In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-4433

LAKEVIEW TECHNOLOGY, INC.,

Plaintiff-Appellant,

v.

ERIC ROBINSON,

Defendant-Appellee.

____________

Appeal from the United States District Court for the

Northern District of Illinois, Eastern Division.

No. 05 C 3227—Charles P. Kocoras, Chief Judge.

____________

ARGUED APRIL 3, 2006—DECIDED MAY 1, 2006

____________

Before EASTERBROOK, ROVNER, and WILLIAMS, Circuit

Judges.

EASTERBROOK, Circuit Judge. Eric Robinson was a

vice president of sales of Lakeview Technology, a vendor

of software that enables users to access their data during

system outages. Late in 2004 Robinson entered negotiations

with Vision Solutions, Inc., one of Lakeview’s competitors;

he did not inform Lakeview about this step, nor did he

inform his employer when he accepted Vision’s offer of

employment. He told Lakeview that he would be leaving but

lied about the reason. Asked point-blank about rumors that

he was going to Vision, Robinson told Lakeview that he was

doing no such thing and would instead pursue real-estate

interests after his departure. By deceiving his employer,
2 No. 05-4433

Robinson not only extended the duration of his salary but

also obtained commercially valuable information that he

could take with him. During April and May 2005, Lakeview

made its selling plans for the 2005-06 sales year; Robinson

took this information with him to Vision in the middle of

May 2005. When Lakeview learned that it had been gulled,

it filed this suit under the diversity jurisdiction.

Robinson had promised Lakeview, through his employment contract, that for a year following his departure he

would not compete with it by soliciting any of Lakeview’s

customers with which he had contact or any prospective

customer to which Lakeview had attempted to sell software

during the preceding 24 months. He also promised to hold

in confidence all of Lakeview’s trade secrets, including its

plans, pricing, and customer lists. Lakeview asked for an

injunction to ensure that Robinson kept these promises.

After Robinson told the district judge that he would limit

his efforts to places in which Lakeview had not been

promoting its software and would not solicit his old customers or let Vision in on any of Lakeview’s secrets, the court

denied Lakeview’s motion for a preliminary

injunction—without holding an evidentiary hearing to

explore the question whether Robinson is telling the truth.

Lakeview took an interlocutory appeal under 28 U.S.C.

§1292(a)(1). Discovery continues in the district court, and

the district judge has yet to set a schedule for dispositive

motions. So preliminary relief may be the only kind available for some time to come. The dispute is not moot: the

limit on using trade secrets is of indefinite duration, and

the limit on solicitation is extended if not complied with

during the year provided by the contract.

The district court gave three reasons for denying relief:

(1) The absence of proof that Robinson had solicited

Lakeview’s customers or disclosed its secrets; (2) Robinson’s

pledge not to do so in the future; and (3) the prospect of

hefty damages if he should act otherwise. The first of these
No. 05-4433 3

is inadequate as a matter of Illinois law, which controls

here. That subject is covered in Hess Newmark Owens Wolf,

Inc. v. Owens, 415 F.3d 630 (7th Cir. 2005), and the discussion need not be repeated. Injunctions issue to curtail

palpable risks of future injury; it is not essential to establish that the worst has come to pass.

The second reason is weak given Robinson’s history of

deceit. Whether an ex-employee who concedes telling

lies that serve his financial interest is continuing to dissemble, as Lakeview contends, is a question that a court may

not resolve against the employer without a hearing. See,

e.g., Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1171

(7th Cir. 1997); Medeco Security Locks, Inc. v. Swiderek, 680

F.2d 37, 39 (7th Cir. 1981). Especially when his lawyer

contends (as Robinson’s does) that he is entitled to ignore

his commitments, which at oral argument counsel called

onerous. This implies a strong temptation to disregard the

contractual promises coupled with a belief that doing so

would be justified. The risk that action will follow cannot be

called insubstantial.

The court’s final reason fails to take account of the limits

on Robinson’s wealth. The judge wrote that, if Robinson

fails to honor his contractual obligations, “the damage could

be very large, given the nature of the industry involved and

the length of the revenue-generating relationship with

customers” but could be calculated, so that a financial

remedy would be adequate. Ability to calculate damages

does not make that remedy adequate, however, if the

plaintiff cannot collect the award. A judgment-proof defendant is not deterred by the threat of money damages, so

some other remedy (such as the contempt power) may be

essential. Nothing in the record suggests that Robinson

would be good for “very large” damages. He could provide assurances via a bond or a letter of credit—and if

Vision is confident that it has in place controls to prevent

Robinson from violating his promises to Lakeview, then
4 No. 05-4433

Vision should be willing to pledge its credit to induce a

commercial surety to stand behind Robinson’s obligation.

But neither Robinson nor Vision (which is not a party, and

which therefore cannot be ordered to pay from corporate

funds) has offered to provide the sureties that would

make damages a potentially adequate remedy for the

potentially “very large” injuries that Robinson can inflict on

Lakeview.

The balance of equities is so lopsided that Lakeview is

entitled to injunctive relief, unless Robinson demonstrates

that any judgment against him can be satisfied. If, as

Robinson assured the district court, he plans to abide by all

of his commitments, then an injunction that obliges him to

keep these promises while allowing him to remain on

Vision’s payroll costs him nothing: the costs of false

positives are nil. (Any slight risk can and should be ameliorated by an injunction bond under Fed. R. Civ. P. 65(c). See

Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883,

amended, 209 F.3d 1032 (7th Cir. 2000).) But an injunction

can protect Lakeview from potentially substantial injury if

Robinson should yield to temptation: the costs of false

negatives are large. See generally Illinois Bell Telephone

Co. v. WorldCom Technologies, Inc., 157 F.3d 500, 503-04

(7th Cir. 1998); American Hospital Supply Corp. v. Hospital

Products Ltd., 780 F.2d 589, 593-94 (7th Cir. 1986); Lawson

Products, Inc. v. Avnet, Inc., 782 F.2d 1429, 1433-34 (7th

Cir. 1986).

Whether a bond or other surety would be a sufficient

reason to withhold injunctive relief is a question best left to

the district court. See Wolfinger v. Mueller, 165 F.2d 844

(6th Cir. 1948). Our suggestion that financial security could

be an adequate substitute for an injunction should not be

confused with the proposition, rejected in Grupo Mexicano

de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S.

308 (1999), that a district court always may require defendants to put up assets. Here the plaintiff is presumptively
No. 05-4433 5

entitled to equitable relief under the traditional formula

that considers both the probability of success on the merits

and the potential costs of judicial error. When the evaluation of relative error costs depends in large measure on the

fact that the defendant may be unable to pay damages, this

balance changes if a bond or letter of credit ensures that the

prevailing side can be compensated adequately. A “noninjunction bond” then is the flip side of an injunction bond

under Rule 65(c). Cf. 7-20 Chisum on Patents §20.04[1][g].

Until this issue has been resolved one way or the other,

however, Lakeview is entitled to a preliminary injunction

that will reduce the risks it must bear from uncertainty

about Robinson’s conduct. This is not to say, however, that

Lakeview is entitled to its fondest wish—that Robinson be

banned from working for any competitor. Sweeping relief is

inappropriate if more focused restrictions will serve.

The judgment of the district court is vacated, and the case

is remanded with instructions to craft appropriate equitable

relief with dispatch. The mandate will issue forthwith.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—5-1-06