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Polyone Corp. v. Lu

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

June 25, 2015

POLYONE CORP., Plaintiff,
v.
YUN MARTIN LU, et al., Defendants.

MEMORANDUM OPINION AND ORDER

MANISH S. SHAH, District Judge.

Plaintiff, an American plastics manufacturer, claims defendants conspired with plaintiff's former employee in an illegal effort to compete with plaintiff in the manufacture and sale of TPEs-a soft plastic. Plaintiff's five-count amended complaint alleges state-law claims for misappropriation of trade secrets, tortious interference with contract, tortious interference with prospective business relations, and civil conspiracy. Plaintiff also claims multiple violations of the federal Computer Fraud and Abuse Act.

Defendants have moved to dismiss (1) for improper service, (2) for lack of subject matter jurisdiction, and (3) for failure to state a claim. For the following reasons, all three motions are denied.

I. Legal Standard

Federal courts are courts of limited jurisdiction; "they have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto." Transit Express, Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2001) (internal quotation omitted). The burden of establishing that a district court has proper jurisdiction lies with the plaintiff. Id. A defendant arguing that a plaintiff has not met this burden may move for dismissal under Federal Rule of Civil Procedure 12(b)(1). When reviewing a 12(b)(1) motion, "[t]he district court may properly look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists." Capitol Leasing Co. v. FDIC, 999 F.2d 188, 191 (7th Cir.1993) (internal quotation omitted).

"A motion under Rule 12(b)(6) tests whether the complaint states a claim on which relief may be granted." Richards v. Mitcheff, 696 F.3d 635, 637 (7th Cir. 2012). Under Rule 8(a)(2), a 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). The short and plain statement under Rule 8(a)(2) must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quotation omitted). Under the federal notice pleading standards, a plaintiff's "[f]actual allegations must be enough to raise a right to relief above the speculative level...." Twombly, 550 U.S. at 555. Put differently, a "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). "In reviewing the sufficiency of a complaint under the plausibility standard, [the court] accept[s] the well-pleaded facts in the complaint as true...." Alam v. Miller Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013).

II. Background

Plaintiff PolyOne is one of the world's leading providers of specialized polymer materials, services, and solutions. [22] ¶ 12. Among its products are so-called TPEs-a type of soft plastic used in a variety of applications, including toothbrush grips, synthetic wine corks, and cap liners. Id. ¶ 13. Plaintiff's TPE formulations are closely-guarded trade secrets. Id.

In 2005, defendants Tie-Liang Tyler Xu and Yun Martin Lu-a former PolyOne employee-started a competing TPE company in China called Polymax Nantong. Id. ¶¶ 14, 16. They were later joined by another former PolyOne employee, defendant Thomas Castile. Id. ¶ 15.

In 2008, Lu began having conversations with non-party Joseph Kutka about expanding Polymax to the United States and Europe. Id. ¶ 18. Kutka was a PolyOne employee and thus subject to a non-compete agreement. Id. ¶ 19. Kutka's lawyer advised him that, if he were to leave PolyOne, the agreement would ban him from working in the TPE area in North America for at least a year. Id. ¶ 19. Kutka continued to develop his relationship with Lu and Polymax and later began to actively help the company establish its American presence. Id. ¶ 20.

In 2010, Kutka, Castile, Lu, and Xu began conspiring to steal a large customer away from PolyOne in the hopes of establishing Polymax's foothold in the United States. Id. ¶¶ 24-26. Castile contacted the customer and obtained a sample of PolyOne's confidential pellets for analysis, even though agreements between PolyOne and the customer prohibited such disclosure. Id. ¶ 30. Defendants eventually persuaded the customer to do business with them instead of PolyOne. Id. ¶ 36.

By May 2013, Kutka had decided to leave PolyOne for Polymax TPE (the American Polymax entity). Id. ¶ 48. In order to help his new company, Kutka decided to download tens of thousands of PolyOne files, which contained confidential trade secrets and other proprietary information. Id. Around this same time, Kutka installed a document destruction program called CCleaner (though plaintiff does not allege that Kutka ever used it). Id. ¶ 49.

Kutka left PolyOne in late 2013. Id. ¶ 61. PolyOne sued him and, on February 27, 2015, a jury in the Northern District of Ohio returned a verdict finding Kutka liable for breach of his employment agreement, breach of the duty of loyalty, and spoliation of evidence. Id. ¶ 64. The defendants in this case-Lu, Castile, Xu, Polymax TPE, and Nantong Polymax-were originally named in the Ohio action, but later dismissed with the understanding that the case against them would be refiled in the Northern District of Illinois. See [40-1].

Plaintiff's five-count amended complaint alleges misappropriation of trade secrets, tortious interference with contract, tortious interference with prospective business relations, civil conspiracy, and violations of the Computer Fraud and Abuse Act. Plaintiff suggests the CFAA claim gives this court federal-question jurisdiction, and that, alternatively, jurisdiction arises from the parties' ...


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