Evan Law Group LLC v. Taylor
| Decision Date | 10 December 2010 |
| Docket Number | No. 09 C 4896,09 C 4896 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | EVAN LAW GROUP LLC Plaintiff, v. JONATHAN TAYLOR, JONATHAN BLANCHARD, BLANCHARD & ASSOCIATES, and CHI KIU CHAN, Defendants. |
Plaintiff Evan Law Group, LLC ("Evan Law"), a law firm specializing in patent law, alleges that defendant Jonathan Taylor was formerly employed as a patent agent of Evan Law. In September 2008, Taylor departed Evan Law and began to work for defendant Blanchard & Associates ("B&A"), a competing law firm. Defendant Jonathan Blanchard ("Blanchard") is a former Evan Law partner who departed Evan Law in June 2006 and formed B&A.1 Defendant Chi Kiu Chan is a patent attorney presently residing in Hong Kong and practicing in the People's Republic of China.2 Prior to the formation of Evan Law, Chan, Taylor, and Blanchard worked at the same Illinois law firm. Prior to Taylor's departure from Evan Law, Chan would contract with Evan Law for Evan Law to be the United States patent agent for Chan clients. After Taylor's departure, Chan began transferring this work to B&A. Central to plaintiff's allegations are the contention that, when Taylor left Evan Law, he took confidential computer files as well as copyrighted materials (the "Master Lists") used to represent and counsel patent clients. The Blanchard Defendants allegedly have used these files to take clients away from Evan Law and to attract and serve patent clients.
The SAC contains 12 counts denominated as follows: (I) violation of the Computer Fraud and Abuse Act ("CFAA"), 18 U.S.C. § 1030, against Taylor only; (II) violation of the Illinois Computer Crime Prevention Law ("ICCPL"), 720 ILCS 5/16D-3, against Taylor only; (III) copyright infringement against the Blanchard Defendants; (IV) unfair competition/misappropriation against the Blanchard Defendants; (V) participation in racketeering activity in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c), 1964(c), against Taylor and Blanchard; (VI) conspiracy to engage in a pattern of racketeering activity in violation of RICO, 18 U.S.C. §§ 1962(d), 1964(c), against Taylor and Blanchard;3 (VII) breach of the employment contract between Taylor and Evan Law against Taylor; (VIII) breach of fiduciary duty against Taylor;4 (IX) tortious interference with contracts against all defendants;
(X) tortious interference with business relationships against all defendants;
(XI) civil conspiracy against all defendants; and (XII) unjust enrichment against the Blanchard Defendants. Plaintiff relies on supplemental jurisdiction over the state law claims; there is no contention that complete diversity of citizenship is satisfied.
The Blanchard Defendants have moved to dismiss all counts except Count I. Defendants concede a violation of the CFAA is adequately alleged and that plaintiff has adequately alleged the existence of copyrighted material. Defendants contend the elements of the other federal claims are not sufficiently alleged to satisfy the pleading requirements set forth in Bell Atl, Corp. v. Twombly, 550 U.S. 544 (2007), and its progeny, or, to the extent applicable, the requirements of Fed. R. Civ. P. 9(b). As to the state law claims, defendants contends they are inadequately pleaded, preempted, and/or dismissible as duplicative. Defendants also contend the court should decline to exercise supplemental jurisdiction over the state law claims because they would predominate. 5 The Supreme Court recently summarized the pleading standard applicable to Rule 12(b)(6) motions to dismiss for which Rule 9(b) is inapplicable.
To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." [Twombly, 550 U.S.] at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id., at 556. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Ibid. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'" Id., at 557 (brackets omitted).
Two working principles underlie our decision in Twombly. First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Id., at 555 (). Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id., at 556. Determining whether a complaint states a plausible claim for relief will, as the Court of Appeals observed, be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. 490 F.3d, at 157-158. But where the well-pleaded facts do not permit the court to infer more thanthe mere possibility of misconduct, the complaint has alleged-but it has not ", show[n]"-"that the pleader is entitled to relief." Fed. Rule Civ. Proc. 8(a)(2).
Ashcroftv. Iqbal, 129 S. Ct. 1937, 1949-50 (2009).
The Seventh Circuit applies a type of sliding scale approach to plausibility. The more complex and less straightforward the case and the more costly potential discovery, the more detail that will be required to satisfy the plausibility requirement. Swanson v. Citibank, N.A., 614 F.3d 400, 404-05 (7th Cir. 2010); Tamayo v. Blagojevich, 526 F.3d 1074, 1082-83 (7th Cir. 2008); Limestone Dev., Corp. v. Village of Lemont, Ill., 520 F.3d 797, 803-04 (7th Cir. 2008). A plaintiff Swanson, 614 F.3d at 404. "[I]n many straightforward cases, it will not be any more difficult today for a plaintiff to meet that burden [of stating a claim] than it was before the reme Court's recent decisions." Id.
Defendants contend that plaintiff has failed to allege the necessary elements of the Count III copyright claim. The basic elements of a copyright infringement claim are "(1) ownership of a valid copyright, and (2) copying of constituent elements of the work that are original." Schrock v. Learning Curve Int'l, Inc., 586 F.3d 513, 517 (7th Cir. 2009) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 361 (1991)). Accord Edgenet, Inc. v. GS1 AISBL, ____ F. Supp. 2d___, 2010 WL 3812798 *14 (E.D. Wis. Sept. 27, 2010) (quoting JCW Invs., Inc. v. Novelty, Inc., 482 F.3d 910, 914 (7th Cir. 2007)).
Defendants contend use and distribution of the Master Lists have not been adequately alleged. Defendants do not dispute that ownership of a valid copyright in the Master Lists is adequately alleged nor do they dispute that it is adequately alleged that Taylor used portable electronic storage devices to copy the pertinent files from Evan Law's computers. The general content of the Master Lists is alleged as well as how they can be used and the benefits of use as regards providing legal representation for patent clients. It is further alleged that defendants have used the contents of the materials when soliciting clients and for providing services to clients. To the extent use is a necessary aspect of the copying element of plaintiff's infringement claim, it has been adequately alleged. Cf. Edgenet, ___ F. Supp. 2d at____, 2010 WL 3812798 at * 15-16. Since plaintiff's claim is not based on public distribution, it is unnecessary for plaintiff to also allege distribution.
Blanchard and B&A also contend that vicarious infringement is not adequately alleged. "[T]o state a claim for vicarious copyright infringement, a plaintiff must allege that the defendant: (1) at all material times possessed the right and ability to supervise the infringing activity; and (2) has a direct financial interest in the infringer's activity." Century Consultants, Ltd. v. Miller Group, Inc., 2008 WL 345541 *8 (CD. I11. Feb. 7, 2008) (quoting QSR Soft, Inc. v. Restaurant Tech., Inc., 2006 WL 3196928 *4 (N.D. I11. Nov. 2, 2006)). Plaintiff has alleged that Taylor was employed by B&A and that Blanchard is B&A's principal, and has also alleged that the Master Lists are being used to benefit B&A's legal business. Vicarious infringement is adequately alleged. No aspect of Count III will be dismissed.
Counts V and VI are federal RICO claims. Defendants contend a pattern of racketeering activity is not sufficiently alleged. As to Count VI, defendants also contend a conspiracy has not been adequately alleged. By its language, the particularity requirement of Fed. R. Civ. P. 9(b) is limited to the "circumstances constituting fraud." See Lachmund v. ADM Investor Servs., Inc., 191 F.3d 777, 783 (7th Cir. 1999); Hecht v. Commerce Clearing House, Inc., 897 F.2d 21, 26 n.4 (2d Cir. 1990); Whitley v. Taylor Bean & Whitacker Mortg. Corp., 607 F. Supp. 2d 885, 898 (N.D. I11. 2009); Guar, Residential Lending Inc. v. Int'l Mortg. Or. Inc., 305 F. Supp. 2d 846, 853 (N.D. I11. 2004). The predicate acts and pattern of racketeering activity essential to a fraud-based RICO claim must be alleged with sufficient particularity. See Santana v. Cook...
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