22 F.Supp.3d 880 (N.D.Ill. 2014), 14 C 00203, Paragon Micro, Inc. v. Bundy
| Citation | 22 F.Supp.3d 880 |
| Docket Number | 14 C 00203 |
| Date | 28 May 2014 |
| Parties | PARAGON MICRO, INC., Plaintiff, v. NICHOLAS J. BUNDY and NJB SALES, INC., Defendants |
| Court | U.S. District Court — Northern District of Illinois |
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OPINION
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MEMORANDUM OPINION AND ORDER
Paragon Micro, Inc. (" Plaintiff" ) brings this action against Nicholas J. Bundy and NJB Sales, Inc. (" NJB" ) (collectively, " Defendants" ) alleging destruction of data in violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. ; fraudulent computer tampering in violation of 720 Ill. Comp. Stat. 5/17-51; misappropriation of trade secrets in violation of the Illinois Trade Secrets Act, 765 Ill. Comp. Stat. 1065/1 et seq. ; deceptive trade practices in violation of the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510/2 et seq. , and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. ; and multiple common law fraud and tort claims. Presently before the Court is Defendants' motion to compel arbitration and dismiss this action or, alternatively, to stay this action pending arbitration pursuant to the Federal Arbitration Act (" FAA" ), 9 U.S.C. § § 3-4. For the reasons set forth below, the Court grants Defendants' motion.
RELEVANT FACTS
Plaintiff is an Illinois corporation with its principal place of business in Lake Zurich, Illinois. (R. 1, Compl. ¶ 2.) Bundy is a resident of Lake Zurich, Illinois, and is also the president, director, and sole shareholder of NJB, an Illinois corporation with its principal place of business in Lake Zurich, Illinois. ( Id. ¶ ¶ 3-4.)
Plaintiff sells technology products and services to businesses and educational and government institutions. ( Id. ¶ 8.) Plaintiff sells its products and services through its Account Representatives. ( Id. ¶ 9.) Account Representatives have access to a portion of Plaintiff's confidential information; specifically, information related to Plaintiff's product cost. ( Id. ¶ ¶ 9, 12.) Other types of confidential information include, for example, trade secrets, marketing and sales programs, customer and supplier
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information, pricing information, and profit margins. ( Id. ¶ 12.) Account Representatives use the product cost information for several tasks, including to develop pricing and margin strategies, to negotiate sales, to set prices, and to make decisions regarding Plaintiff's customer relationships. ( Id. ¶ 9.) In an effort to protect its confidential information, Plaintiff requires its employees and contractors to sign agreements containing confidentiality provisions. ( Id. ¶ 13.)
In or about June 2008, Plaintiff hired Bundy as an Account Representative. ( Id. ¶ 14.) In this position, Bundy was entrusted with a portion of Plaintiff's confidential information. ( Id. ) This information included pricing, terms, and cost information for customers to whom Bundy was assigned. ( Id. ) In connection with his employment relationship with Plaintiff, Bundy executed an Independent Contractor Agreement (the " Agreement" ) on or about June 18, 2008. ( Id. ) Section 4 of the Agreement contains a confidentiality provision that states: " Contractor agrees that he/she will at no time during the period that this Agreement remains in effect or after the termination of this Agreement, whether that termination is voluntary, involuntary, for cause, or otherwise, disclose any confidential information of Company gained by him/her." (R. 1-1, Ex. A, Agreement at 2-3.) Section 5 of the Agreement contains a no-solicitation provision that states:
During the period that this Agreement remains in effect and for a period of three (3) months following the termination of this Agreement for any reason whatsoever, Contractor shall not: (a) directly or indirectly . . . solicit business from or do business with any actual or prospective customer or client which Contractor dealt with on behalf of the Company[.]
( Id. at 3.) Additionally, section 10 of the Agreement contains an arbitration provision that states: " Any and all disputes shall be submitted to and settled by final and binding arbitration in Chicago, Illinois, pursuant to the rules of the American Arbitration Association then in effect." ( Id. at 5.)
On December 22, 2008, Bundy incorporated NJB and began using this company to perform his duties as Plaintiff's Account Representative. (R. 1, Compl. ¶ 17.) Bundy requested that Plaintiff pay the commissions Bundy earned from his sales of Plaintiff's products and services to NJB, and Plaintiff agreed to do so. ( Id. ) Plaintiff demanded that Bundy keep Plaintiff's information confidential, and Bundy agreed to Plaintiff's demand. ( Id. ¶ 18.) Plaintiff alleges that because Bundy was, and still is, NJB's sole shareholder and operator, NJB was aware that Plaintiff considered its information to be confidential. ( Id. )
Plaintiff alleges that beginning in late December 2013, Bundy abused the trust that Plaintiff placed in him. ( Id. ¶ ¶ 1, 19.) Specifically, Plaintiff alleges that Bundy began diverting sales from Plaintiff to NJB, falsifying Plaintiff's account profile with an anti-virus software vendor to divert Plaintiff's customer information to NJB, falsifying sales transactions to conflate his commission, deleting and destroying Plaintiff's information off of Plaintiff's computer network to conceal his deception and to gain an unfair advantage over Plaintiff's customers, and misappropriating Plaintiff's confidential information. ( Id. ¶ ¶ 1, 19-25.)
On January 3, 2014, Plaintiff terminated its employment relationship with Bundy and NJB and demanded that Bundy immediately return all of its confidential information that Bundy had in his possession. ( Id. ¶ 26.) Plaintiff alleges that
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Bundy refuses to return its confidential information. ( Id. ¶ 27.) Plaintiff alleges that Defendants continue to exploit this confidential information to solicit Plaintiff's customers to do business with NJB rather than with Plaintiff. ( Id. ¶ 29.)
PROCEDURAL HISTORY
Plaintiff commenced this action on January 13, 2014. (R. 1, Compl.) Plaintiff asserts eleven claims. ( Id. ) It asserts four claims against Bundy alone: breach of fiduciary duty (Count I); destruction of data on Plaintiff's computer in violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq. (Count II); computer tampering in violation of 720 Ill. Comp. Stat. 5/17-51 (Count III); and common law fraud (Count VI). ( Id. ¶ ¶ 33-47, 62-65.) Plaintiff asserts another seven claims against both Defendants: misappropriation of trade secrets in violation of the Illinois Trade Secrets Act, 765 Ill. Comp. Stat. 1065/1 et seq. (Count IV); unfair competition (Count V); conversion (Count VII); unjust enrichment (Count VIII); tortious interference with prospective advantage (Count IX); misrepresentations in violation of the Illinois Uniform Deceptive Trade Practices Act, 815 Ill. Comp. Stat. 510/2 et seq. (Count X); and misrepresentations in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Comp. Stat. 505/1 et seq. (Count XI). ( Id. ¶ ¶ 48-61, 66-98.)
On January 22, 2014, Defendants moved to compel arbitration and dismiss this action or, alternatively, to stay these proceedings pending arbitration. (R. 18, Defs.' Mot.) Defendants argue that the Court must compel arbitration because a written agreement to arbitrate exists between the parties, Plaintiff's disputes fall within the scope of the arbitration agreement, and Plaintiff refuses to comply with the arbitration agreement. ( Id. at 4-9.) Plaintiff filed a response to Defendants' motion on February 11, 2014, (R. 30, Pl.'s Resp.), and Defendants filed a reply on February 20, 2014, (R. 35, Defs.' Reply). On February 24, 2014, Plaintiff moved to file a sur-reply, attached instanter, in opposition to Defendants' motion. (R. 37, Pl.'s Mot. Sur-Reply.) The Court grants Plaintiff's motion to file a sur-reply and considers its sur-reply in ruling on Defendants' motion to compel arbitration, which is presently before the Court.
LEGAL STANDARDS
The FAA reflects a " liberal federal policy favoring arbitration." AT& T Mobility LLC v. Concepcion, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983)). The FAA operates to place arbitration agreements on the same footing as other contracts to ensure that judiciaries enforce agreements to arbitrate. Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991); Dean Witter Reynolds v. Byrd, 470 U.S. 213, 219, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985). The relevant language of the FAA provides that an arbitration clause in a contract " shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. Courts are to uphold and enforce applicable arbitration agreements according to their terms unless they are invalidated by " generally applicable contract defenses, such as fraud, duress, or unconscionability." Concepcion, 131 S.Ct. at 1746 (quoting Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996)).
The FAA permits a federal district court to compel arbitration when there is (1) a written agreement to arbitrate;
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(2) a dispute covered by or within the scope of a...
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