Chicago Business Litigation Lawyer Blog

As Illinois trade secrets litigation attorneys, we were interested to see a trade secrets lawsuit arise out of the time-sensitive and competitive world of women’s fashion. As the Naples Daily News reported in July, Florida clothing company Chico’s FAS Inc. has sued competitor Cache Inc. and two former employees who moved to Cache, Rabia Farhang and Christine Board. Chico’s alleges that Farhang and Board shared designs from Chico’s White House/Black Market line with Cache, resulting in nearly identical spring and summer collections from the two brands. The lawsuit’s complaint includes exhibits of pictures of both collections. It accuses the women of breach of their nondisclosure agreements and legal duties, and Cache of inducing them to breach those agreements, and all defendants of tortious interference with contractual relations, misappropriation of trade secrets, unfair competition, theft, unjust enrichment and civil conspiracy.

According to the complaint in the case (PDF), which was filed in New York state court, Cache has not been financially successful in the past four or five years, during which time Chico’s White House/Black Market line has done well. Chico’s alleges that Cache tried to fix this by inducing Farhang and Board to leave Chico’s in the fall of 2009, taking their knowledge of design plans for 2010 clothing lines along with other trade secrets and confidential information. At Chico’s, Farhang and Board both participated in the designs of the 2010 lines, Farhang as a senior officer. Using the allegedly stolen designs, the complaint says, Cache saw an increase in sales in spring of 2010, and Chico’s alleges that Cache will use stolen designs in its fall line as well. Because of this, it requested preliminary and permanent injunctions stopping Cache from selling clothes from its spring, summer and fall lines, as well as a recall of the spring and summer lines. It also asked for financial damages and court orders protecting its trade secrets and confidential information.

Our Chicago business emergency lawyers believe this case is a good example of a situation in which swift action is necessary. If the allegations by Chico’s are true, its intellectual property and brand have already been somewhat diluted by Cache’s use of very similar designs in its spring and summer lines. This would be ongoing damage to the company that includes difficult-to-measure non-financial harm to its identity and customer loyalty, as well as actual financial damages from infringement. Furthermore, the tight schedules of fashion and retail companies mean that they bring out their fall lines in mid-summer, which means the court must take quick action on the July 29 lawsuit to stop the infringing on the fall line. This also means that Cache’s fiscal health could be in serious trouble if the count chooses to grant the injunction against the fall line and the recall order for the spring and summer lines. For both sides, this claim represents a legal emergency requiring quick action to protect their business.

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Our Chicago covenant not to compete and trade secret attorneys can assist your company or business in drafting agreements to protect your business from rogue former employees who engage in unfair competition. Our Chicago business lawyers and Chicago business trial attorneys can file lawsuits seeking a TRO, injunction and actual damages to protect your business from employees who steal customer information and violate non-compete agreements. To see the types of cases our Chicago business law lawyers handle you can look at our website. To contact one of our Chicago business law attorneys, click here. You can also view our Chicago business attorneys listings in Super Lawyers.

Vincent L. DiTommaso

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Peter S. Lubin

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Our Oak Brook covenant not to compete attorneys were interested to see a major non-compete lawsuit happening right here in Chicago. FierceWireless.com reported Jan. 19 that wireless telephone giant Motorola sued former executive David Hartsfield in federal court, claiming he will inevitably disclose Motorola’s confidential business information if he is allowed to take a new job at Finnish wireless phone company Nokia. Motorola is seeking a restraining order to prevent Hartsfield from taking the job.

Hartsfield resigned in December from a job developing CDMA technology at Motorola to take the position of vice president of CDMA at Nokia. In its lawsuit, Motorola claims that the non-disclosure agreement in Hartsfield’s employment contract will be violated if he takes the job. In particular, Motorola claims that it needs to protect product and pricing strategies. Hartsfield has filed a motion to dismiss the suit, arguing that it unreasonably interferes with his ability to make a living, and that Motorola has not identified any wrongdoing on his part. He also plans to argue that the non-disclosure agreements common in the wireless industry are not legitimate. Motorola has aggressively pursued non-compete and non-disclosure lawsuits in the past, including a 2008 non-compete lawsuit against an executive who left for Apple’s iPhone sales business. That case was dismissed in 2009.

DiTommaso-Lubin is not involved in this case. However, our Northbrook, Evanston, Waukegan, Joliet, Lisle, Downers Grove, Wheaton, Naperville, Aurora, Elgin, and Chicago non-compete contract attorneys believe Hartsfield could build a strong defense, if his claims are true. Although the federal court has diversity jurisdiction, it must apply Illinois law, which requires it to identify a legitimate business interest behind non-disclosure and non-compete agreements. If there is none, the law says Motorola may not restrain the otherwise legal business activity of Hartsfield moving to a competitor. Hartsfield claims CDMA is an industry-wide standard, not a technology proprietary to Motorola. Similarly, at least some of Motorola’s pricing information must be public knowledge. That means the company may have an uphill battle proving that this knowledge, at least, is a trade secret worthy of protection.

Continue reading "Motorola Sues Former Executive for Moving to Competitor Nokia -- Our Chicago Covenant Not to Compete Lawyers Defend and Prosecute Non-Compete and Trade Secret Lawsuits Throughout Illinois" »

Our Chicago trade secrets litigation lawyers were interested to see a recent case pitting a school bus company in Cook County against competitors and former employees. Alpha School Bus Company, Inc. v. Wagner, No. 1-06-3427 (Ill. 1st May 15, 2009). Alpha is owned by Cook-Illinois Corporation (collectively “Alpha”), which contracts to provide busing to school districts for special education students. Defendant Michael Wagner was an officer of Alpha and non-appealing defendant Leroy Meister was a managing employee. Barbara Ann Hackel owned Southwest Transit and Wagner owned Southwest Transit Leasing LLC, which leased buses to Southwest. Wagner and Meister left Alpha to join Southwest in 2003.

Alpha alleges that defendants, while employed at Alpha, conspired to secure a contract for Southwest by using their positions to make sure Southwest had a lower bid. Alpha also alleges that in forming Southwest, defendants conspired to drive Alpha out of business, sabotaged it, stole trade secrets and lured away employees. They allegedly hid their involvement in Southwest, solicited Alpha’s customers, falsified time sheets for Meister and other employees and had employees of Alpha stay to sabotage the company. Alpha sued for misappropriation of trade secrets, civil conspiracy, breach of fiduciary duty, antitrust violations and an injunction.

After Alpha filed several amended complaints, defendants moved to dismiss all of these claims, which the trial court granted with prejudice on all counts except the claim for misappropriation of trade secrets. The trial court found that all of the counts were based on the alleged theft of trade secrets and were therefore preempted by the Illinois Trade Secrets Act. Similarly, several other counts alleging conspiracy were preempted by the Antitrust Act. The remaining count was the claim for misappropriation of trade secrets, which the court dismissed without prejudice because it did not have enough information to state a cause of action. After an amended complaint that didn’t meet legal standards, the court dismissed that count with prejudice as well. The instant appeal followed.

The appeals court started by noting that Alpha did not submit a record of the trial, as required, so it could only consider the issues of law. It then took up the issue of whether the Antitrust and Trade Secrets Act preempt Alpha’s breach of fiduciary duty, conspiracy, trade secrets and antitrust claims. Alpha claims that Wagner used his position to prepare a lower bid for Southwest, which indeed would be a breach of fiduciary duty under caselaw. The court wrote that this would have involved the misappropriation of trade secrets, but does not depend on it. Thus, the Trade Secrets Act doesn’t preempt the breach of fiduciary duty claim and the trial court erred.

Similarly, the claim that Hackel induced Wagner to breach his fiduciary duty should not have been dismissed, the court wrote, because most of the allegations supporting it did not depend on misappropriation of trade secrets. And Cook-Illinois may sue Wagner for breach of fiduciary duty because Alpha properly asserted that Wagner was an officer of Cook-Illinois when he allegedly converted some of its trade secrets for use by Southwest. The First reversed the trial court on those three claims.

However, it upheld the trial court on all of the other claims. In many cases, the court wrote that the claims failed as a matter of law because of confusions between defendants as individuals and the corporations for whom they were acting as agents, or because of procedural errors. Furthermore, most of the trade secrets Alpha alleged were misappropriated failed to meet the definition of a trade secret under Illinois law: “Plaintiffs’ attempt to claim as a trade secret their “customer list,” i.e., the names of the school districts, is patently false because this information is glaringly nonsecret.” Finally, the court affirmed on the dismissal of the final complaint with prejudice, noting that the record shows no attempt by Alpha to amend its complaint again before the dismissal and appeal. Thus, the trial court was mostly affirmed and partly reversed.

Continue reading "Illinois Trade Secrets Act Does Not Preempt Breach of Fiduciary Duty Claims, First District Rules" »