Tuesday, October 2, 2012

Cook County Order on Attorneys' Fees Illustrates Factors Used to Assess Bad Faith

Earlier this year, Judge Mary Anne Mason in the Circuit Court of Cook County awarded attorneys' fees to a prevailing defendant under Section 5(i) of the Illinois Trade Secrets Act. That provision allows for a defendant to recover legal fees if a claim of misappropriation is made in bad faith.

A copy of Judge Mason's Memorandum Opinion and Order in Portola Packaging, Inc. v. Logoplaste USA, Inc. is embedded below. This was not an employee defection case, but rather one which arose out of the ashes of a failed business transaction. I have a similar bad faith fees issue currently pending in the United States Court of Appeals for the Seventh Circuit in the case of Tradesmen Int'l, Inc. v. Black (Nos. 11-3715 and 12-2032). In that case, my clients petitioned the district court for an award of fees following entry of summary judgment.

By and large, the standard by which to examine "bad faith" under the ITSA (or any of its uniform act counterparts) is somewhat ad hoc. Many courts adhere to a two-part objective/subjective test very similar to that discussed in last week's post concerning the Leadscope case out of Ohio.

Judge Mason's opinion is very interesting in that it shows how a trial court judge, following the conclusion of a trade secrets case, will go back over the evidence and compare it to what the allegations revealed. For instance, one of the factors Judge Mason examines is the plaintiff's failure to retrieve copies of confidential information from the proposed acquiring company after negotiations broke down. During the course of the lawsuit, Portola had continued to insist that it did not demand retrieval of confidential documents because it held out hope of rekindling a business relationship with Logoplaste. As no documents revealed Portola's interest in this "rekindling", Judge Mason was not buying the argument.

This demonstrates that factors other than what is pled in the complaint are highly relevant to the bad-faith inquiry. Further illustrative of this is Judge Mason's reliance on evidence of pre-litigation communications where Portola had examined a litigation strategy because "new suppliers that are caught up in litigation can scare potential customers." This type of evidence, arguably irrelevant to what the allegations say, illustrates motive to pursue a competitor not for the hopes of winning a suit, but simply to deter competition altogether.

Portola Packaging v. Logoplaste - Order on Fees

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