Cortz, Inc. d/b/a In the Swim v. Doheny Enterprises, Inc. et al

Filing 104

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 7/11/2017:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CORTZ, INC., d/b/a In the Swim,
Plaintiff,
v.
DOHENY ENTERPRISES, INC., and
TIM MURPHY,
Defendants.

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Case No. 17 C 2187

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, United States District Judge:
On May 5, 2017, Plaintiff Cortz, Inc., d/b/a In the Swim (“Cortz”) filed a six-count First
Amended Complaint for Injunctive and Other Relief against its former employee Tim Murphy
(“Murphy”) and Doheny Enterprises, Inc. (“Doheny Enterprises”) alleging violations of the
Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1831, et seq. (Count I), and the
Illinois Trade Secrets Act (“ITSA”), 765 ILCS 1065/1, et seq. (Count II), three breach of
contract claims (Counts III-V), and a tortious interference with contract claim (Count VI). See
28 U.S.C. §§ 1331, 1367(a).
Before the Court is Cortz’s renewed motion for a preliminary injunction brought pursuant
to Federal Rule of Civil Procedure 65(a) in which Cortz focuses on its trade secret claims and
two breach of contract claims alleged in the First Amended Complaint. The Court held a
preliminary injunction hearing on June 28 and 29, 2017, at which time the following witnesses
testified: (1) David Newman, Cortz’s Executive Vice President of Finance; (2) Michael “Mick”
Doheny, Vice President of Doheny Enterprises; (3) Timothy Murphy, Cortz’s former Director of
Purchasing; and (4) Rick Parise, a Category Director at Leslie’s Pool Supplies. The parties

produced the following witness testimony through deposition designations: (1) John Doheny,
President of Doheny Enterprises; (2) Brink Spruill, Vice President of Sales and Marketing at
Kelley Technical Coatings (“Kelley”); and (3) Martin (“Marty”) Mullarkey, President of
Mullarkey Associates and a sales representative/agent for Kelley.
In assessing the parties’ preliminary injunction arguments, the Court considered the
totality of the evidence presented at the evidentiary hearing, including the deposition
designations, and carefully examined the credibility of the witnesses. When assessing witness
credibility, the Court considered each witness’ demeanor and facial expressions; intelligence;
ability and opportunity to see, hear, or know the matters about which the witness testified;
memory; potential for bias; and, significantly, the believability of the witness’ testimony in light
of the other evidence presented. See Anderson v. City of Bessemer, N.C., 470 U.S. 564, 575
(1985); Furry v. United States, 712 F.3d 988, 993 (7th Cir. 2013). Further, the Court thoroughly
analyzed the controlling legal authority.
With these standards in mind, Cortz has not met its burden of establishing the likelihood
of success on the merits as to its breach of contract claim against Doheny Enterprises in relation
to the November 30, 2015 Confidentiality Agreement, its DTSA and ITSA claims, and its breach
of an employment contract claim against Murphy. Therefore, the Court, in its discretion, denies
Cortz’s motion for a preliminary injunction. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S.
7, 24 (2008) (“A preliminary injunction is an extraordinary remedy never awarded as of right.”);
Turnell v. CentiMark Corp., 796 F.3d 656, 661 (7th Cir. 2015) (“A preliminary injunction is an
extraordinary equitable remedy that is available only when the movant shows clear need.”).
Further, the Court, in its discretion, grants Defendants’ in limine motion limiting Rick Parise’s
testimony as inadmissible hearsay, as discussed in detail below. See Fed.R.Evid. 801(c).

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BACKGROUND1
I.

Introduction
Cortz has been in business for over thirty years and provides swimming pool and spa-

related products to residential and commercial customers across the United States. (6/28/17,
Newman Prelim. Inj. Hr’g.)2 Specifically, Cortz offers an assortment of merchandise, such as
spa and pool chemicals, equipment, supplies, and parts, from different manufacturers and has its
own branded products. (Id.) In addition, Cortz sells its products through a variety of different
marketplaces and websites, such as Amazon and eBay. (Id.) Doheny Enterprises, which has
been in business for fifty years, directly competes with Cortz and offers pool and spa chemicals,
equipment, and accessories to customers across the United States. (6/28 M. Doheny Prelim. Inj.
Hr’g.) Like Cortz, Doheny Enterprises sells its products through online marketplaces like
Amazon and eBay, as well as through its own proprietary website and at its retail stores. (Id.)
II.

Prospective Purchase of Cortz
In November 2015, John Doheny, Doheny Enterprises’ President, discovered that Cortz

might be for sale. (R. 84, J. Doheny Dep., at 40-41.) More specifically, John Doheny learned
that Lincoln International, LLC (“Lincoln”) was acting as a broker for the sale of Cortz, after
which he contacted a representative at Lincoln to express an interest in purchasing Cortz. (Id. at

1

Although the parties filed numerous documents under seal, the Seventh Circuit has held that
“[d]ocuments that affect the disposition of federal litigation are presumptively open to public
view, even if the litigants strongly prefer secrecy, unless a statute, rule, or privilege justifies
confidentiality.” In re Specht, 622 F.3d 697, 701 (7th Cir. 2010); see also United States v.
Foster, 564 F.3d 852, 853 (7th Cir. 2009) (sealed documents “that influence or underpin the
judicial decision are open to public inspection unless they meet the definition of trade secrets or
other categories of bona fide long-term confidentiality.”). Moreover, the Court does not discuss
specific details of the parties’ confidential information or the alleged trade secrets in this order.
2

The parties did not order an official transcript of the preliminary injunction hearing, therefore,
the Court refers to the court reporter’s unofficial transcript of the evidentiary hearing.
3

40-41.) In connection with this inquiry, John Doheny signed a Confidentiality Agreement on
behalf of Doheny Enterprises. (Id. at 42.) In particular, Doheny Enterprises’ counsel forwarded
the Confidentiality Agreement to John Doheny, who signed it on November 30, 2015. (Id. at 4243; Prelim. Inj. Hr’g Ex. 35, Confidentiality Agmt.)
Following the execution of the Confidentiality Agreement, in December 2015, an
associate at Lincoln sent Cortz marketing materials to John Doheny and Doheny Enterprises’
counsel. (J. Doheny Dep., at 52-53; Prelim. Inj. Hr’g Ex. 39.) In January 2016, John Doheny
attended a meeting with Cortz’s management team. (J. Doheny Dep., at 53.) The Cortz
employees attending the January 2016 meeting were Steve Druckman (CEO), Eric Rohrdanz
(COO), David Newman (CFO), and Christine Mattson (CMO). (6/28 Newman Prelim. Inj. Hr’g;
6/29 M. Doheny Prelim Inj. Hr’g.) Defendant Tim Murphy, Cortz’s former Director of
Purchasing, did not attend the January 2016 meeting and did not participate in any discussions
with Doheny Enterprises regarding the potential sale of Cortz. (6/29 M. Doheny Prelim Inj.
Hr’g.) At that time, however, John Doheny knew who Murphy was and that he worked for
Cortz. (J. Doheny Dep., at 51.) Meanwhile, at the January 2016 meeting, Cortz distributed an
information packet marked confidential to the following Doheny Enterprises’ personnel
attending the meeting – John Doheny (President), Mick Doheny (Vice President), and Brian
Hendrickson (Vice President of Marketing). (Id. at 30-31, 52-53.)
At some point after the January 2016 meeting, John Doheny expressed an interest in
purchasing Cortz. (J. Doheny Dep., at 55-56.) Nonetheless, in February 2016, Cortz’s counsel
sent a letter to John Doheny – but not to Doheny Enterprises’ counsel – explaining that because
Doheny’s participation in the sale had ended, John Doheny should destroy the confidential
information provided by Cortz pursuant to paragraph 6 of the Confidentiality Agreement. (Id. at

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71-72.) According to John Doheny, upon receiving this letter, he destroyed the confidential
information and contacted Mick Doheny and Brian Henderson directing them to do the same.
(Id.) John Doheny specifically testified that because Doheny Enterprises’ counsel had not
attended the January 2016 meeting and had not received the packet of confidential information,
he did not think to contact counsel and ask him to destroy any confidential documents that
counsel might have. (Id. at 72-74.)
Leslie’s Pool Supplies (“Leslie’s”) was the successful purchaser of Cortz, and around the
end of June 2016, Leslie’s closed on its acquisition of Cortz. (6/28 Newman Prelim. Inj. Hr’g.)
Cortz is now a wholly-owned subsidiary of Leslie’s. (Id.) At the preliminary injunction hearing,
Newman testified that Leslie’s paid approximately $7 million for Cortz, along with paying
approximately $30 million in Cortz’s debt. (Id.) Newman further explained that prior to Leslie’s
2016 acquisition, more specifically from 2012 to 2016, Cortz’s sales were steady, but its
earnings were going down. (Id.) Newman also clarified that Leslie’s yearly sales figures are
about five times larger than Cortz’s yearly sales. (Id.) Similarly, Mick Doheny testified at the
preliminary injunction hearing that Leslie’s is ten times larger than Doheny Enterprises. (6/29
M. Doheny Prelim. Inj. Hr’g.)
III.

Murphy’s Employment
Defendant Murphy began his employment with Cortz in April 1997 starting as a Store

Assistant Manager. (6/29 Murphy Prelim. Inj. Hr’g.) At that time, Murphy entered into an
employment agreement with Cortz. (Id.) During his employment at Cortz, Murphy worked his
way up to the position of Cortz’s Director of Purchasing. (Id.) When Murphy was the Director
of Purchasing, his responsibilities included purchasing products from vendors and negotiating
vendor agreements. (Id.) At the preliminary injunction hearing, Newman testified that as

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Cortz’s employee, Murphy had access to the costs of goods from its suppliers, the suppliers’
rebate structures, and the suppliers’ early-buy discount terms, as well as certain marketing
strategies like bundling products for a discounted price. (6/28 Newman Prelim. Inj. Hr’g.) In
particular, Newman testified that Murphy attended daily management meetings, at which time
various Cortz officers and managers met with Cortz’s CEO and reviewed what Newman
characterizes as a “great sum of data.” (Id.; Prelim. Inj. Hr’g Ex. 43.) Newman further
elucidated that Murphy was privy to the daily flash report sent to approximately twenty-five to
thirty other Cortz employees. (6/28 Newman Prelim. Inj. Hr’g.) Also, Newman stated that after
Cortz fired Murphy, Murphy did not physically take any documents containing Cortz’s trade
secrets with him. (Id.)
Cortz terminated Murphy’s employment on July 14, 2016. (Id.; 6/29 Murphy Prelim. Inj.
Hr’g.) At the preliminary injunction hearing, Murphy explained that Cortz terminated his
employment due in part to his refusal to sign a retention bonus agreement that Leslie’s offered
because it contained a two-year non-compete clause prohibiting him for working in the
swimming pool supply industry if he left Leslie’s employment or if Leslie’s terminated his
employment. (6/29 Murphy Prelim. Inj. Hr’g.) Murphy also testified that prior to rejecting the
retention bonus, he had numerous conversations with Cortz and Leslie’s, at which time he
expressed his concerns about the two year non-compete clause. (Id.) Similarly, Newman
testified that Cortz terminated Murphy’s employment because Murphy would not sign the two
year non-compete agreement. (6/28 Newman Prelim. Inj. Hr’g.)
After his termination, Murphy began looking for work and called Mick Doheny in July
2016. (Id.; 6/28 M. Doheny Prelim. Inj. Hr’g.) That phone call resulted in several meetings
between Murphy and Mick Doheny. (6/28 M. Doheny Prelim. Inj. Hr’g.) Doheny offered to

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hire Murphy as a re-buyer working with 14 vendors. (6/29 Murphy Prelim. Inj. Hr’g; 6/29 M.
Doheny Prelim. Inj. Hr’g.) At the preliminary injunction hearing, Mick Doheny clarified that a
re-buyer is tasked with looking at sales trends to build and then place orders for products with
certain vendors. (6/28 M. Doheny Prelim. Inj. Hr’g.) Doheny Enterprises and Murphy agreed
that Murphy would initially work as a consultant with the understanding that it was for a oneyear trial period. (J. Doheny Dep., at 57-58; 6/28 M. Doheny Prelim. Inj. Hr’g.) Doheny
Enterprises and Murphy signed a consulting agreement dated August 29, 2016 (“Consulting
Agreement”) and Murphy started working for Doheny Enterprises on September 6, 2016. (6/28
M. Doheny Prelim. Inj. Hr’g; Prelim. Inj. Hr’g Ex. 7 Consulting Agmt.) The Consulting
Agreement affirmatively prohibited Murphy from using third-party confidential information in
connection with his employment with Doheny. (Consulting Agmt. ¶ 10.)
IV.

Vendor Pricing
At the preliminary injunction hearing, Rick Parise, a Leslie’s employee who works with

vendors, testified that he had a telephone conversation with Brink Spruill, an employee of pool
supply vendor Kelley, sometime in February 2017. (6/29/17 Parise Prelim. Inj. Hr’g.) Parise
testified that during this telephone conversation, Spruill brought to his attention that Murphy –
who now works for Doheny Enterprises – had pressured Spruill about costs and vendor pricing.
(Id.) Further, Parise testified that he talked to Spruill another time after the first conversation,
although he did not recall the exact date. (Id.) During this second conversation, Parise told
Spruill that Leslie’s legal counsel had contacted him about the February 2017 telephone
conversation. (Id.)
On the other hand, Brink Spruill testified at his deposition that he did not recall this
conversation with Parise and that he has not talked to or e-mailed Murphy after Leslie’s acquired

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Cortz in June 2016. (R. 83, Spruill Dep., at 29-32, 39.) Not only did Spruill testify that he did
not remember any such conversation, but he specifically denied that he told Parise that Murphy
put pressure on him regarding vendor pricing or that he discussed Murphy putting pressure on
him with any other vendors. (Id. at 32-33.) Spruill also testified that no one at Doheny
Enterprises, including Murphy, has told him that they know the prices Cortz pays Kelley. (Id. at
60-61.)
Next, Cortz points to the ongoing three-year negotiation between Doheny Enterprises and
Kelley regarding the per gallon price of a product called “Zeron,” which is an epoxy pool
coating. (R. 86, Mullarkey Dep., at 74; 6/28 M. Doheny Prelim. Inj. Hr’g.) In particular, in
November 2016, Kelley’s agent, Marty Mullarkey, along with Mick Doheny and Brink Spruill,
exchanged a series of e-mails concerning Mick Doheny’s request for lower Zeron prices from
Kelley. (Mullarkey Dep., at 76-81; 6/28 M. Doheny Prelim. Inj. Hr’g.) Shortly thereafter, in a
letter to Mick Doheny, Spruill mentioned Cortz (by its abbreviation ITS) and offered Doheny a
reduced price on the Zeron. (6/28 M. Doheny Prelim. Inj. Hr’g; Ex. 33, 11/17/16 Spruill Letter.)
Spruill specifically referenced Cortz as follows:
Please consider that Kelley Technical Coatings has done some good things in support of
the Doheny efforts to reach deep into the marketplace. For instance, we direct hundreds
of callers to you when inquiring about purchasing Olympic, a very trusted brand. I
believe our website to be superb and we will be ramping up our social media presence for
the upcoming year, along with our ongoing marketing investments. I also think it
important to mention we sent out at no charge over $43,000 in free goods plus freight last
year to Doheny customers (we code them) for whatever complaint they were being
unreasonable about, just to maintain a smooth relationship and faith in the line.
Remember, Doheny grew 12% over the last 4 years where ITS [Cortz] flat lined.
(11/17/16 Spruill Letter.) Mick Doheny replied to Spruill’s letter requesting an additional $4.00
per gallon price reduction on Zeron. (6/28 M. Doheny Prelim. Inj. Hr’g; Prelim. Inj. Hr’g Ex.
34, 11/22/16 e-mail.) Kelley eventually offered to reduce the price by an additional $2.00 a

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gallon, which Mick Doheny accepted. (6/28 M. Doheny Prelim. Inj. Hr’g.) In explaining why
he asked for a lower per gallon price for Zeron, Mick Doheny testified that he requested a lower
price because he discovered through Cortz’s advertising that Cortz was selling its self-branded
version of Zeron for a retail price of $69.99 a gallon, which was essentially Doheny Enterprises’
wholesale per gallon cost of the product. (Id.) Mick Doheny explained that “I just wanted a
better price on it because I couldn’t sell it for what they were selling it for and not lose money.”
(Id.) Furthermore, Mick Doheny testified that Murphy was not involved in the Zeron price
negotiations and that Murphy never told him the vendor price that Cortz paid. (Id.)
LEGAL STANDARD
“A preliminary injunction is an extraordinary equitable remedy that is available only
when the movant shows clear need.” Turnell v. CentiMark Corp., 796 F.3d 656, 661 (7th Cir.
2015); see also Whitaker By Whitaker v. Kenosha Unified Sch. Dist. No. 1 Bd. of Educ., 858 F.3d
1034, 1044 (7th Cir. 2017) (“A preliminary injunction is an extraordinary remedy.”). Moreover,
a preliminary injunction is “a way to maintain the status quo until merits issues can be resolved
at trial.” Michigan v. U.S. Army Corp of Eng’rs, 667 F.3d 765, 783 (7th Cir. 2011). To obtain a
preliminary injunction, the moving party must show that (1) its claims have some likelihood of
success on the merits; (2) it will suffer irreparable harm prior to the final resolution of its claims;
and (3) legal remedies are inadequate. See Jones v. Markiewicz-Qualkinbush, 842 F.3d 1053,
1058 (7th Cir. 2016); D.U. v. Rhoades, 825 F.3d 331, 335 (7th Cir. 2016).
“If the movant successfully makes this showing, the court must engage in a balancing
analysis, to determine whether the balance of harm favors the moving party or whether the harm
to other parties or the public sufficiently outweighs the movant’s interests.” Whitaker, 858 F.3d
at 1044; see also Jones, 842 F.3d at 1058. The balancing of harm “is done on a ‘sliding scale’

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measuring the balance of harms against the moving party’s likelihood of success,” namely, the
“more likely he is to succeed on the merits, the less the scale must tip in his favor.” Whitaker,
858 F.3d at 1054; see also Jones, 842 F.3d at 1060. “The converse, however, also is true: the
less likely he is to win, the more the balance of harms must weigh in his favor for an injunction
to issue.” Whitaker, 858 F.3d at 1054. In sum, “[o]nce all the equitable factors are before the
judge, [] a classic discretionary decision must be made involving how much weight to give
individual components of the calculus and to what direction the balance of equity tips.” Jones,
842 F.3d at 1060 (quoting Lawson Prods., Inc. v. Avnet, Inc., 782 F.2d 1429, 1436 (7th Cir.
1986)).
ANALYSIS
The Court turns to the first preliminary injunction inquiry, namely, whether Cortz’s
claims have some likelihood of success on the merits, because it is dispositive. “[T]he threshold
for demonstrating a likelihood of success on the merits is low.” Rhoades, 825 F.3d at 338; see
also Whitaker, 858 F.3d at 1046. As the Seventh Circuit teaches, “[i]n framing the probability of
success necessary for a grant of injunctive relief, we have said repeatedly that the plaintiff’s
chances of prevailing need only be better than negligible.” Rhoades, 825 F.3d at 338. Put
differently, “[t]o demonstrate the requisite likelihood of success,” the moving party need “only to
present a claim plausible enough that (if the other preliminary injunction factors cut in their
favor) the entry of a preliminary injunction would be an appropriate step.” U.S. Army Corps of
Eng’rs, 667 F.3d at 783.
I.

Breach of Confidentiality Agreement (Count III)
Because the parties’ legal memoranda focus on the November 30, 2015 Confidentiality

Agreement that Doheny Enterprises entered into during its discussions to purchase Cortz, the

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Court begins its analysis with Cortz’s claim that Doheny Enterprises breached this agreement.
At issue is the non-solicitation clause of the Confidentiality Agreement, which reads in its
entirety:
For a period of two (2) years from the date of this Agreement, we and our
Representatives (excluding our Professional Advisors so long as such Professional
Advisors are not acting on our behalf with respect to the restrictions set forth in this
paragraph 3) agree not to directly or indirectly solicit for employment or employ any
Employees of the Company. The foregoing will not restrict us from soliciting or hiring
any Employee (other than a management-level employee) of the Company who: (a)
responds to a public general advertisement or non-directed search inquiry (in each case
not directed at or targeted to, the Company or any of the Company’s employees), or (b) is
referred to us by search firms (in each case not directed at, or targeted to, the Company or
any of the Company’s Employees). “Employees” shall be defined as any management
level employee of the Company, or any other employee of the Company with whom we
or any of our Representatives have direct contact or who becomes known to us or any of
our Representatives in connection with the Potential Transaction.
(R. 34-1, Ex. A, Confidentiality Agmt. ¶ 3.) Also at issue is paragraph six of the Confidentiality
Agreement, which states in relevant part:
Promptly upon a written request by or on behalf of the Company, we agree to destroy
(and we shall confirm all such destruction in writing by an authorized signatory) all
Confidential Information in our or our Representatives’ possession or to which either we
or our Representatives have access.
(Id. ¶ 6.)
The Confidentiality Agreement calls for the application of Delaware law. (Id. ¶ 9.) In
Delaware, the elements of a breach of contract claim are: “[1] the existence of the contract,
whether express or implied; [2] the breach of an obligation imposed by that contract; and [3] the
resultant damage to the plaintiff.” Avaya Inc., RP v. Telecom Labs, Inc., 838 F.3d 354, 389 (3d
Cir. 2016) (quoting VLIW Tech., LLC v. Hewlett–Packard Co., 840 A.2d 606, 612 (Del. 2003)).
“If a contract’s terms are clear and unambiguous, the court will interpret such terms according to
their ordinary and usual meaning.” Cont’l Warranty, Inc. v. Warner, 108 F. Supp. 3d 256, 25960 (D. Del. 2015). “Only if the contract is ambiguous may a court consider extrinsic evidence of
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the parties’ intent.” Life Plans, Inc. v. Sec. Life of Denver Ins. Co., 800 F.3d 343, 349 (7th Cir.
2015) (citing O’Brien v. Progressive No. Ins. Co., 785 A.2d 281, 288-89 (Del. 2001)). “In
looking at extrinsic evidence to interpret an ambiguous contractual provision, ‘a court may
consider evidence of prior agreements and communications of the parties as well as trade usage
or course of dealing.’” Aleynikov v. Goldman Sachs Grp., Inc., 765 F.3d 350, 362 (3d Cir. 2014)
(quoting Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232-33 (Del. 1997)).
Cortz admits that the non-solicitation clause in paragraph three of the Confidentiality Agreement
is a restrictive covenant, (see R. 7, 3/21/17 Brief, at 6), and “Delaware courts construe restrictive
covenants narrowly as written.” Smartmatic Int’l Corp. v. Dominion Voting Sys. Int’l Corp., No.
CIV.A. 7844-VCP, 2013 WL 1821608, at *9 (Del. Ch. May 1, 2013).
A.

Non-Solicitation Clause

Cortz first argues that Doheny Enterprises breached the non-solicitation clause in
paragraph three of the Confidentiality Agreement when it hired Murphy within two years of the
November 30, 2015 Confidentiality Agreement even though Murphy no longer worked for Cortz
at that time. In making this argument, Cortz asks the Court to consider testimony provided by
Brad Keyworth, who was part of the Lincoln Financial team working to find buyers for Cortz in
2015-16. More specifically, Cortz argues that the language in paragraph three is not ambiguous
and that both current and past management employees are covered under paragraph three based
on trade usage as described by Keyworth. In Delaware, however, trade usage is extrinsic
evidence that courts examine only if the contract language is ambiguous. See Aleynikov, 765
F.3d at 362; Cont’l Warranty, 108 F.Supp.2d at 260; Eagle Indus., 702 A.2d at 1233; United
Rentals, Inc. v. RAM Holdings, Inc., 937 A.2d 810, 835 (Del. Ch. 2007); see, e.g., Motorola Inc.
v. Amkor Tech., Inc., 958 A.2d 852, 858 (Del. 2008) (“the Superior Court looked to trade usage

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as a source of resolving the contract ambiguity.”). Here, neither Cortz nor Doheny Enterprises
argue that the non-solicitation clause in the Confidentiality Agreement is ambiguous, although
they point to extrinsic evidence in making their arguments.
The Court thus turns to the plain language of the Confidentiality Agreement keeping in
mind that in Delaware “[r]estrictive covenants are carefully negotiated and our law requires that
their unambiguous terms be given effect.” Allied Capital Corp. v. GC–Sun Holdings, L.P., 910
A.2d 1020, 1024 (Del. Ch. 2006). In paragraph three, Doheny Enterprises agreed “not to directly
or indirectly solicit for employment or employ any Employees of the Company.” The agreement
also states “‘Employees’ shall be defined as any management level employee of the Company, or
any other employee of the Company with whom we or any of our Representatives have direct
contact or who becomes known to us or any of our Representatives in connection with the
Potential Transaction.” The Court notes that this language defines employee in the present tense.
In response to Cortz’s motion, Doheny Enterprises argues that because Cortz had
terminated Murphy’s employment before Doheny Enterprises had hired him, it did not breach the
Confidentiality Agreement as the non-solicitation clause only covered current management
employees. In making its argument, Doheny Enterprises asserts that the definition of employee
in Black’s Law Dictionary does not include a person who once worked for an employer. See
Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 738 (Del. 2006) (en banc)
(“Delaware courts look to dictionaries for assistance in determining the plain meaning of terms
which are not defined in a contract.”). In particular, Black’s Law Dictionary defines employee
as “[s]omeone who works in the service of another person (the employer) under an express or
implied contract of hire, under which the employer has the right to control the details of work
performance.” Employee, BLACK’S LAW DICTIONARY (10th ed. 2014). The Court agrees

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that the plain language of the Confidentiality Agreement concerns current employees based on
the contract language and the dictionary definition, which are in the present tense.”3 That Cortz
now asks the Court to rewrite this plain language to include past employees contradicts wellsettled Delaware law. See Haft v. Dart Grp. Corp., 841 F. Supp. 549, 564 (D. Del. 1993)
(“Courts should not rewrite the plain language of ‘an otherwise valid contractual provision,’ even
to supply perceived omissions.”) (citation omitted); Cincinnati SMSA Ltd. P’ship v. Cincinnati
Bell Cellular Sys. Co., 708 A.2d 989, 992 (Del. 1998) (“it is not the proper role of a court to
rewrite or supply omitted provisions to a written agreement.”); see, e.g., Unwired Planet, Inc. v.
Microsoft Corp., 193 F. Supp. 3d 336, 343 (D. Del. 2016). Also important, Cortz’s broad
interpretation of the non-solicitation clause – which Cortz admits is a restrictive covenant –
contradicts Delaware law which instructs courts to construe restrictive covenants narrowly. See
Smartmatic Int’l Corp., 2013 WL 1821608, at *9; see also New Castle Cty. v. Pike Creek
Recreational Servs., LLC, 82 A.3d 731, 748 n.124 (Del. Ch. 2013) (“restrictive covenants should
be strictly construed and narrowly read”).
Examining the undisputed evidence in the record, Doheny Enterprises did not solicit or
hire Murphy while he was Cortz’s employee. Rather, Murphy contacted Doheny Enterprises and
Doheny Enterprises hired Murphy after Cortz had terminated Murphy’s employment on July 14,
2016. The undisputed evidence further reveals Doheny Enterprises offered Murphy the position
of consultant for a one-year trial period in August 2016. Murphy then started working for
Doheny Enterprises on September 6, 2016. Under these facts, Cortz has not met its burden of

Likewise, the Oxford English Dictionary defines “employee” in the present tense, namely, “[a]
person employed for wages.” 5 Oxford English Dictionary 191 (2d ed. 1989); see also Employee,
New Oxford American Dictionary 569 (3d ed. 2010) (“a person employed for wages or salary”).

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establishing that its chances of succeeding on the breach of the non-solicitation clause are better
than negligible. See Rhoades, 825 F.3d at 338; U.S. Army Corps of Eng’rs, 667 F.3d at 783.
B.

Paragraph Six

Cortz further argues that although John Doheny ensured that Doheny Enterprises and its
representatives would destroy Cortz’s sales materials and confidential information after the sale
process ended, he failed to direct Doheny Enterprises’ attorneys to destroy the confidential
information, and thus Doheny Enterprises breached paragraph six of the Confidentiality
Agreement. Indeed, John Doheny admits that he failed to contact counsel to destroy the
materials Cortz provided to Doheny. Specifically, at his deposition, John Doheny testified that
because Doheny’s counsel had not attended the January 2016 meeting with Cortz and had not
received the detailed packet of Cortz’s confidential information provided at that time, he did not
think to contact counsel and ask him to destroy any confidential documents. Meanwhile, at the
preliminary injunction hearing, Newman testified that there was no harm or damage to Cortz
based on counsel’s failure to destroy the documents at issue. (6/28 Newman Prelim. Inj. Hr’g;
Prelim. Inj. Hr’g Ex. 39.) As such, Cortz has not presented evidence of any injury, which is a
required element of a breach of contract claim under Delaware law. See Phunware, Inc. v.
Excelmind Grp. Ltd., 117 F. Supp. 3d 613, 625 (D. Del. 2015).
Moreover, Doheny Enterprises has offered to destroy these documents, which is a remedy
contemplated by the Confidentiality Agreement, namely, specific performance. (Confidentiality
Agmt. ¶ 8.) Thus, pursuant to the Confidentiality Agreement, the Court directs Doheny
Enterprises to destroy these documents and “confirm all such destruction in writing by an
authorized signatory.” Accordingly, Cortz has failed in its burden of demonstrating that its
chances of succeeding on its breach of contract claim based on paragraph six of the

15

Confidentiality Agreement are better than negligible due to lack of harm or injury. See Rhoades,
825 F.3d at 338; see also U.S. Army Corps of Eng’rs, 667 F.3d at 783.
II.

Trade Secret Claims (Counts I and II)
Cortz further argues that Doheny Enterprises and Murphy have misappropriated its trade

secrets. Specifically, in Count I of the First Amended Complaint, Cortz brings a trade secret
misappropriation claim under the Defend Trade Secrets Act of 2016 (“DTSA”), which creates a
private cause of action in favor of the “owner of a trade secret that is misappropriated ... if the
trade secret is related to a product or service used in, or intended for use in, interstate or foreign
commerce.” 18 U.S.C. § 1836(b)(1). See Mission Measurement Corp. v. Blackbaud, Inc., 216 F.
Supp. 3d 915, 919-20 (N.D. Ill. 2016). Under the DTSA:
(3) the term “trade secret” means all forms and types of financial, business, scientific,
technical, economic, or engineering information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods, techniques, processes,
procedures, programs, or codes, whether tangible or intangible, and whether or how
stored, compiled, or memorialized physically, electronically, graphically,
photographically, or in writing if –
(A) the owner thereof has taken reasonable measures to keep such information
secret; and
(B) the information derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable through proper
means by, another person who can obtain economic value from the disclosure or
use of the information[.]
18 U.S.C. § 1839(3). In addition, under the DTSA, “misappropriation” is defined as “an
unconsented disclosure or use of a trade secret by one who (i) used improper means to acquire
the secret, or, (ii) at the time of disclosure, knew or had reason to know that the trade secret was
acquired through improper means, under circumstances giving rise to a duty to maintain the
secrecy of the trade secret, or derived from or through a person who owed such a duty.” Mission
Measurement, 216 F. Supp. 3d at 920 (citation omitted).
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In Count II, Cortz alleges a trade secret misappropriation claim under the Illinois Trade
Secrets Act (“ITSA”). “In order to establish improper use of trade secrets, a plaintiff must show:
‘(1) a trade secret existed; (2) the secret was misappropriated through improper acquisition,
disclosure, or use; and (3) the owner of the trade secret was damaged by the misappropriation.’”
Destiny Health, Inc. v. Connecticut Gen. Life Ins. Co., 39 N.E.3d 275, 282 (1st Dist. 2015)
(citation omitted); see also Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721
(7th Cir. 2003) (“To prevail on a claim for misappropriation of a trade secret under the Act, the
plaintiff must demonstrate that the information at issue was a trade secret, that it was
misappropriated and that it was used in the defendant’s business.”). Under the ITSA,
(d) “Trade secret” means information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique,
drawing, process, financial data, or list of actual or potential customers or suppliers, that
(1) is sufficiently secret to derive economic value, actual or potential, 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 reasonable under the circumstances to
maintain its secrecy or confidentiality.
See 765 ILCS 1065/2(d); Triumph Packaging Grp. v. Ward, 834 F.Supp.2d 796, 806 (N.D. Ill.
2011). Under the ITSA, the Court may enjoin actual or threatened misappropriation of trade
secrets. See 765 ILCS 1065/3(a); Triumph Packaging, 834 F.Supp.2d at 806.
Without referring to the ITSA’s or DTSA’s specific definitions of “trade secret,” Cortz
maintains that “[f]inancial information, such as information related to online strategy formation,
development, and implementation, vendor negotiation information, information related to
customer pricing and profit margins, and cost margins in online marketplaces, plainly
constitutes a trade secret under the DTSA and the ITSA.” (R. 7, 3/21/17 Brief, at 4.) In making
this argument, Cortz cites this Court’s decision in Mission Measurement, which does not support
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Cortz’s contention that this information “plainly” constitutes a trade secret or “falls squarely”
within the statutes’ definitions of trade secret. Indeed, as the Seventh Circuit instructs, “[i]t is
not enough to point to broad areas of [information] and assert that something there must have
been secret and misappropriated. The plaintiff must show concrete secrets.” Composite Marine
Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1266 (7th Cir. 1992) (per curiam).
Under this guidance, the definition of trade secret is not as simple as Cortz suggests. As
the Seventh Circuit teaches, “a trade secret ‘is one of the most elusive and difficult concepts in
the law to define.’” Learning Curve Toys, 342 F.3d at 723 (citation omitted). “In many cases,
the existence of a trade secret is not obvious; it requires an ad hoc evaluation of all the
surrounding circumstances.” Id. In making this ad hoc evaluation, Illinois courts often refer to
six factors in deciding whether a trade secret exists:
(1) the extent to which the information is known outside of the plaintiff’s business; (2)
the extent to which the information is known by employees and others involved in the
plaintiff’s business; (3) the extent of measures taken by the plaintiff to guard the secrecy
of the information; (4) the value of the information to the plaintiff’s business and to its
competitors; (5) the amount of time, effort and money expended by the plaintiff in
developing the information; and (6) the ease or difficulty with which the information
could be properly acquired or duplicated by others.
Id. at 722; see also Mangren Research & Dev. Corp. v. Nat’l Chem. Co., 87 F.3d 937, 942 (7th
Cir. 1996) (Under Illinois law, “the information at issue ‘must be sufficiently secret to impart
economic value to both its owner and its competitors because of its relative secrecy.’”) (citation
omitted).
In its reply brief and at the preliminary injunction hearing, Cortz added specificity as to
what it considers its trade secrets. In doing so, Cortz discusses its vendor pricing. Specifically,
Cortz highlights Leslie’s December 31, 2011 vendor agreement with Kelley noting that it
contains a confidentiality clause concerning the confidential and/or proprietary information
disclosed by the parties. (Prelim. Inj. Hr’g Ex. 42, 12/31/11 Vendor Agmt. ¶ 7.) The fact that
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Leslie’s – not Cortz – and Kelley entered into a vendor agreement with a confidentiality clause
provides some evidence that vendors take affirmative steps to maintain the secrecy and
confidentiality of their vendor pricing. See Learning Curve Toys, 342 F.3d at 725-26; Arcor, Inc.
v. Haas, 363 Ill. App. 3d 396, 402 (1st Dist. 2005.) Cortz also provides additional evidence
about vendor practices concerning the confidentiality of vendor prices, including Marty
Mullarkey’s deposition testimony that Mullarkey Associates keeps vendor prices confidential by
not sharing this information with anyone outside of the customer and the supplier involved in the
transaction. (Mullarkey Dep., at 21-22.) In addition, Cortz entered into non-disclosure
agreements with Doheny Enterprises and Murphy, which is evidence that Cortz took steps to
maintain its confidential information’s secrecy. See Cumulus Radio Corp. v. Olson, 80 F. Supp.
3d 900, 911 (C.D. Ill. 2015); see, e.g., Mission Measurement, 216 F. Supp. 2d at 922. As such,
Cortz has presented some evidence that “the real value of the information ‘lies in the fact that it
is not generally known to others who could benefit [from] using it.’” Mangren Research, 87
F.3d at 942 (citation omitted).
That being said, Cortz has not presented evidence regarding other relevant factors
addressed by the Seventh Circuit in Learning Curve Toys or case law discussing the ITSA’s or
DTSA’s definitions of trade secret in relation to its vendor pricing. Cortz, for example, does not
discuss the amount of time, effort, or the money that it expended in developing its vendor pricing
nor whether it would be difficult to duplicate its effort in doing so. See Delta Med. Sys. v. MidAm. Med. Sys., Inc., 331 Ill. App. 3d 777, 791 (1st Dist. 2002) (“Where information can be
readily duplicated without involving considerable time, effort or expense, it is not a trade
secret.”); see also Mangren Research, 87 F.3d at 942 (first statutory requirement under ITSA
“precludes trade secret protection for information generally known within an industry even if not

19

to the public at large.”); see, e.g., Arcor, Inc., 363 Ill. App. 3d at 401-02 (lengthy process in
obtaining customers fulfilled first requirement under ITSA).
Rather than developing its argument as to how vendor pricing constitutes a trade secret
under the ITSA’s or DTSA’s definitions of trade secret, at the preliminary injunction hearing,
Cortz offered evidence that Murphy and about thirty of his co-workers were privy to a “great
sum of data” on a daily basis, that Cortz has approximately 400 vendors and 20,000 different
products or SKUs, and the vendor pricing as to these 20,000 products is relevant for about two to
three years. (6/28 Newman Prelim. Inj. Hr’g.) Likewise, Doheny Enterprises has well over
30,000 products/SKUs and approximately 300 to 500 vendors. (6/29 M. Doheny Prelim. Inj.
Hr’g.) Cortz also presented testimony that Murphy did not take any physical documents with
him, such as the voluminous daily flash reports, after Cortz fired him, and that it is unlikely that
Murphy would remember Cortz’s thousands of different vendor prices. (6/28 Newman Prelim.
Inj. Hr’g.) Murphy also testified that he did not take any physical documents with him when he
left Cortz, did not remember Cortz’s specific vendor pricing, and did not remember the data
reflected in the “humongous” daily flash reports. (Murphy Prelim. Inj. Hr’g.)
In any event, assuming that Cortz’s vendor pricing is a trade secret as defined by both the
DTSA and ITSA, Cortz must present some evidence that Doheny Enterprises or Murphy
misappropriated this trade secret. In support of this requirement, Cortz explains that it can
establish misappropriation through Rick Parise, a Leslie’s employee, who testified that he had a
February 2017 telephone conversation with Brink Spruill, a Kelley’s employee. At the
preliminary injunction hearing, Parise testified that during this February 2017 telephone
conversation, Spruill told him that Murphy had pressured Spruill about costs and vendor pricing.
Parise’s testimony is textbook hearsay offered for the truth, and Cortz has failed to offer a

20

hearsay exception. See Fed.R.Evid. 801(c); see, e.g., United States v. Walker, 673 F.3d 649, 657
(7th Cir. 2012).
On the other hand, Brink Spruill testified at his deposition that he did not recall this
conversation with Parise and that he had not talked to Murphy after Leslie’s had acquired Cortz
in June 2016. Further, not only did Spruill testify that he did not remember any such
conversation with Parise, but he specifically denied that he told Parise that Murphy put pressure
on him regarding vendor pricing or that he discussed Murphy putting pressure on him with other
vendors. Spruill also stated that no one at Doheny Enterprises, including Murphy, has told him
that they know the vendor prices that Cortz pays Kelley. Likewise, Mick Doheny testified at the
hearing that Murphy never told him the vendor price Cortz paid for Zeron. Thus, even if Parise’s
testimony was not inadmissible hearsay, his testimony lacks credibility based on the other
evidence presented at the preliminary injunction hearing and Parise’s demeanor while testifying.
See Kramer v. Am. Bank & Trust Co., N.A., 989 F. Supp. 2d 709, 711 (N.D. Ill. 2013)
(“demeanor and inflection can be critical components of the decision whether to believe a
witness”).
Furthermore, Cortz contends that the second instance of trade secret misappropriation
involved ongoing negotiations between Doheny Enterprises and Kelley regarding the per gallon
price of a product called “Zeron,” which is an epoxy pool coating. In particular, in November
2016, Kelley’s agent, Marty Mullarkey, along with Mick Doheny and Brink Spruill, exchanged a
series of e-mails concerning Mick Doheny’s request for lower Zeron prices. Thereafter, in a
November 17, 2016 letter to Mick Doheny, Spruill mentioned Cortz (by its abbreviation ITS)
and offered Doheny Enterprises a reduced price on the Zeron. Mick Doheny replied to Spruill’s

21

letter requesting an additional $4.00 per gallon price reduction. In the end, Kelley offered to
reduce the price by $2.00 a gallon, which Mick Doheny accepted.
Cortz asserts that Mick Doheny’s request for the additional $4.00 price reduction for
Zeron indicates trade secret misappropriation because a $4.00 reduction would bring Doheny
Enterprises’ wholesale cost of Zeron suspiciously close to what Cortz pays Kelley for its similar,
self-labeled epoxy paint. It also appears that Cortz is arguing that because Spruill mentioned
Cortz’s growth had “flat lined” in his November 17, 2016 letter to Mick Doheny, something is
amiss. In explaining why he asked Kelley for a lower per gallon price for Zeron, Mick Doheny
testified that he did so because he discovered that Cortz was selling Zeron at a retail price which
was essentially Doheny Enterprises’ wholesale cost of the product. He further explained that “I
just wanted a better price on it because I couldn’t sell it for what they were selling it for and not
lose money.” (Id.) In addition, Mick Doheny testified that Murphy was not involved in the
Zeron price negotiations and that Murphy never told him the Zeron vendor price that Cortz paid.
After observing Mick Doheny’s demeanor, facial expressions, and knowledge of the matters to
which he testified, the Court concludes that his testimony is credible. See Nomanbhoy Family
Ltd. P’ship v. McDonald's Corp., 579 F. Supp. 2d 1071, 1088 (N.D. Ill. 2008) (“Demeanor can
be a significant component of credibility and related determinations.”).
Next, Cortz suggests that it is inevitable that Murphy will continue to use and disclose
Cortz’s trade secrets on behalf of Doheny Enterprises, and thus there is a threatened
misappropriation of its trade secrets. See Saban v. Caremark Rx, L.L.C., 780 F.Supp.2d 700, 734
(N.D. Ill. 2011). The inevitable disclosure doctrine allows a plaintiff to “prove a claim of trade
secret misappropriation by demonstrating that defendant’s new employment will inevitably lead
him to rely on the plaintiff’s trade secrets.” PepsiCo Inc. v. Redmond, 54 F.3d 1262, 1269 (7th

22

Cir. 1995); see also Strata Marketing, Inc. v. Murphy, 317 Ill.App.3d 1054, 1069, 251 Ill.Dec.
595, 740 N.E.2d 1166 (1st Dist. 2000) (“PepsiCo correctly interprets Illinois law and [we] agree
that inevitable disclosure is a theory upon which a plaintiff in Illinois can proceed under the
[Illinois Trade Secrets Act].”). “[T]he mere fact that a person assumed a similar position at a
competitor does not, without more, make it ‘inevitable that he will use or disclose ... trade secret
information’ so as to ‘demonstrate irreparable injury.’” PepsiCo, 54 F.3d at 1269 (quotation
omitted).
Because Cortz did not develop its inevitable disclosure argument in its legal memoranda,
at the preliminary injunction hearing, the Court asked Cortz’s counsel what evidence supports its
argument of that there is a threatened or inevitable use of its alleged trade secrets. In response,
counsel explained that evidence supporting inevitable or threatened use includes that Mick
Doheny and Murphy have a close working relationship and that the “information, pricing, what
sells well, what doesn’t sell well,” is “information that goes to directly to the job Mr. Murphy is
doing for them.” (6/29 Closing, Prelim. Inj. Hr’g.) Counsel further asserted that “the
combination of past violations plus the nature of the working relation and the information
[Murphy] knows as its relates to the job he’s doing for Doheny’s makes it inevitable that if that
relationship is allowed to continue, the information will continue to be passed.” (Id.)
As discussed above, Cortz has failed to set forth evidence of any “past violations” in
relation to its alleged trade secrets. Also important, Mick Doheny credibly testified that Murphy
does not negotiate vendor pricing as part of his re-buying duties at Doheny Enterprises and that
Murphy has not discussed Cortz’s vendor pricing with him. Also, Murphy credibly testified that
he does not negotiate vendor pricing as a re-buyer for Doheny Enterprises. (6/29 Murphy
Prelim. Inj. Hr’g.) Thus, what remains is Cortz’s conjecture that Murphy might use Cortz’s

23

alleged trade secrets in his new position because Cortz uses eleven of the fourteen vendors
Murphy works with when Murphy builds orders for Doheny Enterprises. It is well-established,
however, that an “employer’s fear that its former employee will use the trade secrets in his new
position is insufficient to justify application of the inevitable disclosure doctrine.” Triumph
Packaging Grp., 834 F. Supp. 2d at 809. In addition, Newman testified that Leslie’s negotiates
vendor prices and purchases 80 percent of Cortz’s products, which leads to a reasonable
inference that Cortz’s former vendor pricing for these products may no longer relevant.
In a similar vein, at the preliminary injunction hearing, the Court asked Cortz’s counsel to
explain its other trade secrets beyond vendor pricing. Counsel responded that other trade secrets
included “the products that sell really well or sell not so well,” which, on its face, lacks sufficient
specificity. See Fire ‘Em Up, Inc. v. Technocarb Equip. (2004) Ltd., 799 F. Supp. 2d 846, 850
(N.D. Ill. 2011) (“specificity of concrete trade secrets is required to support a finding of
misappropriation”). Counsel nevertheless points to Newman’s preliminary injunction hearing
testimony about Cortz selling aqua quartz silica sand and that Murphy was involved in
purchasing this product for Cortz and knows that it sells well. Doheny Enterprises now offers
this product through its catalog. (6/29 M. Doheny Prelim. Inj. Hr’g.) At the preliminary
injunction hearing, Mick Doheny explained that Doheny Enterprises has been selling sand for
years, but it never put the sand in its catalog before because it costs more to buy it from the
catalog than buying it directly from its retail stores due to freight costs. (Id.) Further, Mick
Doheny stated that he put this product in Doheny Enterprises’ catalog because he saw it in
Cortz’s catalog. (Id.) Mick Doheny’s explanation is not only credible, but Cortz has not
presented any evidence that Murphy shared Cortz’s vendor pricing of aqua quartz silica sand

24

with Mick Doheny in the first instance. Therefore, Cortz’s argument regarding aqua quartz silica
sand is unavailing at this juncture.
Although Murphy testified at the preliminary injunction hearing that he sent certain
documents to his home e-mail account in 2012 or 2013 because he could not remotely access
Cortz’s server, there is no other evidence in the record that Murphy physically took any
documents from Cortz, let alone Cortz’s alleged trade secrets, except for what little he
remembers. Furthermore, evidence in the record suggests what Murphy remembers about
Cortz’s vendor pricing would be stale at this point or irrelevant now that the larger Leslie’s
negotiates 80 percent of Cortz’s vendor pricing See, e.g., Saban, 780 F.Supp.2d at 714. Indeed,
as the Saban decision explains, “[t]he protections afforded to trade secrets reflects a balancing of
conflicting social and economic concerns.” Id. at 734 (citing Service Ctrs. of Chicago, Inc. v.
Minogue, 180 Ill. App. 3d 447, 452 (1989)). The Illinois Appellate Court has reasoned as
follows:
On one hand, an employer who has invested time, money and effort in developing a
secret advantage should be protected from a former employee who obtains the secret
through improper means. On the other hand, the court must recognize that in a society
based on competition, the employee has a right to make use of the general knowledge and
skills acquired through experience in pursuing the occupation for which he is best suited.
Minogue, 180 Ill. App. 3d at 452 (internal citation omitted).
Considering these concerns in the context of the evidence presented, Cortz has failed in
its burden of establishing the relatively low threshold that its chances of succeeding on its trade
secrets claims are better than negligible at this juncture. See Rhoades, 825 F.3d at 338. In other
words, Cortz’s trade secret claims are not plausible based on the evidence before the Court. See
U.S. Army Corps of Eng’rs, 667 F.3d at 783; see also Hoosier Energy Rural Elec. Co-op., Inc. v.
John Hancock Life Ins. Co., 582 F.3d 721, 726 (7th Cir. 2009) (movant must have “a plausible
theory on the merits—not necessarily a winning one.”).
25

III.

Breach of Non-Disclosure Agreement (Count IV)4
In Count IV, Cortz brings a breach of contract claim against Murphy based on his

employment agreement dated April 29, 1997. Although Cortz failed to move Murphy’s 1997
employment agreement into evidence at the preliminary injunction hearing, Murphy testified that
he signed the 1997 employment agreement in which he promised not to use or disclose Cortz’s
confidential information. (6/29 Murphy Prelim. Inj. Hr’g.) Moreover, the parties discuss
Murphy’s 1997 employment agreement in their legal memoranda.
In support of its motion for a preliminary injunction, Cortz argues that based on Spruill’s
telephone call with Parise and the negotiations for the price of Zeron, Murphy violated his 1997
employment agreement with Cortz. As discussed above, however, Parise’s testimony is
inadmissible hearsay and Mick Doheny’s well-reasoned explanation of the price negotiations for
Zeron belie Cortz’s argument. Further, Cortz contends that it “need not wait until Murphy
actually again uses Cortz’s confidential information” because “[h]e has demonstrated that he will
continue to use and disclosed Cortz’s confidential information on behalf of Doheny.” (R. 43,
Supp. Brief, at 14-15.) Not only does this argument lack an evidentiary basis, but Cortz has not
cited any legal authority that the inevitable disclosure doctrine applies to breach of contract
claims and the Court found none. Accordingly, Cortz has failed in its burden of showing that its
chance of succeeding on its breach of the 1997 employment contract claim is better than
negligible due to lack of evidence supporting this claim. See Rhoades, 825 F.3d at 338; U.S.
Army Corps of Eng’rs, 667 F.3d at 783.

In its legal memoranda and in Count V, Cortz alleges that Murphy also breached a “Form of
Parent Exchange and Subscription Agreement” in which Murphy agreed to be bound by the In
the Swim Holdings Limited Liability Company (“LLC”) Agreement dated March 31, 2008.
Cortz did not address or develop this argument at the preliminary injunction hearing.
4

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CONCLUSION
Because Cortz has not met its burden of establishing the likelihood of success on the
merits as to its breach of contract claim against Doheny Enterprises in relation to the November
30, 2015 Confidentiality Agreement, its DTSA and ITSA claims, and its breach of the 1997
employment contract claim against Murphy, the Court, in its discretion, denies Cortz’s motion
for a preliminary injunction. Also, the Court, in its discretion, grants Defendants’ in limine
motion limiting Rick Parise’s testimony as inadmissible hearsay.
Dated: July 11, 2017
ENTERED

______________________________
AMY J. ST. EVE
United States District Court Judge

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