PeopleFlo Mfg. v. Sundyne, LLC
| Decision Date | 09 May 2022 |
| Docket Number | 20 CV 3642 |
| Parties | PEOPLEFLO MANUFACTURING, INC., Plaintiff, v. SUNDYNE, LLC, ACCUDYNE INDUSTRIES LLC, DXP ENTERPRISES, INC., and PUMPWORKS, LLC, Defendants. PUMPWORKS, LLC, Counter-Plaintiff, v. PEOPLEFLO MANUFACTURING, INC., Counter-Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Before the court are Defendants Sundyne, LLC's (“Sundyne”) and PumpWorks, LLC's (“PumpWorks”) motions for sanctions against Plaintiff PeopleFlo Manufacturing, Inc (“PeopleFlo”) under Federal Rule of Civil Procedure 37(b)(2)(A). (See R. 184, Sundyne's Mot.; R 188, PumpWorks's Mot.) Through its motion Sundyne seeks entry of an order dismissing PeopleFlo's claims for breach of a non-disclosure agreement and misappropriation of trade secrets (Counts IV and V). In the alternative, Sundyne asks the court to appoint a Special Master to determine whether PeopleFlo's allegedly protected information qualifies as a trade secret and, if so whether Sundyne misappropriated that information.
PumpWorks similarly asks the court to strike from the amended complaint PeopleFlo's allegations relating to misappropriation of trade secrets. Although PeopleFlo does not directly charge PumpWorks with a trade secret misappropriation claim PumpWorks asserts that PeopleFlo “backdoors” trade secret allegations against PumpWorks through its breach of contract claim. PumpWorks also alleges that PeopleFlo seeks damages for PumpWorks's supposed conspiracy to cover up trade secret misappropriation. For the following reasons, the motions are denied:
Procedural History
This diversity case stems from PeopleFlo's efforts to find a large industry partner that could help bring its novel sealless pump design to market. PeopleFlo negotiated with Sundyne and its affiliate Accudyne, LLC (“Accudyne”), as well as DXP Enterprises, Inc. (“DXP”) and its subsidiary PumpWorks, before finally reaching a deal with PumpWorks. This business relationship did not go smoothly. PeopleFlo alleges that PumpWorks failed to uphold its end of the bargain, that DXP and Sundyne sabotaged the deal, and that Accudyne and Sundyne used PeopleFlo's trade secrets collected during negotiations to develop and market a competing product. PeopleFlo brings a variety of claims against Defendants under Illinois law stemming from these allegations. In turn PumpWorks countersues PeopleFlo, alleging that PeopleFlo breached their agreement by failing to timely deliver working products and return advance payments made for those products.
Fact discovery in this case began in July 2020. (R. 125.) In September 2020, Sundyne served its first set of interrogatories to PeopleFlo, asking it in part to:
9. Identify all products manufactured or sold by Sundyne that misappropriate any aspect of PeopleFlo's technology, and for each such product, identify: (a) the product name; (b) what aspect or feature of the product that PeopleFlo contends that Sundyne misappropriated; and (c) whether, to PeopleFlo's knowledge, the design feature or technology existed prior to the date that PeopleFlo first used it, and if so, where said technology was used.
(R. 184, Sundyne's Mot. Ex. 2 at 10.) PeopleFlo responded a month later, and Sundyne challenged the lack of specificity in its response. (See Id. at 2.) Thereafter, PeopleFlo twice supplemented its answer to Interrogatory (“INT”) No. 9. However, the first supplemental response did not address INT No. 9(b) or 9(c) and only identified “categories” of information misappropriated, rather than the actual trade secret information that Sundyne allegedly stole, and the second failed to address INT No. 9(c). (See R. 170.) In December 2021 Sundyne moved to compel PeopleFlo to provide more details to its answer. (R. 139, Sundyne's Mot. to Compel.)
The court granted Sundyne's motion to the extent Sundyne sought the supplementation of PeopleFlo's response to INT No. 9(c) and denied it to the extent Sundyne sought information not requested in INT No. 9. (R. 170.) The court also cautioned PeopleFlo that it would “be barred from using or relying on any responsive technical information it fails to disclose” and that “[a]s such, a detailed narrative answer, combined with the identification of documents reflecting such information, is crucial.” (Id.) In February 2022 PeopleFlo supplemented its response to INT No. 9(c). (R. 184, Sundyne's Mot. Ex. 4.) But Sundyne contends that PeopleFlo failed “to conduct a good faith investigation to determine whether its claimed ‘confidential information,' was actually known to third persons” before PeopleFlo used that technology. (Id. at 4-5.) Sundyne asks the court to sanction PeopleFlo for failing to comply with the court's order by dismissing certain claims. (Id.)
For its part, PumpWorks served PeopleFlo with its first set of interrogatories in June 2021, asking it in part to:
16. Identify all trade secrets you claim have been misappropriated by Sundyne or Accudyne with sufficient particularity to distinguish such trade secret from public domain information and information disclosed in one or more of the published patent applications filed by you or on your behalf that were or could have been observed by Jim Hook when he visited PeopleFlo or Sundyne.
(R. 189, PumpWorks's Mem. at 2-3.) PumpWorks claims that PeopleFlo did not identify any trade secrets in response to INT No. 16. (Id. at 3 ().) As a result, in December 2021 PumpWorks moved to compel PeopleFlo to supplement its response. (R. 144, Def. PumpWorks's Mot. to Compel.)
The court granted PumpWorks's motion to compel as to INT No. 16, finding that although PeopleFlo argued it could not answer the interrogatory, allegations in its amended complaint suggested otherwise. (R. 168 at 6-7.) Specifically, while PeopleFlo conceded it was not present during a June 2019 visit to Sundyne's plant by Jim Hook, a DXP regional vice president, PeopleFlo alleges in its amended complaint that PumpWorks observed PeopleFlo's “concept, confidential information and trade secrets” during that visit. (Id. .) In light of this allegation, the court ordered PeopleFlo to “provide a narrative answer to No. 16 and detail the trade secrets PumpWorks was able to observe Sundyne using as of June 2019, answer ‘unknown,' or withdraw the allegation.” (Id. at 7.) The court further ordered PeopleFlo to “explain whether any of the trade secrets identified in answer to No. 16 have ever been disclosed in connection with any patent prosecutions.” (Id.)
In response to the court's order, PeopleFlo supplemented its answer to INT No. 16 by stating that its knowledge of PumpWorks's alleged conspiracy was based on information DXP and PumpWorks representatives communicated to PeopleFlo after Hook's visit. (R. 189, PumpWorks's Mem. at 3-4.) PumpWorks asserts that PeopleFlo's response violates the court's order because it does not provide a narrative answer and is “indecipherably vague” or “simply parrot[s]” information that is publicly available. (Id. at 4.) PumpWorks further contends that PeopleFlo “referenc[ed] 52 documents containing 481 pages without providing any pinpoint citations to distinguish which of these materials” constitute its trade secrets and which, “if any, disclose . . . material comprising unprotectable third party content or public domain materials.” (Id. at 8.) PumpWorks thus asks the court to sanction PeopleFlo by striking all trade secret claims and allegations related to misappropriation of trade secrets by PumpWorks from the amended complaint.
PeopleFlo brings its misappropriation of trade secrets claim pursuant to the Illinois Trade Secrets Act (“ITSA”), 765 ILCS 1065/1. ITSA requires a plaintiff to establish that: “(1) the information at issue was a trade secret; (2) . . . it was misappropriated; and (3) it was actually used in the defendant's business.” In re Adegoke, 632 B.R. 154, 165 & n.8 (Bankr. N.D.Ill. 2021). A trade secret is defined under ITSA as “information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method technique, drawing, process, financial data, or list of actual or potential customers or suppliers.” 765 ILCS 1065/2(d). To prevail on a trade secret claim, a plaintiff must “identify specific trade secrets subject to protection.” Vendavo, Inc. v. Long, 397 F.Supp.3d 1115, 1130 (N.D. Ill. 2019). It is not enough for a plaintiff to assert that “general categories of information are trade secrets.” Id. (). Furthermore, a plaintiff must show that the information sought to be protected is not “generally known or understood within an industry” or to the public and that the plaintiff “has taken ‘affirmative measures' to prevent others from using the information.” Adegoke, 632 B.R. at 166 (citing Gen. Elec. Co. v. Uptake Techs., Inc., 394 F.Supp.3d 815, 831 (N.D. Ill. 2019)).
As explained, Sundyne and PumpWorks move for sanctions under Federal Rule of Civil Procedure 37(b)(2)(A) based on PeopleFlo's alleged failure to comply with discovery orders requiring it to identify its trade secrets and disclose whether any part of the protected information is publicly available. Rule 37(b)(2)(A) allows a court to enter “just orders” for failing to obey a discovery order, including prohibiting that party from “supporting or opposing designated claims or defenses, ” striking or staying proceedings, dismissing the action, and entering a default judgment. A court also has ...
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