Bliss Clearing Niagara v. Midwest Brake Bond

• Decision Date: 14 May 2003
• Docket Number: No. 5:02-CV-67.,5:02-CV-67.
• Citation: 270 F.Supp.2d 943
• Parties: BLISS CLEARING NIAGARA, INC., Plaintiff, v. MIDWEST BRAKE BOND CO., Defendant.
• Court: U.S. District Court — Western District of Michigan

270 F.Supp.2d 943

BLISS CLEARING NIAGARA, INC., Plaintiff, v. MIDWEST BRAKE BOND CO., Defendant.

No. 5:02-CV-67.

United States District Court, W.D. Michigan, Southern Division.

May 14, 2003.

John M. Brown, Dykema, Gossett, PLLC, Lansing, MI, Bruce G. Davis, Douglas A. Dozeman, Warner, Norcross & Judd, LLP, Grand Rapids, MI, for Plaintiff.

Dean W. Amburn, Robert J. Lenihan, II, Harness, Dickey & Pierce, P.L.C., Troy, MI, Richard A. Gaffin, Miller, Canfield, Paddock & Stone, PLC, Grand Rapids, MI, for Defendant.

OPINION

QUIST, District Judge.

Plaintiff, Bliss Clearing Niagara, Inc. ("Bliss"), has sued Defendant, Midwest Brake Bond Co. ("Midwest"), alleging claims for trademark infringement, unfair competition, and dilution under the Lanham Act, 15 U.S.C. §§ 1114, 1125(a) and (c), a claim for misappropriation under the Michigan Uniform Trade Secrets Act ("MUTSA"), M.C.L. § 445.1901-.1910, and various tort claims. Bliss alleges that, among other things, Midwest obtained and used Bliss' trade secrets, and confidential and proprietary information, to manufacture, distribute, and sell a machine identical to Bliss' "Torc-Pac 40" clutch. Now before the Court is Midwest's motion pursuant to Federal Rule of Civil Procedure 12(c) for judgment on Counts VI, VII and VIII of Bliss' complaint, which allege, respectively, claims for tortious interference with contractual relations and advantageous business opportunity, unfair competition in violation of the common law, and conversion. Midwest also seeks judgment on that portion of Count IV which alleges a common law claim for misappropriation.

I. Facts¹

Bliss is engaged in the business of developing, manufacturing, and marketing industrial clutches and other components used in various machines to manufacture products. (Compl. ¶¶ 1, 7.) One of Bliss' products is the well-known "Torc-Pac 40" wet-type clutch, which it designed and began to sell in approximately 1958. (Id. ¶¶ 7, 11.) In addition to manufacturing and selling clutches, Bliss manufactures and sells replacement parts for the Torc-Pac 40 and other clutches and repairs and remanufactures clutches for its customers. (Id. ¶ 8.) During the process of designing, developing, and manufacturing the Torc-Pac 40, Bliss invested substantial resources to create detailed drawings and blueprints of the Torc-Pac 40 and its componentes. (Id. ¶ 11.) Such information is highly confidential and proprietary to Bliss. (Id. ¶ 12.)

On January 23, 1996, Bliss furnished more than 150 unpublished copyrighted drawings, including those of the Torc-Pac 40, to Midwest for the purpose of obtaining a quotation from Midwest for the manufacture of certain Torc-Pac parts. (Id. ¶ 16.) Bliss furnished the drawings to Midwest pursuant to a confidentiality agreement, in which Midwest acknowledged that the drawings belonged to Bliss, were confidential information, and were to be used solely for the purpose of preparing the quotation. (Id. ¶ 17.) The confidentiality agreement also precluded Midwest from copying or reproducing the drawings, furnishing them to others, or using them in the manufacture of the Torc-Pac 40, without Bliss' written consent. (Id.)

Midwest returned the drawings to Bliss on or about October 24, 2000, after counsel for Bliss demanded their return. (Id. ¶ 23.) Bliss alleges that prior to the time it furnished the drawings to Midwest, Midwest was manufacturing and/or distributing replicas of the Torc-Pac 40 and/or its parts, but that after receiving the drawings from Bliss, Midwest was able to refine its replicas and parts and began manufacturing and/or distributing an identical Torc-Pac 40 and parts. (Id. ¶ 19-20.) Bliss also alleges that Midwest began labeling and marketing its replica and parts using the Torc-Pac 40 trademark and began using the Torc-Pac 40 name in Midwest's informational and marketing materials without Bliss' authorization. (Id ¶ 19, 21.) Moreover, Bliss claims that both before and after it received the drawings from Bliss, Midwest solicited several key employees with special knowledge of the Torc-Pac 40 product line away from Bliss for the purpose of obtaining Bliss' confidential and proprietary trade secrets, including customer lists. (Id. ¶ 22.)

On April 25, 2002, Bliss filed its complaint against Midwest alleging various claims based upon Midwest's use of the Torc-Pac 40 name and Bliss' confidential and proprietary information in the manufacture and sale of its replica Torc-Pac 40 and parts.

II. Motion Standard

Midwest brings its motion under Fed. R.Civ.P. 12(c). A motion pursuant to Rule 12(c) may be brought after the close of the pleadings to raise various Rule 12(b) defenses. Alexander v. City of Chicago, 994 F.2d 333, 335 (7th Cir.1993). As with a Rule 12(b)(6) motion, a court must examine only the pleadings and accept all of the non-movant's allegations as true in ruling on a Rule 12(c) motion. St. Paul Ins. Co. v. AFIA 937 F.2d 274, 279 (5th Cir.1991). A motion for judgment on the pleadings may be granted only where "it appears beyond doubt that the plaintiff cannot prove any set of facts that would support his claim for relief." Thomason v. Nachtrieb, 888 F.2d 1202, 1204 (7th Cir.1989).

III. Discussion

Midwest contends that it is entitled to judgment as a matter of law on Bliss' common law claims of misappropriation, tortious interference with contractual relations and advantageous business opportunity, unfair competition, and conversion upon two grounds. First, Midwest argues that these claims are displaced by MUSA. Second, Midwest argues that Bliss' common law misappropriation claim and the other claims occurring before enactment of MUTSA and, thus, not affected by MUTSA's displacement provision, are untimely because those claims were filed beyond the three-year statute of limitations.

A. Displacement Under MUTSA

The Michigan Legislature enacted MUTSA, Michigan's version of the Uniform Trade Secrets Act ("UTSA"), to take effect as of October 1, 1998. M.C.L. § 445.1910. MUTSA provides a statutory action and remedies for misappropriation of trade secrets. M.C.L. § 445.1903, 1904. The statute also displaces conflicting tort remedies for misappropriation of a trade secret. CM I Int% Inc. v. Intermet Int'l Corp., 251 Mich.App. 125, 132, 649 N.W.2d 808, 812-13 (2002) (per curiam). In particular, Section 8 of MUTSA provides that the "act displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret." M.C.L. § 445.1908(a). However, MUTSA does not displace contractual remedies, "[o]ther civil remedies that are not based upon misappropriation of a trade secret," or "[c]riminal remedies, whether or not based upon misappropriation of a trade secret." M.C.L. § 445.1908(2).

No Michigan state or federal court has interpreted or applied the displacement provision of MUTSA, although several state and federal courts have interpreted very similar versions of the UTSA adopted by other states. See, e.g., Smithfield Ham & Prods. Co. v. Portion Pac, Inc., 905 F.Supp. 346, 348-49 (E.D.Va.1995) (interpreting Virginia UTSA and concluding that the plaintiffs tortious interference claims were not displaced); Coulter Corp. v. Leinert, 869 F.Supp. 732, 734-35 (E.D.Mo.1994) (interpreting Florida UTSA to conclude that the plaintiffs claims for unfair competition and an accounting were displaced but that the plaintiffs claim for breach of the duty of confidentiality was not barred); Savor, Inc. v. FMR Corp., 812 A.2d 894, 898 (Del.2002) (interpreting Delaware UTSA to conclude that the plaintiffs unfair competition and conspiracy claims were displaced); Frantz v. Johnson, 116 Nev. 455, 464-65, 999 P.2d 351, 357-58 (2000) (applying Nevada UTSA and concluding that the plaintiffs claims for misappropriation of confidential information, breach of fiduciary duty, intentional interference with contractual relations, intentional interference with prospective advantage, breach of the covenant of good faith and fair dealing, civil conspiracy, and unjust enrichment were displaced). In determining whether a claim is displaced, courts generally examine whether the claim is based solely upon the misappropriation of a trade secret. If so, the claim must be dismissed. See Craig Neon, Inc. v. McKenzie, 25 Fed.Appx. 750, 751-52, 2001 WL 1338434, at *2 (10th Cir.2001) ("There is also no real dispute that plaintiffs fraud-and-deceit claim could stand alone even without proving that the sign plans were a trade secret."); Thomas & Betts Corp. v. Panduit Corp., 108 F.Supp.2d 968, 971 (N.D.Ill.2000) (stating that "facts constituting a misappropriation of trade secrets give rise to liability under the [Illinois UTSA], but not under any other state law theory"); Glasstech, Inc. v. TGL Tempering Sys., Inc., 50 F.Supp.2d 722, 730 (N.D.Ohio 1999) ("The preemption section of the UTSA has been interpreted to bar claims which are based entirely on factual allegations of misappropriation of trade secrets."); Coulter Corp., 869 F.Supp. at 734 (stating that in light of the UTSA's displacement provision, "the issue becomes whether allegations of trade secret misappropriation alone comprise the underlying wrong; if so, the cause of action is barred"); Smithfield Ham & Prods. Co., 905 F.Supp. at 348-49 ("In order to survive summary judgment ... a plaintiff must be able to show that the distinct theories of relief sought are supported by facts unrelated to the misappropriation of the trade secret."). In Weins v. Sporleder, 1999 SD 10, 2000 SD 10, 605 N.W.2d 488 (2000), the Supreme Court of South Dakota summarized the displacement analysis as follows:

South Dakota's adoption of the Uniform Trade Secrets Act, SDCL 37-29-7, prevents a plaintiff from merely restating their trade secret claims as separate tort claims. In analyzing claims for the purpose of applying the displacement provision, the issue is not what label the plaintiff puts on their [sic] claims. Rather, the court is to...