Centrifugal Acquisition Corp. v. Moon

• Decision Date: 02 February 2012
• Docket Number: Case No. 09–C–327.
• Citation: 849 F.Supp.2d 814
• Court: U.S. District Court — Eastern District of Wisconsin
• Parties: CENTRIFUGAL ACQUISITION CORP., INC., d/b/a Centrifugal Castings, a Delaware Corporation, Plaintiff, v. Adrian A. MOON, Belinda L. Moon, Belinda Moon, LLC, a Wisconsin limited liability company, Jeffrey A. Moon, JM Casting Co., LLC, a Wisconsin limited liability company, Centrifugal Casting, LLC n/k/a Moon Investments, LLC, a Wisconsin limited liability company, and Belinda & Adrian, LLC, a Wisconsin limited liability company, and U.S. Battery Mfg. Augusta, Inc. d/b/a U.S. Battery Manufacturing, Co., a Georgia corporation, Defendants.

849 F.Supp.2d 814

CENTRIFUGAL ACQUISITION CORP., INC., d/b/a Centrifugal Castings, a Delaware Corporation, Plaintiff,

v.Adrian A. MOON, Belinda L. Moon, Belinda Moon, LLC, a Wisconsin limited liability company, Jeffrey A. Moon, JM Casting Co., LLC, a Wisconsin limited liability company, Centrifugal Casting, LLC n/k/a Moon Investments, LLC, a Wisconsin limited liability company, and Belinda & Adrian, LLC, a Wisconsin limited liability company, and U.S. Battery Mfg. Augusta, Inc. d/b/a U.S. Battery Manufacturing, Co., a Georgia corporation, Defendants.

Case No. 09–C–327.

United States District Court, E.D. Wisconsin.

Feb. 2, 2012.

Daniel S. Klapman, Frederic A. Mendelsohn, Burke Warren MacKay & Serritella PC, Chicago, IL, for Plaintiff.

Joseph W. Seifert, Seifert Seifert & Knupp, Evan E. Knupp, Lisa M. Arent, Whyte Hirschboeck Dudek SC, Milwaukee, WI, James B. Wall, Burnside Wall LLP, Augusta, GA, for Defendants.

DECISION AND ORDER

RUDOLPH T. RANDA, District Judge.

This diversity action arises from Centrifugal Acquisition Corporation, Inc.'s (“CAC”) purchase of Centrifugal Casting LLC from Adrian and Belinda Moon (the “ABC Defendants”). In its verified complaint, CAC generally alleges that after it purchased Centrifugal Casting, Adrian and Belinda Moon misappropriated trade secrets, breached their non-competition agreement, and tortiously interfered with CAC's business, principally by setting up a competing business through their son, Jeffrey Moon and JM Casting Company, LLC (the “JM Defendants”).

In December of 2009, the ABC Defendants and the JM Defendants stipulated to the entry of a preliminary injunction. Almost a year later, CAC settled its claims against the ABC Defendants. On November 5, 2010, the Court entered a consent decree and injunction which permanently restrained and enjoined the ABC Defendants from breaching the applicable non-competition agreement.

Now before the Court are cross-motions for summary judgment filed by CAC and the JM Defendants. CAC moves for summary judgment on its claims for Misappropriation of Trade Secrets, Aiding and Abetting Breach of the Non–Competition Agreement, and Conspiracy to Commit Breach of the Non–Competition Agreement. In its own motion, the JM Defendants move for summary judgment on all of CAC's claims. A variety of collateral motions are also pending which will be addressed herein as necessary.

BACKGROUND

Adrian Moon and his wife, Belinda Moon, operated a business manufacturing and selling lead battery terminals, including links, cables and connectors. The battery terminals were made using a process Adrian Moon developed over many years with Tom Balestrieri, a friend and vendor for the company. Adrian Moon operated this business out of the garage at his home in New Berlin, Wisconsin until 2000, when he moved the company to 136 East Walker Street, Milwaukee, Wisconsin (the “Walker Street Facility”).

CAC is a Delaware corporation formed for the purpose of acquiring Adrian and Belinda Moon's Centrifugal Casting Business. Its principals and directors are Maurice Meyers, Dwyn von Bereghy, and Martin Franke.

Centrifugal Casting was a significant competitor in the battery terminal business, in large part because of the process developed by Adrian Moon to manufacture high quality, defect-free, high torque, porosity-free battery terminals that its competitors could not match (referred to by CAC as the “Proprietary Process”). In the summer of 2003, Adrian and Belinda Moon began talking to CAC's group of investors about selling the business. Adrian Moon represented to CAC that the success of his business was “primarily a result of its possession and utilization of a proprietary manufacturing process developed over a number of years of research and development.”

On May 28, 2004, CAC purchased substantially all of the business assets of Centrifugal LLC for over $2.5 million dollars, including the Proprietary Process and certain information pertaining to contact information, vendor lists, pricing, and margins (the “Confidential Business Information”). The parties concurrently executed an Asset Purchase Agreement (“APA”) and 16 related documents, including a ten-year Non–Competition Agreement,¹ an employment agreement for Adrian Moon, a consulting agreement for Belinda Moon, and a five-year lease with Belinda & Adrian, LLC for CAC to use the Walker Street Facility.

U.S. Battery Manufacturing Augusta, Inc. (“U.S. Battery”) was a customer of Centrifugal LLC since approximately 2001 and remained a customer of CAC until CAC began to lose the U.S. Battery Augusta business in 2007 and 2008. CAC's loss of the U.S. Battery Augusta business occurred at approximately the same time that the JM Defendants entered the marketplace. Proceedings on CAC's claim for declaratory judgment against U.S. Battery are currently stayed.

The ABC Defendants and the “Proprietary Process”

The primary reason Meyers, von Bereghy and Franke funded the purchase of Centrifugal LLC is because, as represented in connection with the purchase, the Proprietary Process resulted in battery terminals of higher quality, durability and conductivity as compared to competitors, providing a distinct competitive advantage. Adrian Moon developed the Proprietary Process and Confidential Business Information over a span of 20 years, beginning in the mid 1980s with friend and vendor Tom Balistrieri.

The Proprietary Process employs a specialized method of “centrifugal rubber mold casting” to manufacture battery terminals and components that are of a higher quality than those manufactured by competitors, using centrifugal force to produce castings from a rubber mold. A disc-shaped rubber mold is spun along its central axis at a set speed. The casting material, molten lead alloy, is then poured through an opening at the top center of the mold, which passes through a series of canals to fill the mold. The filled mold then continues to spin as the metal solidifies, resulting in a casted product. In order to create the molds for what are high-tolerance parts (to specifications within thousandths of an inch), Adrian Moon utilized “match plates,” a tool that holds a number of identical machined dies or parts that are pressed into heated rubber discs in a vulcanizing process to create the reusable rubber molds for each individual part. The match plates also impress into the molds part-specific feeder systems comprisingthe canals by which the lead alloy fills the mold cavities.

When Adrian Moon first started to develop the Proprietary Process from his New Berlin garage, Balestrieri worked on a trial and error basis at his family business shop (a tool and die machine shop) to develop match plates and other aspects of the Proprietary Process. To create a match plate, Adrian Moon would first create a prototype die which has a shape and size slightly different than the desired final specifications of the part. Because lead alloys expand in their liquid form, they contract as they solidify requiring the prototype die (and ultimately the match plate) to take this “shrink factor” into account. The shrink factor is not a consistent change in size in proportion to the part one is trying to cast, but is unique for each part, dependent on its shape and size. Therefore, determining the exact size and shape of a die that will result in casting parts within customer specifications of a thousandth of an inch is a complex aspect of the Proprietary Process that required Adrian Moon to test the prototype die by creating test molds and casting test parts, measuring the test parts, directing Balestrieri to make extremely fine tooling changes to the size and shape of the prototype die, and then starting the process over again, trying various combinations of production variables until customer tolerances are consistently met. It was not until these exact requirements were satisfied that Adrian Moon would have dimensions of a prototype die to be fabricated to a match plate that could be used to manufacture a particular battery terminal.

Each time Adrian Moon and Balestrieri made a new battery terminal or part, they had to develop a new match plate and further develop a new “recipe,” in terms of the type of rubber to use for the mold, the specific temperatures to heat the molten lead, the speeds or revolutions per minute (RPMs) to feed the lead into the molds, direction and duration of the spin, the clamping pressure on the mold, and the feeder and venting system designs to allow the lead to properly make its way into the mold and allow air to escape the mold, all of which independently and in combination impact the ability to achieve the quality and tolerances required by customers. Production techniques such as how many molds to have in series in mass production constitute another production variable, as molds distort after prolonged exposure to heat. When the right combination of production variables and specifications of the prototype die consistently produce parts within customer specification, the exact dimensions of the die would then be tooled to match plates which contain several (depending on the size of the part) exact copies of the prototype, and from which reusable molds are pressed. The type and source of the rubber is also a production variable that impacts the manufacture of parts using the Proprietary Process.

Ultimately, the Proprietary Process developed to the point where there are specific steps and formulae to produce any given part: (1) tooling a prototype die from a customer's specifications; (2) developing feeder and venting systems for each mold that determine the manner in which molten lead and air trapped within it are handled in the casting process; (3) developing a rubber mold that can produce multiple parts, including utilizing specific rubber material that will (i) withstand the various temperatures used in the casting process, (ii) hold its properties during the casting process to produce a consistent product...