Universal Die & Stampings, Inc. v. Justus

• Decision Date: 25 February 1993
• Docket Number: No. 91-0627,91-0627
• Parties: UNIVERSAL DIE & STAMPINGS, INC., Plaintiff-Appellant, v. Danny JUSTUS, Defendant, Don Lee Rolstad, and Rolco, Inc., Defendants-Respondents.
• Court: Wisconsin Court of Appeals

Page 797

497 N.W.2d 797

174 Wis.2d 556

UNIVERSAL DIE & STAMPINGS, INC., Plaintiff-Appellant, v. Danny JUSTUS, Defendant, Don Lee Rolstad, and Rolco, Inc., Defendants-Respondents.

No. 91-0627.

Court of Appeals of Wisconsin.

Submitted on Briefs July 14, 1992.

Opinion Released Feb. 25, 1993.

Opinion Filed Feb. 25, 1993.

[174 Wis.2d 558] For the plaintiff-appellant the cause was submitted on the briefs of J. Thomas Haley, Madison.

For the defendants-respondents the cause was submitted on the brief of John Walsh and Saul C. Glazer of Axley Brynelson, Madison.

Before GARTZKE, P.J., and DYKMAN and SUNDBY, JJ.

DYKMAN, Judge.

Universal Die & Stampings, Inc. appeals from a judgment dismissing its complaint against Don Lee Rolstad and Rolco, Inc. The issue is whether the trial court erred by declining to grant Universal's motion for summary judgment. We conclude that summary judgment should have been granted, and therefore reverse with instructions to grant the motion.

FACTS

In 1984, Universal sued two of its former employees and a corporation that the employees had organized, alleging theft of a customer list. The case was tried on the theory that the employees and the corporation had stolen Universal's trade secret. The trade secret was a treatment of steel used in conveyor belts. The issue at trial was whether Universal or the employees had invented the trade secret. In 1987, the jury found that the corporation, Plexus Industries, and one of the employees, Danny Justus, had stolen the trade secret from its owner, Universal.

After judgment was entered, Universal moved the circuit court for an injunction against Plexus and Justus. The trial court On May 1, 1989, Plexus and Justus moved to reopen the injunction. The trial court denied the motion. ¹ No appeal was taken.

denied Universal's motion on procedural grounds. Universal appealed, and we reversed. See [174 Wis.2d 559] Universal Stampings, Inc. v. Plexus Indus., Inc., 149 Wis.2d 398, 439 N.W.2d 644 (1989). On remand, the trial court enjoined Justus, his agents, employees, successors and assigns from using Universal's trade secret. By this time, Justus had filed a petition in bankruptcy, and Plexus had sold its assets to Rolco, Inc. Rolco assumed Plexus' debts and hired Justus to sell the conveyors it manufactured. Don Lee Rolstad is the sole shareholder of Rolco.

Universal commenced this action on March 6, 1989, for damages and an injunction prohibiting Justus, Rolco and Rolstad from using Universal's trade secret. Universal moved for summary judgment. The trial court granted the motion as to Justus, but denied it as to Rolco and Rolstad. The case was tried to a jury under the Uniform Trade Secrets Act, sec. 134.90, Stats., enacted in April 1986. The jury found that when Rolco and Rolstad manufactured metal conveyor belts, the method of treating the conveyor belts was generally known in the metals industry. Because sec. 134.90(1)(c)1., Stats., defines a trade secret as information not generally known to other persons who can obtain economic value from its use, the trial court dismissed Universal's complaint. Universal appeals only from the denial of its motion for summary judgment.

STANDARD OF REVIEW

When reviewing a grant or denial of summary judgment, we apply the same methodology as the trial court. Schultz v. Industrial Coils, Inc., 125 Wis.2d 520, 521, 373 N.W.2d 74, 74 (Ct.App.1985).

We first examine the complaint to determine whether a claim has been stated and then the answer to ascertain whether it presents a material issue of fact. If they do, we then examine the moving party's affidavits to determine whether a prima facie case for summary judgment has been made.... If it has, we look to the opposing party's affidavits [or other proof] to determine whether any material facts are in dispute which would entitle the opposing party to a trial.

Id. at 521, 373 N.W.2d at 74-75 (citation omitted).

APPLICATION OF METHODOLOGY

Universal's complaint alleges that Rolstad and Rolco stole its trade secret. Rolstad and Rolco's answer denies that they did so. The issue is joined, and we move to the third step of summary judgment methodology and examine Universal's affidavits and other material. Universal filed affidavits, and pertinent parts of transcripts of Rolstad's testimony taken at a hearing for a temporary restraining order and at a deposition. It included copies of its judgment against Plexus and the injunction issued in that action. A supplementary affidavit included materials obtained through discovery and portions of depositions of four persons were appended.

The materials submitted by Universal in its motion for summary judgment disclose extensive alleged facts. These facts include the following.

On June 11, 1987, the jury returned a verdict for Universal in Universal's suit against Plexus and Justus. On August 7, 1987, Rolstad incorporated Rolco. Rolstad was aware of the suit between Universal and Plexus and Justus. The same attorney that represented Plexus and Justus incorporated Rolco. On August 25, 1987, an order for judgment in Universal's favor was entered. About that time, Plexus went out of business, and Rolco took over the space and the same manufacturing process that Plexus had used. Rolco was substituted for Plexus, and began doing the same thing that Plexus did. It did so by purchasing most or all of Plexus' assets, including its customer lists. It assumed Plexus' debts and kept Plexus' telephone Rolstad had been in the welding business for eighteen years but had not built metal conveyor belts prior to forming Rolco. He learned everything about the metal conveyor belt business from Plexus, Justus and the employees with them. After Plexus went out of business, Rolco hired Justus, whose job was sales. Justus was hired to do the same job that he did for Plexus. Justus was paid on commission. He received a commission check on every order of conveyor belts that Rolco manufactured and sold. It did not matter who talked to the customer or whether Justus worked on the sale. Justus had not been working for two or three months but still received the commission checks. Rolco sold its products to essentially the same customers to whom Plexus had sold them. Another employee of Rolco, Judy Boehnen, worked as a secretary for both Plexus and Rolco. She lived with Justus.

number and post office box. On two or three occasions, Rolco's receptionist identified the business as Plexus. In June and September 1989, Rolco processed orders addressed to Plexus.

Universal argues that the material presented above constitutes a prima facie case in its favor because the doctrine of res judicata prevents Rolco and Rolstad from relitigating the former case of Universal Stampings, Inc. v. Plexus Indus., Inc. (Sauk County No. 84-CV-160). Whether the doctrine of res judicata applies is a question of law. Post v. Schwall, 157 Wis.2d 652, 658, 460 N.W.2d 794, 796 (Ct.App.1990). We review questions of law de novo. Id.

The doctrine of res judicata renders a final judgment conclusive in all subsequent actions between the same parties (or their privies) as to all matters which were litigated, or which might have been litigated, in the former proceedings. Schaeffer v. State Personnel Comm'n, 150 Wis.2d 132, 138-39, 441 N.W.2d 292, 295 (Ct.App.1989). Rolstad and Rolco assert that they were not parties to the former proceeding, and that the previous action could not have applied to them because their theft of Universal's trade secret (which they deny) occurred after the jury verdict in the previous case.

There is no dispute that Rolstad and Rolco were not parties in the prior action. But Universal contends that they are in privity with Plexus and Justus and, hence, bound by the prior judgment. Defining privity is difficult. In Kimberly-Clark Co. v. Patten Paper Co., 153 Wis. 69, 86, 140 N.W. 1066, 1072 (1913), the court said: "In judgments or decrees which do not determine status, but relate to the rights or interests of parties in and to certain property, privies are those who succeed to the ownership of that property or some right or interest therein under one of the parties to the litigation...." RESTATEMENT (SECOND) OF JUDGMENTS § 44 (1982) provides:

A successor in interest of property that is the subject of a pending action to which his transferor is a party is bound by and entitled to the benefits of the rules of res judicata to the same extent as his transferor, unless:

(1) A procedure exists for notifying potential successors in interest of pending actions concerning property, the procedure was not followed, and the successor did not otherwise have knowledge of the action; or

(2) The opposing party in the action knew of the transfer to the successor and knew also that the successor was unaware of the pending action.

In discussing situations where privity will provide res judicata effect, Professor Moore states:

It is true that privity depends upon the circumstances, but the rational grounds on which the concept is based can be stated with sufficient definiteness to give some general indication of its scope and limitations. In most situations in which privity has been held to exist, one or more of the following relationships have been held to exist between those held to be in privity: concurrent relationship to the same property right; successive relationship to the same property or right 1B J. MOORE, J. LUCAS & T. CURRIER, MOORE'S FEDERAL PRACTICE par. 0.411, at 392 (2d ed. 1993) (footnote omitted).

or representation of the interests of the same person.

FEDERAL RULE OF CIVIL PROCEDURE 65(d) " 'is derived from the common-law doctrine that a decree of injunction not only binds the parties defendant but also those identified with them in interest, in "privity" with them, represented by them or subject to their control.' " Golden State Bottling Co. v. NLRB, 414 U.S. 168, 179, 94 S.Ct. 414, 422, 38 L.Ed.2d 388 (1973) (quoting Regal Knitwear Co. v....