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EBI Holdings, Inc. v. Butler

February 17, 2009

EBI HOLDINGS, INC. AND EBI, L.P., PLAINTIFFS,
v.
DAN BUTLER, PANACEA HEALTH LLC, BLACKSTONE MEDICAL, INC., ANTHONY JAMIE RILEY, AND ANTHONY J. PAGANO, INDIVIDUALLY AND IN THEIR PROFESSIONAL CAPACITIES, DEFENDANTS.



The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge

OPINION

This matter is before the Court on Defendant Blackstone Medical, Inc.'s Motion to Dismiss Counts IV, V, VIII, IX, and X of Plaintiff's First Amended Complaint (d/e 51) (Blackstone's Motion to Dismiss), Defendants Panacea Health LLC's, Anthony Riley's and Anthony Pagano's Motion for Judgment on the Pleadings and to Adopt and Incorporate by Reference (d/e 53) (Panacea Defendants' Motion for Judgment on the Pleadings), and Defendant Dan Butler's Motion for Judgment on the Pleadings and to Adopt and Incorporate by Reference (d/e 64) (Butler's Motion for Judgment on the Pleadings).

Plaintiffs EBI Holdings, Inc. and EBI, L.P., doing business as Biomet Spine, Biomet Trauma, Biomet Osteobiologics, and Biomet Bracing, are in the business of developing, manufacturing, and marketing medical products. Defendant Butler was hired by Plaintiffs in June 2000 to sell Plaintiffs' products in central Illinois and eastern Iowa. During the course of his employment with Plaintiffs, Butler signed certain Confidentiality and Non-Competition Agreements. Butler's employment with Plaintiffs terminated effective June 1, 2007. According to Plaintiffs, Butler formed a new competing entity, Defendant Panacea Health LLC (Panacea), with Defendants Anthony Riley and Anthony Pagano. Plaintiffs assert that Panacea entered into an agreement with Defendant Blackstone Medical (Blackstone) relating to the sale of medical products in the territory in which Butler had represented the Plaintiffs.

Plaintiffs' ten-count First Amended Complaint (d/e 35) alleges a variety of claims arising out of these circumstances. Blackstone moves to dismiss Counts IV, V, VII, IX, and X of the First Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Panacea, Riley, and Pagano (collectively the Panacea Defendants) seek judgment on the pleadings on Counts IV, V, VII, IX, and X pursuant to Federal Rule of Civil Procedure 12(c). Butler seeks judgment on the pleadings on Counts II, III, VIII, IX, and X. The Panacea Defendants and Defendant Butler seek to incorporate the arguments from Blackstone's Motion to Dismiss and accompanying Memorandum of Law in Support of Motion to Dismiss Counts IV, V, VIII, IX, X of Plaintiffs' First Amended Complaint (d/e 52) (Blackstone's Memorandum) into their submissions. For the reasons set forth below, the requests to incorporate by reference are allowed; however, the Motion to Dismiss and the Requests for Judgment on the Pleadings are denied.

BACKGROUND

Butler was employed by Plaintiffs as the Central Illinois and Central Eastern Iowa territory sales manager, selling Plaintiffs' products including electrical bone growth simulator devices. Butler's customer base consisted of approximately forty hospitals and approximately 300 orthopedists, neurosurgeons, and podiatrists. At the time Butler was hired, he executed a Confidentiality and Non-Competition Agreement, dated June 20, 2000. First Amended Complaint, Ex. B, Confidentiality and Non-Competition Agreement, dated June 20, 2000 (June 2000 Agreement). A year later, Butler executed a second Confidentiality and Non-Competition Agreement, dated July 18, 2001, and signed July 20, 2001. First Amended Complaint, Ex. C, Confidentiality and Non-Competition Agreement, dated July 18, 2001 (July 2001 Agreement).

Plaintiffs assert that, in 2006, they decided to streamline certain sales and marketing efforts. According to Plaintiffs, as a result of this decision, they entered into a distribution agreement with One Medical, Inc., effective June 1, 2007, to distribute Plaintiffs' products in parts of Illinois, Iowa, and Indiana. In 2006, Plaintiffs informed Butler that his employment would terminate on June 1, 2007 and that if Butler wished to continue to market Plaintiffs' products, he must accept employment with One Medical. Defendant Butler's Answer to First Amended Complaint (d/e 39) (Butler's Answer), p. 24, ¶ 4. Butler states that he sought assurances from Plaintiffs and One Medical that, as an employee of One Medical, his salary and territory would remain the same as they were with the Plaintiffs. Id., p. 8, ¶ 57. According to Butler, Plaintiffs and One Medical failed to make assurances as to the continued integrity of his sales territory or compensation package and it was Butler's belief that his sales territory would be significantly affected and his compensation package would be significantly reduced should he accept a position with One Medical. Id., p. 24, ¶ 5. Butler did not accept employment with One Medical and his employment with Plaintiffs terminated effective June 1, 2007.

Plaintiffs assert that Butler was asked to transfer his inventory and confidential and customer information to One Medical. According to Plaintiffs, Butler failed to transfer his entire inventory and provided One Medical with only cursory customer information. Plaintiffs further assert that they also did not receive Butler's entire inventory and that they received only small amounts of confidential and customer information from Butler. According to Plaintiffs, Butler formed Panacea, with Defendants Riley and Pagano and entered into an agreement with Defendant Blackstone relating to the sale of electrical bone growth simulator devices. According to Plaintiffs, Blackstone agreed to give Panacea an override commission on all electrical bone growth simulator sales made in Butler's territory to former and existing customers of the Plaintiffs. Plaintiffs assert that since Butler's employment with Plaintiffs terminated, Butler has been working for and with competitors of Plaintiffs and directly competing for business against Plaintiffs in the same territory in which he worked as an employee of the Plaintiffs. Plaintiffs further allege that, while Butler was still employed by Plaintiffs, he gave Panacea and Blackstone confidential information, competed with Plaintiffs, and diverted customers to Blackstone and the Panacea Defendants.

Plaintiffs' First Amended Complaint alleges the following claims against Defendant Butler: breach of contract (Count I), breach of duty of loyalty and fiduciary duty (Count II), breach of duty of loyalty (Count III), threatened and actual misappropriation of trade secrets (Count VI), unjust enrichment (Count VIII), civil conspiracy (Count IX), and tortious interference with prospective economic advantage (Count X). Plaintiffs also seek an order requiring Butler to specifically perform alleged agreements that he signed (Count VII). Plaintiffs' First Amended Complaint alleges the following claims against Defendants Blackstone, Panacea, Riley, and Pagano: inducement of breaches of fiduciary duty and duty of loyalty (Count IV), tortious interference with contract (Count V), threatened and actual misappropriation of trade secrets (Count VI), unjust enrichment (Count VIII), civil conspiracy (Count IX) and tortious interference with prospective economic advantage (Count X). Defendant Butler filed an Answer to the First Amended Complaint, as did the Panacea Defendants.

Butler's Answer; Defendant Panacea Health LLC, Anthony Riley, and Anthony Pagano's Answer to Plaintiffs First Amended Complaint (d/e 49) (Panacea Defendants' Answer). Defendant Blackstone filed an Answer and Affirmative Defenses to Counts I, II, III, VI, and VII of Plaintiffs' First Amended Complaint (d/e 50) (Blackstone's Answer), together with its pending Motion to Dismiss Counts IV, V, VIII, IX, and X. The Panacea Defendants then filed their pending Motion for Judgment on the Pleadings, seeking to incorporate by reference the arguments from Blackstone's Motion to Dismiss. Finally, Defendant Butler filed his pending Motion for Judgment on the Pleadings, also asking to incorporate the arguments from Blackstone's Motion to Dismiss.

ANALYSIS

A. DEFENDANT BLACKSTONE

Defendant Blackstone asks the Court to dismiss Counts IV, V, VIII, IX, and X. In analyzing Blackstone's Motion to Dismiss, the Court must accept all well-pleaded allegations in the First Amended Complaint as true and draw all reasonable inferences in Plaintiffs' favor. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008). Plaintiffs need only provide a short and plain statement giving Defendants fair notice of the nature and basis of the claim. Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007); Fed. R. Civ. P. 8(a)(2). Plaintiffs' factual allegations must be sufficient to state a claim of relief that is plausible on its face, rather than merely speculative. Twombly, 127 S.Ct. at 1965, 1974.

Blackstone asserts that the state law claims in Counts IV, V, VIII, IX, and X are preempted under § 8(a) of the Illinois Trade Secrets Act (ITSA). 765 ILCS 1065/8(a).*fn1 Blackstone further contends that Count IX should be dismissed because it merely duplicates Plaintiffs' underlying tort claims and that Count X should be dismissed for failure to allege facts sufficient to support a finding on an essential element of the claim. The Court turns ...


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