Ark. Labeling, Inc. v. Proctor
| Decision Date | 11 May 2022 |
| Docket Number | 4:19-cv-00773-KGB |
| Parties | ARKANSAS LABELING, INC. PLAINTIFF v. TIM PROCTOR, LABEL EDGE, LLC, GARY PARR, and GP LABELS UNLIMITED, LTD. DEFENDANTS |
| Court | U.S. District Court — Eastern District of Arkansas |
Before the Court is separate defendants Gary Parr and GP Labels Unlimited, Ltd.'s ("GP Labels") (collectively "Parr Defendants") motion to dismiss for lack of personal jurisdiction (Dkt. No. 77). Plaintiff Arkansas Labeling, Inc. ("ALI"), has responded in opposition to the motion (Dkt. No. 80). The Parr Defendants also submitted a reply to ALI's response (Dkt. No. 87). For the reasons set out below, the motion is denied (Dkt. No 77).
On November 1, 2019, ALI initiated this lawsuit against defendants Tim Proctor and Label Edge, LLC ("Label Edge") (collectively, "Proctor Defendants"), asserting causes of action for: (1) conversion; (2) tortious interference with a contractual relationship or business expectancy; (3) theft of trade secrets; (4) breach of fiduciary duty and duty of loyalty; (5) unauthorized computer program access and theft; (6) unauthorized access to property; (7) breach of contract; (8) Arkansas Deceptive Trade Practices Act; (9) unjust enrichment; and (10) punitive damages (Dkt. No. 2, at 9-18). The original complaint contained allegations relating to Mr. Parr, owner of GP Labels, and relating to GP Labels (See, e.g., Dkt. No. 2, ¶¶ 18-20, 26-30, 75(c), 79). ALI later filed an amended complaint restating generally the same allegations as in the initial complaint but dropping the Arkansas Deceptive Trade Practices Act claim (Dkt. No. 23).
On September 8, 2021, ALI filed a second amended complaint adding Mr. Parr and GP Labels as defendants and pleading additional facts related to these defendants (Dkt. No. 72).[1] ALI asserts the same causes of action in its second amended complaint as it pled in its amended complaint: (1) conversion; (2) tortious interference with a contractual relationship or business expectancy; (3) theft of trade secrets; (4) breach of fiduciary duty and duty of loyalty; (5) unauthorized computer program access and theft; (6) unauthorized access to property; (7) breach of contract; (8) unjust enrichment; and (9) punitive damages (Dkt. No. 72, ¶¶ 59-113).
The following facts are taken from ALI's second amended complaint as well as the affidavits and exhibits submitted with the Parr Defendants' motion and ALI's response to the Parr Defendants' motion (Dkt. Nos. 72, 77-1, 77-2, 80-1, 80-2, 80-3, 80-5, 80-6, 80-7).
ALI is an Arkansas corporation with its principal place of business in Saline County, Arkansas (Dkt. No. 72, ¶ 1). Mr. Proctor is an individual resident of Texas and the owner of Label Edge, a Texas corporation with its principal place of business in San Antonio, Texas (Id., ¶¶ 2-4). Mr. Parr is an individual resident of Texas and the owner of GP Labels, a Texas corporation with its principal place of business in San Antonio, Texas (Id., ¶¶ 5-7).
ALI alleges that Mr. Proctor and Mr. Parr secretly developed and executed a scheme to steal ALI's confidential and proprietary information to begin directly competing with ALI (Id., ¶¶ 31, 54-55). ALI alleges that the Parr Defendants knowingly assisted, encouraged, facilitated, and financed Mr. Proctor's plan to leave ALFs employ after stealing ALI's confidential and proprietary information; to create a new business in direct competition with ALI; and to further the Parr Defendants' own business interests (Dkt. No. 72, ¶¶ 29, 55, 57).
ALI is a graphic design business that has been in business since 1979 (Id., ¶ 12). It has a national and international customer base (Id.). ALI assists its customers with creating designs for the labeling of their products and with manufacturing the product labels (Id.). ALI's work covers various categories of products, including the designing, labeling, and packaging of baked goods, lunch meats, plastic bottles for beverages, firearms, cooking spices, and "almost any type of labeling one can imagine" (Id.). ALI maintains that, as a result of 40 years of quality work, time, effort, and goodwill, it has developed and maintained numerous business contacts and relationships in the labeling and packing industry (Id., ¶ 19).
According to ALI, its business operations rely on its confidential and proprietary processes, strategies, designs, documents, product lists, supplier lists, and customer lists-all of which, ALI alleges, constitute trade secrets (Id., ¶ 13).
ALI depends, in part, upon Label Traxx, a program which allows ALI to maintain its accounting records, orders of raw materials, graphic designs for customers, customer product information, and customer contact information, "among other confidential proprietary information essential to ALI's business operations" (Id., ¶ 13). Label Traxx is accessible only to ALI's graphic designers and management-level employees (Id., ¶13).
According to ALI, the program allows ALI to track its confidential and proprietary information about when ALI's designs are created, sent to customers, approved by customers, ordered by customers, shipped to customers, and, if needed, later revised by customers (Id., ¶ 14). Label Traxx stores all prior designs and labeling done by ALI for its customers and contains all of ALI's customer contact information, such as contact names, addresses, telephone numbers, and email addresses (Id.). ALI alleges that Label Traxx also stores confidential and proprietary information that is critical to ALI's design process for each customer's labeling and packaging, including ALI's technical drawings of its customer's Plate (the "Plate" or "Plates"), the specific tools ALI uses to create Plates for physical printing, the pantone color ALI uses with each Plate to create the customer's label, the calculations for the color scheme for ALI's customer's labels, the precise diameters of ALI's design, and the measurements necessary for ALI's equipment to produce the label (Id., ¶ 15).
ALI alleges that it continuously builds upon the foundation of its information stored in Label Traxx to service customers and maintain its business relationships (Id., ¶16).
In addition, ALI alleges that its customer Plates-a blueprint that allows ALI to create the labeling for its customers- are confidential and proprietary trade secrets imperative to its business operations (Id., ¶ 17). ALI first designs a digital Plate for a customer, also referred to as a technical drawing (Id.). All Plates created by ALI contain unique design and registration markings on the "bearer bars" of the Plate (Id.). The "bearer bars" are located on the exterior of ALI's Plate designs (Id.). All Plates designed by ALI also include a unique date of design, unique part number created by ALI, and initials of ALI's graphic designer (Id.). The part numbers and randomized placement of the unique markings allow ALI to identify quickly each Plate it designs and attribute the Plate to its customers (Id.). ALI designs the digital Plates in Adobe Illustrator and stores the files on a private server, which is password-restricted for only ALI's graphic designers and management to access (Id.).
Once a customer approves the technical drawing of a Plate, ALI physically prints a single copy of the customer's Plate to use for the label-making process at ALI's facilities (Id., ¶ 18). The physical copy of a customer's Plate also contains ALI's unique design and registration markings (Id.). ALI stores the single physical copy of each Plate in a restricted-access area of its facilities (Id.). At no time are the Plates or technical drawings of the Plates provided to ALI's customers, in either digital or physical form, unless the customer specifically contracts and pays for the Plate and its technical drawing (Id.).
Mr. Proctor was employed by ALI as a Pressman and Operations Manager from February 2001 until approximately August 2013 (Id., ¶ 20). In May 2015, Mr. Proctor was re-hired as the Sales and Operations Manager at ALI (Id., ¶ 21). ALI alleges that, during his employment, Mr. Proctor had knowledge and access to ALI's confidential and proprietary information, including all of ALI's information stored in Label Traxx, Adobe Illustrator, and its Plates (Id., ¶ 22). ALI further alleges that Mr. Proctor was exposed to ALI's customers and business contacts in the labeling and packaging industry, including Mr. Parr and GP Labels (Id., ¶¶ 22-23).
ALI and the Parr Defendants were in business together for more than 25 years (Dkt. Nos. 72, ¶ 23; 80-1, at 2). GP Labels is a "broker" between the customer, the entity that manufacturers a product, and the printer who prints labels for the customer's product (Dkt. No. 77-1, ¶ 6). The Parr Defendants used ALI as one of their "printers" to create and produce labels for their customers (Dkt. Nos. 77-1, ¶ 3; 77-2, at 3; 80-2, at 5-6). None of GP Labels' customers are, or were at any time relevant to ALI's claims, located in Arkansas (Dkt. No. 77-1, ¶ 3, 5(e)). The Parr Defendants and ALI never entered into a contract related to any matter between the parties, including the printing of labels (Id., ¶ 6).
All communications were directly between the Parr Defendants and ALI, and their relationship required ongoing communications as orders were submitted and completed (Dkt. Nos. 77-1 ¶ 6; 80-2, at 2-3). The parties frequently exchanged materials between each other, including samples of art files ALI would create into...
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