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Junction Solutions, LLC v. MBS Dev

November 21, 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 AND 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 violation of the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq. ("ITSA") (Count II), violation of the parties' Confidentiality Agreement (Count III), breach of the parties' Employment Agreement (Count IV), "tortious interference with a contract" (Count V), and intentional interference with prospective economic advantage (Count VI). Count I of the complaint seeks preliminary and permanent injunctive relief. Counts I, II, and VI are alleged against all defendants; Counts III and IV are alleged only against Ernest, Tucker, and Paul. Count V is alleged only against MBS. The case was removed to this court and defendants filed their answer and counterclaims.

Before the court is defendants' motion for judgment on the pleadings. For the reasons explained below, defendants' motion is denied.

I. BACKGROUND

A. Junction and MBS

Junction is a provider of software and information technology consulting services for businesses. Among its software applications is the "Junction Multi-Channel Distribution Software for Microsoft Axapta" ("JMCD Software"), which allows businesses to increase the utility of certain software applications created by Microsoft, such as "Axapta." Defendants Ernest, Tucker, and Paul are former Junction employees who helped develop the JMCD Software. When they were hired, the defendants signed confidentiality and employment agreements under which they pledged, among other things, to protect Junction's trade secrets from disclosure to third parties. After helping to create the JMCD Software, however, they abruptly left Junction to begin working for MBS, a competing business software and consulting company founded by Steve and Laura Guillaume, former employees of Junction.

Junction alleges that the Guillaumes founded MBS while they were still employed by Junction, and that during their employment, Steve Guillaume and the other defendants stole trade secrets from Junction. Specifically, Junction alleges that Steve Guillaume and one or more of the other individual defendants made unauthorized copies of all of Junction's software code, saving copies for themselves or for MBS. After defendants left Junction, Junction discovered that defendants had created "new, undisclosed developments" related to the JMCD software, developments which were required to be disclosed pursuant to Steve Guillaume's employment agreement but were not. Junction alleges that these developments belong to Junction.

B. Colorado Suit

In November 2004, Junction sued MBS and the Guillaumes in the United States District Court for the District of Colorado. Junction Management Solutions, LLC v. MBS DEV, Inc., No. 04-cv-02288-PSW-MJW (D. Colo. filed Nov. 3, 2004) (the "Colorado suit" or the "first suit"). The complaint alleged violation of the ITSA, breach of certain employment agreements, breach of fiduciary duty, inducing a breach of fiduciary duty, intentional interference with contractual relations, intentional interference with prospective business relations and prospective clients, and violation of the Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. Junction claimed, inter alia, that Steve Guillaume had breached his employment agreement with Junction which contained a confidentiality covenant, an agreement not to solicit Junction employees, and an agreement not to compete with Junction for twelve months following the termination of his employment. See Colorado Compl. Junction alleged that MBS (through the actions of the Guillaumes) intentionally interfered with Junction's contracts with Ernest, Tucker and Paul. Junction also complained that Steve Guillaume was refusing to return its trade secrets and confidential material related to Junction's Axapta Code. Junction sought injunctive relief "immediately and permanently enjoining any and all of the defendants from using, selling licensing, distributing, and/or marketing Junction's Axapta Code, along with any and all other Junction confidential and trade secret information, to any other individual or entity, for any use whatsoever." Colorado Compl. ¶ 65. Junction sought this relief based on the allegation that "MBS has used and will continue to use Junction Axapta Code and derivatives thereof to create modified or new versions (similar to [J]unction's with similar functionality and similar look and feel) thereof which it will license to prospective customers of Junction and possibly disclosing and/or selling the Junction code to Microsoft, each of which would have a negative impact on Junction's competitive advantage in the industry and all of which would violate the Guillaume Agreement." Colorado Compl. ¶ 60.

In December 2004, after Junction's motion for a preliminary injunction was denied, the parties reached a settlement agreement (the "Settlement Agreement"). Although Ernest, Tucker, and Paul were not originally named as defendants in the suit, they were parties to the Settlement Agreement and as such reaffirmed the pledges made in their Confidentiality and Employment Agreements not to disclose confidential and proprietary Junction information to third parties. The court dismissed the case with prejudice while retaining jurisdiction for the limited purpose of enforcing the Settlement Agreement. See Junction Management Solutions, LLC v. MBS DEV, Inc., No. 04-cv-02288-PSW-MJW, 2007 WL 184682, at *1 (D. Colo. Jan. 22, 2007) (providing a recitation of the procedural history of Junction's case before the Colorado court).

C. Illinois Suit

In February of 2006-well after the Settlement Agreement had been executed- Junction learned that MBS had entered into a partnership with Iteration2, a California corporation, and that MBS and Iteration2 were planning to market the "MBS multi-channel distribution software for the Axapta Platform for customers with multi-channel distribution requirements." Compl. ¶ 43. Junction alleges that this is identical to its own JMCD Software and claims that the defendants used Junction's intellectual property and trade secrets to develop MBS's product.

On March 14, 2006, Junction filed the instant suit in the Circuit Court of Cook County (the "Illinois suit" or the "second suit"). The defendants later removed the suit to this court and moved for dismissal pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure, claiming that the venue provision in the Colorado Settlement Agreement required the present litigation to be brought in the District of Colorado.

At the same time, defendants moved to enforce the Settlement Agreement in the District of Colorado, claiming that Junction violated the Settlement Agreement by filing this action in Illinois rather than in Colorado. Judge Phillip S. Figa heard the motion on May 23, 2006 and denied the motion to enforce the settlement agreement. 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 (court did not see "the venue provision [in the Settlement Agreement] foreclosing the Illinois case on the basis of Colorado or the District of Colorado providing exclusive venue, because there is no claim or cause of action arising under [the] agreement."). However, Judge Figa stated he was not resolving the issue whether the Colorado Settlement Agreement provided defendants with a defense to Junction's claims. See id. In an order dated June 5, 2006, Judge Figa made clear that the dismissal was without prejudice. See Junction Management Solutions, LLC v. MBS DEV, Inc., No. 04-cv-02288-PSW-MJW, 2007 WL 184682, at *1 (D. Colo. Jan. 22, 2007).

This court then denied defendants' Rule 12(b)(3) motion based on Judge Figa's ruling. See Junction Solutions, LLC v. MBS DEV, Inc., No. 06 C 1632, 2007 WL 114306, *3 (N.D. Ill. Jan. 7, 2007) ("Under the doctrine of collateral estoppel, Judge Figa's decision bars relitigation of the question ...


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