MEYER TECHNOLOGY SOLUTIONS,
LLC, a Missouri Limited
Liability Company,
Plaintiff,
v.
KAEGEM CORP., an Illinois
Corporation,
Defendant.
Case No.
17 C 281
Judge Harry D. Leinenweber
KAEGEM CORP. an Illinois
Corporation,
Counter-Plaintiff,
v.
MEYER TECHNOLOGY SOLUTIONS,
LLC, a Missouri Limited
Liability Company, and
MICHAEL MEYER, Individually,
Counter-Defendants.
MEMORANDUM OPINION AND ORDER
Plaintiffs/Counter-Defendants
Meyer
Technology
Solutions,
LLC, and Michael Meyer (together, “Meyer”) move to dismiss Counts
IV,
V,
and
VI
of
Defendant/Counter-Plaintiff
Kaegem
Corp.’s
(“Kaegem”) Second Amended Counterclaims for failure to state a
claim.
For the reasons stated herein, the Court grants in part
and
denies
in
part
Meyer’s
Motion.
(ECF
No.
38.)
Accordingly,
Counts V and VI are dismissed with prejudice.
I.
BACKGROUND
Once more, the parties are before the Court on Plaintiff’s
Motion to Dismiss Defendant’s Counterclaims under Federal Rule of
Civil Procedure 12(b)(6).
The facts are the same as the last time
the Court ruled on such a motion.
Meyer Tech. Sols., LLC v.
Kaegem Corp., No. 17 C 281, 2017 WL 4512918, at *1 (N.D. Ill.
Oct. 10,
2017)
(granting
12(b)(6)
motion).
In
in
part
brief,
and
Meyer
denying
in
contracted
software platform called “GCT” for Kaegem.
part
to
Meyer’s
develop
a
Kaegem maintains that
it owned the GCT platform outright as of November 2013.
After
that point, Kaegem allegedly stopped paying for certain upgrades
to GCT and, in response, Meyer allegedly accessed the GCT platform
and disabled it.
Kaegem had by this point negotiated contracts
with third-party customers which depended on Kaegem’s continued
access to and use of GCT.
Kaegem
hired
All
restore GCT.
Desperate to preserve its clients,
Covered,
an
IT
support
services
company,
to
All Covered did not provide much relief, however.
Once Meyer learned Kaegem had hired them, Meyer reached out to All
Covered
himself
software.
All
and
explained
Covered—now
that
newly
he,
not
apprised
Kaegem,
of
this
owned
the
ownership
dispute and apparently uneager to play referee—refused to lend
Kaegem
further
assistance
in
restoring
- 2 -
GCT.
Kaegem
failed
to
restore GCT and eventually lost all of its customer contracts.
Meyer sued Kaegem for breach of contract, and Kaegem levied nine
counterclaims.
counterclaims
After
on
counterclaims.
the
dismissed
Motion,
Meyer’s
Court
Kaegem
several
filed
of
six
those
amended
(Kaegem’s 2d Am. Countercls., ECF No. 36.)
Meyer
now moves to dismiss three of them, Counts IV, V, and VI, for
failure to state a claim.
II.
DISCUSSION
On a motion to dismiss, the Court assumes the truth of well
pled factual allegations and draws all inferences in favor of the
non-movant
(here,
Kaegem).
See,
Berger
v.
Nat’l
Collegiate
Athletic Ass’n, 843 F.3d 285, 289-90 (7th Cir. 2016).
Count IV,
for tortious interference with contractual relations, and Count V,
for tortious interference with prospective economic advantage, may
be considered together.
Both require that Kaegem allege Meyer
directed some conduct at third-party business contacts that caused
those parties to discontinue relations with Kaegem.
F:A J Kikson
v. Underwriters Labs., Inc., 492 F.3d 794, 800 (7th Cir. 2007)
(citations omitted) (describing elements of prospective advantage
claim); accord Nagle v. Chi. Sch. Reform Bd. of Trustees, No. 96 C
4150, 1999 WL 160234, at *9 (N.D. Ill. Mar. 10, 1999) (citing
Cont’l Mobile Tel. Co. v. Chi. SMSA Ltd. P’ship, 587 N.E.2d 1169,
1174 (Ill. App. Ct. 1992)) (describing elements of contractual
interference
claim).
Kaegem
failed
- 3 -
in
large
part
to
do
so,
meaning, as described below, that Count IV survives only in part
and Count V must be dismissed in full.
Finally, Kaegem fails in
Count VI to allege a necessary element, so its conversion claim
also must be dismissed.
A. Count IV (Tortious Interference with Contract) and
Count V (Tortious Interference with Business Expectancy)
To state a claim for tortious interference with contract, a
plaintiff
must
allege:
(1)
the
existence
of
a
valid
and
enforceable contract between the plaintiff and another; (2) the
defendant’s
awareness
of
this
contractual
relation;
(3)
the
defendant’s intentional and unjustified inducement of a breach of
the contract; (4) a subsequent breach by the other, caused by the
defendant’s wrongful conduct; and (5) damages.
Pier
&
Exposition
Auth.,
804
F.3d
836,
842
Healy v. Metro.
(7th
Cir.
2015)
(quoting HPI Health Care Servs., Inc. v. Mt. Vernon Hosp., Inc.,
545 N.E.2d 672, 676 (Ill. 1989)).
To state a claim for tortious
interference with prospective economic advantage, a plaintiff must
allege:
(1) the plaintiff had a reasonable expectancy of a valid
business
relationship;
(2)
the
defendant
knew
about
the
expectancy; (3) the defendant intentionally interfered with the
expectancy and prevented it from ripening into a valid business
relationship;
plaintiff.
and
(4)
the
intentional
interference
injured
the
Boffa Surgical Grp. LLC v. Managed Healthcare Assocs.
Ltd., 47 N.E.3d 569, 577 (Ill. App. Ct. 2015) (citation omitted).
- 4 -
To state a claim for either tort, the plaintiff must also
allege that the defendant directed his behavior toward a third
party.
06976,
Inteliquent, Inc. v. Free Conferencing Corp., No. 16-CV2017
WL
1196957,
at
*16
(N.D.
Ill.
Mar.
30,
2017)
(collecting cases and noting that in an interference with contract
case, plaintiff must allege that defendant directed his behavior
toward the third party that defendant induced to breach); Boffa,
47
N.E.3d
at
577
(plaintiff
in
interference
with
prospective
advantage case must allege some action by the defendant directed
at the third party with whom the plaintiff has the expectancy).
Kaegem’s contract interference claim passes this test, but
only in part.
Kaegem alleges it had contracts with customers as
well as a contract with All Covered, the tech support company it
hired to help get GCT back online after Meyer allegedly shut it
down.
But Kaegem never alleges that Meyer directed any conduct
toward
any
of
Kaegem’s
customers.
The
only
relevant
conduct
Kaegem alleges is that Meyer contacted All Covered to explain that
he and not Kaegem owned GCT.
Thus, Kaegem has stated a claim for
tortious interference with contract as to All Covered, but not as
to any of its customers.
extent
that
Kaegem
may
This claim survives, but only to the
seek
damages
for
Meyer’s
alleged
interference with the All Covered contract.
Kaegem’s prospective advantage interference claim fares even
worse because there is no third party that meets the required
- 5 -
criteria.
Kaegem states it had business expectancies with several
customers,
but
Kaegem
fails
to
allege
action toward any of those customers.
that
Meyer
directed
any
Again, Kaegem does allege
that Meyer directed some action toward All Covered, but by the
time Meyer contacted All Covered to tell them (accurately or not)
that he owned the GTC software, All Covered and Kaegem were not
flirting
with
some
business
expectancy;
already blossomed into contract.
their
relationship
had
Meyer’s actions directed toward
All Covered cannot be the premise of Kaegem’s expectancy claim nor
can
they
Kaegem’s
rescue
the
allegedly
otherwise
ruined
deficient
business
allegations
opportunities
concerning
with
its
consumers.
This is the second time Kaegem has pressed this claim only to
have Meyer move to dismiss it on 12(b)(6) grounds.
The last time
around, Kaegem responded to Meyer’s Motion by seeking to amend the
claim and allege properly the required action directed toward a
specific third party.
(Kaegem’s Resp. to First Mot. to Dismiss at
9, ECF No. 28 (“As such facts may indeed exist, specifically that
Meyer may have contacted potential investors and persuaded them
not to invest in Kaegem, Kaegem requests leave to amend[.]”).)
The
Court
granted
that
leave,
yet
Kaegem
did
not
provide
the
allegations it suggested it would and has failed again to craft a
valid claim.
Accordingly, Count V is dismissed with prejudice.
- 6 -
One further digression is needed to close out the Court’s
analysis
on
Counts
IV
and
V.
Meyer
also
argues
that
both
interference claims should be dismissed because the only tortious
activity undergirding them is Meyer’s alleged violation of the
Meyer-Kaegem contract, and “a party cannot be liable in tort for
interfering with its own contract.”
F.E.L. Publications Ltd. v.
Catholic
216,
Bishop
of
Chi.,
754
F.2d
221
(7th
Cir.
1985).
According to Meyer, its failure to transfer the software (i.e.,
the
alleged
breach)
communication
interference).
with
is
All
Both
indistinguishable
Covered
are
(i.e.,
examples
of
from
the
its
subsequent
allegedly
Meyer
tortious
expressing
its
ownership over the software, Meyer emphasizes, so the Court should
view those acts as one and the same.
Meyer says this case is like
Israeli Aircraft Industries, Ltd. v. Sanwa Business Credit Corp.,
850 F. Supp. 686, 692 (N.D. Ill. 1993), aff’d sub nom. Israel
Aircraft Industries Ltd. v. Sanwa Business Credit Corp., 16 F.3d
198 (7th Cir. 1994), where the court agreed the plaintiff had
failed to state a claim for tortious interference.
In that case,
the plaintiff, defendants, and a third party business prospect
were parties to a shared agreement.
withdrew
from
the
shared
agreement
Id. at 688.
(allegedly
The defendants
in
breach)
and
explained its reasons for doing so to the third party, which then
followed suit.
Id.
The court opined that these circumstances did
not give rise to a tortious interference claim:
- 7 -
“All defendants
did
was
cut
short
their
own
contract
negotiations.
True,
[plaintiff’s] joint venture with [the third party] failed as a
result of defendants’ actions, but the failure was not because
defendants directed some action at [the third party] that made
[it] quit negotiating with [plaintiff].”
Id. at 693.
Those facts do not parallel the ones at bar, and the Court is
not
convinced
by
Meyer’s
argument.
Meyer
reached
out
to
All
Covered—a third party unrelated to the Meyer-Kaegem agreement and
with
whom
allegedly
Kaegem.
Meyer
to
blow
had
up
no
relationship
All
Covered’s
nor
reason
business
to
contact—
relationship
with
This is a world apart from the preexisting relationship
between the defendant and the third party in Israeli Aircraft.
No
matter how Kaegem labels them, Meyer’s communications with All
Covered are distinguishable from Meyer’s failure to transfer the
software.
Count IV survives, though in the limited form described
above.
B.
Count VI (Conversion)
To state a cause of action for conversion in Illinois, a
plaintiff
must
demonstrate:
(1)
An
unauthorized
and
wrongful
assumption of control, dominion, or ownership by a person over the
property of another; (2) plaintiff’s right in the property; (3)
plaintiff’s right to immediate possession of the property; and (4)
a demand by plaintiff for possession thereof.
Runnemede Owners,
Inc. v. Crest Mortg. Corp., 861 F.2d 1053, 1060 (7th Cir. 1988)
- 8 -
(citations omitted).
Last time around, Kaegem alleged that Meyer
unlawfully converted the GCT software.
The Court dismissed this
claim on 12(b)(6) grounds because under Illinois law software is
intangible property not amenable to conversion.
Meyer Tech., 2017
WL 4512918, at *3 (citing First Nat’l Bank of Springfield v. Dept.
of Revenue, 421 N.E.2d 175, 177 (Ill. 1981)).
The Court also
noted
Plaintiff
that
assuming
“[t]o
the
extent
unauthorized
Defendant
control
over
charges
tangible
information
with
housed
within the software, its current allegations do not suggest that
this
material
[is]
distinct
from
the
allegedly
misappropriated
trade secrets recited in Defendant’s third counterclaim.
As such,
the Illinois Trade Secrets Act preempts Defendant’s currently pled
conversion
counterclaim
information.”
updated
not
“proprietary
Countercls.
remain.
as
the
reports
conversion
software
at
may
and
¶¶ 82-85.)
First,
compliance
Despite
Kaegem
1060
(stating
claim
itself
implicate
fails
to
that
alleges
but
rather
plans.”
this
demanded return of this property.
F.2d
it
tangible
Id.
Kaegem’s
converted
inasmuch
Meyer
GCT-related
(Kaegem’s
revision,
allege—as
that
two
2d
Am.
problems
required—that
it
Runnemede Owners, Inc., 861
plaintiff
claiming
allege it demanded possession from defendant).
conversion
must
If that were the
only problem, the Court would permit Kaegem yet another chance to
re-plead its conversion claim.
But there is another problem: The
- 9 -
Illinois Trade Secrets Act (“ITSA”) preempts the claim.
The ITSA
“is intended to displace conflicting tort, restitutionary, unfair
competition, and other laws of this State providing civil remedies
for misappropriation of a trade secret.”
Spitz v. Proven Winners
N. Am., LLC, 759 F.3d 724, 733 (7th Cir. 2014) (quoting 765 ILCS
1065/8).
Since
Spitz,
the
key
question
in
determining
ITSA
preemption has been whether the claim would lie if the information
at issue were not confidential.
IPOX Schuster, LLC v. Nikko Asset
Mgmt. Co., 191 F. Supp. 3d 790, 802 (N.D. Ill. 2016) (describing
Spitz and progeny).
Here, though, Kaegem does not seek recovery
for any wrongs beyond the mere misappropriation of “proprietary”
information.
Cf. Charles Schwab & Co. v. Carter, No. 04 C 7071,
2005 WL 2369815, at *4 (N.D. Ill. Sept. 27, 2005).
articulated,
this
confidential
nature.
converted
materials
claim
lives
If
on
and
Kaegem
their
dies
had
website
by
that
showcased
“for
the
As presently
information’s
these
world
allegedly
to
ogle,”
Meyer and any other member of the public would have been free to
possess
them—such
possession
Kaegem’s publication.
being
impliedly
authorized
by
Cf. Hecny Transp., Inc. v. Chu, 430 F.3d
402, 404 (7th Cir. 2005); see also, Runnemede Owners, Inc., 861
F.2d
at
1060
(stating
conversion
claims
will
not
lie
defendant’s assumption of possession is unauthorized).
unless
Because
Kaegem’s conversion claim lacks legs if the at-issue materials
were not confidential, that claim is preempted by the ITSA.
- 10 -
See,
e.g., Opus Fund Servs. United States LLC v. Theorem Fund Servs.,
LLC,
2017
U.S.
preemption
Dist.
over
Lexis
160649,
allegations
at
that
*13-14
(finding
defendants
ITSA
converted
“confidential and proprietary data”).
Twice
now,
Kaegem
conversion claim.
amendment
that
has
failed
to
state
an
actionable
The Court warned Kaegem before its most recent
ITSA
would
preempt
the
claim
to
the
extent
it
relied on alleged misappropriation of material not distinct from
the basis of its ITSA allegations in Count I.
failure
to
state
a
claim
warrants
dismissal
Kaegem’s persisting
of
Count VI
with
prejudice.
III.
CONCLUSION
For the reasons stated herein, Meyer’s Motion to Dismiss is
granted in part and denied in part.
Counts V and VI are dismissed
with prejudice.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: 3/22/2018
- 11 -
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?