Groupon, Inc. v. Hanna et al.

11CH36731
October 21, 2011
State Court
Illinois
Circuit Court of Cook County, Chancery Division

The three employees whom Groupon, Inc. (“Groupon”) sued on October 21, 2011 filed a counterclaim against Groupon on January 25, 2012. The three former employees, Nikki Dorough, Brian Hanna and Michael Nolan, countered that the coupon company pursued a "sham litigation" and requested the Illinois state court to void the noncompete provisions in their Groupon employment contracts.

The employees now work Google Offers, a directly competing discount service started by Google, Inc. (“Google”) after Groupon rejected Google’s buy-out. Groupon alleged in its complaint that the employees, were provided with proprietary and confidential information relating to Groupon’s business practices and strategies, such as Groupon’s price structures and deals with merchants, its timing of the deals and its list of current and potential merchants.

Dorough, Hanna and Nolan began work for Google Offers allegedly in breach of their non-compete agreement with Groupon which bars them from working with a direct competitor for 24 months after leaving the company. Groupon does not claim that Hanna and Nolan already disclosed the above trade secrets to Google or stole any trade secrets, in violation of the Illinois Trade Secrets Act. Rather, it alleges that Hanna and Nolan would inevitably disclose the trade secrets to Google because Google Offers directly competes with Groupon. According to Groupon, the “ongoing and/or threatened” disclosure by Hanna and Nolan would cause the company irreparable harm if the two employees are not enjoined from continuing their activities at Google Offers.

The inevitable disclosure doctrine is preemptively used by a court to prevent disclosure of a trade secret where a former employee’s “new employment will inevitably lead him to rely on [a former employer’s] trade secrets.” PepsiCo, Inc. v. Redmont, 54 F.3d 1262, 1269 (7th Cir. 1995). The doctrine is not universally adopted and even limited in some jurisdictions. See , e.g., EarthWeb, Inc. v. Schlack, 71 F. Supp. 2d 299 (S.D.N.Y. 1999). The doctrine may prevent a former employee from working with a direct competitor even if the employee was never subject to a non-compete agreement and attempts in good faith to prevent using his knowledge of a former employer’s trade secrets. See PepsiCo, 54 F.3d at 1270 (finding that even though no trade secrets were stolen or misappropriated, defendant, PepsiCo, Inc.’s former employee, could not help but rely on Pepsi’s confidential and proprietary information on how to price, distribute and market sports drinks in his work for Quaker Oats Company’s competing GATORADE branded sports drinks).

N/A
Groupon, INC.
Brian Hanna, Michael Nolan
Uniform Trade Secrets Act