United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
J. THARP, JR. UNITED STATES DISTRICT JUDGE.
allegations in this suit follow the pattern familiar in
restrictive covenant cases: former employee leaves to work
for a competitor, takes confidential files with him, and then
solicits other employees and customers to join him at his new
company. The setting here is Las Vegas and Plaintiff
Stericycle, Inc. (“Stericycle”) is the employer
who alleges foul play. Donald Simota, Dana Sullivan, and Chad
Van Houten (“the defendants”) are the former
employees who allegedly joined a competitor-Patriot
Environmental Services, Inc. (“Patriot”)-and took
Stericycle information and customers with them, in violation
of their contractual and fiduciary duties. The defendants
have filed a partial motion to dismiss Stericycle's
breach of contract claims (Counts I-IV) under Federal Rule of
Civil Procedure 12(b)(6), arguing that even though their
employment agreements contain restrictive covenants that
mandate, among other things, that whatever happens at
Stericycle stays at Stericycle, those covenants are
unenforceable due to a lack of adequate consideration. The
Court disagrees and finds that the defendants' roughly
thirteen months of employment and Simota's grant of stock
options were sufficient consideration under Illinois law to
support their restrictive covenants. As a result, all four of
Stericycle's contract claims survive dismissal and the
Court denies the defendants' partial motion to dismiss.
purposes of this Rule 12(b)(6) motion, the Court must treat
the following facts asserted in Stericycle's complaint as
true. Yeftich v. Navistar, Inc., 722 F.3d 911, 915
(7th Cir. 2013) (citing Fed.R.Civ.P. 12(b)(6)). Stericycle is
in the medical and waste management business and offers
hazardous waste emergency response services. (Compl.
¶¶ 14-15, ECF No. 1.) In January 2015, Stericycle
acquired (through an indirect subsidiary) Double Barrel
Environmental Services, LLC (“Double Barrel”) to
expand its hazardous waste emergency response business.
(Id. ¶ 27.) At the time of the acquisition, the
defendants were employed by Double Barrel in its Las Vegas
office; Simota was the Southern Nevada Operations Manager,
Van Houten was a Project Manager, and Sullivan was an Office
Administrator. (Id. ¶¶ 23-25.) Following
the acquisition, all three defendants became employees of
Stericycle and fulfilled substantially the same roles that
they had with Double Barrel. (Id. ¶¶ 27,
following month, between February 15 and 18, 2015, the
defendants entered into nearly identical Confidentiality and
Nonsolicitation Agreements with Stericycle (the
“Nonsolicitation Agreements”). (Compl.
¶¶ 32-34, 36.) The agreements bar the defendants
from disclosing to third parties or using for their own
purposes any of Stericycle's confidential information or
trade secrets. (Id. ¶ 42.) They also prohibit
the defendants from soliciting any Stericycle customers or
employees for a period of twelve months following their
termination from the company. (Id. ¶¶
40-41.) The Nonsolicitation Agreements state that Stericycle
offered “employment” to the defendants in
consideration for these covenants. (Nonsolicitation
Agreements 1, Exs. D-F, ECF Nos. 1-4 to -6.) That employment
was on at-will basis. (Employee Confirmation Letters, Ex. C,
ECF No. 1-3.)
also signed an Employee Covenant Agreement on April 1, 2015
(the “Covenant Agreement”), which contained
nearly identical nondisclosure and nonsolicitation
restrictions as the Nonsolicitation Agreements. (Compl.
¶¶ 35-36.) It also contained an additional
restriction that barred Simota from working for a Stericycle
competitor for a period of twelve months after he left the
company. (Id. ¶¶ 37-39.) According to the
Covenant Agreement, Stericycle granted Simota “an
option to purchase shares of Stericycle common stock . . .
pursuant to an option agreement dated the same date as [the
Covenant Agreement]” in consideration for these
restrictions. (Covenant Agreement 1, Ex. G, ECF No.
defendants worked for Stericycle until March 2016. While
employed by Stericycle, all three defendants had access to
and became familiar with the company's confidential
information and trade secrets. (Compl. ¶ 43.) They also
cultivated relationships with Stericycle customers and worked
to develop new business. (Id. ¶ 45.) On March
4, 2016, Simota resigned his employment with Stericycle.
(Id. ¶ 46.) Although he gave two weeks'
notice, he announced his last day one week later, on March
11, 2016. (Id.) Van Houten resigned on or around
March 9, 2016, but announced his last day on March 11, 2016
as well. (Id. ¶ 47.) Sullivan resigned on or
around March 8, 2016, and stayed on with Stericycle until
March 22, 2016. (Id. ¶ 48.)
after leaving Stericycle, the defendants began working for
Patriot, one of Stericycle's competitors in the hazardous
waste emergency response business. (Compl. ¶¶ 1,
49.) All three defendants took on the same or substantially
similar positions at Patriot that they held at Stericycle.
(Id. ¶¶ 50-51.) As they left Stericycle,
Simota and Sullivan took confidential information with them,
including detailed information pertaining to Stericycle's
customers and pricing. (Id. ¶¶ 55-60.)
Moreover, the defendants informed Stericycle customers about
their move to Patriot and solicited at least one Stericycle
employee to join Patriot. (Id. ¶¶ 61-68.)
March 30, 2016, Stericycle sent letters to the defendants
reminding them of their post-employment obligations and
demanding compliance with their covenants. (Id.
¶ 69.) Shortly after the defendants responded to those
letters on April 8, 2016, Stericycle filed suit. (Id.
¶¶ 70-73.) Among other counts in its
complaint, Stericycle asserts that the defendants have
breached the restrictive covenants in their Nonsolicitation
Agreements and Covenant Agreement, as well as their fiduciary
duties to Stericycle, and seeks damages and injunctive
relief. (Id. ¶¶ 74-113.) In May 2016,
following a hearing, the Court entered a temporary
restraining order enjoining the defendants from soliciting
Stericycle customers and employees for a twelve-month period
and barring defendants from using or disclosing
Stericycle's confidential information or trade secrets.
(TRO 2-4, ECF No. 21.) Two months later, in July 2016, the
defendants filed a motion to dismiss Stericycle's breach
of contract claims (Counts I-IV). (Defs.' Mot. to
Dismiss, ECF No. 42.)
overcome a motion to dismiss under Rule 12(b)(6), “a
complaint must ‘state a claim to relief that is
plausible on its face.'” Adams v. City of
Indianapolis, 742 F.3d 720, 728 (7th Cir. 2014) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). “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.” W. Bend Mut. Ins. Co.
v. Schumacher, 844 F.3d 670, 675 (7th Cir. 2016)
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009)). This Court “must accept as true all factual
allegations in the . . . complaint and draw all permissible
inferences” in Stericycle's favor. Id.
(quoting Bible v. United Student Aid Funds, Inc.,
799 F.3d 633, 639 (7th Cir. 2015) (internal quotation marks
omitted)). However, “[w]hile a plaintiff need not plead
‘detailed factual allegations' to survive a motion
to dismiss, [it] still must provide more than mere
‘labels and conclusions or a formulaic recitation of
the elements of a cause of action' for [its] complaint to
be considered adequate under [Rule] 8.” Bell v.
City of Chi., 835 F.3d 736, 738 (7th Cir. 2016) (quoting
Iqbal, 556 U.S. at 678).
sole issue presented by the defendants' motion is whether
the Nonsolicitation Agreements and the Covenant Agreement
were supported by adequate consideration. The defendants
argue that the consideration underlying the Nonsolicitation
Agreements fails because it was based only on the promise of
at-will employment, and because they worked for Stericycle
for no more than thirteen months (not two years), their
employment was insufficient as a matter of Illinois law to
serve as consideration for a restrictive covenant.
(Defs.' Mem. in Supp. of Mot. to Dismiss 3-4, ECF No.
43.) Simota argues that his Covenant Agreement also lacked
sufficient consideration because it was supported only by an
illusory grant of options that never vested or resulted in a
payout. (Id. at 4.) Stericycle contends that the
defendants were employed for a “substantial
period” under Illinois law in light of their
voluntarily resignation from Stericycle, and thus the
Nonsolicitation Agreements are enforceable. (Pl.'s Resp.
in Opp'n to Mot. to Dismiss 8-11, ECF No. 47.) With
regard to the Covenant Agreement, Stericycle argues that the
options served as adequate consideration regardless of
whether they vested. (Id. at 5-7.) The Court
addresses the two different agreements in turn and finds that
both are supported by sufficient consideration.
The Defendants' Nonsolicitation Agreements (Counts I,
the defendants resigned from Stericycle after about thirteen
months of continued employment to work for a competitor, the
Court finds that there is enough consideration to enforce the
Nonsolicitation Agreements. A contract is enforceable under
Illinois law whenever there is an exchange that includes an
offer, acceptance, and consideration. All Am. Roofing,
Inc. v. Zurich Am. Ins. Co., 404 Ill.App.3d
438, 449, 934 N.E.2d 679, 689 (1st Dist. 2010) (citation
omitted). “Consideration is defined as a bargained-for