This case commenced in September 1993 when Plaintiff, Flavorchem Corporation ("Flavorchem"), filed a complaint seeking injunctive and compensatory relief for an alleged misappropriation of trade secrets. Flavorchem filed its First Amended Complaint on December 21, 1995. Specifically, Flavorchem alleges that Defendant, Patrick Imburgia ("Imburgia"), a former employee, illegally copied certain flavor formulas developed by Flavorchem and after leaving Flavorchem formed his own company in California, Mission Flavors and Fragrances, Inc. ("Mission Flavors"), which has allegedly used the misappropriated flavor formulas. Defendants denied these allegations, asserted laches and statute of limitations defenses, and filed a counterclaim seeking a declaratory judgment that Imburgia had no duty not to disclose or use information obtained while a Flavorchem employee, that Flavorchem's formulas are not trade secrets and that Imburgia independently developed its own flavors and products.
The issue before the Court is which statute of limitations governs this case: the Illinois Trade Secrets Act, 765 ILCS § 1065/1 (1993) et seq. ("Illinois Act"), or the California Uniform Trade Secret Act, Cal. Civil Code § 3426 et seq. ("California Act"). Flavorchem urges application of the Illinois Act while Defendants contend that the California Act applies; in the alternative, Flavorchem argues that even if the California Act applies substantively, the Illinois Act applies procedurally thus mandating the five-year statute of limitations.
The Court finds that in applying Illinois choice of law rules, the circumstances of this case render the Illinois Act applicable; however, even if the California Act applies, federal law requires following the procedure of the forum state, under circumstances such as these; and, thus, the Illinois five-year statute of limitations is properly applied to this case.
Flavorchem is an Illinois Corporation with principal place of business in Downers Grove, Illinois. Mission Flavors is a California Corporation with principal place of business in Rancho Santa Margarita, California. Imburgia, a citizen of California, is the Chief Executive Officer and President of Mission Flavors. Imburgia was employed by Flavorchem from January 1, 1979 to January 31, 1986, and during his tenure he worked only in Illinois in production and the laboratory.
During his employment with Flavorchem, Imburgia had access to, and knowledge of, certain of what Flavorchem terms 'trade secrets,' and was not authorized to remove, disclose or use any formula for his own benefit. After leaving Flavorchem, Imburgia worked for another company for two years prior to forming Mission Flavors. Flavorchem asserts that Imburgia disclosed and used Flavorchem formulas in his subsequent employment and at Mission Flavors.
The Uniform Trade Secrets Act has been adopted by Illinois at 765 ILCS § 1065/1 (1993) et seq., effective January 1, 1988; and by California at Cal. Civil Code § 3426 et seq., effective January 1, 1985. Both the Illinois Act and the California Act are intended to safeguard intellectual property and business information by codifying, and eliminating inherent inconsistencies in, the existing common law relating to trade secrets. See Pepsico, Inc. v. Redmond, 1995 U.S. Dist. LEXIS 19380, 1996 WL 3965, at *15 (N.D. Ill. Jan. 2, 1996); MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993) applying California law. The pertinent statutory definitions and prohibitions are identical. Compare 765 § ILCS 1065/2 with Cal. Civil Code § 3426.1). However, the California Act provides for a three-year statute of limitations while the Illinois Act provides for a five-year statute of limitations. Compare 765 ILCS § 1065/7 with Cal. Civil Code § 3426.6. Under both Acts, to prove a claim for misappropriation of trade secrets, a plaintiff must establish that the information was a) a secret (i.e., not generally known in the industry); b) misappropriated (i.e., stolen rather than independently developed or obtained from a third source); and 3) used in the appropriator's business. Composite Marine Propellers v. Van Der Woude, 962 F.2d 1263, 1265-66 (7th Cir. 1992); MAI Systems Corp., 991 F.2d at 521.
A. Choice of Law Standard
The parties agree that Illinois choice of law rules apply to this case, but disagree as to the effect of those rules. Namely, Flavorchem asserts that the Illinois Act, with its five-year statute of limitations, applies whereas Defendants argues that the California Act, with its three-year statute of limitations applies.
In a diversity suit such as this, a federal district court applies the choice-of-law rules of the state in which the court sits. Klaxon v. Stentor Electric Mfg., 313 U.S. 487, 85 L. Ed. 1477, 61 S. Ct. 1020 (1941). Thus, Illinois choice of law principles apply to this case. The Illinois Supreme Court has held that in tort actions "the local law of the State where the injury occurred should determine the rights and liabilities of the parties, unless Illinois has a more significant relationship with the occurrence and with the parties, in which case, the law of Illinois should apply." Ingersoll v. Klein, 46 Ill. 2d 42, 45, 262 N.E.2d 593, 595 (1970). A clear reading of Ingersoll demonstrates that the Illinois Supreme Court rejected the "wooden application" of the "arbitrary" Lex loci delicti doctrine, also known as the "place of the injury rule," in favor of the "most significant contacts" test, embodied in the RESTATEMENT (SECOND) OF CONFLICTS OF LAW, regarding tort claims such as this. Ingersoll, 46 Ill. 2d at 47-49, 262 N.E.2d at 595-597 (adopting the American Law Institute's Tentative Draft No. 9 of § 379, RESTATEMENT OF THE LAW (SECOND) CONFLICTS OF LAWS, later adopted as § 145).
The Courts of the Northern District of Illinois and the Seventh Circuit have recognized that Illinois conflicts of law rules require the use of the 'most significant contacts' approach in tort claims. Palmer v. Beverly Enterprises, 823 F.2d 1105, 1112 (7th Cir. 1987); Abbott Laboratories v. Nutramax Products, Inc., 844 F. Supp. 443, 446 (N.D. Ill. 1994).
Under this approach, not all contacts are relevant; rather, only those contacts which implicate the underlying policies and purposes of the conflicting laws are considered. Generally, these contacts include the following:
1. the place where the injury occurred;
2. the place where the conduct causing the injury occurred;