The Seventh Circuit Court of Appeals recently considered an ancillary, yet interesting issue relating to a suit based on the Computer Fraud and Abuse Act. A former employer, International Airport Centers ("IAC") had sued its former employee, Jacob Citrin, alleging that the employee had breached his fiduciary duties to IAC when he deleted certain company data from the laptop lent to him for work use by IAC. The district court dismissed IAC's suit for failure to state a claim and on appeal the Seventh Circuit reversed and remanded the case to the district court.
Citrin subsequently filed suit in Delaware state court for advancement of money for attorneys' fees and expenses he had incurred defending himself against IAC's suit. Apparently, Citrin's employment contract required IAC to pay his expenses of defending any suit based on acts performed in connection with the company's business "in advance of the final disposition of such action." If, however, Citrin is found to have breached his fiduciary duty to IAC, there will be no indemnification and he will thus have to repay any money advanced to him by the company. Since IAC is chartered in Delaware, it concedes that Delaware law governs. Nonetheless, IAC asked the district court to enjoin him from proceeding in the Delaware suit based on a theory that the suit was a collateral attack on the Seventh Circuit's ruling that IAC has stated a claim against Citrin under the federal Computer Fraud and Abuse Act. The district court denied the preliminary injunction motion, and IAC appealed.
In affirming the district court's ruling, the Seventh Circuit held that Citrin is simply requesting an advancement of his litigation expenses in accordance with his employment contract, and his entitlement to such advancement is independent of the merits of the suit for which the money is sought. In other words, the claim for advancement is not a compulsory counterclaim to the underlying suit as it does not arise out of that litigation, but rather out of the employment contract. The Court did raise a slight concern that in filing his suit in Delaware, Citrin may have been "forum shopping," as Delaware not only permits advancement clauses but encourages them. While Citrin could have brought his advancement suit in the Northern District of Illinois without the need for separate litigation, the court, nevertheless, concluded that Delaware was also an appropriate forum as its state law governed the matter.
Comment: Maybe I am missing something since I do not specialize in employment law matters, I have not seen the employment contract provision at issue in this case, and I am not familiar with the facts in the underlying suit. I can understand a clause that requires the employer to indemnify the employee named as a defendant in a suit brought by a third party. However, I find it odd that an advancement clause would not contain an exception for those cases in which the employer itself was suing its former employee based on acts performed or breaches made in connection with the employer's business.
International Airport Centers, L.L.C., et al. v. Citrin, 2006 WL 2060425 (7th Cir., July 25, 2006).