Conxall Corp. v. Iconn Sys., LLC

• Decision Date: 02 September 2016
• Docket Number: No. 1–14–0158.,1–14–0158.
• Citation: 61 N.E.3d 1081,406 Ill.Dec. 813
• Parties: CONXALL CORPORATION, an Illinois Corporation, Plaintiff–Appellant and Cross–Appellee, v. ICONN SYSTEMS, LLC, an Illinois Limited Liability Corporation; Richard Regole; Kerry Nelson ; Robert Smith; Manual Sanchez; Mario Caldera; and Jerome Vorel, Defendants–Appellees and Cross–Appellants (Mine Safety Appliances Company, a Pennsylvania corporation, Third–Party Defendant).
• Court: United States Appellate Court of Illinois

61 N.E.3d 1081

406 Ill.Dec. 813

CONXALL CORPORATION, an Illinois Corporation, Plaintiff–Appellant and Cross–Appellee,

v.ICONN SYSTEMS, LLC, an Illinois Limited Liability Corporation; Richard Regole; Kerry Nelson ; Robert Smith; Manual Sanchez; Mario Caldera; and Jerome Vorel, Defendants–Appellees and Cross–Appellants (Mine Safety Appliances Company, a Pennsylvania corporation, Third–Party Defendant).

No. 1–14–0158.

Appellate Court of Illinois, First District, Sixth Division.

Sept. 2, 2016.

Williams Montgomery & John, Ltd., of Chicago (Peter C. John and Alyssa M. Reiter, of counsel), and Howarth & Smith, of Los Angeles, California (Don Howarth, of counsel), for appellant and cross-appellee.

Pedersen & Houpt, P.C., of Chicago (Marc D. Janser and Stan Sneeringer, of counsel), for appellees and cross-appellants.

OPINION

Justice DELORT delivered the judgment of the court as to Parts I, II, and III, with opinion. Justice DELORT delivered the judgment of the court as to Part IV.

¶ 1 The plaintiff, Conxall Corporation, sued defendants iCONN Systems, LLC, Richard Regole, Kerry Nelson, Robert Smith, Manual Sanchez, Mario Caldera, and Jerome Vorel, alleging that they misappropriated trade secrets relating to a cable assembly and panel mount that Conxall produced and sold to third-party defendant Mine Safety Appliances (MSA). After a four-week trial, a jury returned a general verdict in favor of defendants. Conxall filed a posttrial motion for judgment n.o.v. and new trial, and iCONN filed a motion for attorney fees pursuant to section 5 of the Illinois Trade Secrets Act (Act) (765 ILCS 1065/1 et seq. (West 2008)). The court denied both motions, precipitating Conxall's appeal and iCONN's cross-appeal. MSA is not a party to either appeal.

¶ 2 In its appeal, Conxall contends that the trial court erred by denying its posttrial motion for three reasons. First, it contends that the trial court tendered an instruction to the jury that misstated the law and prejudiced its case. Second, it argues that the court should have instructed the jury to limit its consideration of a special interrogatory that MSA propounded to its deliberations over iCONN's cross-claim against MSA. Third, it argues that the jury's answer to the special interrogatory was against the manifest weight of the evidence. In its cross-appeal, iCONN claims that the trial court abused its discretion by denying its motion for attorney fees.

¶ 3 BACKGROUND

¶ 4 Conxall manufactures cable and connector assemblies used in electronic devices. The third-party defendant, MSA, is a Pennsylvania corporation that manufactures safety equipment for firefighters. Defendant iCONN was formed by defendants Richard Regole, Kerry Nelson, and Robert Smith, who are all former executive-level Conxall employees. Regole worked at Conxall from 1991 to 2000, serving as general manager, director of sales and marketing, and manufacturing director; Nelson worked at Conxall from 1997 to 2004, serving as national sales manager and manager of industrial products; and Smith worked at Conxall from 1994 to 2006, serving as director of operations.

¶ 5 Defendants Jerome Vorel, Manual Sanchez, and Mario Caldera are former Conxall manufacturing employees who went to work for iCONN. Vorel worked at Conxall from 1993 to 2008. From 1993 to 2000, Vorel was a maintenance mechanic responsible for repairing leaky roofs, toilets that would not flush, and jammed doors. In 2000, he became an industrial engineer. Vorel left Conxall on June 24, 2008, and began working at iCONN on June 26. Sanchez and Caldera worked on Conxall's assembly line from 1988 and 1992, respectively, to November 8, 2007, when both men began working at iCONN.

¶ 6 The events that gave rise to this lawsuit began in March 2006. Around that time, Conxall secured a lucrative business opportunity to sell MSA cable assemblies and panel mounts for incorporation into the Firehawk, a firefighter's mask that MSA manufactured. Once MSA notified Conxall that it had been chosen to supply the components, Conxall and MSA collaborated on a design for the cable assembly and panel mount.

¶ 7 After the design process concluded, Conxall began shipping parts to MSA. MSA eventually became dissatisfied with the quality of Conxall's products. As a result, MSA sought out iCONN so that it could also supply MSA with cable assemblies and panel mounts for the Firehawk. In October 2007, Jim Flaherty, an MSA materials manager, contacted iCONN and spoke to Regole. Flaherty told Regole that MSA was experiencing problems with Conxall because Conxall was struggling to deliver enough quality products to MSA in a timely manner. Regole visited MSA's manufacturing facility on October 23, 2007. During the visit, MSA agreed to allow iCONN to submit a bid for the Firehawk cable assembly and panel mount.

¶ 8 To assist iCONN, Flaherty gave iCONN (1) a sample cable assembly and panel mount, (2) MSA's quality control specifications, (3) two dimensional (2D) design drawings, and (4) three dimensional (3D) models. Flaherty e-mailed Regole the 2D drawings and quality control documents on October 25. Jeremy Steck, an MSA engineer, e-mailed the 3D models to iCONN on October 29. Flaherty testified that the drawings MSA sent to iCONN “were the property of [MSA],” that the 2D drawings contained a proprietary title block with MSA's name on it, and that he told Regole the samples “were MSA parts.” When Steck e-mailed the 3D models, he did not refer to Conxall, and the models themselves bore no indicia of ownership as to any party. According to Regole, he also asked Steck to send component drawings, but Steck refused because he believed that the component drawings belonged to Conxall.

¶ 9 Sometime around April 1, 2008, Conxall discovered that iCONN was also supplying MSA with cable assemblies and panel mounts. Later that month, Conxall filed this lawsuit.

¶ 10 On March 9, 2009, Conxall added two claims alleging that iCONN misappropriated trade secrets with respect to products that Conxall had sold to three additional companies—Skybitz, Hach, and Kustom Signals, Inc. (KSI). When all was said and done, Conxall had alleged that iCONN misappropriated four categories of purportedly secret information: (1) the overall design of the Firehawk products; (2) the designs and related information covering certain component parts that went into the Firehawk products; (3) the process that Conxall used to manufacture the Firehawk products; and (4) the overall designs of the Hach, Skybitz, and KSI products.

¶ 11 On November 16, 2009, defendants filed a motion to dismiss Conxall's amended complaint. The trial court denied the motion on May 27, 2010. On June 27, 2011, iCONN filed a third-party complaint against MSA. iCONN's complaint set forth claims for indemnity and fraud. The gist of iCONN's claims against MSA was that, assuming iCONN had misappropriated a trade secret by using the information contained in the 2D and 3D files that MSA gave iCONN, MSA had misled iCONN into believing that MSA owned the information in the files.

¶ 12 On October 26, defendants filed a motion for summary judgment against Conxall. The court denied the motion, and the case proceeded to a jury trial.

¶ 13 After the close of evidence, the trial court instructed the jury. Over Conxall's objection, the court tendered instruction No. 18 to the jury, a nonpattern instruction, which stated: “the plaintiff must show that specific secrets were misappropriated. It is not sufficient to point to broad areas of technology and assert that something there must have been secret and misappropriated.”

¶ 14 The court also tendered six special interrogatories to the jury. Special interrogatory No. 4, which was proffered by MSA, asked “[d]id MSA own the information contained in the two drawings and two [3D] files relating to the panel mount and cable assembly that MSA produced to ICONN?” In chambers, Conxall specifically objected to a different interrogatory that is not at issue in this appeal, but it did not specifically object to special interrogatory No. 4. After that objection was overruled and immediately before the parties and judge returned to the courtroom, one of Conxall's attorneys lodged a general objection to all of MSA's special interrogatories, stating simply, “I think I better—just for the record, Conxall objects to all MSA's proposed special interrogatories.”

¶ 15 Ultimately, the jury returned a general verdict in favor of iCONN and answered special interrogatory No. 4 “yes.” Conxall filed a motion for a new trial and judgment n.o.v., and iCONN filed a motion for attorney fees. The trial court denied all three motions in a single order on December 20, 2013. With respect to iCONN's motion for attorney fees, the court stated: “Defendant iCONN's Motion for Attorney Fees is denied. The Court finds that Conxall's claims were not frivolous and not brought in bad faith. There was sufficient circumstantial evidence for this finding that Conxall's claims were not brought in bad faith and were not frivolous.” Conxall appealed, and iCONN cross-appealed.

¶ 16 ANALYSIS

¶ 17 In its appeal, Conxall has raised three issues. First, Conxall contends that the trial court erred by tendering instruction No. 18. Second, Conxall argues that the trial court erred by refusing to restrict the jury's consideration of special interrogatory No. 4 to its deliberations with respect to iCONN's case against MSA. Finally, Conxall claims that the jury's answer to special interrogatory No. 4 was against the manifest weight of the evidence. In its cross-appeal, iCONN argues that the trial court erred by denying its motion for attorney fees. We consider these arguments in turn.

¶ 18 I. Instruction No. 18 Was Properly Granted

¶ 19 We first consider Conxall's claim that the trial court erred by tendering instruction No. 18. “The purpose of jury instructions is to provide the jury with correct legal rules that can be applied to the evidence to guide the jury toward a proper verdict.” People v....