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Jano Justice Systems, Inc. v. Burton

December 11, 2008

JANO JUSTICE SYSTEMS, INC., PLAINTIFF,
v.
SAM BURTON AND SCB SYSTEMS, INC., DEFENDANTS.



The opinion of the court was delivered by: Richard Mills, U.S. District Judge

OPINION

Defendants Sam Burton and SCB Systems, Inc. (collectively, "Defendants") move to dismiss Counts II, III, and IV of Plaintiff Jano Justice Systems, Inc.'s ("JJS") Complaint. Defendants also move for judgment on the pleadings with regard to Count I.

With one small exception, the motions are denied.

I. BACKGROUND

JJS, a Mississippi corporation, brings this diversity suit against Sam Burton and his business, SCB Systems, Inc. According to the allegations of the Complaint, which we take as true, JJS "provid[es] electronic data solutions to Circuit Clerks and county officers in several states including Illinois." Compl. ¶ 3. In carrying out its business, JJS relies on "certain proprietary information including source code, commonly known as CLERICUS MAGNUS Integrated Justice Information Systems." Compl. ¶ 4. This proprietary information allows users "to organize and integrate information and implement their job functions . . . ." Compl. ¶ 5.

Burton is a major shareholder in JJS, "owning fifty-percent of all shares of stock." Compl. ¶ 6. Burton was also the vice president of JJS until his resignation in November 2006. Compl. ¶ 7. While so employed, or shortly thereafter, Burton began working as a sole proprietor. Compl. ¶ 8. Eventually, Burton incorporated his business and became the sole shareholder of SCB Systems, Inc. Compl. ¶¶ 9-10. SCB Systems "performs services including but not limited to maintenance on Clericus Magnus software." Compl. ¶ 11. Burton, as well as other former JJS employees now working for him, "had access to [JJS's] proprietary information as well as knowledge pertaining to [JJS's] potential and existing customers." Compl. ¶ 13-14. SCB Systems competes directly with JJS and has "marketed and provided products and services to [JJS's] potential and existing customers," including work "that otherwise would have been done by [JJS]." Compl. ¶ 15-16. Further, "Burton has held SCB Systems, Inc., out to [JJS's] customers as the same business . . . or as still connected to" JJS. Compl. ¶ 17.

JJS' Complaint contains four counts. Count I alleges that Burton breached his fiduciary duties of loyalty, good faith, due care, fairness, and avoiding self-dealing. Count II alleges that Defendants tortiously interfered with JJS' business relations. Counts III and IV charge Defendants with violations of the Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq., and the Illinois (or Uniform) Deceptive Trade Practices Act, 815 ILCS 510/1 et seq., respectively.

II. STANDARDS

Defendants move to dismiss Counts II, III, and IV under Federal Rule Civil of Procedure 12(b)(6).*fn1 "A plaintiff's complaint need only provide 'a short and plain statement of the claim showing that the pleader is entitled to relief,' sufficient to provide the defendant with 'fair notice' of the claim and its basis." Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (quoting Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp v. Twombly, 127 S.Ct. 1955, 1964 (2007)). All well-pleaded facts are taken as true and the complaint, as well as all possible inferences, are construed in the plaintiff's favor. Id.

With regard to Count I, Defendants move for judgment on the pleadings. However, it is unclear why Federal Rule of Civil Procedure 12(c) would apply prior to the close of pleadings. See Fed. R. Civ. P. 12(c). Nevertheless, the Court need not solve the mystery, because the same Rule 12(b)(6) standards can be applied. See Guise v. BWM Mortgage, LLC, 377 F.3d 795, 798 (7th Cir. 2004).

III. ANALYSIS

A. Count I: Breach of Fiduciary Duty

First, the Complaint alleges that Burton breached various fiduciary duties owed to JJS. Defendants argue that this claim is preempted by Illinois Trade Secrets Act, or, alternatively, fails to state a claim because Burton owed no fiduciary duties.

Section 8(a) of the Trade Secrets Act provides that "[e]xcept 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." Section 8(b) substantially limits the scope of subsection (a), adding that "[t]his Act does not ...


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