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Laches defense rescues competing former employee

Osler Institute v. Miller, Case No. 1-13-3899 (1st Dist. Jan. 9, 1997)

Osler Institute is a non-profit company based in Terre Huate, Indiana that helps doctors prepare for their board exams. Richard Miller worked for Osler, and allegedly setup a competing company called Nighthawk Medical Educators Ltd. while still employed at Osler, and even used Osler’s resources to compete against it.

Osler first filed suit in Cook County State Court against Miller in 2005 and the parties quickly entered a consent decree prohibiting Miller from competing with Osler or using its trade secrets. In 2006, Osler gave Miller notice that it would present a show-cause petition alleging that Miller worked for a competitor in Louisville, Kentucky offering the same course as taught by Osler using the same instructor on the same days. The Court granted the petition and sanctioned Miller $13,000.

Osler allegedly discovered that Miller violated the decree again by supposedly stealing Osler’s property and continuing to compete against it. However, Osler did nothing until shortly after the consent decree expired, when it filed suit in Indiana state court against Miller for misappropriating Osler’s confidential files and competing against it while the decree was in force. The trial court dismissed the complaint.

On appeal, the Indiana appeals court recognized that the parties had already in Cook County, Illinois and affirmed the dismissal of the trial court on res judicata. In particular, the Indiana Appellate Court noted that Osler was “aware of the newly alleged conversion almost two years before the expiration of the Illinois court’s jurisdiction to enforce the consent decree,” and that Osler could (and should) have raised its Indiana claims in the Illinois action.

Inexplicably, Osler waited another year and then refiled in Cook County. Miller raised the affirmative defense of laches in a motion to dismiss, noting that Osler waited five years after learning of the alleged violation to raise the issue. Miller further claimed that the delay prejudiced him, in that he could not secure or locate certain relevant witnesses, documents, website data, marketing materials and other critical exculpatory evidence. The circuit court granted Miller’s motion to dismiss based on laches and Osler appealed.

The 1st District affirmed, and, in particular, noted that Osler attempted to file a case in Indiana when the Cook County Circuit Court expressly retained jurisdiction to enforce the consent decree. In addition, Osler’s decision to wait a year after the Appellate Court raised affirmed the dismissal of Osler’s Indiana case was also relevant. The court concluded “that Osler lacked the required diligence in pursuing the present action.”

Interestingly, the 1st District was not particularly critical of Miller, who stood accused of misappropriating Osler’s intellectual property and using it to compete against Osler while still employed there. In particular, the Court stated that Miller was “lulled into doing that which he would not have done […] had the right been properly asserted.”

More than perhaps any recent case, this case shows that a litigant cannot stand on its rights, but must act quickly and decisively to assert those rights. If Osler had raised the issues while the consent decree was in place, it likely would have prevailed. Nonetheless, Osler apparently made a strategic decision (that the Court likely picked up on) in an attempt to effectively extend the 36 month consent decree and prevent Miller from competing with it long after the consent decree expired.

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