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Prominence Advisors, Inc. v. Dalton

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

December 18, 2017



          SARA L.ELLIS, United States District Judge

         This diversity action arises out of a short-lived employment arrangement between Plaintiff Prominence Advisors, Inc. (“Prominence”) and its former employee, Defendant Joseph Dalton. After employing Dalton for a few months, and less than a month after entering into an employment agreement, Prominence fired Dalton. Prominence now brings this suit alleging that subsequent to Dalton's termination he breached the terms of the employment agreement by failing to return property belonging to Prominence, soliciting or encouraging one of Prominence's employees to resign from Prominence, and disparaging Prominence to that same employee (Count I). Prominence also alleges that Dalton has misappropriated Prominence's trade secrets in violation of the Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1831 et seq., (Count II), and the Illinois Trade Secrets Act (“ITSA”), 765 Ill. Comp. Stat. 1065/1 et seq., (Count III). Dalton moves to dismiss [10] the breach of contract claims in Count I relating to employee solicitation and non-disparagement, and Counts II and III in their entirety. Because Prominence alleges facts from which the Court could reasonably infer that Dalton disparaged Prominence and either solicited or encouraged its employee to resign, the Court denies the motion to dismiss the breach of contract claims. Because Prominence fails to allege facts that plausibly show that Dalton misappropriated its trade secrets, the Court grants the motion to dismiss Counts II and III, without prejudice.


         Prominence is an Illinois company that provides tools and services related to various software programs used in the health care field. Prominence hired Dalton, a citizen of Minnesota, as its Director of Technology. The parties entered into an employment agreement (the “Agreement”) in April 2016 with an effective date of January 1, 2016. As part of the agreement, and as a condition of his offer of employment, Dalton agreed to several restrictive covenants contained in the Agreement. These included a Covenant Against Competition, Non-Solicitation of Customers, and Non-Solicitation of Employees. Doc. 1-1 § 4. The Agreement also included a requirement that Dalton return all property, including confidential information belonging to Prominence, at the end of his employment. Doc. 1-1 § 10. And the Agreement contained a non-disparagement clause, barring Dalton from disparaging Prominence. Doc. 1-1 § 11.

         In furtherance of its business activities, Prominence has developed and maintained confidential information related to its operations (“Confidential Information”). This Confidential Information includes customer and potential customer information, employee agreements, training and review programs and techniques, personnel data, and other electronic data. Prominence protects this Confidential Information from disclosure to third parties, and Prominence gains a competitive advantage from keeping this information secret.

         While Dalton was employed as the Director of Technology at Prominence, he was responsible for migrating electronic files containing Confidential Information from a cloud based system known as Aero FS to another system called DropBox. As part of the migration, Dalton backed up copies of the Confidential Information on an external hard drive. Additionally, Dalton has retained access to the DropBox folders on two of his personal devices.

         Shortly after entering into the Agreement, Dalton's relationship with Prominence soured. On May 13, 2016, Prominence terminated Dalton's employment. Immediately after his termination, Dalton contacted another Prominence employee, Ben Reusser. Immediately after Dalton spoke with Reusser, Reusser informed Prominence that Dalton had contacted him and had relayed Dalton's version of events relating to the termination. Five days later, Reusser resigned from Prominence, stating that he could not reconcile what Dalton had told him about the termination with the story Prominence had told him and that he wished to continue working with Dalton.

         As a result of Reusser's departure, Prominence was no longer able to perform on a high-value consulting agreement it had with Johns Hopkins, and was forced to terminate the agreement, forfeiting over $475, 000 in fees.


         A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (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.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.


         I. Count I: Breach of Contract

         Prominence alleges that Dalton breached Sections 4, 10, and 11 of the Agreement. Section 4 includes the restrictive covenants barring Dalton from competing with Prominence, soliciting Prominence's customers, and soliciting Prominence's employees. Section 10 requires Dalton to return all property belonging to Prominence at the end of his employment with Prominence, including Confidential Information. And Section 11 bars Dalton from disparaging Prominence in anyway. Dalton moves to dismiss Prominence's breach of contract claims arising from alleged breaches of Sections 4 and 11 for failure to allege facts sufficient to establish a breach of those provisions. Dalton concedes that Prominence adequately alleges a breach of Section 10.

         As an initial matter, Prominence argues that Dalton's motion to dismiss the parts of Count I arising from his alleged breaches of Sections 4 and 11 fails because a defendant cannot partially dismiss counts, and that by conceding the claim arising from the breach of Section 10 is properly pleaded, Dalton cannot dismiss the claim arising under Sections 4 and 11. This is a misunderstanding of the law. Parties may not partially dismiss claims. BBL, Inc. v. City of Angola, 809 F.3d 317, 325 (7th Cir. 2015). But claims and counts are not the same thing. Liston v., Ltd., 254 F.Supp.3d 989, 1002 (N.D. Ill. 2017). Claims are grievances arising from particular sets of facts whereas counts are the legal theories upon which the plaintiff seeks redress for those grievances. See Lucas v. Vee Pak, Inc., 68 F.Supp.3d 870, 876 (N.D. Ill. 2014) (stating claims are “the plaintiff's grievance and demand relief, and ‘counts, ' [are] legal theories by which those facts purportedly give rise to liability and damages”). Defendants can move to dismiss some claims brought under a single count without moving to dismiss the entire count. Spriesch v. City of Chicago, No. 17 C 1952, 2017 WL 4864913, at *2 (N.D. Ill. Oct. 26, 2017). The allegations underlying Prominence's claim for breach of Section 10 are Dalton's continued possession of the hard drive and access to the DropBox. ...

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