394 F.Supp.3d 815
N.D. Ill.2019Background
- GE Digital and GE Power developed cloud-based analytics; six senior GE employees (Bell, Bolick, Allardyce, Marwaha, McGinnis, Paulsen) signed confidentiality and non-solicitation agreements and later joined Uptake, a Chicago-based competitor.
- Timeline (2018): Bell left GE and quickly became Uptake president; he solicited other GE executives who resigned and joined Uptake; Uptake also pursued acquisition/joint-venture talks with GE and approached GE customers.
- Forensic review revealed retained GE files, photographs of GE whiteboards, and cloud-stored GE documents by several departing employees; some devices were wiped or not returned.
- GE sued Uptake and the six individuals for breach of contract (NSAs and confidentiality agreements), misappropriation under the Illinois Uniform Trade Secrets Act (ITSA) and the federal Defend Trade Secrets Act (DTSA), tortious interference (with contracts and prospective advantage), unfair competition, and breach of fiduciary duty.
- Defendants moved to dismiss; the court applied Rule 12(b)(6) standards and resolved choice-of-law, enforceability, preemption by ITSA, and whether pleaded facts plausibly alleged misuse or inevitable disclosure of trade secrets.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for NSAs (New York vs. California) | NSAs specify New York law; should govern. | California has greater interest; §16600 renders employee non-solicitation void. | New York law applied; because California law is not clearly contrary on point, the parties' choice stands. |
| Enforceability of NSAs and confidentiality agreements | NSAs and confidentiality agreements are reasonable and necessary to protect GE's proprietary interests. | NSAs are void/overbroad (esp. under CA law); confidentiality agreements too vague/overbroad. | NSAs enforceable under New York at pleading stage (but McGinnis’s NSA governed by CA and void). Confidentiality agreements sufficiently definite and enforceable at this stage. |
| Trade secret claims under ITSA and DTSA / inevitable disclosure | GE alleges specific categories of trade secrets, protective measures, and misconduct (device wiping, retained files, soliciting employees) supporting actual and inevitable-disclosure theories. | Misappropriation not sufficiently pleaded; DTSA does not recognize inevitable disclosure. | ITSA and DTSA claims survive at pleading stage; inevitable-disclosure theory is viable on the pleadings and DTSA claim not dismissed. Illinois law governs trade-secret claims because Uptake’s principal place of business is Illinois. |
| Tortious interference & unfair competition / ITSA preemption | GE alleges Uptake induced breaches of NSAs and engaged in unfair competition beyond mere misappropriation (media leaks, targeting customers, mass hiring). | ITSA preempts claims that are essentially trade-secret misuse; therefore tort-based claims must be dismissed to the extent based on trade secrets. | Tortious interference with Confidentiality Agreements is preempted by ITSA; tortious interference with NSAs survives. Unfair competition and tortious interference with prospective advantage survive in part because some alleged misconduct goes beyond misappropriation and preemption cannot be resolved on the pleadings. |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim to survive dismissal).
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard requires factual content permitting reasonable inference of liability).
- PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir.) (trade-secret protection can include inevitable-disclosure doctrine).
- Edwards v. Arthur Andersen, LLP, 189 P.3d 285 (Cal. 2008) (California §16600 broadly prohibits restraints on engaging in a lawful profession, affecting non-compete and related covenants).
- Mohanty v. St. John Heart Clinic, S.C., 866 N.E.2d 85 (Ill. 2007) (Illinois courts reluctant to void contractual provisions absent clear conflict with public policy).