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Linen v. Fischer

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

September 8, 2017

MICKEY'S LINEN Plaintiff,
v.
DONALD FISCHER, Defendant.

          Judge Robert W. Gettleman

          MEMORANDUM OPINION AND ORDER

          SHEILA FINNEGAN, United States Magistrate judge

         Plaintiff Mickey's Linen (“Mickey's”) brings this four-count action against its former employee, Defendant Donald Fischer, for breach of an employment agreement (Count I), misappropriation of trade secrets under the Defend Trade Secrets Act 18 U.S.C. § 1836, et seq. (“DTSA”) and Illinois Trade Secrets Act, 765 ILCS 1065/1 et seq. (“ITSA”) (Count's II and III), and breach of duty of loyalty (Count IV). (Doc. 24). Mickey's originally filed this action in March 2017 (Doc. 1), and then sought a temporary restraining order and preliminary injunction. (Doc. 5). The parties thereafter agreed to a standstill (obviating any need for a TRO) and expedited discovery (Docs. 19, 22), and consented to this Court's jurisdiction to rule on Mickey's motion for preliminary injunction. (Docs. 31-32). The Court held an evidentiary hearing on Mickey's preliminary injunction motion on June 7, 2017, after which the parties filed their respective briefs. (Docs. 42, 46, 48, 50-51). Having considered those briefs and the evidence presented at the June 7 hearing, for the reasons explained below, the Court now grants in part and denies in part Mickey's motion for preliminary injunction (Doc. 6). The parties are directed to submit a proposed injunction order consistent with this Opinion within ten days of its issuance.

         BACKGROUND

          I. FISCHER'S HIRING AND EMPLOYMENT AGREEMENT WITH MICKEY'S

         Mickey's is in the business of leasing and laundering various linens (such as mats, table cloths, napkins, and similar products) for hospitality providers and food service establishments (such as restaurants, country clubs, banquet halls, and similar businesses). (Doc. 50, 6/7/2017 Preliminary Injunction Hearing Transcript (“Tr.”), at 18-19). Mickey's also has a division known as “Medclean, ” which provides similar services to the retail medical industry, although its primary business is in the hospitality and food service area. (Tr. at 186, 210). One of Mickey's direct competitors in the hospitality and food service area is Fischer's new employer, Alsco, Inc. (“Alsco”). (Tr. at 19).

         Among other locations, Mickey's has long had facilities in Chicago and Villa Park, Illinois and Milwaukee, Wisconsin. (Tr. at 109-10). In October 1997, Mickey's hired Fischer as a “route representative” (which Fischer described as a “delivery driver”) in Mickey's Chicago facility, which then serviced its customers in Cook, Lake, and DuPage counties. (Tr. at 19-21). At the time of his hiring, Fischer signed an Employment Agreement which defined Mickey's “Business” for purposes of that agreement as “uniform and linen rentals, the sale of restroom supplies, paper products and similar items.” (Doc. 54, at 11; see also Doc. 24-1 for a clearer copy). This agreement included, among other provisions, a Non-Competition provision (Paragraph No. 6), a Non-Solicitation of Customer and Prospects provision (Paragraph No. 7), and a Confidentiality provision (Paragraph No. 5). (Id. at 11-12). The Non-Competition provision prohibited Fischer from engaging in the same “Business” as Mickey's in the counties then serviced by Mickey's Chicago facility (Cook, Lake, and DuPage) for eighteen months after the termination of Fischer's employment, as follows:

NON-COMPETITION.
For a period of eighteen months after the effective date of the termination of Employee's employment, Employee shall not, directly or indirectly, engage in any business, enterprise or employment located in the geographic areas designated below [Cook, Lake, and DuPage Counties], whether as owner, partner, officer, director, shareholder, independent contractor, consultant, employee, agent, advisor, investor or otherwise (collectively “Participant”), which directly or indirectly engages in the same or a similar business to the Business or any other activity in which the Company is engaged or which otherwise competes with the Company.

(Doc. 54, at 11, ¶ 6). The Non-Solicitation provision similarly recited an 18-month term:

NON-SOLICITATION OF CUSTOMERS AND PROSPECTS.
For a period of eighteen months after the effective date of the termination of Employee's employment, Employee shall not, directly or indirectly, individually or as a Participant with any Person, solicit or accept business from any Customer or Prospect; for the purposes of this Employment-Agreement, a “Customer” is any Person for whom the Company provided any service within eighteen months prior to the effective date of the termination of Employee's employment with the Company, and a “Prospect” is any Person whom Employee contacted or solicited to do business with the Company within six months prior to the effective date of the termination of Employee's employment with the Company as evidenced by Employee's “diary”, “call sheets” or sales activity reports.

(Id. at 12, ¶ 7). The Confidentiality provision, however, included no geographic or temporal limitation, providing in relevant part, as follows:

         CONFIDENTIALITY.

Except in the performance of Employee's employment duties, Employee shall not at any time, both while employed by the Company and thereafter, use or divulge to any Person any information received by Employee during the course of Employee's employment with regard to the Business, the Company's Customers, “Prospects” (hereinafter defined), employees and agents . . . (collectively the “Confidential Information”). Employee acknowledges that the Confidential Information is not generally available in the Company's industry or to the Company's competitors, are assets of the Company, has independent economic value to the Company and must be kept strictly confidential in order to preserve and enhance the Business and the Company's productivity, profitability and good will. . . .

(Id. at 11, ¶ 5).

         In addition to the foregoing, Fischer's Employment Agreement also included a Severability provision, providing as follows:

SEVERABILITY.
Whenever possible, each provision of this Employment Agreement shall be interpreted in such manner as to be valid and enforceable under applicable law, but if any provision of this Employment Agreement shall be held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be deemed severed herefrom and such invalidity or unenforceability will not affect any other provision of this Employment Agreement, the balance of which will remain in and have its intended full force and effect; provided, however, if such invalid or unenforceable provision, including, without limitation, the geographic scope described in Section 6 or the time periods described in Sections 5, 6, 7 or 8, may be modified so as to be valid and enforceable as a matter of law, such provision will be deemed to have been modified so as to be valid and enforceable to the maximum extent permitted by law.

(Id. at 12, ¶ 13). Also relevant is the Employment Agreement's Remedies provision:

REMEDIES.
Employee acknowledges and agrees that the Company's remedies at law may be inadequate to redress a default in the performance of Employee's employment duties or Employee's covenants, agreements or obligations contained in this Employment Agreement, and therefore, the Company shall be entitled to equitable relief, including, without limitation, temporary, preliminary and permanent injunctive relief, specific performance or other equitable remedies, in addition to any and all other remedies available to the Company pursuant to this Employment Agreement, at law or in equity. . . .

(Id. at ¶ 9).

         II. FISCHER'S ADVANCEMENT AND INCREASING ACCESS TO MICKEY'S CONFIDENTIAL INFORMATION

         Fischer admitted at the June 7 hearing that his entry position as a route representative for Mickey's was “very customer-focused.” (Tr. at 21). He was “the face of the company” to the customers he serviced and responsible for their contract renewals and any other issues they might have. (Id. at 21-22). In that role, Fischer had access to the contact information, contracts and expiration dates, and pricing for the customers he serviced. (Id. at 22-24). Fischer remained a route representative for about two years until 2000, when he was promoted to the position of route supervisor. (Id. at 24). In this position, Fischer was responsible for supervising three or four route representatives and coaching them to engage their customers for contract renewals, but spent the bulk of his time meeting with customers himself, addressing their issues, handling contract renewals, and selling Mickey's services. (Id. at 26-27).

         By 2003, Fischer was promoted to District Manager, which was the next upward position within Mickey's Service Department. (Tr. 29, 178). As District Manager, Fischer was responsible for supervising both route representatives and route supervisors. (Id. at 27-30, 178). But again, Fischer spent the majority of his time as District Manager meeting with customers and addressing their issues, soliciting contract renewals, selling services to new and existing clients, and handling any other aspects of customer relationships. (Id. at 28-30). And again, Fischer had access to substantial customer information in this role, including the products and services they purchased and the pricing at which they did so, and their contract expiration dates. (Id.).

         Fischer was next promoted to Service Manager for Mickey's entire Chicago facility in 2012 or 2013. (Tr. at 32-33). As Service Manager, Fischer was responsible for all functions of Mickey's Service Department, the focus of which was customer service, customer retention, and growing Mickey's customer base. (Id. at 32-37). Fischer was responsible for all route supervisors (two to four) and route representatives (about eighteen) in the Service Department and any significant customer service issues they were unable to handle, as well as signing up new customers. (Id.). In this role, Fischer reported only to the General Manager of Mickey's Chicago facility, Chris Brown, and on occasion the President of the company. (Id. at 33-34).

         III. FISCHER'S ROLES DURING AND AFTER MICKEY'S TERRITORY REROUTE

         In 2014, Mickey's began transferring part of the territory then handled by its Chicago facility to its Milwaukee facility. (Tr. 112-15, 121). This “reroute” took place in three phases which were completed by year-end (id.); and Fischer prepared for, designed, and oversaw that transition. (Id. at 203). According to Mickey's Chris Brown, Fischer was entrusted with that responsibility because that was “his area of expertise, ” since he “knew that customer base very, very well.” (Id.). In preparation for this reroute, Fischer assured (personally or through his staff) that every affected customer's contract was renewed so that the Milwaukee facility “would have a clean customer base, all with fresh renewals, ” and that any customers who used products or services unavailable through the Milwaukee facility were converted into product and service lines handled out of Milwaukee. (Tr. at 187). This reroute moved the northern border of Mickey's Chicago facility south from the Wisconsin state line to a line that roughly traces Illinois State Routes 120 and 137. (Id. at 120-21, 212-13). As a result, when the transition was complete in 2014, Mickey's Chicago facility (and thus, Fischer) no longer handled customers north of Routes 120 and 137. (Id.).

         Following this reroute, in 2015, Fischer was promoted again, this time to Regional Service Manager, in which he retained his responsibilities for the Service Department in Mickey's Chicago facility and assumed the same responsibilities for Mickey's Villa Park facility. (Tr. at 38-39, 185). As such, Fischer was responsible for the service departments in both locations, managed the route supervisors who oversaw the route representatives in both locations, and was ultimately responsible for all routes and all customers serviced out of both locations. (Id. at 39-41, 185-86). Fischer also assumed a larger leadership role within the company in other respects, including managing its truck fleet and paper inventory program and participating in the negotiation of its Collective Bargaining Agreement. (Id. at 46-47, 51, 187-88).

         Fischer's access to Mickey's confidential information increased in this larger role, as well. He now attended weekly manager's meetings for both the Chicago and Villa Park facilities along with the leaders of each Department at those facilities, at which particular customer challenges, strategies for addressing them, marketing plans, and other customer issues were addressed. (Id. at 46-50, 186-90). Fischer also attended company profit and loss meetings, at which the financial data for each Department and other budgetary and profitability information for the company was distributed and evaluated. (Id.) And as before, Fischer enjoyed wide access to and routinely utilized extensive confidential customer information, including customer contacts, contract terms, pricing, and discounts, contract expiration dates and renewal terms, strategies for marketing and adding new products and services, new customer install schedules, lists of the company's highest revenue producing customers and problem or at-risk customers, and bad debt listings. (Id. at 52-57, 180-86). Fischer acknowledged at the June 7 hearing that all of this information was confidential; indeed, the financial information distributed at company profitability meetings was deemed so sensitive that it was not allowed to leave the meeting room. (Id. at 50, 52-57).

         Finally, in October 2016, Fischer became Mickey's “key account representative.” (Tr. at 41-42, 191-92). The parties disagree about who initiated this change - Mickey's says Fischer requested it; Fischer says Mickey's offered it - but Fischer admits he welcomed it. (Id.). In this position, Fischer was entrusted with maintaining and growing the Chicago facility's “key accounts” (meaning the top 150 revenue producing customers serviced out of that location), which were the company's “largest dollar customers.” (Id. at 41-43, 147, 192). To that end, Fischer was responsible for making “goodwill visits” to the key Chicago customers that had issues to be addressed, and thus retained access to Mickey's confidential information relating to these customers, including key contacts, contract terms and expiration dates, pricing, volumes, and purchasing histories. (Id. at 42-43, 192). But Fischer stresses (and Mickey's does not appear to dispute) that all of these customers were south of the Route 120-Route 137 line, due to Mickey's Chicago-Milwaukee reroute in 2014. (Doc. 48, at 7; Tr. 131, 212-13).

         IV. FISCHER'S DEPARTURE FROM MICKEY'S TO WORK FOR ALSCO

         Shortly after becoming Mickey's Key Account Representative, in December 2016, Fischer engaged in discussions with Mickey's key competitor, Alsco, about joining its sales force. (Tr. 67, 146-47, 151, 221, 224). Fischer's initial contact was with one of Alsco's sales consultants who had himself previously worked for Mickey's, Dominick Castaldo. (Id.). Castaldo then recommended Fischer to Alsco's Regional Manager, Dave Carman, to fill an open sales consultant position that serviced Alsco's customers in all of Wisconsin and along the Illinois-Wisconsin border. (Id. at 221-23).

         Fischer spoke with Carman later in December 2016, and Carman found him “very knowledgeable about the industry” and asked to reconvene their discussion after the holidays. (Id.). In their second conversation in early January 2017, the “main topic of discussion” was Fischer's non-compete agreement with Mickey's. (Id. at 223). Carman knew to raise this issue because “most people” who work in their industry have a non-compete agreement, and Alsco had by then already hired two of Mickey's other employees who had signed two different versions of a non-compete agreement-an “older version” that prohibited work for a competitor in a specific geographic area, and a “newer version” that prohibited work for any competitor. (Id. at 223-25). Knowing all this, Carman asked Fischer during their January 2017 conversation if he had signed “the older or the newer version of Mickey's non-compete, ” and Fischer answered that he had signed the older version (which prohibited work for a competitor within a specific geographic area). (Id.). Carman asked Fischer for a copy of the agreement, but Fischer did not have one and declined to ask Mickey's for one, for fear “that Mickey's would be concerned that he was going to be employed by a competitor.” (Id.). Nevertheless, despite lacking reliable information about the scope of Fischer's non-compete agreement with Mickey's, Carman directed Fischer to fill out an employment application online, and Fischer did so. (Id. at 226-27, 231).

         Shortly after this second conversation with Mr. Carman, and having been invited to submit an employment application to Alsco, Fischer resigned from his job with Mickey's on January 9, 2017. (Id. at 68). Surprised by this news, Mickey's Chris Brown asked Fischer directly if he was going to go to work for Alsco, but Fischer denied any such intention and instead claimed he was leaving the industry to work in his family's tile business. (Id. at 69-72). Fischer notes that he had not yet secured employment with Alsco when he made this misstatement (he did not submit his application to Alsco until January 20, and did not receive his offer letter from Alsco until February 3 or 4). (Id.) But still, Fischer admits that he was untruthful when he told Mickey's that he was leaving the industry to work for his family's tile business, since he knew at the time that he was trying to land a job with Alsco and Alsco had expressed an interest in hiring him and invited him to submit an application. (Id. at 71-72, 79, 85).

         Fischer continued working for Mickey's for another few weeks after his resignation, until January 26 or 27, 2017. (Id. at 69). And given his representation that he was leaving the industry (and not heading to a competitor), Mickey's made no effort to shield Fischer from its confidential information or clients during this period. (Id. at 72, 195-96). Instead, Chris Brown asked Fischer how many weeks he could remain in his position, and asked him to visit some specific customers during the remaining three weeks that Fischer agreed to stay in order to assure that all outstanding issues with those customers were resolved. (Id.). Had Mickey's known that Fischer was going to work for a competitor, however, its normal process would have been to ask for the employee's keys, company phone, and confidential company information in their possession “and take them to the door.” (Id. at 197). But Mickey's took no such measures with Fischer, believing him to be leaving the industry. As a result, Fischer was not called upon to return his company cellphone or any confidential company information until the time of his departure. And even then, Fischer failed to return much information at all, and worse, he failed to explain (at least convincingly) why.

         For instance, before returning his company-issued cell phone, Fischer wiped all information from it-including his customer contacts and other company information- claiming that he had been unable to delete some personal information and photos from the phone, and so (without seeking permission or help from Mickey's IT department) he deleted all information from the phone instead. (Tr. 74-75, 102, 198-99). This left Mickey's unable to retrieve the company and customer information that Fischer had on the phone or determine whether and to whom he might have sent it. (198-99, 202-03). Similarly, despite a requirement to return all company documents in his possession, Fischer returned a mere inch of paperwork on his last day. (Id. at 78, 200-01). When Chris Brown asked about the substantial volume of paperwork he believed Fischer had accumulated over the last twenty years, Fischer first claimed that someone else had cleaned out his office for him. (Id. at 200-02). And when that proved false, Fischer claimed he had shredded the few documents in his possession on his last day of work on his way to meeting with Brown, and ...


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