Page 31 - John Hundley 2014

Focus on Contract Law

Sharp Thinking

No. 122 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. November 2014

Extra Burdens Apply For Breach Of Confidentiality Agreement

A plaintiff claiming breach of a confidentiality agreement cannot merely rely on the existence of such
an agreement and its breach, the U.S. Court of Appeals for the Seventh Circuit has held.

Ruling in nClosures Inc. v. Block & Co., __F.3d __, 2014 WL 5359725 (7th Cir.
2014), the court said that under Illinois law such a plaintiff also must show that “the
information sought to be protected is actually confidential and reasonable efforts
were made to keep it confidential.”

In nClosures, the parties had signed a confidentiality agreement at the onset of
their business relationship, but additional confidentiality agreements were not
required of individuals who accessed design files; design drawings were not
marked as confidential or proprietary; and drawings were not kept under lock and
key or in a computer with limited access. “These facts show that nClosures did not engage in reasonable
steps to protect the confidentiality of its proprietary information, and therefore that the confidentiality
agreement with Block is unenforceable,” the court said.

Piercing Corporate Veil Difficult In Contract Cases

Quoting Tower Investors, LLC v. 111 E. Chestnut Consultants, Inc., 371 Ill.App.3d 1019 (2007), the
Appellate Court’s First District has emphasized that the law imposes “stringent” standards when courts
are asked to pierce corporate veils in breach-of-contract cases.

Noting that in other contexts courts will pierce corporate veils where (1) a unity of interest and
ownership appears so strong that the separate personalities of the corporation and the parties who
compose it no longer exist, and (2) adhering to the fiction of a separate corporation would promote
injustice or inequitable circumstances, the panel said that in contract cases “additional compelling facts” –
such as a finding of fraud – “may also be required.” Saletech, LLC v. East Balt, Inc., 2014 IL App (1st)
132639.

“The reason is that a party seeking relief for a breach of contract presumably entered into the contract
with the corporate entity voluntarily and knowingly and expecting to suffer the consequences of the limited
liability status of the corporate form,” the court stated.

Contractual Venue Clause Enforced

Where one party to a prospective contract places a choice-of-venue clause into the contract and the
other party acquiesces, the former “freely and voluntarily waive[s] any objection” to the latter’s exercise of
venue discretion granted by the subject clause, a panel of the Appellate Court in Chicago has ruled.

Acting in Saba Software, Inc. v. Deere & Co., 2014 IL App (1st) 132381, the panel seemed to
distinguish prior authority where the clause at issue hadn’t been suggested by the later-objecting party.

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Sharp Thinking is an occasional newsletter of The Sharp Law Firm, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp
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