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GemShares LLC v. Lipton

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

July 21, 2019

GEMSHARES LLC, Plaintiff,
v.
ARTHUR JOSEPH LIPTON and SECURED WORLDWIDE, LLC, Defendants.

          MEMORANDUM OPINION AND

          MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE

         GemShares LLC has sued Arthur Lipton and Secured Worldwide, LLC, alleging, among other claims, that Lipton breached a covenant not to compete by forming Secured Worldwide to develop a product that used GemShares' intellectual property. The Court previously ruled that Lipton is collaterally estopped from relitigating the question of whether he breached a contractual covenant not to compete and granted summary judgment in favor of GemShares' on Lipton's liability for breach. In light of those rulings, GemShares has moved for equitable relief and attorney's fees.

         Background

          The Court assumes familiarity with its prior written decisions in this case. See GemShares LLC v. Lipton (Motion to Dismiss Order), No. 17 C 6221, 2018 WL 827962 (N.D. Ill. Feb. 11, 2018); GemShares LLC v. Lipton (Issue Preclusion Order), No. 17 C 6221, 2019 WL 330470 (N.D. Ill. Jan. 25, 2019); GemShares LLC v. Lipton (Order on Liability for Breach), No. 17 C 6221, 2019 WL 587392 (N.D. Ill. Feb. 13, 2019). The following is an abridged summary of the relevant procedural history.

         In June 2018, GemShares moved for partial summary judgment on count 4 of its amended complaint, in which it alleged that Lipton breached a non-compete provision of GemShares' operating agreement. The sole basis on which GemShares sought summary judgment was the earlier decision of a federal district court in New York in related litigation between Lipton and Cormac Kinney, an investor in Lipton's company Secured Worldwide. GemShares argued that the New York court's ruling precluded Lipton from relitigating the issue of whether he had breached the non-compete provision.

         In a written decision, the Court found that issue preclusion applied but deferred ruling on Lipton's liability for breach of contract because neither party had adequately addressed the other elements of the claim. Issue Preclusion Order, 2019 WL 330470, at *5. After the parties submitted additional briefing, the Court granted summary judgment in favor of GemShares on the claim for breach of contract. Order on Liability for Breach, 2019 WL 587392, at *2. Lipton moved for reconsideration of that decision, a motion the Court denied. Dkt. no. 206.

         GemShares has moved for equitable relief on its breach-of-contract claim. Specifically, it asks the Court to permanently enjoin Lipton and Secured Worldwide from violating the non-compete provision and to assign to GemShares Lipton's interest in a particular patent application. It has also requested an award of attorney's fees. For the reasons stated below, the Court grants the motions for the injunction and assignment of patent rights but declines to rule on the fee request at this stage.

         Discussion

         A. Permanent injunction

         A party seeking a permanent injunction must prove four elements: "(1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction." Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 156-57 (2010).

         1. Enforceability

         Lipton first argues that the non-compete provision of the GemShares operating agreement is unenforceable because it is overly broad. The provision states:

[A]ll Interest Holders shall not, until the dissolution of the Company or until the first anniversary of the effective date of termination of their respective status as an Interest Holder, engage in, acquire or own any interest in, or assist any person who or which, directly or indirectly through any other person, engages in any business, enterprise, trade, profession or employment that is competitive with the Company and is related to any Gemstone Financial Product, as defined herein. For purposes hereof, a business, enterprise, trade, profession or employment ...

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