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Advanced Aerofoiltechnologies v. Thomas Todaro

November 30, 2011

ADVANCED AEROFOILTECHNOLOGIES, INC., ET AL., PLAINTIFFS,
v.
THOMAS TODARO, ET AL.,
DEFENDANTS.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Before the Court are (1) Plaintiffs' Motion for a Temporary Restraining Order [3] and (2) Defendants' Motion to Dismiss [8]. On November 4, 2011, Plaintiffs Advanced Aerofoil Technologies, AG ("AAT AG"), Advanced Aerofoil Technologies, Inc. ("AAT Inc.") and Advanced Aerofoil Technologies, GmbH ("AAT Germany"), (collectively "AAT"), filed a five count complaint against Defendants Thomas Todaro, Anthony Chalder, Mark Tarby, Charles Byrd, Daniel Abbasi, Herve Flutto, Peter Konrad, Advanced Engineering Technologies, and Flowcastings, LLC, alleging violations of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, et seq., the Illinois Trade Secret Act, ("ITSA"), 765 ILCS 1065/1, et seq., conversion, and tortious interference with contract and with prospective economic advantage. Plaintiffs seek injunctive relief, restitution, and compensatory and punitive damages. On November 10, 2011, Plaintiffs also filed an emergency motion for a temporary restraining order ("TRO"). In their motion for a TRO, Plaintiffs focus principally on the CFAA and ITSA claims.

On November 15, 2011, Defendants filed a motion to dismiss [8] pursuant to Fed. R. Civ. P. 12(b)(2) and 12(b)(6), principally arguing that (1) the Court lacks personal jurisdiction over the Defendants and (2) an existing settlement agreement between the parties prevents Plaintiffs from seeking judicial relief in any event. On November 16, 2011, the Court conducted an initial hearing on Plaintiffs' request for a TRO. The Court then set a briefing schedule on the respective motions and set the matter for further hearing. On November 22, 2011, the Court held a second hearing during which Plaintiffs elicited testimony from a live witness, Robert Seth Armstrong,*fn1 and both counsel presented their arguments on the pending motions. On November 24, 2011, Plaintiffs filed a motion for leave to supplement the record [25] with additional materials and affidavits. Finally, on November 28, 2011, both parties submitted additional briefing [26, 27] addressing certain issues that arose during the November 22 hearing, including the amount of any bond that the Court would set in the event that it entered the requested TRO.

Having considered the relevant legal standards governing the TRO and the motion to dismiss, as well as Plaintiffs' and Defendants' motions, memoranda, and supporting materials, the arguments of counsel and the testimony presented at the November 22, 2011 hearing, the Court grants Defendants' motion to dismiss [8] and denies Plaintiffs' motion for a TRO [3]. Given the dismissal on jurisdictional grounds, the denial of the TRO obviously is without prejudice to Plaintiffs seeking injunctive relief in a court of competent jurisdiction -- for example, in connection with any arbitration proceeding that may be commenced (see discussion at 13-14, infra).

I. Background*fn2

AAT AG, a Swiss Company, is a worldwide provider of precision investment castings for power generation and transportation industries. AAT AG is a parent company with branches in Germany (AAT GmbH) and in the United States (AAT Inc.). Plaintiffs explained that AAT Germany and AAT Inc. share all information and resources as sister-companies. AAT Inc. is a Delaware Corporation that has its primary office at 20 North Wacker Drive, Suite 3720, Chicago, Illinois. It appears to have a single employee, Mr. Armstrong, who testified that he has worked at AAT, Inc. since March 2011. The individual Defendants are former employees of (or consultants to) Plaintiffs, who worked in senior management for AAT Germany. While Defendants were physically present in Germany for all of their substantive work, they were compensated for their employment, reimbursed for expenses, filed tax returns and received health coverage from AAT Inc., and paperwork regarding their employment was sent to or from the Chicago office. Plaintiffs also contend that Defendant Todaro attended at least one meeting with one of AAT's customers, Abrasive Form, in Illinois during 2010.*fn3 Defendant Abbasi admits that he traveled to Illinois for an interview with AAT Inc. Plaintiffs also point to alleged business transacted by and meetings attended by Defendants Chalder, Tarby, Byrd, and Abbasi involving "customers" or a "client" of AAT, but provide no details whatsoever as to those contacts. Apart from these contacts, Plaintiffs have not alleged any other specific interaction between any of the individual Defendants and the State of Illinois. Defendants Advanced Engineering Technologies and Flowcastings, LLC*fn4 are companies created by some of the individual Defendants, and according to Plaintiffs are in direct competition with AAT in the casting business.

Plaintiffs allege that at some point in the first quarter of 2011, Defendants Byrd and Flutto "hatched a plan to secretly set up a competing venture (Flowcastings, LLC), and pilfer valuable confidential, proprietary and trade secret information from Plaintiffs, while secretly undermining Plaintiffs' business by destroying vital records and negatively and falsely reporting on Plaintiffs' economic prospectus to other employees and customers." Pl. TRO at 5. According to Plaintiffs, Defendant Byrd hired Defendant Abbasi to be an outside fundraiser for AAT Germany. However, Byrd secretly instructed Abbasi to put on hold his fundraising efforts for AAT Germany and instead directed him to find investors for Flowcastings. Abbasi is now the President of Flowcastings.

After securing financing for Flowcastings, Flutto and Byrd are alleged to have left their positions at AAT AG and AAT Germany, after which time they purportedly began recruiting AAT employees during the first and second quarters of 2011. Plaintiffs also allege that before leaving, Flutto and Byrd accessed AAT Germany's servers and transferred confidential, proprietary and trade secret information. They also instructed new Flowcastings hires, at a time when they were still AAT Germany employees, to sabotage their AAT Germany computer files and data and destroy testing results before leaving their AAT positions. Flutto and Byrd then hired AAT Germany's Technical Director, Defendant Thomas Todaro, while he was still working at AAT Germany. Plaintiffs allege that Todaro, while he was still employed and compensated by AAT Inc., set out to sabotage AAT Germany's operations and intentionally sought to damage its customer relationships. Defendants also hired former AAT Germany employees Fabian Korb, Peter Konrad, Anthony Chalder, and Bernd Leonhardt.

On September 2, 2011, AAT AG and Defendants Todaro and Byrd signed a Confidential Termination Agreement ("Settlement Agreement"). In the Settlement Agreement the parties agreed to release each other from "any and all claims, liabilities, obligations, both known and unknown, that arise out of or in any way are related to events, acts, conduct, or omissions occurring at any time prior to and including the Settlement Agreement Date." Settlement Agreement, p. 2. The Settlement Agreement also included a covenant not to sue and provided that any dispute concerning the Agreement would be resolved by binding arbitration in Manhattan, New York, New York, in accordance with the laws of the State of New York. Settlement Agreement, p. 3-4. There is no indication in the record of any confidentially agreement or covenant not to compete between any of the Plaintiffs and any of the Defendants at any time relevant to this lawsuit.

On October 13, 2011, AAT Inc.'s Director Robert Seth Armstrong was inadvertently copied on an e-mail from Graham Durber, Marketing & Technical Manager, Europe of Western Australian Specialty Alloys, answering an e-mail sent by Defendant Herve Flutto, regarding the supply of alloy for Flowcastings. Attached to the e-mail was a power point presentation that included Flowcastings Management Team-all former members of AAT Germany's senior management. Plaintiffs allege that the technology discussed in the power point presentation is virtually identical to AAT Germany's confidential and proprietary technology-technology to which the former AAT Germany employees had unfettered and unlimited access. Three weeks after receiving the October 13 e-mail, Plaintiffs filed this suit.

II. Analysis

Before the Court are Plaintiffs' motion for a TRO and Defendants' Motion to Dismiss. Because Defendants argue that Plaintiffs' complaint must be dismissed for lack of personal jurisdiction and this Court only has the power to grant a TRO if it has personal jurisdiction, the Court begins by addressing Defendants' motion. See, e.g., American Girl, LLC v. Nameview, Inc., 381 F. Supp. 2d 876, 880 (E.D. Wis. 2005) ("Because 'a restraining order or injunction is an in personam restraint issued against a party over whom the court has acquired jurisdiction,' '[i]f the court lacks personal jurisdiction over a party, it should not enter an injunction or restraining order against that party.'" (citing 13 James Wm. Moore et al., MOORE'S FED.

PRACTICE § 65.61[1] (3d ed. 2005)).

A. Defendants' Motion to Dismiss

Defendants argue that Plaintiffs' claims must be dismissed for lack of personal jurisdiction. In the alternative, Defendants argue that even if this Court has personal jurisdiction, Plaintiffs' claims must be dismissed because the Settlement Agreement between the parties instructs that arbitration in New York-not a ...


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