United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MANISH S. SHAH, District Judge.
Bankers Life and Casualty Company sells insurance, typically to people over 65. Defendants are former employees who left Bankers Life to work for a competitor. Bankers Life alleges that, prior to leaving, defendants downloaded highly confidential, proprietary information, and used that information to solicit Bankers Life's customers. Bankers Life also alleges that defendants induced others to quit their jobs at Bankers Life and join defendants at the competitor. Bankers Life sued, under theories of breach of contract, misappropriation of trade secrets, and breach of fiduciary duties. Defendants move to dismiss all claims. For the reasons below, that motion is denied.
I. Legal Standards
In deciding whether to dismiss a claim under Federal Rule of Civil Procedure 12(b)(6), I construe the complaint in the light most favorable to plaintiff, accept as true all well-pleaded facts, and draw reasonable inferences in its favor. Yeftich v. Navistar, Inc., 722 F.3d 911, 915 (7th Cir. 2013). The complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). It must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal marks omitted). To avoid dismissal, the complaint must "state a claim to relief that is plausible on its face." Yeftich, 722 F.3d at 915 (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Yeftich, 722 F.3d at 915 (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
Bankers Life sells insurance, typically to people over 65. FAC ¶ 1. Bankers Life invests substantial resources to cultivate its customer relationships. FAC ¶ 5. From face-to-face meetings, Bankers Life's salespeople learn detailed information about customers, including their insurance needs. FAC ¶ 5. It takes years to develop good customer relationships. FAC ¶ 5. Bankers Life's customer relationships are characterized by low turnover and long-term stability. FAC ¶ 5. About 90% of Bankers Life's policyholders renew their policies in a given year. FAC ¶ 5. The relationship between Bankers Life and its policyholders lasts an average of nine years. FAC ¶ 5.
Bankers Life's head office is in Chicago, and it has branch offices elsewhere, including Omaha. FAC ¶¶ 1, 34. Defendants are former Bankers Life employees, who all worked in Omaha. FAC ¶¶ 6-12. Berger, Dingledine, Dlugosh, and Montes were "sales agents." FAC ¶¶ 9-12. The other defendants held higher positions: Miller was a Branch Sales Manager, Parsons was a Unit Sales Manager, and Sanchez was a Unit Supervisor. FAC ¶¶ 6-8. All defendants signed contracts with Bankers Life. FAC ¶ 21. The contracts contained restrictive covenants, limiting defendants' rights to compete with Bankers Life (while employed, and for a period of time afterward). FAC ¶ 21. In particular, certain provisions limited defendants' rights to: (1) use Bankers Life's confidential information; (2) solicit Bankers Life's customers; or (2) solicit Bankers Life's employees. FAC ¶ 22.
In a single day, nine employees from the Omaha branch office-including all of the defendants-quit, to work for a competitor. FAC ¶¶ 2, 23, 76-83. Bankers Life contends that Miller, Parsons, and Sanchez (the defendants who held higher positions than sales agent) induced the other defendants to quit. FAC ¶¶ 23, 75. Bankers Life alleges that all defendants except Dlugosh took highly confidential information with them when they left. FAC ¶¶ 2, 24. Bankers Life also alleges that defendants have solicited customers to switch from Bankers Life to the competitor. FAC ¶¶ 2, 24-25, 85-131. Finally, Bankers Life alleges that, since leaving, defendants have solicited additional Bankers Life employees to quit and join the competitor. FAC ¶¶ 26, 131.
In Count I, Bankers Life asserts that Miller, Parsons, and Sanchez breached the agent-non-solicitation provisions of their contracts, by inducing the other defendants to quit. In Count II, Bankers Life asserts that all defendants except Dlugosh breached the confidentiality provisions of their contracts, by downloading and retaining Bankers Life's confidential information. In Count III, Bankers Life asserts that all defendants breached the customer-non-solicitation provisions of their contracts, by inducing customers to switch to the competitor. In Count IV, Bankers Life asserts that all defendants except Dlugosh misappropriated Bankers Life's trade secrets. And in Count V, Bankers Life asserts that Miller, Parsons, and Sanchez breached their fiduciary duties of loyalty, by downloading, retaining, and using Bankers Life's confidential information, and by inducing employees to quit and join the competitor.
A. Breach of Contract (Counts I, II, and III)
1. Choice of Law
Illinois choice-of-law rules apply. Spitz v. Proven Winners N. Am., LLC, 759 F.3d 724, 729 (7th Cir. 2014). Illinois follows the Restatement (Second) of Conflict of Laws. Morris B. Chapman & Assocs., Ltd. v. Kitzman, 193 Ill.2d 560, 568-69 (2000). Accordingly, in a contract action involving an express choice-of-law provision, "the law of the state chosen by the contracting parties will apply unless: (1) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (2) its application would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue." Old Republic Ins. Co. v. Ace Prop. & Cas. Ins. Co., 389 Ill.App.3d 356, 363 (1st Dist. 2009) (quotation marks omitted) (quoting § 187 of the Restatement). The parties selected Illinois law, but defendants argue that Nebraska has a materially greater interest in this case and applying Illinois law would be contrary to Nebraska's fundamental policy.  at 5-7.
Nebraska's interest is materially greater than Illinois's. As defendants point out:
[A]t all material times, all of the Defendants were citizens and residents of Nebraska. All of the Defendants performed their work in Nebraska. Each agreement attached to the First Amended Complaint names Nebraska as the primary territory to which the agreement applies. All of the alleged activities and "breaches" are claimed to have taken place in Nebraska, including the alleged contacting of Nebraska policyholders.
 at 7 (record citations omitted). This is sufficient. See Brown & Brown, Inc. v. Mudron, 379 ...