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Sysco Corporation v. Katz

United States District Court, Seventh Circuit

October 3, 2013



RONALD A. GUZMN, District Judge.

For the reasons stated above, Katz's motion to dismiss [26] is granted in part and denied in part while Reinhart's motion to dismiss [23] is granted.


Sysco Corporation ("Sysco") and Sysco Grand Rapids, LLC ("SGR"), collectively, "Plaintiffs, " sued their former employee Aaron Katz and his new employer Reinhart Foodservice, LLC when he left SGR and began employment with Reinhart. Both Katz and Reinhart have filed motions to dismiss.

I. Facts

The following well-pleaded facts are taken as true for purposes of these motions to dismiss. Katz began working at Sysco in or around 1999. (Am. Compl., Dkt. # 41, ¶ 2.) In or about October 2004, Katz began employment with Sysco Dallas as Executive Vice-President and signed a Confidentiality Agreement at that time. ( Id . ¶ 28.) At some point, Katz began employment with SGR. During the course of his employment, Katz was responsible for high-level strategic decisions, had access to confidential client lists, sales and cost information, and was privy to certain strategic initiatives of SGR. ( Id . ¶ 30.)

Katz announced his resignation on July 1, 2013, telling the Vice-President for Employee Relations that he had been planning to join Reinhart for some time but had waited until June 29, 2013 so that certain of his retirement benefits would vest. ( Id . ¶ 45.) Prior to that date, while on vacation, Katz logged onto his SGR e-mail account and remotely accessed Plaintiffs' stored communications and electronic document repository systems. ( Id . ¶ 34.) Over several days, Katz forwarded e-mails to his wife's e-mail account with SGR/Sysco documents attached. ( Id .) These documents covered a variety of topics including merger and acquisition strategy materials, templates for master distribution agreements, sales forecasts, information related to marketing programs and a spreadsheet detailing sales figures and profit margins. ( Id . ¶ 36.) Some of the documents date back to 2008 while others were only days old. ( Id . ¶ 37.)

On information and belief, Katz disclosed the documents or the information contained therein to Reinhart. ( Id . ¶ 38.) Sysco has learned that Katz accepted employment with Reinhart on or about May 8, 2013, almost two months prior to his resignation. ( Id. ¶ 48.) During this almost two-month period between his acceptance of employment at Reinhart and his resignation from SGR, Katz had repeated communications with Reinhart executives. ( Id .) After Katz's last day at SGR, which was July 1, 2013, individuals from SGR's Information Technology Department began a review of Katz's recent e-mail history and discovered the e-mails he had forwarded to his wife's e-mail account. ( Id . ¶ 50.) On July 9, 2013, Plaintiffs sent Katz and Reinhart a letter informing them that they were aware of the e-mails and documents that Katz sent to his wife's e-mail account, demanded that Katz refrain from accessing, disclosing, or in any way using Plaintiffs' confidential or proprietary information, and instructed Katz and Reinhart to preserve all evidence relating to such activity. ( Id . ¶ 51.)

On July 15, 2013, Plaintiffs received a response from Reinhart, which was copied to Katz, in which Reinhart stated it had discussed the issue with Katz, who denied sharing any confidential information with Reinhart personnel, and stated that he had destroyed any of Plaintiffs' information he may have had upon his termination of employment with SGR. ( Id . ¶ 52.) On July 17, 2013, Plaintiffs received an e-mail from Katz stating that he had destroyed all information he had from them. ( Id .) Katz waited two days after he received Plaintiffs' July 9, 2013 letter, which instructed him to preserve all evidence, to destroy the e-mails and documents. ( Id . ¶ 54.) He destroyed the documents and e-mails while an employee of Reinhart and with the knowledge of others at Reinhart, including Grace Shaff, Reinhart's General Counsel. ( Id .) Subsequent forensic examination uncovered information that Katz had been considering relocating to the Chicago area, where Reinhart is located, as early as April 2013 and that Katz had been sending e-mails to his wife's e-mail account with Plaintiffs' documents attached as of May 4, 2013. ( Id . ¶ 57.) On or about July 23, 2013, Plaintiffs discovered an e-mail sent from Katz's wife's e-mail account to Katz's SGR e-mail account on July 1, 2013, which appeared to be sent by an individual named "Vince" asking "how your notice went." ( Id . ¶ 59.) The sender asked Katz to call him at 847-274-8072, which an online reverse lookup indicates is registered to "Reyes, H." ( Id . ¶ 60.) The parent company of Reinhart is Reyes Holdings, and, on information and belief, the phone number in the e-mail is registered to Vince Daniels, the Vice-President of Human Resources for Reinhart. ( Id . ¶ 61.)

Plaintiffs filed suit against Reinhart and Katz alleging the following counts: Count I - violation of the Computer Fraud and Abuse Act (against Katz and Reinhart); Count II - violation of the Stored Communications Act (against Katz); Count III - breach of contract (Katz); Count IV - breach of fiduciary duty (Katz); Count V - breach of duty of loyalty (Katz); Count VI - intentional interference with contract (Reinhart); and Count VII - inducement of breach of fiduciary duty (Reinhart).

II. Standard

On a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded factual allegations of the complaint, drawing all reasonable inferences in plaintiff's favor. Hecker v. Deere & Co. , 556 F.3d 575, 580 (7th Cir. 2009). "[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations" but must contain "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). III. Analysis

A. Computer Fraud and Abuse Act ("CFAA") - against Katz and Reinhart

The CFAA creates a civil cause of action against an individual who: "(A) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer; (B) intentionally accessed a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or (C) intentionally accessed a protected computer without authorization, and as a result of such conduct, causes damage and loss." 18 U.S.C. § 1030(a)(5)(B). To succeed on a CFAA claim brought under § 1030(a)(5)(B), a plaintiff must ...

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