A company that wanted to build gas-fired power plants in Texas can’t continue its lawsuit against two of its former employees for allegedly undercutting their development deals, because the employees’ actions didn’t ultimately completely eliminate those business opportunities, a sharply divided Illinois Supreme Court has ruled.
Dissenting Supreme Court justices, however, said the decision would allow these employees, and others like them, to sidestep consequences for allegedly attempting to seize the opportunity for themselves.
The 4-3 decision was handed down on July 29. Illinois Supreme Court Chief Justice Anne M. Burke wrote the majority opinion, in which justices Mary Jane Theis, P. Scott Neville and Michael J. Burke concurred.
David K. Overstreet
| illinoiscourts.gov
Michael J. Burke and Anne M. Burke are not related.
The decision ended a lawsuit brought by Indeck Energy Services, a Buffalo Grove company that develops and operates independent power plants.
The lawsuit was brought against former Indeck employees Christopher M. DePodesta and Karl G. Dahlstrom.
According to the decision, Indeck hired DePodesta in 2010 and Dahlstrom in 2011 to help Indeck scout out and secure new opportunities for them to develop so-called “peaker plants,” powered by natural gas in the so-called Electrical Reliability Council of Texas, which operates and manages the electrical grid for about three-fourths of the state of Texas.
Ultimately, they helped develop plans for four plants in Texas.
However, according to the case narrative contained in the Supreme Court decision, DePodesta and Dahlstrom allegedly then began to set up their own company and began to work directly with other companies to allegedly secure the opportunities for themselves.
According to the decision, DePodesta and Dahlstrom also allegedly used Indeck company resources and company information to further their efforts, and allegedly took steps to “prevent discovery of what they were doing.”
DePodesta and Dahlstrom resigned from Indeck in 2013. Upon discovering the alleged double-cross, Indeck sued its former workers.
The company specifically alleged DePodesta and Dahlstrom deliberately withheld development opportunities from Indeck and then sought to “usurp the opportunities,” allegedly costing Indeck more at least $60 million in equity in the proposed new power plants.
However, in Lake County Circuit Court, Judge Margaret A. Marcouiller ruled in favor of the former employees, finding their actions didn’t ultimately cost Indeck its Texas business opportunities.
That finding was overturned on appeal.
But the Illinois Supreme Court majority determined Marcouiller had read the law right.
The majority noted an operating agreement with a key development partner in the power plant project allowed that other company “to partner with any entity.”
The majority found the alleged actions by DePodesta and Dahlstrom did not “foreclose” on Indeck’s opportunities to try again to develop power generating turbines in that area of Texas. Neither did the employees “wrongfully appropriate for themselves the exclusive right to work … on projects in the ERCOT area.”
A contrary decision “would allow a plaintiff corporation to recover damages in a suit for usurpation of a corporate opportunity even if the corporation were able to use the opportunity itself, and even if there were no wrongful gains that could be recovered from the fiduciary,” Chief Justice Burke wrote in the majority decision.
“We can see no justification for this result.”
Three justices, however, disagreed sharply with that reasoning.
Justice David K. Overstreet authored the dissent, joined by justices Rita B. Garman and Robert L. Carter.
Overstreet noted the business opportunity presented to Indeck after DePodesta’s and Dahlstrom’s alleged actions “was not the same” opportunities for partnership Indeck had identified as “available in 2013.”
Further, Overstreet said, the majority decision will not only allow DePodesta and Dahlstrom to “evade liability” for their alleged actions, but could have ramifications far into the future in such disputes, in which other employees entrusted with sensitive information and projects by their employers may similarly choose to allegedly attempt to double-cross their employers.
“As it stands, the rule of law established by the majority will allow dishonest fiduciaries to procure opportunities for themselves and strategically contract their way out of the requirements of the corporate opportunity doctrine, thereby avoiding any consequences of usurping corporate opportunities,” Overstreet wrote.
He said in this case, Indeck wasn’t only harmed by what their former employees allegedly did, but also by what they allegedly did not do – namely disclose to Indeck the opportunity, and to seek Indeck’s consent to pursue their own business opportunity from it.
“… The appellate court concluded - and I agree - that, because there is sufficient evidence that defendants usurped a corporate opportunity, it is immaterial whether additional opportunities were or still are available to (Indeck),” Overstreet wrote.
Indeck was represented in the case by attorney Robert G. Black, of Naperville.
DePodesta and Dahlstrom were represented by attorneys Stuart P. Krauskopf and Jamie S Ritchie, of the firm of Krauskopf Kauffman P.C., of Chicago.