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FOX CONTROLS INC. v. HONEYWELL INC.

United States District Court, N.D. Illinois


April 23, 2004.

FOX CONTROLS, INC., an Illinois corporation, Plaintiff,
v.
HONEYWELL, INC., a Delaware corporation, Defendant

The opinion of the court was delivered by: JOHN GRADY, Senior District Judge

MEMORANDUM OPINION

Before the court is defendant Honeywell, Inc.'s motion to dismiss Counts V and VI of the Second Amended Complaint. For the reasons stated below, the motion is granted in part.

BACKGROUND

  Plaintiff, Fox Controls, Inc. ("Fox Controls"), brought this action against Honeywell, Inc. ("Honeywell"), claiming that defendants misappropriated confidential and proprietary information created by Fox Controls. Honeywell manufactures machine safety products, and Fox Controls distributes and installs Honeywell's products.

  The Second Amended Complaint alleges six claims: copyright infringement (Counts I and II); violation of the Illinois Trade Secrets Act (Count III); breach of contract (Count IV); quasi-contract/unjust enrichment (Count V); and quantum meruit (Count VI).

  Honeywell now moves to dismiss Counts V and VI of the Second Amended Complaint, arguing that they are preempted by the Illinois Trade Secrets Act.*fn1

  DISCUSSION

  Section 8 of the Illinois Trade Secrets Act (the "ITSA"), 765 ILCS 1065/1 et seq., provides in relevant part:

(a) Except as provided in subsection (b), this Act is intended to displace conflicting tort, restitutionary, unfair competition, and other laws of this State providing civil remedies for misappropriation of a trade secret.
(b) This Act does not affect:
(1) contractual remedies, whether or not based upon misappropriation of a trade secret, . . .
(2) other civil remedies that are not based upon misappropriation of a trade secret;
(3) criminal remedies, whether or not based upon misappropriation of a trade secret; or
(4) the definition of a trade secret contained in any other Act of this State.
765 ILCS 1065/8. By its plain terms, the ITSA preempts common-law claims that are based on misappropriation of trade secrets. Honeywell contends that Counts V and VI of the Second Amended Complaint, which are claims for "quasi-contract/unjust enrichment" and quantum meruit, are preempted by the ITSA. The issue is whether those claims are based on the misappropriation of trade secrets or on something more. See Fox Controls, Inc. v. Honeywell Inc., No. 02 C 346, 2002 WL 1949723, at *2 (N.D. Ill. Aug. 22, 2002).*fn2

  Count V alleges that Fox Controls "conferred good and valuable benefits upon Honeywell by virtue of the consulting services and documentation that it provided to Honeywell" with the expectation of compensation and that "Honeywell accepted and unjustly retained the benefits conferred by Fox Controls without compensating Fox Controls." (Second Amended Complaint, ¶¶ 41-43.) The allegations of Count VI are virtually identical. (Id., ¶¶ 46-47.) Both counts incorporate and re-allege the general factual allegations of the complaint (which include allegations regarding misappropriation of trade secrets) and the allegations of Count IV, the breach of contract claim. Count IV alleges that Honeywell failed to pay Fox Controls for consulting services and for the creation of a safety training materials, and failed to "appoint Fox Controls as a safety distributor with the right to sell safety products to sub-distributors or otherwise receive an override on all North American sales of safety products." In addition, plaintiff claims in Count IV that Honeywell misused Fox Controls's confidential materials. (Id., ¶ 38.)

  Because Counts V and VI incorporate factual allegations concerning the misappropriation of plaintiff s confidential and proprietary information, those claims are based in part on the alleged misappropriation. To the extent that Counts V and VI rely on misappropriation, they are preempted by the ITSA. For the most part, though, Counts V and VI are not based on misappropriation, but simply on allegations that Fox Controls was not paid for services that it rendered to Honeywell.*fn3 The claims are not preempted to the extent that they rely on these factual allegations.

  CONCLUSION

  For the foregoing reasons, Honeywell's motion to dismiss Counts V and VI of the Second Amended Complaint is granted to the extent that Counts V and VI are based on the misappropriation of trade secrets. Counts V and VI are therefore dismissed without prejudice. Plaintiff is given leave to file a Third Amended Complaint by May 7, 2004, that deletes from Counts V and VI those allegations that are preempted by the Illinois Trade Secrets Act.

  A status hearing is set for May 12, 2004, at 10:30 a.m.


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