United States District Court, N.D. Illinois, Eastern Division
ACT II JEWELRY, LLC, a Delaware Limited Liability Corporation d/b/a Lia Sophia; and KIAM EQUITIES CORPORATION, a Delaware Corporation, Plaintiffs,
ELIZABETH ANN WOOTEN; ADORNABLE-U, LLC, a Delaware Limited Liability Company; NICOLE MEAD; SHANNON ECKELS; and BECKA DAUN, Defendants. ELIZABETH ANN WOOTEN; ADORNABLE-U, LLC, a Delaware Limited Liability Company; NICOLE MEAD; and SHANNON ECKELS, Counterplaintiffs/ Third-Party Plaintiffs,
ACT II JEWELRY, LLC, a Delaware Limited Liability Company; and KIAM EQUITIES CORP., a Delaware Corporation; VICTOR K. KIAM III; and ELANA KIAM, Counterdefendants/ Third-Party Defendants.
MEMORANDUM OPINION AND ORDER
D. LEINENWEBER, JUDGE
the Court are Cross-Motions for Partial Summary Judgment.
Plaintiffs Act II Jewelry, LLC, Kiam Equities Corp.
(“KEC”), F-Five LLC, Victor K. Kiam, III, and
Elena Kiam (collectively, “Act II”) move for
summary judgment on the breach of fiduciary duty claim and
all remaining counterclaims. Defendants Elizabeth Ann Wooten,
Adornable-U, LLC, Nicole Mead, Shannon Eckels, and Becka Daun
(collectively, “Adornable-U” or
“Defendants”) move for summary judgment on Act
II's trade secret and breach of contract claims. For the
reasons stated herein, Act II's Motion for Summary
Judgment and Adornable-U's Motion for Summary Judgment
are granted in part and denied in part. Act II's Motion
for Summary Judgment is granted as to the tortious
interference claims and the Illinois Consumer Fraud claim,
but denied as to the breach of fiduciary duty claim, breach
of Incentive Agreement claim and the Illinois Wage Payment
and Collection Act claim. Defendants' Motion for Summary
Judgment on Act II's trade secret claims against Mead,
Eckels, and Daun is granted. The rest of Defendants'
Motion is denied.
Court assumes familiarity with the underlying facts of this
case as recited in its previous opinions [ECF Nos. 90, 95,
252]. See, generally, Act II Jewelry, LLC v. Wooten,
301 F.Supp.3d 905 (N.D. Ill. 2018) (motion to dismiss and
partial summary judgment); Act II Jewelry, LLC v.
Wooten, No. 15 C 6950, 2016 WL 4011233 (N.D. Ill. July
27, 2016) (motion to dismiss counterclaims); Act II
Jewelry, LLC v. Wooten, No. 15 C 6950, 2016 WL 3671451
(N.D. Ill. July 11, 2016) (motion to dismiss operative
complaint). The Court reiterates the basic facts and will
discuss in more detail in the analysis as necessary.
Act II Jewelry, LLC was in the jewelry sales industry.
(Defs.' Resp. to Pls.' Facts, Dkt. No. 307, ¶
4.) It marketed and sold jewelry by having a network of sales
representatives hold parties in customers' homes,
commonly known as the “party plan” business
model. (Id.) Ann Wooten was employed as Vice
President of Product Development by Act II for approximately
three and a half years from July 2011 to February 9, 2015.
(Id.) As Vice President of Product Development,
Wooten, and her team, selected, developed, and designed Act
II's line of jewelry. (Id. ¶ 5.)
December 1, 2014, Act II announced it would be winding down
its direct-selling, party plan jewelry business in the United
States and Canada and its sales advisors would be selling its
Fall/Winter 2014 collection at discounted prices through
December 31, 2014. (Id. ¶ 8.) To ensure an
orderly wind down process, Act II entered into a Key Employee
Incentive Bonus Agreement (the “Incentive
Agreement”) with several employees, including Wooten.
Incentive Agreement provided financial incentives for Wooten
to remain employed with Act II and work diligently during the
wind down period. (Dkt. No. 307, ¶ 8.) The Incentive
Agreement included a reaffirmation of a previously agreed to
Non-Disclosure Agreement stating that all trade secrets
Wooten obtained during her employment were to be held in
confidence solely in connection with and for the purposes of
employment with Act II. (Id. ¶ 7.) The
Incentive Agreement also specifically allowed Wooten to
continue working in the jewelry field, stating that nothing
in the agreement would prevent Wooten from “continuing
her work as a jewelry designer, as long as [Wooten] does not
infringe on any intellectual property belonging to the
Company.” (Id. ¶ 10.) Finally, the
Incentive Agreement entitled Wooten to severance and bonus
pay if she acted in accordance with the agreement so long as
she was not terminated for cause. (Id. ¶ 11.)
terminated its normal business at the end of December 2014,
and ceased all operations as of March 7, 2015. (Pls.'
Resp. to Defs.' Facts, Dkt. No. 294, ¶ 47.) Act II
has not engaged in any business since March 7, 2015.
Act II decided to close shop, Wooten decided to open her own
business in the same industry. The crux of the dispute
between the parties here is the propriety of Wooten's
activities from the fall of 2014 to her termination date with
Act II on February 9, 2015. The parties tell very different
stories of what occurred during this period. The Court
outlines each parties' rendition in turn.
to Act II, Wooten used Act II's proprietary information
to launch her new business, Adornable-U. While she was still
employed by Act II, Wooten covertly directed Act II designers
Bonnie Jaekel and Abbey Johnson to spend Act II work time to
develop designs for Adornable-U. (Dkt. No. 307, ¶ 12.)
She also coached Act II supplier La Radiant in its
negotiations against Act II and secretly took Act II's
jewelry styles, including pieces from the unreleased
collection she and her team developed in 2014, and used them
for Adornable-U. (Id.) Wooten also took proprietary
information from Act II prior to her termination. She
forwarded numerous e-mails and attachments from her Act II
business account to her personal email account including
proprietary information regarding the Spring/Summer 2015
collection, sales trends for Act II styles, and other topics
clearly related to the launch of her new business.
(Id.) While still employed and under contract with
Act II, Wooten began operating Adornable-U's business by
marketing Adornable-U to the public: she published
Adornable-U's catalog online, registered and/or employed
sales representatives to hold parties and take customer
orders, and sold and distributed starter kits (containing
actual product). (Dkt. No. 307, ¶ 13; Defs.' Reply
to Pls.' Add'l Facts, Dkt. No. 334, ¶ 76.) In
short, in Act II's view, Wooten stopped working in the
best interests of Act II and further took Act II's
proprietary information to benefit her new business. All of
these activities, according to Act II, were undertaken
without Act II's knowledge. While Act II had been
generally aware of Wooten's intention to start her own
direct-sales jewelry business after Act II shuttered its
doors, Act II expected that Wooten would not take any of its
proprietary information and would not begin operating prior
to concluding her work with Act II.
tells a very different story. According to Wooten, she was
always up front with Act II and its owners about her plans to
continue in the business after Act II shut down. In September
2014, Wooten disclosed to Act II that, in light of the fact
that Act II was going out of business, she wished to start
her own company and enter into the direct-sales jewelry
business. Wooten spoke with Act II personnel about her new
business plans several times over the course of the next two
months. Act II's owners expressed support and said they
had no objection to Wooten starting her own direct-sales
jewelry company and working with former Act II Sales
Advisors. With Act II's blessing, Wooten incorporated
Adornable-U, a direct-selling jewelry business on October 30,
to Wooten, at no point during Act II's winding down
process did she ever use or misappropriate any of Act
II's trade secret information for the design or sourcing
of Adornable-U's 2015 or its subsequent jewelry lines.
(Dkt. No. 294, ¶ 33.) Wooten did not refer to or in any
way use Act II's Spring/Summer 2015
“collection” in the selection or development of
Adornable-U's jewelry lines or catalogs. (Id.
¶ 35.) To the contrary, Wooten selected and developed
Adornable-U's 2015 and subsequent jewelry lines
independently, using only information regarding those jewelry
products and designs obtained from third-party vendors.
(Id. ¶ 37.)
January 20, 2015, things went awry. Wooten posted
Adornable-U's first product catalog online. (Dkt. No.
307, ¶ 15.) According to Act II, Adornable-U's
product catalog contained Act II's work product because
it included many “carryover” jewelry items in Act
II's Fall/Winter 2014 and prior jewelry collections, as
well as items that Act II's designers had been designing
in the fall of 2014, but that had not yet appeared in an Act
II published collection. (Id. ¶ 16.) After
Adornable-U's catalog was published, the parties
attempted to negotiate. Those negotiations were unsuccessful.
(Id. ¶ 19.)
February 9, 2015, Act II notified Wooten that her employment
was terminated for cause. (Dkt. No. 334, ¶ 81; Dkt. No.
307, ¶ 24.) On March 6, 2015, Adornable-U started
selling jewelry. (Dkt. No. 307, ¶ 30.) From 2015 through
2017, Adornable-U sold 755 styles of jewelry. (Dkt. No. 334,
¶ 93.) Only 62 of those styles are at issue in this
filed suit against Wooten and Adornable-U in the Circuit
Court of Cook County, Illinois on March 20, 2015, which was
subsequently removed to federal court. (Dkt. No. 307, ¶
32.) From March 2015 to August 2015, Act II sent four letters
to individuals associated with Adornable-U, including actual
and potential sale agents. (Id. ¶¶ 33-39.)
The letters advised the recipients of the pending lawsuit,
summarized the claims in the suit, and advised the recipients
of potential future discovery obligations. (Id.
¶¶ 33-39.) The letters stated that “this
lawsuit does not seek to block Ms. Wooten from operating a
direct selling jewelry company” and that Act II and KEC
were “not seeking to block [the letter's
recipients] from representing [Adornable-U].”
(Id. ¶ 33.) Act II contends these letters were
necessary to assert its rights and advise the recipients of a
litigation hold. (Id. ¶¶ 33-39.)
Adornable-U disagrees, arguing that the letters were sent as
a campaign explicitly and implicitly to threaten
Adornable-U's actual and potential sales agents with a
lawsuit if they continue working with Adornable-U. (Pls.'
Resp. to Defs.' Add'l Facts, Dkt. No. 330, ¶
19.) Additionally, Act II served 314 third-party subpoenas,
many to Adornable-U sales agents, for documents and/or
deposition testimony in this case. (Id. ¶ 22.)
Adornable-U argues that Act II used the guise of discovery to
threaten Adornable-U sales agents with suit if they continue
working for Adornable-U.
the Court are Cross-Motions for Summary Judgment. The Court
considers each claim in turn.