H.B. Fuller Co. v. Hamm
| Decision Date | 24 August 2018 |
| Docket Number | Case No. 17-cv-5562 (DWF/HB) |
| Parties | H.B. Fuller Co., Plaintiff, v. Timothy Hamm, Defendant. |
| Court | U.S. District Court — District of Minnesota |
This matter is before the Court on H.B. Fuller's Motion to Amend [Doc. No. 37]. H.B. Fuller alleges that Timothy Hamm, a former sales manager for the company, breached contractual and common law duties he owed to the company and violated state and federal trade secrets laws when he improperly collected H.B. Fuller's proprietary information and used it for the benefit of his new employer, IFS Industries, Inc. (Compl. [Doc. No. 1].) By this motion, H.B. Fuller seeks to add a number of new factual allegations and two new claims: a claim for breach of Hamm's non-competition agreement and a claim for specific performance of that agreement. For the reasons stated below, the Court will grant the motion in part, allowing H.B. Fuller to amend its complaint to add the new factual allegations, but will deny the motion without prejudice as to the new claims.
H.B. Fuller is a company that develops, manufactures, markets, and sells adhesives and specialty chemical products. (Compl. ¶ 6 [Doc. No. 1].) On February 1, 2017, Hamm began working for H.B. Fuller as a Geographic Sales Manager in the company's Durable Assembly business in North America. (Id. ¶ 14.) As a condition of his employment, Hamm executed a Non-Disclosure and Non-Competition Agreement ("NDA") in which he agreed to, among other things, maintain the secrecy of H.B. Fuller's confidential information, refrain from using the company's confidential information after ending his employment with H.B. Fuller, and refrain from competing against H.B. Fuller for the twelve-month period following the termination of his employment with the company. (Compl., Ex. 1 at 5 [Doc. No. 1-1].)
Among the confidential and proprietary information H.B. Fuller seeks to protect through its NDA is its confidential model for pricing its adhesive products, including the "contribution margin" on particular products for particular customers, and its plans for future pricing and margins as to particular products or customers. It alleges that access to this information would, among other things, allow a competitor in the "fiercely competitive" adhesive market to identify customers or products with higher margins, allowing them to undercut H.B. Fuller's pricing for specific customers or across the board, as well as to target new customers. (Compl. ¶¶ 7-9.)
The operative Complaint goes on to allege that on August 7, 2017, roughly six months after beginning his position with H.B. Fuller, Hamm notified the company that hewas leaving his position to accept a new job with a competitor. (Id. ¶ 24.) Although his then soon-to-be employer directly competes with H.B. Fuller in the Durable Assembly business, Hamm represented that he would honor the commitments he made to H.B. Fuller in his NDA. (Id. ¶ 26.) Hamm's last day as an employee of H.B. Fuller was on August 25, 2017. (Id. ¶ 30.) As part of his transition out of his employment with H.B. Fuller, Hamm completed a termination checklist in which he stated he had turned in all of the company files, materials, records, and property in his possession. (Id. ¶¶ 27-28.)
After Hamm left his position, H.B. Fuller retained a computer forensics consulting firm to examine and analyze the data on Hamm's company laptop as part of its standard operating procedures. (Id. ¶¶ 32-33.) The forensic examination showed that on August 18, 2017, the same day that Hamm notified the company that he would be leaving to accept another position, Hamm used a personal email account to send emails from his company laptop while he had access to H.B. Fuller files. (Id. ¶ 35.) It also showed that the same day, he inserted a USB flash drive into his company laptop, and also that he "accessed"1 a number of company files in the "Documents" directory of his laptop, although the Complaint does not specifically allege that he transferred or copied any of those files onto the USB device or elsewhere. Among the files he accessed that day was an Excel spreadsheet named "Hamm Copy of targets 2017" (id.), which listed dozens of H.B. Fuller customers or potential customers as well as information about many of them,including product orders, product volume, pricing, contribution margins, and revenue information. (Id. ¶ 36.)
Based on these findings, H.B. Fuller concluded that Hamm had taken confidential information from the company in violation of his NDA obligations. (Id. ¶ 42.) Shortly thereafter, on December 26, 2017, H.B. Fuller filed a six-count complaint against Hamm asserting causes of action for (1) breach of contract, (2) specific performance, (3) trade secret misappropriation under the Defend Trade Secrets Act, (4) trade secret misappropriation under the Minnesota Uniform Trade Secrets Act, and (5) breach of duty of loyalty and confidentiality. (Id. ¶¶ 51-91.) It also sought injunctive relief. (Id.)
H.B. Fuller moved for a temporary restraining order (TRO) to require Hamm to produce all personal electronic storage devices, storage locations, and personal accounts for forensic examination by an independent third party. (Mot. TRO [Doc. No. 6].) Rather than litigating over the TRO, the parties stipulated to an order governing preliminary forensic analysis, which was entered on January 23, 2018. (Stipulation [Doc. No. 18]; Order Governing Preliminary Analysis [Doc. No. 25].) Pursuant to the parties' agreement, Pixley Forensics conducted an initial preliminary forensic review and analysis of Hamm's personal electronic storage devices and accounts on February 5, 2018. (Stipulation at 2.) The results of that review and analysis give rise to the instant motion.
H.B. Fuller's Proposed Amended Complaint ("PAC") clarifies that Hamm's new employer is IFS Industries ("IFS") and alleges that Pixley Forensics concluded Hamm not only retained possession of H.B. Fuller confidential information and property after heterminated his employment with the company, but that he "accessed" some of that information after he began his employment with IFS.2 (Id. ¶ 50.) Specifically, Pixley Forensics found that USB drives in Hamm's possession contained 367 data files that were also within the "Documents" directory he accessed on his company laptop on August 18, 2017; that his personal emails contained 33 H.B. Fuller data files that were also in that directory; and that his iPhone held 95 H.B. Fuller data files that were also in that directory. (Id. ¶ 51.) Pixley Forensics also found the "Hamm Copy of targets 2017" Excel file in Hamm's personal email account. (Id. ¶ 54.)
Pixley Forensics also concluded that Hamm "accessed" at least 31 of the H.B. Fuller data files on his USB devices over the course of four occasions in September and December of 2017. (Id. ¶¶ 55-56.) Pixley Forensics reported, however, that Hamm did not use any of his own devices to access those files, as a result of which H.B. Fuller alleges it is reasonable to conclude he used his IFS company laptop to access the files on those occasions. (Id. ¶ 59.) H.B. Fuller alleges that one of those files pertains to an H.B. Fuller customer identified as "Customer A," and two of those files pertain to another H.B. Fuller customer identified as "Customer B." (Id. ¶¶ 57-58.) The Customer A file and one of the Customer B files was "accessed" on December 5, 2017, and the other Customer B file was "accessed" on December 19, 2017. (Id.) As to the file that pertained to Customer A, the PAC alleges it contained "information relating to pricing and rebate programs," but there is no equivalent allegation regarding the two filespertaining to Customer B. (Id.) H.B. Fuller further alleges generally that some of the files Hamm "accessed" in September and December contain "highly-sensitive, confidential and proprietary information" regarding significant customers of its Durable Assembly business, "including information related to Customers A and B and specifically relating to pricing and rebate programs." (Id. ¶ 61.) It goes on to assert that the information Hamm "accessed" after he joined IFS would allow a competitor such as IFS to know H.B. Fuller's confidential information for various customers and potential customers, including product volumes, pricing, plans, "contribution margins," and revenues. (Id. ¶ 70.)
The PAC further alleges that IFS "recently"3 approached Customer B to run trials of an adhesive product in competition with an H.B. Fuller product, and that IFS proposed a pricing structure that was "just below H.B. Fuller's pricing structure" for that product. (Id. ¶ 64.) H.B. Fuller asserts that IFS's recent strategic bid for Customer B's business, taken together with Hamm's post-termination access of H.B. Fuller files, demonstrate that Hamm is competing with H.B. Fuller in the Durable Assembly business in violation of Section B(4) of his NDA by sharing H.B. Fuller's confidential information with IFS salesmen and assisting IFS in pursuing Customer B's business. (Id. ¶¶ 65-66.) The PAC also alleges that Hamm's stated position at IFS is "a step down" from his position at H.B. Fuller, and that H.B. Fuller "is informed and reasonably believes" that Hamm's position is only a "means to demonstrate facial compliance with his non-compete obligations"when in actuality Hamm is engaged in the sale of Durable Assembly products in direct competition with H.B. Fuller. (Id. ¶ 61.)
By this motion, H.B. Fuller seeks to amend its complaint to include additional factual allegations and, based on those allegations, to add claims for breach of contract and specific performance premised on violation of Hamm's non-compete obligations under Section B(4) of the NDA. H.B. Fuller contends that it did not include those claims in its initial complaint because it lacked evidence at the time to support them, even though the...
To continue reading
Request your trial