Thermodyn Corp. v. 3M Co., No. 3:07 CV 2491.

• Court: United States District Courts. 6th Circuit. United States District Court of Northern District of Ohio
• Writing for the Court: Jack Zouhary
• Citation: 593 F.Supp.2d 972
• Parties: THERMODYN CORPORATION, Plaintiff, v. 3M COMPANY, et al., Defendants.
• Decision Date: 17 December 2008
• Docket Number: No. 3:07 CV 2491.

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593 F.Supp.2d 972 THERMODYN CORPORATION, Plaintiff,
v.
3M COMPANY, et al., Defendants. Case No. 3:07 CV 2491. United States District Court, N.D. Ohio, Western Division. December 17, 2008.

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Gregory H. Wagoner, Robert M. Anspach, Anspach Meeks Ellenberger, Toledo, OH, for Plaintiff.

Brian E. Szymanski, Kevin H. Rhodes, Peter L. Olson, 3M Innovative Properties Company, St. Paul, MN, David E. Kitchen, Thomas H. Shunk, Baker & Hostetler, Cleveland, OH, Fritz Byers, Gregg A. Peppel, Coy, Konieczny & Peppel, Toledo, OH, for Defendants.

MEMORANDUM OPINION AND ORDER

JACK ZOUHARY, District Judge.

INTRODUCTION

Before the Court are a number of motions. Plaintiff Thermodyn Corporation filed a Motion for Partial Summary Judgment (Doc. No. 73). Defendants 3M Company and Dyneon LLC (together, "3M/Dyneon") filed a Motion for Summary Judgment (Doc. No. 72), as did Defendants Cary Kaufman and his companies, FKM Industries and Silaflex, Inc. (together, the "Kaufman Defendants") (Doc. No. 75). Plaintiff filed a Motion in Limine (Doc. No. 80). Finally, Plaintiff Thermodyn and the Kaufman Defendants filed a Joint Stipulation for Consolidation (Doc. No. 104) asking the Court to allow Thermodyn to amend its Complaint to add state law claims currently being litigated in the Lucas County Court of Common Pleas.

The Court held a hearing on November 12, 2008 to address all motions (Doc. No. 107). This Opinion and Order supplements rulings made at that hearing: denied Plaintiff's Motion in Limine (Doc. 80); denied Joint Stipulation for Consolidation (Doc. No. 104); denied Plaintiff's Motion for Partial Summary Judgment (Doc. No. 73); and granted in part and denied in

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part Defendants' Motions for Summary Judgment (Doc. Nos. 72 & 75).

BACKGROUND

This case is about the alleged theft of trade secrets by a former employee who then allegedly provided the trade secrets to a competitor of his former employer.

Thermodyn manufactures fluoroelastomer sheeting and sells it in the form of industrial gaskets, expansion joints, and caulk. Fluoroelastomers are synthetic rubbers made from polymers containing fluorine. Thermodyn has a unique set of recipes and manufacturing processes it uses to produce its products. Over the years, Thermodyn has worked with its raw polymer suppliers to develop and improve its recipes and processes. Thermodyn also has developed a customer list throughout its years in business.

Dyneon LLC is a division of 3M Company. 3M/Dyneon produces the raw fluoropolymers used by companies, like Thermodyn, to produce fluoroelastomers. 3M/Dyneon does not make gaskets, belting, or expansion joints. Thermodyn did and continues to purchase some of its raw polymer from 3M/Dyneon, although Thermodyn purchases the bulk of its raw polymer from DuPont, 3M/Dyneon's competitor. Typically, before a customer like Thermodyn uses the raw polymer in its production, Thermodyn sends the raw polymer to an independent company which mixes the polymer with other chemicals to produce a compound.

To encourage customers to buy its raw polymer, 3M/Dyneon often supplies potential customers with free polymer. 3M/Dyneon also provides its customers with assistance in developing compound formulas with its product. In fact, 3M/Dyneon publishes compound formulas for its products on its website.

Cary Kaufman was hired by Thermodyn in March 1998 as the marketing director. Kaufman's employment with Thermodyn was his first contact with the fluoroelastomer industry. After several years, Kaufman was given the additional position of president of Global Sealing Systems, a division of Thermodyn. Because of his position with Thermodyn, Kaufman had access to information about Thermodyn's products and production methods. As part of his employment, Kaufman signed an agreement containing various restrictions, including a non-disclosure restriction, prohibiting him from disclosing any of Thermodyn's proprietary information, as well as non-competition and non-solicitation agreements, in which Kaufman agreed not to directly compete in the same market as Thermodyn within one year after leaving Thermodyn's employ.

Kaufman resigned from Thermodyn in early January 2005. Kaufman told his former employer he was leaving to devote more time to personal pursuits. However, in April 2005, Kaufman signed on as a consultant for 3M/Dyneon. As part of his consulting agreement, in July 2005, Kaufman traveled to 3M/Dyneon's offices in St. Paul, Minnesota to meet with 3M/Dyneon representatives and to give a presentation about the fluoroelastomer market. Kaufman's consulting agreement with 3M/Dyneon specified that 3M/Dyneon did not wish to receive any third-party confidential information.

Shortly after leaving Thermodyn, Kaufman also formed two companies: Silaflex, Inc. and FKM Industries. In March 2005, Kaufman formed Silaflex whose primary business was the distribution of rubber products for two companies. Silaflex distributed silicone for Silicone Manufacturing, and it distributed extruded rubber and fluoroelastomer products for M-Cor. In July 2005, Kaufman and a partner began

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planning the creation of FKM Industries, a company that would manufacture flurorelastomer sheeting, thus becoming a competitor in the market with Thermodyn. Kaufman and his business partner planned to formally launch FKM Industries in the fall of 2006.

After starting FKM Industries and Silaflex, Kaufman began working with 3M/Dyneon to develop recipes for a product line of fluoroelastomer gasket sheeting. 3M/Dyneon provided Kaufman with formulas for fluoroelastomer compounds for manufacturing purposes. 3M/Dyneon also provided Kaufman with free polymer during this development period.

In addition to being a customer or potential customer of 3M/Dyneon, in November 2005, Kaufman also proposed that his companies and 3M/Dyneon enter into a business venture together (Doc. No. 73, Ex. 32). Kaufman proposed that, in addition to specifying that Dyneon material be used in the products he would make and sell, he might produce products that would bear the "Dyneon" brand, which Dyneon itself could then sell. Throughout his proposal, Kaufman used the term "partner" to describe the proposed relationship between the companies. The proposal was sent to 3M/Dyneon's Opportunity Assessment Team for review. 3M/Dyneon ultimately rejected the proposal in a letter dated March 20, 2006 (Doc. No. 75, Ex. M).

During this time, Kaufman was preparing a business plan and developing a potential customer base. According to Kaufman's sworn statement, he used publicly available databases in order to develop a potential customer list for his new endeavors.

In October 2006, soon after FKM Industries began implementing its business plan and pursuing customers, Kaufman and his companies were sued by Thermodyn in the Lucas County Court of Common Pleas. As a result of that lawsuit, 3M/Dyneon ceased providing raw fluoropolymer to Kaufman's companies. Thus, 3M/Dyneon never actually sold any raw fluoropolymer to Kaufman. This suit was filed in this Court in August 2007.

MOTION IN LIMINE: SPOLIATION CLAIM

Plaintiff Thermodyn filed a Motion in Limine (Doc. No. 80) asking the Court to apply an adverse inference against both Defendants when considering Defendants' Motions for Summary Judgment and Plaintiffs Motion for Partial Summary Judgment. As part of its Motion in Limine, Thermodyn also requests this Court instruct the jury to apply an adverse inference against Defendants with respect to certain missing evidence. Defendants filed Oppositions to the Motion (Doc. Nos. 94 & 96).

Thermodyn argues the inference is appropriate because Kaufman deleted some e-mails and files from his Thermodyn laptop during October 2004. In Ohio, the elements of a spoliation claim are:

"(1) pending or probable litigation involving the plaintiff, (2) knowledge on the part of defendant that litigation exists or is probable, (3) willful destruction of evidence by defendant designed to disrupt the plaintiffs case, (4) disruption of the plaintiffs case, and (5) damages proximately caused by the defendant's acts." Ed Schmidt Pontiac-GMC Truck, Inc. v. Chrysler Motors Co., 575 F.Supp.2d 837, 840 (N.D.Ohio 2008) (quoting Smith v. Howard Johnson, 67 Ohio St.3d 28, 29, 615 N.E.2d 1037 (1993)). "[W]illfulness contemplates not only an intentional commission of the act, but also a wrongful commission of the act." Id.

The e-mail deletions occurred when Kaufman ran a "cleanup" program in Microsoft Outlook Express before he left

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Thermodyn. The cleanup program is a standard function of the Outlook Express program and is run periodically by the user to keep the computer operating efficiently. Kaufman returned the laptop at his departure, and the laptop has been in Thermodyn's control ever since. (In fact, Jeff MacMillan, vice president at Thermodyn, has been using it.) When litigation began between the parties, Thermodyn took the laptop to a forensic computer expert who concluded the Outlook Express cleanup program was run eight times during a five-day window in October 2004. The expert was able to determine that the program deleted 389 e-mails from Kaufman's outbox.

The forensic expert also concluded that Kaufman deleted a number of unknown data files and e-mails from his computer during the course of his use of the laptop. However, as Defendants point out, the deleted files are mostly images and instructions downloaded during Internet surfing and were deleted during normal computer upkeep. Four types of Internet files (.aspx, .js, .htm, and .html files) account for nearly half of the 132,336 files. Only 47 of the deleted files are .doc or .xls files—the file types most likely to hold information that could be a trade secret or other damning evidence. Further, Defendants argue most of these files were in fact recoverable at the...