U.S. Polymers-Accurez, LLC v. Kane Int'l Corp.

• Decision Date: 19 September 2018
• Docket Number: No. 4:17-CV-2371 RLW,4:17-CV-2371 RLW
• Parties: US POLYMERS-ACCUREZ, LLC, Plaintiff, v. KANE INTERNATIONAL CORP., et al, Defendants.
• Court: U.S. District Court — Eastern District of Missouri

US POLYMERS-ACCUREZ, LLC, Plaintiff, v. KANE INTERNATIONAL CORP., et al, Defendants.

No. 4:17-CV-2371 RLW

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

September 19, 2018

MEMORANDUM AND ORDER

This matter is before the court on Defendants Kane International Corp., Parker Ingredients, LLC, Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 34), Defendant Maclan Industries, Inc.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 38), Defendant Matthew Grodd's Motion to Dismiss Pursuant to F.R.C.P. 12(B)(6) (ECF No. 48), Plaintiff/Counter-Defendant US Polymers-Accurez, LLC's Motion to Dismiss Kane's Counterclaim (ECF No. 53), and Third-Party Defendants' Motion to Dismiss Third-Party Complaint (ECF No. 55). These matters are fully briefed and ready for disposition.

BACKGROUND¹

Kane International Corporation ("Kane") supplies urethane ink resins to the ink manufacturing industry. US Polymers-Accurez, LLC ("USPA") and Kane had an ongoingbusiness relationship, entering into at least two different contractual arrangements. The Secrecy Agreement purports to deem as "trade secrets" all information provided by Kane and USPA to each other, subject to three exceptions. After entering into the Secrecy Agreement, USPA began producing urethane ink resins that it sold only to Kane for use by Kane's customers.

By 2009, the parties' business relationship had grown to such a level that USPA was manufacturing the majority of Kane's urethane product line. On January 16, 2009, the parties entered into a Supply Agreement, under which the parties "reaffirmed" the Secrecy Agreement, and USPA agreed to continue manufacturing Kane's proprietary urethane ink resins.

In the Complaint, USPA alleges long-running and wide-ranging illegal conduct, occurring over several states and multiple years. USPA brings this action against the Defendants regarding their conspiracy (the "Kane Conspiracy"), led by ringleaders Thomas Kohlberg and his grandson Matthew Grodd, on behalf of Kane International Corporation ("Kane"), Maclan Industries ("Maclan"), and Parker Ingredients, LLC ("Parker Ingredients"), "to misappropriate USPA's trade secrets and other confidential and proprietary information, deceive end user customers in the ink resin market, tortuously interfere with USPA's contracts with its employees, and induce those employees to breach their fiduciary duties to USPA." (Complaint, ECF No. 1, ¶1). USPA alleges claims under the Defend Trade Secrets Act ("DTSA"),² Missouri UniformTrade Secrets Act ("MUTSA"), New York trade secrets law and asserts other common law claims. In turn, Kane brought claims against USPA and USPA's managing members Maurice S. Meyers ("Meyers") and Nick J. Agliata, Jr. ("Agliata") for breach of contract, misappropriation of trade secrets, tortious interference with business relationships, and indemnification. (ECF No. 30).

STANDARD OF REVIEW

To survive a motion to dismiss, a complaint "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp., v. Twombly, 550 U.S 544, 570 (2007). A "formulaic recitation of the elements of a cause of action" will not suffice. Twombly, 550 U.S. at 555. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

DISCUSSION

I. Defendants Kane International Corp., Parker Ingredients, LLC, Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 34) and Defendant Maclan Industries, Inc.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 38)³

A. Counts VII-X, XVI, XVII, and XX-XXVII

1. MUTSA Preemption

This district has outlined what is required for preemption under MUTSA:

The MUTSA "displace[s] conflicting tort, restitutionary, and other laws ... providing civil remedies for misappropriation of a trade secret." Mo.Rev.Stat. § 417.463.1. Federal courts in Missouri have interpreted this provision to preempt "civil claim[s] that are derivative of a claim of misappropriation of trade secrets." Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., No. 4:00CV70 CEJ, 2002 WL 32727076, at *4 (E.D.Mo.Feb.25, 2002). Common-law claims are preempted as derivative "if they are based on facts related to the misappropriation of trade secrets claim." Reliant Care Mgmt., Co. v. Health Sys., 2011 WL 4369371 at *3-4 (internal citations omitted); see also Bancorp Servs., L.L.C., 2002 WL 32727076, at *4; and Hallmark Cards v. Monitor Clipper Partners, 757 F.Supp.2d 904, 917 (W.D.Mo.2010)). "The crucial question is whether 'the claims are no more than a restatement of the same operative facts' that formed the basis of the plaintiff's statutory claim for trade secret appropriation." Secure Energy, Inc. v. Coal Synthetics, LLC, No. 4:08CV1719 JCH, 2010 WL 1691454, at *2 (E.D. Mo. Apr. 27, 2010) (internal citations omitted). In determining whether to find a claim preempted under MUTSA, courts must "look beyond the label of the claims to the facts being asserted in support of the claims." Id. at *1 (internal quotations omitted). However, "[f]or preemption to be triggered, the property that has been stolen/misappropriated must be a trade secret: otherwise, the Trade Secret Act has no application." Hallmark Cards, 757 F.Supp.2d at 917. Put another way, MUTSA will not preempt a claim if the information at issue does not rise to the level of a statutorily-defined trade secret.

Level One Techs., Inc. v. Penske Truck Leasing Co., L.P., No. 4:14 CV 1305 RWS, 2015 WL 1286960, at *4 (E.D. Mo. Mar. 20, 2015).

Defendants claim that USPA's allegations based upon the MUTSA are barred by the statutory provisions of Missouri law. The Court holds that it is premature to dismiss USPA's claims in Counts VII-X, XVI, XVII, and XX-XXVII based upon pre-emption. The Court has not determined as a matter of law that the underlying information qualifies as a trade secret. Until that time, it would be premature to find that USPA's claims pre-empted by the MUTSA. Hallmark Cards, Inc. v. Monitor Clipper Partners, LLC, 757 F. Supp. 2d 904, 917 (W.D. Mo. 2010) ("For preemption to be triggered, the property that has been stolen/misappropriated mustbe a trade secret: otherwise, the Trade Secret Act has no application."). The Court denies the Motion to Dismiss on this basis.

2. Counts XVI and XVII

"A claim for tortious interference with a contract or business expectancy requires proof of each of the following: (1) a contract or a valid business expectancy; (2) defendant's knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of the contract or relationship; (4) absence of justification; and (5) damages resulting from defendant's conduct." Community Title Co. v. Roosevelt Fed. Sav. & Loan Ass'n, 796 S.W.2d 369, 372 (Mo. banc 1990); Graham v. Hubbs Mack & Mfg., Inc., 92 F. Supp. 3d 935, 943 (E.D. Mo. 2015); see also Glob. Packaging Servs., LLC v. Glob. Printing & Packaging, 248 F. Supp. 3d 487, 494 (S.D.N.Y. 2017) ("To state a claim for tortious interference with business relations, a plaintiff must adequately allege that: "(1) the plaintiff had business relations with a third party; (2) the defendant interfered with those business relations; (3) the defendant acted for a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts injured the relationship.").

Defendants assert that Counts XVI (tortious interference with Eisele Agreement) and XVII (tortious interference with Gaal Agreement)⁴ are preempted because the allegations contained therein "focus on Defendants' intent to interfere with the Eisele and Gaal Agreementsto accomplish trade secret misappropriation" and is derivative of the MUTSA claim made in Count VII. (ECF No. 47 at 8).

The Court denies the Motion to Dismiss Counts XVI and XVII because the Court holds that USPA's claim extends beyond the misappropriation of trade secrets and alleges tortious interference with the Eisele and Gaal Agreements through inducement of disclosure of confidential information and co-opting USPA employees to work for Kane to compete with USPA. (Complaint, ¶219, 232). USPA's claim for tortious interference with contracts "may be based upon 'additional facts aside from the alleged misappropriation of trade secrets.'" Lasco Foods, Inc. v. Hall & Shaw Sales, Mktg., & Consulting, LLC, No. 4:08CV01683 JCH, 2009 WL 3523986, at *6 (E.D. Mo. Oct. 26, 2009) (quoting Trinity Hospice, Inc. v. Miles, No. 4:06CV1674, 2007 U.S. Dist. LEXIS 18805, at *8 (E.D. Mo. Mar. 16, 2007)). USPA has not limited its claim only to interfering with its business expectancies through utilization of trade secrets. At this stage of the litigation, this Court denies Defendants' motion to dismiss Counts XVI and XVII.

3. Count XX (Breach of Eisele's Duty of Loyalty)

In Count XX, USPA alleges that Defendant Eisele "breached his duty of loyalty to USPA, while employee by USPA, by engaging in direct competition with USPA, on behalf of Kane, as part of the Kane Conspiracy, Kohlberg Trade Secret Theft and other conduct." (Complaint, ¶254). Defendants assert that Defendant Eisele's alleged breach of loyalty in Count XX is based upon trade secret misappropriation and is derivative of the MUTSA claim made in Count VII.

At this stage of the litigation, the Court cannot hold that Count XX is derivative of the MUTSA claim made in Count VII. The Court notes that the Complaint contains severalallegations that Eisele breached his duty of loyalty by performing actions other than misappropriating trade secrets, such using a Kane business card and email and representing to end user ink resin customers that he...