UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

GUARANTEED RATE, INC.,

Plaintiff,

v.

GREG THOMAS, 

Defendant.

No. 20 CV 3288

Judge Manish S. Shah

MEMORANDUM OPINION AND ORDER

While employed by Guaranteed Rate Inc., Greg Thomas accepted a position 

with GRI’s competitor, CrossCountry Mortgage, recruited employees to join CCM, 

and allegedly took confidential information, before resigning from GRI. Thomas now 

works at CCM with another colleague he recruited from GRI. GRI claims that 

Thomas breached his contract and fiduciary duties. For the reasons stated below, 

Thomas’s motion to dismiss is denied. 

I. Legal Standard

A complaint must contain a short and plain statement that plausibly suggests 

the violation of a legal right. Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 

U.S. 544, 556–58 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 677–80 (2009). At the motion 

to dismiss stage, I accept the plaintiff’s factual allegations as true and draw all 

reasonable inferences in its favor. Iqbal at 678–79. I do not accept allegations that 

are unsupported, conclusory, or legal conclusions. Id. I may consider documents 

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attached to the complaint and documents that are referenced in and central to its 

claims. Reed v. Palmer, 906 F.3d 540, 548 (7th Cir. 2018).

II. Facts 

Guaranteed Rate Inc., a residential mortgage company, hired Greg Thomas as 

a branch manager. [1] ¶¶ 7–9.1 Thomas’s duties included soliciting customers, 

recruiting salespeople, and strengthening business operations. [1] ¶ 12. To achieve 

these goals, GRI trusted Thomas with confidential information, including the 

identities of top-performing employees, hiring criteria, training techniques, pricing 

and cost structure, information about potential clients, and detailed client records. 

[1] ¶¶ 13–14. GRI also made substantial investments in Thomas’s branch and 

expended significant money, time, and resources to hire employees to grow its 

business and strengthen its reputation. [1] ¶¶ 8, 10. 

Thomas’s employment agreement contained a clause prohibiting the misuse of 

confidential information and a non-solicitation clause that prevented Thomas from 1) 

soliciting employees to join him in a different business venture and 2) supervising, 

managing, or overseeing the work of any former GRI employee, during Thomas’s 

employment and for two years after leaving the company, unless the company 

approved such a request. [1] ¶¶ 15, 17; [1-1] at 14–15. Under the non-solicitation 

clause, Thomas had to pay $50,000 in liquidated damages for each instance of noncompliance. [1-1] at 15. This payment would not relieve him of any other obligation 

1 Bracketed numbers refer to entries on the district court docket. Referenced page numbers 

are from the CM/ECF header placed at the top of documents.

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or amount owed under the contract. [1-1] at 15. The contract also contained a 

modification clause, allowing a court to modify any provision deemed unenforceable, 

and a separate clause that stated all of the terms were “reasonable in all respects” 

and “necessary to protect legitimate business and competitive interests.” [1] ¶ 18; [1-

1] at 16–17. 

While employed at GRI, Thomas accepted a salesperson position with a 

competitor, CrossCountry Mortgage. [1] ¶ 19. Before leaving, Thomas attempted to 

poach GRI employees, in part to improve his standing with CCM. [1] ¶ 21. Thomas 

asked at least two other GRI employees to join him, and facilitated a discussion 

between one of them and CCM’s CEO. [1] ¶¶ 20, 22–27. As a part of his pitch, Thomas 

falsely suggested that many employees were leaving GRI to go work for CCM. [1] 

¶¶ 23, 28.2 About a month later, Thomas took a screenshot of his year-to-date 

numbers and those of a few other GRI employees and sent it to his personal email 

address. [1] ¶ 30. A few weeks later, Thomas resigned from GRI. [1] ¶ 31. In his 

resignation letter, Thomas asked to take his client list, other information deemed 

eligible for release, and another GRI employee to CCM, which GRI denied. [1] ¶ 32.

The next day, that same employee left GRI to go work on the same team as Thomas 

at CCM, at an office located in the same geographic area as the GRI branch. [1] ¶¶ 33–

34. GRI filed this lawsuit against Thomas, alleging breach of contract and breach of 

2 The two employees Thomas solicited did not join CCM. [1] ¶ 29.

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fiduciary duty for joining a competitor, soliciting GRI employees, and taking 

confidential information. [1].3 

III. Analysis

The enforceability of a restrictive covenant, like a non-solicitation clause, is a 

question of law. Reliable Fire Equipment Co. v. Arredondo, 2011 IL 111871, ¶ 12.4

Because restrictive covenants are restraints on trade, the terms of the covenant must 

be reasonable to be enforceable. Id. ¶ 16.5 A covenant is reasonable if it 1) is no 

3 GRI is pursuing similar claims against three other GRI employees. See Memorandum 

Opinion and Order, ECF No. 33, Guaranteed Rate Inc. v. Wilson, No. 20-CV-1663, 2020 WL 

4736395 (N.D. Ill. August 14, 2020) (denying defendant’s motion to dismiss); [22-1] and [22-

2] (state court orders denying defendant’s motion to dismiss in Guaranteed Rate Inc. v. Harry 

Richter, No. 2020 L 371 (Ill. Cir. Ct. June 30, 2020)). 

4 The court has subject-matter jurisdiction under 28 U.S.C. § 1332 because GRI is a citizen 

of Delaware and Illinois, Thomas is a citizen of Indiana, and the amount in controversy 

exceeds $75,000 because GRI alleges at least three instances of non-solicitation (costing 

$50,000 each) and litigation costs and fees. [1] ¶¶ 3–5. A federal court sitting in diversity 

applies the choice-of-law rules of the state in which it sits to determine what substantive law 

applies. Gunn v. Continental Casualty Company, 968 F.3d 802, 808 (7th Cir. 2020). Illinois 

courts apply Illinois law unless a difference in law affects the outcome of the case or the 

parties agree that forum law does not apply. Id. (citing Bridgeview Health Care Center, Ltd. 

v. State Farm Fire & Cas. Co., 2014 IL 116389, ¶ 14 and Belleville Toyota, Inc. v. Toyota 

Motor Sales, U.S.A., Inc., 199 Ill.2d 325, 351 (2002)). For contract disputes, Illinois courts 

honor contracting parties’ choice-of-law provision unless an exception applies. See Belleville 

Toyota, Inc., 199 Ill.2d at 351. Here, the employment agreement contained an Illinois choiceof-law provision and an exception does not apply. [1-1] at 17. Illinois law governs the parties’ 

breach of contract dispute. The parties also agree Illinois law applies. [22] at 4, n.1. 

5 Before considering whether a restrictive covenant is reasonable, the court must determine 

whether the covenant is ancillary to a valid contract and supported by adequate 

consideration. McInnis v. OAG Motorcycle Ventures, Inc., 2015 IL App (1st) 142644, ¶ 26; 

Mohanty v. St. John Heart Clinic, S.C., 225 Ill.2d 52, 68 (2006). To be ancillary, “[t]he 

covenant must be subordinate to the contract’s main purpose.” Abel v. Fox, 274 Ill.App.3d 

811, 814 (4th Dist. 1995). The main purpose of GRI’s contract with Thomas was to establish 

Thomas’s compensation package and benefits, and the non-solicitation provision was 

subordinate to that purpose. See [1-1]. Thomas also worked at GRI for over two years, [1] 

¶¶ 9, 31, which constitutes adequate consideration. See McInnis, 2015 IL App (1st) 142644, 

¶ 27; see also Bankers Life and Casualty Company v. Miller, 2015 WL 515965, at *3–4 

(N.D.Ill. 2015). 

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greater than required to protect an employer’s legitimate business interest; 2) does 

not impose undue hardship on the employee; and 3) is not injurious to the public. Id.

at ¶ 17. The court must evaluate the totality of the circumstances to determine 

reasonableness. Id. at ¶¶ 16, 42. For example, whether a legitimate business interest 

exists depends on various factors, including the near-permanence of customer 

relationships, the employee’s acquisition of confidential information through his 

employment, and time and place restrictions. Id. ¶ 43.6 The specific facts and 

circumstances of a particular case matter because “the same identical contract and 

restraint may be reasonable and valid under one set of circumstances, and 

unreasonable and invalid under another set of circumstances.” Id. ¶ 42 (citation 

omitted). Because reasonableness is such a fact-intensive inquiry, only in extreme 

cases will a court find a restrictive covenant invalid on its face. See Bankers Life and 

Casualty Company v. Miller, 2015 WL 515965, at *5 (N.D.Ill. 2015) (motions to 

dismiss are not the appropriate vehicle to decide fact-intensive issues) (collecting 

cases). 

Thomas’s argument—that covenants that prohibit the solicitation of “any” 

employee when the employer is a large corporation are unenforceable as a matter of 

law—is wrong. Sometimes courts have enough information at the motion to dismiss 

stage to reach that conclusion, and sometimes they do not.7 Here, there is insufficient 

6 Undue hardship is about whether the restrictions unreasonably limit the employee’s ability 

to work elsewhere. See Mohanty v. St. John Heart Clinic, S.C., 225 Ill.2d 52, 76–77 (2006). A 

covenant is injurious to the public when it violates the public policy of the state. Id. at 69.

7 Compare Atkore International v. Fay, 2018 WL 6248767, at *3 (N.D.Ill. 2018) (concluding 

at the motion to dismiss stage that a customer non-solicitation clause was unreasonable 

because it included prospective customers and customers with whom the employee never had 

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information to make a reasonableness determination. Thomas argues GRI is a large 

corporation without submitting any evidence, like an affidavit, about the actual size 

of GRI. The allegations in the complaint do not indicate the number of employees 

hired by GRI or the company’s geographical scope.8 There is also insufficient 

information about the length of the restriction. See Lawrence and Allen, Inc. v. 

Cambridge Human Resource Group, Inc., 292 Ill.App.3d 131, 139 (2nd Dist. 1997) 

(the court could not determine whether a two-year restriction was reasonable because 

the record contained no evidence regarding how long it took the plaintiff to acquire a 

client or obtain a project). Here, GRI alleges it expended substantial time, money, 

and resources to develop its employees, [1] ¶ 8, so a two-year ban may be reasonable. 

I cannot draw inferences in Thomas’s favor at this stage in the litigation. See Iqbal

at 678–79. Finally, while Illinois courts may be reluctant to enforce customer nonsolicitation clauses, Cambridge Engineering, Inc. v. Mercury Partners 90 BI, Inc., 378 

Ill.App.3d 437, 455 (1st Dist. 2007), Thomas fails to present any evidence or argument 

that GRI’s protectable interest in its customers is analogous to GRI’s protectable 

interest in its employees. At this stage of the case, the restrictions placed on Thomas’s 

any contact), with Pactiv Corp. v. Menasha Corp., 261 F.Supp.2d 1009, 1014–15 (N.D.Ill. 

2003) (concluding at the summary judgment stage that the employee non-solicitation clause 

was unreasonable because of the size of the company, which included more than 100 

subsidiaries and affiliates across the globe), and Pampered Chef v. Alexanian, 804 F.Supp.2d 

765, 770 (N.D.Ill. 2011) (ruling at the preliminary injunction stage after an evidentiary 

hearing that the employee non-solicitation clause was unreasonable based on the size of the 

sales force, which was approximately 60,000 individuals). 

8 For example, based on the allegations in the complaint, it would be an inference in Thomas’s 

favor, one that I cannot draw at this stage, to conclude that GRI hired janitors who fell within 

the scope of the employee non-solicitation clause.

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activities may have been “narrowly tailored to protect only against activities that 

threaten” GRI’s interests. Id. at 452 (citation and quotation omitted). Thomas cannot 

skip the necessary factual development to determine reasonableness. While Thomas’s 

legal arguments may prevail, his motion to dismiss GRI’s breach of contract claim is 

denied.9 

GRI also states a claim for breach of fiduciary duty under Illinois law. Under 

Illinois law, fiduciary duties extend to employees. Lawlor v. North American Corp. of 

Illinois, 2012 IL 112530, ¶ 69. During employment, an employee may plan to compete 

with his employer but cannot commence competition or entice co-workers away. 

Alpha School Bus Co., Inc. v. Wagner, 391 Ill.App.3d 722, 736 (1st Dist. 2009) (citation 

9 Because I do not reach the question of enforceability, I need not reach the issue of 

modification. However, to the extent the parties brief the issue again at a later stage, they 

should address whether the requested modification is a major or minor change, since Illinois 

courts are circumspect in their modification. See Cambridge Engineering, Inc. v. Mercury 

Partners 90 BI, Inc., 378 Ill.App.3d 437, 456–57 (1st Dist. 2007). The greater the deficiencies, 

the less likely a court will modify a restrictive covenant because “that would be tantamount 

to fashioning a new agreement” and “could have the potential effect of discouraging the 

narrow and precise draftsmanship which should be reflected in agreements.” Lee/O’Keefe 

Ins. Agency, Inc. v. Ferega, 163 Ill.App.3d 997, 1007 (4th Dist. 1987). I also need not reach 

the issue of whether the liquidated damages provision is an unenforceable penalty, since I 

have yet to determine whether there was a breach. Nevertheless, if the parties brief this issue 

again, they should address whether a flat amount of $50,000 for each instance of noncompliance ignores the severity of each breach, based on the different activity the covenant 

restricts regardless of the outcome and the covenant’s application to “any” employee. See XCO 

Intern. Inc. v. Pacific Scientific Co., 369 F.3d 998, 1004 (7th Cir. 2004) (“if a contract provides 

that breaches of different gravity shall be sanctioned with equal severity, it is highly likely 

that the sanction specified for the mildest breach is a penalty”) (collecting cases). The parties 

should also address whether the liquidated damages provision in Thomas’s contract included 

actual damages. Compare H & M Driver Leasing Services, Unlimited, Inc. v. Champion 

Intern. Corp., 181 Ill.App.3d 28, 30–31 (1st Dist. 1989) (the covenant stated that the company 

agreed to pay liquidated damages “plus” actual damages, which was an unenforceable 

penalty), with [1-1] at 15 (the non-solicitation clause in Thomas’s agreement stated that 

“[y]our payment of such liquidated damages will not relieve you of any other obligation or 

amounts” owed under the agreement), and [1] at 7 (the complaint states GRI seeks 

“compensatory damages in an amount in accord with the proofs” for breach of contract). 

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omitted); ABC Trans Nat. Transport, Inc. v. Aeronautics Forwarders, Inc., 90 

Ill.App.3d 817, 824 (1st Dist. 1980). GRI alleges that while employed, Thomas 

actively attempted to recruit employees for CCM and successfully convinced one 

employee to leave. [1] ¶¶ 20–22, 27, 32–34. Thomas also took allegedly confidential 

information. [1] ¶ 30.10 Drawing all reasonable inferences in GRI’s favor, these 

actions suggest Thomas went beyond planning and started competing against GRI 

while employed. After termination, former employees may compete with their former 

employer absent fraud, a contractual restrictive covenant, or the improper taking of 

a customer list, provided there was no demonstrable business activity before their 

termination. Alpha School Bus Co., Inc., 391 Ill.App.3d at 736. At this stage in the 

pleadings, GRI has sufficiently alleged a restrictive covenant, business activity before 

Thomas’s resignation, and the improper taking of information. [1-1] at 14–15; [1] 

¶¶ 20–22, 27, 30, 32–34. Thomas’s motion to dismiss GRI’s fiduciary duty claim is 

denied.11

10 Thomas’s argument that the production levels of loan officers amount to general knowledge 

and information, see System Development Services, Inc. v. Haarmann, 389 Ill.App.3d 561, 572 

(5th Dist. 2009) (general knowledge and skills that employees acquire through experience is 

not confidential information), and that the screenshot only contained production level data, 

require inferences that cannot be drawn here. For now, it is reasonable to infer that because 

Thomas took a screenshot and went to work for a competitor, [1] ¶¶ 30–32, the information 

he took was confidential and misused.

11 Under Illinois’s choice-of-law rules, Illinois courts apply the internal affairs doctrine, a 

conflict-of-law principle that recognizes that only one state—the company’s state of 

incorporation—should govern matters relating to the corporation’s internal governance. See 

CDX Liquidating Trust v. Venrock Associates, 640 F.3d 209, 212 (7th Cir. 2011) (citing Newell 

Co. v. Petersen, 325 Ill.App.3d 661,686–89 (2nd Dist. 2001)). GRI is incorporated in Delaware. 

[1] ¶ 3. The parties did not appear to consider whether Delaware law should apply under 

Illinois’s application of the internal affairs doctrine and whether the outcome under Delaware 

law might be different. Under Delaware law, only key managerial employees owe fiduciary 

duties. See Triton Const. Co., Inc. v. Eastern Shore Elec. Services, Inc., 2009 WL 1387115, at 

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IV. Conclusion 

The amended motion to dismiss, [20], is denied. The original motion to dismiss, 

[17], is terminated as moot. Defendant shall answer the complaint by November 24, 

2020, and the parties may proceed with discovery. The parties must submit a joint 

status report with a proposed schedule for discovery completion and an update on the 

progress of discovery by Novmber 30, 2020. 

ENTER:

___________________________

Manish S. Shah

United States District Judge

Date: November 3, 2020

*10 (Del.Ch. 2009). However, fiduciary relationships may arise through principles of agency. 

Id. at *11 (an agent has a duty to refrain from placing himself in a position antagonistic to 

his principal). Illinois law does not limit fiduciary duties to key managerial employees, but 

an employee’s duty to a company may resemble a principal-agency relationship. See Corroon 

& Black of Illinois, Inc. v. Magner, 145 Ill.App.3d 151, 160 (1986). For purposes of deciding 

the motion to dismiss, I apply Illinois law on fiduciary duties, but at a later stage, the parties 

may need to brief whether Delaware law ought to apply.

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