Packaging Corp. of Am., Inc. v. Croner

• Decision Date: 03 January 2020
• Docket Number: No. 19-CV-03286,19-CV-03286
• Citation: 419 F.Supp.3d 1059
• Parties: PACKAGING CORPORATION OF AMERICA, INC., Plaintiff, v. Patrick CRONER, Defendant.
• Court: U.S. District Court — Northern District of Illinois

419 F.Supp.3d 1059

PACKAGING CORPORATION OF AMERICA, INC., Plaintiff,

v.Patrick CRONER, Defendant.

No. 19-CV-03286

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

Signed January 3, 2020

Douglas Alan Albritton, Jeffrey Michael Hansen, Michele Violet Novelli, Actuate Law, LLC, Chicago, IL, for Plaintiff.

Lauren Waxler, Husch Blackwell, Chicago, IL, Stephen Reid Howe, Husch Blackwell LLP, Milwaukee, WI, for Defendant.

MEMORANDUM OPINION AND ORDER

John J. Tharp, Jr., United States District Judge

Plaintiff Packaging Corporation of America, Inc. ("PCA") filed this lawsuit alleging that defendant Patrick "Buzz" Croner violated The Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1831 et seq. , and the Illinois Trade Secrets Act ("ITSA"), 765 ILCS 1065/1 et seq. , and breached his employment contract when he went to work for a competitor and began soliciting the same clients. Croner subsequently filed a partial motion to dismiss the trade secret counts for failure to state a claim under Federal Rules of Civil Procedure 12(b)(6). The Court grants the motion and dismisses Counts I and III of the complaint with prejudice. PCA also filed a motion for a preliminary injunction seeking to restrain Croner from disclosing or misappropriating trade secrets as well as soliciting a subset of PCA customers per a non-solicitation clause of Croner's employment contract. That motion is denied with respect to the remaining breach of contract claim.

BACKGROUND

The parties do not dispute many of the key facts in this case.¹ PCA is one of the nation's biggest producers of containerboard products and uncoated freesheet. Croner began his career as a salesman in the corrugated box industry in 2005 at Welch Packaging, a direct competitor of PCA (though significantly smaller). As part of his employment contract with Welch, Croner signed a non-solicitation agreement restricting contact with customers for 18 months should he leave the company. In July 2007, Croner accepted a sales position at Field Packaging Group, LLC, at which point he signed another restrictive covenant, this time limiting the customers he could solicit during the first 12 months after departing Field.

On April 14, 2011, PCA acquired Field. In the aftermath of the sale, Croner reached out to a PCA executive to express concern over the acquisition's effect on the scope of the restrictive covenant he had previously signed with Field. Def.'s Mem. in Opp.'n to Mot. for Prelim. Inj. 9, ECF No. 70. Croner maintains that the PCA executive told him that PCA does not do those types of agreements. Id. Years later, in 2018, Croner inquired again about the validity of the agreement to PCA management, who responded that PCA inherited the contract as part of its purchase of Field and that it "wouldn't be inclined" to execute a new agreement with Croner. Def.'s Mem. in Opp.'n to Mot. for Prelim. Inj. Ex. E: 9. A month later, Croner asked two other PCA managers about the clause and alleges that they did not respond in writing, but that they agreed with him orally that the agreement would not hold up in court. Def.'s Mem. in Opp.'n to Mot. for Prelim. Inj. 10. Another follow-up request for clarification went ignored. Id. At the preliminary injunction hearing, however, Martin Field (formerly the principal at Field Packaging and who became Croner's Sales Manager after PCA acquired Field) testified that he told Croner many times that PCA believed that the non-solicitation agreement was enforceable.

In 2016, Welch began recruiting Croner to return to its employ. The recruitment continued into the fall of 2018, at which point Croner told Welch executives that he was "gathering data" for everyone to review. Mot. for Prelim. Inj. 9. The following spring, the courtship continued, with Croner telling PCA that he had "opened up to you on my accounts, a strategy to move forward and a game plan with PCA." Id. at 10. Eventually, Croner resigned from PCA on May 6, 2019 and accepted an offer to return to Welch as an Executive Vice President of Business Development with a base salary of $1,200,000. That offer included a third restrictive covenant that Croner signed. Shortly after leaving PCA, Croner, by his own admission, began soliciting some of his former clients from PCA. Mot. for Prelim. Inj., Pl.'s Ex. 38.

The key portion of the 2007 non-solicitation agreement between Croner and Field² reads as follows:

[I]f [the employee] voluntarily terminates his employment with Company or is terminated by the Company for any reason other than fraud, theft, embezzlement, commission of a felony, engaging in unlawful sexual harassment, or violation of paragraph 2, Non-Disclosure/Confidentiality, Employee will not for the twelve (12) month period following his termination directly or indirectly solicit, service, have contact with, or divert any entity which is, as of the time of the termination of Employee's employment or the immediate twenty-four (24) month period prior to such termination, a customer of the Company or prospective customer with whom Employee had prior dealings or who were customers of the Company about whom Employee learned as a result of his employment or through confidential, proprietary or trade secret information of the Company. The only exception is that this paragraph shall not apply to those customers of Employee with whom he had an on-going relationship as of the date he became employed by Company and who were not already customers of Company.

Compl. Ex. 1 at 2-3, ECF No. 1. Croner and a representative for Field signed the agreement on July 31, 2007. PCA did not require, or ask, Croner to sign a new non-solicitation agreement with PCA after it acquired Field, and the 2007 employment contract between Croner and Field does not contain an assignment clause. The purchase agreement between PCA and Field, however, expressly lists Croner's contract with Field as a material contract acquired in the deal:

12. Agreement between Company and Patrick Croner dated 7/31/07, Summary of Offer dated 6/19/07 regarding confidentiality, non-competition and non-solicitation, Limited Release from Non-Competition and Confidentiality Agreement dated 7/19/07.

Pl.'s Mem. of Law in Support of its Mot. for a TRO Ex. 2, ECF No. 9.

On May 15, 2019, nine days after Croner's resignation, PCA filed a three-count complaint alleging Croner: (1) violated the DTSA; (2) breached the restrictive covenant in his employment contract with PCA; and (3) violated the ITSA. On May 23, 2019, the Court granted in part the plaintiff's motion for a temporary restraining order seeking to restrain Croner from contacting a restricted list of PCA customers with whom he had dealt during the 24-month period before his resignation. The Court carved out two exceptions to the restrictive list: (1) any customers with whom Croner had an ongoing relationship prior to the 24 months preceding his resignation from PCA; and (2) any customers who were clients of both PCA and Welch during the 24-month period preceding Croner's resignation.

Following entry of the temporary restraining order, Croner filed a partial motion to dismiss for failure to state a claim with respect to Counts I and III (the federal and state trade secrets counts), and PCA filed a motion for a preliminary injunction. The parties conducted limited, expedited, discovery and briefed both Croner's motion to dismiss and PCA's motion for preliminary injunction in advance of a preliminary injunction hearing conducted on October 30, 2019.

At the preliminary injunction hearing, the Court heard from two witnesses: Croner and Martin Field, an executive at PCA who had previously been deposed as PCA's corporate representative. As a general point, the Court notes that Mr. Field's testimony at the injunction hearing differed significantly and frequently from his deposition testimony, as he repeatedly gave answers inconsistent with his prior responses at the deposition. For example, while he had previously admitted that PCA had no proof that Croner had taken confidential information with him upon his resignation, he stated at the hearing that he had changed his mind after further investigation. He also initially had declared under oath: that the proper procedure at PCA to remove data from a piece of hardware is to delete the data; that Croner had not returned a single document or electronic file to PCA; that only he and an information technology employee had access to PCA's internal pricing system; that it is not possible to reverse engineer those pricing procedures using the final price; that PCA sales representatives do not have access to this internal pricing data; that it would be impossible to memorize the costs for all of PCA's millions of products; that it would also be impossible to memorize all of the details relating to customer preferences; and that other companies also working with PCA clients likely learned the same customer preferences as PCA. When asked about these responses at the injunction hearing, Field recanted on each of these subjects, once again citing new information learned or alternative lines of thought. His responses included admissions that he personally inspected Croner's office after his departure (despite having signed a declaration stating that he had not done so) and that Croner had actually left documents in folders on his desk despite having signed a declaration stating that Croner had returned no documents to PCA. Field's responses regularly included statements to the effect of "I thought the answer was correct when I gave it but on further review, I decided that it wasn't." He nonetheless also acknowledged that, as PCA's corporate representative, it had been his duty to be prepared to set forth PCA's position as to relevant facts at the deposition. While an occasional need to modify a prior response is to be expected, particularly in the context of the expedited process of preparing for a preliminary injunction hearing, the level of backtracking engaged in by Mr....