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Network Cargo Systems International, Inc. v. Pappas

United States District Court, N.D. Illinois, Eastern Division

April 25, 2014

NETWORK CARGO SYSTEMS INTERNATIONAL, INC., et al., Plaintiffs,
v.
CAROLINE PAPPAS, Defendant.

MEMORANDUM OPINION AND ORDER

ELAINE E. BUCKLO, District Judge.

Defendant Caroline Pappas's motion to dismiss the amended complaint is granted only in part for the reasons stated below.

I.

Pappas is the former regional sales manager for Network Cargo Systems U.S.A., Inc. ("Network Cargo America"), a wholly owned subsidiary of Network Cargo Systems International, Inc. ("Network Cargo International"). These companies-collectively, "Plaintiffs"-act as general sales agents for airlines seeking to sell cargo space on their planes.

Plaintiffs have filed an eleven count complaint against Pappas alleging violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq., (Counts I and II); breach of her employment agreement (Count III); violation of the Illinois Uniform Trade Secrets Act, 765 ILCS § 1065/1 et seq. (Count IV); and various Illinois common law claims (Counts V-XI).

Pappas has moved to dismiss all counts in the amended complaint under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. In resolving Pappas's motion, I must accept all well-pled allegations in the amended complaint as true and draw all reasonable inferences in Plaintiffs' favor. Int'l Airport Centers, LLC v. Citrin, 440 F.3d 418, 419 (7th Cir. 2006).

II.

As an initial matter, Pappas argues that Network Cargo International lacks standing to assert any claims against her because it was not a party to her employment agreement. Plaintiffs counter that an undisclosed parent corporation is considered a party to employment agreements entered into by its subsidiaries unless a particular employee's contract provides otherwise. See Montel Aetnastak, Inc. v. Miessen, No. 13 C 3801, 2014 WL 702322, at *5 (N.D. Ill. Jan. 28, 2014) (Castillo, C.J.) (citing Restatement (Third) of Agency § 6.03 (2006)). However, Plaintiffs overlook the threshold requirement that the undisclosed parent corporation and subsidiary must be in a principal-agent relationship before both entities have overlapping enforcement rights with respect to the subsidiary's contracts. Id. at *4.

Under Illinois law, "[a] complaint relying on agency must plead facts which, if proved, could establish the existence of an agency relationship." Connick v. Suzuki Motor Co., Ltd., 675 N.E.2d 584, 592 (Ill. 1996). "The test of agency is whether the alleged principal has the right to control the manner and method in which work is carried out by the alleged agent and whether the alleged agent can affect the legal relationships of the principal." Chemtool, Inc. v. Lubrication Techs., Inc., 148 F.3d 742, 745 (7th Cir. 1998) (applying Illinois law).

Here, the amended complaint is devoid of allegations concerning (1) whether Network Cargo International controls the manner and method of Network Cargo America's business activities or (2) whether Network Cargo America can affect Network Cargo International's legal relationships. Cf. Miessen, 2014 WL 702322 at *4 (denying motion to dismiss Canadian parent corporation for lack of standing because complaint alleged that U.S. subsidiary was authorized to enter into purchasing contracts on parent's behalf and could therefore affect parent's legal relationships). Plaintiffs allege nothing more than a parent-subsidiary relationship between Network Cargo International and Network Cargo America. Am. Compl. at ¶¶ 1-2. This allegation, standing alone, is insufficient to establish a principal-agent relationship under Illinois law. See Gass v. Anna Hosp. Corp., 911 N.E.2d 1084, 1090 (Ill.App.Ct. 2009) (holding that parent corporation, by definition, has working control of subsidiary corporation through stock ownership, but stock ownership alone does not create principal-agent relationship between parent and subsidiary).

Therefore, I grant Pappas's motion to dismiss Network Cargo International's claims for lack of standing. Henceforth, the term "NCS" refers only to Network Cargo America.

III.

Next, Pappas seeks dismissal on jurisdictional grounds. She argues that federal subject matter jurisdiction is lacking because (1) NCS has failed to state a claim under the only federal statute invoked in the amended complaint and (2) ...


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