United States District Court, N.D. Illinois
March 30, 2004.
HECNY TRANSPORTATION, INC., Plaintiff
GEORGE CHU, et al., Defendant
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants' motion for summary
judgment on Plaintiffs claims and on Plaintiffs revived motion for
summary judgment on its Defendants' fiduciary duty counter-claim and
Plaintiffs revived motion for summary judgment on Defendants' defamation
counter-claim. For the reasons stated below we grant Defendants' motion
for summary judgment and grant both of Plaintiffs motions for summary
Plaintiff Hecny Transporation, Inc. ("Hecny") is a freight forwarding.
business. Its parent corporation is Hecny Transportation, Ltd.
("Hecny Hong Kong") Defendant George Chu worked for Hecny as the station
manager for Hecny's Chicago office ("Chicago station") from 1989 until
1998. Defendant Daisy Chu is George Chu's wife and was never a Hecny
employee. Defendant Wilfredo Jamilosa was a clerk employed by Hecny at
the Chicago station during the pertinent time period.
In 1989 Hecny and George Chu entered into a profit sharing agreement
under which George Chu, by making a personal capital investment, was
entilted to a certain percentage of profits at the Chicago station. The
agreement contained non-compete agreement under which George Chu agreed
not to compete with Hecny until two years after he left employment with
Hecny. In 1994 Hecny offered George Chu a larger percentage of profits in
exchange for another personal investment.
George Chu and Hecny had arguments concerning the management of the
Chicago station and on September 1, 1998 George Chu resigned. George Chu
agreed to stay at Hecny until outstanding accounting issues could be
resolved. George Chu claims that Hecny agreed to pay him back his capital
contributions and that to this date Hecny has not done so.
Hecny brought the instant action against George Chu after a Hecny
officer from Los Angeles reviewed the Chicago station books and records.
that while George Chu was in charge of the Chicago station, he
allowed another freight company named Platinum Services II, Inc. to
simultaneously operate at the Chicago station. Hecny claims that George
Chu allowed Platinum to use the Hecny facilities and Hecny employees for
its operations. Hecny claims that Platinum had no employees of its own
other than Daisy Chu and that George Chu allowed Platinum to have
confidential Hecny documents. According to Hecny, George Chu caused some
of Hecny's customers to switch to Platinum. Hecny also claims that when
George Chu left the Chicago station he took items belonging to Hecny such
as boxes of files, computer software and hardware, a fax machine, and a
Hecny's fourth amended complaint contains ten counts alleging claims of
misappropriation of trade secrets, breach of fiduciary duty, breach of
contract, intentional interference with contractual relations, fraud, and
conversion. George Chu and Daisy Chu have filed a counterclaim against
Hecny and Hecny Hong Kong seeking a declaratory judgment and alleging
claims of breach of contract, breach of fiduciary duty, aiding and
abetting a breach of fiduciary duty, and defamation. Hecny Hong Kong has
moved for summary judgment on Defendants' breach of fiduciary duty claim.
Hecny and Hecny Hong Kong have moved for summary judgment on Defendants'
Summary judgment is appropriate when the record reveals that there is
no genuine issue as to any material fact and the moving party is entitled
to judgment as a matter of law. Fed.R.Civ.P. 56(c). In seeking a grant
of summary judgment the moving party must identify "those portions of
`the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any/ which it believes
demonstrate the absence of a genuine issue of material fact." Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P.
56(c)). This initial burden may be satisfied by presenting specific
evidence on a particular issue or by pointing out "an absence of evidence
to support the non-moving party's case."Id. at 325. Once the movant has
met this burden, the non-moving party cannot simply rest on the
allegations or denials in the pleadings, but, "by affidavits or as
otherwise provided for in [Rule 56], must set forth specific facts
showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e).
A "genuine issue" in the context of a motion for summary judgment is not
simply a "metaphysical doubt as to the material facts." Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586
(1986). Rather, a genuine issue of material fact exists when "the
evidence is such mat a reasonable jury could return a verdict for the
nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986); Insolia v. Philip Morris, Inc.,
216 F.3d 596, 599 (7th Cir. 2000). The court must consider the record
as a whole, in a light most favorable to the non-moving party, and draw
all reasonable inferences that favor the non-moving party.
Anderson, 477 U.S. at 255; Bay v. Cassens Transport
Co., 212 F.3d 969, 972 (7th Cir. 2000).
I. Illinois Trade Secrets Act Preemption
Defendants argue that Hecny's breach of fiduciary duty claim (Counts I
to VI), tortious interference with contract claims (Counts IV and VIII),
fraud claims (Counts V, VII, and IX), and conversion claim (Count X) are
preempted by the Illinois Trade Secrets Act ("ITSA"), 765 ILCS 1065/1
et sea. The ITSA abolished all common law causes of action for
misuse of trade secrets except for breach of contract claims. 765 ILCS
1065/8(b)(1); Composite Marine Propellers, Inc. v. Van Der
Woude, 962 F.2d 1263, 1265 (7th Cir. 1992); Thomas & Belts
Corp. v. Panduit Corp., 108 F. Supp.2d 968, 971 (N.D. Ill. 2000).
We agree with Defendants that Hecny has built the above mentioned
claims in part upon conduct involving the alleged misuse of trade secrets
information. Counts IV through X incorporate the allegations in Count II
which is the ITSA Count. All Counts incorporate paragraphs 23-26 of the
complaint which alleges that George
Chu misused Hecny's confidential trade secrets. All Counts
incorporate paragraphs 27, 28, 34, and 59 of the complaint which contain
allegations that Defendants misused Hecny's confidential information.
Hecny also makes reference to the "foregoing" misconduct in its complaint
thereby incorporating prior conduct concerning trade secrets. Therefore
the ITSA preempts the claims and we grant summary judgment on Hecny's
breach of fiduciary duty claim (Counts I to VI), tortious interference
with contract claims (Counts IV and VIII), fraud claims (Counts V, VII,
and IX), and conversion claim (Count X).
II. Illinois Trade Secrets Act Claim
Defendants argue that Hecny has not presented any facts that establish
that it had any trade secrets. Information can only be a trade secret if
it is "sufficiently secret to impart economic value to both its owner and
its competitors because of its relative secrecy." George S. May Int'l
Co. v. International Profit Assocs, 628 N.E.2d 647, 653 (Ill.App.
Ct. 1993). Also, in order to establish an ITSA claim the plaintiff must
show that it took "reasonable steps" to keep its information secret. 765
ILCS 1065/2(d)(2). Hecny admits that its business is just like any other
freight business and its procedures are similar to other freight
forwarders. (SF 25, 26, 27). Hecny admits that its pricing is readily
available within the industry. (SF 18, 20, 21,
22, 28). Hecny admits that it failed to keep the alleged trade
secret information confidential. (SF 36-40). In response to Defendants'
interrogatories Hecny failed to identify any specific documents or
information that constituted trade secrets. Instead Hecny continues to
rely on vague contentions that items such as pricing structures
were missappropriated. Therefore, we grant summary judgment on the ITSA
III. Breach of Contract Claim
Defendants argue that the breach of contract claim is unenforceable.
Covenants not to compete are disfavored under Illinois law because such
contracts inhibit free trade. Office Mates 5, North Shore, Inc. v.
Hazen, 599 N.E.2d 1072, 1080 (111. App. Ct. 1992). Such covenants
are not enforceable unless they are reasonable in scope and "protect a
legitimate business interest of the employer." Id. In this case, as
indicated above, Hecny does not have any confidential information or have
any confidential aspects of its business that would warrant such a not to
compete agreement. In addition, it is clear that Hecny does not have near
permanent customers which also indicates that such an agreement was not
warranted to protect Hecny's legitimate business interest. (SF 18-21, 25,
26). Springfield Rare Coin Galleries, Inc. v. Mileham,
620 N.E.2d 479, 490 (Ill.App. Ct. 1993). Therefore, we
grant Defendants' motion for summary judgment on the breach of
IV. Breach of Fidcuciary Duty and Defamation
Hecny Hong Kong moves for summary judgment on the breach of fiduciary
duty counterclaims against Hecny Hong Kong. Hecny correctly points out
that although Hecny Hong Kong was the parent company of Hecny, Hecny Hong
Kong was not a party to the joint venture agreement and Defendants have
not provided sufficient evidence to show that it owed a fiduciary duty to
George Chu. Therefore, we grant the motion for summary judgment on the
breach of fiduciary duty counterclaim against Hecny Hong Kong.
Hecny and Hecny Hong Kong have also moved for summary judgment on
Defendants' defamation claims. Defendants' defamation claim is based upon
allegations that Benson Chan allegedly defamed the Chus by telling one of
Hecny's former customers that there was a $3 million civil action and a
criminal case pending against the Chus. The record is clear that at the
time of the statement in question that Chan had filed a complaint with
the Bensenville Police Department and he believed that there was a
criminal case pending. Therefore, we grant summary judgment on the
This case has been pending for over six years. Several attempts at
settlement negotiations have failed and the parties have continued to
prolong this case without reason. Based on the foregoing analysis, we
grant Defendants' motion for summary judgment in its entirety. We also
grant Hecny Hong Kong's motion for summary judgment on the breach of
fiduciary duty counter-claim and grant Hecny's and Hecny Hong Kong's
motion for summary judgment on the defamation claim. All other
counter-claims are dismissed without prejudice.
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