Am. Consol. Indus. v. Blasingim
| Decision Date | 15 December 2022 |
| Docket Number | 1:19-cv-137,5:17-cv-2253 |
| Parties | AMERICAN CONSOLIDATED INDUSTRIES, INC., et al., Plaintiffs, v. CHAD BLASINGIM, et al., Defendants. MONARCH STEEL COMPANY, INC., Plaintiff, v. JAMES EDWARD MCCRACKEN, et al., Defendants. |
| Court | U.S. District Court — Northern District of Ohio |
What began as a relatively straightforward trade-secret dispute in connection with a former employee's decision to work for a competitor has grown into complicated and interrelated proceedings raising the prospect of discovery sanctions and contempt. Because of the time and technical expertise required to manage and oversee the parties' investigation of the facts necessary for resolution of these serious issues (Blasingim ECF No. 116; McCracken ECF No 37), the Court appointed a Special Master (Blasingim ECF No. 122; McCracken ECF No. 43).
Based on her management of the proceedings and her review of the record and the parties' respective positions, the Special Master recommends that the Court hold Liberty Steel Products one of the Defendants in the McCracken matter (Case No. 5:17-cv-2253), in civil contempt and find that Liberty Steel engaged in sanctionable discovery conduct in the Blasingim case (No. 1:19-cv-137). (Blasingim ECF No. 166, PageID #4939; McCracken ECF No. 75, PageID #3082.) She also recommends various remedial measures and sanctions to address the misconduct she details in her Report and Recommendation. (Blasingim ECF No. 166, PagelD #4939-40; McCracken ECF No. 75, PageID #3082-83.)
After the parties filed objections and motions to adopt or modify the Special Master's Report and Recommendation, the Court held oral argument. At the argument, counsel for the parties agreed that the Court could and should resolve the issues without an evidentiary hearing. With the benefit of the parties' briefing and argument, the Special Master's Report and Recommendation, and careful consideration of the serious issues raised on the complicated record presented, the Court turns to resolution of all pending motions, objections, and other issues. In doing so, the Court limits its role to determining the facts relevant to the issues of discovery sanctions, contempt, and any remedy, mindful that a jury in the Blasingim case will ultimately decide the facts, including whether Plaintiffs have trade secrets.
Rule 53 provides that the Court “must decide de novo all objections to findings of fact made or recommended by a master.” Fed.R.Civ.P. 53(f)(3). The Rule “requires de novo review only of objections to the findings of fact included in the Master's Report”-not the entirety of the master's report and recommendation. Quantum Sail Design Grp., LLC v. Jannie Reuvers Sails, Ltd., 827 Fed.Appx. 485, 491 (6th Cir. 2020). In reviewing objections to a master's findings of facts, a court operates with “respect and a tacit presumption of correctness,” but “assumes the ultimate responsibility for deciding all matters.” Id. at 491 (cleaned up). Similarly, the Court “must decide de novo all objections to conclusions of law made or recommended by a master.” Fed.R.Civ.P. 53(f)(4). With respect to procedural matters, however, the Court “may set aside a master's ruling . . . only for an abuse of discretion.” Fed.R.Civ.P. 53(f)(5).
When acting on the Special Master's report and recommendation, the Court “may adopt or affirm, modify, wholly or partly reject or reverse, or resubmit to the master with instructions.” Fed.R.Civ.P. 53(f)(1). In this respect, the ultimate decision rests with the Court and must be its own. See Quantum Sail Design Grp., 827 Fed.Appx. at 491. Against this standard of review of the Special Master's Report and Recommendation, the Court makes two notes at the outset. First, in this ruling, the Court endeavors to prepare a single document including the relevant background for the benefit of the parties, the Sixth Circuit, and any members of the public who might review these proceedings. Second, addressing the parties' objections and motions in response to the Special Master's Report and Recommendation requires handling some matters in an order that might appear not to make the most sense logically or procedurally. But the Court has done its best to keep such instances to a minimum and to make this ruling as complete and accessible as practicable.
Based on the record before the Court, including the Special Master's Report and Recommendation, the Court makes the following findings of fact. Additionally, resolution of some legal matters the parties raise requires a detailed factual discussion best handled with those legal issues. In those instances, which the Court tries to keep to a minimum, the Court's findings of fact appear in the discussion of its conclusions. In making its findings, the Court is mindful and emphasizes that these findings are made only for purposes of resolving the particular motions and issues pending before it-unless expressly stated otherwise.
Liberty Steel processes “coated, cold rolled, and hot rolled steel and provides a variety of state-of-the-art stamping and blanking services.” (Blasingim ECF No. 166, PageID #4940 (referencing Liberty Steel's website); McCracken ECF No. 75, PageID #3083 (same).) The company has its headquarters in North Jackson, Ohio. (Id.)
Monarch Steel Company, Inc. is a subsidiary of American Consolidated Industries. (Id.) Monarch Steel “is one of the country's largest providers of hot rolled, cold rolled and galvanized steel product.” (Id. (referencing Monarch Steel's website).) Like Liberty Steel, Monarch Steel has its headquarters in Northeast Ohio, but it also has service centers in Alabama, Kentucky, and elsewhere in Ohio. (Id.) Liberty Steel and Monarch Steel are competitors. (Id.)
In the McCracken case, Monarch Steel averred that it hired James McCracken in 2012 as an account manager. (McCracken ECF No. 1, ¶ 9, PageID #3.) His responsibilities included sales and customer support for new and existing customers. (Id.) Monarch Steel alleged that Mr. McCracken left the company by September 11, 2017 and then went to work for Liberty Steel. (Id., ¶¶ 15 & 16, PageID #5.) When he did so, Monarch Steel alleged that he pursued at least three of its customers using confidential information from Monarch Steel. (Id., ¶¶ 17 & 18.)
B.1. The Southern Strategy
As the Special Master reports (Blasingim ECF No. 166, PageID #4940; McCracken ECF No. 75, PageID #3083), beginning in 2017, Liberty Steel sought to compete against Monarch Steel and others in the southeastern United States through the acquisition of Mississippi Steel Processing, LLC (Blasingim ECF No. 177, PageID #6857; McCracken ECF No. 78, PageID #3665). Further, the Special Master states that Liberty Steel Steel. (Blasingim ECF No. 166, PageID #4940; McCracken ECF No. 75, PageID #3083.) Primarily, Mr. McCracken worked with customers in Northeast Ohio. (Blasingim ECF No. 175-1, PagelD #6490-91; McCracken ECF No. 77-1, ¶ 6, PageID #3345-46.) According to Liberty Steel's briefing to the Special Master, “Liberty did not hide the fact that it was specifically interested in doing business with MTD, Monarch's largest customer, as well as other potential customers in the region.” (Blasingim ECF No. 177, PageID #6857; McCracken ECF No. 78, PageID #3665.)
Although Liberty Steel's counsel references this episode as part of the company's “Southern Strategy” (id.), Liberty Steel objects to the Special Master's use of the term in connection with her discussion of Liberty Steel's hiring of Mr. McCracken at the beginning of her factual account of the background resulting in these proceedings. (Blasingim ECF No. 159, PagelD #4841-42; ECF No. 68, PagelD #2984-85.) The Court OVERRULES this objection for two reasons. First, whether Liberty Steel hired Mr. McCracken as part of its Southern Strategy or not, the factual discussion to which Liberty Steel objects has little to do with the issues before the Court in these proceedings. Second, nothing about this background discussion in the Special Master's Report and Recommendation undermines her conclusions or recommendations.
About six weeks after Mr. McCracken left Monarch Steel, on October 24, 2017, Monarch Steel filed a complaint against Mr. McCracken, JIMMYMAC, LLC (his company), and Liberty Steel (Case No. 5:17-cv-2253). Monarch Steel alleged that, before Mr. McCracken left the company, he emailed himself confidential and proprietary trade secret information from Monarch Steel's computer system, including “volume and pricing structure details pertaining to significant customer and vendor agreements.” (McCracken ECF No. 1, ¶¶ 14 & 41, PageID #5 & 9.) Further, Monarch Steel alleged that Mr. McCracken “attempt[ed] to ‘wipe' all traces of his illegal conduct from his computer.” (Id., ¶ 14, PageID #5.) Monarch Steel sought damages for misappropriation of trade secrets and tortious interference with its business relationships along with injunctive relief. (Id., ¶¶ 20-45, PagelD #6-10.)
In the end, Mr. McCracken worked for Liberty Steel only for “a few months.” (Blasingim ECF No. 175-2, ¶ 3, PageID #26502; McCracken ECF No. 77-2, ¶ 3, PageID #3357.) In his brief time with the company, he remained an independent contractor, did not have a physical office or desktop computer with Liberty Steel, and made only one sale. (Id.)
B.3. Settlement and the...
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