United States District Court, N.D. Illinois
May 6, 2004.
YCA, LLC, Plaintiff,
KEVIN J. BERRY, Defendant
The opinion of the court was delivered by: HARRY LEINENWEBER, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff YCA, LLC (hereinafter, "YCA") filed a seven-count complaint
against one of its former employees, Defendant Kevin Berry (hereinafter,
"Berry"). Counts I, II and III of YCA's complaint allege that Berry
breached duties of non-solicitation, non-recruitrnent and non-disclosure
he agreed to as part of a restrictive covenant he signed when he
commenced work as a consultant for YCA. Counts IV and V allege that,
primarily through this breach, Berry tortiously interfered with YCA's
business and violated his duty of loyalty to YCA. Counts VI and VII
request that the Court enjoin Berry from continuing his alleged conduct,
and request that the Court award it attorneys' fees for the course of
YCA, and its predecessor, Young, Clark & Associates, Inc.
(hereinafter, "Young Clark"), earn revenue by training its clients how to use Microsoft's Project and Primavera software. Primarily,
YCA "consults" by conducting training classes, in which YCA instructors
teach a client's employees how to use this software. YCA also provides
its clients with YCA-developed software utilities specially designed to
service that client's particular need. Over the years, YCA claims that it
has developed unique consulting processes, methods, and techniques called
"skill blocks" which it teaches its hired consultants. YCA also has
developed confidential marketing skills and techniques to lure and retain
In 1997, Young Clark retained Berry to serve as one of its consultants.
Young Clark insisted that Berry sign a
"Confidentiality/Non-Disclosure/Restrictive Covenants Agreement" in
consideration of his work for YCA. This agreement barred Berry from
disclosing any of YCA's confidential information while associated with
YCA, and for two years thereafter. The agreement stated that confidential
information includes, but is not limited to:
. . . project management training and
consulting techniques, project management software
development processes, project management charts,
tables, graphs and forms, computer programs and
documentation, customer or supplier lists and
information, pricing information, marketing and
distribution plans, dealing lists and financial
information concerning the business affairs of
The agreement also imposed two restrictive covenants on Berry, which
bar him from recruiting YCA employees and soliciting YCA customers. In its terms, the covenant of non-recruitment states
that during Berry's tenure with YCA and for two years thereafter, he
. . . directly or indirectly by assisting
others, recruit or hire, or attempt to recruit or
hire, any other associate of YCA, or induce or
attempt to induce any associate of YCA to
terminate association with YCA.
The covenant of non-solicitation contains narrower language, barring
Berry only from soliciting (within two years of ending his employment):
. . . any of YCA's customers, including
actively sought prospective customers, with whom
you have had material contact during your
association for purposes of providing products or
services that are competitive with YCA; [sic]
Provided that "material contact is agreed to exist
between you and each customer or potential
customer: (i) with whom you have dealt; (ii) whose
dealing with YCA were coordinated or supervised by
you; or (iii) about whom YCA obtained confidential
information in the ordinary course of business as
a result of your association with YCA;
[sic] Provided further that the
geographic scope of this nonsolicitation of
customers restrictive covenant shall be
coextensive with those political subdivisions . . .
where YCA does business."
During the course of his relationship with Young Clark/YCA, Berry spent
approximately 90% of his time working on projects for Caterpillar Inc.
(hereinafter, "CAT"). Out of roughly 200 worldwide CAT facilities, Berry
worked for CAT Financial Services (hereinafter, "FS"), CAT Lafayette
Engine Center (hereinafter, "LEC"), and the CAT More Electric Initiative
(hereinafter, "MEI"). Berry also performed work for CB Richard Ellis and Alliance Energy
In November 1998, Young Clark sold itself to ProfitSource Corporation,
and became a wholly-owned subsidiary of ProfitSource. The 1998
stock-purchase agreement specified that all employee restrictive
covenants remained binding and enforceable. In 2000, Young Clark's former
owner Alden P. Young formed YCA and purchased all of Young Clark's assets
from ProfitSource. Section 1.1(b) of the Asset Purchase Agreement
defined as an asset transferred from Young Clark to YCA "all of Young
Clark & Associates, Inc.'s right, title and interest under its
contracts, which for purposes hereof, shall mean all . . . restrictive
covenants described in Section 3.10." However, § 3.10 on its face
appears to release these covenants, stating that "Young Clark &
Associates, Inc. [and Shareholder] hereby release and extinguish the
restrictive covenants applicable to . . . all employees of Young Clark
and Associates, Inc. who become employees of YCA, Inc." Berry contends
that this Asset Purchase Agreement released all of the restrictive
covenants binding him to Young Clark/YCA. YCA disagrees, noting that, in
a related matter, a Georgia court has already held that the Asset
Purchase Agreement merely extinguished Young Clark's rights
under the restrictive covenant, and transferred said rights as assets to
YCA. Sometime between October and December in 2002, Berry began discussing a
plan to leave YCA and start a rival consulting firm with fellow employees
Thomas Stevens ("Stevens") and William M. Wilson ("Wilson")-Between
December 2 and December 9, 2002, Stevens and Wilson entrusted Berry with
finalizing a 3-year cash flow projection and developing a competitive
advantage statement, business plan, travel and expense form, billing
forms, and local press releases. Berry used his YCA computer to create
the travel and expense form, using a YCA form as a template. Berry also
met with Stevens, Steven's wife, and Wilson on December 16 to
strategically plan their new company. Berry also planned all-day meetings
with them on December 21 and 22, although it is not certain that those
meetings actually took place. During these conducted and planned
meetings, Berry and his partners orchestrated everything from their new
company's pricing strategy to its competitive advantages. The planned
discussions also included identifying "high" and "medium" probability
clients for their new company. On January 6, 2003, Stevens resigned from
YCA. On January 7, Stevens formally created PMAlliance, a new company
that would specialize in precisely the same business as YCA. On January
14 and January 30, respectively, Wilson and Berry announced their
resignations, and subsequently joined PMAlliance.
At the same time Berry was meeting with Stevens and Wilson to plan
PMAlliance, he served on the Marketing Team of YCA. This team, which included just eight YCA officers, communicated via
telephone and e-mail several times per month to formulate YCA's
strategies for obtaining and retaining clients. Following Stevens'
resignation on January 6, 2003, YCA asked Berry if he planned on joining
Stevens at PMAlliance, so as to ascertain whether YCA should remove him
from the Marketing Team. Berry informed YCA that he had no plans to leave
YCA. This allowed Berry to remain on the team until he announced his own
resignation on January 31, 2003. Between the time of Stevens' resignation
and his own, Berry used his YCA telephone to call Wilson and Stevens,
presumably to help plan PMAlliance.
In February 2003, shortly before his resignation from YCA became
effective, Berry had dinner alone with YCA consultant Crissy Blanton
("Blanton"). Berry also had discussions with YCA consultant Bill Bordiuk
("Bordiuk") about designing computer software for PMAlliance. Bordiuk
eventually left YCA to join PMAlliance.
Upon resigning from YCA, Berry became Executive Vice President of
PMAlliance, where he assumed responsibility for PMAlliance's marketing
efforts. Over the next few months, Berry phoned and/or e-mailed several
CAT officials whom he met while working for YCA. For example, Berry
called CAT FS officer Jack Sollner ("Sollner") twenty-nine times between
February and June 2003. Over the course of these discussions with Sollner
and others, Berry succeeded in winning several consulting contracts with CAT for PMAlliance. Berry
contends that he never solicited work from any of these individuals.
Rather, Berry insists that the CAT officers solicited him for
work. YCA disputes this assertion, a material fact that the Court relies
on below in precluding summary judgment.
Additionally, Berry retained more than 1,000 pages of documents he
accumulated while working for YCA, and brought these documents over to
PMAlliance. Among other things, Berry kept 19 of YCA's Itemization of
Client Services forms spanning nine months of YCA billings in 2002
containing client-sensitive price information and client-contact
information, YCA expense information related to specific clients, and YCA
client files, includes more than 1,000 pages of status memos, program
files, report packages, meeting notes etc., regarding projects Berry had
worked on during his employment with YCA. Berry acknowledges keeping
these documents, but contends that they are contractually the property of
CAT, not YCA.
A. Possible Extinguishment of the Restrictive Covenants
Berry argues that the Asset Purchase Agreement in 2000 extinguished all
of his obligations under the restrictive covenants.
Berry raises this argument both to support his summary judgment claim,
and as the basis for his counterclaim that YCA breached its contractual
obligations to him as an alleged third-party beneficiary of the Asset Purchase Agreement. Since such a possible
extinguishment would render moot the rest of the pending issues, the
Court addresses it first.
Section 10.6 of the Asset Purchase Agreement ("Entire Agreement; No
Third Party Beneficiaries") states that "except for any additional
agreements contemplated hereby and referenced herein, this Agreement . . .
is not intended to confer upon any person other than Seller and Purchaser,
any rights or remedies hereunder." Berry contends that he qualifies as a
third-party beneficiary under § 10.6's "except for" clause. Berry
notes that §§ 3.10, 8.4, 9.2 and 9.3 of the Asset Purchase Agreement
appear on their surface to denote certain benefits to "all employees of
Seller who became employees of Purchaser," a class that includes him.
Section 3.10 states that "Seller and Shareholder [Young Clark and
Profitsource] hereby release and extinguish the restrictive covenants
applicable to . . . all employees of Seller who become employees of
Purchaser." Sections 9.2 and 9.3 release these restrictive covenants in
the event that a bankruptcy or cancellation interrupts finalization of
the Asset Purchase Agreement. Although no such bankruptcy or cancellation
took place, Berry asks the Court to consider them as evidence of the
contracting parties' intent. Lastly, § 8.4 states that all employees
shall "enter into such agreements with Seller necessary to terminate any and all prior employment agreements between such
employees and Seller."
YCA disagrees that the Asset Purchase Agreement bestows any rights to
Berry as a third-party beneficiary. YCA notes that § 1.1(b) of the
Asset Purchase Agreement defines as an "asset" transferred to Purchaser
YCA "rights of the Seller, Shareholder and EPS Solutions Corporation
under the restrictive covenants described in Section 3.10." YCA thus
argues that the true intent of § 3.10 is to release solely Young
Clark's rights under the restrictive covenants, so as to avoid the
"vulnerability of [the] assignee to competing claims." E. Allan
Farnsworth, Contracts, § 11.9, pp. 817-823 (2d Ed. 1990). After
all, YCA contends, it would be illogical for a contract to transfer a
right to a purchaser, while simultaneously extinguishing that right.
In related litigation concerning Berry's business partner Stevens, a
Georgia state court ruled that Stevens' restrictive covenants remained
enforceable despite the Asset Purchase Agreement. The Georgia court
It would have made no sense for the parties to the
Asset Purchase Agreement to define the restrictive
covenants as `assets' or for YCA, LLC to purchase
them if YCA, LLC could not enforce them.
Accordingly, when Sections 1.1(b) and 3.10 are
read together, and each section is given meaning,
it is clear that the parties intended for YCA, LLC
to acquire Young, Clark & Associates, Inc.'s
right in the restrictive covenants at issue, and
for Young, Clark & Associates, Inc. to release
it [sic] rights in the same. Thomas P. Stevens and PM Alliance v. YCA, LLC and Alden P.
Young, Case No. 03-A-00354-4 (Superior Court of Gwinnet County,
The Georgia court's decision does not control this Court's ruling here.
Nevertheless, this Court finds its reasoning persuasive. This is
particularly true in light of the general presumption under Illinois law
that parties contract only for their own benefit. Federal Ins. Co. v.
Turner Const. Co., 660 N.E.2d 127, 132 (App. Ct. Ill. 1995).
Therefore, the Court finds that § 3.10 grants Berry no third-party
rights under the contract and that. Consequently, he remains bound to the
restrictive covenants he signed, to the extent the Court can enforce
those covenants under Illinois law.
Similarly, Berry's argument that he constitutes a third-party
beneficiary under § 8.4's release of employment contracts does not
hold water. As seen in §§ 1.1(b), 3.10, 9.2, and 9.3, the contract
distinguishes between the terms "employment contract" and "restrictive
covenants." Therefore, the contract's plain language indicates that §
8.4 does not release Berry from
"Confidentiality/Non-Disclosure/Restrictive Covenants Agreement" he
signed. Therefore, the Court grants YCA's motion for summary judgment as
to Berry's counterclaims. B. Berry's Motion to Strike Testimony of Robert Mandall
Berry has moved to strike the testimony of YCA's computer expert
Mandall, who recovered a plethora of deleted documents from Berry's old
YCA computer. Berry contends that YCA failed to disclose Mandall by the
required discovery cut-off deadline of December 23, 2003. Berry also
argues that YCA deliberately withheld Mandall's name from its
interrogatory and document production responses, which was filed after
the close of discovery by agreement of the parties. Berry notes that, in
YCA's January 13, 2003 responses to his interrogatories 1, 2, 5, and 6,
YCA denied having anyone work on Berry's computer, and denied using any
expert witnesses at all. Similarly, Berry points out that in YCA's
January 23, 2003 responses to a document production request, YCA stated
that while it would produce documents recovered from Berry's YCA
computer, "to date, none exist." Berry believes that YCA's subsequent
disclosure of. Mandall in its response to Berry's summary
judgment motion violates Rules 26(a)(2)(B) and 37(c)(1) of the
Federal Rules of Civil Procedure. This prejudiced Berry, as Berry
prepared his summary judgment motion without full knowledge of YCA's case
against him. As a sanction, Berry asks the Court to strike Mandall's
declaration, and the documents he recovered from the computer.
The Court need not address whether YCA violated discovery rules, as it
finds that any such delay was justified. YCA submitted the above discovery responses in light of Berry's
deposition testimony during July and August 2003. In that testimony,
Berry stated that he had no contact with Stevens regarding the formation
of PMAlliance other than an e-mail exchange regarding a projected
cash-flow statement. Berry stated that this exchange took place on either
his AOL or Yahoo account. Therefore, based on Berry's sworn deposition
testimony, YCA had no reason to suspect that Berry's YCA computer would
contain discoverable information. Indeed, such a search would have
amounted to an expensive fishing expedition for YCA, as YCA notes that
Mandall charged YCA $5,000 to $10,000 per computer to find and recover
This changed on February 11, 2004 when Berry augmented his prior
testimony with a sworn, affidavit. In this affidavit, Berry stated that,
in addition to examining the cash flow chart, he "also printed a
checklist or `New Company Task List' from publicly-available Microsoft
Project software and sent it to Stevens." In doing so, Berry acknowledged
creating a document that theoretically could exist on his YCA
computer, and not just on his outside e-mail accounts. This affidavit, by
itself, justified YCA's late-found interest in Berry's computer, which
culminated in Mandall's March 12, 2004 report.
Berry responds to YCA's argument in two ways. First, Berry notes that
Stevens' January 12, 2004 deposition makes reference to Berry working on a "document" (which Berry claims refers to the New
Company Task List) using a Microsoft business template. This, Berry
contends, should have put notice on YCA that Berry's YCA computer would
contain discoverable information. Even if the Court agreed that this
vague reference from Stevens' deposition placed YCA on notice regarding
Berry's YCA computer, it hardly presented YCA with enough time to affect
its responses to Berry's interrogatories (due the next day, January 13,
2003) or document production requests (due January 23, 2003). YCA's
response to the document production requests that it would
disclose all documents recovered from Berry's computer, but that "to
dale, none exist," the Court considers an entirely honest and legitimate
response to the very late, very vague "disclosure" in Stevens' deposition
that Berry's YCA computer might contain discoverable information. In
general though, looking at the vagueness of Stevens' January 2004
deposition testimony contrasted with the clear denials found in
Berry's July and August 2003 deposition testimony the Court finds
it impossible to say that Stevens' obscure, throw-away reference to Berry
working on a "document" qualified as giving YCA legitimate notice.
Further, to require YCA to give notice of Mandall's work shortly after
receiving Stevens' testimony supposes that YCA could nearly instantly:
read the tea-leaves of Stevens' deposition, derive that this testimony
implies that important deleted documents might be found on Berry's YCA
computer, conduct a cost-benefit analysis to determine whether retrieving this mysterious "document"
is worth Mandall's $5,000 to $10,000 fee, hire Mandall, and then give
Berry notice of his hiring. The Court elects not to impose such a heavy
burden on YCA.
Second, Berry argues that, even if Berry's February 11, 2004 affidavit
constituted the first notice YCA received regarding Berry's computer, YCA
should have informed Berry of. Mandall's work prior to March 12,
2004. In particular, Berry claims that YCA's counsel misled him into
thinking that Mandall would not work on his computer in a February 26,
2004 counsel-to-counsel letter. This letter stated that "YCA has hired
and intends to use Robert Mandall regarding computers" and added that
"[b]oth Wilson's and Steven's YCA computers are being examined by
forensic analysis." Berry argues that by not including his
computer as one "being examined," YCA intentionally misled him of its
This argument is not persuasive. Berry's argument centers around the
idea that he was prejudiced by YCA's late disclosure of Mandall's work.
However, the Court detects no appreciable prejudice to Berry caused by
the delay between February 26, 2004 and March 12, 2004. Berry filed his
supposedly prejudiced summary judgment motion on February 13, 2004
nearly two-weeks before the February 26, 2004 letter.
Therefore, it is difficult to see how a theoretical YCA disclosure on
February 26, 2004 instead of March 12, 2004 would have remotely impacted
Berry's case or summary judgment motion. The Court further notes that Berry raised the
February 26, 2004 letter only in his reply brief, depriving YCA of an
opportunity to possibly explain its omission of Berry's computer from
those Mandall was analyzing. Therefore, given the harmless nature of
YCA's two-week delay, and the overall promptness of YCA's notice (a month
after learning that it contained discoverable information), the Court
declines to sanction YCA by striking Mandall's testimony or findings.
Berry's posture with respect to Mandall's testimony brings to mind the
tale of the criminal who murders his parents and then begs the Court's
mercy because he is an orphan. Having stalled, evaded and danced around
its statutory obligations to provide YCA with notice on where it might
find discoverable information, Berry now seeks to exclude this
newly-discovered evidence. If Berry had wished to avoid "unfair surprise"
concerning his legal strategy (not concerning the information, since he
was its author), perhaps he should have followed the spirit of the
discovery rules and informed YCA back in July and August 2003 that his
YCA computer might contain relevant documents. The Court does not believe
that the mere month's time between Berry's affidavit it took YCA to file
amended discovery answers was excessive. Accordingly, the Court denies
Berry's motion to strike Mandall's affidavit. C. YCA's Motion for Default Judgment
YCA contends that the documents recovered by Mandall prove that Berry
perjured himself in his July and August 2003 deposition testimony. YCA
claims that Berry perjured himself in the following ways:
1) By specifically denying that he and Stevens had
discussed the formation of PMAlliance through
e-mail, phone conversations or in-person
meetings, other than with respect to a single
e-mail containing a three-year projected cash
2) By specifically denying that he was involved in
the development of PMAlliance's business plan,
or in identifying high or medium probability
3) By specifically denying that he and Wilson had
ever discussed plans to leave YCA and join
Stevens' new company, or that he knew that
Wilson had drafted a PMAlliance mission
To prove perjury, YCA must meet a high burden. The Supreme Court has
held that a witness does not commit perjury unless "[he] gives false
testimony concerning a matter with the willful intent to provide false
testimony, rather than as result of confusion, mistake, or faulty
memory." United States v. Dunnigan, 507 U.S. 87, 94 (1993).
However, should YCA succeed in proving perjury, the Court has the
inherent authority to sanction the opposing party for its misconduct.
This inherent authority derives "not by rule or statute but by the
control necessarily vested in courts to manage their own affairs so as to
achieve the orderly and expeditious disposition of cases." Chambers v. NASCO,
Inc., 501 U.S. 32
, 42 (1991). Sanctions such as shifting attorneys'
fees and default judgment may be imposed under the court's inherent
authority. Id. at 44-45.
With respect to claims 2 and 3, the Court believes that Berry merely
evaded the full-truth citing a remarkably faulty memory, rather than
committing actual perjury. Specifically, Berry states that he "wasn't
really" involved in formulating PMAlliance's business plan or a high and
medium probability client list. Similarly, Berry remarked that he "didn't
know" whether or not he had talked with Wilson about joining Stevens' new
company, and was "not familiar" with whether Wilson drafted a PMAlliance
mission statement. Such semantic or memory distinctions do meet the legal
definition of perjury.
Conversely, Berry's statements regarding his contact with Stevens
constitute deliberate untruths. In particular, the following deposition
exchange proves damaging:
Q: [d]id anything happen after that cash-flow
analysis that conveyed to you the impression that
Mr. Stevens was still serious about starting his
own company? Did he have any conversations with
you, send you E-mails, anything like that?
Q: So when did you next know that, in fact, Mr.
Stevens was implementing this plan?
Berry: When he sent everyone an E-mail
announcing his resignation. In reality, documents recovered from Berry's computer showed that he
had extensive meetings with Stevens about forming a new company
subsequent receiving the cash-flow statement. Specifically, Berry's YCA
computer shows the cash flow plan first appearing on December 2, 2002.
This same YCA computer shows meeting notes for a December 16, 2002
meeting with Stevens, Stevens' wife, and Wilson. It also shows meeting
plans for all-day meetings to take place December 21-22, 2002. Berry's
YCA phone records similarly show numerous calls to Stevens during
December 2002, after he received the cash-flow plan but prior to Stevens'
January 2003 resignation. Berry himself admitted, in his February 11,
2004 affidavit, that in addition to looking at the cash-flow analysis, he
also participated in creating a "New Company Task List." This evidence is
not remotely consistent with Berry's sworn statement he had no
conversations, e-mails, or "anything like that" with Stevens between the
time he received the cash-flow statement and the time Staevens resigned.
However, the Court does not believe this perjury entitles YCA to a
default judgment. Berry himself corrected some of the damage caused by
his false testimony by submitting his February 11, 2004 affidavit. This
affidavit alerted YCA to the need to conduct a last minute examination of
Berry's computer, allowing it to find the documents and information
covered up by the perjured deposition testimony. Indeed, ironically,
Berry's false testimony has, in many ways, only hurt himself as it prevented YCA from discovering
and disclosing to Berry the documents on his YCA computer. This, in turn,
led to Berry filing a summary judgment motion based on an incomplete case
record. Therefore, it is hard to find that YCA suffered any prejudice
from Berry's perjury, and may have actually benefitted from it.
Nevertheless, the Court feels a sanction is appropriate. Berry offered
his February 11, 2004 affidavit only after Stevens' January 2004
deposition testimony suggested (albeit vaguely) that Berry's July and
August 2003 deposition testimony contained inaccuracies. Had Stevens'
testimony not potentially alerted YCA to Berry's false
testimony, it's possible that Berry would have chosen not to submit his
February 11, 2004 affidavit. This, accordingly, might have allowed him to
succeed in concealing the depth of his involvement in the formation of
PMAlliance indefinitely or at least past the course of this
litigation. Therefore, as punishment for his misleading and dishonest
testimony, the Court imposes the lesser sanction of awarding YCA all of
its attorney's fees and costs associated with the taking of Berry's
depositions, responding to Berry's summary judgment motion, preparing its
own summary judgment motion on the cross-claims, preparing its own
default judgment motion, and retaining Mandall's services to recover
deleted documents on Berry's YCA computer. D. Count I: Breach of Contractual
Illinois law disfavors restrictive covenants as a restraint on trade.
As such, courts must strictly construe them to ensure that their intended
effect is not to prevent competition per se. Hanchett Paper Co. v.
Melchiorre, 792 N.E.2d 395, 400 (Ill.App. Ct. 2003). Courts should
enforce restrictive covenants only upon finding the covenant reasonable
and necessary to protect an employer's legitimate business interest.
Id. Illinois law recognizes two legitimate business interests:
(1) near-permanent customer relationships in which the employee would not
have had contact with the customer absent the employee's employment; and
(2) confidential information gained by the employee through his
employment that he could use for his own benefit. Id.
Berry does not dispute that YCA had a legitimate business interest, per
se, in protecting him from soliciting customers. Rather, Berry seeks
summary judgment on two grounds: (1)that the non-solicitation covenant is
unreasonably broad and unenforceable as a matter of law; and (2) that YCA
has produced no evidence that he solicited anyone.
Berry contends that the non-solicitation covenant is unreasonably broad
because it lacks any geographic scope. Berry argues that since CAT has
277 facilities located in 43 countries, while he only worked with five
facilities located within the United States, the restrictive covenant is
"inherently unreasonable." Berry is correct that Illinois law generally disfavors
non-solicitation covenants without a geographic scope, and the authority
he cites adequately supports this proposition. However, in each of the
cases he cites, the restrictive covenant at issue was much broader than
the one Berry signed. Notably, in every case the covenant at issue did
not limit its applicability to only those customers with whom
the employee had material contact. See Pactiv Corp. v. Menasha
Corp. 261 F. Supp.2d 1009, 1014-1015 (N.D. Ill. 2003) (ban on hiring
any of company's worldwide management-level employees unreasonably
broad); Telxon Corp. v. Hoffman, 720 F. Supp. 657, 664 (N.D.
Ill. 1989)(no provision limited scope of covenant not to compete to
customers with whom employee had developed relationships); Ken-Pin,
Inc. v. Vantage Bowling Corp., 2004 U.S. Dist., LEXIS 1050, at *20
(N.D. Ill. 2004) (again, no limitation of restrictive covenant to
customers with whom employee had worked with). Conversely, when the
restrictive covenant contains no geographical limitation but limits its
effect to customers with whom the employee had material contact with, as
in Berry's case, Illinois courts have repeatedly upheld such restrictive
covenants valid. See Tower Oil & Technology Co. v. Buckley,
425 N.E.2d 1060, 1066 (Ill.App. Ct. 1981); Health Professionals,
Ltd. v. Johnson, 791 N.E.2d 1179, 1192 (Ill.App. Ct. 2003)
(internal citation omitted). Therefore, the Court finds the restrictive covenant of non-solicitation enforceable against
The Court now turns to Berry's second summary judgment argument
concerning the covenant of non-solicitation: that YCA has produced no
evidence that he solicited CAT, and not that CAT solicited him.
Berry concedes that YCA has produced substantial evidence showing that he
called Sollner 29 times, that he called CAT official Fred Martin twice,
that he e-mailed CAT LEC officer Steve Shoemaker to "discuss PMAlliance
manpower to support his three projects," and that he informed CAT
official Kent Bates that he was leaving YCA to join PMAlliance. However,
Berry notes that none of this evidence is inconsistent with a finding
that these CAT officials solicited him for work, and that his restrictive
covenant does not prevent unsolicited work from former YCA clients with
whom he had material contact. Further, Berry states that the only
evidence in the record of whom solicited who comes from his own
deposition testimony, in which he states that these officials contacted
Berry asks the Court to distinguish between solicitation and contact,
citing Henry v. O'Keefe, 2002 WL 31324049, at *5 (N.D. Ill.
2002) for the proposition that Illinois courts recognize such a
distinction. However, O'Keefe actually demonstrates how broadly
Illinois law defines "solicitation." In O'Keefe, a former
co-owner of a consulting firm, Jean O'Keefe ("O'Keefe"), contacted
several clients whom she had covenants not to solicit for another year. In
these contacts, O'Keefe stipulated that she could not work for the
clients for another year due to the restrictive covenant, but asked the
clients to "let [her] know when you come upon a company looking for help
from someone like [her]." Id. Despite the fact that O'Keefe
specified that she could not do any work for these clients, the
Court found that she had breached her non-solicitation covenant.
Id. at *6.
Next, Berry attempts to draw an analogy to criminal law, arguing that
just as phone records cannot prove criminal conspiracy, neither can they
evidence civil solicitation. Although Berry properly describes the
criminal law rules, the Court believes the analogy is inappropriate.
Criminal law is replete with evidentiary rules which place a far heavier
burden on the prosecution than the corresponding civil rule would on a
plaintiff, such as the famous "beyond a reasonable doubt" standard of
Rather, in considering the sufficiency of the phone and e-mail records
to meet YCA's summary judgment burden, the Court instead looks to
Illinois lenient rules regarding what constitutes solicitation. As the
Court in 0'Keefe notes, "the law generally deems a person to
have intended the natural and probable consequences of [his] actions.
Thus, if a recipient would have understood a particular contact as a
solicitation for business, that suffices to show solicitation."
Id. at * b. Indeed, under Illinois law, an employee violates a non-solicitation covenant even
if he contacts clients merely to inform them he has changed employers, as
the clients might understand that as a request to move with him to the
new company. Merrill Lynch, Pierce, Fenner & Smith v. Cross,
1998 U.S. Dist., LEXIS 3188 at *4.
Here, on at least one occasion, Berry informed a former client that he
was leaving YCA to form PMAlliance. Further, Berry's repeated contacts
with multiple CAT officials, when combined with evidence showing that
PMAlliance had prepared a list of "high" and "medium" probability client
possibilities, clearly meets YCA's burden of showing the "specific issues
of material fact" in dispute necessary to withstand summary judgment.
Although Berry claims that he was solicited, and not the other way
around, he is correct when he elsewhere reminds the Court in his briefs
that it should reject any "attempt to inject Berry's credibility into
summary judgment." Rather, the truthfulness of Berry's claims regarding
whom solicited who is a jury question. Therefore, the Court denies
summary judgment as to Count I.
E. Count II: Breach of Non-Disclosure Agreement
Berry also seeks summary judgment on YCA's claims regarding his breach
of a non-disclosure agreement. Berry seeks summary judgment on three
grounds: (1) the alleged information disclosed is not "confidential"; (2)
any possibly confidential information belongs to the customer, not YCA; and (3) YCA lacks evidence that
Berry used confidential information.
Because each of these points contains enough legal validity to grant
summary judgment as to some, but not all, the alleged confidential
information, the Court believes it is useful to list all the types of
confidential information that YCA claims Berry took with him to
1) YCA billing information related to specific
clients. This includes client-specific pricing,
client-contact information, and expense
information related to specific clients.
2) YCA's customer list, containing specific
3) YCA client files regarding projects Berry
worked on during his employment with YCA.
4) YCA's marketing materials, including YCA
marketing plans that Berry learned of while
serving as a member of the Marketing Team.
5) YCA consulting techniques and confidential
consulting processes, known as "skill blocks,"
which Berry learned as a consultant for YCA.
6) YCA's training materials.
Berry argues that much of the information he took from YCA to
PMAlliance does not fit the legal definition of confidential information.
Berry notes that his non-disclosure agreement defines confidential
information to exclude "data or information that has become available to
the public through no breach of this Agreement by you." This, Berry
contends, includes information distributed to customers or the public, such as the training material given to
attendees of its classes, and the pricing information, marketing
material, and list of 75 clients found either on YCA's website or given
to prospective clients. Furthermore, Berry contends that the consulting
techniques he learned at YCA now form part of his general knowledge, and
do not qualify as "confidential information."
Concerning the information YCA provides paying or prospective
customers, both YCA and Berry cite to ILG Indus., Inc. v. Scott,
49 Ill.2d 88 (1971) to support their argument. Scott held that
"the disclosure of this information, or a part thereof, to a customer, or
a supplier of a component part, where necessary for a business purpose,
does not in all cases destroy the confidential or secret nature thereof."
Id. at 94. In Scott, the Court found that the
information remained confidential because "there was evidence that not
all of the critical information was supplied. There was also evidence
that the recipients thereof understood that the information they received
was to be treated in confidence." Neither party refers to any cases that
cite Scott on this point of law, and the Court's research has
found none. Nevertheless, Scott apparently remains good law in Illinois,
and its language binds the Court's decision here.
Looking at the Scott factors, it appears that YCA's training and
marketing materials cannot constitute confidential information. YCA acknowledges distributing its training materials to every
attendee of its training classes, and its marketing materials to every
potential customer. By definition, the training and marketing materials
disclosed all of the information they contained distinguishing this case
from Scott, in which "there was evidence that not all the critical
information was supplied."
YCA notes that PMAlliance's training materials contain hidden computer
"meta-tags" indicating they were prepared using a YCA template. This
meta-tag template is not transparently disclosed to attendees of the
training seminars. However, while meta-tags and templates might
constitute "information," Scott's analysis concerned whether
"not all of the critical information was supplied" (emphasis
added). Id. With respect to the training materials, the Court
believes that the critical information contained in YCA's
training materials is that which would interest an attendee at one of
their seminars. The Court highly doubts that these attendees have much
use for meta-tags or hidden templates that contain no useful content and
provide them no help in their training processes.
YCA also notes that these materials are copyrighted and trademarked,
and claims that PMAlliance's materials are substantially similar to their
own. However, YCA has not filed a breach of trademark or copyright claim,
but only a claim for disclosure of confidential information. YCA cannot
convert its claim into one of breach of trademark or copyright merely by
alleging substantial similarity to materials produced by PMAlliance.
Therefore, the Court agrees with Berry that all information which YCA
distributes via its training seminars, non-client specific marketing
materials or website cannot constitute confidential information. The
Court thus grants summary judgment as to any of YCA's claims arising out
of disclosure of that information. This does not include any pricing or
marketing information which YCA devised specifically for one
client. Similarly, it does not include any marketing information that
Berry might have learned as a member of the Marketing Team that YCA did
not widely disperse to its paying or potential clients. Unless excluded
by the Court's ruling below, these claims survive for trial.
It also, technically, does not include customer lists and customer
contact lists not available to the general public. However, in Illinois,
customer lists qualify as protectable trade secret only when:
. . . the information has been developed by the
employer over a number of years at great expense
and kept under tight security. However, the same
type of information is not protectable where it
has not been treated as confidential and secret by
the employer, was generally available to other
employees and known by persons in the trade, could
be easily duplicated by reference to telephone
directories or industry publications, and where the customers on such lists did business
with more than one company or otherwise changed
businesses frequently so that their identities
were known to the employer's competitors.
Office Mates 5, North Shore, Inc. v. Hazen,
599 N.E.2d 1072
, 1085 (Ill.App. Ct. 1992).
As both Berry and YCA note, this is a case for disclosure of
confidential information, not trade secrets. Illinois courts grant
substantially more protection to trade secrets than they do to
confidential information. Therefore, it is safe to assume, a
fortiori, that if Illinois law limits trade secret protection in
the above manner, it would restrict protection of confidential
information at least as severely.
Here, YCA disclosed a partial customer list to the public over
the internet and in its training materials, but did not disclose every
customer, nor the personal contacts it had with each customer. With
respect to the customers contained on the partial list YCA provides to
the public, the Court believes Berry has met his initial summary judgment
burden. This shifts the burden to YCA to demonstrate specific triable
issues of fact. YCA fails do so. Therefore, the Court grants summary
judgement as to claims regarding the publicly disclosed customer list.
However, the Court declines to grant summary judgement as to the names
of contact individuals on the publicly disclosed lists, or as to any
customers not found on the publicly disclosed lists. In summary judgment, Berry must first demonstrate the absence of any
material fact before the burden shifts to YCA. Under Hazen, this
would require Berry to show that the information contained in the
non-disclosed contact and customer list was public information, or could
"be easily duplicated by reference to telephone directories or industry
publications." Id. Since Berry fails to present any evidence of
this, Berry cannot obtain summary judgment on these claims.
Berry likewise argues that the "skill blocks" he learned as a YCA
consultant now form part of his general knowledge, and do not qualify as
protected confidential information. Illinois law highly disfavors
protecting such knowledge from competition. As stated in Scott, "the
right of an individual to follow and pursue the particular occupation for
which he is best trained is a most fundamental right. . . . One who has
worked in a particular field cannot be compelled to erase from his mind
all of the general skills, knowledge and expertise acquired through his
experience." Scott, 49 Ill.2d. at 93-94.
Asking the Court to depart from this general rule, YCA cites the
Seventh Circuit case of Curtis 1000 v. Suess, 24 F.3d 941, 948
(7th Cir. 1994). There, the Seventh Circuit recognized that "Illinois
cases distinguish between sellers of services . . . and sellers of
ordinary goods." Id. The Court continued by noting that, with
respect to sellers of services, "customers come to repose trust in a particular seller, and that trust is a valuable
business asset, created by years of careful management, that the employee
is not allowed to take with him." Id. Suess, as can be seen from
its clear language, is not legally or factually relevant to the present
action. In Suess, an employee began competing against his former
employer, in violation of a restrictive covenant. The "trust," or
goodwill, protected by the Seventh Circuit concerned the employee's
knowledge about "the particular needs and circumstances of the firm's
customers in his sales area. The acquisition of this information enabled
Suess to become an effective salesman for Curtis and he was compensated
for his sales successes in the commissions he received generated by an
employee on behalf of the employer." Id. at 947.
Here, however, YCA attempts to use Suess not only to prevent Berry from
cashing in on the knowledge he acquired about YCA clients, but also to
prevent Berry from using the non-client specific "skill blocks" of
consulting knowledge he acquired in the employ of YCA. However, as shown
above, Suess recognized a protectable property interest only in the
"trust" earned by the employee, not in the knowledge of general business
practices acquired through training and experiences. Id. at 948.
As YCA cites no other cases to support this claim, the Court has nothing
to consider but the general rule that "one who has worked in a particular
field cannot be compelled to erase from his mind all of the general skills, knowledge and expertise acquired through his
experience." Scott, 49 Ill.2d. at 93-94. Consequently, the Court grants
Berry's motion for summary judgment on all of YCA's claims concerning
disclosure of its consulting techniques or "skill blocks."
Berry's second argument for summary judgment on Count II also makes a
legally valid point. Under the terms of the Master Consulting Agreement
between YCA and CAT, any confidential information created by a consultant
"is and shall be owned by Caterpillar." The Agreement defines
confidential information as:
. . . any design, specification, idea, concept,
plan, copy, formula, drawling, procedure, business
process, organizational data, customer or supplier
lists, or other business or technical information
that the disclosing party holds confidential or
considers proprietary whether oral, written or
viewed by inspection, that is obtained as a result
of services rendered by Consultant to Caterpillar
in connection with this Agreement.
YCA's claims for disclosure of confidential information include claims
that Berry revealed "client-specific pricing information," "YCA expense
information related to specific clients," and "YCA client files." Much,
if not all, of this information related to Berry's or YCA's work with
CAT. To the extent that such information was information generated for
the benefit of CAT, and presented to CAT (i.e., project files, pricing
data, etc.), the Court reads the terms of the Master Consulting
Agreement as awarding CAT ownership of the information. YCA argues that ownership of the information is irrelevant, as Berry did not
obtain CAT's written permission to use the information. However, YCA has
no standing to sue on CAT'S behalf. Similarly, as this information
belongs to CAT and not YCA, YCA has no cognizable interest authorizing it
to sue Berry for disclosing this information. Note, as stated above, the
Court's order concerning this information applies only to information
generated by YCA for the benefit of CAT and handed over to CAT.
Information concerning CAT generated by YCA for its own internal purposes
(i.e., marketing strategies on retaining CAT as a client), and
information generated on behalf of other clients besides CAT, remains
confidential information owned by YCA, in which YCA retains every right
to sue Berry.
Berry's last argument that YCA has no evidence that he disclosed
confidential information, mostly concerns claims for which the Court has
already granted summary judgment. With respect to the nondisclosure
claims that remain alive (client-specific marketing/pricing information
given to clients other than CAT, confidential marketing information for
YCA's own benefit and not given to clients, confidential marketing
information that Berry learned as a member of the Marketing Team, and
project files related to clients other than CAT), Berry merely claims
that YCA has produced no evidence that he actually used this information
on behalf of PMAlliance. YCA tacitly acknowledges that it has no direct evidence that Berry used
its confidential information. In responding to Berry's motion for summary
judgment, YCA supported its claims solely by referring to its own
complaint, and the speed with which Berry retained CAT as a client for
PMAlliance. These "facts" are insufficient to withstand summary judgment.
However, YCA makes a legitimate legal argument that, as head of
PMAlliance's marketing department, Berry has already or will inevitably
disclose confidential information he learned in the employ of YCA. In
PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269-1270 (7th Cir.
1995), the Seventh Circuit held that Illinois law recognizes the doctrine
of "inevitable disclosure" in trade secrets cases. Although
PepsiCo involved misappropriation of trade secrets, not mere
confidential information, its factual record heavily informs the present
action. In PepsiCo, a former marketing employee of PepsiCo. went to work
in marketing for PepsiCo. competitor Quaker Oats. Although the employee
pledged not to reveal any trade secrets he learned at PepsiCo, the
Seventh Circuit recognized that inherent difficulty in him maintaining
that pledge. The Court noted that:
. . . unfairly armed with knowledge of PCNA's
plans, [the employee Redmond] will be able to
anticipate its distribution, packaging, pricing,
and marketing moves. Redmond and Quaker even
concede that Redmond might be faced with a
decision that could be influenced by certain confidential information that he
obtained while at PepsiCo."
Id. at 1270.
Ergo, "unless Redmond possessed an uncanny ability to compartmentalize
information, he would necessarily be making decisions about Gatorade and
Snapple by relying on his knowledge of PCNA trade secrets." Id.
The Seventh Circuit's decision in PepsiCo. has been followed by at least
one Illinois state court, and never disagreed with, suggesting that the
Seventh Circuit's decision accurately reflected Illinois law. See
Strata Mktg. v. Murphy, 740 N.E.2d 1166, 1177-1178 (Ill.App.
Ct. 2000) ("we believe PepsiCo correctly interprets Illinois
law"). Numerous cases in this court have also followed PepsiCo.,
generally in marketing-relating cases such as this one. See Lucini
Italia Co. v. Grappolini, 2003 LEXIS U.S. Dist., LEXIS 7134 at *53
(N.D. Ill. 2003); Kempner Mobile Elecs. v. Southwestern Bell Mobile
Sys., 2003 U.S. Dist., LEXIS 3512 at *68-69 (N.D. Ill. 2003).
Here, like in PepsiCo., the employee (Berry) held a sensitive
marketing-related position. As a trusted independent contractor and
member of the Marketing Team, Berry had access to highly sensitive
confidential information regarding YCA's strategies and practices
concerning specific clients and potential clients. Berry then moved to
PMAlliance, where he performed the same marketing duties he did for YCA, and where he soon signed consulting
agreements with many former YCA customers. Regardless of whom first
solicited who (a jury question to decide), the fact that Berry even
negotiated to consult with these former clients certainly presents the
logical inference that he could not avoid using YCA's confidential
marketing information to his advantage. Indeed, similar to Berry argument
with respect to the consulting knowledge he learned at YCA, and in accord
with PepsiCo., this sensitive marketing data (which Berry
accumulated both through his regular YCA work, and his membership on the
Marketing Team) has now become part of Berry's general knowledge which
the Court cannot expect him simply to forget. The fact that he
(apparently) took some confidential marketing-related documents only
makes a judicial inference of inevitable disclosure sufficient to
withstand summary judgment more likely as it suggests an actual
intention by Berry to take efforts to remind himself of information he
might accidently forget.
The Court draws the same inference with respect to the client project
files Berry took which do not belong to CAT. Although Berry contends he
retained these files only for legitimate reasons, the Court cannot grant
him summary judgment based on his word alone when faced with likelihood
that this information could lead to inevitable disclosure. Specifically,
the Court declines summary judgment as to these files because they
provided Berry with client-sensitive information that, by definition, would aid or assist him in soliciting
these clients or performing work on behalf of them.
F. Count III: Breach of Contractual Duty of
Berry also brings summary judgment with respect to YCA's claims that he
breached a covenant not to recruit. Berry predicates this argument on two
claims: (1) YCA lacks evidence that Berry recruited any YCA employee; and
(2) Berry's covenant not to recruit is unenforceable.
Berry argues that YCA lacks evidence that he recruited anyone by noting
that Stevens and Wilson resigned before him. Berry insists that
he merely told Stevens he might have interest in joining him.
This, Berry argues, is insufficient to show that Berry participated in
recruiting Stevens or Wilson.
YCA disagrees with Berry's assertions, noting that it has substantial
evidence that Berry worked with Stevens and Wilson in setting up
PMAlliance. This, YCA argues (and Berry fails to legally dispute),
amounted to Berry inducing Stevens and Wilson to leave YCA by supporting
them in their efforts to found PMAlliance. YCA supports this claim with a
mountain of evidence obtained through expert witness Mandall's work in
recovering files that Berry had deleted from his YCA computer. According
to these files, Berry met or planned to meet at least three times with
Wilson and Stevens during December 2002, and the three of them worked
extensively in making preparations for the founding of PMAlliance. YCA also has provided evidence that Berry solicited YCA employee
Blanton, in the form of a declaration by Blanton. Although Blanton
remains an employee of YCA, Berry has submitted nothing indicating that
she has a personal interest in this dispute or that she perjured herself
in her declaration. Consequently, the standard legal caution against
relying on self-interested affidavits to withstand summary judgment does
not apply to Blanton's declaration. Finally, YCA has also provided
substantial evidence of Berry's successful efforts to recruit Bordick to
design computer software for PMAlliance. Accordingly, the Court finds
that YCA has provided sufficient evidence of Berry's efforts to recruit
Stevens, Wilson, Blanton and Bordick.
Berry's second argument concerning his covenant not to recruit deserves
more careful attention. Berry argues that, pursuant to Unisource
Worldwide, Inc. v, Carrara, 244 F. Supp.2d 977, 983 (C.D. Ill.
2003), non-recruitment covenants constitute an invalid restraint on trade
in Illinois. Carrara noted that "the only two `legitimate
business interests' that may give rise to a covenant not to compete in
Illinois are `near permanent' relationships with customers, and
confidential information or trade secrets." Id. Believing that a
covenant not to recruit met neither interest, Carrara struck one down as
unenforceable. In doing so, Carrara acknowledged that its
opinion concerning Illinois law directly contradicted that of the
Illinois Appellate Court in Arpac Corp. v. Murray, 589 N.E.2d 640, 650 (Ill.App. Ct. 1992). However, the
Court stated that it "is not bound by the Illinois appellate court's
decision in Arpac Corp., and believes that the Illinois Supreme
Court, if and when it decides this issue, will support this Court's
In Pactiv Corp. v. Menasha Corp., 261 F. Supp.2d 1009,
1014-1015 (N.D. Ill. 2003), a court in the Northern District of Illinois
rejected as overly broad a covenant between employers that prevented one
employer, Menasha, from hiring away any management-level employee of
Pactiv. Generally under Illinois law, such contracts are valid, but
cannot constitute an invalid restraint on trade between the two
employers. Freund v. E.D. & F. Man. Int'l, Inc.,
199 F.3d 382, 385 (7th Cir. 1999). In Menasha, the Court found such a
restraint to exist. The Court noted that although the Pactiv had a
protectable interest in not having Menasha hire away some of its
management-level employees (specifically those which worked on an
agreement between Pactiv and Menasha), the contract as written was overly
broad by including all management-level employees. This, by definition,
meant that the contract prevented Menasha from hiring away many of
Pactiv's employees who possessed no confidential information.
Although not strictly factually analogous (as it concerned an
employer-employer contract, not an employee restrictive covenant), the
Court finds Pactiv highly instructive in adjudicating the current issue as well as in harmonizing Carrara
with Arpac. As even Carrara acknowledged, Illinois law
recognizes the protection of confidential information as a "legitimate
business interest," Therefore, given Arpac, this Court holds
that Illinois law declares a covenant not to recruit enforceable, to the
extent that it supports the employer's legitimate business interest in
guarding his confidential information from potential competitors.
The Court now turns to the question of whether this specific
restrictive covenant limits itself to protecting that interest and,
if not, whether the Court can reform the contract to do so.
As noted in the finding of facts, the restrictive covenants agreement
states that Berry cannot:
. . . directly or indirectly by assisting
others, recruit or hire, or attempt to recruit or
hire, any other associate of YCA, or induce or
attempt to induce any associate of YCA to
terminate association with YCA.
The Court finds such language far too over-broad to protect YCA's
legitimate business interest: ensuring that its confidential information
remains within YCA, and does not benefit competitors. Such a purpose
could be wholly fulfilled by a restrictive covenant that places two
important limitations on the scope of the non-recruitment provision.
Specifically, such a covenant would bar Berry from recruiting only when
(1) he recruits YCA associates who might possess any confidential
information; and (2) he recruits these associates on behalf of a YCA
competitor. However, the covenant as written does not confine itself to those terms.
Instead, it bars Berry from recruiting any YCA employees for
any business, even for businesses doing wholly different lines
of work, in geographic areas where YCA does not even function. The Court
cannot understand what legitimate business purpose is accomplished by so
broad a restrictive covenant. Indeed, to demonstrate the absurdity of
this covenant, the Court notes that it would theoretically prevent Berry
from recruiting a YCA's janitor to work as postal carrier in Somalia.
Illinois law abhors restraints on trade. Center for Sight of Cent.
Ill. I v. Deranian, 712 N.E.2d 417, 421 (App. Ct. Ill. 1999). As
such, restrictive covenants must be strictly construed. Hanchett
Paper Co. v. Melchiorre, 792 N.E.2d 395, 400 (App. Ct. Ill. 2003).
Illinois courts will enforce restrictive covenants in the employment
setting only if "the terms of the agreement are reasonable and necessary
to protect a legitimate business interest of the employer." Dam,
Snell & Taveirne, Ltd. v. Verchota, 754 N.E.2d 464, 468 (App.
Ct. Ill. 2001). Here, the agreement contains unnecessarily broad terms,
that serve to restrain trade beyond that required to protect YCA.
Accordingly, Illinois bars enforcement of the contract as written.
However, although Berry's restrictive covenant is unreasonable on its
face, it is not unreasonable as applied to Berry's conduct. The Court
notes that the contract contains a "Construction of Agreement" clause, which states: "[i]n the event a court should
determine not to enforce a covenant as written due to overbreadth, you
specifically agree that said covenant shall be enforced to the extent
reasonable, whether said revisions be in time, territory, or scope of
prohibited activities." This clause both empowers and requires the Court
to attempt reform of Berry's overly broad covenant of non-recruitment.
Such an effort is quite easy to accomplish. The Court hereby reforms
Berry's restrictive covenant of non-recruitment to limit its
applicability to cases in which Berry attempts to recruit those YCA
associates who potentially possess confidential information to go work
for a YCA competitor.
This reformed covenant, as applied, serves to protect YCA's legitimate
business interests by keeping confidential information away from the
prying eyes of competitors. The Court notes that each of the individuals
recruited by Berry likely had access to such information, which they
could use to benefit PMAlliance. Berry's restrictive covenant thus served
YCA's legitimate interests in preventing competitior PMAlliance from
learning that information. Therefore, the Court finds the reformed
restrictive covenant enforceable, and denies summary judgment on this
G. Counts IV, V, VI, and VII
For the reasons stated elsewhere in this opinion, the Court denies
Berry's motion summary judgment on these claims. YCA may continue to
trial under these counts only with respect to claims for which the Court did not summary judgment, with one caveat.
Elsewhere in this opinion, the Court rejected YCA's disclosure of
confidential information claims regarding YCA's training materials. The
Court noted that the training materials publicly disclosed all critical
information contained therein, although they contained hidden YCA
meta-tags and template markers. However, although the Court grants
summary judgment as to the non-disclosure claim concerning these training
materials, it permits these claims to survive under Count V's theory that
Berry breached his duty of loyalty to YCA. The Court notes that although
the meta-tag and template data is hidden (and thus irrelevant to the
average user), this data evidences that Berry created PMAlliance's
training materials using a YCA-owned computer and/or YCA-owned software.
Such a claim, if proven at trial, clearly shows that Berry committed what
YCA alleged in paragraph 43(a) of its complaint,
For the reasons stated herein the Court hereby:
1. Grants YCA's motion for Summary Judgment on Berry's counterclaims.
2. Denies Berry's Motion for Summary Judgment as to Counts I, III-VII.
3. Grants in Part and Denies in Part Berry's Motion for Summary
judgment as to Count II, for breach on agreement not to disclose
non-confidential information. Specifically, the Court denies summary judgment as to the following confidential
information: client-specific marketing/pricing information given to
clients other than CAT, confidential marketing information for YCA's own
benefit and not given to clients, confidential marketing information that
Berry learned as a member of the Marketing Team, and project files
related to clients other than CAT. The Court grants Berry's motion for
summary judgment on Count II with respect to the rest of YCA's claims for
disclosure of confidential information.
4. Denies YCA's Motion for Default Judgment, but sanctions Berry by
awarding YCA attorney's fees and costs related to taking Berry's
depositions, responding to Berry's summary judgment motion, presenting
its summary judgment motion on its cross-claim, presenting its motion for
default judgment, and paying Mandall to analyze Berry's YCA computer.
5. Denies Berry's Motion to Strike the testimony and expert report of
IT IS SO ORDERED.
© 1992-2004 VersusLaw Inc.