Wagner-Meinert Eng'g, LLC v. TJW Indus., Inc.
| Decision Date | 25 February 2022 |
| Docket Number | CAUSE NO. 1:21-CV-313 DRL-SLC |
| Citation | 587 F.Supp.3d 744 |
| Parties | WAGNER-MEINERT ENGINEERING, LLC, and Wagner-Meinert LLC, Plaintiffs, v. TJW INDUSTRIAL, INC., Joseph Wagner, Juan Arambula, Jr., Ryan Schroeder, and James Wagner, Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
William A. Ramsey, Barrett McNagny LLP, Fort Wayne, IN, for Plaintiffs.
Jeremy D. Lemon, Hunt Suedhoff Kalamaros LLP, Fort Wayne, IN, Justin A. Allen, Tiaundra M. Gordon-Foster, Todd J. Kaiser, Ogletree Deakins Nash Smoak & Stewart PC, Indianapolis, IN, for Defendants.
WMI—a commercial and industrial refrigeration and engineering business collectively referring to Wagner-Meinert Engineering LLC and Wagner-Meinert LLC—claims that its prior owners left the business only to misappropriate trade secrets for the benefit of a competing business known as TJW Industrial, Inc. WMI pursues trade secret, contract, and various tort claims. The defense requests the dismissal of certain claims. The court grants the motion only in part.
For purposes of this motion to dismiss, the court accepts all well-pleaded allegations as true. In 2011, Joseph Wagner was a member of WMI, formerly owning a 3.6 percent stake in the company. Pursuant to the operating agreement, he agreed to protect WMI's proprietary and confidential information and not to disclose this information without the company's written permission during and after his employment. He further agreed to a 42-month non-solicitation and non-competition covenant [ECF 1-1 § 14.02].
In 2015, Joseph Wagner sold his shares in WMI for $1,316,844. He remained an employee, negotiating his employment contract the next year to receive an annual salary and bonus of $180,000 and an annual retention bonus of $100,000. This 2016 employment contract extended the terms of the 2011 non-competition provisions until June 22, 2019.
Joseph Wagner resigned his position on October 19, 2018. He continued to receive a salary until June 22, 2019. On January 8, 2019, more than five months before his restrictive covenants expired according to the complaint, he registered articles of incorporation for TJW Industrial, Inc. TJW Industrial performs commercial and industrial refrigeration and engineering services and competes with WMI.
Juan Arambula Jr., James Wagner, and Ryan Schroeder all worked for WMI in various roles before leaving the company in the late summer 2019 to work for TJW Industrial. Juan Arambula, Joseph Wagner, and James Wagner all were subject to non-solicitation provisions, but allegedly poached numerous WMI employees with access to confidential information to work at TJW Industrial—leading to a majority of TJW Industrial's workforce coming from WMI. The complaint alleges these employees performed work for TJW Industrial or shared proprietary information while still employed by WMI, including downloading information from WMI's servers, providing TJW Industrial with trade secrets, and soliciting WMI's clients. WMI employees were subject to confidentiality provisions.
WMI also alleges that Juan Arambula secretly brokered the sale of a tool from WMI to TJW Industrial while he was still at WMI. In an effort at sabotage, James Wagner is alleged to have deleted a significant number of files from his WMI computer, including those related to active projects, taken with him a computer owned by WMI, and informed several WMI customers that active projects were in fact inactive. Ryan Schroeder is alleged to have copied WMI's intellectual property onto external drives and facilitated James Wagner taking the computer.
The complaint focuses on misappropriating activity. WMI alleges that TJW Industrial took numerous actions to misappropriate WMI's trade secrets, goodwill, or other property. The intellectual property TJW Industrial acquired included customer files used for quoting and pricing jobs, project bid files, quoting and estimating software and data, labor factors, software, vendor catalogs, annotated searchable manuals, and the company's CAD library, including notes, comments, and information compiled and created by WMI.
In total, WMI advances eight claims against TJW Industrial and former WMI owners or employees: one under the federal Defend Trade Secrets Act and another under the Indiana Trade Secrets Act (counts 1 and 2); tortious interference with a contract (count 3); breach of contract against Joseph Wagner (count 4); conversion against TJW Industrial (count 5); an offense against intellectual property claim (count 6); unfair competition against TJW Industrial (count 7); and breach of the duty of loyalty against the four individual defendants (count 8). WMI casts two requests for injunctive relief—one against Joseph Wagner and TJW Industrial and one against all defendants—as additional counts (counts 9 and 10). The defense seeks to dismiss counts 3 and 5-10.
In reviewing a motion to dismiss, the court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in the plaintiff's favor. Reynolds v. CB Sports Bar, Inc. , 623 F.3d 1143, 1146 (7th Cir. 2010). A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "[W]ritten instruments attached to a pleading become part of that pleading for all purposes." Williamson v. Curran , 714 F.3d 432, 436 (7th Cir. 2013) (quotation and citation omitted). The complaint must contain enough factual matter, accepted as true, to state a plausible claim, not a speculative one. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim must be plausible, not probable. Indep. Trust Corp. v. Stewart Info. Servs. Corp. , 665 F.3d 930, 935 (7th Cir. 2012). Whether a claim is sufficiently plausible to survive a motion to dismiss is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." McCauley v. City of Chi. , 671 F.3d 611, 616 (7th Cir. 2011) (quoting Iqbal , 556 U.S. at 679, 129 S.Ct. 1937 ).
The defense seeks to dismiss seven claims. The defense argues that, to the extent these claims hinge on the misappropriation of trade secrets or confidential information not otherwise considered a trade secret, the Indiana Uniform Trade Secrets Act (IUTSA) proves the only remedy. The IUTSA has a preemption provision that displaces conflicting law (except contract and criminal law) that relates to the misappropriation of trade secrets. Ind. Code § 24-2-3-1(c). WMI contests the scope of IUTSA's preemption clause and otherwise opposes the motion to dismiss.
In 1982, the General Assembly enacted the IUTSA "to make uniform the law" of trade secrets "among states enacting the provisions of this chapter." Ind. Code § 24-2-3-1(b) ; see also HDNet LLC v. N. Am. Boxing Council , 972 N.E.2d 920, 922-23 (Ind. Ct. App. 2012), trans. denied 980 N.E.2d 322 (Ind. 2012). To effectuate its aim, the IUTSA "displaces all conflicting law of this state pertaining to the misappropriation of trade secrets, except contract law and criminal law." Ind. Code § 24-2-3-1(c). The General Assembly worded this preemption provision more strongly than the one within the uniform act on which it was based. Infinity Prods., Inc. v. Quandt , 810 N.E.2d 1028, 1033 (Ind. 2004).
This case presents the question whether the IUTSA preempts claims based on the theft of confidential or proprietary information that may not rise to the level of a trade secret; though, as it turns out here after all briefing, the motion presents a narrower question of whether the civil conversion claim is preempted.
The Indiana Supreme Court has not decided this issue. The Indiana Court of Appeals has interpreted the IUTSA's preemption provision broadly, approving a view that it "abolishes all free-standing alternative causes of action for theft or misuse of confidential, proprietary, or otherwise secret information falling short of trade secret status (e.g. idea misappropriation, information piracy, theft of commercial information, etc.)," including claims that "merely outline[ ] another allegation of civil misappropriation of [a plaintiff]’s ideas." HDNet , 972 N.E.2d at 924-25, 927 (approving BlueEarth Biofuels, LLC v. Hawaiian Elec. Co. , 235 P.3d 310, 321 (Haw. 2010) ) (quoting Hauck Mfg. v. Astec Indus. , 375 F. Supp.2d 649, 655 (E.D. Tenn. 2004) ); cf. AGS Capital Corp. v. Prod. Action Int'l, LLC , 884 N.E.2d 294, 308 (Ind. Ct. App. 2008) ().
In HDNet , the HD television channel engaged the North American Boxing Council (NABC) in discussions to broadcast mixed martial arts bouts. The two parties exchanged emails to flesh out this concept for a uniquely branded fight series. NABC viewed the information as a protectible commercial idea. HDNet , 972 N.E.2d at 921. NABC later sued HD. The council claimed that HD's owner formed HDNet Fights for the purpose of using this confidential and proprietary idea. NABC advanced several claims, including idea misappropriation and trade secret conversion. The trial court found that NABC's claims were not preempted by the IUTSA. See id. at 922.
NABC defended this ruling on interlocutory appeal, arguing that IUTSA's plain language only applied to actions when a conflicting law pertained to the misappropriation of "trade secrets." NABC said its claims concerned something less than a statutorily-defined "trade secret" such that its claims should not be preempted. The Indiana Court of Appeals disagreed and reversed.
The state court regarded the legislature's directive that the IUTSA be "applied and construed to effectuate its general purpose to make uniform the law," Ind. Code § 24-2-3-1(b), as requiring more than a narrow reading of "trade secrets" to enforce...
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