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Intertek USA Inc. v. Amspec, LLC

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

September 11, 2014



JOAN B. GOTTSCHALL, District Judge.

Intertek USA Inc. sued its competitor, AmSpec, LLC; its former employees, Jim Graca, Lisa Graca, and Melanie McMahon; and AmSpec officers Matthew Reilly and Malcolm Vella (collectively, "Defendants"), alleging, among other things, that Defendants misappropriated Intertek's trade secrets. Intertek moves for a preliminary injunction, seeking to enjoin AmSpec from opening a branch office in or around the Chicago metropolitan area as well as injunctive relief against Jim Graca and Melanie McMahon. The court held a preliminary injunction hearing from September 2-5, 2014. For the reasons explained below, Intertek's motion for a preliminary injunction is granted.


Intertek is a Louisiana corporation that tests and inspects petroleum products and chemicals. As part of its network of testing labs and offices, Intertek has a Chicago branch located in Romeoville, Illinois. Intertek owns roughly 60% of the market share for petrochemical testing and inspection in Chicago.

Jim Graca, Lisa Graca, and Melanie McMahon are all former employees of Intertek. Jim Graca was the branch manager of Intertek's Romeoville office. His wife, Lisa Graca, was Intertek's administrative assistant for the Midwest region. McMahon was the lab manager for the Romeoville office.

As employees of Intertek, the Gracas and McMahon were required to execute electronically "Employee Confidentiality and Innovation Agreements." The agreements included non-solicitation clauses, which prohibited former employees from attempting to solicit any Intertek employee for one year following their resignation or termination. The agreements also required employees not to disclose Intertek's confidential information and trade secrets, including its financial information, customer lists, and information related to its testing methods. An Intertek employee's access to confidential information was limited to information relevant to that employee's job, and access was password-protected.

AmSpec competes with Intertek in the petrochemical-testing industry. In 2013, AmSpec received an infusion of venture capital, which allowed it to expand into new markets, including Chicago. On September 13, 2013, after Jim Graca had heard that AmSpec was coming to Chicago and had called inquiring about a job, AmSpec's COO, Malcolm Vella, and Vice President, Matt Reilly, met with Graca in the Chicago area to discuss AmSpec's plans to open a lab in Chicago. On September 20, 2013, Reilly e-mailed Graca, saying that he was preparing a "business plan" for AmSpec's entrance into the Chicago market. (Pl.'s Ex. 3.)[1] Reilly told Graca that he "would greatly appreciate any information that [Graca] could give [Reilly]" regarding (1) the "top 20 or so potential clients with estimated potential revenue, " (2) the "minimum staffing requirements necessary to handle the anticipated workload, " and (3) a "listing of analytical capabilities required to accommodate the regional needs." ( Id. )

On September 25, 2013, Graca told Reilly that he "ha[d] an Admin, Ops Manager and Coordinator on board" to leave Intertek with Graca for AmSpec. (Pl.'s Ex. 6.)[2]He told Reilly that he was "working on the Business Plan" and asked Reilly whether he would like the plan fitted for Chicago or the entire Midwest region. ( Id. )

On September 27, 2013, Reilly e-mailed Graca an offer of employment to be AmSpec's Area Manager for the Inland Waterways & Midwest Region. (Pl.'s Ex. 7.) He noted that AmSpec had "not broken ground on a facility [in Chicago] yet" but said that he anticipated AmSpec would be able to do so "in approximately two months." ( Id. )

On October 3, 2013, Graca downloaded Intertek's 13-month Chicago aging and sales reports by accessing Intertek's "Phoenix" system, which is accessible only to Intertek employees through its intranet. (Pl.'s Ex. 8.) The reports listed Intertek's clients in the Chicago branch and their outstanding balances. ( Id. ) Graca then e-mailed the reports from his Intertek address to his personal e-mail address. ( Id. ) He then placed the e-mail in an e-mail folder labeled "AmSpec."

Also on October 3, 2013, Reilly sent Graca an e-mail with the subject line, "Chicag[o] - Budget Discussion." (Pl.'s Ex. 9.) Reilly attached a form template that he said would be used for presentation of his business plan to AmSpec's owners. ( Id. ) He asked Graca to review the document and to "let [Reilly] know when [Graca] ha[d] some time to discuss, " noting that he wished to "get [the business plan] preliminarily wrapped up and passed on prior to the weekend." ( Id. ) The business plan template attached to the e-mail included sections titled "Proposal, " "Assets, " "Summary, " "Financial Projections, " "Market Analysis, " "Staffing Requirements, " and "Capital Expenditure." ( Id. )

On October 4, 2013, Graca responded to Reilly's e-mail and asked if it would be "possible to try to complete tomorrow." (Pl.'s Ex. 10.) Reilly replied, "No worries... Tomorrow is fine...." ( Id. )

On October 5, 2013, Graca told Reilly to "add the Enbridge Southern Lights to our capability." (Pl.'s Ex. 11.) Enbridge was an Intertek customer, and "Southern Lights" was a specific testing project that Intertek performed for Enbridge. Graca's e-mail stated, "This will reflect analytical support to more customers than just Enbridge." ( Id. ) He then listed eleven different tests, such as "D5453 Sulfur" and "D6730 DHA." ( Id. ) He also listed four "non-routine methods" that AmSpec could "ship out for." ( Id. ) Graca testified that the e-mail had been prepared by Melanie McMahon.

On October 7, 2013, Jim Graca requested that Lisa Graca send him a copy of the recent profit and loss (P&L) statement for Intertek's Romeoville branch. (Pl.'s Ex. 14.) The P&L statement included information about the quantities of chemicals that Intertek tested, the payroll structure of Intertek's Romeoville branch, and the branch's rent and electricity costs. Graca forwarded the statement to his personal e-mail account and placed it in his AmSpec folder.

On October 11, 2013, Vella wrote Graca, saying "We need to really get things going" because Vella had "a board meeting [at the end of the month]" and wanted to "present everything then." (Pl.'s Ex. 16.) On October 13, 2013, Graca sent Reilly an e-mail titled, "Chicago Capabilities, " which listed the methods and instruments that McMahon thought AmSpec should have in its Chicago office. (Pl.'s Ex. 17) The list was later found in Vella's files. The list included dozens of pieces of equipment that McMahon thought AmSpec should have in its new lab, as well as the American Society for Testing and Materials (ASTM) testing methods that AmSpec should use with the equipment. ( Id. ) When Intertek's Vice President for the Central Region, Jeffrey Kaylor, reviewed McMahon's "wish list" at the hearing, he stated that it was "in essence" Intertek's lab in Chicago.

Kaylor testified that several pieces of equipment and methods identified on McMahon's wish list would not have been readily known and used in other labs, including "X-Ray, Sulfur, Lead and Chloride, " "Lubricity HFRR, " "Filtration Setup, " "DHA on LPG, " "Sulfur Speciation, " and "API Gravity, Density, Relative Density (Specific Gravity) by Hydrometer." He testified that Intertek performed some of these tests for a single Intertek customer in Chicago. He further testified that because the decision to purchase equipment requires a careful weighing of the demand in a market, whether the demand can be satisfied by equipment elsewhere, and the projected profitability of having the equipment on hand, it took Intertek five to ten years to develop the Intertek lab reflected on McMahon's wish list.[3]

After receiving McMahon's wish list from Graca, Reilly and Vella began preparing AmSpec's business plan for the Chicago branch using the same template that Reilly had previously sent Graca. (Pl.'s Ex. 22.) They presented the business plan to AmSpec's board on December 23, 2013. The plan included, among other things, a proposed budget, financial projections, a customer list, a personnel list, and a list of equipment to be included in AmSpec's Chicago lab. According to numerous witnesses whose testimony the court credits, the lab equipment included in the business plan closely mirrored McMahon's wish list.

On November 7, 2013, Lisa Graca e-mailed Jim Graca the most recent P&L statement for all of Intertek's offices in the Inland Waterways. (Pl.'s Ex. 21.) As the branch manager of Intertek's Romeoville office, Jim Graca would not have had access to this information. As the Midwest Regional Administrative Assistant, however, Lisa Graca was a "super user" of the Intertek intranet system and had access to the information. Jim Graca e-mailed the documents that his wife sent him to his personal e-mail account and placed them in his AmSpec folder.

On February 3, 2014, Reilly texted Jim Graca, explaining that he did not respond to Graca's e-mails sent to Reilly's AmSpec address because he "intended to call and suggest that we start communication from your personal emails to mine so as to leave no trace if and when things hit the fan." ...

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