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General Electric Co. v. Uptake Technologies, Inc.

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

June 25, 2019

General Electric Company, General Electric International, Inc., Plaintiffs,
v.
Uptake Technologies, Inc., Ganesh Bell, Scott Bolick, Jay Allardyce, Ravi Marwaha, Kelly McGinnis, and Alex Paulsen, Defendants.

          MEMORANDUM OPINION AND ORDER

          Honorable Thomas M. Durkin, United States District Judge.

         Plaintiffs General Electric Company and General Electric International (GE) seek injunctive relief and damages against Uptake Technologies and six former high-level GE employees who left GE to work for Uptake. GE alleges claims for breach of contract, trade secret misappropriation, tortious interference, unfair competition, and breach of fiduciary duty. The defendants filed a motion to dismiss for failure to state a claim. For the following reasons, the defendants' motion is granted in part and denied in part.

         Legal Standard

         A Rule 12(b)(6) motion challenges the “sufficiency of the complaint.” Berger v. Nat. Collegiate Athletic Assoc., 843 F.3d 285, 289 (7th Cir. 2016). A complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), sufficient to provide defendant with “fair notice” of the claim and the basis for it. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). This standard “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While “detailed factual allegations” are not required, “labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The complaint must “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). “‘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.'” Boucher v. Fin. Sys. of Green Bay, Inc., 880 F.3d 362, 366 (7th Cir. 2018) (quoting Iqbal, 556 U.S. at 678). In applying this standard, the Court accepts all well-pleaded facts as true and draws all reasonable inferences in favor of the non-moving party. Tobey v. Chibucos, 890 F.3d 634, 646 (7th Cir. 2018).

         Background

         General Electric and the Individual Defendants

         In 2011, GE launched a campaign to connect heavy industrial equipment to cloud-based software and analytics. R. 19 ¶ 1. The purpose was to provide customers with a better way to track production efficiency and monitor the health and life of their machinery. Id. After finding initial success, GE formed GE Digital, a GE subsidiary dedicated to providing software for industrial equipment to other GE businesses and outside companies. Id. GE Digital works closely with GE Power, another GE subsidiary, to design software for companies in the power industry. Id. ¶ 40.

         Individual defendants Ganesh Bell, Scott Bolick, Jay Allardyce, Ravi Marwaha, Kelly McGinnis, and Alex Paulsen all held high-level positions with either GE Digital or GE Power. Id. ¶¶ 45-50.[1] Bell, Allardyce, Marwaha, and McGinnis are domiciled in and citizens of California. Id. ¶¶ 18, 20, 21-22. Bolick is domiciled in and a citizen of Illinois and Paulsen is domiciled in and a citizen of Pennsylvania. Id. ¶¶ 19, 23. The individual defendants were critical to GE's strategic, product development, sales, and marketing efforts, and had access to GE's confidential and proprietary data, including information regarding marketing, pricing, product development, sales, and acquisition strategies. Id. ¶¶ 51, 67. As part of their employment, the individual defendants each signed an Employee Innovation and Proprietary Information Agreement (Confidentiality Agreement). Id. ¶ 66. Through the Confidentiality Agreement, the defendants agreed “not to use, publish or otherwise disclose (except as my Company duties may require), either during or subsequent to my employment, any secret* or confidential* information or data of the Company or its parent, subsidiaries, or affiliates.” Id. ¶ 71. The Agreement further provided that GE considers secret or confidential:

any information or data that is not generally known - regardless of whether such information or data is in oral, written, machine readable or other form.... Without limitation, examples of information or data that may be of a secret or confidential nature are: drawings, manuals, notebooks, reports, models, inventions, formulas, processes, machines, compositions, computer programs, accounting methods, business plans, information systems, customer and employee lists and any information and data in electric form.

Id. ¶ 72, Exs. 1-6 at 2. Bell's, Bolick's Allardyce's, and McGinnis's Confidentiality Agreements did not include choice-of-law provisions. See Id. Exs. 1-3, 5. Marwaha's and Paulsen's Agreements provided for New York law. See Id. Exs. 4, 6.

         The individual defendants also each signed an Employee Non-Solicitation Agreement (NSA). Id. ¶ 73. Under the terms of the NSA, they agreed that during their employment and for 12 months afterwards, they would not “directly or indirectly, solicit or encourage any person who is a Lead [or Senior] Professional Band or higher employee of the Company (hereinafter ‘Restricted Person') to terminate his or her employment relationship with the Company or accept any other employment outside of the Company[.]”[2] Id. ¶ 74, Exs. 7-12 at 2. Bell's, Bolick's, Allardyce's, and Paulsen's NSAs contained a New York choice-of-law provision. Id. ¶ 76. McGinnis's and Paulsen's NSAs provided for New York law unless they lived and worked in California at the time of the dispute, in which case California law would apply. Id. None of the individual defendants signed non-compete agreements.

         Uptake Enters the Market

         In 2014, Uptake Technologies, a Chicago-based startup, joined the data analytics market for industrial equipment. Id. ¶¶ 3, 17. Uptake does not manufacture its own industrial equipment, but instead competes with GE to develop software. Id. ¶ 4.

         The relevant events all occurred between January and December 2018, when GE filed its first complaint in this case. First, Bell left GE on February 2 and was named president of Uptake just over two weeks later. Id. ¶ 60. Almost immediately, Bell began soliciting Bolick, Allardyce, and Marwaha, all of whom resigned from GE on April 9 to join Uptake. Id. ¶ 85. After their resignations, GE forensically examined their company computers. Id. ¶ 89. The examination revealed that Bell emailed Bolick at least twice after becoming Uptake's president, including sending a link to an article on Uptake's private investments. Id. In addition, the examination showed Marwaha opened a series of articles about Uptake minutes after reading a LinkedIn message, which GE alleges was sent from someone at Uptake at the behest of Bell. Id. ¶ 90. The examination also revealed that all three possessed GE trade secrets. Id. ¶ 98. Further, Bolick, Allardyce, and/or Marwaha performed the following acts prior to their resignations:

• Allardyce and Marwaha scheduled and attended meetings with GE personnel outside the scope of their duties to inquire about GE confidential and trade secret information. Id. ¶¶ 91-92;
• Bolick accessed a series of documents that, while dated for GE, would provide an enormous advantage for a startup company. Id. ¶¶ 93-94;
• All three rendered their GE-issued phones and iPads unreadable by either wiping the devices or refusing to provide GE with the passwords. Id. ¶ 96;
• Marwaha failed to return at least one GE-issued laptop computer. Id. GE alleges Bolick, Allardyce, and Marwaha coordinated wiping their devices to conceal their misappropriation of GE information and Bell's solicitation. Id. ¶ 97.

         In late April 2018, GE sent letters to Bolick, Allardyce, and Marwaha to remind them of their ongoing obligations to GE and to demand that they return GE's confidential and trade secret information. Id. ¶ 99. Following these letters, Uptake's counsel admitted that Marwaha had a significant number of GE files stored on a cloud-based repository, and that Bolick and Allardyce had photographs of GE whiteboards that contained confidential and trade secret information. Id. ¶ 101. GE and Uptake agreed on a forensic protocol through which these items were allegedly deleted. Id. ¶ 104. Bolick, Allardyce, and Marwaha denied that they had any other GE information. Id. ¶ 102.

         At around the same time, Uptake hired Kelly McGinnis. Id. ¶ 105. Prior to leaving GE, McGinnis solicited another GE employee to join her at Uptake, which the employee eventually did. Id. ¶ 106. McGinnis also erased the contents of her GE-issued phone, which GE believes was done to hide misappropriation of information and solicitations by Bell, Allardyce, Bolick, and Marwaha. Id. ¶ 107.

         Throughout the same period, Uptake repeatedly approached GE about a joint venture or acquisition. Id. ¶¶ 78, 81, 108. On one such occasion, GE and Uptake executed a confidentiality agreement. Id. ¶ 108. Within days of their discussions falling through, the Wall Street Journal published an article indicating that GE had hired bankers to consider the sale of its digital assets. Id. ¶ 110. Further, Uptake began directly targeting GE customers, citing the recent news of GE selling its digital business. Id. ¶ 111. GE alleges that Uptake leaked their discussions to the press to harm GE's standing in the marketplace and to target GE customers. Id. ¶ 112.

         In late August, Alex Paulsen also left GE for Uptake. Id. ¶ 114. GE examined one of his company-issued devices, which revealed a June email with the subject line, “Uptake Availability - Got your Info from Kelly McGinnis - Sr. Director, Commercial Finance.” Id. ¶ 116. After Paulsen's departure, Uptake again inquired about a deal with GE and GE again declined. Id. ¶ 117.

         In mid-November, Uptake scheduled a joint interview for five GE employees, at which time they met with three Uptake employees, including Paulsen. Id. ¶ 123. Two days later they all received offer letters from Uptake, which four of the five accepted. Id. ¶¶ 125-26. At least one of the letters offered a salary five percent higher than the individual's GE salary, despite that individual not sharing his salary information during the interview. Id. ¶ 125. Later that week, Uptake's CEO again contacted GE about entering into a transaction. Id. ¶ 127.

         GE contends that Uptake's repeated hiring of its employees followed by attempts to acquire GE Digital demonstrate Uptake's desire to supplant GE by acquiring its employees, confidential information, and customers. Id. ¶ 128. Further, GE asserts that Uptake's hiring of Bell, Allardyce, Bolick, Marwaha, McGinnis, and Paulsen put GE Power's and GE Digital's confidential information and trade secrets at risk. Id. ¶¶ 67, 133. Specifically, Bell is a software engineer who is deeply aware of GE Digital's software applications; Allardyce, Bolick, and Marwaha are uniquely positioned to replicate GE's Digital's software; and McGinnis and Paulsen know GE's financial and sales information and clients who Uptake should target. Id. ¶¶ 45-50, 131-135.

         GE brings this action against Uptake and the individual defendants, seeking injunctive relief and damages, for Breach of Contract (Count I), violations of the Illinois Trade Secrets Act (Count II) and Defend Trade Secrets Act (Count III), Tortious Interference with Contract (Count IV), Tortious Interference with Prospective Economic Advantage (Count V), Unfair Competition (Count VI), and Breach of Fiduciary Duty (Count VII).

         Analysis

         I. Breach of Contract (Count I) (Against the Individual Defendants)

         In Count I, GE alleges Bell, Bolick, Allardyce, Marwaha, McGinnis, and Paulsen breached their NSAs and Confidentiality ...


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