Mike Vaughn Custom Sports, Inc. v. Piku

• Decision Date: 25 April 2014
• Docket Number: Case No. 12–13083.
• Citation: 15 F.Supp.3d 735
• Parties: MIKE VAUGHN CUSTOM SPORTS, INC., Plaintiff, v. Chrystem “Chris” PIKU, Piku Management Co. d/b/a Worldpro Goaltending—USA, Dennis Dombrowski, and Factory Modification and Design, LLC, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

15 F.Supp.3d 735

MIKE VAUGHN CUSTOM SPORTS, INC., Plaintiff

v.Chrystem “Chris” PIKU, Piku Management Co. d/b/a Worldpro Goaltending—USA, Dennis Dombrowski, and Factory Modification and Design, LLC, Defendants.

Case No. 12–13083.

United States District Court, E.D. Michigan, Southern Division.

Signed April 25, 2014.

Bruce A. Vande Vusse, Brian J. Renaud, Michael R. Blum, Foster Swift Collins & Smith PC, Farmington Hills, MI, for Plaintiff.

Arnold S. Weintraub, Elana H. Gloetzner, Law Offices of Elana Weintraub Gloetzner, PLC, Southfield, MI, for Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS BY DEFENDANTS PIKU AND PIKU MANAGEMENT COMPANY

DAVID M. LAWSON, District Judge.

Plaintiff Mike Vaughn Custom Sports, Inc. manufacturers ice hockey equipment for goaltenders who play the sport at all levels. The plaintiff filed a complaint alleging that Dennis Dombrowski, a former employee, stole design, product, and customer information, formed defendant Factory Modification and Design, LLC as a competing business, and conspired with the other defendants to use the purloined information to manufacture and sell competing products. The plaintiff filed a fourteen-count complaint, later amended, seeking damages and equitable relief. Presently before the Court is a motion by defendants Piku Management Company and its president, Chrystem “Chris” Piku, to dismiss counts I (trade dress infringement), II (trademark dilution and false promotion of goods), III (false designation of origin), IV (trade dress dilution), IX (breach of duty of loyalty), and X (breach of fiduciary duty) of the amended complaint for failure to state a claim. The Court heard oral argument on November 7, 2013, and now concludes that the plaintiff has not pleaded sufficient facts to support its claims in counts I, II, or IV, but the amended complaint adequately states claims in counts III, IX, and X. Therefore, the motion to dismiss will be granted in part and denied in part.

I.

According to the plaintiff, Mike Vaughn Custom Sports, Inc. is a Michigan corporation that designs, manufactures, and sells custom goaltender equipment for professional, collegiate, high school, and amateur hockey players. Defendant Dennis Dombrowski is a former employee of Vaughn Sports. Defendant Piku Management Company is the former retail sales agent for Vaughn Sports products, and defendant Chrystem “Chris” Piku is the President and Chief Executive Officer of Piku Management. Defendant Factory Modification and Design, LLC is a company owned by Dombrowski that manufactures catch gloves, blocker gloves, leg pads, and knee guards for goalies.

The plaintiff alleges that it is a “recognized industry leader” in the design, manufacture, and sale of custom goaltender equipment, Am. Compl. ¶ 20, having developed a famous brand identity and reputation internationally, with sales of its products in the United States, Canada, South America, Europe, and Asia. The plaintiff's product line-up includes hockey goalie pads, catch gloves, arm and chest pads, goal masks, goal pants, goal sticks, goal cups, goal bags, and related accessories. The plaintiff alleges that it developed a signature trade dress for its goalie pads, goalie catch glove, and other products, which it describes as the “Vaughn Trade Dress,” id. ¶ 22, although it has not said exactly what that is.

Dombrowski worked for Vaughn Sports from February 12, 1987 through June 20, 1994 in various capacities, including as a production manager. The plaintiff fired him on November 12, 2010. During his employment, Dombrowski had access to the plaintiff's confidential business information and trade secrets, including the plaintiff's product design specifications, logos, customers, customer contact information, customer-preferred product design specifications, lists of raw materials suppliers and their pricing information, inventory on hand, and other protected business information.

The plaintiff alleges that Dombrowski knew about the plaintiff's policies prohibiting: (1) the removal of company property from Vaughn Sports facilities without authorization; (2) bringing unauthorized visitors into the Vaughn Sports Facility; and (3) using the plaintiff's company telephone lines for non-business communications, including with direct business competition. Nevertheless, the plaintiff says that Dombrowski engaged in multiple lengthy telephone calls on the company telephone lines with Peter Smith, owner of Smith Hockey, Inc., a direct competitor of Vaughn Sports. Smith also is a former employee of the plaintiff, worked with Dombrowski, and created a website following his departure selling hockey goaltender products that are identical in design to the products that Vaughn Sports manufactures. Vaughn Sports believes that Dombrowski helped Smith establish the competing business while Dombrowski worked as an employee at Vaughn Sports. The purpose of the phone calls was to share the plaintiff's confidential business information and trade secrets and to assist Smith in developing his competing business.

The plot came to light, according to the plaintiff, in January 2012, when Yellow Freight Lines, a common carrier, mistakenly delivered to the Vaughn Sports manufacturing facility, “c/o Dennis Dombrowski,” a large hydraulic press machine specifically to manufacture hockey goaltender equipment. The plaintiff alleges that Dombrowski, acting in concert with Smith, Piku, and Piku Management, acquired the hydraulic press to manufacture infringing competitive hockey goaltender products that are identical in design, or confusingly similar to, Vaughn Sports' goaltender products and based on Vaughn Sports' confidential business information, trade dress, and trade secrets.

Before he was fired, Dombrowski, without company authorization, instructed subordinate level production employees to suppress or slow production of Vaughn Sports goalie pads that had been ordered or that were part of a normal production run. Dombrowski did this, says the plaintiff, so that he and other defendants could develop and market their competing hockey goaltending products. He also instructed subordinate level production employees to re-cut or duplicate sections and other pieces of Vaughn Sports goalie pads despite not having any customer orders or other instructions for the re-cutting. Dombrowski mailed those items to Piku and Piku Management in furtherance of their plans to develop and market competing products using Vaughn Sports' trade dress, trade secrets, and confidential business information.

Before Dombrowski left, his employee personnel file and the Vendor Book from Vaughn Sports premises went missing. The amended complaint alleges that Dombrowski removed them or arranged to have them removed. The Vendor Book contained vendor source information for every raw material purchased by Vaughn Sports, the material specification and material item number relating to the vendor, the quantities normally ordered, and the prices paid by Vaughn Sports to vendors for the material. The plaintiff believes that Dombrowski removed the Vendor Book or arranged for its disappearance in furtherance of his joint plan with Piku or Piku Management to develop and market competing products.

Also before Dombrowski was fired, the Vaughn Sports “Master Inventory Book” went missing. The Mastery Inventory Book contained a listing of Vaughn Sports' product inventory on hand, a description of each production job step for each Vaughn Sports product, and the amount of worker time allocated to each production step. That information, along with the Vendor Book, would allow someone to obtain costs for the production of competing products identical to Vaughn Sports. The amended complaint alleges that Dombrowski removed the Master Inventory Book or arranged with Piku Management to remove it, as part of their joint plan to develop and market competing products using Vaughn Sports's trade dress, trade secrets, and confidential business information.

Defendants Piku and Piku Management sold Vaughn Sports products through a goaltender training school called “Worldpro Goaltending—USA” that Piku operated under the auspices of Piku Management. Vaughn Sports financially sponsored the training school until September 2010. Vaughn Sports terminated the sales relationship around September 2010 because Piku and Piku Management failed to maintain a store front, as required by Vaughn Sports policy; keep regular business hours; carry reasonable inventory of Vaughn Sports stock; solicited and accepted orders for Vaughn Sports products with product fit and design modifications that were illegal within the hockey industry; made direct modification to the National Hockey League player's Vaughn Sports goalie equipment, in violation of NHL rules that any proposed modification be pre-approved by the NHL; sold Vaughn Sports products directly to a Canadian hockey equipment dealer that was not an authorized Vaughn Sports dealer, in violation of Vaughn Sports policy; overcharged customers for Vaughn Sports products and falsely represented to those customers that Vaughn Sports imposed those charges; and falsely represented to customers that certain product modifications were his designs, even though Vaughn Sports made the modifications.

The amended complaint alleges that Dombrowski and Piku regularly worked together in the production and outside sale of Vaughn Sports products prior to his termination. Dombrowski regularly allowed Piku to enter the manufacturing areas of Vaughn Sports' facilities, visually inspect and handle the plaintiff's goaltender products, and review and inspect Vaughn Sports' production machinery and processes. The purpose of these joint inspections was to copy know-how on the machinery, tools, process and procedures necessary to manufacture goal equipment, and to copy Vaughn Sports's trade dress and product designs.

The plaintiff alleges that Piku and Dombrowski contacted the plaintiff's long-standing...