A recent decision from the Illinois Appellate Court for the First District reminds employers of the need to act quickly and thoroughly in investigating potential breaches of employee restrictive covenants and in taking actions to enforce their rights under those agreements.
In Bridgeview Bank Group v. Meyer, 2016 IL App (1st) 160042, the court affirmed the trial court’s denial of an employer’s petition for a temporary restraining order against a former employee. Bridgeview Bank had employed Thomas Meyer as a senior vice president. The bank entered into an employment agreement incorporating non-compete, non-solicitation and non-disclosure provisions at the beginning of the employment relationship.
The bank subsequently terminated Meyer’s employment and entered into a severance agreement that waived Meyer’s non-compete obligations but kept his non-solicitation and non-disclosure obligations in place. After terminating Meyer, the bank found emails Meyer had sent himself containing 2015 income statements, usernames and passwords, and a list of contacts, including Meyer’s personal contacts, Bridgeview personnel and third-party business contacts (including some Bridgeview customers).
On Dec. 8, 2015, more than four months after Meyer was terminated, Bridgeview filed a complaint against Meyer alleging breach of contract (for violations of the employment and severance agreements), breach of fiduciary duty, tortious interference with business relationships and violation of the Illinois Trade Secrets Act. Two weeks later, Bridgeview filed a motion for a temporary restraining order. Rather than file and present it as an emergency motion, Bridgeview waited to present its motion on the court’s regular motion call on Jan. 4, 2016.
In considering the trial court’s denial of Bridgeview’s petition, the appellate court first noted that the bank’s complaint did not contain any allegations of specific facts regarding Meyer’s conduct. Rather, it only contained conclusory allegations that Meyer had contacted Bridgeview’s customers, divulged confidential information and interfered with Bridgeview’s contractual or prospective relationships with customers and prospective customers. The court held that these allegations were insufficient to establish that Bridgeview was entitled to temporary injunctive relief under Illinois law.
With respect to Bridgeview’s allegations that Meyer took confidential customer contact information, the court noted that “while certain information on the list may be ‘confidential’ in the sense that it was unknown outside the bank, Bridgeview made no preliminary showing that the information was of any particular value to Meyer or his current employer.” The court further explained that “while, under appropriate circumstances, a customer list can qualify as a trade secret, there is no per se rule affording it such status.”
The court further held that Bridgeview failed to present any evidence that it had longstanding relationships with its customers or expended significant time and money developing its customers and thus “made no showing that it had a protectable interest in its SBA customer base.”
The court affirmed the trial court’s finding that Bridgeview failed to establish a likelihood of success on the merits based upon the bank’s failure to allege specific facts in its pleadings and questions about whether Bridgeview had a protectable interest in the information Meyer took.
As for Bridgeview’s allegation that it would suffer irreparable harm absent a temporary restraining order, the court noted that Bridgeview presented no evidence that Meyer was likely to continue to use or disclose the confidential information in the future. The court also noted that Bridgeview waited several months before bringing suit and then several weeks before presenting its motion for a temporary restraining order. Based upon the lack of specific facts in the record, the lack of evidence of future harm and Bridgeview’s delay in bringing the action, the court affirmed the trial court’s finding that Bridgeview had failed to establish that it would suffer irreparable harm in the absence of a temporary restraining order.
The Bridgeview opinion provides some valuable reminders for employers seeking to protect confidential information from post-employment misuse. If an employer suspects a former or current employee breached a restrictive covenant, it should investigate that breach thoroughly and quickly — and if it decides to bring a lawsuit, it should identify specific facts supporting its claims rather than simply alleging “misappropriation” and misuse generically. By being specific, the employer highlights to the court that its lawsuit is not simply a kneejerk reaction but that it has investigated and has a concrete basis for its concern. Generic allegations untethered to concrete facts are less likely to resonate with a court than facts tied to the specific facts of a case. Although employers need to thoroughly investigate their claims, they also need to do so quickly.
And finally, employers should be aware that customer contact information alone is not necessarily protectable under a non-disclosure agreement or as a trade secret under Illinois law. Best practices for enterprise risk management dictate that employers take reasonable steps to secure their confidential information from theft in the first place.