Fail–safe Llc v. A.O. Smith Corp..

• Decision Date: 14 January 2011
• Docket Number: Case No. 08–CV–0310.
• Parties: FAIL–SAFE LLC, Plaintiff,v.A.O. SMITH CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

762 F.Supp.2d 1126

FAIL–SAFE LLC, Plaintiff,

v.A.O. SMITH CORPORATION, Defendant.

Case No. 08–CV–0310.

United States District Court, E.D. Wisconsin.

Jan. 14, 2011.

George Stephen Long, Nicole A. Westbrook, Reid A. Page, Cash K. Parker, Gretchen E. Lipman, Polsinelli Shughart PC, Denver, CO, John R. Schreiber, Patrick G. McBride, Gregory W. Lyons, O'Neil Cannon Hollman Dejong & Laing SC, Milwaukee, WI, for Plaintiff.J. Donald Best, Melanie J. Reichenberger, Richard H. Marschall, S. Edward Sarskas, Michael Best & Friedrich LLP, Madison, WI, for Defendant.

ORDER

J.P. STADTMUELLER, District Judge.

The court commented in its September 3, 2010 order that this case was the “quintessential example” of how litigation can be “the story of regret,” as the parties and attorneys on both sides in this matter had made several “questionable” decisions before this litigation began that ultimately harmed each sides' respective strategic positions. (Docket # 195 at 1). The course of this litigation over the past month has made abundantly clear that the parties' counsel's “questionable” decisions did not cease upon the filing of the complaint in this case and extended well to the eve of trial. Indeed, even to the most casual observer, the docket entries in this case portray all too well contentious litigation conduct that might be best described as a cross between a kabuki dance and musical chairs. However, as reflected in the balance of this order, the extended musical interlude has now come to an end leaving the parties and their counsel standing with no place to go—except home. Whether it be in the plaintiff's failure to disclose its members in its initial complaint, or in the parties' multiple requests for a mediation when the parties' actions suggest virtually no movement in their respective positions, or in the threadbare initial expert reports regarding damages provided by the plaintiff, Fail–Safe, LLC (“FS”), or in the “supplements” to those reports that attempted to repair gaping holes in the initial reports, or in motions, provided by both sides, that rightfully should have been before the court years ago, the docket in this case reflects countless examples of serious inattention to detail on the front end of this ligation, followed by numerous attempts to try to play “catch up” after the case had been scheduled for trial. ¹ The net result has been chaotic litigation that has been, in the words of one Seventh Circuit jurist, “gummed up from the get-go.” Johnson v. McCaughtry, 265 F.3d 559, 567 (7th Cir.2001) (Evans, J., dissenting). Against this background, six motions have been filed by the defendant, A.O. Smith Corporation (“AOS”), and eight motions have been filed by FS since the court issued its December 23, 2010 order regarding damages.² The court resolves in this order AOS's motion for a judgment on the pleadings with respect to FS's remaining claim (Docket # 237), beginning with examining once again the substantive claim of unjust enrichment under Wisconsin law.

To prevail on an unjust enrichment claim, a plaintiff must prove that: (1) a benefit was “conferred upon the defendant by the plaintiff”; (2) there was an “appreciation by the defendant of the fact of such benefit”; and (3) “acceptance and retention” of the benefit by the defendant, under circumstances such that it would be “inequitable to retain the benefit without payment of the value thereof.” Seegers v. Sprague, 70 Wis.2d 997, 1004, 236 N.W.2d 227 (1975). In its summary judgment motion, AOS argued that there was no dispute of fact with regard to whether a benefit was conferred upon the defendant after December of 2004. (Docket # 121). In its current motion, the defendant argues that the third prong of unjust enrichment cannot be met in this case, as “Wisconsin law does not allow unjust enrichment claims to go forward under circumstances such as these.” ³ (Def.'s Br. at 2).

The “circumstances” that AOS references in its briefs to the court are simple. Accepting FS's allegations as true and keeping in mind the law of the case,⁴ AOS contacted FS to see if the latter company had an interest in the production of a pool pump motor. (Compl. ¶ 11; Docket # 195 at 11–12). In the midst of conversations between the two parties and prior to the parties actually meeting in person, FS's founder sent information, described in the complaint as “hydraulic testing and operational protocols for a load-sensing, suction entrapment-preventive motor,” (Compl. ¶ 31), to the defendant. (Docket # 195 at 13–14). Elsewhere in the complaint, FS details the nature of the “hydraulic testing and operational protocols” for the pool pump, noting that the information that FS provided to AOS included an “outline of potential new and innovative features that could be designed into the new pump motor” and the “data for the load sensing and delay technology used on” FS's LoadTec motor, a motor that had previously been sold to the general public.⁵ Id. ¶ 16; (Docket # 195 at 6). Given what was in the complaint and what the court has already ruled, the issue for the court to decide is whether, as a matter of Wisconsin's law regarding the substantive claim of unjust enrichment, principles of equity allow for AOS to retain the benefit of the information FS voluntarily shared with the defendant. Before proceeding to the analysis of that legal issue, the court turns its attention to the procedural standards animating the motion.

Fed.R.Civ.P. 12(c) allows for a judgment on the pleadings. Midwest Gas Servs., Inc. v. Ind. Gas Co., 317 F.3d 703, 709 (7th Cir.2003). Such a motion should be granted “only if it appears beyond doubt that the plaintiff cannot prove any facts that would support [its] claim for relief.” Id. In evaluating the motion, the court accepts all “well-pleaded allegations in the complaint as true, drawing all reasonable inferences in favor of the plaintiff.” Id.; see also Forseth v. Vill. of Sussex, 199 F.3d 363, 368 (7th Cir.2000) (“A complaint may not be dismissed unless it is impossible to prevail under any set of facts that could be proved consistent with the allegations”) (internal citations omitted). ⁶ With these standards in mind, the court addresses the central legal issue.

The central legal issue is not very difficult for this court to resolve, however, as the case law is explicit: under Wisconsin's law of unjust enrichment it is not inequitable for one to benefit from the willful disclosure of information or an idea when such an idea or invention is not protected by some sort of intellectual property right. Abbott Laboratories v. Norse Chemical Corp., 33 Wis.2d 445, 468, 147 N.W.2d 529 (1967) (“In view of the fact that no trade secrets were appropriated by the defendants, there was no unjust enrichment and plaintiff is not entitled to restitution.”). In interpreting Abbott Laboratories, the Seventh Circuit was even more clear, stating that “Wisconsin law denies recovery for unjust enrichment if all the defendant has done is use (to his profit) an idea that is not a trade secret.” ConFold Pac., Inc. v. Polaris Indus., 433 F.3d 952, 957 (7th Cir.2006). Here, as the court stated in its earlier order, the “benefits” that AOS received—the crux of FS's entire remaining claim—is simply information consisting of, at best for FS: (1) a list of features of a proposed motor; (2) general tips or know-how provided by FS; (3) testing data on a publically available motor; and (4) a copy of an unpatented motor. ⁷ (Docket # 195 at 31–32). The plaintiff recently described the “benefit” FS conferred upon AOS as “technical information, instruction and assistance” (Docket # 232 at 6), and, accepting the allegations in the complaint as true, FS simply provided information and ideas to AOS.⁸ The information and ideas that FS provided to AOS were not protected by a patent, and the court has already ruled that “FS failed to take even the most elementary steps to protect” the alleged “benefit” it provided to AOS, ensuring that such information in no way constitutes a “trade secret.” (Docket # 195 at 48). The presumption is that information is within the public domain unless that information is protected by some “body of law” that creates an intellectual property right. ConFold Pacific, Inc., 433 F.3d at 959. Here, as the information in question is “not secret and [is] not protected by any of the laws that create property rights in information, it is in the public domain and freely usable.” Id. Put another way, as a matter of law, Wisconsin's law of unjust enrichment dictates that it is “not inequitable” when one obtains the benefit of information that is not protected by some intellectual property right, such as a patent or a trade secret. Id.; see also Major Mat Co. v. Monsanto Co., 969 F.2d 579, 585 (7th Cir.1992) (holding that a claim based on the plaintiff's allegation that it “conferred a benefit” on the defendant by revealing a market which the defendant later “exploited” without compensating the plaintiff fails to state a claim under Wisconsin's unjust enrichment law); Studio & Partners, s.r.l. v. KI, No. 06–CV–0628, 2008 WL 426496, at *15, 2008 U.S. Dist. LEXIS 11321, at *45–46 (E.D.Wis. Feb. 14, 2008) (dismissing a claim of unjust enrichment premised on the idea that the defendant “stole” an “idea” that was not a trade secret or protected by a patent); see generally State Bar of Wisconsin, Wisconsin Employment Law, § 15.82 (3d ed. 2004) (“[I]t is inconsistent with the careful balancing of interests that trade secret law represents to permit an unsuccessful trade secret plaintiff to achieve the same end by asserting ... [an] unjust enrichment [claim].”) ⁹ The third element of an unjust enrichment claim cannot be met in this case, and, as a result, the court is obliged to dismiss FS's remaining claim.

The court's holding is consistent with the policies underlying trade secret law, which is intended to “encourage innovation and development” without “stifl[ing]...