United States District Court, N.D. Illinois, Eastern Division
BAY FASTENERS & COMPONENTS, INC., a Florida Corporation, Plaintiff,
FACTORY DIRECT LOGISTICS, LLC, dba FDL Fasteners, an Illinois Limited Liability Company; DANIEL LONG, an agent of FACTORY DIRECT LOGISTICS, LLC; and LAWRENCE PALMER, individually and as an agent of FACTORY DIRECT LOGISTICS, LLC, Defendants.
MEMORANDUM OPINION AND ORDER
B. Gottschall United States District Judge
the president of a corporation left to work at a competing
business, the former employer, plaintiff here, brought four
claims in its verified amended complaint (“AC”).
(Verified Am. Compl., ECF No. 34.) In Count I of the AC,
plaintiff alleges that defendants have misappropriated its
trade secrets, thus violating the Defend Trade Secrets Act of
2016 (“DTSA”), 18 U.S.C.A. § 1836 (West
2018). In Count II, defendant Lawrence Palmer
(“Palmer”) is alleged to have breached a
fiduciary duty under Florida law, and plaintiff alleges in
Count III that defendant Daniel Long (“Long”) has
aided and abetted Palmer's breach of fiduciary duty.
Plaintiff withdrew Count IV, which was an unfair competition
claim. Defendants have filed a motion to dismiss pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. For
the reasons that follow, the motion is granted in part
because plaintiff has failed to state claims under state law,
and denied in part because plaintiff has sufficiently alleged
a DTSA claim.
purposes of a Rule 12(b)(6) motion, factual allegations in a
complaint are taken as true. Ashcroft v. Iqbal, 556
U.S. 662, 678-79 (2009). Plaintiff Bay Fasteners &
Components, Inc. (“BFC”) is a Florida corporation
with its principal place of business in Tampa, Florida. (AC
¶ 7, ECF No. 34.) Defendant Factory Direct Logistics,
LLC (“FDL”) is an Illinois limited liability
company with its principal place of business in Schaumburg,
Illinois. (Id. ¶ 9.) Other defendants are Long,
the current president and CEO of FDL, and Palmer, formerly
the president of BFC and currently an employee of FDL.
(Id. ¶¶ 13-14.) BFC is in the business of
supplying fasteners to customers ranging in size from Fortune
500 companies to local manufacturing companies. (Id.
¶ 8.) FDL is in the business of importing and
distributing fasteners and other c-class hardware throughout
the United States, including within this judicial district.
(Id. ¶ 10.) In the past, FDL supplied fasteners
to BFC for sale to BFC's customers. (Id. ¶
Palmer worked for BFC for 25 years, and he served as its
president for approximately 15 years until April 2017.
(Id. ¶ 11.) In or about May 2017, FDL hired
Palmer to open and run an FDL facility in Tampa, Florida and
directly compete with BFC. (Id. ¶ 18.) On May
19, 2017, Defendant Long informed BFC by email of
Palmer's employment with FDL and informed BFC that it
would no longer supply BFC with fasteners due to a conflict
of interest. (Id. ¶ 51.) Long and FDL have
stated that they plan to solicit business, and have since
solicited business, from BFC's customers through Palmer.
(Id. ¶ 5.)
respect to the efforts made by BFC to protect its
confidential information, BFC alleges that it “utilizes
secured login procedures for employees, implements a
shredding procedure for customer information, and limits
employees' access of [sic] documents based on [an]
employee's position within the company.”
(Id. ¶ 26.) Moreover, BFC employees, including
Palmer, receive an employee handbook “that specifically
mentioned non-disclosure of confidential information”
listing as confidential information “Computer Programs,
Computer Programs and Codes, Customer Lists, Financial
Information, New Materials Research, [and] Proprietary
Production Processes.” (Id. ¶¶
28-29.) In 2001, Palmer acknowledged receipt of the employee
handbook, containing its non-disclosure policy. (Id.
¶ 30.) BFC also alleges that it restricts access to its
offices, activates security systems after work hours, or
both. (Id. ¶ 32.) BFC's trade secrets are
alleged to allow it to “recover, receive, process,
market, price, and distribute its products to other companies
more efficiently, effectively, and safely” commensurate
to the standards and needs of its customers. (Id.
¶ 33). BFC also alleged that it spent 20-years
developing a “near-permanent relationship” with
its customers. (Id. ¶ 35.) BFC derives economic
value from keeping its confidential information confidential,
and the resources it has devoted to developing its customers
and customer contact lists, including its customers'
preferences and needs, have allowed BFC to obtain a
competitive advantage over other companies that supply
fasteners. (Id. ¶¶ 27, 37.)
also alleges that before May 3, 2017, FDL and BFC discussed
the possibility of FDL purchasing BFC. (Id. ¶
40.) Pursuant to the companies' longstanding
relationship, BFC disclosed certain, but not all, of its
financial records and other confidential information to FDL.
(Id. ¶ 41.)
of his trusted, executive level position with BFC, Palmer had
access to BFC's customer list and other alleged trade
secrets, and was involved with all of BFC's suppliers and
customers. (Id. ¶ 44.) Palmer was in charge of
maintaining the accounts (id. ¶ 45), and had
access to company sales and profit information, product
specifications, pricing, customer product specifications and
customer contact lists (id. ¶ 46). His position
gave him insight into each customer's wants, needs, and
dislikes, as well as critical pricing and profitability
information. (Id. ¶ 47.)
considering a Rule 12(b)(6) motion to dismiss a complaint,
the court accepts as true all well-pleaded allegations and
draws all reasonable inferences in the plaintiff's favor.
Virnich v. Vorwald, 664 F.3d 206, 212 (7th Cir.
2011). The complaint must provide the defendant with fair
notice of the claim and must be facially plausible.
Prominence Advisors, Inc. v. Dalton, No. 17 C 4369,
2017 WL 6988661, at *2 (N.D. Ill.Dec. 18, 2017) (citing
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). To
state a claim that is facially plausible, plaintiffs must
plead enough facts to establish that their right to relief is
more than merely speculative. Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). When the plaintiff
pleads enough factual allegations allowing the court to draw
the reasonable inference that the defendant is liable, then
the complaint will survive a Rule 12(b)(6) motion to dismiss.
Iqbal, 556 U.S. at 678 (2009) (citing
Twombly, 550 U.S. at 556). Finally, there is no
heightened pleading requirement in DTSA actions. Tesla
Wall Sys., LLC v. Related Cos., L.P., No. 17-cv-5966
(JSR), 2017 WL 6507110, at *10 (S.D.N.Y. Dec. 18, 2017).
move to dismiss plaintiff's DTSA claims, contending that
plaintiff has failed to identify any alleged trade secrets;
that plaintiff has failed to identify that it takes steps to
preserve the confidentiality of its customers, wants or
needs; and that plaintiff has failed to allege that anything
was acquired through improper means. Additionally, defendants
move to dismiss plaintiff's Florida state law claims,
contending that defendant Palmer owed no fiduciary duty at
the time of the challenged action, and that even if plaintiff
properly alleged state law claims, they would nevertheless be
preempted under the Florida Uniform Trade Secrets Act. Fla.
Stat. § 688.008 (West 2018).
Defend Trade Secrets Act Claim Against Defendants (Count
DTSA provides a private right of action for an owner of a
trade secret that has been misappropriated. 18 U.S.C.A.
§ 1836(b) (West 2018). ...