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Lkq Corporation v. Donald Fengler

April 23, 2012

LKQ CORPORATION, PLAINTIFF,
v.
DONALD FENGLER, AN INDIVIDUAL,
DEFENDANT.



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

MEMORANDUM OPINION AND ORDER

Plaintiff LKQ Corporation sued Donald Fengler, alleging that Fengler breached his confidentiality, non-competition, and non-solicitation agreement, and violated the Illinois Trade Secrets Act ("ITSA"), 765 ILCS 1065/1, et seq., when he went to work for one of LKQ's competitors, Allied Auto Salvage, Inc. In addition to its three-count complaint [1], LKQ has filed an emergency motion for a temporary restraining order and other relief [6]. For the reasons set forth below, the Court denies LKQ's motion [6].

I. Background

This case involves the aftermarket automobile parts industry, which Plaintiff describes as "highly competitive and subject to intense price competition." (Compl. ¶ 6.) Plaintiff LKQ Corporation is a national supplier of salvage and aftermarket automobile parts to body shops, mechanical repair shops, and other suppliers. Defendant Donald Fengler is a former employee of LKQ who, until recently, worked as an outside buyer for one of LKQ's wholly-owned subsidiaries.

In 2004, Fengler began working as a purchaser for Team Truck Dismantling ("Team Truck"). Team Truck is a California corporation with its principal place of business in California. All of the work that Fengler performed in connection with his Team Truck employment was in California. On September 8, 2011, Pick-Your-Part Auto Wrecking ("Pick-Your-Part"), a wholly-owned subsidiary of LKQ, acquired Team Truck. Pick-Your-Part was and is a California corporation with its principal place of business in California.

Upon Pick-Your-Part's acquisition of Team Truck, Fengler was presented with the "LKQ Corporation Confidentiality, Non-Competition and Non-Solicitation Agreement" ("the Agreement"). The Agreement stated, in part, that "in consideration of Employee's employment by and with [LKQ] or one of its subsidiaries (this Agreement being a condition of such employment), [LKQ] and Employee agree to": (1) keep all confidential information confidential, both during and after employment with LKQ, and return all confidential information to LKQ upon termination of employment for any reason; (2) not compete with any of LKQ's competitors for nine months following termination of employment, and within a 75-mile radius of any LKQ facility in which the employee worked; and (3) not solicit any of LKQ's customers for nine months following termination of employment. The Agreement included both a choice-of-law clause and a forum selection clause. Fengler's boss, Ted Smith, told Fengler that he was required to sign the Agreement as a condition of his continued employment as an outside buyer with Pick-Your-Part. Fengler signed the Agreement in California on September 13, 2011.

As an outside buyer for Pick-Your-Part, Fengler attended auctions, travelled to dealerships, and met with towing companies and auto repair garages to purchase vehicles for the company. As part of his employment, and to assist with his evaluation of vehicles for purchase, Fengler received LKQ's pricing book. LKQ's pricing book contains vehicle grades based on its evaluation of several benchmarks, including the volume of sales of parts from particular vehicles, inventory levels of vehicles, and other factors. LKQ assembled the pricing book using confidential and proprietary information not available in the public domain.

On March 23, 2012, after working for Pick-Your Part for six months, Fengler left the company and immediately began working for Pick-Your-Part's competitor, Allied Auto Salvage, Inc. Allied is a California corporation with its principal place of business in California. All of the work that Fengler performs as an outside buyer for Allied is done in California.

On April 13, 2012, LKQ filed its three-count complaint in this case, alleging breach of the Agreement and violation of the ITSA, and seeking preliminary and permanent injunctive relief. Along with its complaint, LKQ moved for a temporary restraining order under Federal Rule of Civil Procedure 65. In its motion, LKQ requests that the Court enter an order: (1) restraining and enjoining Fengler from competing against LKQ or any of its affiliated companies, within seventy-five miles of LKQ's present or former facilities in Riverside, San Bernardino, and Hesperia, California; (2) restraining and enjoining Fengler from soliciting any LKQ suppliers with which Fengler had business dealings during his employment with LKQ; (3) restraining and enjoining Fengler from using, disclosing, or transmitting LKQ's confidential information; and (4) entering a mandatory injunction that Fengler return all confidential information to LKQ, and ordering him to account for any profits obtained from its use.

In response, Fengler argues that LKQ's motion must fail because LKQ cannot show a likelihood of success on the merits. Specifically, Fengler contends that California, not Illinois, law applies here and that under California law, LKQ has no chance of success on the merits on either of its two claims. Fengler also attests that (1) he destroyed the pricing book at or about the time that he left his employment with Pick-Your-Part; (2) he did not make or keep any copies of the pricing book or provide the book to any other person or entity; and (3) since leaving Pick-Your-Part, he has never used or disclosed to anyone any information from the pricing book, either by consulting the physical manual or from his own recollection.

II. Analysis

A. Personal Jurisdiction

Before reaching the merits of LKQ's motion, the Court will first address Fengler's argument that this Court lacks personal jurisdiction over him. Fengler concedes that a valid forum-selection clause is enough to confer personal jurisdiction. See Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1292 n.4 (7th Cir. 1989); Ace Hardware Int'l Holdings, Ltd. v. Masso Expo Corp., 2011 WL 5077686, at *6 (N.D. Ill. Oct. 25, 2011) ("A defendant may waive the ability to challenge personal jurisdiction by consenting to an enforceable forum selection clause."); LKQ Corp. v. Thrasher, 785 F. Supp. 2d 737, 742 (N.D.

Ill. May 23, 2011) ("Waiving objections to personal jurisdiction via a valid forum selection provision renders any examination of the defendant's contacts with the forum state unnecessary."). He argues, however, that the forum-selection clause at issue in this case is invalid for lack of consideration. According to Fengler, because the entity that employed Fengler -- Pick-Your-Part -- is not the entity that extracted the promise that LKQ seeks to enforce, Fengler has not properly consented to jurisdiction in Illinois. Moreover, Fengler contends that the agreement was presented to him as a condition of continued employment ...


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