Does Merely "Preparing to Compete" Constitute Unlawful Competition?
A high-profile no-compete case currently pending in Chicago may turn on whether merely “preparing to compete” constitutes “engaging in” contractually prohibited business activities. The case was brought by Citadel Investment Group LLC against several former employees who left to help start a rival firm. Citadel alleges, among other things, that the former employees are in breach of their no-competes with Citadel.
The former Citadel employees responded to Citadel’s lawsuit by filing a Motion to Dismiss in which they argue that they are not “engaged in” prohibited activities (and therefore not in violation of their no-competes) because their new entity has yet to actually open for business. Their argument is premised on a line of Illinois cases holding that it is not a breach of fiduciary duty for a current employee to prepare to compete with his or her employer, so long as no actual competitive activities are undertaken. The former Citadel employees argue that if it is not a breach of fiduciary duty for a current employee to prepare to compete, then they, too, ought to be able to prepare to compete without being found to have engaged in wrongful competition.
Stay tuned for Citadel’s response.
