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Triumph Packaging Group, An Illinois Corporation v. Scott Ward

December 2, 2011

TRIUMPH PACKAGING GROUP, AN ILLINOIS CORPORATION, PLAINTIFF,
v.
SCOTT WARD, VITAL-X ASSOCIATES, LLC, AN ILLINOIS LIMITED LIABILITY CORPORATION, CREATIVE DESIGN PRODUCTS, INC., JOHN DOES, JANE ) DOES AND ABC COMPANIES, DEFENDANTS.



The opinion of the court was delivered by: Amy J. St. Eve, District Court Judge:

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff Triumph Packaging Group's ("Triumph") motion for a preliminary injunction. For the following reasons, the Courtdenies Triumph's motion.

PROCEDURAL HISTORY

On November 8, 2011, Triumph filed a seven-count Complaint against Defendants Scott Ward, Vital-X Associates, LLC ("Vital-X"), Creative Design Products, Inc. ("CDP"), John Does, Jane Does and ABC Companies (collectively, "Defendants"), alleging the following claims: 1) actual and threatened misappropriation of trade secrets in violation of the Illinois Trade Secrets Act ("ITSA"), 765 ILCS 1065/1, et seq. against Defendant Ward; 2) violation of the Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. against all Defendants; 3) breach of fiduciary duty against Defendant Ward; 4) tortious interference with existing and prospective economic advantage against Defendants Ward, Vital-X and CDP;

5) civil conspiracy against all Defendants; 6) breach of contract against Defendant Ward; and 7) conversion against all Defendants. (R-1, Compl.)

On the same date, Triumph brought an emergency motion for a temporary restraining order and preliminary injunctive relief, seeking to enjoin Defendant Ward from, among other things, misappropriating Triumph's trade secrets and other proprietary information, assuming a position with Triumph's competitors--namely, AGI World, Inc. ("AGI World"), soliciting Triumph's clients, and violating his employment agreement with Triumph. (R. 4.) Triumph also sought an order requiring 1) Defendants to disclose all persons or entities to whom Defendant Ward disclosed Triumph's confidential information; 2) Defendants to account for and return to Triumph all originals and copies of Triumph's confidential materials; and 3) Defendant Ward to provide to the Court in a verified filing an accounting of all sales he made to the detriment of Triumph.(Id.)

The Honorable Matthew F. Kennelly, acting in his capacity as Emergency Judge, conducted a hearing on November 8, 2011, and granted Triumph's motion for a temporary restraining order on that same date. (R. 8; R. 9.) The Temporary Restraining Order ("TRO") enjoins Mr. Ward and all parties in active concert or participation with him, including Vital-X and CDP, from, among other things, 1) misappropriating, threatening to misappropriate, revealing or utilizing Triumph's trade secrets and other confidential information; 2) assuming a position with AGI World or related companies that would require him to inevitably use or disclose Triumph's trade secrets and other confidential information; 3) using, disclosing, disseminating, revealing, misappropriating or threatening to misappropriate any of Triumph's confidential or proprietary information or trade secrets; 4) owning any interest in, managing, controlling, participating in, consulting with, rendering services for, or in any manner engaging in any business competing with Triumph's business, as such business existed or in the process of existing on September 20, 2011 within any geographical area in which Triumph engaged or has definitive plans to engage in such business; 5) either as an individual or for his own account, or as an officer, employee, agent or salesperson of any corporation, firm or other entity, directly or indirectly, whether or not for monetary benefit, soliciting or diverting any of Triumph's customers that were customers during the term of Mr. Ward's employment with Triumph; and 6) violating his Employment Agreement with Triumph. (R. 9)

On November 13, 2011, Mr. Ward filed a motion to set a preliminary injunction hearing.

(R. 13.) The Court held a preliminary injunction hearing on November 16, 2011 and November 28, 2011, during which the following witnesses testified: 1) Bart McGuinn, Human Resources Director at AGI North America, LLC ("AGI"); 2) Randy Cecola, Chief Executive Officer of Triumph; 3) Patrice Calmels, former Director of Operations at AGI; 4) Mark Caines, Chief Executive Officer of AGI; and 5) Defendant Scott Ward. During the hearing, the Court had the opportunity to determine the credibility of each witness. The Court closely assessed the demeanor of each witness, including his body language, tone of voice, facial expressions, mannerisms and other indicative factors. At the close of the hearing, the parties each presented oral argument. The parties also filed written post-hearing submissions on November 29, 2011.

In Triumph's post-hearing brief, it narrowed the scope of its request for a preliminary injunction. Specifically, it now seeks to enjoin Mr. Ward from the following:

(1) disclosing to any unauthorized person or use for his own purposes any Confidential Information*fn1 gained while working at Triumph;

(2) refrain (for the remainder of this proceeding but no longer than twenty-four (24) months) from soliciting, diverting, or attempting to solicit or divert, any customer or active prospect of Triumph that was a customer or known active prospect during the term of Mr. Ward's employment;

(3) refrain (for the remainder of this proceeding but no longer than twenty-four (24) months) from encouraging or soliciting an employee or vendor of Triumph to terminate or modify its relationship with Triumph, or to perform substantially similar services as those performed for Triumph while Mr. Ward was employed; and

(4) refrain from engaging in an operational role regarding the design, development, manufacture or sale of food packaging folding cartons within the United States in any area where Triumph conducted such business at the time of Mr. Ward's termination.

See R. 40 at 2.Triumph also requests that the Court require, in the preliminary injunction order, Mr. Ward to "return immediately all data, documents or media in his possession which contain Triumph's Confidential Information." (Id.)

FINDINGS OF FACT

I. The Parties

Triumph is an Illinois corporation with its principle place of business in Bolingbrook, Illinois.*fn2 (Compl. ¶ 11.)Defendant Ward is a resident and citizen of Illinois. (Id. ¶ 12.) Defendant Vital-X is an Illinois corporation with its principal place of business in Barrington, Illinois. (Id. ¶ 13.) Mr. Ward owned and controlled Vital-X until its recent involuntary dissolution. (Id.) CDP is a business enterprise that Mr. Ward owns and controls. (Id. ¶ 14.)

II. Triumph's Business

Triumph is a privately-owned manufacturer. (Plf's Hearing Ex. 10, Stipulated Facts for Preliminary Injunction Hearing ("Stip.") ¶ 1.*fn3 ) Since 2005, Triumph has been in the business of offering high quality packaging services to large suppliers of consumer goods. (Compl. ¶ 18.) At the time Triumph filed the Complaint, its only shareholders were Messrs. Cecola and Ward. (Id. at 19.)Triumph's business includes designing, developing, printing, manufacturing, distributing and selling folding cartons. (Id. ¶¶ 20-21.) It also designs and converts graphics files used in producing folding cartons. (Id.)Mr. Cecola testified that since he purchased Triumph in 2005 out of bankruptcy, it has grown over 20% per year, compared to the industry average of approximately less than 2% per year.

Triumph has offered its services and provided products to several different industries, including consumer products, food, beauty and personal care, automotive and media. (Defs' Hearing Ex. 10, Triumph Sales Data.) The vast majority, approximately 85-95%, of Triumph's sales volume comes from folding carton sales to customers in the food industry.

III. Defendant Ward's Employment with Triumph

On September 5, 2005, shortly after Triumph's formation, Triumph hired Mr. Ward to serve as Triumph's Chief Operating Officer ("COO"), the same role in which he served until Triumph fired him on September 20, 2011. (Stip. ¶ 2.) At the time Triumph hired him, Mr. Ward signed an employment agreement (the "Employment Agreement"), which provided the terms and conditions of his employment. (Stip. ¶ 3; Hearing Ex. B, Employment Agreement.) The Employment Agreement required Mr. Ward to, among other things, 1) refrain from competing with Triumph while employed there and for a 24-month to 30-month period thereafter (Employment Agreement § 8); 2) refrain from soliciting Triumph's customers for anyone's benefit other than Triumph during his employment and for a 24-month period thereafter (id. § 9); and 3) refrain from soliciting Triumph's employees to perform services similar to those the employees performed for Triumph during his employment and for a 24-month period thereafter (id. § 10).In return for those covenants, Triumph allowed Defendant Ward access to its confidential information, paid him a salary of $175,000 per year, and gave him 50 shares of stock in Triumph. (Compl. ¶ 49.)On July 18, 2008, Mr. Ward executed the First Amendment to his Employment Agreement, pursuant to which his base salary increased to $260,000 with the opportunity for a performance-based increase. (Employment Agreement at Ex. A-1.)

In his role as COO, Mr. Ward personally interacted with Triumph's customers, vendors and other key business contacts on a regular basis. (Compl. ¶ 50.)He ran Triumph's day-to-day operations. As a result, he became aware of Triumph's confidential and proprietary information. Mr. Ward was instrumental in establishing and developing Triumph's pricing model, which included interpreting Triumph's pricing margins, vendor costs, market prices, labor rates, production speed and capability, and overhead.

IV. Mr. Ward's Diversion of Triumph's Resources and Revenue During His Employment With Triumph In 2010, while Mr. Ward was Triumph's COO and shareholder, he diverted resources and revenue from Triumph through 1) creating 3D mockups; 2) redesigning efforts of marketing slogans; 3) redesigning efforts of product packaging; 4) engaging in conversations and meetings with representatives of one of Triumph's former customers, Silvestri Sweets ("Silvestri"), 5) producing tens of thousands of ...


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