Service By Air, Inc. v. Phoenix Cartage & Air Freight, LLC

78 F. Supp. 3d 852, 2015 U.S. Dist. LEXIS 9992, 2015 WL 395221
CourtDistrict Court, N.D. Illinois
DecidedJanuary 28, 2015
DocketCase No. 14-cv-1754
StatusPublished
Cited by11 cases

This text of 78 F. Supp. 3d 852 (Service By Air, Inc. v. Phoenix Cartage & Air Freight, LLC) is published on Counsel Stack Legal Research, covering District Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Service By Air, Inc. v. Phoenix Cartage & Air Freight, LLC, 78 F. Supp. 3d 852, 2015 U.S. Dist. LEXIS 9992, 2015 WL 395221 (N.D. Ill. 2015).

Opinion

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge

Plaintiff Service By Air, Inc. (“SBA”) brings this action against Defendants Phoenix Cartage and Air Freight, LLC, Philippe Gabay, and Radiant Logistics, Inc. Before the Court are Radiant’s motion to dismiss [37] and Phoenix and Ga-bay’s motion to dismiss [40]. For the reasons stated below, the Court grants Defendants’ motion in part, dismissing Counts IV, V, and VI. It also dismisses Counts VIII through XI against Phoenix and Gabay.

I. Background1

Plaintiff provides international freight and global logistics services, including ocean and ground shipping. In 2014, a competing freight shipper, Radiant, purchased SBA’s sales agent, Phoenix. In response to the acquisition, Plaintiff filed this action against Radiant, Phoenix, and Phillipe Gabay, owner and manager of Phoenix. The amended complaint alleges breach of contract; tortious interference with contract; intentional interference with business expectancy; federal trademark infringement and unfair competition in violation of the Lanham Act, 15 U.S.C. § 1114 and 15 U.S.C. § 1125(a), the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq., and common law.

[857]*857A. SBA and Phoenix’s Sales Agent Agreement

In October 2009, Plaintiff and Phoenix entered into a Sales Agent Agreement (“SAA”), in which Phoenix agreed to act as Plaintiffs sales agent in the Philadelphia area. The SAA, which is governed by Illinois law, includes the following provisions, in relevant part:

14. Confidential Information and Non-Disclosure .... Sales Agent and all employees shall not at any time directly or indirectly furnish to any person not directly affiliated with the SBA Network any information as to SBA’s methods or techniques, SBA customer lists, or any information pertaining to operations or procedures which have been supplied by SBA.... Sales Agent agrees that, upon termination or expiration of this Agreement, Sales Agent shall not use, either directly or indirectly any such confidential information or trade secrets or methods and techniques of doing business learned from SBA.... Sales Agent further agrees that the use by a spouse or member of Sales Agent’s immediate family, during or after the term hereof, of such confidential information, trade secrets, materials, SBA computer software, customer lists and its manual and procedures provided by SBA shall be deemed a violation by Sales Agent of this provision, unless such use relates solely to operations authorized herein.... Additionally, it shall be a violation of this Agreement for Sales Agent, or any of its employees or family members, to transport SBA computer software or any copies or reproductions thereof off site of the Premises....
18. Transfer on Death or Mental Incapacity. Upon the death or mental incapacity of any person with controlling interest in Sales Agent, the executor, administrator, or personal representative of such person shall transfer its interest to a third party approved by SBA within twelve (12) months after such death or mental incapacity .... the personal representative of the deceased Sales Agent shall have a reasonable time, but in no event more than eighteen (18) months from Sales Agent’s death, to dispose of the deceased’s interest in this Agreement....
21. Right of First Refusal. Service By Air, Inc. will have the irrevocable first right and option to purchase Sales Agent’s intangible assets and any employment contracts and leases on the same terms and conditions as any bona fide purchaser. Service By Air, Inc. may exercise this right by notifying Sales Agent of its decision in writing within thirty (30) days after receipt of a copy of the offer to purchase, which offer to purchase must contain all the terms of the proposed sale and the identity of the proposed purchaser.... Any sale or attempted sale without first giving SBA the right of first refusal shall be void and of no force or effect. Service By Air, Inc. shall not exercise its right of first refusal in the sale of the Sales Agent’s operations to a family member who otherwise qualifies in accordance with this Agreement.
22. Covenant Not to Compete. During the term of this Agreement and for three (3) years after termination of the agreement for any reason, Sales Agent shall not directly or indirectly participate, engage nor have any interest in any freight forwarding business in the Philadelphia Metropolitan Area other than the Service By Air business. Sales Agent acknowledges that it shall be deemed a breach of this Agreement if Sales Agent’s spouse or other member of Sales Agent’s immediate family shall [858]*858engage in any conduct prohibited in this Agreement....

FAC, Ex. A at 40-51. Following various amendments and extensions, the SAA expired on February 28, 2014.

B. Radiant Purchases Phoenix

As part of a larger competitive strategy, Radiant began to purchase its competitors’ service agents. Relevant here, Radiant executed an asset purchase agreement with Phoenix (“Radiant-Phoenix APA”) on March 1, 2014, which Plaintiff characterizes as an acquisition.2 Ga-bay had travelled to Radiant’s corporate headquarters in January or February of 2014 to negotiate the APA and his upcoming employment as Vice President of Business Development for Radiant’s Mid-Atlantic region. Radiant announced both the purchase and Gabay’s transfer on March 3, 2014.

The Radiant-Phoenix APA required Phoenix to make several disclosures before closing. Most relevant here, it included the following language:

6.8 Conforming Customers and NonConforming Customers.
(a) Conforming Customers. Schedule 6.8 contains a true and correct schedule identifying, for the 12 month period immediately preceding the Closing Date, all total and per customer revenues, (without identifying the customers’ names) attributable to all Conforming Customers and all total and per customer revenues (without identifying the customers’ names) attributable to all NonConforming Customers.

Radiant MTD, Ex. B at 24. It included the following relevant definitions:

“Conforming Customers” means all legacy customers of the Phoenix Business and all new customers of Gabay or attributable to sales personnel reporting to Gabay, however, only to the extent each of such customers is located outside of the Non-Compete Radius [which included the Philadelphia area as defined in the SAA] and with whom Seller and/or Gabay is otherwise entitled to do business without violating the [SAA, among other agreements].

Id. at 44.

“Non-Conforming Customers” means all legacy customers of and attributable to the Phoenix Business or any other business attributable directly or indirectly to Gabay as of and prior to the Closing Date (i) located within the Non-Compete Radius [which included the Phila[859]

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Bluebook (online)
78 F. Supp. 3d 852, 2015 U.S. Dist. LEXIS 9992, 2015 WL 395221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/service-by-air-inc-v-phoenix-cartage-air-freight-llc-ilnd-2015.