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Western Union Co. v. Kula

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

July 12, 2017

WESTERN UNION COMPANY and WESTERN UNION, LLC, Plaintiffs,
v.
TOM KULA and PAYMENTUS GROUP, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE, United States District Court Judge.

         Defendant Tom Kula (“Kula”) has moved for summary judgment on Counts III, IV, and V of Plaintiffs Western Union Company and Western Union, LLC's (collectively “Plaintiffs” or “Western Union”) Complaint alleging claims for misappropriation of trade secrets, breach of contract, and tortious interference with contract. (R. 86, Def's. Mem. of Law in Support of Mot. for Summ. J.) For the following reasons, the Court denies Kula's motion for summary judgment.

         BACKGROUND

         This case arises from Defendant Kula's departure from Western Union and his alleged subsequent recruitment of Western Union clients for his new employer, Paymentus Group, Inc. (“PGI”). Western Union has sued Kula for misappropriation of trade secrets, breach of the non-compete and confidentiality provisions in his restrictive covenant contract, and tortious interference with Western Union's contractual relations with its customers. (R. 1, Compl.)[1]

         I. Kula's Employment at Western Union

         Kula initially began working at Western Union in 1993, and after a period during which he worked elsewhere, Western Union rehired him in October 2000. (R. 86, Ex. 1 Def.'s Statement of Facts ¶ 8.) Beginning in 2008, Kula was the Vertical Vice President, Payment Sales at Western Union. (Id. ¶ 9.) On May 9, 2016, Kula's supervisor, Michelle Young, gave Kula a written letter warning him that, due to the loss of two substantial Western Union clients, any future instances of “lost revenue, neglected client relationships, team leadership or any noncompliance with Company policies . . . will result in further disciplinary action up to and including the termination of your employment.” (R. 86, Ex. 3 Warning Letter.) Carter Hunt was Young's supervisor, and he approved Young's delivery of the warning letter to Kula although he had never given a similar written warning to any other Western Union employee. (Def.'s Statement of Facts ¶¶ 13-14.)

         Kula submitted his resignation on July 11, 2016. (Id. ¶ 15.) Kula claims that he notified both Michelle Young, his former supervisor, and Frank Lockridge, his supervisor at the time, that he was leaving for a non-sales position at PGI.[2] (Id. ¶ 15, Ex. 2 Kula Dec. ¶ 6.) Kula's last day of employment at Western Union was July 22, 2016, and after leaving Western Union, he began working at PGI as Vice President of Implementation Services. (Def.'s Statement of Facts ¶¶ 16, 18.) PGI initially offered Kula the position of Vice President of Sales, but he requested a different role. (R. 109, Ex. B Tom Kula Deposition 186: 13-24.) Regardless, at PGI, Kula reports to a senior manager responsible, at least in part, for the Sales Group. (Id. 125: 1-11, 172: 7-12.)

         II. Kula's 2015 Restrictive Covenant Agreement

         During his term of employment at Western Union, Kula entered into multiple compensation and employment agreements. (Def.'s Statement of Facts ¶ 19.) The 2015 Restrictive Covenant Agreement (“2015 “RCA”) includes various post-employment restrictive covenants, including obligations relating to confidentiality, non-solicitation, and noncompetition. (Id. ¶ 20; see also R. 86, Ex. 6 2015 RCA.) The 2015 RCA provides that Delaware law governs its terms. (Def.'s Statement of Facts ¶ 22.) The 2015 RCA further states that the consideration Western Union provided for the RCA is “employment or continued employment, ” an award pursuant to the 2015 Long-Term Incentive Plan (“2015 LTIP”), and other “good and valuable consideration.” (Def.'s Statement of Facts ¶ 23; see also 2015 RCA 1.)

         The parties dispute whether Kula accepted the 2015 RCA. Western Union has not identified a physically signed copy of the 2015 RCA, and Kula testified that he did not physically sign the 2015 RCA or electronically accept it. (Def.'s Statement of Facts ¶¶ 25-27.) Western Union, on the other hand, claims that Kula accepted the RCA through its electronic signature process on May 13, 2016. (R. 109, Pls.' Resp. to Def.'s Statement of Facts 7: 27; Ex. C Tracy McKee June 20, 2017 Declaration (“McKee Declaration”)[3] ¶ 4.) Western Union transitioned from ink signatures to electronic acceptance of RCAs and other agreements about 10 years ago. (Pls.' Resp. to Def.'s Statement of Facts 19: 4.)

         When a Western Union employee receives a vested stock grant requiring acceptance of an RCA, the employee receives an email notifying him of this fact and providing instructions on how to accept the RCA. (Def.'s Statement of Facts ¶ 29.) Tracy McKee, Western Union's Compensation Director, testified that Merrill Lynch, the administrator of its benefits, sent Kula a notification that he had to accept the grant on its benefits website and that the stock award was subject to the terms and conditions of his award agreement. (McKee Declaration ¶ 10; Ex. 3 Notification of Grant Award.) Kula could only access his grant award using a unique username and password. (McKee Declaration ¶ 13.) Western Union has produced internal records indicating that Kula accepted a stock award of 3, 295 units of Western Union stock and the 2015 RCA on the Merrill Lynch benefits website on May 13, 2016 at 3:26 PM. (Pls.' Resp. to Def.'s Statement of Facts 11: 34-35; R. 86, Ex. 9 Tom Kula Grant Award.) When he officially resigned from Western Union on June 22, 2016, his stock ceased to vest pursuant to the 2015 LTIP. (Pls.' Resp. to Def.'s Statement of Facts 7: 28.) Kula has never received any vested stock in connection with the 2015 RCA or 2015 LTIP. (Def.'s Statement of Facts ¶ 28.) Kula claims that there are no emails or screenshots demonstrating that he electronically accepted the RCA. (Id. ¶¶ 31-33.) Kula further contends that these records demonstrate only acceptance of the stock award and do not include any language stating that accepting the stock award required the acceptance of the RCA. (Id. ¶ 36.) Kula does not recall accepting the RCA. (Kula Deposition 13: 19-21.)

         According to McKee, however, Merrill Lynch's benefits website requires[4] that employees open and accept the agreements associated with any stock award that they accept. (McKee Declaration ¶¶ 20-24.) The Merrill Lynch website prompts all employees to “view the Grant Documents [including the RCA] before making a [stock award] election.” (Pls.' Resp. to Def.'s Statement of Facts 20: 9.) Merrill Lynch's records demonstrate that Kula reviewed the RCA and other grant documents at approximately 3 PM on May 13, 2016. (McKee Declaration ¶ 23.) McKee testified that Merrill Lynch's system would not permit Kula, or any other employee, to accept their stock award without clicking a button and entering a password indicating that he accepted all the employment agreements. (Id. ¶¶ 25, 27.)

         Additionally, when PGI was recruiting Kula, they asked him if he had any agreements with Western Union that would limit his employment with PGI. (Kula Deposition 15: 8-13.) In response, Kula provided PGI with the 2015 RCA. (Id. 16: 21-23.) Kula testified that he provided PGI with the 2015 RCA, but when he did so, he did not know if that agreement was valid or enforceable. (Id.)

         The stock award Kula accepted on May 13, 2016 was provided pursuant to the 2015 LTIP. (Def.'s Statement of Facts ¶ 40.) The 2015 LTIP does not mention the 2015 RCA and it does not contain any language indicating that an employee must agree to the 2015 RCA as part of accepting a stock award. (Id. ¶ 39.) LTIPs from prior years included explicit language indicating that an employee had to accept an RCA before receiving a stock award, but the 2015 LTIP did not contain that language. (Id. ¶¶ 39, 41.) The 2015 RCA, however, explicitly references and incorporates the 2015 LTIP as consideration for its obligations. (See 2015 RCA 1 (“In consideration of employment or continued employment by the Company, the grant to Employee of an award pursuant to The Western Union Company 2015 Long-Term Incentive Plan (incorporated herein by this reference). . .”))

         III. Kula's 2016 Variable Compensation Plan

         The 2016 Variable Compensation Plan (“2016 VCP” or the “Plan”) provided for additional compensation for sales employees who met certain performance requirements. (Id. ¶ 42.) The 2016 VCP contained restrictive covenants that are separate from, but similar to, the 2015 RCA's restrictive covenants. (Id. ¶ 44.) The 2016 VCP, for example, used slightly different language to describe employees' obligations and also did not contain any noncompetition obligations. (Id.) The 2016 VCP provided that “[a]pplicable state law governs the validity, construction, interpretation, administration, and effect of this Plan.” (R. 86, Ex. 11 2016 VCP § 8.) The Plan also provided that it “cancels, supersedes and replaces all previous compensation plans or arrangements (either verbal or written) in which [the employee] previously participated.” (2016 VCP 3.) Kula accepted the 2016 VCP and it was effective from January 1, 2016 until Kula left Western Union on July 22, 2016. (Def.'s Statement of Facts ¶¶ 47-49.) He repeatedly received payments pursuant to the Plan through the end of his employment with Western Union in June 2016. (Id. ¶ 48.)

         IV. Alleged ...


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