Cornerstone Assurance Group Inc. v. Harrison
Filing
19
OPINION AND ORDER signed by the Honorable Charles R. Norgle, Sr on 10/5/2017. Mailed notice (ags, )
1!
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
CORNERSTONE ASSURNCE GROUP, INC,,
Plaintiff,
No. 17 CV 4718
v.
Hon. Charles R. Norgle
DANIELLE HARRISON,
Defendants.
OPINION AND ORDER
Plaintiff Cornerstone Assurance Group, Inc. ("Plaintiff') sues Danielle
("Defendant") for breach
of
contract
in
Harrison
connection with her June 15, 2015 employment
agreement and a violation of the Illinois Trade Secrets Act ("ITSA"),765 ILCS 106511 et seq.
The Complaint alleges that Defendant breached the employment agreement by disclosing
confidential information protected by the agreement. The protected information allegedly
included trade secrets, such as client lists with detailed information regarding the individuals
contained therein, which serves as the basis for Plaintiffs ITSA
claim. Before the Court
is
Defendant's motion to dismiss. For the reasons that follow, the motion is denied.
I. BACKGROUND
Defendant writes comprehensive group insurance policies. Plaintiff entered her
employment agreement with Defendant on June 15, 2015 and served as a sales representative. In
that role, Plaintiff provided marketing services, handled enrollment, provided benefits
consulting, and sold policies on Defendant's behalf. Plaintiff serviced clients across myriad
states. As a sales representative, Defendant had access to confidential information related to
client names, addresses, contact information, dates of binh, gender, years of service, income,
private health and medical care information for those who had previously filed claims, and
claims history information. Plaintiff alleges that this information constitutes trade secrets.
The employment agreement contains a confidentiality provision which applies to "(i)
financial information conceming [Defendant's] business, marketing plans, personnel, contacts,
leads, prospects, client lists, fee schedules, forms, information, business management and
methods, or trade secrets; (ii) contact names, leads, prospect names, client names, records and/or
client histories; and (iii) computer software, management information and information"
(collectively, the "Restricted Information"). Compl .n 14, Ex. A
'lT
6.1. Under this agreement,
Plaintiff agreed'othat she has a continuing duty to [Defendant] which shall survive termination of
employment to: (i) maintain the secrecy of the Restricted Information and use such Restricted
Information for the exclusive benefit and advantage of [Defendant]; and (ii) retain and keep any
Restricted Information which comes into [her] knowledge, possession or control, regardless
of
whether by proper or improper means, as strictly confidential and shall not disclose such
Restricted Information to any third party." Id. fl 15, Ex. A
tT
6.1. In consideration for
Defendant's agreement to these provisions, Plaintiff paid Defendant one-thousand dollars.
Plaintiff states that it spent years generating and maintaining the Restricted Information and that
the information pertains to union workers with whom Plaintiff has "near permanent
relationships." Id. 1122. Moreover, Plaintiff narrowly tailors its insurance policies to meet the
needs of its clients based on the Restricted Information.
Plaintiff ultimately asserts that before and after terminating Defendant, Defendant
disclosed Restricted information to third-parties, including Plaintiff s competitors. Specifically
Plaintiff alleges that Defendant disclosed Plaintiff
husband's company, USI Insurance Services
s
trade secrets to Defendant's husband and the
,LLC ("USI"). According to the Complaint,
Defendant's husband and USI then used that information to wrongfully recruit Plaintiff s clients.
For essentially the same reasons and because the Restricted Information allegedly contains trade
secrets, Plaintiff asserts that Defendant violated the ITSA.
II. DISCUSSION
A. Standard of Review
A motion under Rule l2(b)(6) tests the sufflrciency of the complaint under the plausibility
standard, Bell
Atl. Corp. v. Twombly,
Gibson v. City of Chicaeo , 910
plaintiff
even
F
550 U.S. 544,570 (2007), not the merits of the suit,
.2d 1510, 1520 (7th Cir. 1990) (citation omitted). "[A]
s claim need not be probable, only plausible: 'a well-pleaded complaint may proceed
if it strikes a sawy judge that actual proof of those facts is improbable, and that a recovery
is very remote and
unlikely."' Indep. Trust corp. v. Stewart Info. Servs. Corp., 665 F.3d 930,
935 (7th Cir.2012) (quoting Twombly, 550 U.S. at
556). "To meet this plausibility standard, the
complaint must supply 'enough fact to raise a reasonable expectation that discovery will reveal
evidence' supporting the plaintiff s allegations." Id. (quoting Twombly, 550 U.S. at 556). In
deciding a Rule l2(bX6) motion, the Court accepts as true all well-pleaded facts in a plaintiff
s
complaint and draws all reasonable inferences in his favor. Burke v. 401 N. Wabash Venture.
LLC,714 F.3d 501, 504 (7thCir.2013) (citations omitted).
B. Plaintiff Has Stated a Plausible Claim for Breach of Contract
To plead a breach of contract claim under Illinois law,
o'a
plaintiff must allege: (l) the
existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a
breach by the defendant; and (4) resultant damages." TAS Distrib. Co. v. Cummins Engine Co.,
491 F.3d 625, 631 (7th Cir.2007) (quoting W.W. Vincent & Co. v. First Colony Life Ins. Co.,
814 N.E.2d 960,967
(Ill. App.
1st Dist. 2004)).
Here, Defendant assumes, for purposes of this motion only, that Plaintiff has met all but
the third element of the
claim. Regarding the breach element, Defendant argues that Plaintiff
states no more than mere labels and conclusions or formulaic recitations of the element.
Defendant asserts that the Complaint fails to state the breach element because the allegations
refer too vaguely to unspecified third-parties. Additionally, Defendant takes umbrage with
Plaintiff s Complaint naming only one competitor to whom Plaintiff disclosed confidential
information and the Complaint's failure to name a specific client in connection with the alleged
wrongful disclosure.
The Court rejects Defendant's position. Plaintiff states in detailed manner the type
of
information it believes Defendant disclosed in breach of the employment agreement.
Specifically, the Complaint explains that Defendant was privy to names, addresses, contact
information of contacts at all union levels, union member lists and directories, dates of birth,
gender, years of service, income, and health and medical information. Plaintiff also sets forth the
particular terms of the employment agreement that protected the Restricted Information from
disclosure. Even absent the specification of names, Plaintiff has provided more than enough
information to put Defendant on notice of the claim against which she must defend. From
naming in detail the buckets of information-all of which Defendant had access to throughout
o'fair
notice of what...the
the duration of her employment with Plaintiff-Defendant would be on
claim is and the grounds upon which it rests." Twombly, 550 U.S. at 555.
Defendant's assertion that Plaintiff s failure to state more than one competitor likewise
fails. Disclosing confidential information to only
one competitor rather than several competitors
still breaches the agreement "not to disclose such Restricted Information to any third party."
Compl. fl 15, Ex. A fl 6.1 (emphasis added); see also Airgas USA. LLC v. Adams, No. 15 C
4
50316, 2016 WL 3536788, at *3 (I{.D. Ill. June 27,2016) ("The Agreement clearly prohibits
defendant from contacting customers of plaintiff and asking them to buy someone else's
product"). Accordingly, it is plausible that after discovery, Plaintiff could show that at least
some of the Restricted Information and persons contained within the contact lists were
illicitly
communicated to a third party.
C. Plaintiff Has Stated a Claim Pursuant to the ITSA
The Court turns to Plaintiff s ITSA claim. "To prevail on a claim for misappropriation
a trade secret under the
of
[ITSA], 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."
Learning Curve Toys. Inc. v. PlayWood Toys" Inc. ,342
F
.3d 714,721 (7th Cir. 2003) (internal
citations omitted). Under the ITSA, a trade secret is:
[I]nformation, including but not limited to, technical or non-technical 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.
Id. (quoting765 ILCS 1065 l2(d)) (alteration in original). Both of these "statutory requirements
focus fundamentally on the secrecy of the information sought to be protected." Id. (internal
citations omitted). The first section does not allow for "trade secret protection for information
generally known or understood within an industry even if not to the public at large." Id. at122
(internal quotation and citation omitted). The second aspect prevents plaintiffs who fail to take
affirmative measures against others utilizing their proprietary information from availing
themselves of trade secret protection. Id. (internal citation omitted). Despite the express
definitions in the ITSA, Illinois courts refer to the following common law factors for guidance:
"(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
business; (3) the extent of measures taken by the
s
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. (citing cases). These factors serve only as guideposts, none of the factors is
dispositive, arrd a precise definition of trade secret, applicable to every context, does not exist.
Id. (internal citation omitted).
At this stage of the litigation, Plaintiff has set forth sufficient factual allegations such that
it could plausibly show that at least some of the information allegedly misappropriated may
legally be considered trade secrets. For example,
'oa
list of actual or potential customers may
qualify as a trade secret, but such a determination tums on the facts of
a
case." First Fin. Bank"
N.A. v. Bauknecht ,71 F . Supp. 3d 819, 839 (C.D. Ill. 2014) (citing Multiut Corp. v. Draiman,
834 N.E.2d 43, 50
(Ill. App. lst Dist. 2005)); id. at 841 (distinguishing between simply
names,
addresses, and phone numbers and'ocustomer lists developed by businesses that serve diffuse
customers that have particular needs") (citing Elmer
Miller. Inc. v. Landis, 625 N.E.2 d 338,342
(Ill. App. lst Dist. 1993). In addition to customer lists, financial information-such
as
insurance claims histories and records-has also been found to be a trade secret. See First Fin.
Bank, 71 F.Supp.3d at 839, 847 ("Plaintiff has produced undisputed evidence sufficient to show
that the customer lists and financial information are secret and economically valuable.").
Defendant also argues that Plaintiff "fails to appreciate the distinction between personal
or private information on the one hand and trade secret information on the
other." Def.'s Mot. to
Dismiss at9,125. But, "fw]hether customer lists are trade secrets depends on the facts of each
case." Liebert Corp. v. Mazur, 827 N.E.2d 909, 922 (Ill. App. 1st Dist. 2005). Although the
court in Mazur upheld the trial court's decision that the customer lists were not trade secrets, it
did note that the contact list met the first requirement of a trade secret under the ITSA. Id. at
923. Specifically, the plaintiff
s
"method of building its large customer database by discovering
and developing relationships with appropriate buyers...require[d] significant time, effort, and
expense... [so the
plaintiffl derived economic value from
it." Id. The Mazur court also described
other cases in which Illinois courts have found customer lists to constitute trade secrets. Id. at
922. ln Stampede Tool Warehouse Inc. v. May, the plaintiff sold tools to automotive jobbers and
developed its customer list by calling service stations and tool dealers to acquire names. 651
N.E.2d 209,211
(ll.
App. lst Dist. 1995). Despite the defendants argument that anyone could
get this information from various telephone books and other
directories-an argument similar to
Defendant's argument that the Restricted Information in this case "could be ascertained from
various, including pubic, sources," Def.'s Mot. to Dismiss at 8, fl 24; see also id.
Stampede Tool court rejected that position, stating that
[because
at9,f125-the
"[t]he customer list is a trade secret
it was] developed through the laborious method of prospecting, which requires
a
substantial amount of time, effort, and expense...A list ofjobbers is not readily available from
anyone public source. Stampede Tool, 65 1 N.E.2 d at 216; see also RKI. Ins. v. Grimes
, 177
Supp. 2d859,874 G\f.D. Ill. 2001) (finding names and addresses of potential customers;
historical sales information; details of pending sales quotations; sales figures; and shipping,
pricing, cost, and profit margin information meet the secrecy criteria under the ITSA).
F
.
Here, Plaintiff alleges that it spent years developing the Restricted Information, including
union clients' members' claim histories and claims data-data which is not likely to be
ascertainable to others from readily available sources-and specifically states that the
information at issue is not generally accessible to other persons. Further, Plaintiff alleges that it
"uniquely tailored" its insurance policies "to the individual needs of its clients based upon: (a)
private member information...and (b) [Plaintiffls] consideration of the members'prior claims
history and claims data." Compl. 124. The Complaint states a plausible claim under the ITSA
and therefore withstands Defendant's attack on motion to dismiss.
Defendant's argument that Plaintiff failed to allege that Defendant misappropriated the
trade secret also fails. On Defendant's view, the claim fails because Plaintiff only names one
competitor and does not "allege when or how [Plaintiff] supposedly disclosed the trade secrets,
or which particular trade secrets she even disclosed." However, Plaintiff correctly points out that
"the degree of specificity defendant claims is necessary is, in fact, not necessary. The
[employment agreement] clearly prohibits defendant from contacting customers of plaintiff and
asking them to buy someone else's product...land Defendant] is not entitled to dismissal because
[Plaintiff] did not plead the method of defendant's alleged contacts with these customers, or
when they occurred or name them in the complaint." Airgas,2016 WL 3536788, at
*3.
The
allegations stating the specific items that Defendant allegedly misappropriated and the particular
person and company to which Defendant allegedly made the wrongful disclosures do not, as
Defendant contends, leave her'oonly to guess as to what [Plaintiff] claims she actually did to
violate the ITSA." Def.'s Mot. to Dismiss at9,126. The Complaint puts Defendant on notice
of the alleged violations.
D. The Marital Communications Privilege Does Not Bar Either of Plaintiffls Claims
The Court next addresses Defendant's argument that the Illinois marital privilege statute
bars both the breach of contract and ITSA claims because the claims are premised entirely on
privileged marital communications. Illinois privilege law governs in this case. Fed. R. Evid. 501
(In civil cases, "state law govems privilege regarding a claim or defense for which state law
supplies the rule of decision.").
The marital communication privilege issue is best addressed after discovery. First, the
allegations state that Defendant "disclosed the Trade Secrets to [Defendant's husband] and USI
so that [Defendant's husband] and USl could use the
information for their own benefit to solicit
[Plaintiff s] clients." Compl. fl 57 (emphasis added). Thus, construing the Complaint in favor of
Plaintiff
as the Court must on
motion to dismiss, Plaintiff asserted disclosure beyond
conversations with Defendant's husband. It is plausible that Plaintiff shared information with the
USI itself through USI employees other than her husband; the marital communication privilege
would not cover such communications.
Second, as Plaintiff points out,
it makes little
sense to enable Defendant to cloak herself
from liability at this early stage of the litigation when the Complaint plausibly shows that
discovery may reveal that the marital communications were disclosed to third parties, namely,
other USI employees. Where a spouse shares a marital communication with third party, he or
she waives the marital privilege, and
it becomes fair game for the opposing party to reveal the
information at issue. See United States v. Hamilton, 701 F.3d 404,407 (4th Cir. 2012) (where
there is a voluntary disclosure of marital communications to third parties, the communication no
longer comes within the privilege) (citing Wolfle v. United States, 291 U.S. 7, 14 (1934)). Here,
it is plausible that Defendant's husband shared Plaintiff s confidential information with other
9
USI employees in order for USI to utilize the information to its benefit. In that situation, the
privilege would not apply.
Likewise, the marital communication privilege would not prohibit a jury from analyzing
circumstantial evidence-for example, what USI may have done with Restricted information
provided by Defendant's husband after he received the confidential information from
Plaintiff-
to find that Plaintiff breached the contract and violated the ITSA. See 735 ILCS 5/8-801 (stating
that husband and wife may not testify as to any communication or admission made by either
of
them to the other) (emphasis added). The privilege does not cover subsequent uses of the
communications outside of the marital union. Once Defendant asserts the privilege with more
specificity after discovery-rather than attempting to broadly sweep away all allegations in the
Complaint-the Court can determine exactly what evidence the marital communication privilege
screens in this case. Otherwise stated, the Complaint establishes a
plausibility that information
other than the communicated words between Defendant and her husband could establish liability
in this case. See Lien v. Wilson & Mcllvaine, No. 87 C 6397, 1988 WL 87061, at * 1 (N.D. Ill.
Attg.12,l988) (citing Ryan v. Commissioner of Intemal Revenue, 568 F2.d 531,542 (7th Cir.
1984)) ("The marital communications privilege, like all privileges, must be narrowly construed
because
it blocks
the
judicial fact-finding function.") (Title VII case);
see also
United States v.
DA{if, 446 F.3d 701,706 (7th Cir. 2006) (criminal case stating that there is no value in collusion
between spouses, "so any confidential statements concerning
a
joint criminal enterprise are not
protected by the privilege").
E. Defendant's Alternative Request for Entry of a Protective Order
In the event that Defendant's motion is denied, Defendant requests, in the alternative, that
the Court enter a protective order "to protect from inquiry or disclosure the communications
l0
between [Defendant] and her husband." Def.'s Mot. to Dismiss at 10. The request is denied.
Plaintiff is correct that the Court will only entertain
a request
for
a
protective order after the
parties have had an opportunity to meet and confer pursuant to Local Rule 37.2, which directs
the Court to "refuse to hear any and all motions for discovery and production of documents
under Rules 26 through 37 of the Federal Rules of Civil Procedure." Rule 26(c) governs
protective orders. Accordingly, the Court will address any motion for a protective order at a later
time, should either party elect to file such a motion.
III. CONCLUSION
In sum, Plaintiff has stated a plausible claim that Defendant breached her employment
agreement by disclosing confidential information to a competitor. Plaintiff has also
demonstrated that
it is plausible that Defendant, in allegedly misappropriating Restricted
Information covered by the employment agreement, also wrongfully disclosed trade secrets.
Lastly, Defendant's request for a protective order is denied and can be addresse d at a later date
once an appropriate motion has been
filed. In light of the foregoing, Defendant's motion to
dismiss is denied.
IT IS SO ORDERED.
CHARLES RONALD NORG
United States District Court
DATE: October 5,2017
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?