Chicago Business Litigation Lawyer Blog
After several former employees stole and destroyed internal data from their employer in order to found a competing business, and were sued, the trial court’s appointing of a third party to monitor the new company’s compliance with discovery and restraining orders was not error.
Shamrock Corporation has sold antifreeze, motor oil, and heat transfer fluids since 1974. Eventually, John Dreamer, Sr. became the sole shareholder of Shamrock. When John died, his wife, Annie Dreamer, became the sole shareholder. The entirety of Shamrock’s stock is held in a trust with Annie as the beneficiary.
Shamrock had five employees: John Dreamer, Jr., Les Kreifels, Steven Wroblewski, David Wells, and Chris England. The Dreamer family decided to sell Shamrock and offered Wroblewski and Wells the opportunity to make the first offer. The two submitted an offer that was financially acceptable but included collateral terms that the Dreamer family refused to accept. In August 2017 Shamrock made a counter-offer that revised some of the collateral terms.
In September 2017, Wroblewski and Wells abruptly resigned. England resigned four days later. Just prior to their resignations, the three had Beaver Shredding, Inc. destroy several boxes of documents at Shamrock’s headquarters. The three also deleted large amounts of data from Shamrock’s internal computer system. Prior to the deletion, Wroblewski had uploaded data from the computers to the digital storage site Dropbox.
Shortly after the resignations, the three former employees launched a competing company, Skyline. Skyline then began to represent itself as Shamrock’s successor business to customers and vendors. Shamrock filed suit against the employees, alleging that they destroyed data after uploading it to Dropbox. Shamrock moved for a temporary restraining order which the trial court granted. The trial court also appointed an accounting monitor to monitor Skyline’s transactions and books during the pendency of the litigation. Skyline refused to comply with the monitor. The trial court held Skyline in contempt, and Skyline appealed the entry of the restraining order.
The Illinois Appellate Court began by finding that the question in the instant case was considerably narrower than that which was presented in the appellate briefs. The panel determined that the question was whether the trial court had erred in appointing someone to facilitate the production of Skyline’s bank records and Quickbooks files during the litigation. The panel determined that the restraining and discovery orders did not constitute a fishing expedition on the part of Shamrock. Rather, the panel found that the production of bank records and Quickbooks files directly related to the claims Shamrock made regarding the theft of its internal data. The panel further determined that the trial court did not act improperly in appointing a neutral third party with the necessary expertise to monitor Skyline’s compliance. The panel found support for this position in decisions from other jurisdictions and the Cook County circuit court rules. The panel determined that the trial court’s orders were to be affirmed. The panel did, however, vacate the contempt holding, finding that Skyline had acted in good faith to test the orders of the trial court. The panel, therefore, affirmed in part and reversed in part the decision of the trial court.
You can view the Appellate Court’s decision here.
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