Zeigler Auto Group II, Inc. v. Chavez

          MEMORANDUM OPINION & ORDER

          John Robert Blakey, United States District Judge

         This case arises out of the actions of two former Zeigler Chevrolet-Schaumburg (Zeigler Chevrolet) employees who left Zeigler Chevrolet to work for competitor Bill Stasek Chevrolet, Inc. (Stasek Chevrolet). According to Plaintiffs, Defendant Horacio Chavez' employment with Stasek Chevrolet violates several restrictive covenants contained in his Non-Compete & Non-Solicitation Agreement (the Agreement). Plaintiffs also allege that Defendants Chavez and Dimitrios Maravelas misappropriated Plaintiffs' trade secrets and that Mr. Chavez solicited Mr. Maravelas to work at Stasek Chevrolet. Plaintiffs sued alleging, as relevant here, breach of contract, tortious interference with contract, and violations of the Defend Trade Secrets Act and the Illinois Trade Secrets Act. [50]. Plaintiffs also filed an amended motion for preliminary injunction, which is presently before the Court. [52]. For the reasons explained below, the motion is granted in part and denied in part.

         I. BACKGROUND

         A. Plaintiffs' Business

         Zeigler Auto Group II, Inc. (Zeigler) owns several automobile dealerships primarily located in Michigan and Illinois. [54] (Ex. 1) ¶ 5. Zeigler Chevrolet is among those dealerships. Id. ¶¶ 5-6.

         Zeigler attributes much of its success to its secure customer relationship system, the VinSolutions system. Id. ¶¶ 17-23; [54] (Ex. 2) ¶¶ 10-26. This system contains information such as Zeigler customer purchase history, notes from any interaction with customers or potential customers, notes of customer purchasing habits, customer car service information, and analytic data about sources for sales leads. Id. ¶ 19. The VinSolutions system contains notes not only regarding Zeigler Chevrolet, but for all of Zeigler's dealerships. Id. Zeigler employees update this information daily and in real time. Id. ¶ 20. This Zeigler-specific information is not generally known to the public. Id. ¶ 23, (Ex. 2) ¶¶ 15-16.

         Because of its value, Zeigler keeps this information confidential. [54] (Ex. 1) ¶¶ 24-30, (Ex. 2) ¶¶ 18-26. Zeigler secures its confidential information by providing employees user-specific login information and restricting the level of information a given employee may access based upon that employee's job duties. Id. Some employees have no access at all. [54] (Ex. 2) ¶ 20. Zeigler also requires its high-level employees, who are given the greatest VinSolutions system access, to sign non-compete, non-solicitation, and confidentiality agreements. Id. ¶ 21. Finally, all Zeigler employees are also required to review, agree to, and sign the Employee Handbook, which emphasizes the importance of keeping Zeigler's business information confidential. Id. ¶¶ 22-23, (Ex. A).

         B. Defendants Chavez' and Maravelas' Employment

         In August 2017, Zeigler Chevrolet hired Defendant Horacio (Jose) Chavez to serve as general manager. See also, [54] (Ex. 1) ¶ 34; [63] (Ex. 4) ¶ 13. As Zeigler Auto President Aaron Zeigler testified, Zeigler considered Mr. Chavez a high-level employee with a variety of key responsibilities. [54] (Ex. 1) ¶¶ 34-40. In addition to serving as general manager, Mr. Chavez also participated in Zeigler's Performance Group. Id. ¶¶ 36-38. That group is comprised of top executives from the various Zeigler dealerships. Id. During its meetings, the Performance Group discusses the health of the dealerships including finances, business processes, sales, negotiating tactics, hiring practices, legal matters, and other sensitive topics. Id. Mr. Zeigler testified that, as a key employee, Zeigler Chevrolet required Mr. Chavez to sign the Agreement, which included non-compete, non-solicitation, and confidentiality provisions. See also id. ¶ 39, (Ex. B), (Ex. 2) ¶¶ 39-40. Mr. Zeigler further testified that Zeigler Chevrolet required Mr. Chavez to sign the Agreement as part of his employment and pay plan. See also, [72] (Ex. A) ¶ 4, (Ex. 1) at 2.

         Defendant Dimitrios Maravelas is also a former Zeigler Chevrolet employee. Mr. Maravelas served as Zeigler Chevrolet's used car manager and reported directly to Mr. Chavez. [54] (Ex. 1) ¶¶ 31-33, (Ex. 2) ¶¶ 27-28. In this role, Mr. Maravelas managed the used car inventory, purchased and sold cars, supervised the reconditioning of the used car inventory, marketed Zeigler Chevrolet's used cars, and worked with salespeople. [54] (Ex. 2) ¶ 28. Like all Zeigler Chevrolet employees, Mr. Maravelas signed Zeigler's Employee Handbook, which reminds employees of the importance keeping Zeigler's business information confidential. Id. (Ex. B). Additionally, Zeigler provided Mr. Maravelas a unique username and password to log onto the VinSolutions system. Id. ¶¶ 31-32. Zeigler authorized Mr. Maravelas to have full access so that he could effectively perform his job. Id. ¶¶ 29, 31.

         C. Defendant Chavez Resigns

         This story took a sharp turn on January 28, 2019 when Mr. Chavez unexpectedly resigned. [54] (Ex. 1) ¶ 41. The day after his resignation, Mr. Chavez returned his Zeigler-issued laptop and cellphone. Id. (Ex. 2) ¶ 42. Upon return, even though Zeigler did not instruct him to do so, Mr. Chavez reset the settings on both devices so that his information was erased. Id. ¶¶ 44-45. Beyond his Zeigler laptop and cellphone, Mr. Chavez also took it upon himself to store Zeigler information on a USB flash drive. Id. ¶ 46. Mr. Chavez asserts that he left the flash drive in a Zeigler shred bin after resigning. [63] (Ex. 4) ¶ 44. Plaintiffs argue Mr. Chavez never returned the flash drive and may still possess it. [54] (Ex. 2) ¶ 48. Significantly, Zeigler further discovered that on the day of his resignation, and again the day after, Mr. Chavez logged onto the VinSolutions system eight times, until his access was terminated on January 29. [70] ¶ 18, (Ex. 1).

         Mr. Zeigler testified that as of February 2019 Plaintiffs had not discovered Mr. Chavez' inappropriate logins to the VinSolutions system. Thus, the relationship between Plaintiffs and Mr. Chavez remained on good terms, and in mid-February 2019, Mr. Zeigler gave Mr. Chavez his blessing to work at competitor Stasek Chevrolet. [63] (Ex. 13).^[1] Ostensibly referencing Mr. Chavez' non-compete clause, Mr. Zeigler also told him, “I'm not going to do anything about preventing you from working” at Stasek Chevrolet. Id., (Ex. 4) ¶ 80.

         D. Defendant Chavez Recruits Defendant Maravelas

         The next shoe to drop came in mid-February after Mr. Chavez accepted the general manager position at Stasek Chevrolet, which was when Mr. Chavez and Mr. Maravelas engaged in the first of many phone calls. [54] (Ex. 4) (Ex. F) at D. Maravelas 0023. Even though the Agreement prohibited Mr. Chavez from soliciting Zeigler employees, id. at (Ex. 1) (Ex. B at cl. 4), Mr. Chavez and Mr. Maravelas spoke on the phone, and sent text messages repeatedly from mid-February through the end of March. [54] (Ex. 4) (Exs. A, E-F). On April 2, 2019, Mr. Maravelas text messaged Mr. Stasek, “I'll quit tomorrow if that works.” Id. at (Ex. C) at Stasek 0436, (Ex. E) at D. Maravelas 302.

         Yet despite deciding to quit, Mr. Zeigler testified that Mr. Maravelas stayed at Zeigler Chevrolet for about two more weeks without informing Zeigler Chevrolet of his plans to quit and work for Stasek Chevrolet. See also, id. at (Ex. 2) ¶ 50, (Ex. E). During this two-week period, Mr. Maravelas stayed in close contact with Mr. Chavez and Mr. Jeremy Stasek, the owner of Stasek Chevrolet. Id. at (Ex. 4) (Exs. A, C-F). During this two-week time period, Mr. Maravelas also repeatedly logged onto Zeigler's VinSolutions system. [70] ¶ 19, (Ex. 1) (logging on more than 40 times between March 30 and April 15). Indeed, he continued to do so not only during the time period between telling Mr. Stasek he planned to quit and when he finally informed Zeigler Chevrolet on April 13, 2019, [54] (Ex. 2) (Ex. E), but also three times following his formal resignation until Zeigler terminated his access on April 15, 2019. Id.

         E. Plaintiffs Suspect Further Anticompetitive Conduct

         Following Mr. Maravelas' resignation, Zeigler began to suspect other improper actions when Zeigler's relationship manager contacted Zeigler's advertising partner, The Daily Herald. [54] (Ex. 2) (Ex. F). Specifically, Zeigler's relationship manager claimed that she learned that Mr. Chavez used his knowledge of Zeigler's pricing to try to obtain the same pricing for Stasek Chevrolet. Id. In response to this claim, however, Stasek Chevrolet's advertising and marketing campaign partner, Pinnacle, submitted a declaration denying Mr. Chavez participated in any discussions regarding the Daily Herald. [63] (Ex. 12) ¶¶ 13-16. Mr. Chavez also submitted a declaration stating that “[s]ince my employment with Zeigler ended, I never told anyone the advertising rates negotiated on behalf of Zeigler.” [63] (Ex. 4) ¶ 37.

         As a result of these actions, on April 23, 2019, Plaintiffs filed a complaint in this Court and, on May 3, 2019 filed a motion for preliminary injunction. [1]; [10]. Plaintiffs eventually amended both filings following expedited discovery. [50]; [52]. Plaintiffs motion for preliminary injunction moves for an order enjoining Chavez from employment with any automobile dealership or dealership related entity within 50 miles of Zeigler Chevrolet for 24 months; enjoining Defendants from disclosing or using Plaintiffs' trade secrets for 24 months; ordering Defendants to return any trade secrets; enjoining Defendants from interfering with Zeigler's relationship with customers and potential customers, and advertising partners; enjoining Defendants from soliciting Zeigler employees to terminate their employment for 24 months; ordering Defendants to produce personal storage devices for inspection; enjoining Defendants from destroying any records; and to waive the posting of bond.^[2] [52].

         II. Legal Standard

         In deciding whether a preliminary injunction should issue, this Court “engages in a two-step analysis.” Turnell v. CentiMark Corp., 796 F.3d 656, 661 (7th Cir. 2015) (citing Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of Am., Inc., 549 F.3d 1079, 1085-86 (7th Cir. 2008)). First, this Court considers whether Plaintiffs demonstrated that: “(1) absent preliminary injunctive relief, [they] will suffer irreparable harm in the interim prior to a final resolution; (2) there is no adequate remedy at law; and (3) [they have] a reasonable likelihood of success on the merits.” Id. at 661-62 (citing Girl Scouts, 549 F.3d at 1086; Cooper v. Salazar, 196 F.3d 809, 813 (7th Cir. 1999)). To demonstrate a likelihood of success on the merits, the moving parties “need not demonstrate a likelihood of absolute success, ” but rather must show their chances are better than negligible. Vendavo, Inc. v. Long, 397 F.Supp.3d 1115, 1129 (N.D. Ill. 2019).

         If Plaintiffs make that threshold showing, then this Court adopts a sliding scale approach and weighs the harm to the moving party of not granting the preliminary injunction against the harm to the nonmoving parties (and the public) of granting the injunction. Triumph Packaging Grp. v. Ward, 834 F.Supp.2d 796, 806 (N.D. Ill. 2011). During this second phase, the more likely the plaintiff is to be successful on the merits, the less strongly the “balance of irreparable” harms need to weigh in the plaintiff's favor. Id. (quoting Ty, Inc. v. Jones Grp., Inc., 237 F.3d 891, 895 (7th Cir. 2001)).

         Given the early stage in litigation and the immediate nature of a motion for preliminary injunction, the law permits this Court to consider evidence it would not otherwise consider at trial or on a motion for summary judgment. See S.E.C. v. Cherif, 933 F.2d 403, 412 n.8 (7th Cir. 1991); 11A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2949 (3d ed. 2019).

         III. ...