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Integrated Genomics, Inc. v. Kyrpides

January 26, 2010

INTEGRATED GENOMICS, INC., PLAINTIFF,
v.
NIKOS KYRPIDES, DEFENDANT.



The opinion of the court was delivered by: Joan Humphrey Lefkow United States District Court Judge

Judge Joan H. Lefkow

OPINION AND ORDER

Integrated Genomics, Inc. ("Integrated") filed a four-count amended complaint against Nikos Kyrpides alleging (1) breach of contract, (2) breach of fiduciary duty, (3) tortious interference with prospective economic advantage, and (4) common law unfair competition.*fn1

Kyrpides counterclaimed, alleging (1) breach of contract, (2) violations of the Illinois Wage Payment and Collection Act ("IWPCA"), 820 Ill. Comp. Stat. § 115/1 et. seq., and (3) breach of promissory note. Pending before the court are both parties' motions for summary judgment and Integrated's motion to strike. Integrated seeks summary judgment on the first three counts of its complaint, Kyrpides's affirmative defenses, and Kyrpides's counterclaims. Kyrpides seeks summary judgment on all four counts of Integrated's complaint and on his breach of promissory note counterclaim. For the following reasons, Integrated's motion for summary judgment [#177] and its motion to strike [#208] are granted in part and denied in part, and Kyrpides's motion for summary judgment [#180] is granted in part and denied in part.

LEGAL STANDARD

Summary judgment obviates the need for a trial where 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). To determine whether any genuine issue of fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56(c) & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact is one that might affect the outcome of the suit. Insolia, 216 F.3d at 598--99. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986).

BACKGROUND*fn2

Integrated, a Delaware corporation with its principal place of business in Chicago, Illinois, develops software for analyzing genomes and undertakes such analyses itself. It has customers throughout the United States and internationally. In August 1999, Integrated hired Kyrpides as an annotator of its ERGOTM bioinformatics software. Over the course of his employment, Integrated ultimately promoted Kyrpides to Director of Bioinformatics. Kyrpides resigned from Integrated in April 2004 to take a job with the Joint Genome Institute ("JGI") in California.

I. Kyrpides's Employment Agreement

On August 19, 1999, Kyrpides and Integrated executed an employment agreement. The agreement defined Kyrpides's employment period as "commencing on August 17, 1999 (the 'Commencement Date') and ending on August 16 (such period, as it may be extended, the 'Employment Period'), unless sooner terminated in accordance with the provisions of Section 4." Ex. 2 to IG's L.R. 56.1 Stmt. at § 4 (hereinafter "Employment Agreement"). Section 4 provided, among other things, that either party could terminate the employment relationship without cause by providing thirty days written notice. Kyrpides agreed to an annual base salary of $84,000 for his first year of employment and to having subsequent adjustments determined by Integrated's president.*fn3 The employment agreement contained a covenant not to compete and not to disclose proprietary information:

6. Non-Compete

(a) During the Employment Period and for a period of two years after the termination or expiration thereof, the Employee will not directly or indirectly:

(I) as an individual, proprietor, partner, stockholder, officer, employee, director, joint venturer, investor, lender, or in any other capacity whatsoever (other than as the holder of not more than one percent (1% ) of the total outstanding stock of a publicly held company), engage in the business of developing, producing, marketing or selling products or services which would compete with products or services of the kind or type developed or being developed, produced, marketed, or sold by the Company, or planned to be produced, marketed or sold as described in any business plan of the Company or as set forth in any notes or minutes of internal Company meetings, while the Employee was employed by the Company; or

(ii) recruit, solicit or induce, or attempt to induce, any employee or employees of the Company to terminate their employment with, or otherwise cease their relationship with, the Company; or

(iii) solicit, divert, or take away, or attempt to divert or take away, the business or patronage of any of the clients, customers or accounts, or prospective clients, customers or accounts, of the Company which were contacted, solicited or served by the Employee while employed by the Company.

(b) If any restriction set forth in this Section 6 is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time or over too great a range of activities or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities or geographic area as to which it may be enforceable.

(c) The restrictions contained in this Section 6 are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable for such purpose. The Employee agrees that any breach of this Section 6 will cause the Company substantial and irrevocable damage and therefore, in the event of any such breach, in addition to such other remedies which may be available, the Company shall have the right to seek specific performance and injunctive relief.

7. Proprietary Information and Developments

7.1 Proprietary Information

(a) Employee agrees that all information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company's business or financial affairs (collectively, "Proprietary Information") is and shall be the exclusive property of the Company. By way of illustration, but not limitation, Proprietary Information may include inventions, products, processes, methods, techniques, formulas, compositions, compounds, projects, developments, plans, research data, clinical data, financial data, personnel data, computer programs, and customer and supplier lists. Employee will not disclose any Proprietary Information to others outside the Company or use the same for any unauthorized purposes without written approval by an officer of the Company, either during or after his employment, unless and until such Proprietary Information has become public knowledge without fault by the Employee. Employment Agreement §§ 6--7.1(a). This 1999 employment agreement is the only written contract Kyrpides entered into during his employment at Integrated.

II. Integrated's Financial Difficulties

In August 2001, Kyrpides's annual salary was $91,000. In October 2001, to address financial difficulties, Integrated instituted a ten percent pay reduction for all employees, including Kyrpides. A letter was circulated to all employees explaining this action and requesting their agreement to it. Although no document with Kyrpides's signature has been tendered, Kyrpides has admitted that he agreed to the reduction and also to accept delayed paychecks. The pay reduction was only temporary, and in fall 2002, Kyrpides's annual salary was increased to $120,000. Kyrpides also agreed to accept late paychecks as Integrated was still having financial difficulties. Between 2002 and 2004, Integrated issued paychecks that were over sixty days late on more than one occasion. In October 2003, Kyrpides, along with several other employees, wrote to Dr. Andres Schulze, head of one of Integrated's main investors, to advise him of Integrated's financial difficulties and delayed paychecks. Despite these delays and complaints, Kyrpides did receive payment for each pay period of his employment with Integrated, receiving his final check on June 3, 2004, over a month after his resignation.

III. Events Leading up to Kyrpides's Resignation from Integrated

In October 2003, Kyrpides interviewed for a position at JGI, a project of the Lawrence Berkeley National Laboratory operated by the Regents of the University of California. During his interview, Kyrpides indicated that several other Integrated employees would also be interested in applying to JGI and joining him there. On December 19, 2003, JGI offered Kyrpides a position as a biologist staff scientist in JGI's Microbial Genome Analysis Program.

On February 26, 2004, Kyrpides wrote to Roelf Datema, Integrated's chief executive officer, advising him that he was resigning and expected to leave in mid-April but noting that he had not yet accepted any other position. Kyrpides testified that he accepted the JGI position the following day. He left Integrated on April 20, 2004. In negotiating his last day of employment -- April 20, 2004 -- Kyrpides relied on the provisions of his 1999 employment agreement, claiming that premature termination would entitle him to severance.

In March 2004, prior to Kyrpides's departure from Integrated but after he had accepted the JGI position, he wrote a letter of recommendation to JGI on behalf of Natalia Ivanova, a fellow Integrated employee. Ivanova accepted a position at JGI on March 27, 2004 and left Integrated on May 12, 2004. In an annual supplement to his professional resume for 2004 and 2005, Kyrpides listed as one of his achievements "identify[ing] and recruit[ing] a group of world experts in microbial genome analysis and metabolic reconstruction" and included Ivanova in this group. Ex. 17 to Integrated's L.R. 56.1 Stmt. Despite this statement, Kyrpides testified that he attempted to persuade Ivanova to stay at Integrated after he accepted his position at JGI, but that Ivanova told him that "'[t]here is nothing that would make me stay. I am determined to leave, and I'm looking for alternative positions.'" Ex. 3 to Integrated's L.R. 56.1 Stmt at 340:8--16, hereinafter "Kyrpides Dep." Ivanova has stated that she left Integrated for financial and emotional reasons, as the reduced pay and delayed paychecks she received from Integrated between 2001 and 2004 made it difficult for her to provide for her two children and parents, ultimately forcing her to leave her children in Russia with her parents while she sought more financially stable employment in the United States.

In his resignation letter, Kyrpides stated that Integrated would suffer as a result of his resignation, as replacing any microbiologist or biochemist in his group would take between six and twelve months, but replacing him or Ivanova would "evidently take much longer." Ex. B to Am. Compl. Integrated has estimated that had it hired a qualified replacement for Ivanova, the cost would have been between $30,000 to $40,000 in employee time and recruiter fees, and that approximately $76,000 to $100,000 in salaried time would have to be spent before this replacement became profitable. Integrated did not, however, endeavor to hire a replacement for Ivanova. Instead, it relied on other staff to cover Ivanova's workload. In 2007, Integrated began to outsource Ivanova's ...


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