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AUTOMED TECHNOLOGIES v. ELLER

July 11, 2001

AUTOMED TECHNOLOGIES, INC., PLAINTIFF,
v.
CHARLES ELLER, HERB YOUNGS, AND PEGG, INC., D/B/A SUN DESIGN, INC., DEFENDANTS.



The opinion of the court was delivered by: James B. Moran, Judge.

    MEMORANDUM OPINION AND ORDER

Plaintiff AutoMed Technologies, Inc. (AutoMed) has filed an 18-count complaint against defendants Charles Eller, Herb Youngs and Pegg, Inc. d/b/a Sun Design Systems, Inc. (Sun Design). The suit collectively alleges misappropriation of AutoMed's trade secrets, breaches of contracts and breaches of fiduciary duties against each defendant and under various legal theories.*fn1 Defendants Eller and Youngs move to dismiss all the claims against them under Fed. R. Civ. P. 12(b)(6). Their motion is granted in part and denied in part. Defendants Eller and Youngs, and third-party witness Express Scripts, Inc. also move for a protective order to prevent disclosure of their trade secrets until AutoMed more specifically identifies which of its trade secrets were allegedly misappropriated. This motion is granted.

BACKGROUND

AutoMed designs automated medical dispensing systems. Eller and Youngs were high-level employees who oversaw the research and development of several new and existing products. Eller initially worked with Travenol Laboratories, Inc. (Travenol), pursuant to an employment agreement signed January 3, 1983. This contract included non-disclosure and non-compete provisions that survived termination of his employment. Travenol later became Baxter Healthcare Corporation (Baxter), which then sold its productivity systems business unit, the division in which Eller worked, to AutoMed. The governing asset purchase agreement, dated December 21, 1998, assigned certain of Baxter's intellectual property and trade secret rights to AutoMed. These included the OptiFill and Quickscript automated prescription bottle filler systems. The asset purchase agreement also assigned Baxter's rights under any confidentiality and non-compete agreements with the division's employees and third-party subcontractors.

Eller continued his work in the business unit uninterrupted, signing a new contract on April 9, 1999, officially accepting employment with AutoMed. He did not sign the attached and referenced non-competition and non-disclosure agreement. Youngs also signed an employment agreement with AutoMed, his including non-competition and non-disclosure provisions, on April 13, 1999.*fn2 Following the acquisition, AutoMed began developing the Next Generation OptiFill System (Next Generation), an enhanced version of OptiFill. Eller managed the OptiFill business segment, including the original and Next Generation products. Youngs designed much of the software associated with these systems. During Baxter's development of its OptiFill and other systems, it hired Sun Design as a subcontractor. Eller, Youngs and Sun Design, by virtue of their positions, were all privy to certain AutoMed confidential information and trade secrets.

Express Scripts is a mail order pharmaceutical distributor and was an existing OptiFill customer. It collaborated with AutoMed in designing a new system known as the MegaPharmacy Project. Eller organized a team of AutoMed employees, including Youngs, and subcontractors, including Sun Design, to work on the project. In January 2001, Eller and Youngs terminated their employment with AutoMed and accepted positions with Express Scripts. At Express Scripts, Eller and Youngs were assigned to continue their work on the MegaPharmacy Project. They also contracted with Sun Design for design services similar to those it had been providing AutoMed.

DISCUSSION

When deciding a Federal Rule of Civil Procedure 12(b)(6) motion, we must assume the truth of all well-pleaded factual allegations, making all possible inferences in the plaintiff's favor. Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7th Cir. 1994). We will dismiss a claim only if it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Fed. R. Civ. P. 8 (a)(2) only requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Generally, "mere vagueness or lack of detail does not constitute sufficient grounds for a motion to dismiss." Stauss v. City of Chicago, 760 F.2d 765, 767 (7th Cir. 1985).

I. Trade Secrets (Counts 1 and 3)

To state a claim for misappropriation of a trade secret under the Illinois Trade Secrets Act (ITSA), 765 ILCS 1065/1 et seq., the complaint must allege that information was (1) a trade secret, (2) misappropriated and (3) used by defendant. Composite Marine Propellers Inc. v. Van Der Woude, 962 F.2d 1263, 1265-66 (7th Cir. 1992). Defendants argue that the complaint does not adequately identify which trade secrets were allegedly misappropriated, and that it does not plead they actually used any AutoMed secrets.

As Judge Shadur observed at his April 23, 2001 hearing, the original complaint was by no means a model of specificity. It alleged generally that AutoMed's software, design plans and research and development, related to OptiFill, Next Generation and the MegaPharmacy Project, were trade secrets. "It is not enough to point to broad areas of technology and assert that something there must have been secret and misappropriated. The plaintiff must show concrete secrets." Composite Marine, 962 F.2d at 1265. The amended complaint is not much better, but it does meet minimal Fed. R. Civ. P. 8(a) requirements. "Courts are in general agreement that trade secrets need not be disclosed in detail in a complaint alleging misappropriation for the simple reason that such a requirement would result in public disclosure of the purported trade secrets." Leucadia Inc v Applied Extrusion Technologies, Inc., 755 F. Supp. 635, 636 (D. Del. 1991). Although it repeats the general allegations, it also specifies Staffing Simulation software and the source code for PPS software as trade secrets (cplt. ¶¶ 42-43). These are much more specific. And although the generic references to the three research projects are problematic for discovery, they do provide defendants with some notice as to the substance of the claims. As we discuss in our analysis of the motion for protective order below, plaintiff will ultimately need to identify which specific designs, software or research defendants allegedly misappropriated. But for withstanding a motion to dismiss, the amended complaint suffices.*fn3

The complaint must also allege that defendants used the trade secrets. Without access to Eller's, Youngs' and Express Scripts' records, AutoMed has no way of knowing what information their former employees have disclosed and are using in their current research.*fn4 instead, plaintiff relies on the "inevitable disclosure" doctrine. See PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995). Based on defendants' prior positions with plaintiff, the information to which they had access and the nature of their work for their new employer, we can arguably infer use of AutoMed's information. To invoke this doctrine the complaint must do more than make conclusory allegations that the employees will necessarily use trade secrets in their new positions. See Complete Business Solutions. Inc. v. Mauro, 2001 WL 290196 at *5 n.7 (N.D. Ill. Mar. 16, 2001). This complaint satisfactorily does so. It specifically alleges that defendants were assigned to work on the same project that they had been developing for AutoMed. Hiring the former Vice President and General Manager of Systems Engineering (Eller) and the Director of Research and Development and Software Development (Youngs), who headed the MegaPharmacy Project, and then assigning them to the same project, supports an inference that defendants are using information acquired from plaintiff. These facts are sufficient to state a claim.

Lastly, defendants also argue that count 3 is duplicative of count 1, and should therefore be dismissed. We agree. We cannot discern ...


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