Baker Hughes Inc. v. S&S Chem., LLC

• Decision Date: 02 September 2016
• Docket Number: No. 15-2413,15-2413
• Citation: 836 F.3d 554
• Court: U.S. Court of Appeals — Sixth Circuit
• Parties: Baker Hughes Incorporated; Baker Petrolite Corporation, Plaintiffs–Appellants, v. S&S Chemical, LLC ; Bruce Neal Stevens; SPE Wax Technologies, LLC, Defendants–Appellees.

836 F.3d 554

Baker Hughes Incorporated; Baker Petrolite Corporation, Plaintiffs–Appellants,

v.S&S Chemical, LLC ; Bruce Neal Stevens; SPE Wax Technologies, LLC, Defendants–Appellees.

No. 15-2413

United States Court of Appeals, Sixth Circuit.

Argued: July 27, 2016

Decided and Filed: September 2, 2016

ARGUED: David W. Centner, Clark Hill PLC, Grand Rapids, Michigan, for Appellants. Dean W. Amburn, Howard & Howard Attorneys PLLC, Royal Oak, Michigan, for Appellees. ON BRIEF: David W. Centner, Gregory N. Longworth, Clark Hill PLC, Grand Rapids, Michigan, for Appellants. Dean W. Amburn, Gerald E. McGlynn III, Howard & Howard Attorneys PLLC, Royal Oak, Michigan, for Appellees.

Before: GILMAN, WHITE, and STRANCH, Circuit Judges.

OPINION

RONALD LEE GILMAN, Circuit Judge.

Bruce Stevens worked for Baker Petrolite Corporation and its predecessor for approximately seven years. When his employment ended, Stevens signed a contract in which he promised to maintain the confidentiality of Baker Petrolite's trade secrets. Baker Petrolite and its parent company, Baker Hughes Incorporated (collectively, Baker), sued Stevens 18 years after the contract was signed, alleging a breach of their confidentiality agreement. Stevens's defense, and the outcome of this case, hinges on the validity of a broadly worded settlement agreement that was purportedly reached in the interim as a result of an unrelated lawsuit between the parties. Relying on this settlement agreement, the district court entered judgment in favor of Stevens. For the reasons set forth below, we AFFIRM the judgment of the district court.

I. BACKGROUND

A. The parties and the disputed settlement agreement

Baker produces and sells chemicals such as polyethylenes, alcohols, and copolymers. These operations involve proprietary “ethylene polymerization processes” (the EP Processes), which allegedly constitute trade secrets under state law.

Stevens worked for Baker and its predecessor from 1989 until 1996. His employment involved extensive use of the EP Processes. When Stevens's employment ended, he signed a Termination Agreement in which he promised not to disclose any information or data related to Baker's business or technology, including trade secrets such as the EP Processes.

In October 1999, Stevens sued Baker in Oklahoma state court. Stevens alleged that Baker had failed to fully pay the compensation due him during his employment. The parties eventually settled Stevens's lawsuit. In consummation of the settlement, Baker paid Stevens $10,000, and Stevens dismissed his lawsuit against Baker with prejudice.

The parties dispute the remaining terms of the settlement. In particular, the negotiations preceding the cash payment to Stevens involved the circulation of several drafts of a proposed settlement agreement that included a release of all claims. A purported final draft (the Settlement) was sent from Baker to Stevens's attorney, Robert Giles, on March 30, 2000. Stevens and Giles signed the Settlement the following day. Giles then faxed a copy of the signed Settlement to Baker's attorney, Steven Broussard, on April 7, 2000. That same day, Broussard forwarded a copy of the Settlement to Baker's in-house counsel, Jeff Shank. The Settlement contained signature blocks for both Broussard and for a representative of Baker, but the record has no copy of the Settlement showing that either Broussard or a Baker official ever signed the document. Instead, the record contains only the copy of the Settlement signed by Stevens and Giles on March 31, 2000 and faxed to Baker on April 7, 2000.

The terms of the Settlement are consistent with the above-described resolution of Stevens's Oklahoma lawsuit insofar as the Settlement required Stevens to dismiss his complaint in exchange for $10,000. The Settlement, however, has additional terms. As relevant to the current appeal, the Settlement contains a general release (the Release Provision) that provides as follows:

Except for the obligations set forth in this Agreement, Baker hereby fully and forever remises, releases and discharges Stevens and his attorneys, agents, heirs, executors, administrators, predecessors, successors and assigns (collectively referred to as the “Stevens Release Parties”), of and from any and all claims, demands, agreements, contracts, covenants, suits, actions, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, losses and liabilities, of whatever kind or nature, in law, equity or otherwise, whether known or unknown, concealed or hidden, against any of the Stevens Released Parties which Baker has had, may have had or now has, to and including the date of this Agreement.

It is the intention of the parties to this Agreement that the foregoing general releases shall be effective as a bar to all actions, causes of action, suits, claims or demands of every kind, nature or character whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, referred to above....

B. Stevens's subsequent activities

In or around 1999, Stevens formed S&S Chemical, LLC (S&S) as a Colorado limited liability company for the purpose of producing polyethylene products. Baker subsequently came to suspect that S&S was improperly using Baker's EP Processes in doing so. This caused Baker to send Stevens a letter in 2002 reminding Stevens that he had previously promised (in the Termination Agreement) that he would not disclose information relating to the EP Processes or to Baker's other trade secrets. Stevens responded that he and his company had independently developed the processes used to manufacture S&S's chemicals, and Baker later confirmed that S&S was not then using Baker's confidential information.

Several years later, Baker again came to suspect that Stevens and S&S were using Baker's EP Processes. This suspicion arose from a 2013 press release in which S&S announced that it was producing a new line of polymer chemicals. Baker's investigation concluded that S&S's production likely involved the use of Baker's trade secrets. In addition, Baker learned during its investigation that Stevens and S&S had sold certain intellectual property to SPE Wax Technologies, LLC (SPE). Baker determined that this sale likely involved the disclosure of the EP Processes or other information that Stevens had previously promised not to divulge.

C. Baker's lawsuit

Based on its investigation, Baker sued Stevens, S&S, and SPE (collectively, Defendants) in May 2014 in the United States District Court for the Western District of Michigan. Baker alleged in relevant part that (1) Stevens had breached the Termination Agreement by disclosing Baker's trade secrets to SPE, and (2) Defendants had misappropriated Baker's trade secrets by using the EP Processes.

Baker filed an amended complaint in June 2014, and the district court entered a case-management order in December of that year. The court's order required the parties to make their initial disclosures as mandated by Rule 26(a) of the Federal Rules of Civil Procedure by January 14, 2015. In addition, the court later imposed a deadline of July 30, 2015 for the completion of lay-witness discovery.

Defendants timely made their initial disclosures. The disclosures listed 79 individuals likely to have discoverable information, but the list did not include Robert Giles, the attorney who had represented Stevens in the Oklahoma state-court litigation. Giles's name did not surface until Baker located and produced a copy of the Settlement during subsequent discovery.

In April 2015, Baker filed a second amended complaint, again alleging breach of contract and the misappropriation of trade secrets. Defendants answered the amended complaint the following month. In doing so, they asserted as an affirmative defense that Baker's claims were barred by the Release Provision. As support, Defendants cited the Settlement that the parties had allegedly entered into in connection with the resolution of Stevens's 1999 Oklahoma lawsuit against Baker. They noted that the Settlement's Release Provision applied to all “demands, agreements, contracts, ... [and] obligations ... of whatever kind or nature.” As a result, Defendants asserted that Baker had released Stevens from the confidentiality obligations of the Termination Agreement, thereby undercutting Baker's misappropriation and breach-of-contract claims. Defendants attached as Exhibit A to their answer a copy of the Settlement that Stevens and Giles had signed on March 31, 2000. At no point, however, did Defendants supplement their disclosures under Rule 26(a) to identify Giles as a person having information that would be used to support their claims or defenses.

In August 2015, Defendants filed a motion for summary judgment on the basis that Baker's claims were barred by the Release Provision. Included with the motion were (1) a declaration from Giles regarding his role in the resolution of the Oklahoma lawsuit, and (2) a copy of Giles's billing records from his work on that lawsuit.

Baker responded to the motion by, among other things, moving to strike Giles's declaration and billing records on the grounds that Giles had not been identified in Defendants' Rule 26(a) disclosures and that Giles's billing records had not been produced during discovery. It also asserted that (1) Giles's declaration was improper under Rule 56(c)(4) of the Federal Rules of Civil Procedure because it contained speculation and legal conclusions, and (2) the billing records were inadmissible because they had not been authenticated and/or because they contained hearsay.

The district court granted Defendants' motion for summary judgment in October 2015. It first addressed and rejected Baker's motion to strike Giles's declaration and billing records. The court then cited Giles's declaration and records in concluding that the parties had assented to the terms of the Settlement and that the Settlement constituted a valid contract under Oklahoma state law.

It next proceeded to interpret the...