Opinion
21-CV-05388
12-22-2021
WESTROCK COMPANY and VICTORY PACKAGING, LP, Plaintiffs, v. THOMAS DILLON and CDS MOVING EQUIPMENT, INC., Defendants.
MEMORANDUM OPINION AND ORDER
John Robert Blakey, United States District Judge.
This case centers on a former Westrock Company (“Westrock”) employee named Thomas Dillon (“Dillon”) who left Westrock in April 2021 to work for a competitor, CDS Moving Equipment, Inc. (“CDS”). According to Plaintiffs, before Defendant Dillon left Westrock, he misappropriated trade secrets and proprietary information and improperly solicited a customer to CDS. Plaintiffs also allege that Defendants continue to use these trade secrets to unfairly compete and take their customers. Plaintiffs bring claims against Dillon and CDS for violation of the Defend Trade Secrets Act and Illinois Trade Secrets Act, and tortious interference with contracts and business relations; and against Dillon for breach of contract and breach of fiduciary duty. Plaintiffs also filed a Motion for Preliminary Injunction, [4], and Defendants moved to dismiss Plaintiffs’ claims, [65]. For the reasons set forth below, the Court grants in part and denies in part both motions, [4], [65]. 1
I. Background
Plaintiff WestRock Company (“WestRock”) is a vertically integrated paper and packaging product manufacturer and supplier. WestRock sells packaging products to many types of customers, including moving companies. [1] ¶¶ 13, 14, 16. In 2018, it acquired Plaintiff Victory Packaging, LP (“Victory”). Id. ¶ 14. Defendant CDS competes with WestRock to supply moving companies with moving equipment and packaging material. Id. ¶¶ 3, 29–30. The current president of CDS, Richard Bruns, was formerly a WestRock executive, but he left WestRock on “unhappy” terms in November 2019. [1] ¶¶ 31, 34; see also [24-1] ¶ 6. According to WestRock, it terminated Bruns for stealing hundreds of thousands of dollars. [98].
A. Thomas Dillon’s Tenure at WestRock
Until April 2021, Defendant Dillon worked for Westrock selling paper products throughout Illinois, in the Madison Wisconsin area, and in parts of Iowa. Id. ¶¶ 36–37, 39. Dillon first worked for Victory from 2011 to 2014 and again beginning in late 2017; he became a Westrock employee when Westrock acquired Victory. Id. ¶¶ 35–36.
In early 2019, Dillon reviewed a WestRock training module that included a policy entitled “Employee Agreement Regarding Confidentiality, Inventions, Works, Computer Software, and Permissions (Revised version – Feb. 2019)” (“Confidentiality Agreement”). [28] ¶¶ 8–11. Among other things, the Confidentiality Agreement 2 states that, as a condition of employment and for five (5) years after employment ends, an employee shall:
[Not] directly or indirectly, divulge or make use of any Confidential Information of WestRock other than in performance of [employment] duties for WestRock or for the benefit of Westrock.
Make all reasonable efforts to protect and maintain the confidentiality of the Confidential Information of Westrock and follow all policies and procedures established by WestRock with respect to its Confidential Information . . .
Upon cessation of [ ] employment for any reason, [ ] (a) promptly deliver to WestRock and not keep, copy, store, retain or take for any purpose any information provided to [the employee or which the employee] developed or collected in the course and scope of [the employee’s] employment, whether or not [the employee] consider[s] such information to be Confidential Information; (b) certify in writing that [the employee] ha[s] complied with this provision if so requested by WestRock; (c) promptly identify and disclose to WestRock all passwords [the employee] ha[s] been given or which [the employee] created to access WestRock systems, and (d) attend an exit interview if so requested by WestRock where such matters may be discussed.[1.1] §§ 2.2, 2.3. The Confidentiality Agreement broadly defines “Confidential Information” as:
all valuable and/or proprietary information (in oral, written, electronic or other forms) belonging to or pertaining to WestRock or provided to WestRock by third parties, which WestRock treats as confidential and which would be useful to competitors of WestRock or otherwise damaging to WestRock if disclosed.Id. § 2.1. It also outlines a nonexclusive list of Confidential Information that includes: (1) “information regarding customers or vendors of WestRock and the terms of those relationships”; (2) “financial reports and analyses”; (3) “research and development”; and (4) “information provided to WestRock by third parties under a duty to maintain the confidentiality of such information.” Id. 3
After Dillon electronically viewed the training module, he electronically acknowledged the following certification: “I certify that I have read and understand the WestRock Intellectual Property and Confidentiality Agreement Policy.” [1-1] at 6; [28-4].
Around the same time, he also reviewed WestRock’s “Confidential Information and Trade Secrets” Policy and “Acceptable Use” Policy. [28] ¶11; [28-4] at 4. The Confidential Information and Trade Secrets Policy defines “Confidential Information” to include “technical, financial, operational, and strategic information” such as “business plans, customer and supplier lists, contracts, and financial data” and “transactions with customers, marketing plans, supplier arrangements, and pricing information” among other things. [28-3] at 2. It also indicates that Confidential Information should be marked as “Confidential – For WestRock Internal Use” but that even unmarked information may still be Confidential Information. Id. Finally, it defines “Trade Secrets” as a subset of Confidential Information that has economic value because of its secrecy that has been protected by reasonable efforts. Id. at 3.
The Acceptable Use Policy prohibits “saving or forwarding trade secrets, intellectual property, or propriety or confidential information about or belonging to WestRock, WestRock’s customers, or WestRock’s employees, vendors or business partners to a personal device or personal email account”. [28-2] at 4.
B. Dillon’s Resignation from WestRock
On April 21, 2021, Dillon resigned from WestRock. Dillon’s boss, Sean Huggins, testified that Dillon said he decided to leave the packaging industry and was taking a job with a software company. [5-1] ¶ 6; [118] at 25:7–19. Huggins 4 testified that, because Dillon said he was leaving the industry, Huggins allowed him to stay for two weeks to transition his clients and did not revoke his WestRock systems access. [5-1] ¶¶ 6, 7, 45; [118] at 26:5–10. Dillon did not stay for the full two-week period, however; instead, he abruptly left on April 27, 2021. [5-1] ¶ 8. Before leaving, Dillon returned his company-issued laptop and cell phone. Id.
The day after Dillon left, Huggins-unable to find a list of Dillon’s customer contacts-asked another sales representative, Aaron Yates, to call Dillon for his customer list. Id. ¶ 8 n.2; [19]. That same day, Dillon, using his personal email, sent Yates an excel file titled “Mover List 12-21-17”, which listed customer contact information for 209 moving companies in the Chicago area. Dillon also emailed Yates a list of 83 customer email addresses. [19] ¶ 5. A few days later, Dillon-on his own accord-forwarded to Yates an email from a customer who had contacted Dillon via his personal email to request a supply of moving boxes. [24-2] ¶ 41. Finally, on June 11, 2021, at Huggins’ request, Yates also contacted Dillon for the passcode to Dillon’s work-issued cell phone. [19] ¶¶ 6–7.
At some point, Huggins and WestRock discovered that Dillon had not left the packaging industry as he claimed. [5-1] ¶ 9. Instead, he left to work for CDS. Id. WestRock believes that CDS’s president, Bruns, solicited Dillon to leave WestRock for CDS. [1] ¶ 56. 5
In addition, between May and June 2021, WestRock determined that Dillon may have misappropriated WestRock’s confidential information. First, on May 5, 2021, Huggins accessed Dillon’s WestRock email account to monitor for customer sales requests. [30] ¶ 38. He discovered that Dillon had sent to his personal email many WestRock files, which the Court discusses below. Id. Huggins did not contact Dillon to instruct him to delete them, but at some point he contacted internal legal about it. [118] at 71:10–16. Between June and July 2021, WestRock engaged a forensic expert to review Dillon’s company-issued devices. [5-23] ¶ 9. Its expert reported that Dillon had also connected a flash drive and an iphone. Id. ¶¶ 19–25; [29] ¶¶ 15–16. See also discussion at § II.A.1, infra.
Further, WestRock began noticing a reduction in sales volume. In mid-June 2021, a WestRock driver learned that Dillon had solicited one of WestRock’s customers (“Customer A”) to CDS while he still worked for WestRock. [5-14] ¶¶ 46. WestRock also lost sales from a customer’s (“Customer B’s”) San Antonio, Texas location (which is outside Dillon’s WestRock sales territory but where Rick Bruns is located). [75] ¶ 12. Two other WestRock salesmen also learned that CDS was supplying the Chicago locations of other WestRock’s customers (Customers C, D), and possibly Customer B. See [5-15] ¶¶ 2–5; [5-16] ¶¶ 3–6.
With respect to Customer A, Dillon told WestRock on March 15, 2021 (shortly before he quit) that Customer A decided to purchase its boxes from another 6 competitor and instructed WestRock to return to Customer A its box logo printing plates. [5-13] On March 19, 2021, Dillon also asked the WestRock warehouse to make boxes for Customer A at Dillon’s own expense, claiming that it was for a charity event with Customer A. [5-18]. Based on what WestRock learned in June 2021 and from emails Dillon forwarded to his personal email before he left, WestRock now believes that Dillon lied and instead took these actions to move Customer A to CDS. [5-1] ¶¶ 56–63.
WestRock insists that the files Dillon emailed to his personal email (and possibly downloaded onto a flash drive) in the months before he quit contained trade secrets, and further provide the “keys to WestRock’s kingdom.” [63-1] at 7. While the Complaint relies heavily on vague and conclusory statements about the contents and confidential nature of these files, [1] ¶ 58; see also id. ¶¶ 48, 51, 57, WestRock does elaborate upon a subset of these materials, [1] ¶¶ 58–59, 72–73, 81; [4]; [5-1]; [30]; [75], which the Court categorizes as follows:
• Category 1-Customer Contact Information
o January 15, 2021 email exchange with Dillon and a new customer about filling out a new customer order form [82];
o February 1, 2021 email attaching spreadsheets with contact information for hundreds of moving company customers. [38], [39], [40].
• Category 2-Customer Pricing Information
o February 11, 2021, and March 3, 2021 emails, each with an attached individual customer price list. [76], [77], [79], [88];
o January 27, 2021 email and attachments regarding updated customer pricing list and planned incentive pricing. [86];
o April 21, 2021 Email attaching a new national contract with Customer B, along with a price list, and warehouse stock totals. [51].7
• Category 3-Sales, Profits and Stock Information
o March 31, 2021 Email attaching two excel files with customer sales information for hundreds of WestRock customers, [42];
o February 12, 2021, March 15, 2021, March 23, 2021 and April 8, 2021 emails attaching updated stock list for 89 WestRock products, [43], [78], [80], [81].
• Category 4-Customer Order Logs
o April 21, 2021 and April 27, 2021 emails with links to next-day delivery logs for Dillon’s customers. [30-1], [31], [75-4].
• Category 5-Sales Strategy Materials
o February 1, 2021 email attaching “TD Chicago Pipeline 070620” spreadsheet tracking Dillon’s efforts to secure customer business, [87];
o April 6, 2021 email exchange between Dillon and other sales representatives about contacting a potential new customer [83].
• Category 6-Files relating to Customer A:
o February 22, 2021 email attached a “print card” layout for Customer A’s box logo design, [44];
o March 2021 emails to Customer A with order forms, current price list for 68 products and a consignment count report, [41], [45];
o March 2021 emails attaching Customer A invoices from February and March 2021. [46], [47].
WestRock claims that Dillon misappropriated these files in violation of the Defend Trade Secrets Act (“DTSA”) and Illinois Trade Secrets Act (“ITSA”), breached the parties’ Confidentiality Agreement and violated WestRock’s general “Acceptable Use” and “Confidential Information and Trade Secrets” policies.
WestRock also maintains that CDS knows Dillon misappropriated this information because CDS’s president, Rick Brun, worked at WestRock and knows the terms of WestRock’s Confidentiality Agreement. [5] at 12–13; [75] ¶¶ 13–15. Based on Brun’s purported knowledge, WestRock alleges that CDS improperly induced 8 Dillon to violate the Confidentiality Agreement and misappropriate WestRock’s trade secrets. [5] at 12–13. WestRock insists that Dillon and CDS used these trade secrets to steal Customers A, B, C, and D and that they will continue to use the files to unfairly compete with WestRock. Id. 13–14. WestRock now seeks an injunction to enjoin Defendants from accessing, using, or disclosing all of the WestRock files Dillon took; require they return the files and participate in data remediation and some expedited discovery. [4].
C. Dillon and CDS’s Response to WestRock’s Allegations
Dillon does not dispute that he emailed to his personal account various WestRock files and occasionally used a flash drive. In fact, Dillon submitted a forensic expert’s report confirming that he sent hundreds of emails from his WestRock account to his personal email during his tenure and at least 54 WestRock emails in the months before he quit in April 2021. [24-3]. Instead, Dillon argues that he did not misappropriate any trade secrets because he routinely used his personal email and flash drives when performing his job. [24-2]. ¶¶ 32–36. According to Dillon’s forensic expert, between 2011 and 2021 forty-three Victory email addresses sent 592 emails to Dillon’s personal email account. [24-3] at 21–22. Focusing on recent years, 9 most of the emails came from a few WestRock employees and a “Customer Service – Chicago” email account. Id. Dillon also claims that he did not think WestRock had a policy forbidding him from using his personal email and that, when he resigned, WestRock did not ask him to delete WestRock files. [24-2] ¶¶ 32–41. Dillon also maintains that WestRock knew he retained some files after he resigned because he emailed one of the complained-of files (a customer list) to Aaron Yates after he quit. Id. ¶¶ 39-41.
Further, Dillon disputes that he signed the Confidentiality Agreement. Id. ¶¶ 30–31. Although he recalls briefly viewing a “training module” about confidential information in February 2019, he claims that he did not realize that, by certifying he reviewed the “training module”, he had “supposedly signed a confidentiality agreement with WestRock.” Id. ¶ 31.
Regardless, Dillon also contends that none of the files or information at issue constitute trade secrets or confidential information. Id. ¶¶ 42–45. Both he and his new boss, Rick Bruns, insist that customer pricing, sales history, and customer contact information are not confidential in the packaging product industry; and that stock listing information fluctuates so frequently that it is stale and has no value to competitors. Id.; [24-1] ¶¶ 27–30; [95]; [96].
Finally, Dillon and CDS admit that CDS provides packaging supplies to Customers A, B, C and D, but they deny using any of WestRock’s information (whether confidential or not) to win those accounts. [24-1] ¶ 25. Bruns states that CDS had a pre-existing relationship with these customers and sold them products in 10 the past. Id. ¶ 22. With respect to Customer A, C, and D, Dillon maintains that they followed him to CDS because they share a longstanding close business and personal relationship. [24-2] ¶¶ 19–26. Dillon does not address, however, whether he solicited Customer A to CDS while still employed by WestRock. With respect to Customer B, CDS’s new business derives from the customer’s San Antonio, Texas location, which is outside Dillon’s geographic market. [118] at 58:8–19.
II. Motion for Preliminary Injunction
A preliminary injunction “should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). This is because it is “an exercise of a very far-reaching power, never to be indulged except in a case clearly demanding it.” Orr v. Shicker, 953 F.3d 490, 501 (7th Cir. 2020). A movant “must establish that it has some likelihood of success on the merits; that it has no adequate remedy at law; [and] that without relief it will suffer irreparable harm.” GEFT Outdoors, LLC v. City of Westfield, 922 F.3d 357, 364 (7th Cir. 2019).
The Seventh Circuit recently clarified the proper standard for evaluating a “likelihood of success” on the merits. For many years, courts in this Circuit inquired whether the moving party demonstrated a “better than negligible” chance of prevailing on its claim. See, e.g., D.U. v. Rhoades, 825 F.3d 331, 338 (7th Cir. 2016) (“In framing the probability of success necessary for a grant of injunctive relief, we have said repeatedly that the plaintiff’s chances of prevailing need only be better than negligible.”); Omega Satellite Prod. Co. v. City of Indianapolis, 694 F.2d 119 (7th Cir. 1982) (uttering the “better than negligible” standard for the first time); see also [4] at 6 11 (“Plaintiffs need only demonstrate a better than negligible change of succeeding.” (citing Cooper v. Salazar, 196 F.3d 809, 813 (7th Cir. 1999)). The tides changed, however, following the Supreme Court’s twin decisions in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) and Nken v. Holder, 556 U.S. 418 (2009), where the Court demanded a higher showing. The Seventh Circuit thus “retired” this “better than negligible” language and adopted a “strong” showing in its place. See Ill. Republican Party v. Pritzker, 973 F.3d 760, 762–63 (7th Cir. 2020) (“We note this to remind both the district courts and ourselves that the ‘better than negligible’ standard was retired by the Supreme Court.”); Mays v. Dart, 974 F.3d 810, 821 (7th Cir. 2020) (explaining that the “better than negligible” standard “is not the proper standard to apply when evaluating the likelihood of success on the merits in a preliminary injunction motion.”); [21] at 8. The revision, however, is only a change in degree, not kind: a plaintiff must still only demonstrate that the claim has “some chance” of success; “better than negligible” will not do.
If the movant fails to make this three-part prefatory proffer, the court must deny the injunction. Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of Am., Inc., 549 F.3d 1079, 1086 (7th Cir. 2008).
If, on the other hand, a plaintiff satisfies each part of the three-prong proffer, then the trial court proceeds to “weigh the harm that the plaintiff will suffer absent an injunction against the harm to the defendant from an injunction,” and must consider “the public interest.” GEFT Outdoors, LLC v. City of Westfield, 922 F.3d 357, 364 (7th Cir. 2019). At this stage, this “Circuit employs a sliding scale approach 12 for this balancing: if a plaintiff is more likely to win, the balance of harms can weigh less heavily in its favor, but the less likely a plaintiff is to win the more that balance would need to weigh in its favor.’” Id. (citations omitted).
A. Likelihood of Success on the Merits
1. ITSA and DTSA Trade Secret Claims (Counts I & II)
To establish violation of the ITSA or DTSA, WestRock must prove that “(1) a trade secret existed; (2) it was misappropriated through improper acquisition, disclosure, or use, and (3) the misappropriation damaged the trade secret’s owner.” Moss Holdings Co. v. Fuller, 2020 WL 1081730, at *5 (N.D. Ill. Mar. 6, 2020) (quoting Aon Risk Servcs. Co. v. Alliant Ins. Servs., 415 F.Supp. 3d 843, 848 (N.D. Ill. 2019)). The ITSA and DTSA mirror one another, so courts consider “the likelihood of success of the two claims together.” Aon Risk Servcs., 415 F.Supp. 3d at 848.
As a threshold point, for misappropriation claims, “the plaintiff must define the allegedly misappropriated secrets with sufficient specificity.” Next Payment Solus., Inc. v. CLEAResult Consulting, Inc., No. 17 C 8829, 2019 WL 955354, at *22 (N.D. Ill. Feb. 27, 2019). This is so because, “without enough specificity of what information constitutes the claimed trade secret, the Court cannot properly analyze the elements of a trade secret claim.” Id.; cf. IDX Sys. Corp. v Epic Sys. Corp., 285 F.3d 581, 584 (7th Cir. 2002) (“plaintiff must do more than just identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition”).
Generally, WestRock complains that Dillon misappropriated all the files he emailed to himself (or potentially downloaded onto external drives) in the “months 13 before his leaving to work for CDS”, [1] ¶¶ 57, 73, 82, 87; the evidence shows that Dillon emailed to his personal email at least 54 WestRock emails between January 1 and the end of April 2021, [24-3] ¶ 20. Yet, WestRock only offers specific evidence about a subset of those files (Categories 1–6 outlined above). At this stage, the Court can only “properly analyze” this subset of emails. See Next Payment, 2019 WL 955354, at *22.
At the evidentiary hearing, the parties devoted considerable time to Dillon’s alleged copying of files onto an external drive before leaving. Defendants, through their forensic expert, attacked some of the assertions made by WestRock’s forensic expert, Mr. Lucich. [94]; [118] at 100:8-108:21. Even if the Court accepts Mr. Lucich’s opinions, WestRock has failed to provide sufficient information to evaluate its trade secret claims regarding the external drives. Mr. Lucich opined that Dillon connected a flash drive and iPhone to his work computer the month he quit, [5-23], and may have accessed or downloaded some files, id. ¶ 30, but WestRock is not able to identify which files, if any, Dillon downloaded to these devices. Mr. Lucich, however, opines that he found five files on Dillon’s work computer that Dillon may have copied, id. ¶ 32; yet WestRock only asserts that these files include the names of Customers A and B. Id. ¶ 34. That is not the same as explaining how or why the files constitute trade secrets. Similarly, Mr. Lucich identified a few folder and file names on the flash drive whose names suggest that they may contain WestRock information. Id. ¶¶ 40, 42. Again, merely pointing to folders that might contain WestRock’s information does not provide enough information to justify trade secret protection. Overall, at this stage, 14
WestRock has not provided sufficient information about what files, if any, Dillon copied onto the flash drives to evaluate whether the files constitute WestRock’s trade secrets. Because of this, WestRock has failed to show likelihood of success on the misappropriation claims premised on Dillon’s purported external drive usage.
a) Whether the Alleged Information in Categories 1–6 Constitute Trade Secrets.
For information to constitute a trade secret, it must have been “sufficiently secret to impart economic value because of its relative secrecy” and the party claiming protection must have made “reasonable efforts to maintain the secrecy of the information.” Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 722 (7th Cir. 2003); see also 18 U.S.C. § 1893(3); 765 ILCS § 1065/2(d)(2).
Before the Court examines the six categories of emailed files, the Court addresses an overarching issue regarding the “reasonable efforts to maintain secrecy” element. To date, WestRock has not marshalled convincing evidence about how it protects the files at issue. It points to general company policies regarding confidential information, but the record at this stage calls into question whether WestRock adequately enforced these policies. For example, its Confidential Information and Trade Secrets policy instructs employees to mark confidential files as “Confidential – For WestRock Internal Use.” [28-3]. Not a single file at issue bears such a mark. Further, its Acceptable Use Policy prohibits employees from conducting business via personal email. [28-2]. Yet, the record shows that Dillon routinely used his personal email to conduct business and other WestRock employees corresponded with him via his personal email. [24-3]. Given that Dillon failed to follow the policy openly for a 15 substantial period of time without consequence, it is unlikely that WestRock adequately trained its employees on its Acceptable Use Policy or took reasonable efforts to enforce it. In other words, the mere existence of a written policy, standing alone, does not sufficiently demonstrate active efforts to maintain secrecy.