Kendall Holdings, Ltd. v. Eden Cryogenics LLC
| Citation | 2012 Copr.L.Dec. P 30194,846 F.Supp.2d 805 |
| Decision Date | 17 January 2012 |
| Docket Number | Case No. 2:08–cv–390. |
| Parties | KENDALL HOLDINGS, LTD., d/b/a PHPK Technologies, Plaintiff, v. EDEN CRYOGENICS LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION TEXT STARTS HERE
Gerald Paul Ferguson, Kimberly Weber Herlihy, Tyler B. Pensyl, Vorys Sater Seymour & Pease LLP, Columbus, OH, for Plaintiff.
David P. Shouvlin, Bryan R. Faller, Daniel B. Miller, Porter Wright Morris & Arthur LLP, Columbus, OH, for Defendants.
This matter is before the Court on Defendants' Motion for Summary Judgment (Doc. 148), Plaintiffs Motion for Summary Judgment (Doc. 147), and Plaintiff's Motion for Leave to File Surreply (Doc. 172). For the reasons that follow, the Court GRANTS IN PART AND DENIES IN PART both summary judgment motions and GRANTS the plaintiff's motion to file a surreply.
The plaintiff Kendall Holdings, Ltd., d/b/a PHPK Technologies (“plaintiff” or “PHPK”) brought this suit against the defendants Eden Cryogenics LLC (“Eden”), Eden's founder and president Steven L. Hensley (“Hensley”), and Jim Mitchell (“Mitchell”), an Eden employee, to remedy Eden's alleged copyright infringement, misappropriation of trade secrets, deceptive trade practices, and unfair competition claims. This case involves the cryogenics industry, which is a sophisticated industry that utilizes extremely low-temperature substances (such as liquid oxygen, nitrogen, and helium) and high-vacuum conditions. Cryogenics companies, such as the parties to this case, manufacture and supply items, such as valves, bayonets,1 and vacuum-insulated piping, for use in the industrial gas, automotive, military, aerospace, medical, and semiconductor industries.
Hensley began his career in the cryogenics industry in 1967 with CVI, Inc. (“CVI”), a cryogenics company founded by James Pierce (“Pierce”). Hensley asserts that CVI was a leader in the cryogenics industry, and many of the products and innovations created by CVI form the basis for the standardized cryogenics products sold today. While at CVI, Hensley designed CVI's standardized products, including valves, bayonets, and piping, and eventually became CVI's Vice President of Standard Products. Hensley was the primary author of CVI's product catalog.
CVI hired Mitchell in 1988. The following year, Mitchell left CVI to pursue a career as a firefighter. CVI hired Mitchell as an independent contractor in 1991 and Mitchell drafted design and engineering drawings for CVI's standard products, including valves, bayonets, and piping. The parties refer to these drawings as “shop drawings.” Mitchell continued working at his job as a firefighter while working for CVI.
Pierce, CVI's founder, retired from CVI in 1991 and founded PHPK Technologies, Inc. (referred to by the parties as “Old PHPK”). Old PHPK initially operated as an engineering consulting firm. Hensley and Mitchell remained at CVI, which was acquired by Chart Industries, Inc. in 1994.
In 1995, Old PHPK moved into the business of cryogenic products manufacturing and hired Hensley to create a standard product line. Old PHPK. then hired Mitchell as an independent contractor in April 1995. Hensley and Mitchell created Old PHPK's standard product line using their knowledge of the cryogenics industry, as well as their designs from CVI. Hensley and Mitchell also authored Old PHPK's product catalog. Old PHPK additionally developed customer lists and pricing information for its products.
Mitchell ended his employment with Old PHPK in 1999, and he took with him approximately 2000 Old PHPK shop drawings that he had created. Mitchell asserts that it is customary in the cryogenics engineering industry for engineers and independent contractors to take their designs and shop drawings with them when they change employers or leave employment, and that Old PHPK never informed him of any limited-access policy with regards to the shop drawings or indicated to him that he could not take these drawings when he left Old PHPK. Hensley similarly contends that Old PHPK had no policies related to limiting access to shop drawings, and did not require employees to return shop drawings when leaving employment. Hensley also claims that it is common in the industry for engineers to retain these drawings and designs for reference and assistance with future designs. The plaintiff vigorously disputes these assertions, and contends that Old PHPK granted access to the shop drawings to only a select group of employees, kept the shop drawings protected in electronic format, stamped all shop drawings as proprietary and confidential, and in no way allowed employees to take these drawings and designs with them when they left employment.
Mitchell returned to his employment with CVI/Chart upon leaving Old PHPK. Hensley remained at Old PHPK and eventually became Old PHPK's President and General Manager.
In early 2004, Hensley suggested to Richard Coleman, owner of Kendall Holdings, Ltd., that he purchase Old PHPK. In March 2004, Kendall Holdings, Ltd. purchased all of Old PHPK's assets, including Old PHPK's shop drawings, designs, catalog, customer lists, and pricing information, from Pierce and became Kendall Holdings, Ltd. d/b/a PHPK Technologies, the plaintiff herein. PHPK retained Hensley as its president, and he continued in the same role that he had at Old PHPK. PHPK used Old PHPK's shop drawings and designs, and also used Old PHPK's product catalog that Hensley authored. PHPK later hired Mitchell as an independent contractor. While with PHPK, Mitchell again created designs and shop drawings for PHPK standard products, but instead of the valve, bayonets, and piping on which he had previously worked, Mitchell primarily designed cryopumps.
PHPK terminated Hensley in November 2004 because Coleman decided to run the company on his own. Mitchell left PHPK shortly thereafter. Hensley states that he took personal reference material with him when he left PHPK, and he and Mitchell reiterate that PHPK, like Old PHPK, had no policies regarding limited access to shop drawings or required employees to return such documents when leaving employment. Again, the plaintiff vigorously disputes these assertions.
After leaving PHPK, Hensley was unemployed for nearly a year and then worked as a consultant in the cryogenics industry before co-founding a new cryogenics company, Brehon Cryogenics, LLC, in January 2006. This company later became defendant Eden Cryogenics LLC. Eden designs and manufactures cryogenic equipment such as valves, bayonets, and piping, and is in direct competition with PHPK. Hensley hired Mitchell to help design Eden's standard product line, and Mitchell designed these products by referring to his experience in the industry and the designs he created while at CVI and Old PHPK. Hensley, with Mitchell's assistance, also designed Eden's product catalog.
In late 2007, the plaintiff noticed that some of its long-standing customers were purchasing from Eden and that Eden was underbidding PHPK on projects. The plaintiff began an investigation, and concluded that Hensley and Mitchell had improperly acquired shop drawings, customer lists, and pricing information, and were using that information to build Eden's business. The plaintiff also concluded that the defendants had copied PHPK's products catalog.
On February 26, 2008, counsel for the plaintiff sent a cease and desist letter to the defendants outlining the plaintiff's allegations and demanding that the defendants halt all infringing conduct. Two days later, counsel for the defendants responded, indicating that Eden took the allegations very seriously and would conduct a full investigation. Counsel promised to provide a response to PHPK regarding the investigation by April 11, 2008. The plaintiff was not satisfied with this response, and on approximately March 5, 2008, it sent a letter to numerous actual and prospective Eden customers, detailing the plaintiff's claims against the defendants and warning them not to purchase cryogenic products from Eden.
On April 24, 2008, the plaintiff filed the instant action, alleging copyright infringement, misappropriation of trade secrets, deceptive trade practices, unfair competition, breach of fiduciary duty/breach of duty of loyalty, breach of implied contract of confidentiality, conversion, tortious interference with business relationships, and civil conspiracy. The defendants have filed counterclaims for defamation, tortious interference with business relationships, and abuse of process.
On November 14, 2011, the defendants filed Defendants' Motion for Summary Judgment. (Doc. 148.) On December 12, 2011, PHPK filed Plaintiff's Memorandum in Opposition to Defendants' Motion for Summary Judgment (Doc. 159), and on December 30, 2011, the defendants filed their Reply Brief in Support of their Motion for Summary Judgment (Doc. 171).
On November 14, 2011, PHPK filed Plaintiffs' Motion for Summary Judgment (Doc. 147), and on December 12, 2011, the defendants filed Defendants' Memorandum in Opposition to Plaintiff's Motion for Summary Judgment (Doc. 160). The plaintiff filed Plaintiff's Reply in Support of Motion for Summary Judgment on December 30, 2011.
On January 4, 2012, the plaintiff filed Plaintiff's Motion for Leave to File Surreply (Doc. 172) and attached the proposed surreply as an exhibit to the motion (Doc. 172–1). On January 9, 2012, the defendants filed Defendants' Opposition to the Plaintiff's Motion for Leave to File a Surreply. (Doc. 173.)
The Local Civil Rules permit the filing of a motion and memorandum in support, a memorandum in opposition, and a reply memorandum. S.D. Ohio Civ. R. 7.2(a)(1), (2). “No additional memoranda beyond those enumerated will be permitted except upon leave of court for good cause shown.” S.D. Ohio Civ. R. 7.2(a)(2). Because the defendants make new arguments in their reply brief...
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