Fire 'em UP, Inc. v. Technocarb Equip. (2004) Ltd.

• Decision Date: 27 June 2011
• Docket Number: No. 10 C 8050.,10 C 8050.
• Citation: 799 F.Supp.2d 846
• Parties: FIRE 'EM UP, INC., Plaintiff, v. TECHNOCARB EQUIPMENT (2004) LTD., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

799 F.Supp.2d 846

FIRE 'EM UP, INC., Plaintiff,

v.TECHNOCARB EQUIPMENT (2004) LTD., et al., Defendants.

No. 10 C 8050.

United States District Court, N.D. Illinois, Eastern Division.

June 27, 2011.

Jennifer Marie Hill, Kevin Barry Rogers, Law Office of Kevin Rogers, Chicago, IL, for Plaintiff.

Robert David Donoghue, Anna Zartler Krasinski, Daniel Long Farris, Holland and Knight LLP, Chicago, IL, for Defendants.

OPINION AND ORDER

CHARLES R. NORGLE, District Judge.

Before the Court is Defendants Technocarb Equipment (2004) Ltd. (“Technocarb”) and Aurora Electronics, Ltd.'s (“Aurora”) Motion to Dismiss Counts V–VIII of Plaintiff Fire 'Em Up, Inc.'s (“FEU”) Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons the Motion is granted in part and denied in part. Counts V and VII are dismissed without prejudice. Counts VI and VIII are dismissed with prejudice.

I. BACKGROUND

A. Facts

This is a civil action for patent infringement arising under the patent laws of Title 35 of the United States Code. The Court therefore has supplemental jurisdiction over the Illinois state law claims. FEU alleges the following facts. Jeffrey Bach (“Bach”) invented the Diesel Magnum TM Propane Injection System for Diesel Engines (“Diesel Magnum”) and obtained a patent for “Propane Injection Control System and Apparatus for Vehicles,” U.S. Patent Number 7,100,582 B1. Bach assigned his rights in the patent to Dynamic Fuel Systems, Inc., which licensed FEU to manufacture, test, sell, distribute, promote, and protect the patented product. On February 7, 2008, FEU and Technocarb entered into a Master Distributorship Agreement. Pursuant to this agreement Technocarb would be the Master Distributor of the Diesel Mangum for FEU for five years commencing on February 11, 2008. The agreement contains nondisclosure ¹ and non-competition ² restrictive covenants. Under the agreement, FEU released to Technocarb trade secret, confidential, and proprietary information that is invaluable in manufacturing, promoting, and selling the product.

According to FEU, Technocarb used the training and materials provided by FEU to develop, promote, and sell its own fuel device, EcoDiesel System, instead of using reasonable efforts to sell its Diesel Magnum. FEU claims that Technocarb and Aurora participated in a scheme to defraud FEU. Specifically, FEU alleges that Technocarb provided Aurora with its proprietary information to manufacture the competitive product, EcoDiesel.

B. Procedural History

FEU initiated this case on December 20, 2010, alleging breach of contract (Count I), patent infringement (Counts II, III, and IV), trade secret misappropriation (Count V), conversion (Count VI), fraud (Count VII), and an accounting (Count VIII). On December 28, 2010, FEU filed an amended complaint in order to correct an attached exhibit. Initially there were six defendants in this case. Defendant Intigreen Technologies, Inc. (“Intigreen”) was voluntarily dismissed on February 24, 2011; therefore, Count III, which alleges patent infringement against Intigreen, was dismissed. Defendants David Shea, Peter Gordon, and Jeffrey Buechler were voluntarily dismissed on March 16, 2011. On April 11, 2011, the remaining defendants, Technocarb and Aurora (collectively, “Defendants”) answered Counts I, II, and IV of the amended complaint, filed a counterclaim, and moved to dismiss Counts V, VI, VII, and VIII. The Motion is fully briefed and before the Court.

II. DISCUSSION

A. Standard of Decision

In deciding a Rule 12(b)(6) motion, the court accepts all well-pleaded facts as true, and draws all reasonable inferences in favor of the plaintiff. Andonissamy v. Hewlett–Packard Co., 547 F.3d 841, 847 (7th Cir.2008) (citing Porter v. DiBlasio, 93 F.3d 301, 305 (7th Cir.1996)). To survive a motion to dismiss, a complaint must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Determining plausibility is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). “Dismissal is proper if ‘it appears beyond doubt that the plaintiff cannot prove any facts that would support [its] claim for relief.’ ” Wilson v. Price, 624 F.3d 389, 392 (7th Cir.2010) (quoting Kennedy v. Nat'l Juvenile Det. Ass'n, 187 F.3d 690, 694 (7th Cir.1999)). “Finally, a complaint must allege facts bearing on all material elements ‘necessary to sustain a recovery under some viable legal theory.’ ” Looper Maint. Serv. Inc. v. City of Indianapolis, 197 F.3d 908, 911 (7th Cir.1999) (quoting Herdrich v. Pegram, 154 F.3d 362, 369 (7th Cir.1998)).

B. Motion to Dismiss1. Count V—Trade Secret Misappropriation

Count V alleges trade secret misappropriation against Technocarb in violation of the Illinois Trade Secrets Act (“ITSA”). Defendants argue that FEU has failed to adequately allege trade secret misappropriation because the claim recites bare legal conclusions that fail to plead the required elements. To state a claim for trade secret misappropriation, a plaintiff must allege: (1) that the information at issue was a trade secret; (2) that it was misappropriated; and (3) that it was used in the defendants' business. Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir.2003) (citations omitted). But see Parus Holdings, Inc. v. Banner & Witcoff, Ltd., 585 F.Supp.2d 995, 1005 (N.D.Ill.2008) (determining that Liebert Corp. v. Mazur, 357 Ill.App.3d 265, 293 Ill.Dec. 28, 827 N.E.2d 909, 925 (2005), more accurately states the elements of trade secret misappropriation, which include: “(1) a trade secret existed; (2) the secret was misappropriated through improper acquisition, disclosure, or use; and (3) the owner of the trade secret was damaged by the misappropriation” (internal quotation marks and citations omitted)). A trade secret is information that “(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.” 765 ILCS 1065/2(d).

Defendants contend that FEU failed to specify what information constitutes its alleged trade secrets, While it is true that specificity of concrete trade secrets is required to support a finding of misappropriation, Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1265–66 (7th Cir.1992), the alleged trade secrets need not be disclosed in detail in a complaint to survive a motion to dismiss. AutoMed Techs., Inc. v. Eller, 160 F.Supp.2d 915, 920–21 (N.D.Ill.2001). “Courts only dismiss a claim for lack of specificity on the pleadings in the most extreme cases.” Id. n. 3 (citing Thermal Zone Prods. Corp. v. Echo Eng'g, Ltd., No. 93 C 0556, 1993 WL 358148, at *5–6 (N.D.Ill. Sept. 14, 1993)). Nothing about this case, however, appears extreme. FEU alleges that its trade secrets include:

their list of current and prospective customers, lists of current or prospective suppliers, lists of their current and prospective business partners, combinations or compilations of materials necessary to create the Diesel Magnum or perform certain services, programs, methods, techniques and devices used by Fire Em Up in creating the Diesel Magnum and rendering its services, financial data, marketing plans and advertising strategies, and various other proprietary, confidential, and non-public information from which Fire Em Up obtains revenue and competitive advantage.

Am. Compl. ¶ 66.

Similar allegations have been found sufficient to withstand motions to dismiss in this District. See, e.g., Labor Ready, Inc. v. Williams Staffing, LLC, 149 F.Supp.2d 398, 412 (N.D.Ill.2001) (finding allegations of trade secret information including business practices, models, and data; customer lists; customers' information; recruiting and training methods; site selection and compensation models; dispatch office layouts; pricing data; computer software and hardware; formats; manuals; methods and techniques of operation and training; personnel files; and marketing strategies sufficient to state a claim); Lincoln Park Sav. Bank v. Binetti, No. 10 CV 5083, 2011 WL 249461, at *2 (N.D.Ill. Jan. 26, 2011) (denying a motion to dismiss where the complaint contained enough factual detail to put the defendants on notice of misappropriation of “confidential customer and other information” contained in a loan origination system). The Court also notes that under Illinois law, customer lists can constitute trade secrets depending on the facts of each case. See, e.g., Liebert Corp., 293 Ill.Dec. 28, 827 N.E.2d at 922. FEU's allegations regarding its trade secrets are therefore sufficient to withstand dismissal.

Next, Defendants argue that FEU failed to allege facts bearing on an essential element of the statutory definition of a trade secret, i.e., that the alleged trade secret information “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.” 765 ILCS 1065/2(d)(2). FEU points to its Master Distributorship Agreement with Technocarb as factual support for its efforts to protect the alleged trade secret information. While “an agreement restricting the use of information may be considered a reasonable step to maintain secrecy of a trade secret,” Dick Corp. v. SNC–Lavalin Constructors, Inc., No. 04 C 1043, 2004 WL 2967556, at *10 (N.D.Ill. Nov. 24, 2004) (citation omitted), such an agreement, without more, is not enough. Although there are references to the Master Distributorship Agreement in the amended complaint from which inferences of confidentiality may be drawn, FEU has failed to plead that the secrecy of its information was...