A federal judge in Chicago recently wrestled with two issues that we frequently blog about: what constitutes misappropriation of confidential information, and to what extent can a current employee prepare to compete with his employer without breaching his fiduciary duty?
In Chicagoland Aviation, LLC v. Richard R. Todd, et al., flight instructor Richard Todd left his job and started a rival business. Shortly thereafter, Chicagoland Aviation sued him for, among other things, breaching his fiduciary duty by allegedly misappropriating confidential information and starting a competing business while still employed by Chicagoland Aviation. Chicagoland Aviation eventually requested a preliminary injunction, which the court denied.
The court began its analysis of Chicagoland Aviation’s breach of fiduciary duty claim by summarizing the background legal principles: “[g]enerally, employees have a duty not to improperly compete with their employer, solicit the employer’s customers, entice co-workers away from the employer, divert business opportunities, engage in self-dealing, and/or otherwise misappropriate the employer’s property or funds.”
Regarding the purported theft of confidential information, the court concluded that the information at issue was either not confidential or not misappropriated.
First, Chicagoland Aviation alleged that Todd took information about its pricing structure, and based its allegation on Todd’s testimony about a spreadsheet that he created on the date that he terminated his employment with Chicagoland Aviation. However, in light of Todd’s testimony that “he either guessed or looked at websites on the internet” to come up with the numbers on the spreadsheet, the court found the creation of the spreadsheet would not support a misappropriation claim.
Second, Chicagoland Aviation alleged that Todd misappropriated its sales strategy, and as evidence thereof pointed to an e-mail describing Chicagoland Aviation’s sales strategy which Todd received from Chicagoland Aviation’s owner. However, the court held that mere receipt of this e-mail did not indicate actual misappropriation of the sales strategy.
Finally, regarding alleged theft of customer information, Chicagoland Aviation pointed to a list of flying club members that Todd purportedly took. However, the court found that this list was not confidential because the flying club “had public meetings, posted certain members’ photos on [Chicagoland Aviation’s] Facebook page, and its members would exchange contact information.”
As for the premature competition claim, the court likewise concluded that Chicagoland Aviation failed to show a likelihood of success on the merits.
Turning to the specific evidence on this claim, the court held that when Todd discussed the formation of his new business with a co-worker and told him that a “spot [was] available for [him] on [Todd’s] staff at the flight school,” this was not actual competition and therefore was not a breach of fiduciary duty.
Similarly, the court held that Todd’s statement that he was “going to” start a flight school using specific individual’s planes was not evidence that Todd had actually solicited away these individuals as customers.
Here, as in all cases of this sort, the court’s decision was driven by specific facts and circumstances. Nevertheless, the court’s assessment of particular pieces of evidence is noteworthy.