KPM Analytics N. Am. Corp. v. Blue Sun Sci., LLC
| Decision Date | 15 July 2021 |
| Docket Number | CIVIL ACTION NO. 4:21-CV-10572-TSH |
| Parties | KPM ANALYTICS NORTH AMERICA CORPORATION, Plaintiff, v. BLUE SUN SCIENTIFIC, LLC, THE INNOVATIVE TECHNOLOGIES GROUP & CO., LTD., ARNOLD EILERT, MICHELLE GAJEWSKI, ROBERT GAJEWSKI, RACHAEL GLENISTER, GREGORY ISRAELSON, IRVIN LUCAS, and PHILIP OSSOWSKI, Defendants. |
| Court | U.S. District Court — District of Massachusetts |
ORDER AND MEMORANDUM ON DEFENDANTS' MOTIONS TO DISMISS (Docket Nos. 20, 23, 25, 27, 29, 31, 33, & 35)
HILLMAN, D.J.
KPM Analytics North America Corporation ("Plaintiff" or "KPM") filed this action against Blue Sun Scientific, LLC, ("Blue Sun") and The Innovative Technologies Group & Co., Ltd. ("ITG") (collectively, "Corporate Defendants"); Robert Gajewski; Michelle Gajewski; Arnold Eilert; Rachael Glenister; Gregory Israelson; Irvin Lucas; and Philip Ossowski (collectively, "Individual Defendants"). KPM alleges violations of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836, et seq., the Massachusetts Uniform Trade Secrets Act ("MUTSA"), conversion, and unjust enrichment against all Defendants. It also alleges breach of contract, violations of the covenants of good faith and fair dealing, and breach of duty of loyalty against certain Individual Defendants and tortious interference with contractual relations and unfair or deceptive trade practices, in violation of M.G.L. 93A, § 11, against the Corporate Defendants.
The Corporate Defendants move to dismiss for lack of personal jurisdiction and for failure to state a claim. (Docket No. 20). The Individual Defendants move to dismiss for failure to state a claim, and one moves for dismissal based upon improper venue. (Docket Nos. 23, 25, 27, 29, 31, 33, 35). After hearing and for the following reasons, the Court issues this ruling to dismiss certain claims and certain Defendants. Please see the Appendix attached to this Order for a chart summarizing which motions have been granted and which motions have been denied.
KPM is a corporation with a principal place of business in Milford, Massachusetts. (Compl., ¶ 3, Docket No. 1). KPM's business division Unity Scientific ("Unity") manufactures instruments which analyze the chemical composition of common substances found in consumer products, such as the amount of moisture, oil or protein in flour, agricultural ingredients, chocolate, or processed foods. (¶¶ 1, 18-19). These instruments are designed to be easy to operate and maintain in a production line or in a quality control laboratory. (Id.). Each analyzer contains the measuring apparatus and a computer which can report the data from each measurement to KPM for chemical analysis.
KPM's analyzers use near infrared ("NIR") spectroscopy, a scientific technique which measures the diffraction of light or other electromagnetic radiation and provides faster results than traditional wet chemistry testing methods. (¶ 21). The readings that the analyzers producemust be referenced against the proprietary data in KPM's calibration database, which uses calibration datasets to match the measurements reported by the analyzer to the properties associated with certain chemicals (water, oil, protein) based on samples and reference values in the database. (¶ 24). Per KPM, each calibration dataset in its calibration database is drawn from as many as 50-100 samples that KPM has collected over the past twenty years, and the database includes tens of thousands of samples and over 500,00 reference chemistry values. (¶ 26). KPM's technicians and engineers work with customers to collect and process observed variations of constituent materials with simultaneously measured laboratory results to create calibration datasets. (¶ 28). One calibration dataset may take weeks or months to prepare; the more samples, the more accurate the calibration and the analysis. (¶ 26). KPM asserts that it would require decades of effort, significant investments, and an extensive customer base for a competitor to establish a comparable calibration database. (¶ 29).
Once NIR spectroscopy is performed on a sample and referenced to the appropriate calibration dataset in the database, KPM reports the results of the analysis to the customer using its proprietary UCAL Software. That software has been continuously developed, updated, tested, and released for the past twelve years. (¶ 30). KPM asserts that significant investment and several years of effort would be required to replace or replicate the software, which is critical to support NIR analyzers. (Id.).
In order to ensure that only its employees and consultants that work with the calibration data can access it, KPM's IT provider has established procedures to protect this information. They require management sign-off and instituted access-control processes and the calibration database is stored on a protected, confidential Windows File Server. (¶¶ 30-31). KPM alsorequires non-disclosure and confidentiality agreements with its employees to prevent dissemination. (Id.).
Blue Sun, a Maryland-based limited liability corporation, entered the NIR analyzer market in 2018 as KPM's direct competitor. (¶¶ 4, 40). ITG is Blue Sun's parent company and owner and is also incorporated and headquartered in Maryland. (Id.).
In early 2021, KPM began to suspect that Blue Sun had persuaded seven of KPM's current and former employees (the Individual Defendants) to misappropriate KPM's trade secrets and confidential information in violation of their non-disclosure and/or non-competition agreements. (¶ 41). Blue Sun later hired those employees when they left KPM and have used and continue to use KPM's trade secrets and confidential data to attract new customers and poach KPM's existing clients and business opportunities. (Id.).
Robert Gajewski worked for KPM from 2003 until January 13, 2019 as an employee; from February 1, 2019 to May 13, 2019 as an independent contractor; and from May 13, 2019 to April 5, 2021 as an employee. (¶ 37). On September 25, 2008, he executed a Confidentiality and Non-Competition Agreement agreeing to maintain as secret KPM's confidential information. (Docket No. 1-6 at 1-9). Upon his resignation as an employee in 2019, he signed a letter acknowledging that "all trade secrets, business plans and procedures, client contact list and other confidential information of KPM" were proprietary information that he could not use pursuant to his prior 2008 agreement. (Id. at 10-11). When he rejoined KPM as a business development director in June 2019, his offer letter included and referenced an employee handbook, which contained restrictions on the use of KPM's confidential information. (Id.). As an employee of KPM, Robert Gajewski had access to trade secrets and confidential information, includingdatasets, source code, and customer files. (Compl. ¶ 37). KPM alleges that Gajewski acted on behalf of Blue Sun while employed by KPM on numerous occasions. (¶¶ 42, 44-45, 48, 50-51, 53, 64-81).
On January 11, 2019, KPM employee Arnold Eilert sent Michelle Gajewski and rob@bluesunscientific.com an email that a KPM customer was dissatisfied with KPM's human breast milk application, which KPM was "de-emphasizing." Eilert wrote that, (Docket No. 1-8).
On July 18-19, 2019, Gajewski traveled to Michigan to service KPM analyzers for KPM's customer, Post Foods, but documentation from the visit identifies Mr. Gajewski as a "Blue Sun Service Engineer." . On August 14, 2019, KPM customer Lamb Weston's employee sent an email about an error code on her KPM analyzer to Michelle Gajewski's KPM email address and to rob@bluesunscientific.com—KPM believes that the rob@bluesunscientific.com email address belongs to Robert Gajewski. (Compl. ¶ 45).
On January 17, 2020, KPM customer Olam sent emails requesting assistance with the calibration dataset for garlic powder to Gajewski's KPM email address and irvin@bluesunscientific.com; Gajewski responded to assist the customer and removed irvin@bluesunscientific.com from the ensuing email chain. .
On March 26, 2020, Post Consumer Foods, another KPM customer, sent a $900 purchase order for equipment to Rob Gajewski's KPM email address, but the order form showed that BlueSun, not KPM, was the equipment supplier, and that Gajewski had provided the reference quote for the transaction three days earlier. (Docket No. 1-16 at 3).
On November 24, 2020, KPM discovered an anonymous email sent to info@kpmanalytics.com which claimed that Mr. Gajewski was working for both KPM and Blue Sun. (Compl. ¶ 53).
By March 29, 2021, Blue Sun had published 34 application notes on its website about its NIR Spectroscopy products. (¶ 54). Application notes are a "critical component" of the sale of NIR spectroscopy equipment because they "create confidence and trust that a supplier has the calibration history to perform certain measurements for their product of interest." (¶¶ 59, 62). When a customer purchases an NIR spectroscopy product, it also purchases the ability of the accompanying calibration database to take the measurements collected by the analyzer, measure it against the calibration database, and have accurate parameter/constituent results compared to traditional reference methods. (¶ 60). An application note demonstrates the ability of a specific calibration to perform on a range of samples—in other words, how accurate the analyzer's measurements are compared to more traditional (and time-consuming) chemistry reference methods. (Id.). Each data point in the application note reflects a unique sample that has been measured using both NIR spectroscopy and a traditional...
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