Sl Montevideo Technology, Inc. v. Eaton Aerospace

• Decision Date: 12 July 2007
• Docket Number: No. 06-2539.,06-2539.
• Citation: 491 F.3d 350
• Parties: SL MONTEVIDEO TECHNOLOGY, INC., Plaintiff-Appellant, v. EATON AEROSPACE, LLC, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

491 F.3d 350

SL MONTEVIDEO TECHNOLOGY, INC., Plaintiff-Appellant, v. EATON AEROSPACE, LLC, Defendant-Appellee.

No. 06-2539.

United States Court of Appeals, Eighth Circuit.

Submitted: January 11, 2007.

Filed: July 12, 2007.

Counsel who presented argument on behalfof the appellant was Mark H. Verwys of Grand Rapids, MI. David A. Engen of Burnsville, MN, appeared on the brief.

Counsel who presented argument on behalf of the appellee was Elizabeth M. Bradshaw of Chicago, IL. Michael H. King of Chicago, and Frederick W. Morris of Minneapolis appeared on the brief.

Before LOKEN, Chief Judge, BYE and SHEPHERD, Circuit Judges.

LOKEN, Chief Judge.

Eaton Aerospace contracted to supply stabilizer trim motors for Boeing 737 airplanes. Stabilizer trim motors are powered by brushless direct current (DC) motors. Eaton subcontracted with SL Montevideo Technology, Inc. (SLM), to supply a customized brushless DC motor meeting Eaton's specifications for this application. After developing and supplying two versions of that motor for several years, SLM refused to bid on a redesigned model and then commenced this diversity action accusing Eaton of misappropriating SLM's trade secrets and breaching a Proprietary Information Agreement (PIA) by the manner in which Eaton obtained a redesigned motor from another supplier. After trial but before submitting the case to the jury, the district court¹ granted Eaton judgment as a matter of law on both claims. Applying Minnesota law, the court concluded that SLM "has not presented any testimony or exhibits establishing with particularity what its claimed trade secrets are" and "has not presented sufficient evidence from which a reasonable jury could conclude that Eaton breached the PIA." SLM appeals only the dismissal of its breach of contract claim. We affirm.

I.

After Eaton contracted to supply Boeing stabilizer trim motors for the 737 airplane, SLM with input from Eaton and Boeing designed and began supplying Eaton with a customized brushless DC motor for this application, referred to as the -01 motor. SLM was Eaton's sole source for this brushless DC motor. As SLM did not have an exclusive supply contract, Eaton explored developing a second source through another supplier, Astromec, Inc., or Eaton's own production facilities. But nothing came of these efforts.

In 1999, Boeing complained of -01 motor failures. In response, SLM, Eaton, and Boeing modified the -01 brushless DC motor design. The modified product, referred to as the -02 motor, had larger bearings than the -01 motor and incorporated other changes. In 2000 and 2001, SLM supplied -02 motors which Eaton then installed in its stabilizer trim motors. Boeing had no further complaints.

In January 2000, SLM proposed a Proprietary Information Agreement relating to the -01 and -02 brushless DC motors. Eaton responded that it was willing to enter into a PIA; however, because the parties had worked on this project for many years without such an agreement, Eaton proposed that SLM attach to the PIA "a list that outlines the documents that [Eaton] has in its possession that [SLM] believes are confidential." SLM proposed instead that the agreement be limited to documents stamped confidential by SLM. Eaton agreed, and the parties signed the PIA on January 27, 2000. The PIA required that each party "keep in confidence and not disclose to any person . . . the other Party's Proprietary Information." The PIA defined "Proprietary Information" as including:

recorded information . . . of a scientific or technical nature . . . which has been marked as proprietary . . . by a stamp or other written or recorded identification by the originating party prior to disclosure or after disclosure if the Proprietary Information was inadvertently not marked prior to disclosure.

The PIA excluded from protection Proprietary Information "in the public domain," already known or independently developed by the receiving party, or made public to others by the party claiming proprietary rights.

In March 2001, Eaton notified SLM that it was redesigning its stabilizer trim motor for the Boeing 737 and that the changes would require modest redesign of the brushless DC motor component. Eaton invited SLM to redesign its -02 motor. SLM declined. Forced to find a new supplier, Eaton contracted with Astromec to develop and supply a brushless DC motor for the redesigned stabilizer trim motor.

Astromec's design process for this brushless DC motor was long and difficult. Deadlines were missed, and Boeing expressed concerns to Eaton that Astromec could not produce a quality motor. At one point, Eaton asked SLM to reconsider its refusal to redesign the -02 motor. Again, SLM declined. Astromec's struggle to design a motor "from scratch" threatened Eaton's contract commitments to Boeing. Not surprisingly, Eaton's engineers provided guidance and technical support and critiqued Astromec's design proposals. SLM claims that Eaton breached the PIA by disclosing SLM's proprietary information to Astromec during this design and development process.

SLM commenced this action in May 2003, before Astromec was able to supply Eaton with production quantities of its brushless DC motor. SLM claims no lost profits or other direct damages, conceding that its -01 and -02 motors could only be used in Eaton stabilizer trim motors for the 737 airplane and that SLM was unwilling to continue this relationship by supplying Eaton with a redesigned brushless DC motor suitable for use in Eaton's new stabilizer trim motor. Thus, there is no element of unfair competition here. Rather, SLM's contract claim is for "unjust enrichment" measured by the monetary advantage to Eaton of allegedly using SLM's proprietary information to accelerate Astromec's development of an alternative brushless DC motor so that Eaton could meet its contract commitments to Boeing.

Abandoning its trade secret claim on appeal, SLM argues that the district court erred in granting judgment as a matter of law on the contract claim because "the entire design" of SLM's motor is Proprietary Information protected...