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LUCINI ITALIA COMPANY v. GRAPPOLINI

November 12, 2002

LUCINI ITALIA COMPANY, PLAINTIFF,
V.
GIUSEPPE GRAPPOLINI, AND GRAPPOLINI G. S.R.L., DEFENDANTS.



The opinion of the court was delivered by: Morton Denlow, United States Magistrate Judge.

  MEMORANDUM OPINION AND ORDER

Plaintiff, Lucini Italia Company ("Plaintiff" or "Lucini"), filed a seven count first amended complaint against the defendants, Giuseppe Grappolini ("Grappolini") and the Grappolini G. s.r.l. company ("GSRL" or collectively "Defendants"). Grappolini answered count VI (violation of the Illinois Trade Secret Act) and count VII (declaratory judgment) and now moves to dismiss the first five counts. The issue to be determined is whether the preemption clause of the Illinois Trade Secret Act ("ITSA"), 765 Ill. Comp. Stat. 1065/8(a), precludes Lucini from bringing its breach of fiduciary duty (count I), constructive fraud (count II), fraud (Count III), promissory estoppel (count IV), and unjust enrichment (count V) claims. For the reasons stated herein, Defendants' motion to dismiss is denied.

I. LEGAL STANDARDS

A. Motion to Dismiss

In deciding a motion to dismiss, all well-pleaded allegations in the complaint are accepted as true. Hishon v. King & Spaulding, 476 U.S. 69, 73 (1984). Ambiguities in the complaint are construed in favor of the plaintiff Kelley v. Crosfield Catalysts, 135 F.3d 1202, 1205 (7th Cir. 1998). Dismissal of the claims is proper only when it appears beyond doubt that the plaintiff can prove no set of facts to support his claim. Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

B. Preemption Under the ITSA

The ITSA preemption clause provides that the ITSA "is intended to displace conflicting tort, restitutionary, unfair competition, and other laws of this State providing civil remedies for misappropriation of a trade secret." 765 Ill Comp. Stat. 1065/8(a). The clause also has an exception which provides that preemption does not affect "contractual remedies" and "other civil remedies that are not based upon misappropriation of a trade secret." 765 ILCS 1065/8(b)(1) and (2). A trade secret is defined as:

information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that:
(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and
(2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.

765 ILCS 1065/2(d).

When a federal court exercises diversity jurisdiction, it must apply state substantive law as interpreted by the highest court of the state. Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630, 637 (7th Cir. 2002). Absent definitive authority from the state supreme court, federal courts must give "great weight" to the state's intermediate appellate court holdings. Id. Neither the Illinois Supreme Court nor the Illinois Appellate Courts have squarely addressed the preemption issue. Thus, this Court "must make a predictive judgment as to how the supreme court of the state would decide the matter if it were presented presently to that tribunal." Id. at 635.

While recognizing the existence of the exception provision, many federal cases focus on section 8(a), the preemption clause. These cases hold that facts cognizable as a misappropriation of trade secret may be claimed only under the ITSA and bar pleading in the alternative. Learning Curve Toys, L.P., v. Playwood Toys, Inc., No. 94 C 6884, 1999 WL 529572 (N.D. Ill. July 20, 1999). Depending on the facts, some cases look more closely at the exception to the preemption provision and find that independent causes of action may be pursued alongside an ITSA claim.

Learning Curve is an example of a case focusing on the preemption clause. The dispute involved two companies attempting to produce a toy train set with a more realistic train sound. 1999 WL 529572, at * 1. The parties met, and the defendant shared its ideas with the plaintiff company, but no relationship to produce the toys was formed. Id. The lawsuit arose after the plaintiff produced a train making the realistic sound and filed a declaratory judgment action. Id. The defendant counterclaimed for breach of implied-in-fact contract, unjust enrichment, violation of the ITSA, and idea misappropriation, all based on the alleged misuse of the train idea. Id. at *1, *2. The court held that the common law claims were preempted by the ITSA. Id. at *3. Furthermore, if the defendant misappropriated ideas or information, the plaintiff can not plead an alternative cause of action (e.g. breach of fiduciary duty) in the event the information may be found not to be a trade secret. Id. at *2-*3

The court rejected the argument that the ITSA simply preempts common law claims for which misappropriation of a trade secret is an element. The court gave the ...


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