Ags Capital Corp. v. Product Action Intern.
| Decision Date | 11 April 2008 |
| Docket Number | No. 49A02-0702-CV-176.,49A02-0702-CV-176. |
| Citation | 884 N.E.2d 294 |
| Parties | AGS CAPITAL CORP., INC., AGS Capital, LLC, Scott A. Weaver, Alan G. Symons, Superior Metal Technologies, LLC, Fast Tek Group, Llc, Anthony Roark, and Chan Chanthaphone, Appellants-Defendants, Philip "Kirk" Ridenour, William R. Sewell, Ronald R. Scott, Meredith Boatright, Defendants, v. PRODUCT ACTION INTERNATIONAL, LLC, Successor to Product Action International, Inc., Appellee-Plaintiff. |
| Court | Indiana Appellate Court |
James H. Hanson, Lynne D. Lidke, Robert L. Browning, Scopelitis, Garvin, Light, Hanson & Feary Indianapolis, IN, Attorneys for Appellants AGS Capital Corp., Inc., AGS Capital, LLC, Scott A. Weaver, Alan G. Symons, Superior Metal Technologies, LLC, and Fast Tek Group, LLC.
Paul D. Ludwig, Bator, Redman, Bruner, Shive & Ludwig, P.C., Indianapolis, IN, Attorneys for Appellants Anthony Roark and Chan Chantahphone.
Julia Blackwell Gelinas, Alan S. Brown, Melanie D. Margolin, Locke Reynolds LLP, Indianapolis, IN, Attorneys for Appellee.
In this interlocutory appeal, AGS Capital Corporation, Inc., AGS Capital, LLC (collectively "AGS"), Fast Tek Group, LLC ("Fast Tek"), Superior Metal Technologies, LLC ("Superior Metal"), Alan G. Symons, Scott A. Weaver, Anthony Roark, and Chan Chanthaphone (collectively "Appellants") appeal the trial court's grant of preliminary injunction to Product Action International, LLC ("Product Action"). We affirm in part, reverse in part, and remand for further proceedings.
The Appellants raise numerous issues, which we reorder and restate as:
I. Whether Indiana's Uniform Trade Secrets Act preempts Product Action's claim under Indiana's Racketeer Influenced and Corrupt Organizations ("RICO") statute;
II. Whether the trial court's ruling that Product Action established a prima facie case that the Appellants misappropriated trade secrets was clearly erroneous;
III. Whether the trial court's ruling that Product Action established a prima facie case that the Appellees violated Indiana's RICO statute was clearly erroneous;
IV. Whether the trial court's finding that Fast Tek and AGS are "alter egos" is clearly erroneous;
V. Whether the trial court erred in concluding that Product Action would suffer irreparable harm without an injunction;
VI. Whether the preliminary injunction is overbroad; and
VII. Whether the $2000 injunction bond to be posted by Product Action is unreasonably low.
Product Action is in the business of quality control, providing sorting, inspection, rework, containment and engineering services to assist its customers in handling quality issues. Its customers are manufacturers and suppliers primarily in the automotive industry. Product Action has been in business since 1980, employs roughly three thousand individuals, and is headquartered in Indianapolis. In December of 2004, Product Action underwent a corporate reorganization that included restructuring the company as an LLC. In this process all rights from the former entity, Product Action International, Inc., were transferred to Product Action International, LLC.
Throughout its years of operation, Product Action has developed methods and processes to deliver its quality control services quickly and consistently to its customers throughout the United States and Canada. This information has been compiled over the years based on the company's experiences and innovation and is documented particularly in their Quality Management Systems ("QMS") manual. The QMS manual uses flow charts, forms, and written descriptions to depict Product Action's processes from the intake of work through billing and collections. Product Action considers this documentation confidential and has set up safeguards to protect it, such as requiring employees to sign confidentiality agreements and utilizing password protection for the network drive where the manual is stored. In addition to its QMS manual, Product Action's network drive also contains documents pertaining to its operating procedures, sales and marketing strategies, customer lists, pricing plans, sales proposals, and systems and processes.
In September of 2003, AGS Capital, LLC, purchased Fast Tek, a direct competitor of Product Action, from Phillip Grove ("Grove") for $50,000. Grove continued to work at Fast Tek as its chief operating officer and later as executive vice president of strategic planning. Alan G. Symons ("Symons") and Scott A. Weaver ("Weaver") are the owners of AGS with interests of 85% and 15% respectively. "AGS" stands for Alan G. Symons. In addition to Fast Tek, AGS also owns several other companies, including Sam's Technical Publishing ("Sam's Publishing") and Superior Metal. AGS employees regularly performed work for Fast Tek as well as the other AGS-owned companies, including IT, accounting, human resources, and sales and marketing functions.
Weaver was president of Fast Tek from August of 2003 to December of 2006.1 Symons has served as chief executive officer of Fast Tek from the time AGS acquired Fast Tek. Weaver and Symons were paid by AGS for their services rather than receiving a salary from Fast Tek. In their official capacities at Fast Tek, Weaver and Symons were involved in the day-to-day management of Fast Tek by signing checks for the company, attending management meetings, making decisions regarding personnel, collections, sales and employee performance issues.
In an effort to quickly make Fast Tek a profitable company, Symons, Weaver, and Grove discussed strategies such as acquiring and utilizing terms and conditions, forms, documents, processes, trade secrets, confidential information, business plans, and business models of their competitors. Symons regularly mentioned Product Action as a good competitor to emulate. In these conversations, it was noted that Product Action had grown quickly and had an excellent reputation in the industry. Two of Fast Tek's goals, as set by Symons, Weaver, and Grove, were to hire individuals with knowledge and experience in the industry, particularly employees of Product Action, and to acquire and utilize Product Action's business model.
On September 8, 2003, in a meeting with Grove and Chrisie Van Meter ("Van Meter"), Weaver's personal secretary, Weaver instructed Van Meter to call Product Action to request a price quotation to be sent to her for Superior Metal. The purpose of requesting the quotation was to obtain Product Action's pricing in order to set Fast Tek's pricing on its services. Van Meter did as instructed and received a quotation for Superior Metal from Product Action, passing the information on for Fast Tek's use.
In 2004, Weaver and Grove were able to convince one of Fast Tek's customers to send them a copy of Product Action's terms of service letter. Weaver directed the secretarial staff to retype the letter, replacing any reference of "Product Action" to "Fast Tek." However, one reference was not altered. For months after the revised letter was utilized and sent to customers of Fast Tek, a portion of Fast Tek's new terms of service letter read: "In no event shall Product Action's cumulative liability to the customer under these terms of services agreement exceed $5,000.00." Hearing Transcript at 709.
From January of 2000 to December of 2002, Anthony Roark ("Roark") was employed by Product Action as a member of the Quality Team that developed and improved the operational processes and procedures utilized by Product Action. In his role on the Quality Team, Roark had access to all of Product Action's information regarding its systems, methods, and processes that could only be accessed by a company issued username and password. As required of all Product Action employees, Roark signed a confidentiality and non-compete agreement.
During his employment at Product Action, Roark copied the information on Product Action's password protected network drive onto a zip drive. The QMS manual was a part of the information on the zip drive. Roark retained this zip drive after leaving the employ of Product Action.
Fast Tek hired Roark in June of 2004 as a trainer in its Michigan office. Shortly after starting his job with Fast Tek, Roark indicated to Grove that he had materials from Product Action. Grove described the content of this material as "Product Action's entire business operating system, or their quality management system." Hearing Trans. at 674. Weaver admitted at the preliminary injunction hearing that he knew Roark had Product Action documents, including the QMS manual and did not take any measures to prevent the use of those documents at Fast Tek. Soon thereafter, despite some of the documents containing labels of "confidential" and "copyrighted," Roark began e-mailing some of the materials to Grove. The documents were altered and assimilated into Fast Tek's daily operations. Eventually, it was widely known among Fast Tek employees that Roark had a library of materials from Product Action.
Within 120 days of starting with Fast Tek, Roark was promoted to vice president of operations. This promotion was based on the library of Product Action documents stored on the zip drive and Roark's ability to implement those processes within Fast Tek.
Weaver, Grove, and Roark discussed and decided to adopt processes from the Product Action QMS manual to be utilized at Fast Tek and provide the needed training to Fast Tek employees. In December of 2004, there was a Fast Tek management meeting at which managers from every branch location as well as the executive management team were present. These individuals were trained on the processes and procedures that were taken from the Product Action QMS manual provided by Roark. The documents utilized in the training were identical to those documents taken off Product Action's network drive.
Chan Chanthaphone ("Chan") worked for Product Action from September of 2002 until May of 2006 as a quality engineer. Similar to...
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