RECO Equip., Inc. v. Wilson
Decision Date | 20 November 2020 |
Docket Number | Case No. 2:20-cv-3556 |
Parties | RECO EQUIPMENT, INC., Plaintiff, v. JEFFREY S. WILSON, et al., Defendants. |
Court | U.S. District Court — Southern District of Ohio |
OPINION AND ORDER
Plaintiff RECO Equipment, Inc. ("RECO") filed this action on July 15, 2020, seeking preliminary and permanent injunctive relief and damages against Defendant Jeffrey S. Wilson ("Wilson") asserting claims for breach of contract and misappropriation of trade secrets. (ECF No. 1.) On July 24, 2020, RECO filed a First Amended Complaint for Preliminary and Permanent Injunctive Relief and Damages adding new claims and defendants. (ECF No. 10.) In addition to Wilson, RECO names in its amended pleading as Defendants Joseph Craig Russo ("Russo"), Republic Equipment Holding LLC ("Republic"), and John Does #1 and #2. Further, RECO asserts in its amended pleading claims for breach of contract, theft and misappropriation of trade secrets under the Ohio Uniform Trade Secrets Act ("OUTSA"), and theft and misappropriation of corporate opportunity.
On September 20, 2020, RECO filed a Motion for Preliminary Injunction. (ECF No. 20.)1 Defendants filed a Response on October 13, 2020. (ECF No. 26.) RECO filed its Replyon October 27, 2020. (ECF No. 33.) With the consent of the parties and pursuant to 28 U.S.C. § 636(c), by Order of Reference dated October 16, 2020 (ECF No. 31), this matter was referred to the Undersigned for the conduct of all further proceedings. For the following reasons, Plaintiff's Motion for Preliminary Injunction (ECF No. 20) is GRANTED.
The Court held an evidentiary hearing on the preliminary injunction motion on November 13, 2020. RECO presented testimony and evidence from Joshua Gasber, RECO's co-owner, Vice President, and Board member ("Gasber"); Sara Bagford, RECO's IT Manager and Systems Administrator ("Bagford"); Brett Creasy, an independently retained certified computer forensic examiner ("Creasy"); and Chad Gilman, RECO's Director of Sales ("Gilman"). Defendants rested at the conclusion of RECO's presentation without presenting any testimony or evidence. Accordingly, the following relevant factual background is taken from the testimony and evidence received at the hearing and the affidavits, declarations, and evidentiary materials submitted in connection with the parties' briefing on the preliminary injunction motion.
RECO is an Ohio corporation headquartered in Belmont County, Ohio. RECO, founded in 1983, is engaged in the buying, selling, leasing, servicing, repairing, and rebuilding of large-scale industrial, construction, and mining equipment. (Tr. at 13, 15; Gasber Aff., at ¶ 2.) RECO operates and provides services in 40 states throughout the Midwest and Southern UnitedStates. (Tr. at 15-16; Gasber Aff. at ¶ 3.) The nucleus of its business is located in Belmont, Ohio. (Tr. at 14; Gasber Aff. at ¶¶3-4.) RECO currently has more than 220 employees, over 80 of whom are service technicians located throughout several locations in seven states throughout the Midwest and Southern United States. (Tr. at 16, 19; Gasber Aff. at ¶ 6.)
RECO became a dealer for Liebherr USA, Inc. and its subsidiaries ("Liebherr") in 1994, and began selling Liebherr material handlers in 1998. (Tr. at 17; Gasber Aff. at ¶ 8.) In 2014, RECO purchased Republic Crane and Equipment Company's Liebherr operations and dealer agreements. These agreements initially covered Georgia, Kentucky, parts of North Carolina, South Carolina, Tennessee, Virginia, West Virginia, and Florida. Liebherr, over the objections of RECO, ultimately decided to remove Florida from RECO's Liebherr operations and dealer agreements footprint because it did not want RECO's territorial footprint to become too large. (Tr. at 16; Gasber Aff. at ¶ 12.) When RECO purchased Republic Crane in 2014, RECO hired all of Republic Crane's employees including Wilson and Russo. (Tr. at 17-18.)
RECO has spent years developing technical expertise in the maintenance, servicing, and rebuilding of certain equipment including, but not limited to, Liebherr A944Cs; Liebherr A934s; Liebherr Wheel Loaders; and Liebherr R944Cs. This expertise is not generally known within the industry, and is a primary reason why RECO has been financially successful. (Tr. at 18; Gasber Aff. at ¶ 9.) At the evidentiary hearing, Mr. Gasper specifically testified as follows:
(Tr. at 19-20.)
RECO spent years cultivating relationships with its customers. These relationships have allowed RECO to obtain a voluminous amount of data about its customers and their equipment. This information includes, but is not limited to (1) service, maintenance, and repair records for all equipment serviced or otherwise worked on by RECO; (2) notes regarding issues; (3) fee schedules for completed maintenance, repairs, and/or rebuilds; and (4) cost reports and breakdowns for specific repairs and rebuilds. This information is confidential and proprietary, not generally known within the industry, and cannot be purchased or otherwise obtained on the open market. (Gasber Aff. at ¶ 10.) RECO has used the expertise, skills, knowledge, and information it has garnered over its years in operation to specialize in the rebuilding of Liebherr material handlers in order to significantly extend the useful life of the piece of equipment. Acquiring Liebherr material handlers at the end of their life and rebuilding them has become asuccessful and significant aspect of RECO's business. (Gasber Aff. at ¶ 11.) RECO has expressed interest, and continues to express interest, in becoming a dealer and handling Liebherr's operations in Florida and RECO has provided service, replacement parts, and equipment to customers operating in Florida who have been unable to obtain such service, replacement parts, and equipment from Florida dealers. (Gasber Aff. at ¶ 12.)
Russo had been a service manager at Republic Crane for years. His early duties at RECO included branch product support, parts, service and equipment at a facility, customer calls, and managing profitability of a specific location. (Tr. at 22.) RECO promoted Russo to Regional Operations Manager for the southern region including the Indiana, Ohio, Kentucky, Tennessee, and North Carolina regions. (Tr. at 22-23.) This was an executive level role. (Tr. at 23.) In this role, Russo was involved in document and data creation, developing training processes, and in establishing RECO's "business gateway." (Tr. at 23.) This "business gateway," developed over hundreds of hours, was designed to enable technicians to have quick problem-solving ability. In RECO's experience, not all machine problems were the same and it was useful to catalog and track "novel" issues and resolutions as they arose. (Tr. at 23-24.) Nothing in RECO's purchase contract with Republic Crane gave Russo the rights to ownership in anything he created or compiled although he was compensated for the development and creation of the materials. (Tr. at 25.) He was probably in the top six or seven highest compensated employees in the company. (Tr. at 25.) Russo was never an officer or shareholder of RECO and did not have a written employment agreement or written non-compete agreement. (Tr. at 25-26.) Russo resigned on July 20, 2020, after RECO filed this lawsuit. (Tr. at 39.)
As RECO was working through Wilson's exit, it became concerned about Wilson's obligations under his employment agreement. (Tr. at 39-40.) When Russo tendered his resignation, RECO learned Russo had moved and downloaded files to his personal email and Dropbox files. At his exit interview, Russo informed RECO that he was going into business with Wilson to service machinery for the David J. Joseph Company ("DJJ") in Florida. (Tr. at 42.)
RECO began an investigation of Russo's computer activity. Some background...
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