IP Law Daily, TRADE SECRETS—N.D. Ill.: Competitor could have misappropriated accounting diligence firm’s confidential information, (May 27, 2025)

By Steven Melendez

Firm’s pleadings adequately described asserted trade secrets, alleged acquisition of those secrets from former employees, and resulting damage.

Two related companies that provide financial and accounting diligence services and asset appraisals for commercial lenders can go forward with federal and Illinois state-law claims for trade secret misappropriation against a competing business that employed two of its former staffers, the federal district court in Chicago has determined. Hilco Diligence Services, LLC and Hilco Valuation Services, LLC, adequately pleaded that after two former employees, Mark Stevens and Michael Baiocchi, left Hilco and began working at Sikich, LLC, a competitor, they gave their new employer trade secret information owned by Hilco, which Sikich allegedly used to the detriment of Hilco (Hilco Diligence Services, LLC v. Sikich, LLC, No. 1:25-cv-01002 (N.D. Ill. May 21, 2025)).

Hilco was in the business of performing financial diligence and asset appraisal services for commercial lenders. The company alleged that the two ex-employees took their new jobs at Sikich in violation of non-compete clauses in their employment agreements. Hilco sued Sikich alleging trade secret misappropriation under the federal Defend Trade Secrets Act and the Illinois Trade Secrets Act, as well as tortious interference with the two workers' employment contracts.

Hilco also alleged that Baiocchi sent Hilco trade secret information to Sikich employees and his personal email account while he was still working at Hilco. “This trade secret information included Hilco’s workbooks, field exam reports, engagement letters, testing trackers, field exam outlines, an information request list, a contact list, a cash management overview, and project lists, among other things,” the court explained.

Sikich sought to dismiss the claims, arguing that Hilco didn't sufficiently plead that relevant documents were trade secrets, that Sikich used an additional set of documents, that Sikich—not simply Baioicchi—misappropriated any trade secrets, or that Hilco was damaged by any misappropriation.

Existence of trade secrets. Sikich argued that Hilco didn't allege the information in question was a trade secret, only that it was “confidential,” in its complaint. But the court found that it had sufficiently argued elsewhere in the complaint that the information was a trade secret.

Sikich also argued that the information was “standard in the industry,” as well as “easily accessible” and not sufficiently valuable to be deemed a trade secret. But the court found that on reading the complaint in the light most favorable to Hilco, the legal standard for evaluating a motion to dismiss, Hilco sufficiently alleged the information was a trade secret, arguing it spent “substantial resources” developing the information and providing detail on how it did so.

Hilco also sufficiently pleaded that it took steps to safeguard the information, the court found, despite claims by Sikich that it shared the information with customers and didn't clearly label it as secret.

“Even accepting Sikich’s arguments that the documents are not labeled as trade secrets and that Hilco disclosed them to customers without restriction, the allegations in the complaint are sufficient to allege the existence of a trade secret,” according to the court. “The protective steps Hilco alleges are not so lacking that the Court must rule at this stage that no trade secret existed.”

Misappropriation of trade secrets. Hilco sufficiently pleaded that Sikich acquired the alleged trade secrets, the court found. Hilco alleged Baiocchi sent secrets to Stevens at his work address and continued sending him Hilco trade secrets even after Baiocchi himself was working for Sikich. One text message with alleged trade secrets also included the text “I wasn't going to email this” with a laughing emoji, according to the ruling. That was sufficient to allege Sikich acquired the trade secrets through Stevens, an employee, and through him knew Baiocchi was breaching his duty to keep them secret.

Damage to Hilco. Sikich argued that Hilco didn't sufficiently plead that it was damaged by the alleged misappropriation. But the court found that Hilco's claims that it suffered “actual misappropriation of Hilco’s trade secrets, injury and harm to its goodwill, business reputation, and competitive position, and the loss and expenditure of significant legal and other fees and expenses to conduct its investigation and remediate harm” were sufficient.

Use of trade secrets. Seventh Circuit caselaw holds that under the Illinois Trade Secret Act, a plaintiff must allege that the defendant actually used the trade secrets. The court found that Hilco had sufficiently alleged such use by Sikich, pointing to evidence that Baiocchi said the secrets could be used in pricing and Stevens' positive response indicating they'd discuss the information and reaching out to relevant potential customers, along with Hilco's claims that Baiocchi at Sikich created variants of the secrets.

Tortious interference. The court also allowed Hilco's tortious interference claim to stand with regard to Baiocchi's contract, pointing to Hilco claims that make it “ reasonable to infer that Sikich representatives met with Baiocchi and induced him to breach his contract with Hilco to instead join Sikich.”

However, the court found the similar claim with regard to Stevens' contract didn't sufficiently allege Sikich was involved in Stevens' decision to breach his contract. The court dismissed that claim without prejudice, giving Hilco leave to amend.

The case is No. 1:25-cv-01002.

Judge: Daniel, J.

Attorneys: Patrick M. DePoy (Bryan Cave Leighton Paisner LLP) for Hilco Diligence Services, LLC. Debbie L. Berman (Jenner & Block LLP) for Sikich, LLC.

Companies: Hilco Diligence Services, LLC; Sikich, LLC

Cases: TradeSecrets IllinoisNews