218 F. Supp. 3d 630
N.D. Ill.2016Background
- Plaintiff Maximum Independent Brokerage, LLC alleges four former employees (Smith, Steinhaus, Oster, Bartell) downloaded/uploaded and attempted to destroy confidential client and company data and then resigned to work for Burns & Wilcox, Ltd. (B & W).
- The former employees had at-will Employment Agreements with Maximum containing non-solicitation, non-recruitment, and trade-secret/confidentiality covenants and an injunction remedy for covenant breaches.
- Maximum pleads breach of contract and trade-secret misappropriation claims against the Individual Defendants, a CFAA claim (18 U.S.C. § 1030) against them, and tortious interference, TIPEA, and civil conspiracy claims against B & W (with conspiracy also naming the Individual Defendants).
- Individual Defendants moved to dismiss Counts I–IV and XI under Rule 12(b)(6) and sought dismissal under Rule 12(b)(1); B & W moved to dismiss the tortious interference (contract), TIPEA, and conspiracy claims under Rule 12(b)(6).
- The court analyzed (1) whether Maximum adequately pleaded CFAA damage/loss and (2) whether the restrictive covenants (non-solicit and trade-secrets) are patently unreasonable at the pleadings stage, and (3) whether B & W’s interference and conspiracy claims survive pleading challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) CFAA claim (Count XI): whether complaint pleads "damage" and $5,000 "loss" within one year | Maximum: defendants impaired/attempted to destroy data and Maximum is incurring investigatory/forensic costs (already > $3,000 and more to come) | Individual Defs: complaint fails to plead sufficient factual damage or $5,000 loss threshold | Court denied dismissal: pleaded damage (attempted destruction) and plausible loss given ongoing forensic costs and one-year window; CFAA claim survives pleading stage |
| 2) Breach of contract — non-solicitation clause enforceability | Maximum: clause is activity-limited (solicit/provide/sell to customers/actively solicited prospects in prior 12 months) and not a patently unreasonable geographic restraint | Individual Defs: clause is overbroad (no geographic limit; might reach customers they never contacted) | Court denied dismissal: clause is an activity restraint with limiting language (12‑month active-solicit scope); reasonableness is fact-intensive and not resolved on Rule 12(b)(6) |
| 3) Trade-secrets/confidentiality covenant enforceability (Section 8) | Maximum: definition targets proprietary, non-public customer lists and electronic data; allegations that defendants uploaded customer files support confidentiality | Individual Defs: definition is overbroad, prohibits broad use/disclosure of any info obtained during employment | Court denied dismissal: pleadings plausibly show proprietary, non-public information; covenant not patently unreasonable at pleading stage |
| 4) B & W claims: tortious interference (contract), TIPEA, civil conspiracy | Maximum: B & W knowingly recruited/promised indemnity, met with Smith, hired the employees while contracts and one-year non-recruitment duty were in effect; B & W used/stole confidential info — supports interference, TIPEA, and conspiracy | B & W: at-will contracts preclude tortious-interference; competitor’s privilege and lack of conspiratorial tortious act defeat claims | Court denied dismissal of all three counts: at-will status not dispositive; allegations support inducement of breaches, bad-faith use of stolen confidential information, and agreement/acts in furtherance of conspiracy; competitor’s privilege is an affirmative defense not to be resolved on the pleadings |
Key Cases Cited
- International Airport Centers, L.L.C. v. Citrin, 440 F.3d 418 (7th Cir.) (plaintiff need not plead the exact method of data destruction to show CFAA "damage")
- Reliable Fire Equip. Co. v. Arredondo, 965 N.E.2d 393 (Ill. 2011) (Illinois test for reasonableness of restrictive covenants)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading requires plausibility)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard for plausibility and inference-drawing)
- Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862 (7th Cir.) (inducing termination of at-will contracts can be actionable interference)
- U.S. Gypsum Co. v. Indiana Gas Co., 350 F.3d 623 (7th Cir.) (complaints need not anticipate or negate affirmative defenses)