Lyn-Flex West Inc. v. Dieckhause et al.

• Court: Missouri Court of Appeals
• Citation: Lyn-Flex West Inc. v. Dieckhause et al., 24 S.W.3d 693 (Mo. App. 1999)
• Decision Date: 21 December 1999
• Parties: (Mo.App. E.D. 1999) Lyn-Flex West, Inc., Plaintiff/Appellant, v. Wayne Dieckhaus, et al., Defendants/Respondents. Case Number: ED75852 Missouri Court of Appeals Eastern District Handdown Date:

24 S.W.3d 693 (Mo.App. E.D. 1999)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court

Lyn-Flex West, Inc., Plaintiff/Appellant, v. Wayne Dieckhaus, et al., Defendants/Respondents.

Case Number: ED75852

Missouri Court of Appeals Eastern District

Handdown Date: 12/21/99

Appeal From: Circuit Court of Gasconade County, Hon. John Brackman

Counsel for Appellant: William M. Sauerwein and Martin W. Blanchard

Counsel for Respondent: Charles A. Seigel, III and Michael A. wolff

Opinion Summary: Plaintiff Lyn-Flex West, Inc., appeals the judgment entered following the grant of a directed verdict in favor of defendants Wayne Dieckhaus, Dick Dieckhaus, George Convy, and Walk Easy Manufacturing Co., Inc. in an action for misappropriation of trade secrets, tortious interference with a business expectancy, and conspiracy.

REVERSED AND REMANDED.

Division One holds: The trial court erred in sustaining defendants' motion for directed verdict and withdrawing from the jury plaintiff's claims of damages because plaintiff presented sufficient evidence to make a claim for: (1) misappropriation of trade secrets under The Uniform Trade Secrets Act, Sections 417.450 to 417.467 RSMo 1998 Supp.; (2) tortious interference with a business expectancy; and (3) conspiracy.

Opinion Author: Paul J. Simon, Judge

Opinion Vote: REVERSED AND REMANDED. Gaertner, P.J. and J. Dowd, J., concur.

Opinion:

Lyn-Flex West, Inc., plaintiff, appeals the judgment entered following the grant of a directed verdict in favor of defendants, Wayne Dieckhaus (Wayne), Dick Dieckhaus (Dick), George Convy, and Walk Easy Manufacturing Co., Inc., (collectively defendants), in an action for misappropriation of trade secrets, tortious interference with a business expectancy, and conspiracy. On appeal, plaintiff contends that the trial court erred in sustaining defendants' motion for directed verdict and withdrawing from the jury plaintiff's claims for damages because plaintiff presented sufficient evidence to make a claim for : (1) misappropriation of trade secrets under Section 417.450 RSMo 1998 Supp. (The Uniform Trade Secrets Act); (2) tortious interference with a business expectancy; and (3) conspiracy. We reverse and remand.

When reviewing a directed verdict in favor of a defendant, we view the evidence in the light most favorable to plaintiff, disregarding all contrary evidence and inferences. Matter of Estate of Wilde, 963 S.W.2d 336, 338 (Mo.App. E.D. 1997). A directed verdict is a drastic action, and accordingly, we will reverse the trial court's directed verdict unless the facts and inferences therefrom are so strongly against the plaintiff as to leave no room for reasonable minds to differ as to a result. Schumacher v. Barker, 948 S.W.2d 166, 168 (Mo.App. E.D.1997).

The record, in the light most favorable to the plaintiff, reveals that plaintiff is a national corporation engaged in the business of shoe insole manufacturing. Walk Easy is also engaged in the same business and is currently one of plaintiff's two competitors, manufacturing the same products and servicing many of plaintiff's former customers at prices pennies lower than plaintiff's. In many instances, plaintiff's product codes are used by Walk Easy. Defendants Wayne, Dick and Convy, formerly officers of plaintiff, currently are officers of Walk Easy.

For years, plaintiff has compiled the identity of its customers, the technical and detailed information concerning products manufactured for each of those customers, the materials used in the production and manufacturing of each product, and the precise dimensions of each part comprising the insole, including notes and codes unique to each customer in a Detailed Price and Specifications Book (price book).

Plaintiff's current and former employees testified that the book was kept in an office with limited access and locked at night,. Although it was not kept in a lock box or stamped confidential, office employees understood it to be such and that it would not be shown to competitors or those who had no need to see its contents. Dick acknowledged that the possession of the book in the hands of a competitor would give an advantage, at least in the area of pricing. Only Gary Hahn, plaintiff's computer technician, had the ability to print out a price book and it was distributed only to those who had a need to use it.

Peter Leher was the sole stockholder of plaintiff until his death. Wayne served as plaintiff's president, with Dick as general manager, and Convy as head of sales. Following Leher's death, plaintiff was operated by United Missouri Bank (UMB) as trustee of his estate. UMB contacted Wallace McNeill, an investor, to inquire whether he was interested in purchasing plaintiff. He declined, as he did not want to compete with an "inside group," consisting of Dick, Wayne, and Convy, along with several of plaintiff's employees who had already expressed an interest in purchasing the company from UMB. During negotiations with Dick, Wayne, and Convy, UMB began to distrust the inside group, as it felt that the Dick and Wayne submitted income and expense reports without supporting information and that Convy had made misrepresentations as to the ownership of certain equipment. Additionally, UMB felt that their offer was too low according to the appraised value of plaintiff.

UMB again contacted McNeill to inquire as to whether he was interested in purchasing plaintiff and he traveled to plaintiff's facilities to view the premises, equipment, books and records. At Wayne's insistence, UMB required all prospective purchasers to sign a confidentiality agreement for fear that a prospective purchaser might be a front for a competitor. In particular, Wayne indicated his concern as to the disclosure of customer names and sales. McNeill signed such an agreement.

On November 7, 1997, McNeill purchased all of the company's stock and the purchase was announced to plaintiff's employees. The next day, Wayne, Dick and Convy announced to McNeill that they were leaving. The three officers left on November 12, 1997 and established Walk Easy, using a corporate name registered to Convy and his son. The lease for the manufacturing facility of Walk Easy had been negotiated one day earlier by Wayne. Dick had been shopping for equipment the week before he left plaintiff. Shortly before he left, Dick asked Jane Folker, who shortly thereafter went to work for Walk Easy, to ask Gary Hahn to print out a new price book for him. That price book has not been found on plaintiff's premises.

In a deposition, Jane Folker admitted to seeing one of plaintiff's price books in Dick's office at Walk Easy, and stated that she had observed Dick use the book on occasion. After these statements were made, the police searched the premises of Walk Easy and recovered a price book of plaintiff. At trial, Dick maintained that the book was given to him by Leher to be kept at his home. He admitted at trial that he did occasionally use the price book for reference in pricing to see how Walk Easy prices compared to plaintiff's. While he maintained at trial that he developed Walk Easy's specifications from memory, reflecting his many years at plaintiff, when asked at trial, he could not recall those specifications. Some of Walk Easy's customers also stated that they did not provide Dick with specifications for their products.

As a result of the competition, plaintiff lost several customers to Walk Easy, including Justin Boot and its subsidiaries, costing plaintiff hundreds of thousands of dollars in lost sales.

Plaintiff brought suit in the circuit court in Franklin County, alleging misappropriation of trade secrets, tortious interference with a business expectancy and conspiracy. At the close of plaintiff's evidence, the defendants made an oral motion for a directed verdict on the basis that plaintiff had failed to produce evidence to support a finding that the price book was a trade secret and thus had failed to show that: (1) any trade secrets had been misappropriated, (2) defendants had acted without justification in interfering with plaintiff's business expectancy and (3) defendants conspired to commit an unlawful act. The trial judge sustained the oral motion, indicating that he did not believe that the price book was a trade secret, by stating "I don't think they made sufficient effort to protect the books before plaintiff bought the company. And all the evidence is that they used those old books." The trial court found that the book was not a trade secret and ruled that plaintiff had not established evidence sufficient to show misappropriation, absence of a justification for tortious interference and an unlawful act for conspiracy. The trial court made no written findings of fact and conclusions of law.

In its first point on appeal, plaintiff contends that the trial court erred in directing a verdict against plaintiff on its claims for damages for misappropriation of trade secrets under the Uniform Trade Secrets Act, Sections 417.450-417.467 RSMo 1998 (Cum. Supp. (all further references herein shall be to RSMo 1998 (Cum. Supp.) unless otherwise noted ). Plaintiff argues that it presented evidence sufficient to allow a reasonable jury to conclude that defendants had misappropriated trade secrets of plaintiff by removing a confidential price book belonging to plaintiff, using the information in such book to compete against plaintiff and that as a result plaintiff was thereby harmed. Defendants contend that the price book does not constitute a trade secret because the information contained in the book is generally known and no efforts were made to maintain its secrecy.

The Uniform Trade Secrets Act, sections 417.450 to 417.467, has been adopted in Missouri, the District of Columbia and forty other states. The definition section 417.453 provides, in pertinent part:

As used in sections 417.450 to 417.467, the following terms mean:

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