Instant Technology, LLC v. Defazio
40 F. Supp. 3d 989
N.D. Ill.2014Background
- Instant Technology sued five former employees (DeFazio, Rehn, Marker, Meek, Bauer), two non‑employees (Joel Katz, Andrea Katz) and Connect Search for breaches of employment covenants, ITSA, tortious interference, fiduciary duties, CFAA, and conspiracy; bench trial in April 2014; Defendants formed Connect on Jan 4, 2012 and began operations Feb 27, 2012; DeFazio left Instant Jan 3, 2012; Connect placed multiple candidates with Instant clients; IT market is highly competitive and non‑exclusive; Instant’s data systems included SmartSearch, hotlist, and roll‑off lists; employee data practices included use of USB drives and remote work; court ultimately found none of the asserted counts established.
- The court adopted uncontested stipulations defining the parties, Instant’s business model, and the timing of Connect’s startup and employees’ departures.
- Non‑Solicitation and Non‑Recruitment covenants were found unenforceable as to the Employee Defendants due to Illinois doctrine requiring substantial continued employment for adequate consideration and due to industry context.
- Non‑Disclosure covenants were not proven to have been violated because there was no evidence of disclosure or retention of proprietary information after termination.
- ITSA claim failed because Instant did not prove information was secret or misappropriated; CFAA claim failed for lack of damage or loss; tortious interference, fiduciary duty, and civil conspiracy claims were defeated for lack of viable underlying torts and enforceable covenants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of restrictive covenants | Instant claims covenants protect legitimate interests. | Employee Defendants contend covenants are overly broad/unreasonable. | Non‑Solicitation Covenants unenforceable; Non‑Recruitment Covenants unenforceable; inadequate consideration for Bauer/Marker/Rehn. |
| ITSA misappropriation claim | Instant alleges confidential client/candidate information was misappropriated. | Information is not secret and no misappropriation shown. | ITSA claim fails; information not a trade secret and no misappropriation proven. |
| CFAA claim against employees | Unauthorized access and data manipulation occurred. | No damage or loss shown; activity does not meet CFAA thresholds. | CFAA claim fails; no damage or loss proven; costs of defense not recoverable under CFAA. |
| Tortious interference with contract | Defendants improperly interfered with contracts via Connect. | No valid contract due to unenforceable covenants; interference not proven. | Dismissed; no valid underlying contract. |
| Fiduciary duties by employee defendants | Defendants breached fiduciary duties by forming Connect and soliciting clients. | Preliminary activities allowed; no breach during employment; post‑employment covenants unenforceable. | No fiduciary duty breached; no post‑employment breach proven. |
Key Cases Cited
- Fifield v. Premier Dealer Services, Inc., 993 N.E.2d 938 (Ill. App. Ct. 1st Dist. 2013) (two-year substantial employment requirement for consideration under covenants)
- Lawrence & Allen, Inc. v. Cambridge Human Res. Grp., Inc., 226 Ill. Dec. 331, 685 N.E.2d 434 (Ill. App. Ct. 1st Dist. 1997) (three‑dimensional reasonableness for restrictive covenants)
- Brown & Brown, Inc. v. Mudron, 320 Ill. Dec. 293, 887 N.E.2d 437 (Ill. App. Ct. 5th Dist. 2008) (two years as adequate consideration standard)
- Reliable Fire & Safety Co. v. Arredondo, 965 N.E.2d 393 (Ill. 2011) (three‑dimensional rule of reason for covenants)
- Office Mates 5, North Shore v. Hazen, 599 N.E.2d 1072 (Ill. App. Ct. 1992) (staffing industry context limits enforceability of covenants)
- Pampered Chef v. Alexanian, 804 F. Supp. 2d 765 (N.D. Ill. 2011) (workforce stability as a business interest; blanket restrictions often unreasonable)