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NICOR ENERGY v. DILLON

July 23, 2003

NICOR ENERGY, PLAINTIFF,
v.
GARY W. DILLON, DEFENDANT



The opinion of the court was delivered by: James Zagel, District Judge

MEMORANDUM OPINION AND ORDER

Nicor Energy has brought a six-count complaint against Defendant Gary W. Dillon for trademark infringement (Count I); unfair competition (Count II); breach of contract (Count III); breach of fiduciary duty (Count IV); violation of the Illinois Trade Secrets Act (Count V); and, unfair competition (Count VI). Dillon now moves to dismiss: (1) portions of Counts II and III concerning the Compensation Agreement formerly between him and Nicor on the ground that the Agreement does not govern his post-employment activities; (2) Count TV on the ground that his conduct did not breach any fiduciary duty owed to Nicor or, alternatively, that any such claim for misappropriation of trade secrets is preempted by the Illinois Trade Secrets Act ("ITSA"); and (3) Count V on the ground that pieces of information about Nicor obtained by Dillon are not trade secrets under ITSA.

Factual Background

In 1986, Dillon founded a company known as Energy Management Company (EMC), an Oklahoma corporation providing electricity and natural gas to customers in Michigan. In March [ Page 2]

of 2001, Nicor acquired EMC, continued its operation, and employed Dillon as a Vice President in its Power Development Division of the new EMC Unit. As part of his employment, Dillon executed a Compensation Agreement, stating that he is responsible for "developing and growing a profitable and robust consumer and commercial sales and marketing platform in Michigan for `Customer Choice' Natural Gas, Electric and Engineering Services." The Agreement specifically replaces all of the terms of his prior employment contract and provides for commission payments to him from contracts be brings into the company. The Agreement contains no language governing post-employment obligations, such as a non-compete clause, and only requires Dillon to comport with Nicor policy and act with integrity while performing his job.

Nicor has alleged a litany of competitive conduct by Dillon and/or his associates shortly before and subsequent to his resignation from Nicor, all of which form the factual basis for this lawsuit. For example, while still employed by Nicor during July and August of 2002, Dillon formed three Michigan corporations: Dillon Energy Consultants, Inc., EMC Gas & Electric Company, and EMC Gas Transmission Company, In September of 2002, Dillon resigned from Nicor and subsequently began to compete against Nicor in Michigan using these corporations. In December of 2002, one of Dillon's associates contacted Shell Energy — an existing Nicor client — regarding the formation of a supplier relationship. During this same time period, Dillon sought a license from the Michigan Public Service Commission and listed five Nicor employees — John Fringer, Jan Rosso, Helen Hawiley, Angela Desjarlais, and Denise McClosky — as employees of his corporation. All of these employees subsequently resigned from Nicor. Prior to resigning, John Fringer sent Dillon an e-mail detailing Nicor's Michigan profit and pricing models and information relating to Nicor's service to a customer named Plastipack. Finally, Dillon also [ Page 3]

contacted at least one other Nicor customer, Oakland Community College, following his Nicor employment.

Standard of Review

The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits. Triad Assocs., Inc. v. Chicago Hous. Authority, 892 F.2d 583, 586 (7th Cir. 1989). A plaintiff fails to state a claim upon which relief may be granted only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle the plaintiff to relief Leahy v. Board of Trustees of Community College Dist. No, 508, 912 F.2d 917, 921 (7th Cir. 1990). In reviewing a motion to dismiss, I must accept as true all of Nicor's well-pleaded factual allegations, and the inferences that can reasonably be drawn from them. The relevant portions of its complaint should be dismissed if it has failed to allege any set of facts upon which relief may be granted, Yeksigian v. Nappi, 900 F.2d 101, 102 (7th Cir. 1990), but I need not accept as true legal allegations that the facts do not support, Evans v. City of Chicago, No. 01 C 6194, 2001 WL 1654769 (N.D. Ill. Dec. 20, 2001).

Counts II and III: Breach of the Compensation Agreement

When he joined Nicor as an at-will employee, Dillon executed a Compensation Agreement with the company, which outlines the terms and conditions of his compensation and benefits structure, sets forth his duties and responsibilities, and replaces all earlier employment agreements. A fair and reasonable construction of the Agreement is that it governs Dillon's behavior while he was a Nicor employee. United Airlines v. City of Chicago, 507 N.E.2d 858, [ Page 4]

861 (Ill. 1987). As a genera) rule, however, Illinois law allows competition between a departing employee and a former employer in the absence of a contractual promise to refrain from such competition. Composite Marine Propellers, Inc. v. Van der Woude, 962 F.2d 1263, 1265 (7th Cir. 1992) (quoting Radiac Abrasives, Inc. v. Diamond Technology, Inc., 532 N.E.2d 428, 433 (Ill.App. Ct. 1988)). In this case, the Agreement does not contain a non-compete clause nor any other provision governing Dillon's post-employment responsibilities. As a result, the Agreement does not prevent Dillon from competing against Nicor as a former employee. While the Agreement does provide for commissions to be paid to Dillon even after Nicor no longer employs him for service provided while an employee, that provision is not sufficient to preclude Dillon from competing with Nicor after leaving the company.

If the parties intended to limit Dillon's activities for a period of time following his employment, they could have easily included such a provision in the Agreement. The fact that such a provision does not appear convincingly suggests it was not part of the contract, Klemp v. Hergott Group, Inc., 641 N.E.2d 957, 960 (Ill.App. Ct. 1994), Lending additional support to this conclusion is the fact that Dillon and Nicor signed a separate Confidentiality Agreement governing his post employment activities for one year after his employment with Nicor is over. However, the Confidentiality Agreement is not currently at issue in the motion to dismiss. Accordingly, 1 dismiss the portions of Counts II ...


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