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OptionMonster Holdings, Inc. v. Tavant Technologies

June 29, 2010

OPTIONMONSTER HOLDINGS, INC., PLAINTIFF,
v.
TAVANT TECHNOLOGIES, INC., ET AL., DEFENDANTS.



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

MEMORANDUM OPINION

This matter is before the court on Plaintiff OptionMonster Holdings, Inc.'s (OptionMonster) motion for a preliminary injunction. For the reasons stated below, we grant the motion for a preliminary injunction.

BACKGROUND

OptionMonster alleges that it hired Defendant Tavant Technologies, Inc. and Defendant Tavant Technologies, India, Private Ltd. (collectively referred to as "Tavant") to develop certain aspects of the OptionMonster Brokerage System (System), an online trading platform. To facilitate the development of the System (Project), OptionMonster allegedly shared its proprietary and trade secret information with Tavant and Defendant Abey Tom, Defendant Bhargava Narayana, Defendant Devesh Raghubanshi, Defendant Khajamiya Mohammad, Defendant Mehrubanu Thoombath, Defendant Mohammad Bilal, Defendant Mohammad Rashid, Defendant Mohneesh Singh, Defendant Muralidhar Polavarapu, Defendant Niju Ninan Pothan, Defendant Praveen Kumar, Defendant R. Jyothi, Defendant R. Nirmal Kumar, Defendant Rachita Roy, Defendant Sridevi Itla, and Defendant B. Uma Gandhi (collectively referred to as "Individual Defendants"). OptionMonster's proprietary and trade secret information was allegedly protected by a Software System Development and Support Services Agreement (Services Agreement) entered into by Tavant, and by various confidentiality agreements entered into by Individual Defendants (Individual Agreements) (Services Agreement and Individual Agreements collectively referred to as "Agreements").

Pursuant to the Agreements, Defendants agreed that the employees working on the Project (Project Staff) would be segregated from all other Tavant employees. Defendants also agreed under an non-assignment provision (Non-Assignment Provision) that none of the Project Staff would be assigned to any projects performed for any competitor of OptionMonster (Competitor) for at least eighteen months after the employee completed work on the Project. In addition, Defendants agreed that OptionMonster's proprietary and trade secret information would be deleted or destroyed as Project Staff completed their work on the Project.

OptionMonster alleges that in December 2009, after becoming concerned that Defendants were violating the Agreements, OptionMonster reviewed Tavant's marketing presentation to other online brokerage companies. According to OptionMonster, the presentation confirmed that Tavant was using OptionMonster's proprietary and trade secret information to solicit business from Competitors. OptionMonster also alleges that one of OptionMonster's employees, Sanjib Sahoo (Sahoo), visited Tavant's facilities in Bangalore, India around that same time, and allegedly saw a demonstration of another trading project being developed by Tavant. After Sahoo allegedly saw the demonstration, OptionMonster allegedly requested that Tavant reconfirm that Defendants were abiding by the terms of the Agreements. According to OptionMonster, Tavant made misrepresentations to OptionMonster at that time indicating that Defendants were in compliance with the Agreements.

OptionMonster allegedly continued to make inquiries regarding Defendants' compliance with the Agreements, and on March 17, 2010, Tavant allegedly admitted that certain Individual Defendants had been assigned to projects for Competitors in violation of the Agreements. OptionMonster claims that, as a result of Tavant's alleged admission, OptionMonster directed Tavant to conclude the work being performed for OptionMonster in Bangalore, India. OptionMonster also allegedly advised Tavant that OptionMonster would conduct an audit in Bangalore from April 12-16, 2010, to confirm that Defendants had deleted or destroyed all information relating to OptionMonster's proprietary information and trade secrets. OptionMonster states that when it conducted the audit, OptionMonster allegedly found that Defendants had not deleted or destroyed OptionMonster's proprietary information and trade secrets, and also found additional evidence indicating that the Project had not been segregated from other projects being performed for Competitors. OptionMonster further alleges that Defendant Mohammad Rashid opened an OptionMonster account solely for the purpose of misappropriating OptionMonster's proprietary information and trade secrets.

On May 5, 2010, OptionMonster brought the instant action seeking damages and injunctive relief. OptionMonster's complaint includes a claim for breach of contract brought against Tavant (Count I), claims for breach of contract brought against Individual Defendants (Count II), claims for violations of the Illinois Trade Secrets Act (ITSA), 765 ILSC § 1065 et seq., brought against all Defendants (Count III), claims for violations of the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030 et seq., brought against Tavant and Rashid (Count IV), a claim for violations of the Lanham Act, 15 U.S.C. § 1051 et seq., brought against Tavant (Count V), and a claim for unjust enrichment brought against Tavant (Count VI).

On May 6, 2010, OptionMonster filed a motion for a temporary restraining order and a motion for a preliminary injunction based upon OptionMonster's breach of contract and ITSA claims. At a hearing on OptionMonster's motion for a temporary restraining order, held May 7, 2010, Defendants agreed to maintain the status quo until the court ruled on OptionMonster's motion for a preliminary injunction.

According to OptionMonster, Defendants have breached the Agreements and used OptionMonster's proprietary and trade secret information to develop products for Competitors. In addition, OptionMonster states that Defendants are immediately poised to deliver products to Competitors that contain or were developed using OptionMonster's confidential information and trade secrets. To preserve the status quo during the pendency of this proceeding, OptionMonster has come before this court requesting that, until the resolution of the instant action, the court prohibit Defendants from marketing or delivering such products and from further using OptionMonster's proprietary information and trade secrets in connection with Defendants' work for Competitors. OptionMonster contends that such relief is necessary to prevent "severe and irreparable harm to OptionMonster's competitive advantage in the online options trading marketplace." (P Mot. 9). OptionMonster moves for a preliminary injunction on its breach of contract and ITSA claims. On May 25, 2010, the court held a preliminary injunction hearing, at which the parties presented documentary evidence and arguments addressing OptionMonster's motion for a preliminary injunction.

LEGAL STANDARD

A preliminary injunction will be granted when "the movant, by a clear showing, carries the burden of persuasion." Goodman v. Illinois Dept. of Financial and Professional Regulation, 430 F.3d 432, 437 (7th Cir. 2005). In order to obtain a preliminary injunction, a plaintiff must show that: "(1) [the plaintiff] ha[s] a reasonable likelihood of success on the merits; (2) no adequate remedy at law exists; (3) [the plaintiff] will suffer irreparable harm which, absent injunctive relief, outweighs the irreparable harm the defendant will suffer if the injunction is granted; and (4) the injunction will not harm the public interest." Goodman, 430 F.3d at 437.

DISCUSSION

I. Reasonable Likelihood of Success on the Merits

OptionMonster claims that it is likely to succeed on the merits of its breach of contract and ITSA claims. To determine whether a plaintiff has a reasonable likelihood of success on the merits, the court must assess whether the plaintiff has "a greater than negligible chance of winning...." AM General Corp. v. DaimlerChrysler Corp., 311 F.3d 796, 804 (7th Cir. 2002). In addition, the required showing by the plaintiff for the likelihood of success on the merits is lower if there is "a greater predominance of the balance of harms." AM General, 311 F.3d at 804; see also Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of America, Inc.,549 F.3d 1079, 1086 (7th Cir. 2008)(stating that, during the balancing stage, "the court employs a sliding scale approach: '[t]he more likely the plaintiff is to win, the less heavily need the balance of harms weigh in his favor; the less likely he is to win, the more need [the balance of harms] weigh in his favor'")(citations omitted). Defendants argue that OptionMonster has not shown a likelihood of success on the merits on the breach of contract claims or ITSA claims.

A. Breach of Contract Claims

Defendants do not dispute that they breached certain provisions of the Agreements. However, Defendants argue that OptionMonster cannot prevail on its breach of contract claims because OptionMonster failed to substantially perform under the contract and waived the confidentiality and Non-Assignment Provisions in the Agreements. To succeed on a breach of contract claim under Illinois law, a plaintiff must show "(1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the ...


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