Medcor, Inc. v. Garcia, 21 CV 2164

CourtUnited States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
Decision Date13 January 2022
Docket Number21 CV 2164
PartiesMedcor, Inc., Plaintiff, v. Christopher Garcia, et al., Defendants.

Medcor, Inc., Plaintiff,
v.

Christopher Garcia, et al., Defendants.

No. 21 CV 2164

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

January 13, 2022


MEMORANDUM OPINION AND ORDER

MANISH S. SHAH UNITED STATES DISTRICT JUDGE

Plaintiff Medcor, Inc. alleges that by starting a rival company, using confidential information, and soliciting clients and employees, defendants Christopher Garcia, Amanda Brown, Ravi Patel, and MedWay Health, Inc. breached contracts and violated state and federal trade secret laws. Medcor moves for a temporary restraining order and preliminary injunction enjoining further competition and use of confidential information. For the reasons that follow, plaintiff's motion is granted in part, denied in part.

I. Standard of Review

The standards for issuing a temporary restraining order and a preliminary injunction are identical. Mays v. Dart, 453 F.Supp.3d 1074, 1087 (N.D. Ill. 2020) (citations omitted). A preliminary injunction is “an extraordinary remedy never awarded as of right.” See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). A plaintiff seeking a TRO or preliminary injunction “must establish that he is likely

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to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Protect Our Parks, Inc. v. Buttigieg, 10 F.4th 758, 763 (7th Cir. 2021) (quoting Winter, 555 U.S. at 7). Although Medcor doesn't need to show that it will definitely win the case, Medcor must show that it has “some likelihood” of succeeding on the merits. Mays v. Dart, 974 F.3d 810, 822 (7th Cir. 2020) (quoting Speech First, Inc. v. Killeen, 968 F.3d 628, 637 (7th Cir. 2020)).

II. Facts

Medcor provided onsite health services to clients throughout North America. [66] at 23-24.[1] During the COVID-19 pandemic, Medcor developed a screening system and testing protocol based on Centers for Disease Control and Prevention guidance, and provided clients with related health security screening, testing, and worksite exposure management. Id. at 27-28, 30-36. Garcia and Brown were employees at Medcor, [81] ¶¶ 19, 20, and directed the operation of its COVID-19

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screening and testing services. [13-1] ¶¶ 13, 18-19. Patel, a doctor, provided on-site physician services to Medcor clients. [81] ¶ 21; [13-1] ¶ 20.

Medcor hired Garcia to be its operations manager in fall 2019. See [69-12]. His contract included restrictions on the use of Medcor's trade secrets and proprietary information, id. at 10-16, along with non-solicitation and non-compete clauses. Id. at 16-18. Around the same time, Medcor hired Brown as a medical administrator. See [69-6]. Later, Brown was promoted to operations director. See [69-10]. Like Garcia's contract, both of Brown's written employment agreements with Medcor included a prohibition on the use of the company's trade secrets and proprietary information, [69-6] at 5-6; [69-10] at 4-8, and non-solicitation and non-compete clauses. [69-6] at 6; [69-10] at 8-9. Patel entered into two agreements with Onsite Physician Services of Illinois, SC, and promised to provide medical services to Medcor clients. See [69-13]; [69-14]. The first of Patel's agreements, see [69-14], was superseded by the second. See [69-13] at 6. Patel's second contract with Onsite included a non-disclosure agreement. See [69-13] at 10-12.

Medcor fired Garcia in December 2020. [81] ¶ 4; see [69-11]. A day later, Garcia used his cell phone to take photographs of documents displayed on his Medcor laptop. See [74-3] at 89-121. The documents were Medcor contracts and proposals, and included client contact information, screening and testing protocols, business plans, and pricing information. See [69-16]; [69-17]; [69-18]; [69-19]; [69-20]; [69-21]; [69-22]; [69-23]; [69-24]; [69-25]; [74-3] at 89-121. Garcia said he took the photographs so that he could use the formatting and structure of Medcor's documents as templates for a

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company that he was starting. See [74-3] at 116-17, 120-21. Garcia registered a website for that company, MedWay, three days after he was fired, and incorporated the business a month later. See [13-1] ¶ 33.

Three months after he was fired, Garcia was featured on a webinar where he suggested that MedWay had been in operation since the beginning of the pandemic and took credit for work completed by Medcor, attributing his personal experiences working for Medcor and its clients to MedWay. See [70-5]; [74-3] at 224-231. Around the same time, Garcia communicated with a Medcor employee about staffing needs at MedWay events and getting her out of an employment contract with Medcor. See [74-3] at 180-200.

After Garcia founded MedWay, Medcor lost the business of two existing clients: CBS Sports and Shed Media. Shed Media became MedWay's largest client, see [74-3] at 140-41, while CBS Sports entered into negotiations with MedWay but ultimately chose a different vendor for its COVID screening and testing services. See [74-4] at 88-90; [46-2]. The parties dispute whether Medcor lost these accounts because of defendants' actions or because CBS and Shed were dissatisfied with plaintiff's services and pricing. See [74-1] at 8-12; [69-1] at 4-6.

Messages between Garcia and Brown[2] show that Garcia and MedWay wanted the CBS account, Garcia fed Brown negative information to relay to CBS, Brown

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instructed a CBS executive not to sign additional contracts with Medcor in anticipation of a deal with MedWay, and Brown, hoping to join MedWay, contemplated disrupting the relationship between Medcor and CBS. See [70-41] at 57-76. Patel paid for a golf outing with a CBS executive and Garcia, and the three men also went to dinner together. See [74-3] at 34-35. But emails between Medcor and CBS executives show that CBS had some problems with Medcor's services, see [74-5], and that the company continued to negotiate with Medcor on future contracts even after Brown was fired in April 2021. See [74-8]; [74-9]; [74-10]. Although the evidence is mixed, I find that defendants exploited an opening between CBS and Medcor and caused Medcor to lose the CBS account.

A Shed executive asked Brown to send Garcia's phone number to her in January 2021, and Brown sent the executive Garcia's contact information. See [46-1] ¶¶ 17-18; [70-7]. Brown forwarded email exchanges about the Shed-Medcor proposal process to Patel. See [69-7]; [69-15]. Garcia credited Brown with delivering Shed to MedWay, see [70-41] at 83, and Patel congratulated Garcia for winning the Shed account. See [70-31] at 120. But a Shed executive said Medcor lost the account because of higher pricing, and that Garcia hadn't contacted her after his firing. See

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[46-1] ¶¶ 13-23.[3] In an email to Brown from January 2021, the Shed executive attached a competing firm's pricing, and Brown told Medcor executives that pricing was an issue for Shed. See [74-13]. After turning down Medcor's proposal, see [74-15], Shed hired a third party (not MedWay) to provide COVID screening and testing services. See id.; [46-1] ¶ 13. Shed's executive later contracted with MedWay because of her past relationship with Garcia and because MedWay's pricing fell within Shed's budget. See [46-1] ¶¶ 14-23. As with CBS, the evidence about Shed is mixed but I conclude that Medcor lost the Shed account because of pricing, not defendants' conduct.

The parties also dispute whether defendants diverted the business of a potential Medcor client, Carr-Hughes Productions. See [74-1] at 12-13; [69-1] at 6-7. Brown received an inquiry from Carr-Hughes on February 16, 2021, and forwarded that email exchange to Patel. See [69-8].[4] Emails between Brown and others at Medcor a month later show that Brown did not follow up on the Carr-Hughes business on behalf of Medcor. See [69-28]. A day after she was asked about the status of the Carr-Hughes inquiry by Medcor executives, see id., Brown messaged Garcia to inquire whether he was doing business with Carr-Hughes. See [70-41] at 2-3. But

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Brown said that Medcor had decided not to pursue clients like Carr-Hughes. [46-3] at 3-4. And a Medcor executive said that the company had generally decided not to pursue clients like Carr-Hughes because of concerns about costs, and that such clients were low priority for the company. See [74-4] at 187-188. Medcor didn't secure the Carr-Hughes business because it was a low priority for the company.

Medcor filed this lawsuit in April 2021. [1]. Medcor moved for a preliminary injunction and temporary restraining order, [12], and the parties conducted limited, expedited discovery. See [33]. Plaintiff seeks injunctive relief on the basis of (1) breach of contract; (2) tortious interference of contract; (3) violations of the Defend Trade Secrets Act and the Illinois Uniform Trade Secrets Act; (4) state and federal claims for unfair competition and trademark infringement; and (5) breach of the duty of loyalty. See [12]; [81].[5]

A member of the senior management team and shareholder at Medcor testified at the preliminary injunction hearing. See [66] at 21. In general, the Medcor executive testified about defendants' employment with the company, their contracts with Medcor, and the confidential nature of the documents that Garcia photographed. See [66]. The presentation of evidence was not completed in the time allotted, and by agreement, instead of reconvening the hearing, the parties took depositions and further briefed the motion. See [65]; [74-3]; [74-6]; [74-7].

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III. Analysis

A. Likelihood of Success on the Merits

1. Choice of Law

Garcia argues that Medcor's breach of contract and trade secret claims against him are governed by California law, citing his contract's choice-of-law provision. See [74-1] at 13-15. The contract says that “[e]xcept in California and any other State where prohibited by law,...

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