Nat'l Tractor Parts Inc. v. Caterpillar Logistics Inc.

• Citation: 171 N.E.3d 1,446 Ill.Dec. 566,2020 IL App (2d) 181056
• Decision Date: 28 February 2020
• Docket Number: No. 2-18-1056,2-18-1056
• Court: United States Appellate Court of Illinois
• Parties: NATIONAL TRACTOR PARTS INC., Plaintiff-Appellant, v. CATERPILLAR LOGISTICS INC., Defendant-Appellee.

2020 IL App (2d) 181056

171 N.E.3d 1

446 Ill.Dec. 566

NATIONAL TRACTOR PARTS INC., Plaintiff-Appellant,

v.CATERPILLAR LOGISTICS INC., Defendant-Appellee.

No. 2-18-1056

Appellate Court of Illinois, Second District.

Rule 23 Filed February 11, 2020

Motion to Publish Granted February 28, 2020

Opinion filed February 28, 2020

Colin H. Dunn, of Colin H. Dunn, LLC, of Chicago, for appellant.

John M. Touhy and David M. Friebus, of Baker & Hostetler LLP, of Chicago, for appellee.

JUSTICE BURKE delivered the judgment of the court, with opinion.

¶ 1 Plaintiff National Tractor Parts (NTP) appeals from an order of the trial court granting summary judgment in favor of defendant, Caterpillar Logistics Inc. (CLI), denying NTP's request for additional discovery and striking its affidavits. For the following reasons, we affirm.

¶ 2 I. BACKGROUND

¶ 3 NTP's pleadings in this case reflect that after 1973 but before it started working for CLI's parent company Caterpillar in 1986, NTP changed the way it performed the assembly process from a cell assembly process to a pulsed line assembly process. In a cell assembly process, multiple parts are brought to a single location for assembly. In a pulsed line assembly process, certain components are assembled at one workstation and then the subassembly is moved to another workstation where specific additional parts are assembled. NTP alleged that this change in process resulted in increased levels of efficiency, quality control, and cost savings. NTP summarized its pulsed line assembly process into "build books" and other assembly aids that its employees used to perform their work. When NTP's build books and other assembly aids were not being used by its employees to perform their work, those materials were kept inside a locked cabinet in a locked office in NTP's dedicated work area located in a Caterpillar or CLI facility. NTP did not require its employees to sign confidentiality agreements; however, its employees were instructed that the build books and other assembly aids were the property of NTP and could not be shared with any other entity.

¶ 4 In 1986 Caterpillar hired NTP to assemble and repair track chain for Caterpillar's truck-based products. In 1989, Caterpillar and NTP entered into the first of two purchase agreements. In those agreements NTP agreed to perform such services exclusively for Caterpillar. NTP also agreed that Caterpillar owned the component parts it provided to NTP to assemble, and NTP agreed to use them for assembling Caterpillar products exclusively. NTP also agreed to keep technical and business information it received from Caterpillar confidential.

¶ 5 In 2004, NTP expressed its desire to perform work for other customers in addition to Caterpillar. Therefore, it entered into a services agreement with CLI, a Caterpillar subsidiary that contracted with third-party suppliers to provide services to Caterpillar's manufacturing facilities. At that time, NTP was building "subassemblies" for Caterpillar excavators and wheel loaders. "subassemblies" were larger parts, such as valves, brake packs, and fuel tanks, made up of smaller component parts. NTP would use Caterpillar parts and instructions to put together subassemblies, and Caterpillar would incorporate the subassemblies into its machines during the manufacturing process.

¶ 6 In the 2004 services agreements, CLI agreed to provide NTP with work instructions and standards, layouts, and visual assembly aids. It also agreed to help NTP with any assembly build questions. NTP agreed to hire hourly associates to perform assembly services and provide management supervision of the subassembly operations. The services agreement also contained confidentiality provisions that prohibited NTP from using information it learned or developed while performing services for CLI for any other purpose. Specifically, those provisions provided:

"9. Confidential Information.

(a) NTP may receive Confidential Information from Cat Logistics or create Confidential Information as a result of Services, and any such Confidential Information is and shall be owned by Cat Logistics. Except as required for the performance of Services hereunder, NTP shall not use or disclose to any third party any such Confidential Information. NTP agrees to take all necessary steps to protect any Confidential information with at least the same degree of care that NTP uses to protect its own confidential and proprietary information of like kind, but not less than reasonable care. NTP shall not use Confidential Information other than to perform Services in accordance with this Agreement. The obligation of confidentiality hereunder shall not apply to information that: (i) was already in the possession of NTP without restriction on its use or disclosure prior to the receipt of the information from Cat Logistics; (ii) is or becomes available to the general public through no act or fault of NTP; (iii) is rightfully disclosed to NTP by a third party without restriction on its use or disclosure; (iv) is independently developed by employees and/or consultants of NTP who have not had access to the Confidential Information; or (v) is required to be disclosed pursuant to judicial or governmental decree or order, provided that Cat Logistics is given prompt notice of and opportunity to defend against disclosure pursuant to such decree or order.

(b) Upon completion of any Services all Confidential Information shall be promptly delivered to Cat Logistics.

(c) The requirements of Section 9(a) shall survive the termination of this Agreement for a period of five (5) years.

(d) For purposes of Section 9, "Confidential Information" means any design, specification, idea, concept, plan, copy, formula, drawing, procedure, business process, organizational data, customer or supplier lists, or other business or technical information that the disclosing party holds confidential or considers proprietary whether oral, written or viewed by inspection, that is obtained as a result of Services rendered by NTP to Cat Logistics in connection with this Agreement.

(e) On or before September 1, 2004, NTP shall obtain a written agreement in the form attached as Exhibit D, or other form acceptable to Cat Logistics, from each of its employees, subcontractors and agents. Upon request, NTP agrees to make such agreements available to Cat Logistics for inspection. NTP shall be liable for any failure by it, or its agents or subcontractors, or its or their employees to comply with Section 9."

Nothing in the services agreement referred to NTP using any secret or proprietary process to build Caterpillar's subassemblies.

¶ 7 NTP and CLI entered into a second services agreement in December 2005. The confidentiality provisions in the 2005 services agreement were identical to those in the 2004 agreement (although the 2005 and subsequent confidentiality provisions were now found in section 8.1 of the services agreements and not section 9 of the agreements). In both agreements NTP agreed to provide labor to perform assembly services, and CLI agreed to define expected work standards, provide visual assembly aids, and work with NTP to design the subassembly process.

¶ 8 NTP and CLI entered into a third services agreement in November 2007. The 2007 services agreement referred to NTP's move to the Aurora Logistics Center, a CLI facility across the street from Caterpillar's Aurora manufacturing plant. Regarding confidentiality, the 2007 agreement was materially identical to the previous agreements. However, the 2007 agreement added two new provisions. First, an express requirement was added that NTP perform services according to Caterpillar's "Standard Processes," which were defined as "Caterpillar Inc. standard processes and procedures required by Cat Logistics." Caterpillar's "Standard Processes" included the assembly processes for Caterpillar's subassemblies. The second provision governed NTP's use of the Aurora Logistics Center. CLI agreed to use "commercially reasonable efforts" to "designate and physically identify and/or delineate NTP's work area within the Aurora Logistics Center and to limit access to any CLI employees or agents "for whom access is required to perform the Services."

¶ 9 In January 2011, the parties entered into a fourth and final services agreement. The 2011 agreement contained the same provisions as the previous agreements regarding confidentiality, subassembly documentation, work standards, visual assembly aids, and working with NTP to "design the subassembly processes." That agreement also contained identical provisions as the 2007 agreement with respect to Caterpillar's Standard Processes and NTP's work area in the Aurora Logistics Center.

¶ 10 In August 2012, CLI informed NTP of Caterpillar's decision to use its own employees to build subassemblies. It told CLI that it would start moving the subassembly work in October 2012 and have a complete exit of all business before January 2014. In late August 2012, CLI began preparations for transitioning subassemblies from NTP to Caterpillar. The wheel loader subassemblies were the first to be moved. CLI notified NTP that Caterpillar engineers would be visiting the Aurora Logistics Center to observe NTP employees perform their services. NTP replied that it would not be a good idea for CLI to observe the assembly process until the parties could come to an agreement on "severance" and the time frame for reducing services. However, in September 2012, NTP noted that it had allowed CLI unrestricted observation of its work by Caterpillar employees.

¶ 11 In an e-mail dated August 20, 2012, from a CLI employee, Jeff Kellogg, to the president of NTP, Christopher Gunier, Kellogg stated:

"As discussed in previous meetings, Caterpillar Inc. has made a strategic decision to in-source the work currently performed by National Tractor Parts (NTP). This reduction in business is expected to begin in October of 2012 and will result in a complete exit of all business before January of 2014. We

...