Reingold v. Swiftships, Inc.

• Decision Date: 16 October 1997
• Docket Number: No. 96-30173,96-30173
• Citation: 126 F.3d 645
• Parties: Irving REINGOLD, Plaintiff-Appellant, v. SWIFTSHIPS, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 645

126 F.3d 645

44 U.S.P.Q.2d 1481

Irving REINGOLD, Plaintiff-Appellant, v. SWIFTSHIPS, INC., Defendant-Appellee.

No. 96-30173.

United States Court of Appeals Fifth Circuit.

Oct. 16, 1997.

Antonio J. Rodriguez, Jon Wesley Wise, Barry A. Brock, Rice & Fowler, New Orleans, LA, for Plaintiff-Appellant.

Philip A. Franco, Sean Damian Moore, Adams and Reese, New Orleans, LA, for Defendant-Appellee.

Appeal from the United States District Court for the Western District of Louisiana.

Before KING, JOLLY and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

Appellant, Irving Reingold, appeals from the district court's partial summary judgment dismissing his actions against the appellee, Swiftships, Incorporated, under the Louisiana Uniform Trade Secrets Act and the Louisiana Unfair Trade Practices Act. We reverse and remand these actions to the district court.

I.

We review a district court's grant of summary judgment de novo, applying the same standard of review as would the district court. See, e.g., Melton v. Teachers Ins. & Annuity Ass'n of Am., 114 F.3d 557, 559 (5th Cir.1997); Dawkins v. Sears Roebuck and Co., 109 F.3d 241, 242 (5th Cir.1997)(citing Cockerham v. Kerr-McGee Chem. Corp., 23 F.3d 101, 104 (5th Cir.1995)). Summary judgment is proper only when it appears that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). On summary judgment the inferences to be drawn from the underlying facts contained in the affidavits, depositions, and exhibits of record must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).

II.

Construing the record on summary judgment in the light most favorable to the nonmoving party, Reingold, we find or infer the following facts.

Appellant Irving Reingold purchased a 90 foot portable female fiberglass boat mold from Thompson Industries of Titusville, Florida ("Thompson") in 1983. Thompson had constructed the mold over a period of nine months at a cost of $1 million. The mold was cast from a plug, which is a hull turned upside down. To make such a mold multiple layers of fiberglass are laid on either side of a balsa wood core over a plug and the structure is braced externally with steel piping. The 90 foot mold built by Thompson was the largest structure of its kind in the United States at the time of its construction. Thompson used the mold to build two hulls for fiberglass boats which were sold to customers.

Swiftships, Incorporated ("Swiftships") first contacted Reingold about purchasing or leasing the mold in 1986. At that time, Swiftships was attempting to secure a contract with the United States Navy to construct two fiberglass-hulled research survey vessels ("RSVs"). Swiftships had never built a fiberglass hull and owned no fiberglass mold of its own. Swiftships negotiated the agreement to produce the RSVs between 1986 and 1990. During that time, Swiftships continued conversations with Reingold over the terms of a lease or a purchase of the 90 foot mold.

In October of 1990, Swiftships entered the RSV contract with the United States Navy. One week later, Swiftships signed a lease agreement with Reingold for use of the 90 foot mold. The five-year lease provided that Swiftships would pay Reingold $100,000 upon signing and an additional $145,000 each for the first two vessel hulls constructed from the mold. Swiftships also agreed to pay $20,000 for each additional hull made using the mold or $20,000 per year for any year in which a hull was not made from the mold. The terms of the lease required Swiftships to give advance written notice each time the mold was used to construct a hull. At the end of the lease, Swiftships was obligated to turn over any modifications of the mold and any plans for such modifications.

The mold was delivered to Swiftships in November of 1990. During the course of the lease, Swiftships made two hulls from the mold and paid Reingold in accordance with the lease. Swiftships also used the mold to make a third hull, which Swiftships contends was merely a thin "test liner." Swiftships did not give Reingold notice or compensation for the third or "test" hull. In the meantime, Swiftships secured a second contract with the Government of Egypt to produce three 110 foot coastal minehunting vessels ("CMVs"). Swiftships hired Accurate Fiberglass, Incorporated ("Accurate") to construct a 110 foot mold to be used in building the hulls for the CMVs. Swiftships instructed Accurate to use a portion of the third or "test" hull made from Reingold's 90 foot mold in constructing the 110 foot mold. Accurate incorporated the first 45 feet of the 90 foot "test" hull into the front portion of the 110 foot mold. Reingold contends that Swiftships used his 90 foot mold, without notifying or compensating him, to make the front 40 to 45 feet of a new 110 foot mold for the Egyptian ships and thereby misappropriated his trade secrets and committed unfair trade practices. Swiftships argues, however, that it used the bow portion of the "test" hull only as construction material that it reshaped and reformed according to independently derived design plans to make the new 110 foot mold. In May of 1994 Swiftships terminated the lease and returned the 90 foot mold to Reingold. Swiftships has refused, however, to turn over to Reingold the 90 foot "test" hull or to compensate him for its use.

III.

Reingold filed suit in December of 1994 alleging that Swiftships's actions in making and using the third hull constituted: (1) a breach of contract; (2) conversion; (3) fraud; (4) negligent misrepresentation; (5) a violation of the Louisiana Unfair Trade Practices and Consumer Protection Act ("LUTPA"); and (6) a violation of the Louisiana Uniform Trade Secrets Act ("LUTSA"). On April 20, 1995, Swiftships moved for summary judgment on the breach of contract claim, the deceptive trade practices claim, and the trade secrets claim. The district court denied the motion as premature because sufficient discovery had not been conducted to properly rule on the motion. The court set a trial date of August 28, 1995. At the pre-trial conference, Swiftships moved for a continuance as it was attempting to procure documents from the Copyright Office at the Library of Congress which, it averred, were relevant to its defense on the trade secrets claim, but had not yet been obtained. That motion was granted.

Swiftships filed a Supplemental Motion for Summary Judgment on September 7, 1995. The supplemental motion sought dismissal on the same grounds as the original summary judgment motion. The district court granted partial summary judgment and dismissed Reingold's claims under the LUTPA and the LUTSA. ¹ The district court provided no statement of reasons in its order. The district court then directed entry of final judgment in favor of Swiftships on the LUTPA and the LUTSA claims pursuant to Federal Rule of Civil Procedure 54(b). Reingold filed this appeal challenging the grant of partial summary judgment. In this diversity jurisdiction lawsuit, we look to the law of Louisiana to determine the substantive rights of the parties under both of appellant's claims.

IV.

A.

Under the Louisiana Uniform Trade Secrets Act (LUTSA), LA. R.S. 51:1431-39, a complainant may recover damages for the actual loss caused by the misappropriation of a trade secret. Id. § 1433. In order to recover damages, a complainant must prove (a) the existence of a trade secret, Pontchartrain Med. Labs. Inc. v. Roche Biomedical Labs. Inc., 677 So.2d 1086, 1090 (La.Ct.App. 1st Cir.1996); Engineered Mechanical Serv., Inc. v. Langlois, 464 So.2d 329, 333 (La.Ct.App. 1st Cir.1984), (b) a misappropriation of the trade secret by another, and (c) the actual loss caused by the misappropriation. LA. R.S. 51:1431, 1433. The LUTSA adopts the Uniform Trade Secrets Act (UTSA) definitions of "trade secret" and "misappropriation," in pertinent parts, as follows:

Trade secret

"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(a) derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and

(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Id. § 1431(4)(a),(b).

Misappropriation

"Misappropriation" means ... use of a trade secret of another without express or implied consent by a person who:

(i) used improper means to acquire knowledge of the trade secret; or

(ii) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

...

(bb) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use[.] Id. § 1431(2)(b).

A complete catalogue of the means which are "improper" for a person to acquire knowledge of the trade secret is not possible, but Section 1431(1) includes a partial listing: "theft, bribery, misrepresentation, breach, or inducement of breach of a duty to maintain secrecy, or espionage through electronic or other means." Id.; see also United Group of Nat'l Paper Distr., Inc. v. Vinson, 666 So.2d 1338, 1345 (La.Ct.App.2d Cir.1996); Pontchartrain Med. Labs, 677 So.2d at 1091; Sheets v. Yamaha Motors Corp., 849 F.2d 179, 183 (5th Cir.1988); Vault Corp. v. Quaid Software Ltd., 655 F.Supp. 750, 763 (E.D.La.1987), aff'd on other grounds, 847 F.2d 255 (5th Cir.1988).

As the moving party, appellee Swiftships has the initial burden of demonstrating that the Rule 56(c) test--"no genuine issue as to any material fact"--is satisfied and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Higginbotham v....