259 F.3d 587 (7th Cir. 2001), 00-3021, MN Mining & Manufacturing Co. v. Pribyl

Docket Nº:00-3021 & 00-2972
Citation:259 F.3d 587
Party Name:MINNESOTA MINING & MANUFACTURING COMPANY, PLAINTIFF-APPELLEE, CROSS-APPELLANT, v. RONALD PRIBYL, JAMES HARVEY, THOMAS SKRTIC, AND ACCU-TECH PLASTICS, INCORPORATED, DEFENDANTS-APPELLANTS, CROSS-APPELLEES.
Case Date:July 25, 2001
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit
 
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259 F.3d 587 (7th Cir. 2001)

MINNESOTA MINING & MANUFACTURING COMPANY, PLAINTIFF-APPELLEE, CROSS-APPELLANT,

v.

RONALD PRIBYL, JAMES HARVEY, THOMAS SKRTIC, AND ACCU-TECH PLASTICS, INCORPORATED, DEFENDANTS-APPELLANTS, CROSS-APPELLEES.

Nos. 00-3021 & 00-2972

IN THE UNITED STATES COURT OF Appeals, FOR THE SEVENTH CIRCUIT

July 25, 2001

        Argued May 11, 2001

        Rehearing Denied August 20, 2001.

        Appeals from the United States District Court for the Western District of Wisconsin. No. 99 C-0265-S--John C. Shabaz, Judge.

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        Before Flaum, Chief Judge, and Bauer and Evans, Circuit Judges.

        Flaum, Chief Judge.

        The Minnesota Mining and Manufacturing Company ("3M") produces and markets a product known as carrier tape. When the company discovered that three of its employees had formed Accu-Tech Plastics ("Accu-Tech") to manufacture and market resin sheeting, the essential component of carrier tape, 3M brought suit. After dismissing certain 3M claims pursuant to Accu-Tech's summary judgment motion, the case proceeded to trial. The jury ultimately determined that Accu-Tech had misappropriated trade secrets from 3M and that Accu-Tech's founders had breached duties of loyalty owed to 3M. Following trial, the district court overturned some of the jury's find ings of liability, upheld other findings, and granted 3M's request for a permanent injunction barring the disclosure (but not the use) of the trade secrets which the jury found Accu-Tech had misappropriated. When final judgment was entered below, the parties filed cross-appeals challenging decisions made by the district court throughout the litigation. For the reasons stated herein, we affirm the district court's decisions as they pertain to Accu-Tech's issues on appeal. As for 3M's claims of error, we affirm in part, and reverse and remand in part the decisions of the district court.

        I. BACKGROUND

        Since 1986, 3M has manufactured and sold carrier tape through its Surface Mount Supplies Division. Carrier tape, which is used to transport sensitive electronic components, is made principally from a thin layer of plastic called resin sheeting into which pockets are molded to fit the components to be transferred. 3M also manufactures the resin sheeting necessary to produce carrier tape. However, 3M, preferring the higher profit margins that attend to the sale of carrier tape, does not vend resin sheeting in the open market (except to its foreign subsidiaries).

        Three individuals who were integral to 3M's development and production of resin sheeting and carrier tape were Ronald Pribyl, Thomas Skrtic, and James Harvey. Pribyl, who began working for 3M in 1989 as its Manager of Manufacturing for North America, supervised the production of all of 3M's resin sheeting and carrier tape in North America. Skrtic, an employee of

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3M's Surface Mount Supplies Division from 1986, was the primary developer of 3M's resin sheeting manufacturing process. Finally, Harvey, who worked as 3M's quality supervisor, was the principal author of a series of 3M manuals documenting the operating, training, and quality control procedures for producing resin sheeting and carrier tape.

        In 1996, 3M announced that it was moving its carrier tape business from Menominee, Wisconsin to Hutchinson, Minnesota. For a variety of reasons, Pribyl, Skrtic, and Harvey did not wish to relocate to Minnesota. Thus, in 1997, the trio, while still under the employ of 3M, formed Accu-Tech. Accu-Tech manufactures and sells resin sheeting to various companies, including those who use the product to manufacture carrier tape. However, Accu-Tech itself does not produce any carrier tape. For approximately two years, Pribyl, Skrtic, and Harvey operated Accu-Tech while still working for 3M. It was not until March of 1999 that their clandestine operation was discovered by 3M. Upon learning of Accu-Tech's existence, 3M terminated all three individuals.

        On April 23, 1999, 3M brought a diversity suit against Pribyl, Skrtic, Harvey, and Accu-Tech, in the District Court for the Western District of Wisconsin. 3M asserted a litany of claims against Accu-Tech's founders, including breach of fiduciary duty, breach of employment contracts, and misappropriation of trade secrets. The complaint also alleged that Accu-Tech, as a corporate entity, had misappropriated trade secrets, engaged in unfair competition, tortiously interfered with prospective contractual relationships, and tortiously induced Skrtic to breach his employment contract with 3M.

        Following discovery, the parties filed cross-motions for summary judgment. On November 12, 1999, the district court granted summary judgment in favor of Accu-Tech and its founders on the breach of contract and tortious interference with contract claims. Additionally, the court granted summary judgment to the defendants on the claim for breach of fiduciary duty to the extent that it was based on alleged improper competition with 3M by Accu-Tech's founders. Finally, the district court held that 3M's unfair competition claim was indistinguishable from its claims for trade secrets misappropriation and tortious interference with contract. Thereafter, on December 7, 1999, the court granted summary judgment in favor of Accu-Tech and its founders on 3M's claim for tortious interference with prospective contractual relations.

        The case proceeded to a bifurcated trial, which commenced on December 13, 1999. On December 16, the jury returned a verdict on liability, finding that: (1) Accu-Tech's founders had each breached a duty of loyalty to 3M, (2) 3M owned four trade secrets, and (3) Accu-Tech and its founders had misappropriated or threatened to misappropriate two of those four trade secrets. The two trade secrets which the jury determined the defendants had misappropriated were (1) the operating procedures, quality manuals, training manuals, process standards, and operator notes for using plaintiff's equipment that makes resin sheeting ("op erating procedures and manuals"), and (2) customized resin formulations that enhance the sheeting and thermoforming capability of resin and give it properties needed in the electronic industry.1 The following day, the jury returned

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its findings on damages. On 3M's claim for breach of the duty of loyalty, the jury determined that Pribyl was liable in the amount of $126,875, while Harvey and Skrtic each owed 3M $46,000. The jury additionally awarded damages against Accu-Tech and its founders in the amounts of $83,000 for misappropriation of 3M's trade secret in customized resin formulations and $187,500 for misappropriation of 3M's trade secret in the operating procedures and manuals.

        Shortly thereafter, the defendants filed a motion for judgment as a matter of law or for a new trial. While that motion was pending, 3M moved for the entry of a permanent injunction. On February 9, 2000, the district court par tially granted 3M's motion, permanently enjoining the defendants from disclosing any of the four trade secrets found by the jury, and from using the two trade secrets which the jury had not found use or disclosure of. However, the court denied 3M's request for a permanent injunction against the use of 3M's customized resin formulations and operating procedures and manuals.

        On March 2, 2000, the district court granted, in part, defendants' motion for judgment as a matter of law. The court partially overturned the jury's verdict, ruling that the defendants were not liable for misappropriating 3M's trade secret in its customized resin formulations. The court also ordered a new trial on the issue of damages for 3M's breach of loyalty claim, unless 3M accepted a remittitur. Rather than face a new trial on damages, 3M accepted the remittitur. On July 20, 2000, the district court entered its final judgment.

        Discontented with various decisions below, the parties have now filed cross-appeals in this court. For their part, defendants argue three points of error. First, they assert that 3M failed to offer any evidence that any specific information within the scope of 3M's trade secret in the operating procedures and manuals was actually secret to 3M or used or disclosed by the defendants. Thus, defendants argue that the district court erred in not granting them judgment as a matter of law on 3M's misappropriation claim regarding those items. Secondly, defendants argue that the district court's order permanently enjoining them from disclosing to any third party 3M's operating procedures and manuals is overly vague, and thus violates Fed. R. Civ. P. 65(d). Finally, they put forth that the district court erred in admitting excerpts from 3M's business conduct manual dealing with an employee's operation of a business that is in competition with any 3M business.

        For its part, 3M suggests four points of error. First, 3M argues that the district court erred in granting Accu-Tech summary judgment on 3M's claim that Accu-Tech had tortiously interfered with defendant Skrtic's employment contract. Second, 3M contends that the court similarly erred in granting Accu-Tech summary judgment on 3M's unfair competition claim against the company. Third, 3M asserts that the district court erred in overturning the jury's finding that the defendants had misappropriated 3M's trade secret in its customized resin formulations. Finally, 3M claims that the district court erred in denying the company a permanent injunction against defendants' use of 3M's trade secrets that the jury found had been misappropriated.

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        II. DISCUSSION

        A. Accu-Tech's Issues...

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