Hayes-Albion v. Kuberski

• Decision Date: 18 August 1981
• Docket Number: Docket No. 48114,HAYES-ALBION
• Citation: 108 Mich.App. 642,311 N.W.2d 122
• Parties: , a Delaware Corporation, d/b/a Gladen Division of Hayes-Albion Corporation, Plaintiff-Appellee, v. Michael A. KUBERSKI, Robert F. Lunger, individually and d/b/a National Pattern and Model Company, International Silicone Corporation, a Michigan corporation, and Erie Marking Tool Company, a Michigan corporation, Betty J. Lunger, and Georgina O. Kuberski, jointly and severally, Defendants-Appellants.
• Court: Court of Appeal of Michigan — District of US

Page 122

311 N.W.2d 122

108 Mich.App. 642

HAYES-ALBION, a Delaware Corporation, d/b/a Gladen Division

of Hayes-Albion Corporation, Plaintiff-Appellee, v. Michael A. KUBERSKI, Robert F. Lunger, individually and d/b/a National Pattern and Model Company, International

Silicone Corporation, a Michigan corporation, and Erie

Marking Tool Company, a Michigan corporation, Betty J.

Lunger, and Georgina O. Kuberski, jointly and severally,

Defendants-Appellants.

Docket No. 48114.

Court of Appeals of Michigan.

Aug. 18, 1981.

Released for Publication Oct. 20, 1981.

E. Frank Cornelius, Ann Arbor, for plaintiff-appellee.

Henry G. Marsh, Saginaw, for defendants-appellants.

Before BEASLEY, P. J., and R. B. BURNS and HOEHN, ^* JJ.

HOEHN, Judge.

Defendants appeal as of right an October 9, 1979, judgment rendered by the trial court granting a permanent injunction in favor of plaintiff and which also gave plaintiff monetary damages and unjust enrichment damages. These damages were based upon defendants' misuse of plaintiff's trade secrets.

Defendant Kuberski was employed by plaintiff on October 17, 1973. Approximately one week after defendant Kuberski was hired by plaintiff, he signed an invention assignment agreement and a trade secret agreement.

Plaintiff manufactures silicone rubber sheets, dies, rollers, and sleeves to be used in hot stamp decorating. Plaintiff does not do the hot stamp decorating itself. Most of the processes and equipment used by plaintiff were developed by the founder of the company, Carl Gladen.

Defendant Kuberski met defendant Lunger while working for plaintiff. Mr. Lunger owned defendant National Pattern and Model Company and defendant Erie Marking Tool Company. Although plaintiff had previously used the services of Erie, the volume of business after this meeting substantially increased. The orders before this meeting were approximately $12,500 for the previous year. For the next year and two months, the sales volume was around $81,000. Before this meeting plaintiff did no business with National Pattern.

In October of 1976, defendants Kuberski and Lunger signed the articles of incorporation for defendant International Silicone. Defendant Kuberski resigned from plaintiff corporation on January 31, 1977. During the intervening time, defendant looked for equipment for International Silicone and made various phone calls. This suit was filed on March 17, 1977, charging defendants with misappropriation of trade secrets and confidential information, and plaintiff sought injunctive relief and damages for lost profits and unjust enrichment. A preliminary injunction was issued on April 25, 1978. A trial to the bench was held from April 24, 1979, through May 23, 1979.

The trial court found that defendant Kuberski's trade secret agreement was valid and enforceable. It also found that, regardless of the contract, defendant Kuberski was prohibited by the common law from disclosing trade secrets. The trial court found that plaintiff's manufacturing procedures manual, that plaintiff's bonding technique, that plaintiff's technology for manufacturing dies, that plaintiff's technology for manufacturing rollers and sleeves, that plaintiff's customer lists and project information, and that plaintiff's materials, supplies, and sources were all trade secrets. The court found that defendants had misappropriated each and every one of the above described trade secrets. The court awarded plaintiff lost profits for the time defendants were in operation. These lost profits were based upon plaintiff's selling price and margin of profit, not defendants'.

The court also rendered a judgment against defendants for unjust enrichment. This was based upon defendant Kuberski's placement of orders with defendants National Pattern and Erie while Mr. Kuberski worked for plaintiff. The court also awarded plaintiff exemplary damages in the amount of $25,000 in cash. In all, defendants were found liable for $176,968.39, plus costs of $3,443.80, plus interest. Defendants were also permanently enjoined from disclosing or using any of plaintiff's trade secrets relating to the production, sale or use of material for hot stamp decorating.

Further facts, where necessary, will be included in the discussion of the issues.

STATEMENT OF ISSUES:

I. WHETHER THE TRADE SECRETS AGREEMENT SIGNED BY DEFENDANT KUBERSKI ONE WEEK AFTER HE WAS EMPLOYED BY PLAINTIFF WAS VALID.

II. WHETHER PLAINTIFF HAS TRADE SECRETS WHICH DEFENDANTS USED IN VIOLATION OF PLAINTIFF'S RIGHTS.

III. WHETHER PLAINTIFF MUST PROVE THAT ITS ALLEGED TRADE SECRETS AND CONFIDENTIAL INFORMATION ARE NOT KNOWN TO OTHERS IN THE TRADE.

IV. WHETHER THE EVIDENCE SUPPORTS THE TRIAL COURT'S FINDING THAT PLAINTIFF IS ENTITLED TO LOST PROFITS AS THE RESULT OF SALES MADE BY DEFENDANTS.

V. WHETHER DEFENDANTS LUNGER, ERIE TOOL, AND NATIONAL PATTERN WERE UNJUSTLY ENRICHED BECAUSE OF DEFENDANT KUBERSKI'S PLACEMENT OF BUSINESS WITH THEM WHEN KUBERSKI WORKED FOR PLAINTIFF, AND IF SO, WHETHER PLAINTIFF CAN RECOVER FOR UNJUST ENRICHMENT IN ADDITION TO LOST PROFITS.

VI. WHETHER PLAINTIFF WAS ENTITLED TO EXEMPLARY DAMAGES UNDER THE FACTS OF THIS CASE.

VII. WHETHER THE TRIAL COURT ERRED IN EXCLUDING THE TESTIMONY OF RAY FLYNT, EVEN ON A SEPARATE RECORD.

VIII. WHETHER THE TRIAL COURT ERRED IN ISSUING A PERMANENT INJUNCTION WHICH PROHIBITED DEFENDANTS FROM EVER DISCLOSING OR USING TRADE SECRETS OR CONFIDENTIAL INFORMATION OF PLAINTIFF.

IX. WHETHER THE TRIAL COURT SHOULD HAVE GRANTED DEFENDANTS' MOTION FOR A NEW TRIAL AND DISQUALIFIED ITSELF BECAUSE OF POSSIBLE BIAS AGAINST DEFENDANTS.

The Court will discuss these issues seriatim.

I. WHETHER THE TRADE SECRETS AGREEMENT SIGNED BY DEFENDANT KUBERSKI ONE WEEK AFTER HE WAS EMPLOYED BY PLAINTIFF WAS VALID.

A condition of employment that one may not disclose trade secrets is valid. O & W Thum Co. v. Tloczynski, 114 Mich. 149, 72 N.W. 140 (1897). The condition may be implied if there is a confidential relationship. Id., 157-158, 72 N.W. 140. This condition does not violate public policy against restraint of trade because:

"To restrain him from making use of what he has not discovered is not an injustice to him, and does not abridge his right to work along those lines which would not be harmful to those to whom he has sustained a position of confidence." Id., 161, 72 N.W. 140.

The statute which makes illegal any contract which prevents a person from engaging in any trade or profession does not apply to a trade secret agreement. Glucol Mfg. Co. v. Schulist, 239 Mich. 70, 74, 214 N.W. 152 (1927). A contract which restricts the employee only from disclosing trade secrets, and not from employment in the industry, does not violate the statute. When "one obtains a trade secret of another either under contract not to divulge the same or because of relationship of confidence or through his employment, he will not be permitted afterward to make use of such secret for his own benefit or to disclose it to others without the consent of the original possessor of the secret". Dutch Cookie Machine Co. v. Vande Vrede, 289 Mich. 272, 279-280, 286 N.W. 612 (1939).

Although one has the right to change jobs and use his learned skills, he does not have the right to disclose trade secrets. Allis-Chalmers Mfg. Co. v. Continental Aviation & Engineering Corp., 255 F.Supp. 645, 653 (E.D.Mich.1966).

The trade secret agreement signed by defendant Kuberski was executed one week after he was hired by plaintiff. The agreement provides:

"I agree not to communicate or disclose to any person, either directly or indirectly or under any circumstances or at any time, any knowledge or information whatsoever acquired by me during the period of my employment relating to or concerning the Company's inventions, trade secrets, systems or any other confidential information regarding the property, business and affairs of the Company or any of its subsidiaries without the written consent of the Company, and I agree not to utilize or make available any such knowledge or information, either directly or indirectly, in connection with the solicitation of or the acceptance of employment with any competitor of the Company."

The agreement was restricted to the disclosure of trade secrets. Defendant Kuberski is perfectly free to use his general skill and knowledge. This agreement does not violate M.C.L. § 445.761; M.S.A. § 28.61.

Even without an agreement specifically prohibiting disclosure of trade secrets, defendant Kuberski is prohibited by the common law from disclosing such trade secrets. O & W Thum Co., supra, 114 Mich. 157-158, 72 N.W. 140. Defendant Kuberski's own testimony indicated that he knew there was certain information he should not disclose to competitors.

Finally, defendant Kuberski's contention that there was no consideration for the agreement, and it was therefore unenforceable, is without merit. M.C.L. § 566.1; M.S.A. § 26.978(1) provides that any agreement to change any contract is not invalid because of lack of consideration, as long as the modification is written and signed. Defendant Kuberski's attempt to restrict this statute to real property and personal property does not easily comport with the language of the statute itself.

It is this Court's opinion that a valid and enforceable trade secret agreement applied to defendant Kuberski. There was no error by the trial court on this issue.

II. WHETHER PLAINTIFF HAS TRADE SECRETS WHICH DEFENDANTS USED IN VIOLATION OF PLAINTIFF'S RIGHTS.

The law gives no protection to knowledge which is so general as to be common property in the trade. Russell v. Wall Wire Products Co., 346 Mich. 581, 590-591, 78 N.W.2d 149 (1956). Kubik, Inc. v. Hull, 56 Mich.App. 335, 347-348, 224 N.W.2d 80 (1974), lists the steps in order to find whether the information is a trade secret. To be a trade secret the information must be: (1) valuable enough to give the possessor a competitive edge over those who do not use the information or know of...