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Bankdirect Capital Finance, LLC v. Capital Premium Financing, Inc.

United States District Court, N.D. Illinois

July 11, 2018

BANKDIRECT CAPITAL FINANCE, LLC, Plaintiff,
v.
CAPITAL PREMIUM FINANCING, INC., Defendant,
v.
BANKDIRECT CAPITAL FINANCE and TEXAS CAPITAL BANK NATIONAL ASSOCIATION, Counter-Defendants.

          MEMORANDUM OPINION AND ORDER

          JOHN Z. LEE UNITED STATES DISTRICT JUDGE

         Plaintiff BankDirect Capital Finance, LLC (“BankDirect”), Defendant Capital Premium Financing, Inc. (“CPFI”), and Counter-Defendant Texas Capital Bank National Association (“TCB”) have brought a number of claims against one another which arise out of a failed business relationship. BankDirect and TCB have moved to dismiss Counts VII and VIII of CPFI's second amended counterclaims. For the reasons given below, BankDirect and TCB's motion is denied.

         Background [1]

         BankDirect and CPFI originate and service loans for the financing of insurance premiums. CPFI's 2d Am. Countercl. (“Countercl.”) ¶ 2, ECF No. 172. TCB controls BankDirect and directs its conduct. Id. ¶¶ 104, 105, 128. BankDirect's primary customer segment is large insurance agencies, while CPFI focuses on small to midsized insurance agencies. Id. ¶¶ 4, 5.

         In 2010, CPFI and BankDirect entered into a set of agreements under a Master Transaction Agreement (“Master Agreement”) designed to substantially intertwine the two companies' sales, marketing, and financing. Id. ¶¶ 1, 9, 10. The Master Agreement also gave BankDirect an option to purchase certain CPFI assets and liabilities upon the Master Agreement's expiration. Id. ¶ 10.

         When the Master Agreement expired in 2016, BankDirect attempted to exercise the purchase option, and CPFI refused to sell. Id. ¶ 136; 3d Am. Compl. ¶¶ 123-40, ECF No. 160. As a result, BankDirect has brought a number of claims, including breach of contract (Counts III, IV and V) and breach of the implied duty of good faith (Count VI). BankDirect also seeks a declaration that the agreements between the parties are enforceable and that it satisfactorily performed its obligations under the agreements (Count II).[2]

         For its part, CPFI's counterclaims contend that BankDirect and TCB breached the parties' agreements (Count II and III) and the covenant of good faith and fair dealing (Count IV). CPFI also alleges that BankDirect and TCB fraudulently induced CPFI to enter into the agreements (Count VI); that the agreements, including the purchase option, are void (Count I); and that BankDirect and TCB have been unjustly enriched (Count V). In addition, CPFI claims that BankDirect and TCB misappropriated proprietary information in violation of the Illinois Trade Secrets Act (“ITSA”), 765 Ill. Comp. Stat. 1065/1 et seq. (Count VII). Lastly, CPFI brings a conversion claim (Count VIII) alleging that, after the parties' dispute arose, BankDirect and TCB unilaterally seized $1, 000, 000 from CPFI's deposit account without having a contractual right to do so.

         Before the Court is BankDirect and TCB's motion to dismiss CPFI's counterclaims for trade-secret misappropriation and conversion (Counts VII and VIII, respectively).

         Legal Standard

         A motion under Rule 12(b)(6) challenges the sufficiency of claims under Rule 8. See Christensen v. Cty. of Boone, 483 F.3d 454, 457 (7th Cir. 2007). The federal notice pleading standard requires claims to “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2009)). Claims need provide only “enough detail to give [defendants] fair notice of what the claim is and the grounds upon which it rests, and, through his allegations, show that it is plausible, rather than merely speculative, that he is entitled to relief.” Tamayo v. Blagojevich, 526 F.3d 1074, 1083 (7th Cir. 2008). In evaluating a Rule 12(b)(6) motion, all well-pleaded allegations are accepted as true, and courts must draw all reasonable inferences in the claimant's favor. See Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901, 903 (7th Cir. 2011); Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009).

         Analysis

         I. ITSA Claim (Count VII)

         BankDirect and TCB move to dismiss CPFI's trade-secret misappropriation claim under the ITSA, 765 Ill. Comp. Stat. 1065/1 et seq. “To state a claim for trade secret misappropriation, a plaintiff must allege: (1) that the information at issue was a trade secret; (2) that it was misappropriated; and (3) that it was used in the defendants' business.” FireEm Up, Inc. v. Technocarb Equip. (2004) Ltd., 799 F.Supp.2d 846, 849-50 (N.D. Ill. 2011) (citing Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir. 2003)).

         “A trade secret is information that ‘(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.'” Id. (quoting 765 Ill. Comp. Stat. 1065/2(d)). “While it is true that specificity of concrete trade secrets is required to support a finding of misappropriation, . . . the alleged trade secrets need not be disclosed in detail in a complaint to survive a motion to dismiss.” Id. at 850 (citing AutoMed Techs., Inc. v. Eller, 160 F.Supp.2d 915, 920- 21 (N.D. Ill. 2001) (internal citation omitted); see Motorola, Inc. v. Lemko Corp., 609 F.Supp.2d 760, 771 (N.D. Ill. 2009) (“ITSA plaintiffs are not required to plead highly specific facts on improper trade secret use, because such facts often will not be available before discovery.”) (citing Sentry Pool v. Wave Tec Pools, Inc., No. 07-4082, 2008 WL 3200837, at *3 (C.D. Ill. Aug. 6, 2008)); see also Covenant ...


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