Polyone Corporation v. Lu et al

Filing 181

MEMORANDUM Opinion and Order. Signed by the Honorable Geraldine Soat Brown on 5/25/2016. (et, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
POLYONE CORPORATION,
Plaintiff,
v.
YUN MARTIN LU, et al.,
Defendants.

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No. 14 C 10369
Judge Manish S. Shah
Magistrate Judge Geraldine Soat Brown

MEMORANDUM OPINION AND ORDER
Geraldine Soat Brown, Magistrate Judge
In this lawsuit, plaintiff PolyOne Corporation (“PolyOne”) alleges, among other things, that
defendants Polymax, LLC, et al., (“Defendants”) misappropriated its trade secrets. (Amend. Compl.)
[Dkt 22.] PolyOne alleges that the formulations for its products are trade secrets. (Id. ¶ 67.)
PolyOne’s original Complaint in this case, filed in December 2014, alleged, “Defendants reverse
engineered PolyOne’s pellets in order to develop a formulation that Polymax ultimately sold to
Customer X [Nomacorc] in competition with PolyOne.” (Compl. ¶ 65.) [Dkt 1.] In its Amended
Complaint, filed in April 2015, PolyOne revised that allegation slightly to state, “Defendants used
PolyOne’s pellets in order to develop a formulation that Polymax ultimately sold to Customer X in
competition with PolyOne.” (Amend. Comp. ¶ 71.)
Defendants’ Renewed Motion to Compel Discovery Relating to Plaintiff’s Testing of
Defendant’s Product (Defs.’ Mot. [dkt 161]) seeks the results of tests performed on behalf of
Polyone on pellets that defendant Polymax produces for Nomacorc, as well as documents,
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communications, and answers to interrogatories relating to those tests. PolyOne objects on the basis
of Fed. R. Civ. P. 26(b)(4)(D), which provides:
Ordinarily, a party may not, by interrogatories or deposition, discover facts known
or opinions held by an expert who has been retained or specially employed by another
party in anticipation of litigation or to prepare for trial and who is not expected to be
called as a witness at trial.
Defendants contend that production of the results and related materials is appropriate under
Fed. R. Civ. P. 26(b)(4)(D)(ii), which permits such discovery when there are “exceptional
circumstances.” Defendants’ Counterclaim alleges, in essence, that PolyOne knew before this
lawsuit was filed that Polymax’s pellets did not have the same formula as PolyOne’s pellets and that
PolyOne’s claim of theft of trade secrets was baseless. (Defs.’ Counterclaim. ¶¶ 57-59, 93.) [Dkt
48.] Polymax claims that the lawsuit is an effort to injure Polymax competitively. (Id. ¶ 82.)1
Defendants’ Counterclaim alleges on information and belief that PolyOne performed
chemical assays or other testing to determine the composition of Polymax’s pellets, and that PolyOne
performed rheological, hardness, FTIR and/or viscosity testing on the pellets. (Id. ¶¶ 57-58.)
Notably, PolyOne answered, “Denied.” (Pl.’s Answer to Counterclaim ¶¶ 57-58.) [Dkt 59.]
Defendants also alleged, “PolyOne is aware, based upon its own testing results, that Nantong
Polymax and/or the Polymax TPE’s pellets are not a copy of any trade secret formula owned by
PolyOne.” (Defs.’ Counterclaim ¶ 59.) Polymax again answered, “Denied.” (Pl.’s Answer to
Counterclaim ¶ 59.)
PolyOne now acknowledges that testing of Polymax’s pellets was, in fact, performed by a
consultant acting on its behalf in May and October 2014, before this lawsuit was filed in December
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Defendants also argue that the test results as such are not protected by Rule 26(b)(4)(D),
but it is not necessary to reach that issue.
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2014. (Defs.’ Mot. at 1-2.) PolyOne argues, however, that its trade secret theory does not depend
on whether Polymax’s pellets use PolyOne’s formula and that it never alleged that its formulation
and Polymax’s formulation were “an exact match.” (Pl.’s Opp’n at 1.) [Dkt 167.] There is some
tension between that argument and PolyOne’s continuing allegation that Defendants “used”
PolyOne’s pellets to develop their formulation. Regardless of the precise parameters of PolyOne’s
claim, the fact that the tests were performed and PolyOne’s knowledge of the results are allegations
in Defendants’ Counterclaim, and PolyOne disputes those allegations.
This is an extraordinary situation in which the consultant’s tests and related communications
are disputed facts at issue in the lawsuit. The test results and communications are relevant not
simply for the results per se, but also as evidence about the motives and knowledge of PolyOne in
bringing the lawsuit, which form the basis of the Counterclaim. The nature of any differences
between PolyOne’s formulation and the formula in Polymax’s pellets – how different they actually
are – and, equally important, PolyOne’s awareness of those differences, may support or undermine
Polymax’s Counterclaim. These are “exceptional circumstances.”
PolyOne did not move to dismiss the Counterclaim, which is an operative pleading in this
lawsuit. The claims asserted in that Counterclaim are proper subjects of discovery. Fed. R. Civ. P.
26(b)(1). PolyOne’s decision to advance a different theory of trade secret misappropriation cannot
preclude Defendants from discovery about the disputed factual allegations of their Counterclaim.

CONCLUSION
Accordingly, Defendants’ Motion [161] is granted. Plaintiff PolyOne Corp. shall answer
Defendants’ Interrogatories 4 and 5 and produce documents responsive to Defendants’ Request 14
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by June 3, 2016.
IT IS SO ORDERED.

_______________________________
Geraldine Soat Brown
United States Magistrate Judge
May 25, 2016

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