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Tro order

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Tro order

  1. 1. In the Circuit Court of Cook County, Illinois County Department, Chancery Division ORDER This matter coming to be heard on Plaintiffs’ Motion for Temporary Restraining Order, due notice having been given, and the Court being fully advised in the premises, IT IS HEREBY ORDERED: 1. On October 29, 2020, this Court received Plaintiffs’ Motion for Temporary Restraining Order and Preliminary Injunction. The Court agreed to hear this case on an expedited basis, and an expedited hearing date was set for Monday, November 16, 2020 at 10:30 a.m. via zoom on the TRO. 2. In this case, Plaintiffs alleges that Defendant Julian Bowron breached his Employment Agreement with Plaintiff Zekelman Industries, Inc. (“Zekeleman”), which contained, among other things, a non-compete, non-disclosure, non-solicitation, and confidentiality 1 ZEKELMAN INDUSTRIES, INC., Z-MODULAR LLC, and Z-MODULAR CANADA INC. FKA VECTORBLOC CORP., Plaintiffs, v. JULIE BOWRON AND VECTORMINIMA INC., Defendants. Case No. 20 CH 6539 Judge Eve Reilly Calendar 07
  2. 2. provision, by forming the company VectorMinima. Plaintiffs allege that VectorMinima directly competes with Zekelman and that Bowron has utilized trade secrets and client lists from Z-Modular in forming VectorMinima and the Metabloq product. 3. A temporary restraining order is a drastic, emergency remedy which may issue only in exceptional circumstances and for a brief duration. ​Abdulhafedh v. Secretary of State​, 161 Ill. App. 3d 413, 416 (2d Dist. 1987). The purpose of a temporary restraining order is to allow the circuit court to preserve the ​status quo​—to prevent a threatened wrong or a continuing injury—pending a hearing to determine whether it should grant a preliminary injunction. ​Id.​ “The status quo to be preserved is the last actual, peaceable, uncontested status which preceded the pending controversy.” ​Martin v. Eggert​, 174 Ill. App. 3d 71, 77 (2d Dist. 1988). While the term status quo has been the subject of often inconsistent interpretations, “‘[preliminary injunctive relief] is designed to prevent a threatened wrong or the further perpetration of an injurious act.’​” Kalbfleisch v. Columbia Cmty. Unit Sch. Dist. Unit No. 4, 396 Ill. App. 3d 1105, 1118 (5th Dist. 2009). Sometimes the status quo is “not a condition​ of rest but, rather, . . . a condition of action that [is] necessary to prevent irreparable harm.” ​Id.​ at 1117. 4. To obtain a temporary restraining order, a plaintiff must typically establish: (1) a clearly protected right; (2) irreparable harm by the defendant’s conduct if an injunction does not issue; (3) there is no adequate remedy at law; and (4) likelihood of success on the merits. Chi. Sch. Reform Bd. of Trs. v. Martin​, 309 Ill. App. 3d 924, 939 (1st Dist. 1999). Additionally, courts often balance the equities or the relative hardships. ​Scheffel & Co. v. Fessler​, 356 Ill.App.3d 308, 313 (5th Dist. 2005). 2
  3. 3. 5. To establish a clearly ascertainable right in need of protection, a plaintiff must raise a fair question that it has a substantive interest recognized by statute or common law. ​Delta Med. Sys. v. Mid-America Med. Sys., Inc.​, 331 Ill. App. 3d 777, 789-90 (1st Dist. 2002). A well-pleaded complaint for injunctive relief must contain on its face a clear right to relief and allege facts​ ​which establish the right to such relief in a positive, certain and precise manner. ​Nameoki Tp. v. Cruse​, 155 Ill. App. 3d 889, 898 (5th Dist. 1987). 6. Plaintiffs raise a fair question that it has a protectable interest. Plaintiffs’ interests stem from the Employment Agreement with Defendant Bowron and Plaintiffs have trade secret and trademark proprietary interests. Courts have routinely recognized trade secrets, confidential information, customer relationships, and trademarks as protectable interests. E.g., Stengstrom Petroleum​ ​Services Grp., Inc. v. Mesch, ​874 N.E.2d 959, 971 (Ill. App. 2007). Plaintiffs allege, among other things, that in violation of the restrictive covenants contained in the Employment agreement, Bowron formed VectorMinima, which directly competes with Zekelman and which was created using misappropriated trade secrets. Additionally, Plaintiffs allege that Defendants target Zekelman’s prospective and current clients. Accordingly, Plaintiffs have raised a fair question of an ascertainable right in need of protection. 7. The elements of irreparable injury and inadequate remedy at law required for a temporary restraining order are closely related. ​Happy R. Sec., LLC v. Agri-Sources, LLC​, 2013 IL App (3d) 120509, ¶ 36. An irreparable injury is one which cannot be adequately compensated in damages or be measured by any certain pecuniary standard. ​Diamond Sav. & Loan Co. v. Royal Glen Condo. Ass’n​, 173 Ill. App. 3d 431, 435 (2d Dist. 1988). However, irreparable injury does not necessarily mean injury that is great or beyond the 3
  4. 4. possibility of repair or compensation in damages, but is the type of harm of such constant or frequent recurrence that no fair or reasonable redress can be had in a court of law. Bally Mfg. Corp. v. JS&A Group, Inc.​, 88 Ill. App. 3d 87, 94 (1st Dist. 1980). 8. Plaintiff raises a fair question of irreparable injury and inadequate remedy at law. Plaintiffs allege that they have and will suffer irreparable harm if a TRO is not issued because Bowron is continuing to solicit Plaintiffs’ clients through a company that directly competes with Zekelman in violation of the Employment Agreement, and which was created using misappropriated trade secrets. Plaintiffs also allege that Defendants infringe on Plaintiff’s “Vector” trademark by using the term “vector” in its company VectorMinima to confuse and target Plaintiffs’ customers. Reply 12. As Plaintiffs point out, irreparable harm is presumed in cases involving trade secrets, confidential information, and restrictive covenants. ​E.g., U-Haul Co. of Central III. v. Hindahl​, 90 Ill. App. 3d 572, 577 (1980); ​Donald McElroy, Inc. v. Delaney​, 72 Ill. App. 3d 285, 294-95 (1979); ​Ty, Inc. v. Jones Group, Inc.​, 237 F.3d 891 (7th Cir. 2001). Accordingly, irreparable harm is presumed in the case at hand, which involves a non-compete provision and allegations that trade secrets and confidential information are being misappropriated by Bowron through VectorMinima. Additionally, Plaintiffs allege that Defendant’s use of the “Vector” trademark continuously misleads Plaintiffs’ customers in a purposeful attempt to siphon away Plaintiffs’ business. Motion 19. The Court finds that Plaintiffs have raised a fair question of irreparable harm. 9. Plaintiffs have also raised a fair question that they have no adequate remedy at law. Plaintiffs note that Bowron stipulated in his Employment Agreement that breach of its covenants would result in irreparable harm to the company and its goodwill and that 4
  5. 5. remedies at law would be inadequate. Motion 18. Additionally, Plaintiffs allege loss of customers and customer goodwill. Because loss of customer goodwill cannot be measured by money damages, Plaintiffs have raised a fair question that there is no adequate remedy at law. ​See Gateway E. Ry. Co. v. Terminal R.R. Ass’n of St. Louis​, 35 F.3d 1134, 1140 (7th Cir. 1994) (stating that “showing injury to goodwill can constitute irreparable harm that is not compensable by an award of money damages”). 10. Next, to show a likelihood of success on the merits, a party must: (1) raise a fair question as to the existence of the right claimed, (2) lead the court to believe that she will probably be entitled to the relief prayed for if the proof sustains her allegations, and (3) make it appear advisable that the positions of the parties stay as they are until the court has an opportunity to consider the merits of the case​. Abdulhafedh​, 161 Ill. App. 3d at 417. An element of the likelihood of success on the merits is whether the complaint states a cause of action sufficient to withstand a 2-615 motion to strike. See​ Strata Marketing, Inc. v. Murphy​, 317 Ill. App. 3d 1054 (1st Dist. 2000). 11. In this case, Plaintiffs raise a fair question that they are likely to be successful on the merits of the case. The three count Complaint seeks injunctive relief stemming from I) Breach of Contract, II) Misappropriation of Trade Secrets, and III) Trademark Infringement and Unfair Competition. 12. Plaintiffs have raised a fair question that they are likely to succeed on the merits of their Breach of Contract claim. Plaintiffs argue that they are likely to succeed on their breach of contract claim because their Employment Agreement with Bowron is ancillary to the purchase agreement, and in this context, non-compete claims must be viewed more favorably to the plaintiffs. ​Health Professionals, Ltd. v. Johnson​, 339 Ill. App. 3d 1021, 5
  6. 6. 1031-32 (3d Dist. 2003). When restrictive covenants are entered into in these circumstances, it is in part to make sure that “the former owner will not walk away from the sale with the company’s customers and goodwill, leaving the buyer with an acquisition that turns out only to be chimerical.” ​Central Water Works Supply, Inc. v. Fisher​, 240 Ill. App. 3d 952, 957 (4th Dist. 1993). ​ A restrictive covenant ancillary to a valid employment relationship, is reasonable, and therefore enforceable, only if the covenant: (1) is no greater than is required for the protection of a legitimate business interest of the employer-promisee; (2) does not impose undue hardship on the employee-promisor, and (3) is not injurious to the public. ​Reliable Fire Equip. Co. v. Arredondo​, 965 N.E.2d 393, 396 (2011). ​Plaintiffs have raised at least a fair question that they can meet these requirements. The Employment Agreement with Defendant Bowron is reasonable in temporal scope because it is only a two year restriction following the end of the Employment Term. The geographical scope of North America is reasonable when Zekelman operates its business throughout North America. Plaintiffs have raised a fair question that the restrictive covenant is not greater than necessary to protect the business interest where Bowron is only prohibited from competing in a very narrow area of this industry. Motion 13. Plaintiffs also point out that Bowron is an engineer, and he has other opportunities for work in spheres that don’t compete with Zekelman. Reply 5. Lastly, Plaintiffs argue that requiring Bowron to abide by the terms of a voluntarily executed contract will cause no injury to public welfare and instead not enforcing the agreement would discourage commerce when Bowron received great financial benefit for his company but refuses to hold up his end of the bargain. Motion 14. Accordingly, the Court 6
  7. 7. finds Plaintiffs have alleged a fair question of the existence of an enforceable contract and an enforceable restrictive covenant. 13. Plaintiffs have also raised a fair question of breach and a resulting harm. Defendants argue that Bowron has not breached the non-compete covenant in the Employment Agreement because he is not competing in any “covered business” as defined by the employment agreement. The definition of “covered business” in the employment agreement is: [A]ny business, other than the Company and its subsidiaries, directly engaged in, or with significant shareholding operations that engaged in, the manufacture of welded or seamless steel tubular or pipe products with substantial manufacturing operations in North America or steel framed modular systems, steel framed modular fabrication or steel framed modular construction. Agmt. §7(c). Defendants allege that since VectorMinima is only an R&D Company, which licenses out the Metabloq intellectual property to companies for manufacture, it is not a company directly engaged in the manufacturing of steel framed modular construction. Response 7-8. Plaintiffs, on the other hand, argue that “engage” is a broad term, which Merriam’s Dictionary has defined as “involved in activity” and “greatly interested.” Reply 3; (https://www.merriamwebster.com/dictionary/engaged (last accessed Nov. 10, 2020).) Plaintiffs argue that VectorMinima’s licensing of technology that enables the manufacturing of steel modular construction is a business that is “directly involved” or “greatly interested” in the manufacture of such systems. Whether or not VectorMinima is actually a “covered business”, the Court believes that Plaintiffs have, at minimum, raised a fair question that Defendants have breached the non-compete provision of their Employment Agreement and that this will cause harm to Plaintiffs as Defendants 7
  8. 8. compete for Plaintiffs’ customers and take away their business. As such, Plaintiffs have at least raised a fair question that they are likely to succeed on their breach of contract claim.​1 14. Additionally, Plaintiffs have raised a fair question that they are likely to succeed on the merits of their misappropriation of trademarks claim. To state a claim for trade secret misappropriation, a Plaintiff must allege: (1) the information at issue was a trade secret; (2) that it was misappropriated; and (3) that it was used in the defendants’ business. Learning Curve Toys, Inc. v. Plywood Toys, Inc.​, 342 F.3d 714, 721 (7th Cir. 2003) (applying Illinois law). Illinois law defines a trade secret as: “Information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.” 765 ILCS 1065/2(d). 15. Plaintiffs allege that it acquired trade secrets involving steel modular construction when it purchased defendant’s company and that defendant then used those trade secrets to further his own company, VectorMinima. Motion 15. Plaintiffs also allege that Defendants have brazenly targeted Zekelman’s clients using their client lists. Motion 15. In response, Defendants argue that Plaintiffs provide no evidence that trade secrets were acquired or used by Defendants. Response 5-6; 765 ILCS 1065/2 (A showing of 1 Defendants also argue that Plaintiffs have failed to show any breach of the non-solicitation covenant in the employment agreement when nothing in the agreement prohibits him from soliciting prospective customers. However, as Plaintiffs have now alleged that Defendants solicited a current client of theirs, Ellis Don. Decl. of Oliver Mason ¶ 3. Accordingly, Defendants’ argument fails. 8
  9. 9. misappropriation or use demands a showing of (1) an acquisition of a trade secret by improper means and (2) disclosure or use of the trade secret.). However, at this stage, it is enough that Plaintiffs allege that trade secrets involving its modular construction technology were used in constructing Metabloq, a product that looks similar to the Plaintiffs’ Vectorbloc system, and that Defendants have used confidential client lists to solicit customers of Plaintiffs. Reply 9. Accordingly, Plaintiffs have shown a fair question that they are likely to succeed on the merits of their trade secrets misappropriation claim. 16. In order to prevail on a trademark infringement claim, a plaintiff must demonstrate: (1) that its mark is a valid mark entitled to legal protection; (2) that defendant is using a similar mark; and (3) that defendant’s use of the similar mark creates a “likelihood of confusion” by the consuming public. ​Rosario D. Salerno’s Sons, Inc. v. Butta​, 263 Ill.App.3d 42, 46 (1st Dist. 1994). Here, Plaintiffs allege an ownership interest in the “Vector” trademark through its long use of the word “Vector” in numerous product lines and services associated with the VectorBloc® modular construction system: e.g. VectorBloc®, Vectorjig, Vectorig, Vectorsight, and Vectorloc. Plaintiffs claim that Defendant’s use of the word Vector in VectorMinima causes consumers to confuse Defendants’ product as their own. In response, Defendants points out that the Seventh Circuit uses various factors to evaluate customer confusion, including: (1) the similarity between the marks in appearance and suggestion; (2) the degree of care likely to be exercised by consumers; (3) the strength of the plaintiff’s mark; (4) any evidence of actual confusion; and (5) the intent of the defendant to “palm off” his product as that of another. ​Sorensen v. WD-40 Co.​, 792 F.3d 712, 726 (7th Cir. 2015). Defendants argue 9
  10. 10. that the marks are not similar in appearance because they combine vector with a completely different word, “minima”, and the mark is weak because it is in a crowded field of other trademark owners using the word “vector”. However, as Plaintiffs point out, none of the other trademarks using the word vector have anything to do with modular construction systems. Reply 14. Next, Defendants argue that there is no actual evidence of customer confusion, and that sophisticated consumers would not mistake Defendants’ product for Plaintiffs. Response 12-13. Plaintiffs point out that even a highly sophisticated consumer would see VectorMinima and believe that it's another line of Vector products from Z-modular. Reply 12-13. No one factor is dispositive in this analysis, and the Court believes many of these factors weigh in favor of Plaintiffs. Accordingly, Plaintiffs have raised at least a fair question that they are likely to succeed on their trademark infringement claim. 17. Therefore, this Court finds that Plaintiff has raised a fair question as to the likelihood of success on the merits element. 18. In balancing the harms, Defendants point out the hardship Bowron will face if he is prevented from earning a livelihood through his business. However, as Plaintiffs point out, Bowron entered into an agreement to sell his company for almost a million dollars, and voluntarily agreed to not compete with the company he sold to Defendants in exchange for the money. Similarly, Plaintiffs point out that Bowron is an experienced engineer, and can work in modular construction with other materials, such as wood. Conversely, the potential hardship on Plaintiffs is great, as the value to their company diminishes greatly when Defendants license out a competing product in violation of the 10
  11. 11. Employment Agreement. Therefore, in balancing the harms, the harm to Plaintiffs must prevail. 19. Plaintiff’s Motion for a Temporary Restraining order is ​GRANTED ​as to the following requests for relief: a. To enjoin Defendant Bowron and VectorMinima from conducting business related to steel modular construction or from participating in any “covered business” as defined by the Employment Agreement for the duration of this TRO which shall last until the time of the hearing on a preliminary injunction motion; b. To enjoin all Defendants from using the “vector” brand name for the duration of the TRO which shall last until the time of the hearing on a preliminary injunction motion. c. To enjoin all Defendants from using or disclosing Plaintiffs’ trade secrets or confidential information for the duration of the TRO which shall last until the time of the hearing on a preliminary injunction motion. This matter is set for status on December 3, 2020 at 9:30 a.m. via Zoom. 11 Dated Judge Eve Reilly