3a Composites United States, Inc. v. United Indus., Inc., CASE NO. 5:14-CV-5147

CourtUnited States District Courts. 8th Circuit. Western District of Arkansas
Docket NumberCASE NO. 5:14-CV-5147
Decision Date15 September 2015


CASE NO. 5:14-CV-5147


September 15, 2015


Currently before the Court are Defendants United Industries, Inc.'s ("United") and Wesley Paulin's Motion for Summary Judgment (Doc. 68), Brief in Support (Doc. 69) and attachments thereto, and Statement of Material Facts Not In Dispute (Doc. 70); Plaintiff 3A Composites USA, Inc.'s ("3A") Response in Opposition (Doc. 78-1), Statement of Disputed Material Facts (Doc. 76-1), and Evidence in Opposition (Docs. 77, 79) and attachments thereto; and Defendants' Reply (Doc. 85). For the reasons given below, Defendants' Motion is GRANTED IN PART AND DENIED IN PART.


3A1 and United are competing manufacturers of graphic arts polystyrene display board ("Board"). 3A is headquartered in Statesville, North Carolina, and employs roughly 2,700 people. United is headquartered in Bentonville, Arkansas, and employs roughly 100 people.

One of the raw components of Board is something called "thick foam." Until nearly 2007, both 3A and United purchased thick foam from outside suppliers.

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However, at some point around a decade and a half ago, 3A began exploring the feasibility of producing thick foam in-house.

In 2005, 3A formally launched a project to develop its own thick foam production line. 3A retained an outside consultant named Ed LeDuc to help with the project. The parties disagree somewhat on the scope of Mr. LeDuc's oversight, but there is no doubt that he played a critical role in the line's development and had a significant amount of responsibility. The project development team also had members who were 3A employees—one of whom was Mr. Paulin: 3A's Product Development Manager. Mr. Paulin was the "startup manager" of this particular project.

In December 2006, 3A successfully produced its desired quality of thick foam and began selling thick foam to United. From then until 2013, 3A was United's primary supplier of thick foam. During this period, Mr. LeDuc continued providing ad hoc assistance to 3A with refinement or trouble-shooting of its thick foam line. Mr. Paulin remained employed at 3A until his resignation in December 2008.

In 2011, United began exploring the possibility of developing its own thick foam line. United's President, John Ferm, met with Mr. LeDuc several times that year and ultimately decided to retain Mr. LeDuc as a consultant for that project. Mr. LeDuc played essentially the same role in the development of United's thick foam line as he had played in the development of 3A's thick foam line, and the two foam lines were essentially identical, albeit with minor differences. In June 2012, after learning that United was developing a thick foam line, 3A issued notice to United that it was cancelling their thick foam supply agreement. In late 2012, United hired Mr. Paulin on

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Mr. LeDuc's recommendation for the position of extrusion manager. Upon his hiring, Mr. Paulin began assisting Mr. LeDuc in the development of United's thick foam line.

On February 1, 2013, United received a cease-and-desist letter from 3A, in which 3A informed United that Mr. Paulin owed a duty of confidentiality to 3A pursuant to a contract he had signed while employed there ("Confidentiality Agreement"). This was the first time that United learned of the existence of Mr. Paulin's Confidentiality Agreement. 3A also asserted that Mr. LeDuc owed 3A a duty of confidentiality. 3A contended that the technology and processes associated with its thick foam line were trade secrets, and demanded that United, Mr. LeDuc, and Mr. Paulin cease their efforts at copying its thick foam line. United countered that the information at issue was neither confidential nor a trade secret, that no one was violating any legal duties, and that it would not stop developing its own thick foam line. Mr. Paulin remains employed in the same role at United today.

On May 31, 2013, 3A initiated this lawsuit by filing its Complaint (Doc. 1) in the United States District Court for the Western District of North Carolina, alleging breach of contract against Mr. Paulin, tortious interference with contract against United, and misappropriation of trade secrets and deceptive trade practices against both Mr. Paulin and United. 3A sought both monetary and injunctive relief. On July 9, 2013, United and Mr. Paulin filed separate Answers (Docs. 15, 17) and a Joint Motion to Change Venue (Doc. 18). Defendants' Motion to Change Venue was granted (Docs. 26, 38), and on May 15, 2014, venue was transferred to this Court.

3A filed its Amended Complaint (Doc. 51) on October 1, 2014, setting forth essentially the same causes of action as were in its original Complaint, but with citations

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to Arkansas law where applicable. Defendants filed their Answer (Doc. 55) on October 14, 2014. On December 19, 2014, Defendants filed their Motion for Summary Judgment on all counts. (Doc. 68). That Motion has now been fully briefed and is ripe for decision.


"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court must view the facts in the light most favorable to the non-moving party, and give the non-moving party the benefit of any logical inferences that can be drawn from the facts. Canada v. Union Elec. Co., 135 F.3d 1211, 1212-13 (8th Cir. 1997). The moving party bears the burden of proving the absence of any material factual disputes. Fed. R. Civ. P. 56(c); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nat'l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602 (8th Cir. 1999).

If the moving party meets this burden, then the non-moving party must "come forward with 'specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587 (quoting Fed. R. Civ. P. 56(c)). These facts must be "such that a reasonable jury could return a verdict for the nonmoving party." Allison v. Flexway Trucking, Inc., 28 F.3d 64, 66 (8th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). "The nonmoving party must do more than rely on allegations or denials in the pleadings, and the court should grant summary judgment if any essential element of the prima facie case is not supported by specific facts sufficient to raise a genuine issue for trial." Register v. Honeywell Fed. Mfg. & Techs., LLC, 397

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F.3d 1130, 1136 (8th Cir. 2005) (citing Celotex Corp v. Catrett, 477 U.S. 317, 324 (1986)).

A. Choice of Law

Although venue was transferred to this Court under 28 U.S.C. § 1404(a) from the Western District of North Carolina, see Doc. 38, this Court must nevertheless apply the same state law that would have been applied by the original transferor court, which must be identified by looking to North Carolina's choice-of-law rules. See Van Dusen v. Barrack, 376 U.S. 612, 639 (1964); Thorn v. IBM, 101 F.3d 70, 72-73 (8th Cir. 1996); Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 600 (4th Cir. 2004). Under North Carolina law, "where parties to a contract have agreed that a given jurisdiction's substantive law shall govern the interpretation of a contract, such a contractual provision will be given effect." Tanglewood Land Co., Inc. v. Byrd, 299 N.C. 260, 262 (1980). Here, the contract's choice-of-law provision explicitly invokes Missouri law (Doc. 69-16, ¶ 12); accordingly, Missouri law governs 3A's claim for breach of contract.

North Carolina's choice-of-law rules follow the lex loci delicti ("law of the place of the wrong") test to decide which state's law governs claims for tortious interference with a contract. See Synovus Bank v. Coleman, 887 F. Supp. 2d 659, 669, 673-74 (W.D.N.C. 2012). However, the rule is less clear in the context of actions that are creatures of statute, such as misappropriation of trade secrets or deceptive trade practices; there appears to be a split of authority within the North Carolina Courts of Appeals that has not been resolved by the North Carolina Supreme Court, see Stetser

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v. TAP Pharm. Prods., Inc., 165 N.C. App. 1, 14-15 (2004), as to whether the appropriate rule is lex loci delicti or the "most significant relationship" test, see, e.g., United Virginia Bank v. Air-Lift Assocs., Inc., 79 N.C. App. 315, 321-22 (1986) (declining to follow Andrew Jackson Sales v. Bi-Lo Stores, Inc., 68 N.C. App. 222, 224-25 (1984), which applied the "most significant relationship" test, and opting instead to apply the lex loci delicti test to a claim of deceptive trade practices). In analyzing this split of authority, the Western District of North Carolina, whence the instant case was transferred, has concluded that the North Carolina Supreme Court "would apply the traditional lex loci rule rather than the most significant relationship test" in a deceptive trade practices case. United Dominion Indus., Inc. v. Overhead Door Corp., 762 F. Supp. 126, 129 (W.D.N.C. 1991). Three years ago, the Eastern District of North...

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