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Giffney Perret, Inc. v. Matthews

March 24, 2009


The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer


Plaintiff Giffney Perret, Inc., formerly known as Lanyap, Inc., was in the direct mail marketing business until it sold most of its assets in 2007. In this lawsuit, Plaintiff alleges that a former employee, Defendant Sherrie Matthews, violated a restrictive covenant in her employment agreement with Plaintiff when she formed Defendant Print Solutions, Inc., a business in competition with Lanyap. Plaintiff seeks damages against Matthews for breach of contract and tortious interference with business expectancy, against Print Solutions for tortious interference with contract, and against both Defendants for misappropriation of trade secrets.

Defendants have filed a motion for summary judgment on all counts. For the reasons explained below, the motion for summary judgment is granted in part and denied in part. Plaintiff has produced sufficient evidence to create a genuine issue as to whether it had a legitimate business interest in confidential pricing information, which could support its restrictive covenant claim (Count I). Plaintiff has not shown, however, that a sample binder and customer information at issue here constitute protectable confidential information. Nor does Plaintiff produce sufficient evidence to create a genuine issue as to whether it had a legitimate business interest in near-permanent customers. Finally, Plaintiff has failed to produce evidence sufficient to support a finding that Matthews's breach caused Plaintiff to lose the business of former customers Nationwide Insurance or Centier Bank.

Consequently, the only remaining issues in Plaintiff's breach of contract claims are whether Lanyap's pricing methods constituted confidential information that could support its restrictive covenant against Matthews, and if so, whether Matthews damaged Lanyap by using that confidential information to solicit former customer Anchor Bank's business. Plaintiff has waived its claims of tortious interference with business expectancy, tortious interference with contract, and misappropriation of trade secrets. The court therefore enters judgment in favor of Defendants on Counts II, IV, and V of the Amended Complaint, and dismisses Defendant Print Solutions, Inc. from this action.


This dispute over a restrictive covenant comes before the court on diversity jurisdiction. (Pl.'s Local Rule 56.1(b)(3) Resp. to Defs.' Local Rule 56.1(a)(3) Statement of Material Facts [hereinafter "Pl.'s 56.1"] ¶¶ 4-5.) Plaintiff is currently named Giffney Perret, Inc. but was known at the time of the relevant events as Lanyap, Inc. (Id. ¶ 1.) It is an Illinois corporation with its principal place of business located in Lombard, Illinois. (Id.) Defendants are Sherrie Matthews, a former employee of Plaintiff, and Print Solutions, Inc., the company that she formed after leaving. (Statement of Material Facts as to Which There Is No Genuine Issue, Pursuant to Local Rule 56.1(a)(3) [hereinafter "Defs.' 56.1"] ¶¶ 2-3.) Both Defendants are citizens of Indiana, with Print Solutions's principal place of business located in Crown Point, Indiana. (Id. ¶¶ 3-4.) As a result of Defendants' alleged breach of contract, misappropriation of trade secrets, and tortious interference with contract and business expectancies, Plaintiff alleges actual damages in excess of $400,000 and in addition seeks punitive damages. (Am. Compl. for Breach of Contract and Other Relief [hereinafter "Am. Compl."] ¶¶ 27, 32, 43, 55, Ex. 5 to Bryan Decl.)

As discussed below, the relevant events occurred mid-2005, after Plaintiff fired Matthews and she started a new business competitive with her former employer. (Pl.'s 56.1 ¶¶ 27-33.) In November 2005, Plaintiff filed a complaint in the Circuit Court of DuPage County alleging violation of Matthews's employment contract and seeking both damages and injunctive relief. (Id. ¶ 7.) After some initial discovery and unsuccessful settlement efforts, Plaintiff voluntarily dismissed that action. (Id. ¶ 8.) In February 2007, Plaintiff filed a similar complaint in federal court. (Id. ¶ 9.) Plaintiff initially sought injunctive relief, but later amended its complaint and now seeks damages only, on a number of theories. Am. Compl., Ex. 5 to Bryan Decl.) After discovery, Defendants filed a motion for summary judgment.


A. Lanyap's Business

Lanyap, Inc. produced and mailed direct marketing materials for its clients, mainly financial institutions. (Pl.'s 56.1 ¶ 1.) The company did not print advertisements itself but rather subcontracted with various vendors to complete any one job. (Miller Dep. 47, Ex. 3 to Bryan Decl.) Lanyap had about fifteen customers, (Pl.'s Local Rule 56.1(b)(3)(C) Statement of Additional Facts [hereinafter "Pl.'s Additional"] ¶ 39), of which three are relevant to this lawsuit: Anchor Bank, Nationwide Insurance, and Centier Bank. (Pl.'s 56.1 ¶¶ 15, 16.) All three customers employed the services of multiple direct marketing companies. (Pl.'s 56.1 ¶ 65.)

Anchor Bank in particular plays a central role in the story. Although Lanyap first acquired Anchor as a client in 2003 (Answer to Interrog. No. 14, Ex. 12 to Harrod Decl.), Plaintiff claims that Lanyap was the only company performing a certain set of jobs for Anchor and that Anchor contracted for that work without requiring Lanyap to bid or otherwise compete for the jobs. (Pl.'s 56.1 ¶¶ 65-66.) An Anchor representative, Emily Campbell, testified that the bank typically uses just one company, formerly Lanyap and now Defendant Print Solutions, for its "standard mailing programs" but that Anchor solicits bids for other print projects, such as calendars and holiday advertisements. (Campbell Dep. 35-36, Ex. 2 to Harrod Decl.) According to Plaintiff's figures, its gross sales to Anchor totaled $960,633 in 2004 and $509,665 in 2005. (Answer to Interrog. No. 14, Ex. 12 to Harrod Decl.)

Lanyap had performed print jobs for a second client, Nationwide Insurance, since the late 1990's (Pl.'s Additional ¶ 3), but it generally had to compete in a bidding process in order to win the company's projects. (Shaw Dep. 45, Ex. 4 to Bryan Decl.) Lanyap was often successful in the bidding, however, and by Plaintiff's tally, its gross sales to Nationwide reached $1,357,899 in 2004 and $1,599,156 in 2005. (Pl.'s Additional ¶ 4.)

The final Lanyap client at issue in this case is Centier Bank, "at best" a small customer of Lanyap over the years. (Miller Dep. 61, Ex. 3 to Bryan Decl.) Plaintiff argues that Matthews worked on the Centier account while she was employed at Lanyap, but the testimony Plaintiff cites establishes only that Matthews solicited the bank's business and then worked on a small and unsuccessful test project for Centier. (Pl.'s Additional ¶ 1; Matthews Dep. 43-44, Ex. 5 to Harrod Decl.) Matthews stated that she was not aware of an active business relationship between Lanyap and Centier at the time of her termination, (Pl.'s 56.1 ¶ 26), and a Centier employee likewise testified that the bank was not doing business with Lanyap at the time Matthews left. (Strickland Dep. 26-27, Ex. 11 to Harrod Decl.) Plaintiff has cited no evidence that Centier was an active customer at that time (Pl.'s 56.1 ¶ 26; Pl.'s Additional ¶ 4), but this court notes interrogatory answers in the record in which Lanyap claimed gross sales to Centier in 2004 and 2005 in the amounts of $27,568 and $13,830, respectively. (Answer to Interrog. No. 14, Ex. 12 to Harrod Decl.)

B. Sherrie Matthews's Employment at Lanyap

Defendant Sherrie Matthews began working for Lanyap in August 2002. (Defs.' 56.1 ¶ 19.) Lanyap hired her as a production manager, meaning that she was responsible for assigning work to Lanyap's vendors and ensuring that those suppliers completed their parts of a project in a timely and accurate manner. (Id. ¶ 23; Miller Dep. 147, Ex. 3 to Bryan Decl.) An agreement Matthews signed when she began her employment included two restrictive covenants, referred to here as a non-disclosure clause and a non-solicitation clause. (Defs.' 56.1 ¶¶ 20-21.) The non-disclosure provision reads in relevant part:

I shall not, during the term of my employment and for a period of two (2) years after termination of my employment, disclose any secrets or confidential technology, proprietary information, customer lists, marketing plans or trade secrets of [Lanyap] or [Lanyap] clients, or any matter or thing ascertained by me through my association with [Lanyap], the use or disclosure of which might reasonably be construed to be contrary to the best interest of [Lanyap]. I further agree that should my employment terminate I will neither take nor retain any papers, customer lists, records, files, computer programs and software, other documents or copies thereof, or other confidential information of any kind belonging to [Lanyap]. (Employee Agreement, Ex. 9 to Bryan Decl.) The non-solicitation provision reads:

I agree that for the period of one (1) year following my leaving of [Lanyap], whether leaving is voluntary or involuntary, that I will not engage or be connected with, in any capacity, any account with which [Lanyap] did business within the year preceding my leaving; or with any company with which [Lanyap] had direct contact as a prospective client. (Id.) The non-solicitation clause also contains a promise not to hire away any employees of Lanyap, but that portion of the agreement is not at issue here.

Through her work as a production manager, Matthews became Lanyap's primary contact with Anchor Bank and Nationwide Insurance. (Pl.'s 56.1 ¶ 25.) According to Plaintiff, Lanyap President James Miller and Vice President Steve Shaw eventually decided to terminate Matthews because of complaints about Matthews's manner of interaction with employees and vendors. (Id. ¶ 27; Miller Dep. 95--96, Ex. 3 to Bryan Decl.) On April 21, 2005, Plaintiff fired Matthews. (Pl.'s 56.1 ¶ 27.)

C. Matthews's Competition with Lanyap

Whatever her manner with co-workers, Matthews apparently maintained her relationships with clients. Neither side disputes that after her termination, Matthews contacted both Anchor and Nationwide to tell them that she had been fired and to let them know who they could contact at Lanyap in her stead. (Id. ¶ 28.) A Nationwide representative testified that Matthews also mentioned her plan to start her own firm but did not at that time solicit Nationwide's business. (Sturgill Dep. 24, Ex. 10 to Harrod Decl.) Within a couple weeks of her firing, Matthews was in contact with Anchor about performing print services for the bank through Matthews's new company, Print Solutions.*fn1 (Pl.'s 56.1 ¶¶ 29-30.) She was able to set up her new business quickly in part because she had no need to buy equipment, apparently because she planned to utilize vendors as she had at Lanyap.*fn2 (Matthews Dep. 217, Ex. 10 to Bryan Dep.) Matthews submitted a quote to Anchor for jobs that Lanyap had been performing. (Pl.'s 56.1 ¶ 29.) The quote contained a "Competitor Pricing" comparison column that illustrated how Anchor might save money by doing business with Print Solutions, which offered prices fifteen percent less than "Competitor Pricing."*fn3 (Id. ¶ 62; Print Solutions Proposal #2, Ex. 9 to Harrod Decl.) Shortly thereafter, Anchor awarded to Print Solutions the work that Lanyap had been performing, and by May 15, Print Solutions was billing Anchor. (Pl.'s 56.1 ¶ 30; Pl.'s Additional ¶ 28.) An Anchor representative testified that his company made the switch because of poor service from Lanyap, in particular a drop in quality that occurred after Matthews left (a puzzling assertion in light of the fact that Matthew's employment with Lanyap ended just three weeks before she began billing Anchor). He also acknowledged, however, that Matthews's familiarity with Anchor's business was a factor in the bank's decision to move its business from Lanyap to Print Solutions. (Pl.'s 56.1 ¶¶ 36-37; Schell Dep. 84, 92, Ex. 4 to Harrod Decl.) Around the same time, Matthews stopped by the offices of Centier Bank and shortly thereafter received an offer from a Centier employee, Wes Strickland, to print notepads for Centier. (Pl.'s 56.1 ¶ 32; Matthews Dep. 161-62, 164-65, Ex. 10 to Bryan Decl.) According to Strickland, Centier generally used local printing companies, as opposed to its direct marketing vendors, for this sort of stationary jobs. (Strickland Dep. 29-30, Ex. 11 to Harrod Decl.)

Several months later, Matthews also began performing services for Nationwide, this time as the result of winning a bid. (Pl.'s 56.1 ¶ 31; Sturgill Dep. 32-33, Ex. 12 to Bryan Decl.) Nationwide's representative testified that Nationwide, like Anchor, noticed a decline in quality of Lanyap's service after Matthews's termination. (Pl.'s 56.1 ¶ 36, 38.) Plaintiff does not dispute that these problems led Nationwide to cease doing business with Lanyap months before Nationwide placed any orders with Matthews and Print Solutions. (Id. ¶ 39.) Plaintiff argues that Lanyap and Print Solutions bid on "some of the same projects" for Nationwide (Pl.'s Additional ¶ 37), but the cited deposition testimony (of a Nationwide representative) refers to only one project, from which Nationwide "pulled" Lanyap and which Defendants subsequently won on a "rebid" after Nationwide solicited a fresh set of bids.*fn4 (Govekar Dep. 31-32, Ex. 13 to Harrod Decl.)

Thereafter, Matthews and Print Solutions continued to furnish Anchor, Nationwide, and Centier with services competitive to those of Lanyap. (Pl.'s 56.1 ¶ 33.) Lanyap apparently did not fare well after Matthews left, and in March 2007, Lanyap sold almost all of its assets, including the name "Lanyap," to another company, merely retaining its claims against Matthews. (Id. ¶¶ 10-11.)

D. Confidential Information

Beyond simply soliciting Lanyap clients, Plaintiff argues that Matthews absconded with confidential information that she used to help her woo away those clients. In response, Matthews both denies that she retained any of Lanyap's property and disputes the confidential nature of the information. (Defs.' 56.1 ¶¶ 40-63.) The iinformation at issue falls into three categories: a binder of sample materials, information about Lanyap's customers and vendors, and information about Lanyap's pricing techniques.

First, both sides agree that Matthews retained a "sample binder" for four days after her termination, but that she returned the binder when Lanyap asked her to do so. (Pl.'s 56.1 ¶¶ 42-43.) While employed at Lanyap, Matthews had assembled the binder herself by collecting sample advertisements, in order to give customers ideas about the sorts of advertisements they might order. (Id. ¶ 44.) Lanyap did not create the samples but rather received them from its vendors. (Miller Dep. 147-48, Ex. 3 to Bryan Decl.) There is no evidence that Lanyap gave Matthews any ...

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