DF Inst., LLC v. Dalton Educ., LLC
| Decision Date | 11 August 2020 |
| Docket Number | 19-cv-452-jdp |
| Parties | DF INSTITUTE, LLC, d/b/a KAPLAN PROFESSIONAL, Plaintiff, v. DALTON EDUCATION, LLC, Defendant. |
| Court | U.S. District Court — Western District of Wisconsin |
Plaintiff DF Institute, LLC, which goes by the name Kaplan Professional, and defendant Dalton Education, LLC both sell products and services related to test prep for certifications in the finance industry. Kaplan alleges that Dalton persuaded multiple Kaplan employees to come work for Dalton, stealing valuable trade secrets in the process.
Kaplan originally sued Dalton as well as two former employees, Allison Steers and Cyndee Redfearn, but Kaplan and those employees have since settled all their claims. Dkt. 194 and Dkt. 196. Dalton moves for summary judgment on the remaining claims for misappropriation of trade secrets, conversion, and tortious interference with a contract. Dkt. 154. Dalton also moves to strike Kaplan's damages expert. Dkt. 200.
The court will grant Dalton's motion for summary judgment in large part. Kaplan hasn't adduced evidence that Dalton ever acquired some of the information at issue, and other information doesn't qualify as a trade secret, so Dalton is entitled to summary judgment on Kaplan's trade secret claims based on that information. The court also concludes that Kaplan's state-law claims fail as a matter of law.
For the purpose of summary judgment, Dalton doesn't deny that it acquired through improper means trade secrets in Kaplan's December 2018 sales variance report and two spreadsheets containing information related to Kaplan's business for certified financial analysts. Instead, Dalton seeks summary judgment on the ground that Kaplan hasn't adduced evidence of damages for any misappropriation of that information. The court agrees with Dalton that Kaplan hasn't adduced evidence of unjust enrichment, which is the only theory of damages asserted by Kaplan's expert. But damages aren't an element of a trade secrets claim, so the court can't grant summary judgment on that ground. The court will give both sides an opportunity to explain whether a trial is still needed to resolve the remaining issues. The court will also deny Dalton's motion to strike Kaplan's expert report as moot because Kaplan's theory of damages fails regardless whether the expert's testimony is admissible.
Kaplan sells products and services related to preparation for the examinations for the certifications for certified financial planners (CFP) and certified financial analysts (CFA), as well as for the Financial Industry Regulatory Authority. Kaplan sells books and other study materials for these exams and offers traditional and virtual classroom instruction and self-study programs. Kaplan offers its products and services to both individuals and corporate clients.
Dalton also provides educational products and services for financial planners, including a review course for obtaining a certification. Dalton does not currently sell any CFA products or services, but it is developing a CFA business that it plans to launch soon. Dalton is one of Kaplan's few competitors.
Several of Kaplan's employees chose to leave the company in 2019 and go to work for Dalton, including Cyndee Redfearn (a wealth manager for Kaplan), Allison Steers (an inside sales manager), Jonathan Prebich (an account director), and Mark Sheehan (vice president ofglobal business development). Dalton hired Prebich as its national account director in February 2019, Steers as a business development manager in March 2019, and Redfearn as a regional account manager in March 2019. Sheehan took a job with Dalton in June 2019, but the parties don't say what the position was. Kaplan alleges that all four employees shared Kaplan's trade secrets and other confidential information with Dalton.
After Kaplan filed this lawsuit, Dalton hired Stroz Friedberg to conduct interviews and perform a forensic analysis to determine who at Dalton may have received Kaplan materials and what devices those materials may have been stored on. Stroz Friedberg also completed the remediation process and removed all potential Kaplan materials from Dalton's systems. As a result of the investigation, Dalton terminated Steers, Redfearn, and Redfearn's supervisor (Laramie McClurg) for retaining or discussing Kaplan documents.
The court will discuss more facts as they become relevant to the analysis.
Kaplan doesn't clearly define in its brief or proposed findings of fact what alleged trade secrets are at issue in this case. It identifies six documents in its brief:
1. An email attachment titled "ALL Market Data" that contains two spreadsheets1
2. Kaplan's CSS CSM training guide
3. A "30.60.90" day plan
4. A December 2018 financial education sales variance report 5. A February 2019 financial education sales variance report
6. Kaplan's "Sales Cycle"
Dkt. 174, at 26-27. Kaplan also objects to Dalton's contentions that several other types of information don't qualify as trade secrets: (1) customer lists; (2) a customer discount for Vanguard; and (3) presentations that Kaplan made to customers about the Security Industry Essentials certification.
In addition to the information that Kaplan specifically identifies, Kaplan says that it is seeking protection for "[v]arious other documents with sensitive nonpublic information regarding Kaplan Professional's customers, business development strategy, and sales and pricing model." Dkt. 174, at 27. But Kaplan neither identifies what those documents are nor explains why they are entitled to trade secret protection, so Kaplan has forfeited any claims based on information not specifically identified above.
Kaplan asserts claims for misappropriation of trade secrets under both state and federal law. See 18 U.S.C. § 1836 and § 1839; Wis. Stat. § 134.90. The parties treat the standards governing the federal and state claim as identical, so the court will do the same. There are two basic elements of a claim: (1) the defendant acquired, used, or disclosed the information through improper means; and (2) the information at issue qualifies as a trade secret. 18 U.S.C. § 1639(5); Wis. Stat. § 134.90(2). Dalton advances arguments under both elements and also contends that Kaplan can't prove any damages.
In its opening brief, Dalton contends that all of Kaplan's trade secrets claims fail because Kaplan hasn't shown that Dalton used any of the alleged trade secrets. But the trade secrets law is written in the disjunctive, so either use or acquisition can violate the law. In itsreply brief, Dalton abandons its original argument and contends instead that Kaplan's lack of evidence on use shows that Kaplan can't prove damages. That's a different issue, which the court will consider later in this opinion.
Dalton contends that it didn't use or acquire three of the nine documents listed above: (1) the CSS CSM training guide; (2) the "30.60.90" plan; and (3) the February 2019 sales variance report. Kaplan cites evidence that Steers downloaded these documents, but it doesn't cite evidence that she ever gave them to Dalton or that Dalton otherwise obtained these documents. See Dkt. 187, ¶¶ 56-57. And a forensic examination of Dalton's information systems uncovered no evidence of these documents. A plaintiff can't rely on speculation at the summary judgment stage. McCoy v. Harrison, 341 F.3d 600, 604 (7th Cir. 2003). So the court will grant Dalton's motion to dismiss Kaplan's trade secrets claims based on these documents.
Information qualifies as a trade secret if it meets two criteria: (1) it derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) it is the subject of efforts to maintain its secrecy that are reasonable under the circumstances. 18 U.S.C. § 1839(3); Wis. Stat. § 134.90(c). Dalton doesn't deny that that the "All Market Data" spreadsheets or the December 2018 sales variance report meet both criteria, so the court won't consider those documents in this section. But Dalton contends that the "Sales Cycle" document, Kaplan's customer lists, the Vanguard customer discount, and the presentations for the Security Industry Essentials certification don't qualify as trade secrets under one or both of the above elements.
Kaplan says almost nothing about this document in its summary judgment brief. Kaplan's only description is a single sentence, contending that the "Sales Cycle" includes "sensitive nonpublic information regarding Kaplan's process for identifying and developing its business-to-business sales opportunities, from the inception of the relationship to closing a sale." Dkt. 174, at 27. Kaplan cites no testimony explaining in any detail what the document is, what specific information is secret, or why the information is valuable. The document itself is simply attached to a declaration filed by one of Kaplan's lawyers, Dkt. 170-4, who doesn't have the foundation to explain the importance of the document. See Nw. Nat. Ins. Co. v. Baltes, 15 F.3d 660, 662 (7th Cir. 1994) ().
Courts often observe that summary judgment requires the party with the burden of proof to "put up or shut up," pointing to evidence from which a reasonable jury could find in its favor of each element of its claim. See, e.g., Beardsall v. CVS Pharmacy, Inc., 953 F.3d 969, 973 (7th Cir. 2020). In the context of a trade secrets claim, it is not enough to claim that documents fall into broad categories of confidential information. Weather Shield Mfg., Inc. v. Drost, No. 17-cv-294-jdp, 2018 WL 3824150, at *2 (W.D. Wis. Aug. 10, 2018). Rather, the party claiming trade secrets protection must identify the...
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