ABC Acquisition Co. v. AIP Prods. Corp.
| Decision Date | 11 August 2020 |
| Docket Number | No. 18 CV 8420,18 CV 8420 |
| Parties | ABC ACQUISITION COMPANY, LLC, Plaintiff, v. AIP PRODUCTS CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
After leaving Aetna Bearing Company, defendant James Trauscht founded defendant AIP Products Corporation and began competing with his former employer. He also hired defendant Donald Koziel, who at the time was working for the plaintiff in this case, ABC Acquisition Company LLC. ABC says that AIP, Trauscht, and Koziel misappropriated trade secrets, breached an employment agreement and their duties of loyalty, tortiously interfered with ABC's contracts and business expectancies, and engaged in a civil conspiracy, among other allegations. The parties filed cross-motions for summary judgment seeking to resolve most (but not all) of those allegations. ABC's motion for partial summary judgment is denied and AIP and Trauscht's motion is granted as to all claims against them. ABC's substantive claims against Koziel remain.
Summary judgment is appropriate if 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 moving party must show that, after construing all of the facts and drawing all reasonable inferences in favor of the non-moving party, United States v. P.H. Glatfelter Co., 768 F.3d 662, 668 (7th Cir. 2014), no reasonable jury could return a verdict in favor of the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party is also entitled to summary judgment if the non-moving party both fails to "make a sufficient showing" on any essential element of its case and has the burden of proof for that element at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). These same rules apply equally to cross-motions for summary judgment, Blow v. Bijora, Inc., 855 F.3d 793, 797 (7th Cir. 2017), and evidence from one motion for summary judgment may be relied upon when deciding the other. Torry v. City of Chicago, 932 F.3d 579, 584 (7th Cir. 2019). Redundant, immaterial, impertinent, or scandalous matters may be struck. Fed. R. Civ. P. 12(f).
Aetna Bearing Company designs and manufactures bearings and related assemblies for agricultural, industrial, and automotive applications. [20] ¶ 1; [53-2] at 2.1 It specializes in unique, made-to-order bearings. Id. For more than eighty years,Aetna did not require its suppliers to promise confidentiality. [91] ¶ 1. By the time defendant James Trauscht joined the company,2 thousands of Aetna's drawings were already in circulation among a myriad of suppliers. [59-2] 13:23-14:1, 34:21-35:1; [82] ¶ 3; [83-1] at 2; [91] ¶ 1. Trauscht took no action to change that policy, even after becoming president. [91] ¶ 1. During his tenure, Aetna continued to purchase parts from suppliers in China without requiring that they sign non-disclosure agreements and without otherwise placing any restrictions on the ways those suppliers used Aetna's drawings. [82] ¶¶ 16-19. Trauscht's presidency ended when he left to start his own bearing company (one of the other defendants in this case), AIP Products Corporation. [82] ¶¶ 3, 6, 12-13.
One of Aetna's suppliers was Anfan Strategic Sourcing and Manufacturing Company. [82] ¶¶ 17, 20, 22. (Anfan is owned by Mike An. [82] ¶ 20.) Aetna sent Anfan manufacturing drawings for the parts it needed manufactured without ever placing any restrictions on Anfan's use or dissemination of those drawings. [82] ¶¶ 22-24, 40. Anfan also received copies of Aetna's drawings directly from Aetna's other suppliers. [82] ¶ 25.
Plaintiff ABC Acquisition Company purchased substantially all of Aetna's assets and now does business under Aetna's name. [53-2] at 2, 6 (§ 2.1), 20 (§ 4.12); [82] ¶¶ 7-8. The first sentence of the purchase agreement says that the agreement was made, "by and among ABC ACQUISITION COMPANY, LLC, a Michigan limited liability company ('Purchaser'), and AETNA BEARING COMPANY, an Illinois corporation ('Seller')." [53-2] at 2. The exact extent of the intellectual property that was sold pursuant to the asset purchase agreement is not clear because the schedule listing it is not a part of the record, but the agreement says that the missing schedule listed all of Aetna's intellectual property. [53-2] at 4 (§1.1), 20 (§ 4.12(A)). Aetna represented that it was in compliance with all laws applicable to that intellectual property, id., and that to the extent the intellectual property constituted proprietary or confidential information, Aetna had adequately safeguarded such information from disclosure. [53-2] at 20 (§ 4.12(B)(xi)).
A few weeks after the asset purchase, Khalid Beidas took over as president of ABC. [82] ¶ 11. Under Beidas, ABC continued to conduct essentially the same business as Aetna, under Aetna's name. Id. ¶ 9. It also took steps to protect itsconfidential information. It put all of its confidential information on a server, instructed its information systems team to install and maintain anti-virus systems, limited access to its confidential information to only those employees that needed it, and prohibited new suppliers from disclosing Aetna's confidential information. [77] ¶ 13.
Beidas immediately made sure that ABC was entering into non-disclosure agreements with new suppliers, but it took a few years before he and ABC went back and put in place non-disclosure agreements with existing foreign suppliers. [82] ¶ 19. The reason for Beidas's delay was that he assumed non-disclosure agreements were already in place. [95] ¶ 6; [53-4] 57:19-59:12. He based his assumption on Aetna's representation that it had adequately safeguarded its proprietary and confidential information. Id. As a result, ABC continued to use Anfan (and other suppliers) without any non-disclosure agreement in place. [82] ¶¶ 22-23, 26, 29-30; [95] ¶¶ 4-5. For the first year or so of Beidas's presidency, ABC also continued to send out drawings that were not marked as either confidential or proprietary. [82] ¶ 34. Near the end of 2016, ABC sent Anfan pricing information and drawings for part number AG5710 (which was used by one of Aetna's customers, Calmer Corn Heads) without first putting in place any non-compete or non-disclosure agreement. [82] ¶¶ 23, 41.
ABC also did not put in place written policies regarding how to treat its own trade secrets or confidential information, [82] ¶ 33, and did not place its drawings in locked drawers or cabinets (meaning that the only lock that protected those drawings was the lock that secured their whole facility). [82] ¶¶ 35-36. There was also a sharedlaptop in ABC's engineering room that was linked to a server that contained ABC's drawings. [82] ¶ 37. The password for it was written on a sticky note affixed to the keyboard. [82] ¶ 38.
Shortly after Trauscht left Aetna and founded AIP, ABC and AIP started competing for customers. [82] ¶ 15. Trauscht emailed Calmer and told them he had sold Aetna and started a new company and that his new company could save Calmer money. [77] ¶ 16; [53-6]. A few months later, Trauscht and An started exchanging texts declaring that they needed to destroy ABC. [77] ¶ 17; [53-7] at 3 (). In one series of texts, Trauscht requested that An remove a label that suggested one of the drawings had come from Aetna. [77] ¶ 18; [53-8] at 18-19 ); [53-20] (some of AIP's drawings noted, "[m]ust comply with current version of AES 1000 general purchasing requirements"). Immediately beforehand, Trauscht had written that he and An were free to remove the label because Trauscht never signed a non-compete and An never signed a non-disclosure agreement. [53-8] at 19.
Within a few years of its purchase of Aetna's assets, ABC terminated its relationship with Anfan. [82] ¶ 26. Anfan now supplies parts to AIP. Id. ¶ 27. As partof that new relationship, Anfan sent AIP and Trauscht the sales assembly drawings for part number AG5710, id. ¶¶ 43-44, and worked directly with Calmer to adapt and revise those drawings. Id. ¶¶ 45-46. Trauscht received the AG5710 drawings from Anfan—not ABC or Aetna. Id. ¶¶ 42, 47, 77.
Shortly after the asset purchase, ABC and the final defendant, Donald Koziel, entered into an employment agreement. [77] ¶ 7; [53-3] at 2. See also [53-2] at 5 (§ 1.1). That agreement prohibited Koziel from divulging, communicating, or using "to the detriment of [ABC] or for the benefit of any other Person" any of ABC's "Confidential Information or Trade Secrets." [53-3] at 7 (§ 6.3). See also [53-3] at 9 (§ 6.6) ("Person" includes individuals, corporations, limited liability companies, and other entities). Confidential information is any confidential data or information that relates to ABC's business and that does not "rise to the status" of a trade secret under law, so long as that information was disclosed through the employment relationship, had value to ABC, and was not generally known to either ABC's or Aetna's competitors. [53-3] at 8 (§ 6.6). It includes (among other kinds of information) "internal business information" (such as that "relating to ... cost, rate and pricing structures and accounting and business methods"), the "identities of [and] specific contractual arrangements with ... the suppliers, distributors, [and] customers" of ABC, "trade secrets, know-how, compilations of data and analyses, techniques, ... documentation, [and] data ... relating thereto," and ...
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