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Single Source, Inc. v. Harvey

April 7, 2008

SINGLE SOURCE, INC., PLAINTIFF,
v.
ARLIS HARVEY AND FOOD MARKETING CONCEPTS, INC., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Defendant Arlis Harvey's ("Harvey") and Defendant Food Marketing Concepts, Inc.'s ("FMC") motion for summary judgment. For the reasons stated below, we deny the motion for summary judgment.

BACKGROUND

Plaintiff Single Source, Inc. ("Single Source") alleges that in 1998 it hired Harvey to assist Single Source in the expansion of its business and customer base in Texas and other areas. In 2000, Harvey was allegedly promoted to a Sales Director position and Harvey executed a confidentiality agreement ("Agreement"). Single Source contends that Harvey promised in the Agreement to keep confidential all of Single Source's trade secrets and to use them solely for the benefit of Single Source.

Harvey allegedly became disgruntled in 2005, because another salesman was making more money than Harvey. Beginning in late 2005, Harvey, while continuing to work for Single Source, allegedly assisted in the formation and outfitting of FMC. While assisting in the formation of FMC, Harvey also allegedly referred customers of Single Source to FMC, solicited sales for FMC from Single Source's customers, and used his Single Source expense account to pursue customers for FMC. Harvey also allegedly used trade secret information obtained from Single Source when assisting in the formation of FMC. In addition, Harvey allegedly disparaged Single Source when speaking to customers of Single Source, causing the customers to give their business to FMC. Single Source brought the instant action and includes in its second amended complaint a breach of fiduciary duty claim brought against Harvey (Count I), and tortious interference with prospective economic advantage ("TIPEA") claims brought against Harvey and FMC (Count II). Defendants move for summary judgment on all claims.

SUMMARY JUDGMENT

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, 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 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 that 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).

DISCUSSION

I. Statement of Additional Facts

Single Source filed a response to Defendants' statement of material facts and Single Source included a statement of additional facts in accordance with Local Rule 56.1. Although Defendants subsequently filed a reply brief in support of their motion for summary judgment, Defendants never filed a response to Single Source's statement of additional facts. In the absence of a response by Defendants properly disputing the facts in Single Source's statement of additional facts, all such facts are deemed to be admitted for the purposes of the summary judgment motion. LR 56.1. Such facts are deemed undisputed due to the lack of a denial by Defendants and the failure by Defendants to point to evidence in support of a denial. Dent v. Bestfoods, 2003 WL 22025008, at *1 n.1 (N.D. Ill. 2003). Further, the Seventh Circuit has held "that a district court is entitled to expect strict compliance with Rule 56.1." Ammons v. Aramark Uniform Servs., Inc., 368 F.3d 809, 817 (7th Cir. 2004)(stating in addition that "[s]ubstantial compliance is not strict compliance"). In fact, the Seventh Circuit, when addressing Local Rule 56.1, recently reaffirmed "'the importance of local rules'" and has noted that it has "'consistently and repeatedly upheld a district court's discretion to require strict compliance with its local rules.'" Chelios v. Heavener, 2008 WL 746842, at *5-*6 (7th Cir. 2008)(quoting Koszola v. Bd. of Educ.,385 F.3d 1104, 1109 (7th Cir. 2004). Therefore, all of the facts contained in Single Source's statement of additional facts are deemed to be undisputed.

II. Breach of Fiduciary Duty Claim

Defendants argue that they are entitled to summary judgment on the breach of fiduciary duty claim contending that Harvey did not owe a duty of loyalty to Single Source. Defendants also argue that there is insufficient evidence to show that Harvey breached a duty of loyalty.

A. Duty of Loyalty

Defendants contend that Harvey did not owe a duty of loyalty to Single Source. Under Illinois law, officers of a corporation "owe a fiduciary duty of loyalty to their corporate employer not to actively exploit their positions within the corporation for their own personal benefit or hinder the ability of a corporation to continue the business for which it was developed." Everen Securities, Inc. v. A.G. Edwards and Sons, Inc., 719 N.E.2d 312, 318 (Ill. App. Ct. 1999). Harvey argues that he was not a director or officer of Single Source and that, as a mere employee of Single Source, he did not owe a duty of loyalty to Single Source. However, aside from the duty of loyalty owed by corporate officers, former employees owe a duty of loyalty to their employers not to "compete with their former employer and solicit former customers . . . before the termination of their employment." Cooper Linse Hallman Capital Management, Inc. v. Hallman, 856 N.E.2d 585, 589 (Ill. App. Ct. 2006)(noting that "while still working for an employer, employees may plan, form and outfit a competing corporation so long ...


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