Destiny Health, Inc. v. Connecticut General Life Insurance Company
2015 IL App (1st) 142530 (2015)
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Rule of Law:
To establish misappropriation of trade secrets under the Illinois Trade Secrets Act in the context of a failed commercial transaction, a plaintiff must show not only access to the trade secrets but also a similarity between the defendant's ultimate product and the alleged trade secrets, or direct evidence of use; mere access and development of a similar product are insufficient to infer misappropriation, and the inevitable disclosure doctrine is generally inapplicable to failed commercial transactions.
Facts:
- Destiny Health, Inc. (Destiny) developed Vitality, a wellness-based healthcare program designed to integrate health insurance coverage with incentives that motivate active participation in healthcare and reward healthy behavior.
- Connecticut General Life Insurance Company and Cigna Corporation (Cigna) became interested in combining its existing wellness program with a points-based program, seeking a third-party vendor.
- In July 2007, Richard Gray, an executive at Cigna, and Art Carlos, president of Destiny, discussed a potential business relationship, leading the parties to execute an amendment to an existing confidentiality agreement for the exchange of sensitive business information.
- In September 2007, Cigna representatives conducted a full-day 'deep dive' evaluation at Destiny’s office, receiving extensive confidential information about Vitality, including proof of concept, return on investment, information technology, and actuarial data.
- In October 2007, Cigna informed Destiny that it could not move forward with the project, citing Vitality's inflexibility, unsupported return on investment claims, Destiny's unproven status in the United States, refusal to consider a vendor relationship, poor past joint venture results, high management turnover, and high program cost.
- Cigna subsequently explored partnerships with other vendors and ultimately selected IncentOne, which developed the 'Cigna Incentive Points Program' using its own research, methodologies, and customizable default settings, unlike Vitality's fixed program.
Procedural Posture:
- Destiny Health, Inc. filed a complaint in the Circuit Court of Cook County against Connecticut General Life Insurance Company, alleging misappropriation of trade secrets under the Illinois Trade Secrets Act.
- Destiny filed a second amended complaint, adding Cigna Corporation as a defendant and adding a claim for breach of contract.
- Cigna moved for summary judgment in the Circuit Court, arguing Destiny failed to raise a genuine issue of material fact regarding trade secret violations or breach of the confidentiality agreement.
- In July 2014, the Circuit Court of Cook County, Hon. Raymond Mitchell presiding, granted Cigna's motion for summary judgment on both the trade secrets and breach of confidentiality agreement claims.
- Destiny appealed the Circuit Court's summary judgment ruling to the Illinois Appellate Court, First District, Sixth Division.
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Issue:
Does a defendant's access to a plaintiff's confidential business information during failed partnership negotiations, followed by the defendant's development of a similar product with another vendor, create a genuine issue of material fact regarding trade secret misappropriation or breach of a confidentiality agreement, particularly under the inevitable disclosure doctrine, when there is no direct evidence of use and the developed product is philosophically and operationally different?
Opinions:
Majority - Presiding Justice Hoffman
No. The Circuit Court correctly granted summary judgment because Destiny Health, Inc. failed to present sufficient evidence to create a genuine issue of material fact that Cigna Corporation used Destiny's trade secrets or breached the confidentiality agreement. The court affirmed the lower court's grant of summary judgment, noting that to establish improper use of trade secrets under the Trade Secrets Act, a plaintiff must show: (1) a trade secret existed; (2) the secret was misappropriated through improper acquisition, disclosure, or use; and (3) the owner of the trade secret was damaged by the misappropriation. For the 'use' requirement, Destiny had to show that Cigna could not have created its incentive-points program without the use of Destiny’s trade secrets. While assuming for analysis that Destiny's confidential information qualified as trade secrets, the court found no evidence of misappropriation. Cigna provided direct evidence, including deposition testimony from Young, Horgan, and Berger, that it designed and developed its program with IncentOne, relying on IncentOne's market research and recommendations, and explicitly denied using Vitality program information. Destiny's expert witness, Ian Duncan, admitted he could not identify any specific Destiny information Cigna used. The court rejected Destiny's argument that circumstantial evidence (Cigna's access and subsequent development of a similar program) was sufficient, stating that circumstantial evidence of use requires demonstrating not only access but also 'similar features' between the secret and the defendant's design. The court found the Vitality program, a fixed model based on actuarial science, and Cigna's customizable program to be philosophically and operationally different, beyond the general concept of an incentive-points program. The court also declined to apply the 'inevitable disclosure doctrine.' Distinguishing PepsiCo, Inc. v. Redmond and Strata Marketing, Inc. v. Murphy, which involved employees leaving to work for competitors, the court followed Omnitech International, Inc. v. Clorox Co., holding that the doctrine is generally inapplicable to trade secret cases arising from failed commercial transactions between two companies. The court reasoned that applying it broadly would unduly restrict companies from evaluating potential acquisitions or partnerships. Conclusory assertions of misappropriation based solely on access during negotiations are insufficient without evidence that the defendant could not have developed its program without using the plaintiff's trade secrets. Destiny’s breach of contract claim also failed for the same reasons, as it was premised on the alleged misappropriation of confidential information.
Analysis:
This case significantly clarifies the burden of proof for trade secret misappropriation, particularly the 'use' element, in the context of failed business negotiations. It establishes a higher standard, requiring specific evidence of use or demonstrable similarity between the alleged trade secret and the defendant's resulting product, moving beyond mere access and general product resemblance. Critically, the decision limits the application of the 'inevitable disclosure' doctrine to employee-competitor scenarios, declining to extend it to arm's-length commercial transaction failures. This ruling provides greater certainty for companies engaging in preliminary partnership discussions, reassuring them that such interactions will not automatically preclude independent development of similar products, provided there is no direct evidence of misappropriation.
