Advantage Marketing Group, Inc. v. Keane

2019 IL App (1st) 181126
FIRST DISTRICT
SIXTH DIVISION
May 10, 2019
No. 1-18-1126
ADVANTAGE MARKETING GROUP, INC., ) Appeal from the Circuit
) Court of Cook County.
Plaintiff-Appellant, )
)
v. ) No. 17 CH 05559
)
JAMES P. KEANE, SR., ) Honorable
) Neil H. Cohen,
Defendant-Appellee. ) Judge Presiding.
PRESIDING JUSTICE DELORT delivered the judgment of the court, with opinion.
Justices Cunningham and Harris concurred in the judgment and opinion.
OPINION
¶1 Plaintiff Advantage Marketing Group, Inc. (AMG) filed a two-count amended complaint
seeking relief against defendant James P. Keane, Sr., for breach of fiduciary duty and tortious
interference with prospective economic advantage. Plaintiff alleged that Keane failed to disclose
a corporate opportunity to purchase a competing business and exploited a client referral to his
advantage. Keane moved to dismiss the amended complaint pursuant to section 2-615 (735 ILCS
5/2-615 (West 2016)) of the Illinois Code of Civil Procedure (Code). Keane argued that the
corporate opportunity doctrine did not apply to him because, at the time of the alleged conduct,
he served as a mere employee of AMG and not as an officer or director of the company. Keane
also contended that even if the corporate opportunity doctrine applied, he disclosed the corporate
opportunity to AMG consistent with the obligations of the doctrine. Finally, Keane argued that
AMG failed to properly plead the allegations for tortious interference with a prospective
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economic advantage. The circuit court granted Keane’s motion to dismiss. We find that AMG
properly stated claims for breach of fiduciary duty and tortious interference with a prospective
economic advantage. We reverse and remand this cause for further proceedings.
¶2 BACKGROUND
¶3 AMG filed its amended complaint on January 23, 2018. The amended complaint alleged
that AMG, an Illinois corporation, is a marketing services company that provides letter-shop and
fulfillment services for its clients. AMG creates and administers print and mailing programs for
its clients from its facility in Elk Grove Village. Keane had formerly served as a director, officer,
and employee of AMG. He was an original founder of AMG and maintains a 35% shareholding
stake in the company.
¶4 The amended complaint alleges that for several years prior to his resignation, Keane
served as a “principal employee of AMG with wide-ranging responsibilities equivalent to those
of an officer.” For example, Keane consistently held himself out to third parties as an AMG
owner when developing customer relationships. Keane had substantial responsibility for AMG
employment decisions, including hiring and termination of staff. He had access to all AMG
books and records, including client lists, employee records, tax documents, vendor information,
and billing data. Keane received a bonus equal to that of Patty Hermann, AMG’s director and
majority shareholder. He was responsible for developing and maintaining AMG’s financial
records and had full access to the company’s accounting system. Throughout his tenure with
AMG, Keane’s job duties included exploring strategic acquisitions, including the purchase of
competing letter-shop businesses, their equipment, and customer lists. The amended complaint
detailed instances when Keane participated in the negotiation and acquisition of related
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businesses, stating that he was “a key point of contact throughout 2013 regarding AMG’s
opportunity to move or acquire property to conduct business operations.”
¶5 On July 10, 2013, Keane’s son, James Jr., also an AMG employee, sent an email to
Keane and Hermann with the subject line, “Mailhouse – Rebranded Website – Is that the same
ownership group as before?” The body of the e-mail included a website link for The Mail
House, a competing business located a few blocks away from AMG’s office. The amended
complaint alleged that during the summer and fall of 2013, Keane and Hermann discussed The
Mail House and whether it was a viable acquisition target. The amended complaint stated,
“Though Hermann is unaware of when Keane ultimately began his own discussions about
buying The Mail House, the business was one that AMG had explored acquiring.”
¶6 The amended complaint alleged that at some point before Keane’s departure from AMG
on September 4, 2015, he started to withhold information for himself and communicated outside
AMG channels using his personal e-mail account while failing to forward information that would
have benefitted AMG. On March 10, 2014, Keane transferred his assigned corporate cell phone
number to his own personal account, outside the view of AMG. The amended complaint alleged
that this action allowed him to retain and use the same phone number following his resignation
from AMG and further prevented AMG from controlling communications that he had during his
employment with AMG.
¶7 The amended complaint also alleged that Keane began preparations to acquire The Mail
House before his September 4, 2015 resignation. For instance, on August 3, 2015, he registered a
new internet domain name, “mailhousedm.com,” along with seven other domain names that each
contained the word, “mailhouse.” On August 12, 2015, he formed Keane, Inc. d/b/a The Mail
House. The alleged complaint stated that “Upon information and belief, Keane formed this
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corporation to acquire The Mail House,” and that “[a]t all times, The Mail House has conducted
letter-shop and fulfillment services similar to, and competitive with, those offered by AMG.”
¶8 During the week before his resignation, Keane failed to disclose and tender to AMG a
referral he received from another company, JD Graphics. James, Jr., forwarded the referral from
JD Graphics to Keane’s personal e-mail account. The amended complaint alleged that Keane
exploited this referral after he began operating The Mail House. In addition, Keane approached
and told clients and vendors of AMG that AMG was in danger of closing its business due to
financial issues.
¶9 On September 5, 2015, the day after Keane resigned, AMG discovered its security
cameras were turned off and that its security tapes were missing. On September 9, 2015, Keane
allegedly disabled AMG’s website. He refused to transfer AMG’s website materials back to the
company for more than one week. Out of business necessity, AMG established an entirely new
website. The day before Keane transferred the website content back to AMG, James, Jr.
registered a new website domain, “amgltd.co,” which differed by only one letter from AMG’s
domain name. The amended complaint alleged that Keane either was aware of or actively
encouraged James, Jr. to disable AMG’s website and then register a substantially similar domain
name. During Keane’s employment with AMG, James, Jr. reported directly to Keane. James, Jr.
tendered his resignation to AMG on September 7, 2015.
¶ 10 The amended complaint alleged that Keane solicited James, Jr. to leave AMG and join
him at The Mail House. Keane did not seek AMG’s consent before soliciting James, Jr. to leave
AMG and join a direct competitor. Further, Keane never sought AMG’s consent to appropriate
the JD Graphics referral or to interfere with AMG’s website operation. Additionally, before his
resignation, James, Jr. had obtained samples of confidential client material that belonged to
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AMG. Keane kept the samples for himself, resigned, and then returned the client materials after
AMG’s then-counsel demanded their return. Since his acquisition of The Mail House, Keane has
continued to perform lettershop and print work for this particular client.
¶ 11 The amended complaint alleged that “At all times before Keane’s resignation, The Mail
House was known to AMG as a competitor. The Mail House provided comparable products and
services to the same type of clientele that AMC had serviced and cultivated. Accordingly, The
Mail House was, and remains, in the same line of business as AMG.” Further, “[a]t no point in
2015 did Keane disclose to Hermann or AMG that he sought to acquire The Mail House. Nor did
Keane ever advise Hermann or AMG that the prior owners of The Mail House were interested in
selling their business to a third party.” Finally, the amended complaint alleged that “[h]ad Keane
brought The Mail House acquisition opportunity to AMG, AMG would have been interested in
pursuing it.”
¶ 12 Count I of the amended complaint alleged breach of fiduciary duty, stating that “[a]s a
key AMG employee with responsibility equivalent to those of an officer, Keane owed a fiduciary
duty of loyalty, fidelity, rectitude, candor, and good faith.” This fiduciary duty prohibited Keane
“from actively exploiting his position within AMG for his own personal benefit and from
hindering the ability of AMG to continue the business for which it was developed.” The
amended complaint alleged that Keane owed AMG a fiduciary duty to disclose and tender all
corporate opportunities, including all material facts to AMG. Keane allegedly breached this duty
by secretly negotiating and purchasing a directly competing business, The Mail House, while
still employed by AMG as “a key AMG employee.” Keane failed to disclose and tender a
corporate opportunity – the potential acquisition of The Mail House – to AMG for its full and
complete consideration. In addition, Keane allegedly breached his fiduciary duty to AMG by: (1)
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soliciting James, Jr. to leave AMG and join The Mail House; (2) misappropriating referrals for
existing lettershop work sent to AMG; (3) misappropriating client samples; and (4) disabling or
otherwise interfering with AMG’s website. AMG sought the imposition of a constructive trust on
The Mail House business to be held for the benefit of AMG, and other relief.
¶ 13 Count II of the amended complaint alleged that Keane tortiously interfered with AMG’s
prospective economic advantage “[b]y acquiring The Mail House for himself and by
appropriating the client referral,” which caused “a termination of AMG’s expectation of entering
into, or continuing, valid business relations.”
¶ 14 On February 20, 2018, Keane moved to dismiss the amended complaint pursuant to
section 2-615 of the Code. Keane argued that the corporate opportunity doctrine has no
application to him as a former employee and applies only to officers and directors. Keane
contended that even if the corporate opportunity applies in this case, he disclosed the corporate
opportunity to AMG consistent with the obligations of the corporate opportunity doctrine. Keane
and Hermann had discussed whether The Mail House was a viable acquisition, as pled in the
amended complaint. Finally, Keane argued that the amended complaint failed to plead
allegations addressing the elements necessary to establish a claim for tortious interference of a
prospective economic advantage.
¶ 15 On May 1, 2018, the circuit court granted Keane’s motion to dismiss. The court found
that AMG failed to allege any facts establishing that Keane was an officer of AMG at the time of
any of the events set forth in the amended complaint. The court stated that being a “key
employee” is not the equivalent of being a corporate officer. The court also held that Keane was
entitled to form a competing business and purchase The Mail House while still employed by
AMG so long as he did not begin to compete against AMG. The court stated that the amended
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complaint failed to allege specific facts showing that Keane actively competed with AMG while
still employed by AMG. Finally, the court found that AMG failed to allege any facts showing
that it had a valid business relationship with JD Graphics or a valid expectancy for such a
relationship and, therefore, did not state a claim for tortious interference with a prospective
economic advantage. This appeal followed.
¶ 16 ANALYSIS
¶ 17 On appeal, AMG argues that it stated a proper claim against Keane for breach of
fiduciary duty. Essentially, AMG contends that Keane owed a fiduciary duty to disclose and
tender The Mail House acquisition opportunity to AMG before he resigned. AMG argues that the
corporate opportunity doctrine’s parameters depend on the scope of the fiduciary’s agency
relationship rather than the employee’s title. AMG contends that Keane’s “preparing to compete”
defense does not apply in cases alleging a usurpation of corporate opportunity. Finally, AMG
argues that the factual allegations arising from Keane’s appropriation of The Mail House
opportunity place it within a cognizable tortious interference claim. We address these issues in
turn.
¶ 18 Standard of Review
¶ 19 “A section 2-615 motion to dismiss tests the legal sufficiency of a complaint.” Hadley v.
Doe, 2015 IL 118000, ¶ 29. The question presented by a section 2-615 motion to dismiss is
whether sufficient facts have been pled in the complaint which, if proved, would entitle the
plaintiff to relief. Bogenberger v. Pi Kappa Alpha Corp., 2018 IL 120951, ¶ 23. We construe all
well-pleaded facts in the light most favorable to the plaintiff and take those facts and all
reasonable inferences which flow from those facts as true. Napleton v. Village of Hinsdale, 229
Ill. 2d 296, 320 (2008). A complaint can be dismissed under section 2-615 only when it clearly
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appears that no set of facts could be proved under the pleadings that would entitle the plaintiff to
relief and where the circuit court can determine the relative rights of the parties solely from the
pleadings. Tuite v. Corbitt, 224 Ill. 2d 490, 510 (2006). We review dismissal pursuant to section
2–615 de novo. Napleton, 229 Ill. 2d at 305.
¶ 20 Claim for Breach of Fiduciary Duty
¶ 21 In count I of the amended complaint, AMG claimed that Keane breached his fiduciary
duty when he misappropriated a corporate opportunity to acquire The Mail House. Keane argues
that he was not an officer or director subject to the corporate opportunity doctrine. Keane
contends that he was permitted under Illinois law to take the preparatory steps of outfitting a
competing business. He also argues that he disclosed the potential acquisition of The Mail House
and that AMG failed to allege in its amended complaint that it took any further action with
regard to The Mail House.
¶ 22 A claim for breach of fiduciary duty must allege: “(1) that a fiduciary duty exists; (2) that
the fiduciary duty was breached; and (3) that such breach proximately caused the injury of which
the party complains.” Lawlor v. North American Corp. of Illinois, 2012 IL 112530, ¶ 69. A duty
of loyalty to the employer extends to officers, directors, and employees. Id. (citing Mullaney,
Wells & Co. v. Savage, 78 Ill. 2d 534, 546-47 (1980)). “Accordingly, a fiduciary cannot act
inconsistently with his agency or trust and cannot solicit his employer’s customers for himself.”
Id.
¶ 23 The corporate opportunity doctrine prohibits a corporation’s fiduciary from
misappropriating corporate property and from taking advantage of business opportunities
belonging to the corporation. Lindenhurst Drugs, Inc. v. Becker, 154 Ill. App. 3d 61, 67 (1987).
“A corporate opportunity exists when a proposed activity is reasonably incident to the
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corporation’s present or prospective business and is one in which the corporation has the
capacity to engage.” Id. Our supreme court has held that it is a breach of fiduciary obligation for
a person to seize for his own advantage a business opportunity which rightfully belongs to the
corporation by which he is employed. Mullaney, 78 Ill. 2d at 545-46 (citing numerous Illinois
Supreme Court cases holding similarly).
¶ 24 In contrast, “corporate competition” occurs when the corporate employer by definition
already has an existing business relationship with a third party or is actively seeking to establish
such a relationship, only to have its efforts thwarted by its own employees seeking the same third
party relationship for themselves. See William L. Schaller, Corporate Opportunities and
Corporate Competition in Illinois: A Comparative Discussion of Fiduciary Duties, 46 J.
Marshall L. Rev. 1, 26 (2012). For example, in Everen Securities, Inc. v. A.G. Edwards & Sons,
Inc., 308 Ill. App. 3d 268 (1999), the defendant Sidney Carlson, while still employed by the
plaintiff Everen Securities (1) created a customer data base from which the defendant A.G.
Edwards could generate letters notifying Carlson’s customers of his change in employment to
A.G. Edwards; (2) made photocopies of documents containing customer account information;
and (3) extended offers of employment on behalf of A.G. Edwards to Everen employees. These
actions supported a finding that Carlson breached his fiduciary duty to Everen. Id. at 276; see
also ABC Trans National Transport, Inc. v. Aeronautics Forwarders, Inc., 90 Ill. App. 3d 817,
826-28 (1980) (employees breached fiduciary duty by actively promoting interests of rival
business and diverting personnel and customers to employer’s competitors).
¶ 25 In corporate competition cases, an employee or agent may legitimately take certain
preparatory steps during the agency relationship so long as they do not directly conflict with the
employer or principal. “As a general rule, employees may plan, form, and outfit a competing
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corporation while still working for the employer, but they may not commence competition.”
Alpha School Bus Co. v. Wagner, 391 Ill. App. 3d 722, 736 (2009)). “In addition, absent fraud, a
contractual restrictive covenant, or the improper taking of a customer list, former employees may
compete with their former employers and solicit former customers provided there was no
demonstrable business activity before termination of their employment.” Id. Although employees
“may go so far as to form a rival corporation and outfit it for business while still employed by the
prospective competitor, an employee is held accountable for breaching his fiduciary duty to his
employer when he goes beyond such preliminary competitive activities and commences business
as a rival concern while still employed.” E.J. McKernan Co. v. Gregory, 252 Ill. App. 3d 514,
530 (1993).
¶ 26 Here, taking AMG’s allegations as true, the amended complaint alleged that Keane “was
a principal employee of AMG with wide-ranging responsibilities to those of an officer,” and that
he misappropriated for himself a corporate opportunity, the acquisition of The Mail House, a
company that competed directly with AMG. In short, this case involves an alleged usurpation of
a corporate opportunity to obtain a competing business so that the defendant could enter into
direct competition with his former employer. This case does not only involve corporate
competition, as Keane would prefer to characterize it. Here, the allegations of corporate
opportunity and corporate competition are intertwined and, thus, we examine both accordingly in
the context of the breach of fiduciary duty claim.
¶ 27 We first consider whether the amended complaint properly pled that a fiduciary duty
between Keane and AMG existed at the time in question. Generally, “[e]very person who accepts
the responsibility of acting on behalf of another is a fiduciary.” Graham v. Mimms, 111 Ill. App.
3d 751, 760 (1982). “An agency is ‘a consensual fiduciary relationship between two legal
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entities’ whereby ‘the principal has the right to control the conduct of the agent, and the agent
has the power to effect [sic] the legal relations of the principal.’ ” State Security Insurance Co. v.
Frank B. Hall & Co., 258 Ill. App. 3d 588, 595 (1994) (quoting Gunther v. Commonwealth
Edison Co., 126 Ill. App. 3d 595, 598 (1984)); see also Restatement (Third) of Agency § 1.01
(2006) (defining agency as “the fiduciary relationship that arises when one person (a ‘principal’)
manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf
and be subject to the principal’s control, and the agent manifests assent or otherwise consents so
to act”). “An employee need not be an officer or a director to be accountable since an agent must
act solely for the principal in all matters related to the agency and refrain from competing with
the principal.” E.J. McKernan, 252 Ill. App. 3d at 530. Indeed, “[w]hen a principal-agent
relationship is present, a fiduciary relationship arises as a matter of law.” Stathis v. Geldermann,
Inc., 295 Ill. App. 3d 844, 859 (1998) (citing State Security Insurance, 258 Ill. App. 3d at 595).
The fiduciary owes a duty of loyalty to the entity for whom the fiduciary is acting. Graham, 111
Ill. App. 3d at 761 (citing Dick v. Albers, 243 Ill. 231, 236 (1909)). “Among other factors, the
precise nature and intensity of the duty of loyalty depends upon the degree of independent
authority exercised by the fiduciary [citation] and the reasonable expectations of the parties at the
beginning of the relationship.” Id.
¶ 28 In this case, AMG pled that Keane served as a key employee upon his resignation. Keane
allegedly “held himself out to third parties as an AMG owner when developing customer
relationships.” He “had substantial responsibility for AMG employment decisions, including
hiring and termination of staff.” AMG alleged that Keane had access to all AMG books and
records, including client lists, employee records, tax documents, and vendor information. He
received a compensation bonus equivalent to the director and majority shareholder of the
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company. He was responsible for developing and maintaining AMG’s financial records. In
addition, Keane was expected to research and develop strategic acquisitions, including the
purchase of competing lettershop businesses, their equipment, and customer lists. Finally, AMG
alleged that at the time of his resignation, Keane owned a 35% shareholder stake in the company.
¶ 29 Even if Keane is not considered to be an officer or director of AMG, his considerable
duties and responsibilities as an employee, his compensation, and his status as a minority
shareholder put him in the position to act solely for the benefit of the principal in all matters
connected with his agency. In Anest v. Audino, 332 Ill. App. 3d 468, 476-77 (2002), the court
found that the counterdefendant Bill Anest was more than a minority shareholder in a close
corporation – he had management responsibilities in the company. “His role in the entity was,
like that of his fellow members, akin to that of an officer or director in a corporation.” Id. at 477.
The Anest court held that it was against the manifest weight of the evidence for the circuit court
to conclude that Anest did not owe any fiduciary duty to the counterplaintiff David Audino. Id.
Simply put, when “employees continue to receive substantial salaries and continue to take part in
top-level management meetings, negotiations and strategy discussions, their employer is entitled
to their undivided loyalty and their utmost good faith.” Regal-Beloit Corp. v. Drecoll, 955 F.
Supp. 849, 864 (N.D. Ill. 1996) (applying Illinois and Wisconsin law). Following Anest and
Regal-Beloit, we conclude that the amended complaint properly pled the existence of a fiduciary
duty between AMG and Keane. Anest, 332 Ill. App. 3d at 477; Regal-Beloit, 955 F. Supp. at 864.
¶ 30 However, Keane argues that the corporate opportunity doctrine as pled in the amended
complaint applies to officers and directors, but not employees and, therefore, AMG did not
properly plead a breach of fiduciary duty. Our supreme court’s holding in Mullaney belies that
contention.
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¶ 31 In Mullaney, the supreme court specifically held that even though the defendant, Barnard
Savage, was just an employee, and not an officer or director, he still had a duty under standard
agency doctrine “to act solely for the benefit of the plaintiff [employer] in all matters connected
with his agency and to refrain from competing with the plaintiff.” 78 Ill. 2d at 546. The plaintiff
employer, Mullaney, Wells and Company (Mullaney), was engaged in underwriting corporate
securities that included the occasional creation of investments on its own account (“two-party
transactions”) and acting, for a fee, as a broker between businesses in need of funds and potential
investors (“three-party transactions”). Id. at 547. While employed by Mullaney, Savage learned
of the undervalued stock of Blossman Hydratane Gas and contacted Blossman about procuring
financing for the company – an example of a three-party transaction. When the proposed
financing failed to materialize, Savage and S.C. Williams, a person with whom Savage had
invested in other deals, offered to buy Blossman’s stock in the gas company – a two-party
transaction. After Savage and Williams bought the Blossman shares, Mullaney sued them for an
accounting and to impose a constructive trust on the proceeds stemming from the Blossman
transaction. The appellate court found that Mullaney had told Savage that he could engage in
transactions on his own account to supplement his income and concluded that Mullaney rarely
purchased stock for its own benefit. Thus, Mullaney did not expect to be provided by its
employees with stock purchase opportunities.
¶ 32 The supreme court disagreed, holding that Savage, while still remaining an employee of
Mullaney, could not “ ‘begin to act on his own’ ” because the ultimate transaction differed from
those in which the plaintiff normally engaged. Id. at 549.
“To accord Savage the option of substituting himself as the investing party
without the consent of the plaintiff is to place himself in a position where his
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personal interests will conflict with his duties to the principal. The situation is in
principle indistinguishable from that of a real estate broker engaged to sell
property owned by his principal who, without full disclosure of all material facts,
acquires an interest in the property himself.” Id.
¶ 33 More recently, the supreme court reaffirmed the holding that employees, as well as
officers and directors, owe a duty of loyalty to their employer. See Lawlor, 2012 IL 112530, ¶ 69
(citing Mullaney, 78 Ill. 2d at 546-47 and E.J. McKernan Co., 252 Ill. App. 3d at 530).
Accordingly, we reject Keane’s argument that the corporate opportunity doctrine does not apply
to employees of a company. The amended complaint adequately pled that Keane, both as a mere
“employee” and, more importantly, in his duties similar to that of an officer or director, owed a
fiduciary duty to AMG. Mullaney, 78 Ill. 2d at 546-47; Anest, 332 Ill. App. 3d at 477.
¶ 34 Next, we determine whether AMG properly pled a breach of fiduciary duty under the
corporate opportunity doctrine. First, we consider whether AMG sufficiently pled the existence
of a corporate opportunity, because if no opportunity existed, the fiduciary cannot commit a
breach of duty in availing himself of the opportunity. Then the question becomes whether AMG
sufficiently pled Keane’s misappropriation of the alleged opportunity.
¶ 35 “A corporate opportunity exists when a proposed activity is reasonably incident to the
corporation’s present or prospective business and is one in which the corporation has the
capacity to engage.” Dremco, Inc. v. South Chapel Hill Gardens, Inc., 274 Ill. App. 3d 534, 538
(1995). In determining whether the fiduciary may take advantage of a business opportunity in
which a corporation is interested, “courts consider whether the corporation had an interest, actual
or in expectancy, in the opportunity and whether the acquisition thereof by the [fiduciary] would
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hinder or defeat plans and purposes of the corporation in carrying on or developing the legitimate
business for which it was created.” Id. Significantly,
“[w]hen a corporation’s fiduciary wants to take advantage of a business
opportunity which is in the corporation’s line of business, the fiduciary must first
disclose and tender the opportunity to the corporation, notwithstanding the fact
that the fiduciary may have believed that the corporation was legally or
financially incapable of taking advantage of the opportunity.” Id. at 542.
Our supreme court has stated:
“[I]f the doctrine of business opportunity is to possess any vitality, the corporation
or association must be given the opportunity to decide, upon full disclosure of the
pertinent facts, whether it wishes to enter into a business that is reasonably
incident to its present or prospective operations. If directors fail to make such a
disclosure and to tender the opportunity, the prophylactic purpose of the rule
imposing a fiduciary obligation requires that the directors be foreclosed from
exploiting that opportunity on their own behalf.” (Emphasis added.) Kerrigan v.
Unity Savings Ass’n, 58 Ill. 2d 20, 28 (1974).
¶ 36 The amended complaint alleged that Keane and Hermann discussed The Mail House in
the summer and fall of 2013 “and whether it was a viable acquisition target.” The amended
complaint alleged that The Mail House “was known to AMG as a competitor,” and that it
“provided comparable products and services to the same type of clientele that AMG had serviced
and cultivated.” AMG alleged, “[t]hough Hermann is unaware of when Keane ultimately began
his own discussions about buying The Mail House, the business was one that AMG had explored
acquiring.” The amended complaint alleged that “[a]t no point in 2015 did Keane disclose to
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Hermann or AMG that he sought to acquire The Mail House. Nor did Keane ever advise
Hermann or AMG that the prior owners of The Mail House were interested in selling their
business to a third party.” Finally, the amended complaint pled that “[h]ad Keane brought The
Mail House acquisition opportunity to AMG, AMG would have been interested in pursuing it.”
¶ 37 Taking the pleadings as true, as we must, AMG has sufficiently pled the existence of a
corporate opportunity, namely, the acquisition of The Mail House, a competing business. AMG
properly pled that The Mail House was in the same “line of business” as AMG because it
provided comparable products and services to the same clientele as AMG. Id.
¶ 38 Under Kerrigan, when a corporate opportunity within the same line of business arises,
the corporate fiduciary must fully disclose and timely tender the opportunity to the corporation.
Id. Keane argues that AMG “has pleaded itself out of court by expressly alleging that Keane
disclosed and discussed The Mail House acquisition opportunity” with AMG. According to
Keane, those allegations establish that he satisfied any possible duty owed to AMG. Further,
Keane contends that because he informed AMG of the alleged opportunity and AMG declined to
pursue it, he was free to pursue the opportunity himself. See id. at 27-28 (“It may be conceded
that if a corporation has been informed by a director of a business opportunity, which it declines,
the director may then be free to pursue the opportunity himself.”).
¶ 39 In this case, however, AMG did not allege in its amended complaint that it declined to
pursue the acquisition of The Mail House. Instead, AMG specifically claimed that it would have
pursued the acquisition of The Mail House if Keane had disclosed the opportunity. The amended
complaint alleged that Keane and Hermann discussed whether The Mail House was a viable
acquisition target in 2013. AMG alleged that Keane never disclosed that he sought to acquire
The Mail House. He also purportedly failed to disclose that the prior owners of The Mail House
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were interested in selling their business to a third party. In short, the pleadings reveal that Keane
allegedly failed to fully disclose the pertinent facts involving the corporate opportunity to acquire
The Mail House, a business that was reasonably incident to AMG’s present operations. Id. at 28.
¶ 40 Moreover, Illinois law requires more than disclosure and tender of the corporate
opportunity. The Mullaney court specifically held that a fiduciary cannot begin to act on his own
“without the consent” of the principal because otherwise, the fiduciary places himself “in a
position where his personal interests will conflict with his duties to his principal.” (Emphasis
added.) 78 Ill. 2d at 549. Similarly, the court in Regal-Beloit issued an injunction against the
defendants, employee-fiduciaries who secretly sought to purchase the same business as their
employer. 955 F. Supp. at 864. The Regal-Beloit court held that:
“the Individual Defendants’ failure to disclose any and all facts relevant and
material to Regal-Beloit’s pursuit of Brad Foote – including Ward’s and Iglar’s
refusal to deal with Regal-Beloit, Brad Foote’s business concerns with Regal
Beloit’s original purchase offer, and the Individual Defendants’ desire and efforts
to acquire Brad Foote on their own account – prior to exploiting that ‘corporate
opportunity’ likely constitutes a breach of their own fiduciary duties of loyalty
and good faith to Regal Beloit.” Id.
¶ 41 Further, a fiduciary’s disclosure of his intent to pursue an opportunity for himself does
not by itself free the fiduciary to pursue the opportunity. See Patient Care Services, S.C. v. Segal,
32 Ill. App. 3d 1021, 1031 (1975) (rejecting the defendant’s argument that once he gave notice
of his intent to pursue the corporate opportunity, “he is ipso facto free to contest with the
corporation the business opportunity”). Indeed, in circumstances where the fiduciary attempts to
seize the business opportunity away from the corporation, which manifested its desire to retain it,
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“the mere fact that such [fiduciary] has announced his intention in advance to throw down the
gauntlet and do battle with his corporation over the opportunity will not constitute good faith.”
Id. at 1032. In Lindenhurst, 154 Ill. App. 3d at 71, the court found the defendant breached his
fiduciary duties to the plaintiff corporation by competing with the plaintiff and taking an
opportunity belonging to the plaintiff for himself. The court concluded that the defendant
“cannot use the fact that he originally disclosed the opportunity to plaintiff, who then made a low
initial offer, to excuse his breach of fiduciary duties in taking the opportunity for himself.” Id. at
70.
¶ 42 Based on these findings, we reject Keane’s argument that his disclosure of the potential
acquisition of The Mail House excused him from his fiduciary duty. The amended complaint
alleges that Keane failed to disclose he was interested in pursuing the acquisition of The Mail
House himself. Under Mullaney and Kerrigan, Keane was required to disclose all the pertinent
facts surrounding the acquisition of The Mail House, including his own personal interest, and
obtain AMG’s consent before pursuing the opportunity himself. 78 Ill. 2d at 549; 58 Ill. 2d at 28.
Taking the allegations as true, we find AMG sufficiently pled a breach of fiduciary duty.
¶ 43 We also reject Keane’s argument that he was permitted to take the preparatory steps of
outfitting a competing business. AMG pled that it remained interested in acquiring The Mail
House and Keane, in direct conflict with that interest, allegedly negotiated for and purchased The
Mail House while still employed by AMG. The pleadings also allege he went beyond mere
preparation. For example, he allegedly solicited James, Jr. to resign from AMG and join him at
The Mail House, misappropriated referrals for existing lettershop work sent to AMG,
misappropriated client samples, and disabled AMG’s website. Taken as a whole, AMG
sufficiently pled that Keane’s conduct violated the rule that an agent (or employee) may not
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compete with his principal (or employer) concerning matters within the scope of this agency (or
employment) for purposes of usurping a corporate opportunity. Mullaney, 78 Ill. 2d at 549.
¶ 44 Finally, we find AMG adequately pled that Keane’s alleged breach proximately caused
injury to AMG. The amended complaint alleged that Keane usurped the corporate opportunity of
acquiring The Mail House and, since that acquisition, he has solicited and served customers of
AMG with his competing company. AMG seeks the imposition of a constructive trust on The
Mail House business to be held for the benefit of AMG.
¶ 45 The circuit court erred in granting Keane’s section 2-615 motion to dismiss as to count I
of the amended complaint. We find that AMG properly alleged a claim for breach of fiduciary
duty against Keane.
¶ 46 Tortious Interference With Prospective Economic Advantage
¶ 47 Next, AMG argues that count II of its amended complaint properly alleged that Keane’s
misappropriation of The Mail House opportunity constituted tortious interference with
prospective economic advantage. To state a claim for tortious interference with prospective
economic advantage, a plaintiff must show “(1) the existence of a valid business relationship or
expectancy; (2) knowledge of the relationship or expectancy on the part of the interferer; (3) an
intentional and malicious interference inducing or causing a breach of termination of the
relationship or expectancy; and (4) resultant damage to the party whose relationship has been
disrupted.” Small v. Sussman, 306 Ill. App. 3d 639, 648 (1999). “A plaintiff states a cause of
action only if he alleges a business expectancy with a specific third party as well as action by the
defendant directed toward that third party.” Associated Underwriters of America Agency, Inc. v.
McCarthy, 356 Ill. App. 3d 1010, 1020 (2005). “A claim of intentional interference ‘must set
forth facts which suggest that defendant acted with the purpose of injuring plaintiff’s
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expectancies.’ ” Kapotas v. Better Government Ass’n, 2015 IL App (1st) 140534, ¶ 80 (quoting
J. Eck & Sons, Inc. v. Reuben H. Donnelley Corp., 213 Ill. App. 3d 510, 515 (1991)).
¶ 48 In this case, taking the pleadings as true, AMG alleged the existence of a valid business
expectancy in that Hermann and Keane had discussed whether The Mail House was a viable
acquisition target and that AMG had remained interested in acquiring The Mail House. AMG
alleged that Keane had knowledge of the expectancy, as he discussed the potential acquisition
with Hermann as early as 2013. As discussed more fully above, the amended complaint alleged
facts showing that Keane acted with the purpose of injuring AMG’s expectancies in that he
usurped a corporate opportunity for his own benefit and to the detriment of AMG. In discussing
the scope and nature of Keane’s fiduciary duties, numerous factual questions exist regarding his
conduct prior to his resignation from AMG. His acquisition of The Mail House terminated
AMG’s alleged expectancy to acquire the same business. Finally, AMG alleged that it incurred
damages from Keane’s actions in the form of customers who defected to The Mail House after
Keane acquired it.
¶ 49 Accordingly, we find AMG sufficiently pled a claim for tortious interference with
prospective economic advantage. We find the circuit court erred in dismissing count II of the
amended complaint.
¶ 50 CONCLUSION
¶ 51 We reverse the judgment of the circuit court and remand the cause for further
proceedings.
¶ 52 Reversed and remanded.
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