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Junction Solutions, LLC v. MBS Dev

November 20, 2007

JUNCTION SOLUTIONS, LLC, PLAINTIFF,
v.
MBS DEV, INC., JEFFREY ERNEST, MITCH TUCKER, AND KENNETH R. PAUL, DEFENDANTS.



The opinion of the court was delivered by: Judge Joan B. Gottschall

MEMORANDUM OPINION & ORDER

Junction Solutions, LLC ("Junction") sued defendants MBS Dev, Inc. ("MBS"), Jeffrey Ernest ("Ernest"), Mitch Tucker ("Tucker"), and Kenneth Paul ("Paul") in Cook County Circuit Court, alleging, inter alia, violations of the Illinois Trade Secrets Act, confidentiality agreements and employment agreements. The case was removed to this court and defendants filed their answer and a seven-count counterclaim. Before the court is Junction's motion to dismiss that counterclaim. For the reasons set forth below, Junction's motion is granted in part and denied in part.

I. BACKGROUND*fn1

Junction is a provider of software and information technology consulting services for businesses. Defendants Ernest, Tucker, and Paul are former Junction employees. During 2003 and 2004, they, along with Steve Guillaume and Laura Guillaume, worked for Junction developing, marketing and selling Microsoft Axapta software to the multi-channel retail market segment. Countercl. ¶ 8.

Due to several disagreements during the summer of 2004, the Guillaumes, Ernest, Tucker and Paul left Junction and began working for MBS, which commenced operations in September of 2004. Countercl. ¶ 9. MBS focuses on developing and selling Microsoft Axapta to the wholesale distribution market segment. The Guillaumes are the principals of MBS.

In November of 2004, Junction sued MBS in the United States District Court for the District of Colorado, alleging, inter alia, that MBS and the Guillaumes misappropriated trade secrets and violated their employment and confidentiality agreements, under which they pledged to protect Junction's trade secrets from disclosure to third parties. See Junction Management Solutions, LLC v. MBS Dev, Inc., 04-cv-2288-PSW-MWJ (D. Colo. filed Nov. 3, 2004) (the "Colorado suit"). In December of 2004, the parties reached a settlement agreement (the "Settlement Agreement"), in which MBS, the Guillaumes, Ernest, Tucker, and Paul agreed not to disclose confidential and proprietary Junction information to third parties, essentially reaffirming the pledges they had made under their employment agreements with Junction.

The Settlement Agreement contains a broad release of "Claims" which includes all "known or unknown" claims or actions. Countercl. ¶ 15; Ex. B ¶ 5. Defendants contend that this provision extinguished all other obligations they had under their employment and confidentiality agreements, save for those that were incorporated into the Settlement Agreement. Countercl. ¶ 17. The Settlement Agreement also contained an agreement that MBS, the Guillaumes, Ernest, Tucker and Paul would not compete with Junction between November 1, 2004 and November 1, 2005 by engaging in any "Business in the Company Verticals." Id. ¶ 18. Defendants contend that this means Junction agreed that defendants were free to compete with Junction after November 1, 2005, the date that the non-compete expired. Id. ¶ 21. Defendants allege that they honored the Settlement Agreement by avoiding any "Business in the Company Verticals" until after November 1, 2005.

On February 17, 2006, a California corporation known as Iteration2 announced that it was entering into a partnership with MBS to market the MBS multi-channel distribution software for the Axapta Platform for customers with multi-channel distribution requirements. Junction subsequently filed this suit in the Circuit Court of Cook County against MBS, Ernest, Tucker and Paul, alleging that MBS could not possibly have developed such a product without using and disclosing proprietary Junction information. See Junction Compl. ¶ 45. Junction also alleges that Ernest, Tucker and Paul breached their employment and confidentiality agreements with Junction.

Defendants removed the suit to this court and then moved to dismiss for lack of venue. See January 9, 2007 Order. Defendants argued that the Colorado Settlement Agreement contained a venue provision that required Junction's suit to be brought in the District of Colorado. At the same time, defendants filed an action before Judge Figa in the Colorado District Court, seeking a declaratory judgment that they were in compliance with the Colorado Settlement Agreement and claiming that Junction had breached the Agreement by failing to bring its new suit in the District of Colorado. On May 23, 2006, Judge Figa held that the venue provision in the Colorado Settlement Agreement did not apply to the suit before this court because Junction's suit did not arise under the Colorado Settlement Agreement. See Tr. Oral Argument May 23, 2006 at 22:1-24:5 ("May 23, 2006 Ruling"). However, Judge Figa made it clear he was not resolving the issue whether the Colorado Settlement Agreement provided defendants with a defense to Junction's claims. See Tr. Oral Argument May 23, 2006.

This court relied on Judge Figa's decision and determined that it barred relitigation of the question whether Junction's current claims arise under the settlement agreement and denied defendants' motion to dismiss for lack of venue. See Junction Solutions, LLC v. MBS DEV, Inc., No. 06 C 1632, 2007 WL 114306, *3 (N.D. Ill. Jan. 7, 2007). Accordingly, this court denied defendants' motion to dismiss for lack of venue.

Defendants subsequently filed their answer to Junction's complaint along with a seven-count counterclaim against Junction, which contains the aforementioned allegations. Most of defendants' claims rely on their allegations that Junction brought a bad faith lawsuit against them in violation of the Settlement Agreement in order to harm MBS, rather than for a legitimate reason. See Countercl. ¶¶ 25-26. Defendants contend that Junction's lawsuit violates the Settlement Agreement. Countercl. ¶ 24. Defendants also allege that Junction sent letters to Iteration2 and Microsoft Corporation for the purpose of interfering with MBS's relationship with those companies. Countercl. ¶ 30. Further, defendants allege that Junction hired a salesman away from "Vis.align," a partner of MBS, and told the salesman about Junction's lawsuit against MBS without informing him that Junction has no evidence to support its claims. Countercl. ¶ 33.

Defendants make the following counterclaims against Junction: (1) breach of the Colorado Settlement Agreement in the filing of this lawsuit; (2) abuse of process; (3) tortious interference with prospective business advantage; (4) violation of the Lanham Act, 15 U.S.C. § 1125; (5) common law unfair competition; (6) violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq.; and (7) violation of the Illinois Consumer Fraud and Deceptive Trade Practices Act, 815 ILCS 505/2. Junction has moved to dismiss defendants' counterclaims.

II. DISCUSSION

A. Legal ...


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