Covenant Aviation Security, LLC v. Berry
15 F. Supp. 3d 813
N.D. Ill.2014Background
- Covenant Aviation Security (Illinois LLC) provides SPP airport screening services; its San Francisco SPP contract is large and economically valuable.
- Gerald L. Berry was Covenant’s president (Oct 2002–July 2012) and signed employment and restrictive covenant/confidentiality agreements containing non-compete, non-disclosure, non-solicit provisions.
- Berry later worked as an independent consultant for Covenant, formed Berry Transportation Security, LLC, and then affiliated with American Homeland Security (AHS). Covenant terminated the consulting arrangement when it learned Berry formed a competitor.
- Covenant alleges Berry had access to confidential/proprietary information (profit & loss, internal costs/overhead, operational data, bid/proposal details) and that he disclosed or offered to disclose that information to AHS and other competitors in connection with SPP rebids.
- Covenant sued Berry for breach of contract, misappropriation of trade secrets under the Illinois Trade Secret Act (ITSA), and breach of fiduciary duty; Berry moved to dismiss under Rule 12(b)(6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether complaint sufficiently alleges existence of trade secrets under ITSA | Covenant: identifies categories (financials, operational, bid/proposal info) and alleges efforts to protect secrecy | Berry: allegations are too broad and lack specific identification of trade secrets | Court: allegations sufficiently specific in categories and describe secrecy measures; survive 12(b)(6) |
| Whether complaint plausibly alleges misappropriation/use/disclosure of trade secrets | Covenant: alleges Berry disclosed/offered info to AHS/others and inevitable disclosure inference applies given his prior access | Berry: no specific allegation that he disclosed or used any confidential information | Court: allegations (including on information and belief) and inevitable disclosure theory adequate to plead misappropriation |
| Whether breach of contract claim is pleaded adequately | Covenant: restrictive agreements prohibit disclosure; alleges Berry used confidential info in breach to compete | Berry: absent specific identified disclosures, no breach alleged | Court: factual allegations of access and disclosure are adequate to state breach claim |
| Whether ITSA preempts breach of fiduciary duty claim | Covenant: fiduciary claim may cover more than trade secrets and is pleaded broadly | Berry: ITSA preempts common-law claims that rest on misappropriation of trade secrets | Court: cannot determine at pleading stage whether fiduciary claim is limited to trade secrets; preemption dismissal denied |
Key Cases Cited
- Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074 (7th Cir. 1997) (Rule 12(b)(6) standard and treating complaint allegations as true)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must raise claim above speculative level)
- PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995) (inevitable disclosure doctrine discussed)
- Liebert Corp. v. Mazur, 827 N.E.2d 909 (Ill. App. 2005) (elements of trade secret misappropriation under ITSA)
- AutoMed Techs., Inc. v. Eller, 160 F. Supp. 2d 915 (N.D. Ill. 2001) (complaint need not disclose trade secrets in detail to avoid public disclosure)