Advantage Mktg. Grp., Inc. v. Keane

• Decision Date: 10 May 2019
• Docket Number: No. 1-18-1126,1-18-1126
• Citation: 143 N.E.3d 139,436 Ill.Dec. 644,2019 IL App (1st) 181126
• Parties: ADVANTAGE MARKETING GROUP, INC., Plaintiff-Appellant, v. James P. KEANE, Sr., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

2019 IL App (1st) 181126

143 N.E.3d 139

436 Ill.Dec. 644

ADVANTAGE MARKETING GROUP, INC., Plaintiff-Appellant,

v.James P. KEANE, Sr., Defendant-Appellee.

No. 1-18-1126

Appellate Court of Illinois, First District, SIXTH DIVISION.

May 10, 2019

PRESIDING JUSTICE DELORT delivered the judgment of the court, with opinion.

¶ 1 Plaintiff Advantage Marketing Group, Inc. (AMG) filed a two-count amended complaint seeking relief against defendant James P. Keane, Sr., for breach of fiduciary duty and tortious interference with prospective economic advantage. Plaintiff alleged that Keane failed to disclose a corporate opportunity to purchase a competing business and exploited a client referral to his advantage. Keane moved to dismiss the amended complaint pursuant to section 2-615 ( 735 ILCS 5/2-615 (West 2016) ) of the Illinois Code of Civil Procedure (Code). Keane argued that the corporate opportunity doctrine did not apply to him because, at the time of the alleged conduct, he served as a mere employee of AMG and not as an officer or director of the company. Keane also contended that even if the corporate opportunity doctrine applied, he disclosed the corporate opportunity to AMG consistent with the obligations of the doctrine. Finally, Keane argued that AMG failed to properly plead the allegations for tortious interference with a prospective economic advantage. The circuit court granted Keane's motion to dismiss. We find that AMG properly stated claims for breach of fiduciary duty and tortious interference with a prospective economic advantage. We reverse and remand this cause for further proceedings.

¶ 2 BACKGROUND

¶ 3 AMG filed its amended complaint on January 23, 2018. The amended complaint alleged that AMG, an Illinois corporation, is a marketing services company that provides letter-shop and fulfillment services for its clients. AMG creates and administers print and mailing programs for its clients from its facility in Elk Grove Village. Keane had formerly served as a director, officer, and employee of AMG. He was an original founder of AMG and maintains a 35% shareholding stake in the company.

¶ 4 The amended complaint alleges that for several years prior to his resignation, Keane served as a "principal employee of AMG with wide-ranging responsibilities equivalent to those of an officer." For example, Keane consistently held himself out to third parties as an AMG owner when developing customer relationships. Keane had substantial responsibility for AMG employment decisions, including hiring and termination of staff. He had access to all AMG books and records, including client lists, employee records, tax documents, vendor information, and billing data. Keane received a bonus equal to that of Patty Hermann, AMG's director and majority shareholder. He was responsible for developing and maintaining AMG's financial records and had full access to the company's accounting system. Throughout his tenure with AMG, Keane's job duties included exploring strategic acquisitions, including the purchase of competing letter-shop businesses, their equipment, and customer lists. The amended complaint detailed instances when Keane participated in the negotiation and acquisition of related businesses, stating that he was "a key point of contact throughout 2013 regarding AMG's opportunity to move or acquire property to conduct business operations."

¶ 5 On July 10, 2013, Keane's son, James Jr., also an AMG employee, sent an email to Keane and Hermann with the subject line, "Mailhouse – Rebranded Website – Is that the same ownership group as before? " The body of the e-mail included a website link for The Mail House, a competing business located a few blocks away from AMG's office. The amended complaint alleged that during the summer and fall of 2013, Keane and Hermann discussed The Mail House and whether it was a viable acquisition target. The amended complaint stated, "Though Hermann is unaware of when Keane ultimately began his own discussions about buying The Mail House, the business was one that AMG had explored acquiring."

¶ 6 The amended complaint alleged that at some point before Keane's departure from AMG on September 4, 2015, he started to withhold information for himself and communicated outside AMG channels using his personal e-mail account while failing to forward information that would have benefitted AMG. On March 10, 2014, Keane transferred his assigned corporate cell phone number to his own personal account, outside the view of AMG. The amended complaint alleged that this action allowed him to retain and use the same phone number following his resignation from AMG and further prevented AMG from controlling communications that he had during his employment with AMG.

¶ 7 The amended complaint also alleged that Keane began preparations to acquire The Mail House before his September 4, 2015 resignation. For instance, on August 3, 2015, he registered a new internet domain name, "mailhousedm.com," along with seven other domain names that each contained the word, "mailhouse." On August 12, 2015, he formed Keane, Inc. d/b/a The Mail House. The alleged complaint stated that "Upon information and belief, Keane formed this corporation to acquire The Mail House," and that "[a]t all times, The Mail House has conducted letter-shop and fulfillment services similar to, and competitive with, those offered by AMG."

¶ 8 During the week before his resignation, Keane failed to disclose and tender to AMG a referral he received from another company, JD Graphics. James, Jr., forwarded the referral from JD Graphics to Keane's personal e-mail account. The amended complaint alleged that Keane exploited this referral after he began operating The Mail House. In addition, Keane approached and told clients and vendors of AMG that AMG was in danger of closing its business due to financial issues.

¶ 9 On September 5, 2015, the day after Keane resigned, AMG discovered its security cameras were turned off and that its security tapes were missing. On September 9, 2015, Keane allegedly disabled AMG's website. He refused to transfer AMG's website materials back to the company for more than one week. Out of business necessity, AMG established an entirely new website. The day before Keane transferred the website content back to AMG, James, Jr. registered a new website domain, "amgltd.co," which differed by only one letter from AMG's domain name. The amended complaint alleged that Keane either was aware of or actively encouraged James, Jr. to disable AMG's website and then register a substantially similar domain name. During Keane's employment with AMG, James, Jr. reported directly to Keane. James, Jr. tendered his resignation to AMG on September 7, 2015.

¶ 10 The amended complaint alleged that Keane solicited James, Jr. to leave AMG and join him at The Mail House. Keane did not seek AMG's consent before soliciting James, Jr. to leave AMG and join a direct competitor. Further, Keane never sought AMG's consent to appropriate the JD Graphics referral or to interfere with AMG's website operation. Additionally, before his resignation, James, Jr. had obtained samples of confidential client material that belonged to AMG. Keane kept the samples for himself, resigned, and then returned the client materials after AMG's then-counsel demanded their return. Since his acquisition of The Mail House, Keane has continued to perform lettershop and print work for this particular client.

¶ 11 The amended complaint alleged that "At all times before Keane's resignation, The Mail House was known to AMG as a competitor. The Mail House provided comparable products and services to the same type of clientele that AMC had serviced and cultivated. Accordingly, The Mail House was, and remains, in the same line of business as AMG." Further, "[a]t no point in 2015 did Keane disclose to Hermann or AMG that he sought to acquire The Mail House. Nor did Keane ever advise Hermann or AMG that the prior owners of The Mail House were interested in selling their business to a third party." Finally, the amended complaint alleged that "[h]ad Keane brought The Mail House acquisition opportunity to AMG, AMG would have been interested in pursuing it."

¶ 12 Count I of the amended complaint alleged breach of fiduciary duty, stating that "[a]s a key AMG employee with responsibility equivalent to those of an officer, Keane owed a fiduciary duty of loyalty, fidelity, rectitude, candor, and good faith." This fiduciary duty prohibited Keane "from actively exploiting his position within AMG for his own personal benefit and from hindering the ability of AMG to continue the business for which it was developed." The amended complaint alleged that Keane owed AMG a fiduciary duty to disclose and tender all corporate opportunities, including all material facts to AMG. Keane allegedly breached this duty by secretly negotiating and purchasing a directly competing business, The Mail House, while still employed by AMG as "a key AMG employee." Keane failed to disclose and tender a corporate opportunity – the potential acquisition of The Mail House – to AMG for its full and complete consideration. In addition, Keane allegedly breached his fiduciary duty to AMG by: (1) soliciting James, Jr. to leave AMG and join The Mail House; (2) misappropriating referrals for existing lettershop work sent to AMG; (3) misappropriating client samples; and (4) disabling or otherwise interfering with AMG's website. AMG sought the imposition of a constructive trust on The Mail House business to be held for the benefit of AMG, and other relief.

¶ 13 Count II of the amended complaint alleged that Keane tortiously interfered with AMG's prospective economic advantage "[b]y acquiring The Mail House for himself and by appropriating the client referral," which caused "a termination of AMG's expectation of entering into, or continuing, valid business relations."

¶ 14 On February 20, 2018, Keane moved to dismiss the amended complaint pursuant to section 2-615 of...