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Fleetwood Packaging v. Hein

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

December 15, 2014

FLEETWOOD PACKAGING, a Division of Signode Industrial Group LLC, Plaintiff,
v.
JOHN HEIN and DUBOSE STRAPPING, INC., Defendants.

MEMORANDUM OPINION AND ORDER

JOHN J. THARP, District Judge.

Before the Court is the plaintiff's emergency motion for a temporary restraining order. Plaintiff Signode Industrial Group LLC ("Signode")[1] seeks to enjoin its former employee, John Hein, now employed by defendant DuBose Strapping, Inc. ("DuBose"), from using confidential information and trade secrets in soliciting customers he sold business to on Signode's behalf during the twelve months before he left Signode's employ. Jurisdiction is premised on diversity.[2] For the reasons explained below, Signode's motion for a temporary restraining order is denied.

BACKGROUND[3]

Signode manufactures and sells strapping products and packaging materials. DuBose is one of its principal competitors. Signode employed defendant John Hein as a salesman from 2001 until September 10, 2014; during that period, Hein served as the Territory Manager for a seven-state region in the northwestern United States. Before working for Signode, Hein worked for several years as a sales representative for a strapping company called A.J. Gerrard, a competitor of Signode. According to Hein, Signode hired him from Gerrard because of the customer relationships he had developed there. During the last seven years of his tenure at Signode, Hein focused entirely on selling strapping products to customers in the metal industry. For about ten years, until 2011, Hein reported directly to Jeff Kellerman, who was the President of the division.

Kellerman subsequently became the Chief Operating Officer of DuBose in June 2014. At that time, he contacted Hein and advised him that DuBose was interested in developing business on the west coast. During ensuing discussions about the possibility of Hein moving to DuBose, Kellerman told Hein not to provide him with any information about Fleetwood. Hein resigned from Signode on September 10, 2014, and started working at DuBose two days later. Both Hein and Kellerman expressly deny that Hein has provided any documents or other information about Signode's business to DuBose.

Hein gave two weeks' notice to Signode on September 10, but Mike Zimmer, Vice President and General Manager of Signode's Fleetwood Packaging division, terminated Hein's employment the next day. Zimmer told Hein that his company-issued laptop computer would be sent for analysis and that he should remove any personal files from the computer; according to Hein, Zimmer refused Hein's request that Signode's IT personnel assist with that process. Signode's forensic analysis of Hein's computer, conducted on or about September 22, 2014, prompted concerns that Hein had copied confidential Signode documents to a number of external storage devices, specifically an external hard drive and nine flash drive devices. On October 10, 2014, Signode demanded that Hein produce those devices for examination. Hein produced the hard drive and two flash drive devices and represented that he did not possess any of the other flash drives. The results of Signode's analysis of Hein's laptop and the external storage devices he provided to Signode are discussed in more detail below.

Based on its forensic review, Signode concluded that Hein had misappropriated confidential information. On December 3, Signode filed the complaint in this matter, along with a motion for a temporary restraining order and preliminary injunction, in the Circuit Court of Cook County. The defendants removed the matter to this Court the next day and a hearing on the TRO motion was held on December 8, 2014.

Signode identifies three types of information that, it alleges, are protected by these provisions and have been misappropriated by Hein. First, it maintains that the identities of its customers, and their contact information, are protected and that Hein therefore cannot contact companies he knows to be Fleetwood's customers. Signode also contends that, in contacting these customers, Hein is using Signode's "Contribution to Profit Reports" and "product matrices" to enable him (on behalf of DuBose) to undercut Signode's pricing. Mike Zimmer (who verified Signode's state court complaint), supplied an affidavit describing these reports. "Contribution to Profit Reports, " which are shared with customers, describe discounts, services, and additional products that Signode provides to specific customers "and the savings the customer realized based on these contributions." (Zimmer ¶¶ 8-12.) Product matrices, by contrast, contain information "about vendors, vendor names, product costs and relevant delivery information" in response to product requests from sales personnel. These documents are used to generate quotes for customers, but are not themselves shared with customers. (Zimmer ¶¶ 13-15.) Access to product matrices, but not Contribution to Profit Reports, is restricted within the company.

DISCUSSION

Signode asserts counts alleging breach of contract (Count I), violation of the Illinois Trade Secrets Act (Count II), and tortious interference with contract (Count III).[4]The premise of each of these claims is that Hein misappropriated confidential information in the weeks leading up to his resignation on September 10, 2014, and even afterward, and has used that information on behalf of his new employer. Signode seeks, among other relief, an injunction barring the defendants from contacting any Signode customers that Hein called on during his last year of employment, or as to which he obtained confidential information during his last year of employment, with Signode. See (Compl., at ¶¶ 13, 16, and 18.)

At present, Signode seeks a temporary restraining order barring such customer contacts pending a hearing on a motion for a preliminary injunction. "A temporary restraining order or a preliminary injunction is an extraordinary and drastic remedy, which should not be granted unless the movant carries the burden of persuasion by a clear showing." Recycled Paper Greetings, Inc. v. Davis, 533 F.Supp.2d 798, 803 (N.D. Ill. 2008) (citing Goodman v. Illinois Dept. of Fin. & Prof'l Regulation, 430 F.3d 432, 437 (7th Cir. 2005)). The standard governing temporary restraining orders is the same as that for preliminary injunctions. Lee v. Orr, 13-CV-8719, 2013 WL 6490577, at *2 (N.D. Ill.Dec. 10, 2013) (citation omitted). In determining whether to grant injunctive relief, courts consider whether the moving party has demonstrated: (1) some likelihood of success on the merits, (2) there is no adequate remedy at law, and (3) irreparable injury will occur without obtaining the relief sought. Planned Parenthood of Indiana, Inc. v. Comm'r of Indiana State Dep't Health, 699 F.3d 962, 972 (7th Cir. 2012); Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992). If the moving party meets these requirements, courts then balance the harm to the non-moving party if injunctive relief is granted against the harm to moving party if relief is denied. Planned Parenthood of Indiana, Inc., 699 F.3d at 972. The Seventh Circuit uses a sliding scale when weighing the harm to a party against the merits of the case. "The more likely it is that [the moving party] will win its case on the merits, the less the balance of harms need weigh in its favor." Id. (quoting Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S., Inc., 549 F.3d 1079, 1100 (7th Cir. 2008)). Finally, courts consider the public interest involved, including the effects of the injunctive relief on non-parties. Id.; Credit Suisse First Boston, LLC v. Vender, 2004 WL 2806191, at *1 (N.D. Ill. December 3, 2004).

On the record before the Court, Signode has not made a sufficient showing in support of its motion to show that an immediate TRO is warranted.

I. LIKELIHOOD OF SUCCESS ON THE MERITS

Based on the evidence presented in support of, and opposition to, the TRO motion, the Court concludes that there is little, if any, likelihood that Signode will succeed on the merits of either its trade secret claim or its claims based on its confidentiality agreement with Hein. Most of the information Signode identifies does not warrant trade secret protection and, to the extent that the identified information is protectable, Signode fails to establish that Hein has misappropriated it, disclosed it, or used it improperly. For largely the same reasons, the evidence does not establish a substantial likelihood of success on the contract-based claims, which also appear to fail in any event because the Confidentiality Agreement appears to be unenforceable under Illinois law.

A. The Illinois Trade Secrets Act

To establish a violation of the Illinois Trade Secrets Act ("ITSA"), a plaintiff must show: (1) the existence of a trade secret; (2) the misappropriation of the trade secret; and (3) the use of the trade secret in the defendant's business. See Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir. 2003); Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1265-66 (7th Cir. 1992).

1. Existence of a Trade Secret

The information Signode seeks to protect fails to satisfy the requirements for protection as trade secrets under Illinois law or confidential information under the Confidentiality Agreement. Illinois law defines a trade secret as:

information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of ...

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