XPO Logistics, Inc. v. Best Dedicated Solutions, LLC et al

Filing 32

OPINION AND ORDER. For the reasons stated in the accompanying Opinion and Order, the Court grants in part and denies in part Defendants motion to dismiss Counts VI, IX, and X 21 . XPO may not proceed on its claims in Counts VI, IX, and X to the extent they depend on the existence of confidential information. The Court orders Defendants to answer the remaining unanswered allegations of the complaint by October 9, 2017. Signed by the Honorable Sara L. Ellis on 9/18/2017. Mailed notice(rj, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
XPO LOGISTICS, INC., a Delaware
Corporation
Plaintiff,
v.
BEST DEDICATED SOLUTIONS, LLC,
an Illinois limited liability company, and
ROBERT BILCOX, KAREN CULVER,
PATRICK GOOD, JENNIFER
GREENHILL, WILLIAM PARKE,
SAMTWAN THOMAS, and DANIEL
VESTAL, individually,
Defendants.

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No. 17 C 1946
Judge Sara L. Ellis

OPINION AND ORDER
After some of Plaintiff XPO Logistics, Inc.’s (“XPO”) employees left their positions to
work for a direct competitor, Defendant Best Dedicated Solutions, LLC (“BDS”), allegedly
taking XPO’s trade secrets and customers with them, XPO brought this action for injunctive
relief and damages against BDS and the former employees: Robert Bilcox, Karen Culver, Patrick
Good, Jennifer Greenhill, William Parke, Samtwan Thomas, and Daniel Vestal (collectively, the
“Individual Defendants”). Among other claims, XPO alleges that BDS violated the Illinois
Trade Secret Act (“ITSA”), 765 Ill. Comp. Stat. 1065/1 et seq. (Count VIII), and committed the
following common law torts: tortious interference with XPO’s business relationships and/or
expectancy with its customers (Count VI) and unfair competition (Count IX). XPO also alleges
that all Defendants engaged in a civil conspiracy when they conspired to breach the Individual
Defendants’ post-employment obligations to XPO and to misappropriate XPO’s trade secrets
(Count X). Defendants move to dismiss Counts VI, IX, and X as preempted by ITSA.

Defendants also argue that if the Court finds that the civil conspiracy claim (Count X) is not
preempted, that claim nevertheless fails pursuant to the intracorporate conspiracy doctrine. The
Court finds that ITSA preempts XPO’s tortious interference, unfair competition, and civil
conspiracy claims to the extent they are based on the misappropriation of confidential
information, but the remainder of these claims may proceed because they seek recovery
independent of the alleged misappropriation. And because the Individual Defendants were not
employed by BDS when they allegedly conspired with BDS, the Court cannot find that the
intracorporate conspiracy doctrine applies at this time.
BACKGROUND 1
XPO and BDS directly compete in the global transportation and logistics industries, with
XPO having freight brokerage locations currently in Bannockburn and previously in Lake Forest,
Illinois and BDS being based in Libertyville, Illinois. XPO provides comprehensive supply
chain solutions to its customers and utilizes Freight Optimizer, a proprietary software platform,
to assist in the running of its business. This program stores XPO’s trade secrets and confidential
information including customer contact information and order history, vendor contact and
pricing information, product cost and pricing information, and XPO’s sales history. Only select
employees can access the program with XPO-provided login information, and they must access it
either within XPO’s facilities or from a private network on an XPO-owned laptop.
The Individual Defendants signed comparable employment agreements with XPO that
included non-competition, non-solicitation, and non-disclosure provisions. The non-competition
provisions required the Individual Defendants not to compete with XPO for a period of six

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The facts in the background section are taken from XPO’s complaint and the exhibits attached thereto
and are presumed true for the purpose of resolving Defendants’ motion to dismiss. See Virnich v.
Vorwald, 664 F.3d 206, 212 (7th Cir. 2011); Local 15, Int’l Bhd. of Elec. Workers, AFL–CIO v. Exelon
Corp., 495 F.3d 779, 782 (7th Cir. 2007).

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months. In the non-solicitation provision, the Individual Defendants agreed, for a period of two
years, not to solicit XPO employees or customers with whom they worked or about whom they
had access to confidential information in their last year of employment. Finally, the nondisclosure provision provided that the Individual Defendants would not disclose any of XPO’s
confidential information during and after their employment with XPO.
Bilcox began working for XPO as a Senior Account Executive on February 22, 2013,
when XPO acquired his prior employer. Greenhill, Thomas, and Vestal all worked under his
supervision. Greenhill worked as an Account Manager for XPO, beginning at the same time as
Bilcox. Thomas, hired on May 14, 2014, was XPO’s Carrier Sales Representative. Vestal began
working as a Carrier Procurement Representative for XPO on March 31, 2014. XPO terminated
Bilcox, Thomas, Greenhill, and Vestal on January 7, 2016 for wrongful workplace conduct.
Soon thereafter, they all began working for BDS, with BDS “hir[ing] Bilcox with the purpose of
having him solicit and hire other XPO employees, in violation of his and the Individual
Defendant’s respective Employment Agreements, and with the purpose of misappropriating
business from XPO.” Doc. 1 ¶ 86. Bilcox, as Managing Director of Strategic Accounts for
BDS, then solicited his former XPO coworkers, including Thomas, Greenhill, and Vestal, to join
him at BDS. Additionally, Parke, who had worked at XPO as a Senior Carrier Procurement
Representative, resigned from XPO on March 11, 2016 and began working for BDS no later than
July 8, 2016. Good resigned from his position as an Account Executive for XPO on September
12, 2016 and joined BDS five days later. Culver, an XPO Account Manager, informed XPO she
was retiring on November 4, 2016, only to begin working for BDS five days later. 2

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The complaint uses two dates for Culver’s alleged retirement, November 4 and December 4. Compare
Doc. 1 ¶ 20, with id. ¶ 73. Because XPO alleges Culver started at BDS on November 9, the Court uses
the November date.

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BDS “recruited and hired the Individual Defendants with the intent to induce them to
disclose to BDS their knowledge of XPO’s confidential business information,” seeking “to
shortcut the years of hard work and investment borne by XPO . . . to gain an unfair competitive
advantage in the marketplace.” Id. ¶¶ 83, 87. Before leaving XPO, the Individual Defendants
accessed and removed confidential information, including XPO’s carrier packet and agreement
as well as a confidential DAT Keypoint TMS data set, 3 from their XPO-owned computers and
shared them with BDS to unfairly compete with XPO. The Individual Defendants, on behalf of
BDS, have also engaged with customers and carriers with whom they had contact with and about
whom they learned confidential and proprietary information while employed by XPO. XPO has
sent letters to BDS, Bilcox, Good, and Parke demanding that they abide by the Individual
Defendants’ contractual obligations to no avail.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not
its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.
1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all wellpleaded facts in the complaint and draws all reasonable inferences from those facts in the
plaintiff’s favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a
Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a
claim’s basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct.
1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads

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The DAT Keypoint TMS data set included information regarding XPO’s historical, sales, and customer
data.

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factual content that allows the court to draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Iqbal, 556 U.S. at 678.
ANALYSIS
I.

ITSA Preemption
BDS argues that because XPO’s common law claims for tortious interference with

business relationships, unfair competition, and civil conspiracy are based on the
misappropriation of XPO’s trade secrets, they are preempted by ITSA. ITSA “abolishes claims
other than those based on contract arising from misappropriated trade secrets, replacing them
with claims under the Act itself.” Hecny Transp. v. Chu, 430 F.3d 402, 404 (7th Cir. 2005)
(citing 765 Ill. Comp. Stat. 1065/8(a)). Where a claim is predicated on the misuse of confidential
or secret information, that claim is preempted by ITSA. Automed Tech., Inc. v. Eller, 160 F.
Supp. 2d 915, 922 (N.D. Ill. 2001). Where a claim would survive regardless of whether the
information at issue was non-confidential, however, that claim is not preempted. IPOX Schuster,
LLC v. Nikko Asset Mgmt. Co., 191 F. Supp. 3d 790, 802 (N.D. Ill. 2016) (“[T]he crux of the
question has been whether the claim would lie if the information at issue were not
confidential.”); RTC Indus., Inc. v. Haddon, No. 06 C 5734, 2007 WL 2743583, at *3 (N.D. Ill.
Sept. 10, 2007). In other words, “when considering whether the ITSA preempts a separate claim,
a court must determine whether that separate claim seek[s] recovery for wrongs beyond the mere
misappropriation.” Lumenate Techs., LP v. Integrated Data Storage, LLC, No. 13 C 3767, 2013
WL 5974731, at *7 (N.D. Ill. Nov. 11, 2013) (alteration in original) (quoting Charles Schwab &
Co. v. Carter, No. 04 C 7071, 2005 WL 2369815, at *4 (N.D. Ill. Sept. 27, 2005)). The Court
thus reviews the claims that Defendants challenge to determine whether they depend on the

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misappropriation of a trade secret. See Thomas & Betts Corp. v. Panduit Corp., 108 F. Supp. 2d
968, 972 (N.D. Ill. 2000).
A.

Tortious Interference with Business Relationships (Count VI)

XPO alleges that BDS purposefully “interfered with XPO’s business relationship with its
customers by soliciting, or otherwise conducting business with, XPO’s customers and by
inducing XPO’s former employees to breach their post-employment contractual obligations to
XPO, to solicit XPO’s customers, and to disclose XPO’s confidential information.” Doc. 1
¶ 159. BDS argues that ITSA preempts XPO’s tortious interference claim because the claim
“flow[s] entirely from the allegations that the Individual Defendants misappropriated XPO’s
trade secrets for BDS’s benefit and thereby prevented [XPO] from having prospective dealings
with its alleged clients.” Doc. 22 at 4. To the extent the claim involves misappropriation and
disclosure of XPO’s confidential information, that part of the claim is preempted. See Traffic
Tech, Inc. v. Kreiter, No. 14-cv-7528, 2015 WL 9259544, at *15 (N.D. Ill. Dec. 18, 2015). But
XPO’s tortious interference claim also “seek[s] recovery for wrongs beyond the mere
misappropriation” of trade secret or confidential information. Lumenate, 2013 WL 5974731, at
*7. It seeks recovery for the alleged damage BDS caused by raiding XPO’s employees and
thereafter using those employees and their knowledge of XPO’s practices and customer
relationships to solicit XPO’s customers, thereby interfering with XPO’s prospective business
opportunities. See, e.g., Doc. 1 ¶¶ 34, 82, 85–86, 91. As such, this portion of XPO’s claim
remains because it rests on XPO’s allegations that BDS solicited XPO’s employees and induced
them to breach their post-employment non-solicitation of customer agreements. See Hecny, 430
F.3d at 405.

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B.

Unfair Competition (Count IX)

For its unfair competition claim, XPO alleges that “BDS, with the assistance of the
Individual Defendants after they had been enticed to join BDS, has systematically raided XPO’s
work force in order to (i) bolster and expand its own business performance, and (ii) obtain and
exploit XPO’s confidential, proprietary, trade secret, and highly sensitive business information.”
Doc. 1 ¶ 188. As with the tortious interference claim, BDS argues that ITSA preempts XPO’s
unfair competition claim because the conduct giving rise to the unfair competition claim also
underlies XPO’s ITSA claim. The Court, again, disagrees in part. Although a portion of XPO’s
unjust enrichment claim involves its confidential information, the claim reaches more broadly to
BDS’ raiding of XPO’s workforce to “bolster and expand its own business performance.” Id.
To the extent the unfair competition claim depends on the misappropriation of confidential or
trade secret information, the Court finds that part of the claim preempted. See Traffic Tech, Inc.,
2015 WL 9259544, at *15. But to the extent XPO seeks to hold BDS liable for raiding its
workforce to unfairly compete with XPO based not on the misappropriation of confidential
information but rather on the solicitation of XPO customers and employees, the unfair
competition claim avoids ITSA preemption. See Christopher Glass & Aluminum, Inc. v.
O’Keefe, No. 1:16-cv-11532, 2017 WL 2834536, at *4 (N.D. Ill. 2017) (finding portions of
breach of fiduciary duty claim not preempted by ITSA to the extent they involved defendant’s
solicitation of employees and customers); IPOX Schuster, LLC, 191 F. Supp. 3d at 803 (finding
unjust enrichment claim based on misuse of plaintiff’s trademark, reputation, and goodwill not
preempted by ITSA); Traffic Tech, Inc., 2015 WL 9259544, at *15 (allowing plaintiff to pursue
unjust enrichment claim based on theory that defendant breached his promise not to steal
corporate opportunities).

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C.

Civil Conspiracy (Count X)

Finally, XPO alleges that BDS and the Individual Defendants “willingly conspired and
agreed between themselves to breach the non-competition provisions, customer non-solicitation
provisions, employee non-solicitation provisions, and/or confidentiality provisions contained in
the Employment Agreements.” Doc. 1 ¶ 197. Defendants again argue that ITSA preempts this
claim because it is premised on the misappropriation of trade secrets. As with the unfair
competition claim, to the extent the claim relies on the breach of the Individual Defendants’
confidentiality provisions and misappropriation of XPO’s trade secrets, see id. ¶¶ 197, 199, ITSA
preempts those parts of the claim. But because the claim also involves allegations that BDS
conspired with the Individual Defendants to breach the non-competition and non-solicitation
provisions of their employment agreements, allegations which do not depend on the
misappropriation of trade secrets, ITSA does not preempt these aspects of the civil conspiracy
claim. See Stereo Optical Co. v. Judy, No. 08 C 2512, 2008 WL 4185689, at *5 (N.D. Ill. Sept.
8, 2008) (noting that where substantive claims on which civil conspiracy claim is based survive
ITSA preemption, civil conspiracy claim also survives to the same extent).
II.

Intracorporate Conspiracy Doctrine (Count X)
Alternatively, Defendants argue that if ITSA does not preempt the civil conspiracy claim,

the Court should dismiss the claim pursuant to the intracorporate conspiracy doctrine. 4 Under
the intracorporate conspiracy doctrine, “[t]he acts of an agent are considered in law to be the acts
of the principal. Thus a conspiracy does not exist between a principal and an agent or servant.”
Salaymeh v. InterQual, Inc., 508 N.E.2d 1155, 1158, 155 Ill. App. 3d 1040, 108 Ill. Dec. 578
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To the extent Defendants argue in reply that the civil conspiracy claim also fails because the only
unlawful act Defendants undertook in furtherance of the conspiracy is the misappropriation of trade
secrets, which is preempted, the Court finds that argument waived as Defendants only raise this argument
in their reply brief. See Dexia Credit Local v. Rogan, 629 F.3d 612, 625 (7th Cir. 2010) (“[A]rguments
raised for the first time in a reply brief are waived.”).

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(1987). Put differently, “if the challenged conduct is essentially a single wrongful act by a single
entity, the fact that two or more agents participated in the decision or the act itself will generally
not constitute a conspiracy.” Dombrowski v. Dowling, 459 F.2d 190, 196 (7th Cir. 1972).
Defendants argue that the Individual Defendants were agents of BDS because they
worked for BDS at the time they allegedly conspired to breach their employment agreements,
solicit employees and customers, and share confidential information with BDS. Doc. 22 at 7.
XPO counters, however, that the intracorporate conspiracy doctrine does not bar its civil
conspiracy claim because it does not apply where “individuals who at some point were or are
employed by a corporation[ ] engaged in the conspiratorial conduct during a period outside of
their employment term.” Doc. 30 at 10. XPO claims that “the Individual Defendants conspired
with each other during periods when some of them were not yet BDS’s employees,” pointing to
both Good and Culver who voluntarily resigned and joined BDS five days later as examples of
individuals who conspired with others at BDS while not yet BDS employees. Id. at 11. Based
on these allegations, which the Court must take as true at this stage, the Court cannot find that
the intracorporate conspiracy doctrine applies. XPO has adequately pled facts that suggest
contact between the Individual Defendants and BDS prior to all of the Individual Defendants’
terminations or resignations from XPO. See Doc. 1 ¶¶ 76–82 (alleging that the Individual
Defendants removed confidential information from XPO prior to their termination and provided
this information to BDS, that the Individual Defendants continue to disclose XPO strategies to
BDS, and that some of the Individual Defendants worked with BDS to raid XPO’s workforce).
Because the complaint suggests that the Individual Defendants were not all employed by BDS
when they engaged in some of this conduct, the Court cannot find that the complaint reveals that
the intracorporate conspiracy doctrine precludes the civil conspiracy claim. See, e.g., Comsys

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Inc. v. City of Kenosha, Wis., No. 16-CV-655-JPS, 2017 WL 1906750, at *14 n.5 (E.D. Wis.
May 9, 2017) (finding that intracorporate conspiracy doctrine did not apply when one of the
alleged members of the conspiracy took actions in furtherance of the conspiracy while still
employed by the plaintiff); Motorola, Inc. v. Lemko Corp., No. 08 C 5427, 2010 WL 1474795, at
*6 (N.D. Ill. Apr. 12, 2010) (noting that although it may be possible to argue that all individual
defendants were effectively defendant’s agents even though still employed by plaintiff,
“determination of their individual motivations is premature on a motion to dismiss,” preventing
the court from finding that the intracorporate conspiracy doctrine applied when for significant
period of the alleged conspiracy, some of the defendants worked for plaintiff).
CONCLUSION
For the foregoing reasons, the Court grants in part and denies in part Defendants’ motion
to dismiss Counts VI, IX, and X [21]. XPO may not proceed on its claims in Counts VI, IX, and
X to the extent they depend on the existence of confidential information. The Court orders
Defendants to answer the remaining unanswered allegations of the complaint by October 9,
2017.

Dated: September 18, 2017

______________________
SARA L. ELLIS
United States District Judge

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