TF Glob. Mkts. (Aust) Ltd. v. Sorenson

TF GLOBAL MARKETS (AUST) LIMITED and ACG MANAGEMENT SOLUTIONS LLC Plaintiffs, v. JAMES SORENSON, Defendant.

No. 21-cv-00208

United States District Court, N.D. Illinois, Eastern Division

February 17, 2023

MEMORANDUM OPINION AND ORDER

Franklin U. Valderrama United States District Judge

Plaintiff TF Global Markets (Aust) Limited (TF Aust) is an online brokerage firm in the financial services and technology industry. R. 1, Compl. ¶ 7.^[1]Plaintiff ACG Management Solutions LLC (ACG) (together with TF Aust, Plaintiffs) is a wholly owned subsidiary of TF Aust that provides support for TF Aust. Id. ¶ 8. Defendant James Sorenson was employed by Plaintiffs as a Senior Network Architect and had access to Plaintiffs' confidential and proprietary information. Id. As a condition of his employment Defendant was required to sign employment agreements containing non-disclosure and property return provisions. Id. ¶ 10. Eight months after signing his latest employment agreement, Defendant resigned and went to work for one of Plaintiffs' competitors. Id. ¶¶ 10, 16. After discovering that Defendant had Plaintiffs' confidential information and refused to return it, Plaintiffs filed this lawsuit against Defendant asserting claims for: breach of contract (Count I) misappropriation of trade secrets under the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065, et seq; (Count II); conversion (Count III); misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA), 18 U.S.C. §§ 1831-39 (Count IV); and breach of fiduciary duty. (Count V). See Compl. Defendant moves to dismiss the Complaint for failure to state a claim. R. 8, Mot. Dismiss. For the reasons that follow, the motion to dismiss is granted in part and denied in part.

Background

TF Aust is an online brokerage firm in the financial services and technology industry operating under the trade name and brand ThinkMarkets.^[2]Compl. ¶ 7. ACG is a wholly owned subsidiary of TF Aust that provides support for TF Aust. Id. ¶ 8. Defendant worked for Plaintiffs from December 14, 2015 to October 2, 2020. Id. ¶ 9. Defendant's most recent role was Senior Network Architect, in which he had access to Plaintiffs' confidential and proprietary information, and trade secrets. Id. This confidential information included code, confidential trading strategies, and information technology developments designed to improve Plaintiffs' business. Id.

Plaintiffs required their employees to sign employment agreements containing non-disclosure and property return provisions. Compl. ¶ 10. On February 13, 2020, Defendant signed his most recent employment agreement (the Agreement). Id. ¶¶ 10, 43.

Section 3(a) of the Agreement required Defendant to return all Plaintiffs' property within three days of the termination of his employment. Id. ¶ 44. Additionally, in Section 5(a), Defendant agreed not to use any confidential information other than in furtherance of his legitimate job duties. Id. ¶ 46.

On October 2, 2020, Defendant resigned without notice. Compl. ¶ 62. Four days later, Plaintiffs sent Defendant a letter requesting the return of all of Plaintiffs' property and reminding him of his obligations under the Agreement, including his obligation not to disclose any confidential information or trade secrets. Id. ¶ 63. Defendant did not respond. Id. ¶ 64.

Three months later, Plaintiffs learned Defendant had taken a job with a competitor, IS Group. Compl. ¶¶ 63-65. IS Group not only competes with Plaintiffs in the same industry, but also is currently engaged in ongoing litigation with Plaintiffs. Id. ¶ 65. As a result, Plaintiffs immediately brought in a forensic investigator to investigate Defendant's network activity prior to his departure. Id. ¶¶ 66-69. The investigation revealed that Defendant had dozens of messages in his Outlook email that were not directly related to his job duties, and which he had no legitimate business reason to have. Id. ¶ 70. These emails included an email from Plaintiffs' external counsel, not sent to Defendant, discussing highly sensitive litigation plans, analysis, and strategies concerning Plaintiffs' litigation with IS Group. Id. ¶ 71. Additionally, the investigation found multiple emails containing confidential, proprietary, and sensitive information, including emails relating to Plaintiffs' efforts to launch new business in Japan and Australia. Id. ¶ 72.

On January 11, 2021, Plaintiffs sent Defendant a second letter demanding the return of their confidential and trade secret information and also demanding that Defendant identify any computers, devices, or storage systems that he used to perform work for Plaintiffs and submit such devices to a third-party forensic firm for inspection. Compl. ¶ 85. Defendant has not agreed to any of these requests as of the filing of the Complaint. Id. ¶ 86.

Plaintiffs subsequently filed this lawsuit against Defendant asserting claims for: breach of contract (Count I); trade secret misappropriation under the ITSA (Count II); conversion (Count III); trade secret misappropriation under the DTSA (Count IV), and breach of fiduciary duty (Count V). Defendant moves to dismiss Plaintiffs' complaint for failure to state a claim. Mot. Dismiss. For the reasons that follow, the motion to dismiss is granted in part and denied in part.

Legal Standard

A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint. Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3D 811, 820 (7th Cir. 2009). To survive a motion to dismiss, a complaint needs only factual allegations, accepted as true, sufficient to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.

Analysis

I. Breach of Contract (Count I)

Plaintiffs allege in Count I that Defendant entered into an employment agreement with them in which he agreed not to disclose, or use for any purpose other than in furtherance of his legitimate job duties, Plaintiffs' confidential and trade secret information. Compl. ¶ 91. Plaintiffs also allege that Defendant agreed to return all of Plaintiffs' property and confidential information. Compl. ¶¶ 88, 91. Defendant, however, has failed to do so. Id. ¶ 92.

To state a breach of contract claim in Illinois, “a party must allege (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) the resultant damages.” Hongbo Han v. United Cont'l Holdings, Inc., 762 F.3d 598, 600 (7th Cir. 2014) (internal quotation marks omitted). “Under Illinois law, a legally enforceable contract is an exchange, and the elements of a contract include offer, acceptance, and consideration.” LKQ Corp. v. Thrasher, 785 F.Supp.2d 737, 742 (N.D. Ill. 2011).

Defendant argues that Plaintiffs have failed to allege a valid and enforceable contract-and specifically, a valid restrictive covenant-because the Agreement was not supported by adequate consideration. R. 9, Memo. Dismiss at 7 (citing Brown & Brown, Inc., v. Mudron, 887 N.E.2d 437, 440 (Ill.App.Ct. 2008)). Defendant argues that under Illinois law, employment for less than two years is inadequate consideration to support a restrictive covenant. Id. at 7-8 (citing Instant Tech, LLC v. DeFazio, 40 F.Supp.3d 989, 1010 (N.D. Ill. 2014). Since he was only employed for eight months after signing the Agreement, reasons Defendant, and no other consideration for the Agreement is alleged, the Agreement fails for lack of consideration. Id. Plaintiffs retort that the vast majority of courts within the Seventh Circuit have rejected a bright line rule as to a specific length of continued employment. R. 17, Resp. at 2 (collecting cases). Moreover, Plaintiffs point out that Defendant resigned instead of being terminated, which weighs in favor of a finding that Defendant's eight-month period of continued employment is sufficient consideration. Id. at 3 (citing, among other cases, R.J. O'brien & Assocs., LLC v. Williamson, 2016 WL 930628, at *4 (N.D. Ill. Mar. 10, 2016)).

Generally, “courts do not inquire into the adequacy of consideration.” McGinnis v. OAG Motorcycle Ventures, Inc., 35 N.E. 2d. 1076, 1083 (Ill. Ct. 2015). Post-employment restrictive covenants, however, are an exception to the general rule. Id. This is so “because it has been recognized that a promise of continued employment may be an illusory benefit where the employment is at-will.” Id. Illinois courts have held that, “continued employment for a substantial period is sufficient consideration to support an employment agreement.” Montel Aetnastak, Inc. v. Miessen, 998 F.Supp.2d 694, 715 (N.D. Ill. 2014).

“Illinois courts have generally held that [at least] two years or more of continued employment constitutes adequate consideration.” Allied Waste Servs. of N. Am., LLC, 177 F.Supp.3d at 1107 (internal quotation marks and citations omitted and emphasis added). The Illinois Supreme Court, however, has not decided the issue. “Where the Illinois Supreme Court has not ruled on an issue, decisions of the Illinois Appellate Courts control unless there are persuasive indications that the Illinois Supreme Court would decide the issue differently.” Nationwide Agribusiness Ins. Co. v. Dugan, 810 F.3d 446, 450 (7th Cir. 2015).

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