Superior Fibers LLC v. Shaffer

• Decision Date: 28 December 2016
• Docket Number: Case No. 2:16-cv-00472
• Parties: SUPERIOR FIBERS LLC, Plaintiff, v. MATTHEW W. SHAFFER, Defendant.
• Court: U.S. District Court — Southern District of Ohio

SUPERIOR FIBERS LLC, Plaintiff, v. MATTHEW W. SHAFFER, Defendant.

Case No. 2:16-cv-00472

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO EASTERN DIVISION

December 28, 2016

JUDGE ALGENON L. MARBLEY

Magistrate Judge Deavers

OPINION & ORDER

This matter is before the Court on two motions: Plaintiff's Motion to Remand and Demand for Attorney's Fees (Doc. 6), and Defendant's Motion for Judgment on the Pleadings. (Doc. 3.) For the following reasons, the Court DENIES Plaintiff's Motion to Remand and Demand for Attorney's Fees, and DENIES Defendant's Motion for Judgment on the Pleadings.

I. BACKGROUND

This case arises from the alleged misuse of Plaintiff's trade secrets by a former employee. Plaintiff alleges that Defendant breached a confidentiality agreement by sharing Plaintiff's confidential information with Defendant's new employer. Plaintiff seeks: (1) an injunction requiring, generally, that Defendant return all such confidential information to Plaintiff, refrain from using it, and identify people and entities with whom Defendant has shared it; (2) a declaration that, among other things, Plaintiff's information is proprietary and that Defendant had (and has) no right to take it; and (3) damages for Defendant's alleged breach of the confidentiality agreement.

A. Factual Background

Superior Fibers, Inc., a predecessor company to Plaintiff Superior Fibers, LLC, hired Mr. Shaffer in early 1994 to work in its Bremen, Ohio plant. (Doc. 11 at ¶¶ 4-6, 10.) When Superior Fibers, LLC ("Superior Fibers") took over the business in 2006, it fired and then re-hired Mr. Shaffer. (Id. at ¶¶ 7-8.) Shortly after Mr. Shaffer's re-hire, he executed an Employee Invention Assignment, Confidentiality, and Restrictive Covenant Agreement ("Agreement"). (Id. at ¶ 9.) The Agreement, which is attached to the complaint, contains both confidentiality and noncompetition provisions. In the confidentiality provision, Mr. Shaffer agreed not to "either voluntarily or involuntarily, at any time during or after his employment with Employer [Superior Fibers], disclose in any manner, or use for or on behalf of anyone except Employer, Confidential Information of Employer." (Agmt. ¶ 3.1.) He further agreed not to "copy or record or allow to be copied or recorded any Confidential Information for any purpose other than for use by or on behalf of Employer," (id.), and to "return to Employer at the time of the termination of his employment...all Employer property in his possession, custody or control, including but not limited to, Confidential Information." (Id. at ¶ 3.2.) The Agreement defined "Confidential Information" to include:

any information of or regarding Employee, in any form, which is not known outside of Employer or which Employer compiled or collected at substantial expense and effort. Such information includes, but is not limited to, in its broadest terms: (i) Employer methods of operation and processes, (ii) information regarding the nature and type of services rendered and/or products or processes sold by Employer, (iii) information regarding Employer's present and/or future products, processes, and systems including patent disclosures and patent applications, (iv) names of Employer's current, prospective, or former suppliers and customers, ...and (xii) any item that constitutes Work Product of the Employer.

(Id. at ¶ 3.3.) Work Product comprises "[a]ll inventions, discoveries, intellectual property of any kind, items treated by Employer as proprietary and/or improvements that relate to the business ofEmployer or "Conflicting Products" (as defined below) which Employee conceives, develops, or reduces to practice, alone or with others, during or within a one-year period after Employee's employment with Employer[.]" (Id. ¶ 2.1.)

The noncompetition provision of the Agreement restricted Mr. Shaffer from conducting a variety of activities during his employment with Superior Fibers, and for twelve (12) months thereafter. These activities included:

...aid[ing]...anyone...in soliciting or calling upon, contracting with, selling to or servicing, with respect to Work Product or Conflicting Products: (i) any Employer customer... (id. at ¶ 4.1);

...participat[ing] in the development, service or support of Work Product or Conflicting Products, in any geographic area(s) in which Employer markets and sells its products, processes or services (id. at ¶ 4.2);

...hold[ing] any interest in or engag[ing] in an executive, management or consulting capacity with respect to any person or entity that manufactures, distributes, or sells Conflicting Products in the same geographic area(s) in which Employer distributes and sells products, processes or services. (Id. at ¶ 4.3.)

The Agreement defines "Conflicting Products" to mean "'composites' or filtration products in its broadest terms of any nature and/or products, processes, or services sold, licensed or offered to be sold by, or in the development at, Employer." (Id. at ¶ 4.5.)

In 2013, Superior Fibers began to shut down its Bremen, Ohio plant, and Mr. Shaffer resigned from Superior Fibers on March 1, 2014. (Id. at ¶¶ 10-11.) Following his resignation, Mr. Shaffer went to work for a direct competitor of Plaintiff's, Pronamic Industries, LLC, where he stayed until approximately April 30, 2015. (Id. at ¶¶ 12-14.) On or about May 1, 2015, Mr. Shaffer took a new job at American Air Filter Company, Inc., d/b/a AAF International ("AAF"). (Id. at ¶ 15.) AAF is another direct competitor of Superior Fibers, but at the time it hired Mr. Shaffer, AAF "lacked the ... ability to produce the products that were being designed, manufactured and produced by Superior." (Id. at ¶¶ 16-17.)

Shortly after AAF employed Mr. Shaffer, Superior Fibers called AAF to advise it of the confidentiality provision of the Agreement that Shaffer had signed while employed with Superior Fibers. (Id. at ¶ 18.) During that communication, Superior Fibers informed AAF that Mr. Shaffer was prohibited from sharing with AAF Superior Fibers' "proprietary information, confidential information, intellectual property and/or trade secrets" ("Superior Fibers Information"). (Id. at ¶¶ 3, 19.) AAF responded that Mr. Shaffer "had never informed AAF about his Confidentiality Agreement." (Id. at ¶ 20.) In May and June of 2015, Superior Fibers attempted to contact AAF's general counsel to discuss the confidentiality provision of the Agreement, to no response. (Id. at ¶ 21-22.)

While employed with Superior Fibers, Mr. Shaffer learned about the "design, manufacturing and production requirements" for a Superior Fibers product, scrim-backed 10 gram ("10 gram"). (Id. at ¶ 23.) Producing 10 gram "with the scrim already attached thereto, inline, through the use of an oven[,]" as Superior did, required "Superior's intellectual property and trade secrets[.]" (Id. at ¶ 24.) Mr. Shaffer was also familiar with the Superior Fibers Information necessary to create products for Superior Fibers customers Chemco Manufacturing Co., Inc. ("Chemco"), Protect Plus Air Holdings, LLC ("Protect Plus"), Glasfloss Industries Ohio, LLC ("Glasfloss"), Clarcor Air Filtration Products, Inc. ("Clarcor"), and Dafco Filtration Group ("Dafco"). (Id. at ¶¶ 36, 45, 54, 63, 72.) When Mr. Shaffer left his employment with Superior Fibers, he "took his hard copies and/or electronic files containing Superior [Fibers] Information without Superior [Fibers'] permission or knowledge." (Id. at ¶ 82.)

Before Mr. Shaffer started with AAF, AAF did not know how to produce 10 gram "with the scrim already attached thereto, inline, through the use of an oven." (Id. at ¶ 25.) AAF used to buy $2,000,000 of 10 gram annually from Superior Fibers. (Id. at ¶ 28.) Now, as a result ofMr. Shaffer improperly sharing Superior Fibers Information with AAF, AAF can produce 10 gram using Superior Fibers' methods, and AAF no longer buys 10 gram from Superior Fibers. (Id. at ¶ 31.) In fact, 10 gram is now AAF's highest-volume product, valued at approximately $5,000,000 per year. (Id. at ¶¶ 26-27.)

Mr. Shaffer did not just help AAF produce 10 gram, however. Once Mr. Shaffer started working for AAF, AAF began using Superior Fibers Information to sell products it had never sold before to Superior Fibers customers Chemco, Product Plus, Glasfloss, Clarcor, and Dafco. (Id. at ¶¶ 32-76.) These customers then stopped ordering these products from Superior Fibers. (Id. at ¶¶ 32, 41, 50, 59, 68.)

B. Procedural Background

On April 21, 2016, Superior Fibers brought a three-count complaint against Mr. Shaffer in the Court of Common Pleas of Fairfield County, Ohio, for: (1) a injunction enjoining Mr. Shaffer from "using, copying, deleting, disseminating, or sharing the Superior [Fibers] Information," ordering him to return any such materials to Superior Fibers, and ordering him to disclose the people and entities to whom he provided the Superior Fibers Information (id. at 11); (2) a judgment declaring that the Superior Fibers Information is proprietary to Superior Fibers, that Shaffer had no right to take it, and requiring Shaffer to return any such information to Superior Fibers (id. at 11-12); and (3) damages from Defendant's breach of the confidentiality provision of the Agreement. (id. at 12-14.) Superior Fibers also seeks attorneys' fees and costs. (Id. at 11-12, 14.)

On May 27, 2016, Mr. Shaffer removed the case to federal court, answered the complaint, and moved for judgment on the pleadings. (Docs. 1-3.) This motion is fully briefed. (See Docs. 3, 9, 15.) On June 15, 2016, Superior Fibers moved to remand the case to state court. (Doc. 6.) On July 8, 2016, Mr. Shaffer opposed Superior Fibers' motion to remand, (Doc. 12),and Superior Fibers did not file a reply brief. Both the motion for judgment on the pleadings and the motion to remand are ripe for review.

II. ANALYSIS

A. Subject-Matter Jurisdiction

Defendant Shaffer removed Superior Fibers' lawsuit to federal court. Plaintiff Superior Fibers seeks to remand the case back to state court,...