API Americas Inc. v. Miller

• Decision Date: 05 April 2019
• Docket Number: Case No. 2:17-cv-02617-HLT
• Parties: API AMERICAS INC., Plaintiff, v. Paul W. MILLER, Defendant.
• Court: U.S. District Court — District of Kansas

380 F.Supp.3d 1141

API AMERICAS INC., Plaintiff,

v.Paul W. MILLER, Defendant.

Case No. 2:17-cv-02617-HLT

United States District Court, D. Kansas.

Signed April 5, 2019

Jennifer M. Hannah, Lathrop Gage, LLP, Kansas City, MO, Mark A. Samsel, Lathrop Gage, LLP, Overland Park, KS, for Plaintiff.

Richard W. Martin, Jr., Law Firm of Martin & Wallentine, LLC, Olathe, KS, Curtis N. Holmes, for Defendant.

MEMORANDUM AND ORDER

HOLLY L. TEETER, UNITED STATES DISTRICT JUDGE

Plaintiff API Americas Inc. filed this action alleging that a former employee, Defendant Paul Miller, misappropriated its trade secrets in an attempt to lure away business to a direct competitor. Currently before the Court are the parties' dueling motions for summary judgment. Plaintiff seeks summary judgment on two counts—Count V for violation of the federal Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 ("DTSA"), and Count VI for violation of the Kansas Uniform Trade Secrets Act, K.S.A. §§ 60-3320, et seq. ("KUTSA")—and on its prayer for attorney's fees under these statutes. Doc. 47. Defendant, in turn, moves for summary judgment on all twelve claims asserted by Plaintiff in this action.¹ Doc. 50.

The majority of the facts in this case are stipulated by the parties and, for the following reasons, the Court finds those facts entitle Plaintiff to relief on its claims for liability under the DTSA and the KUTSA. However, the Court finds a genuine issue of fact exists regarding whether Defendant "willfully" and "maliciously" misappropriated Plaintiff's trade secrets and, accordingly, denies Plaintiff's request for summary judgment on its statutory fee claim. The Court further denies Defendant's competing motion for summary judgment.

I. BACKGROUND²

A. Defendant's Employment with Plaintiff

Plaintiff is a global designer, manufacturer, and distributor of "hot stamping foils" and other products. Doc. 46 at ¶¶ 2-3. Plaintiff's products are used across a variety of industries, although the greeting card and gift wrap industries traditionally comprise one of Plaintiff's largest customer bases. Id. at ¶¶ 3-4.

Defendant started working for Plaintiff in June 2007 as a Customer Service Representative and, at the time of his resignation in September 2017, held the position of Technical Service and Account Manager. Id. at ¶ 9. Although based at Plaintiff's facility in Lawrence, Kansas, Defendant had VPN access to Plaintiff's network enabling him to work from home. Id. at ¶ 6; Doc. 48 at 11 ¶ 50; Doc. 57 at 11 ¶ 50. In his role as a Technical Service and Account Manager, Defendant both provided technical knowledge of Plaintiff's products—by supplying information regarding how the foil is applied and assisting with quality control—and interfaced with Plaintiff's clients by managing outflow of trial samples, evaluating complaints and coordinating follow up, and assisting at trade shows. Doc. 46 at ¶ 9. Defendant therefore admits that, through his position with Plaintiff, he gained:

• Access and knowledge concerning Plaintiff's quality information related to testing and customers;

• Access and knowledge concerning the software used by Plaintiff to store and maintain customer information;

• Access and knowledge concerning customer sales history and personal sales results;

• Access and knowledge concerning Plaintiff's base price list and guidelines for all existing and prospective customers;

• Access and knowledge concerning relative profitability of Plaintiff's product lines;

• Access and knowledge stemming from his participation in meetings in which strategies were discussed and evaluated including sales and operations functions; and

• Access and knowledge concerning Plaintiff's future investments for current and prospective projects.

Id. at ¶ 10. Defendant further admits this information constitutes significant confidential and proprietary information and trade secrets of Plaintiff. Id.

As such, during his employment, Defendant entered into a written Employee Confidentiality, Non-Solicitation and Non-Competition Agreement ("Agreement") with Plaintiff governing the use and disclosure of such information. Id. at ¶ 11. Pursuant to the Agreement, Defendant manifested his understanding that Plaintiff's business "depends on its unique technology, manufacturing processes, marketing strategies, customer and prospective customer relationships, and products, potential products and its business models and strategies" and that Plaintiff "spends substantial time, money and effort in identifying its customers, learning their business needs, and designing[,] manufacturing and distributing products to meet those needs." Id. at ¶ 12. Defendant further acknowledged that, through his employment, he would gain valuable information and knowledge concerning Plaintiff's business and the business of its customers and, were he to use that information and knowledge to compete with Plaintiff, Plaintiff would be "severely and irreparably injured." Id. The issues raised in this action primarily implicate three components of the Agreement: (1) the non-disclosure provisions, (2) the non-competition provisions, and (3) the non-solicitation provisions.

1. Non-Disclosure Provisions

Section 1 of the Agreement governs the disclosure of so-called "confidential information" and "confidential documents"—i.e., information and documents in which Plaintiff or, sometimes, its customers have a proprietary interest. Id. at ¶¶ 15-17. Pursuant to Section 1(b) of the Agreement, Defendant agreed, in pertinent part, that he would not disclose, use, or provide any of the confidential information or documents—either during his employment or at any time thereafter—for his own benefit or for the benefit of any third party. Id. at ¶ 20. Under Section 1(c) of the Agreement, Defendant further agreed that he would not remove confidential information or documents from Plaintiff's premises without prior consent. Id. at ¶ 21. Defendant also agreed that, immediately upon termination of his employment, he would return all confidential information and documents to Plaintiff. Id. at ¶ 22.

2. Non-Competition Provisions

Section 2 comprises the Agreement's non-competition provisions. Pursuant to Section 2(a), Defendant agreed that, during his employment, he would not, without express prior written consent of Plaintiff, "compete or make preparations to compete in any way, directly or indirectly," with Plaintiff in the hot stamping foils business. Id. at ¶ 23. Defendant also agreed he would not "consult with ... any business[,] firm, partnership[,] corporation, or other entity ... which competes with [Plaintiff], in any way, directly or indirectly, in the hot stamping foils business or any other business in which [Plaintiff] is engaged." Id. This non-competition provision was also extended one year beyond the date of termination of Defendant's employment by virtue of Section 2(c), which further provides that Defendant "will not consult with, provide services to, be employed by or have any interest in any business, firm, partnership, corporation or other entity" that competes with Plaintiff. Id. at ¶ 24.

3. Non-Solicitation Provisions

Finally, Section 3 contains the Agreement's non-solicitation provisions. Pursuant to these provisions, Defendant agreed in pertinent part that, for one year following the date of his termination of employment with Plaintiff, he would not "directly or indirectly contact, induce, entice or in any way attempt to solicit the hot stamping foils business of any of [Plaintiff's] customers." Id. at ¶ 25. Defendant agreed this prohibition is "reasonable and necessary to protect the legitimate interests of [Plaintiff]" and, further, "that his violation of any of these covenants will result in immediate, irreparable and substantial harm to [Plaintiff] and its business." Id. at ¶ 27. To that end, Defendant further agreed Plaintiff is entitled to preliminary and permanent injunctive relief and any other remedies available to enforce the non-solicitation provisions and recover damages for their breach. Id.

B. Hallmark RFQ

In May 2017, Hallmark Cards, Inc. ("Hallmark")—one of Plaintiff's largest existing customers—notified Plaintiff it was seeking Request for Quote ("RFQ") proposals for its folio business, which business Plaintiff had previously provided. Id. at ¶¶ 5, 29. Via email dated May 12, 2017, Hallmark notified Plaintiff that responses to its RFQ would be due on August 15, 2017, with a decision made by September 15, 2017. Id. at ¶ 30. Defendant, who was serving as Plaintiff's Account Manager for Hallmark at the time, was copied on the email. Id. Defendant subsequently participated in a strategy meeting with Plaintiff's management to review the RFQ. Id. at ¶ 31. On August 15, 2017, Bob Almer—Plaintiff's Vice President of Sales and Defendant's direct manager—submitted Plaintiff's response to the RFQ. Id. at ¶ 32. Almer copied Defendant on the response, and Defendant had contributed to the response in his capacity as manager of the Hallmark account. Id.

In the weeks following the submission of Plaintiff's RFQ response, Defendant proceeded to send himself—from his business email account to his personal email account—several emails containing Plaintiff's business information:

• On August 15, 2017, Defendant forwarded from his business email account to his personal email account the email with Plaintiff's RFQ response and corresponding attachments. Id. at ¶ 33.

• On August 16, 2017, Defendant sent from his business email account to his personal email account "Quality" documents from Plaintiff. Id. at ¶ 34.

• On August 31, 2017, Defendant sent from his business email account to his personal email account a "Customer Information Query" from Plaintiff. Id. at ¶ 35.

Defendant concedes that each of these emails and corresponding attachments contained confidential and proprietary information of Plaintiff. Id. at ¶¶ 33-35.

On September 7, 2017, Plaintiff presented Hallmark with a Quality Improvement Plan that Defendant helped prepare to address...