RKI, Inc. v. Grimes

Rule of Law:

An employee misappropriates trade secrets and breaches restrictive covenants when they surreptitiously copy confidential company data and use it while joining a direct competitor, especially when coupled with evidence of an intent to use such information and attempts to cover up the actions. A new employer may be liable for tortious interference if they hire an employee knowing of restrictive covenants and facilitate their breach.

Facts:

• Roll-Kraft, a producer of tube and pipe mill rolls, hired Steven Grimes as a salesman in March 1999, providing extensive training and introducing him to its customers and proprietary information.
• In May 1999, Grimes signed an Employment Agreement with Roll-Kraft, which included non-disclosure and non-solicitation clauses, prohibiting him from disclosing proprietary information and from soliciting Roll-Kraft customers for three years after termination within a 50-mile radius of Chicago.
• Roll-Kraft maintained confidential customer contact management systems (ACT, BAM, NPI) containing proprietary data such as customer names, sales history, pending quotations, pricing, and profit margins, which were accessible to Grimes on a need-to-know basis and protected by passwords.
• In October 2000, Roll-Kraft reduced Grimes's salary by $2,500 due to his failure to adequately update customer contact information in the ACT system, despite prior warnings.
• In September and early October 2001, Grimes commenced serious discussions with Chicago Roll, a direct competitor, about joining their company and provided them with a copy of his Roll-Kraft Employment Agreement.
• On the evening of October 16, 2001, after Roll-Kraft suspected his intentions and Grimes denied talking to Chicago Roll, Grimes accessed Roll-Kraft's computer system from his home and downloaded confidential ACT, BAM, and NPI data.
• On October 18, 2001, Grimes resigned from Roll-Kraft via email, effective immediately, despite a 30-day notice requirement in his contract, and immediately began working as a salesman for Chicago Roll, calling on his former Roll-Kraft customers.
• On his first day at Chicago Roll, Grimes signed an indemnity agreement promising to indemnify and defend Chicago Roll against any claims by Roll-Kraft, and later admitted to a former colleague that he used Roll-Kraft's confidential information to take an order and intended to steal all of Roll-Kraft's customers.

Procedural Posture:

• On November 6, 2001, Roll-Kraft filed its verified complaint against Steven Grimes and Chicago Roll Corporation in the United States District Court for the Northern District of Illinois.
• On November 8, 2001, the District Court issued a temporary restraining order (TRO) that enjoined Grimes from performing sales or marketing activities for Chicago Roll, enjoined both defendants from using or disclosing Roll-Kraft’s confidential information, and ordered them to return the confidential information.
• Roll-Kraft's counsel served a notice of depositions scheduling the depositions of Grimes and several Chicago Roll employees for November 13 and 14, 2001.
• Counsel for Grimes and Chicago Roll faxed a letter refusing to produce the deponents for depositions at the scheduled time.
• On November 14, 2001, Roll-Kraft filed an emergency motion to compel depositions and for other relief due to the defendants' refusal.
• The TRO was extended, and Grimes and Chicago Roll were ordered to produce their computers for inspection by Roll-Kraft’s computer forensics expert.
• The District Court conducted a bench trial on December 17, 18, and 19, 2001, and heard closing arguments on December 20, 2001.