Trade Secret Act Does Not Preempt Breach of Fiduciary Duty Claims

Posted on October 5, 2007 by R. David Donoghue

RTC Indus., Inc. v. Haddon, No. 06 C 5734, 2007 WL 2743583 (N.D. Ill. Sep. 10, 2007) (Grady, J.).

Judge Grady denied defendant’s Fed. R. Civ. P. 12(c) motion for judgment on the pleadings. The Court held that plaintiff’s breach of fiduciary duty claim was not preempted by the Illinois Trade Secret Act. Plaintiff alleged that defendant (plaintiff’s employee) violated his fiduciary duty to plaintiff (his employer at the time) by disclosing to third party DCI Marketing (“DCI”) that a DCI employee had accepted an offer to work for plaintiff. The Court held that the alleged acts would breach defendant’s fiduciary duty regardless of whether the hiring decision was confidential. The breach of fiduciary duty claim, therefore, was not preempted.

The Court also held that the non-complete clause defendant signed as a condition of employment was enforceable even though it lacked a geographic restriction. There was a two year time restriction and an “activity” restriction - defendant was only prevented from taking a job with a competitor that would either result in actual or threatened use of plaintiff’s confidential information.

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Insufficient Facts to Determine Whether Computer Program was Protected by Copyright or Trade Secret

Posted on May 29, 2007 by R. David Donoghue

Stafford Trading, Inc. v. Lovely, No. 05 C 4868, 2007 WL 1512417 (N.D. Ill. May 21, 2007) (Coar, J.).

Judge Coar granted in part declaratory judgment plaintiffs' (collectively "Stafford") motion to dismiss and denied Stafford's summary judgment motion.  The Court dismissed defendants' fraud and unjust enrichment counterclaims after holding that they were preempted by the Illinois Trade Secret Act.  The Court also dismissed defendants' fraudulent concealment.  The material fact that Stafford allegedly failed to disclose was the opinion that Stafford owned the RIVAS electronic options trading platform outright.  But the Court held that an allegedly withheld opinion could not support a fraudulent concealment claim.

The Court's summary judgment decision turned largely upon whether RIVAS was a computer program protected by copyright or a "methodology" protected as a trade secret.  The Court held that it had insufficient evidence to make the determination.  Furthermore, neither party briefed the issue of what effect the copyright/methodology would have upon defendants' alleged oral contract between the parties which allegedly made the parties co-owners of RIVAS.  The Court denied summary judgment as to defendants' breach of contract counterclaim because the existence of an oral contracts and its terms were both disputed facts.  Finally, the Court denied summary judgment as to defendants' trade secret counterclaim because, whether RIVAS was determined to be protected by copyright or trade secret, the parties disputed whether defendants employed sufficient means to protect RIVAS's secrecy.
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