Symbria, Inc. v. Callen
1:20-cv-04084
N.D. Ill.Jan 6, 2022Background
- Symbria (and affiliates) sold to an ESOP under a stock purchase agreement (SPA) containing non‑competition, non‑solicitation, and confidentiality covenants; UMHS was a selling owner and agreed to those covenants.
- Former Symbria executives/employees (Callen, Dilmas, Irvine) later worked with UMHS‑owned or related MedRehab entities; plaintiffs allege coordinated formation of competing businesses (the MedRehab entities) using Symbria proprietary materials.
- Plaintiffs allege mass forwarding of Symbria PDPM‑related materials and other confidential/copyrighted documents (emails from company accounts to personal accounts and onward to MedRehab addresses), plus solicitation of Symbria clients and employees.
- Plaintiffs filed a 16‑count third amended complaint asserting DTSA and ITSA trade secret claims, copyright infringement, breach of contract, breach of fiduciary duty, tortious interference, and aiding/abetting; several defendants moved to dismiss.
- District court denied most dismissal motions, but: (1) dismissed breach of contract claim against Dilmas (Count V); (2) dismissed aiding/abetting claims (Counts VIII, XVI) with prejudice for failure to plead substantial assistance; (3) struck request for statutory copyright damages and attorneys’ fees because registration occurred after alleged infringement; (4) other claims (trade secrets, many contract/fiduciary/tortious‑interference claims, copyright ownership) survived to discovery.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Group pleading | Lumped allegations fairly notify all defendants of collective wrongdoing | Collective/group pleading violates Rule 8 and fails to put each defendant on notice | Permissible here: complaint alleges interrelated corporate structure and gives fair notice; group pleading survives dismissal. |
| Trade secret existence (PDPM, Care Guides, software) | Materials and software are proprietary, developed at expense, and protected by reasonable measures | Too conclusory; materials widely shared; partly based on public CMS software | Sufficiently pled at pleadings stage: combination of public and proprietary elements can be secret; alleged access controls and need‑to‑know measures plausibly show reasonable secrecy. |
| Misappropriation (DTSA/ITSA) | Unauthorized emailing to personal accounts, forwarding to competitors, and subsequent use/solicitations show acquisition, disclosure, and use | Lawful acquisition/mere possession; no hacking; no improper acquisition | Allegations that employees emailed confidential materials to personal accounts and forwarded them to competitors plausibly state misappropriation by unauthorized acquisition/disclosure. |
| Copyright infringement & remedies | Symbria owns registered works and defendants reproduced/distributed them | Complaint lacks specificity as to authorship/use; registration occurred after infringement so statutory damages/fees unavailable | Ownership and copying adequately alleged for pleading; but statutory damages and attorneys’ fees stricken because registration post‑dates alleged infringement. |
| ITSA preemption of fiduciary/common‑law claims | Fiduciary and interference claims involve duties and conduct beyond mere misappropriation (e.g., disloyal competition) | ITSA displaces conflicting tort remedies for trade secret misappropriation | ITSA does not preempt fiduciary, tortious‑interference, and related claims here because plaintiffs allege conduct beyond simple misappropriation (breach of loyalty, solicitation, competing while employed). |
| Aiding & abetting breach of fiduciary duty | Corporate defendants knowingly facilitated employees’ breaches | Complaint fails to allege knowing, substantial assistance (only encouragement/solicitation) | Dismissed with prejudice: complaint does not allege factual detail showing defendants provided the required substantial assistance. |
| Breach of contract claims & SPA issues | SPA and employment agreements were breached by UMHS/Callen/Dilmas/Irvine; SPA covenants extend outside Illinois | At‑will employment and handbook disclaimers negate enforceable employment contracts; state court declaratory action and Colorado River abstention/res judicata bar federal claims | Court dismissed Dilmas employment‑contract claim (at‑will/handbook disclaimers). State court declaratory ruling and abstention/res judicata inapplicable now; SPA breach and tortious‑interference claims otherwise survive. |
Key Cases Cited
- Bilek v. Fed. Ins. Co., 8 F.4th 581 (7th Cir. 2021) (pleading stage: court accepts well‑pleaded factual allegations)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (labels/conclusions insufficient; plausibility inquiry)
- Life Spine, Inc. v. Aegis Spine, Inc., 8 F.4th 531 (7th Cir. 2021) (trade secret definition and ITSA/DTSA analysis)
- Feist Publ’ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340 (1991) (originality requirement for copyright)
- Sullivan v. Flora, Inc., 936 F.3d 562 (7th Cir. 2019) (copyright registration and remedies)
- Workman v. United Parcel Serv., Inc., 234 F.3d 998 (7th Cir. 2000) (employee handbook can create contract; disclaimer can defeat claim)
- RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001) (employee downloading/copying employer data can breach duty of loyalty)
- Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976) (doctrine governing federal abstention in presence of parallel state proceedings)
- Vendavo, Inc. v. Long, 397 F. Supp. 3d 1115 (N.D. Ill.) (trade secret protection does not require NDAs with every employee; reasonable protective measures suffice)