Serv. By Air, Inc. v. Phx. Cartage & Air Freight, LLC

• Decision Date: 28 January 2015
• Docket Number: Case No. 14–cv–1754
• Citation: 78 F.Supp.3d 852
• Parties: Service By Air, Inc., Plaintiff, v. Phoenix Cartage and Air Freight, LLC, Philippe Gabay, and Radiant Logistics, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

78 F.Supp.3d 852

Service By Air, Inc., Plaintiff

v.Phoenix Cartage and Air Freight, LLC, Philippe Gabay, and Radiant Logistics, Inc., Defendants.

Case No. 14–cv–1754

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

Signed January 28, 2015

Alexander D. Kerr, Jr., Bruce L. Wald, Jeffrey B. Rose, Natalia Rzepka Griesbach, Tishler & Wald, Ltd., Brian J. Lum, Richard Allen Schnurr, Ice Miller, Chicago, IL, for Plaintiff.

Edward David Shapiro, Irving M. Geslewitz, Shawn M. Staples, Much, Shelist, Freed, Denenberg, Ament & Rubenstein, P.C., Lawrence Charles Rubin, Jeffrey M. Schieber, Taft Stettinius & Hollister LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge

Plaintiff Service By Air, Inc. (“SBA”) brings this action against Defendants Phoenix Cartage and Air Freight, LLC, Philippe Gabay, and Radiant Logistics, Inc. Before the Court are Radiant's motion to dismiss [37] and Phoenix and Gabay's motion to dismiss [40]. For the reasons stated below, the Court grants Defendants' motion in part, dismissing Counts IV, V, and VI. It also dismisses Counts VIII through XI against Phoenix and Gabay.

I. Background¹

Plaintiff provides international freight and global logistics services, including ocean and ground shipping. In 2014, a competing freight shipper, Radiant, purchased SBA's sales agent, Phoenix. In response to the acquisition, Plaintiff filed this action against Radiant, Phoenix, and Phillipe Gabay, owner and manager of Phoenix. The amended complaint alleges breach of contract; tortious interference with contract; intentional interference with business expectancy; federal trademark infringement and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1114 and 15 U.S.C. § 1125(a), the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. , and common law.

A. SBA and Phoenix's Sales Agent Agreement

In October 2009, Plaintiff and Phoenix entered into a Sales Agent Agreement (“SAA”), in which Phoenix agreed to act as Plaintiff's sales agent in the Philadelphia area. The SAA, which is governed by Illinois law, includes the following provisions, in relevant part:

14. Confidential Information and Non–Disclosure .... Sales Agent and all employees shall not at any time directly or indirectly furnish to any person not directly affiliated with the SBA Network any information as to SBA's methods or techniques, SBA customer lists, or any information pertaining to operations or procedures which have been supplied by SBA.... Sales Agent agrees that, upon termination or expiration of this Agreement, Sales Agent shall not use, either directly or indirectly any such confidential information or trade secrets or methods and techniques of doing business learned from SBA.... Sales Agent further agrees that the use by a spouse or member of Sales Agent's immediate family, during or after the term hereof, of such confidential information, trade secrets, materials, SBA computer software, customer lists and its manual and procedures provided by SBA shall be deemed a violation by Sales Agent of this provision, unless such use relates solely to operations authorized herein.... Additionally, it shall be a violation of this Agreement for Sales Agent, or any of its employees or family members, to transport SBA computer software or any copies or reproductions thereof off site of the Premises....

18. Transfer on Death or Mental Incapacity. Upon the death or mental incapacity of any person with controlling interest in Sales Agent, the executor, administrator, or personal representative of such person shall transfer its interest to a third party approved by SBA within twelve (12) months after such death or mental incapacity .... the personal representative of the deceased Sales Agent shall have a reasonable time, but in no event more than eighteen (18) months from Sales Agent's death, to dispose of the deceased's interest in this Agreement....

21. Right of First Refusal. Service By Air, Inc. will have the irrevocable first right and option to purchase Sales Agent's intangible assets and any employment contracts and leases on the same terms and conditions as any bona fide purchaser. .... Service By Air, Inc. may exercise this right by notifying Sales Agent of its decision in writing within thirty (30) days after receipt of a copy of the offer to purchase, which offer to purchase must contain all the terms of the proposed sale and the identity of the proposed purchaser.... Any sale or attempted sale without first giving SBA the right of first refusal shall be void and of no force or effect. Service By Air, Inc. shall not exercise its right of first refusal in the sale of the Sales Agent's operations to a family member who otherwise qualifies in accordance with this Agreement.

22. Covenant Not to Compete. During the term of this Agreement and for three (3) years after termination of the agreement for any reason, Sales Agent shall not directly or indirectly participate, engage nor have any interest in any freight forwarding business in the Philadelphia Metropolitan Area other than the Service By Air business. Sales Agent acknowledges that it shall be deemed a breach of this Agreement if Sales Agent's spouse or other member of Sales Agent's immediate family shall engage in any conduct prohibited in this Agreement....

FAC, Ex. A at 40–51. Following various amendments and extensions, the SAA expired on February 28, 2014.

B. Radiant Purchases Phoenix

As part of a larger competitive strategy, Radiant began to purchase its competitors' service agents. Relevant here, Radiant executed an asset purchase agreement with Phoenix (“Radiant–Phoenix APA”) on March 1, 2014, which Plaintiff characterizes as an acquisition.² Gabay had travelled to Radiant's corporate headquarters in January or February of 2014 to negotiate the APA and his upcoming employment as Vice President of Business Development for Radiant's Mid–Atlantic region. Radiant announced both the purchase and Gabay's transfer on March 3, 2014.

The Radiant–Phoenix APA required Phoenix to make several disclosures before closing. Most relevant here, it included the following language:

6.8 Conforming Customers and Non–Conforming Customers.

(a) Conforming Customers. Schedule 6.8 contains a true and correct schedule identifying, for the 12 month period immediately preceding the Closing Date, all total and per customer revenues (without identifying the customers' names) attributable to all Conforming Customers and all total and per customer revenues (without identifying the customers' names) attributable to all Non–Conforming Customers.

Radiant MTD, Ex. B at 24. It included the following relevant definitions:

“Conforming Customers” means all legacy customers of the Phoenix Business and all new customers of Gabay or attributable to sales personnel reporting to Gabay, however, only to the extent each of such customers is located outside of the Non–Compete Radius [which included the Philadelphia area as defined in the SAA] and with whom Seller and/or Gabay is otherwise entitled to do business without violating the [SAA, among other agreements].

Id. at 44.

“Non–Conforming Customers” means all legacy customers of and attributable to the Phoenix Business or any other business attributable directly or indirectly to Gabay as of and prior to the Closing Date (i) located within the Non–Compete Radius [which included the Philadelphia area as defined in the SAA]; and (ii) with whom Seller is not otherwise entitled to do business without violating the [SAA, among other agreements].

Id. at 48. Paragraph 6.9 also required Phoenix to provide a “list of all of the material contracts of Seller relating to the Phoenix Conforming Business.” Id. at 24. The agreement defined “Phoenix Conforming Business” as “the Phoenix Business relating only to the Conforming Customers.” Id. at 48.

These disclosure requirements are distinct from those in the Laredo APA, which, like many other standard M & A agreements, required the seller to provide the buyer with recent financial statements; a schedule identifying the seller's principle customers; a schedule identifying all material contracts; and access to sites, properties, books and records as well as any additional information that Radiant may reasonably request.

Plaintiff alleges that Phoenix and Gabay additionally disclosed confidential information after the SAA expired. More specifically, at 5 p.m. on February 28, 2014, Phoenix and Gabay shut down Plaintiff's remote access to its proprietary freight forwarding software on the Phoenix computer system. Plaintiff allegedly used this software to track customer's shipping information. After shutting down Plaintiff's access, Phoenix allegedly maintained access to the software, including customer and shipment history information. Lastly, Plaintiff alleges that Phoenix directly or indirectly used confidential information, trade secrets, or methods and techniques of doing business learned from Plaintiff after the SAA expired.

After Radiant announced the acquisition, Phoenix, Gabay and Radiant allegedly attempted to transfer their shared customers with Plaintiff to Radiant. For example, on March 3, 2014, Lori Meyer, a Phoenix employee emailed Plaintiff's customers, stating, “As of March 1, 2014 SBA PHL has joined with Radiant Global Logistics one of the fastest growing freight forwarding companies in North America. We are the same dedicated team you are accustomed to but now able to offer you a more robust solution in servicing your transportation and logistic needs as part of Radiant.” FAC, Ex. J at 1. She provided her new email address and the new office email address, both of which were Radiant email addresses. The amended complaint also alleges that Gabay personally solicited the business of at least one SBA customer in the Philadelphia area. In support of this allegation, Plaintiff attaches an affidavit of one of Plaintiff's employees, stating that he observed Gabay's...