CMI Roadbuilding, Inc v. Iowa Parts, Inc et al
ORDER denying 134 Motion for Partial Summary Judgment and granting 139 Motion for Summary Judgment. The Clerk of Court is directed to enter judgment and terminate all outstanding motions. The Final Pretrial Conference is cancelled and the trial date is vacated. The parties shall bear their own costs and fees. Signed by Judge Linda R Reade on 12/8/2017. (skm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
CEDAR RAPIDS DIVISION
CMI ROADBUILDING, INC. and CMI
IOWA PARTS, INC.,
TABLE OF CONTENTS
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
RELEVANT PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . 2
SUBJECT MATTER JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . 3
SUMMARY JUDGMENT STANDARD . . . . . . . . . . . . . . . . . . . . . . . . . 3
RELEVANT FACTUAL BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . 5
ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Parties and Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
CMI’s Business Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Iowa Parts’s Formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The DTSA and UTSA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statute of Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual or Inquiry Notice . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unjust Enrichment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
The matters before the court are Plaintiffs CMI Roadbuilding, Inc. and CMI
Roadbuilding, Ltd.’s (collectively, “CMI Roadbuilding”) “Motion for Partial Summary
Judgment” (“CMI Motion”) (docket no. 134) and Defendant Iowa Parts, Inc.’s (“Iowa
Parts”) “Motion for Summary Judgment” (“Iowa Parts Motion”) (docket no. 139).
II. RELEVANT PROCEDURAL HISTORY
On April 11, 2017, CMI Roadbuilding filed a Second Amended Complaint (docket
no. 81) against Iowa Parts and Climate Engineers, Inc. (“Climate Engineers”) alleging the
following: (1) Iowa Parts and Climate Engineers violated the Defend Trade Secrets Act of
2016 (“DTSA”), 18 U.S.C. § 1836, by converting CMI Roadbuilding’s trade secrets; (2)
Iowa Parts and Climate Engineers violated the Iowa Uniform Trade Secrets Act
(“UTSA”), Iowa Code Ch. 550, through continued use and disclosure of CMI
Roadbuilding’s trade secrets; (3) Iowa Parts and Climate Engineers converted, under
common law, CMI Roadbuilding’s trade secrets; and (4) Iowa Parts and Climate Engineers
were unjustly enriched, under common law, by their taking of CMI Roadbuilding’s trade
secrets. On April 25, 2017, Iowa Parts filed an Answer (docket no. 84) generally denying
liability and alleging a counterclaim for abuse of process. On April 26, 2017, the parties
stipulated to the dismissal of Climate Engineers from the instant action. See Joint
Stipulation of Dismissal With Prejudice (docket no. 85). On June 30, 2017, the court
dismissed Iowa Parts’s counterclaim. See June 30, 2017 Order (docket no. 122) (accepting
Chief United States Magistrate Judge C.J. Williams’s June 8, 2017 Report and
Recommendation (docket no. 116) recommending that the court dismiss Iowa Parts’s
counterclaim). Accordingly, the four claims asserted in the Second Amended Complaint
are the only remaining claims, and they remain pending only against Iowa Parts.
On September 11, 2017, CMI Roadbuilding filed the CMI Motion. On October 3,
2017, Iowa Parts filed a Resistance (“Iowa Parts Resistance”) (docket no. 146) to the CMI
Motion. On October 10, 2017, CMI Roadbuilding filed a Reply (“CMI Reply”) (docket
no. 147). On November 20, 2017, Iowa Parts filed a Sur Reply (docket no. 159) with
leave of court.
On September 12, 2017, Iowa Parts filed the Iowa Parts Motion. On October 3,
2017, CMI filed a Resistance (“CMI Resistance”) (docket no. 144) to the Iowa Parts
Motion. On October 12, 2017, Iowa Parts filed a Reply (“Iowa Parts Reply”) (docket no.
150). Both parties request oral arguments on the Motions, but the court finds that oral
arguments are unnecessary. The matters are fully submitted and ready for decision.
III. SUBJECT MATTER JURISDICTION
The court has original jurisdiction over the DTSA claim because it arises under the
United States Code. See 28 U.S.C. § 1331 (“The district courts shall have original
jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the
United States.”). The court has supplemental jurisdiction over the UTSA and common law
claims because they are so related to the claim within the court’s original jurisdiction that
they form part of the same case or controversy. See 28 U.S.C. § 1367(a) (“[T]he district
courts shall have supplemental jurisdiction over all other claims that are so related to
claims in the action within such original jurisdiction that they form part of the same case
or controversy . . . .”). In other words, “the federal-law claim and state-law claims in
the case ‘derive from a common nucleus of operative fact’ and are ‘such that [a plaintiff]
would ordinarily be expected to try them all in one judicial proceeding.’” Kan. Pub.
Emps. Ret. Sys. v. Reimer & Koger Assocs., Inc., 77 F.3d 1063, 1067 (8th Cir. 1996)
(second alteration in original) (quotation marks omitted) (quoting Carnegie-Mellon Univ.
v. Cohill, 484 U.S. 343, 349 (1988)).
IV. SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate “if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). “Summary judgment is proper ‘if the pleadings, the discovery and
disclosure materials on file, and any affidavits show’” an absence of a genuine dispute as
to a material fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011)
(en banc) (quoting Fed. R. Civ. P. 56(c)(2)). “A dispute is genuine if the evidence is such
that it could cause a reasonable jury to return a verdict for either party; a fact is material
if its resolution affects the outcome of the case.” Amini v. City of Minneapolis, 643 F.3d
1068, 1074 (8th Cir. 2011) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
252 (1986)). “The movant ‘bears the initial responsibility of informing the district court
of the basis for its motion,’ and must identify ‘those portions of [the record] . . . which it
believes demonstrate the absence of a genuine issue of material fact.’” Torgerson, 643
F.3d at 1042 (alterations in original) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986)). Once the movant has done so, “the nonmovant must respond by submitting
evidentiary materials that set out ‘specific facts showing that there is a genuine issue for
trial.’” Id. (quoting Celotex Corp., 477 U.S. at 324).
On a motion for summary judgment, the court must view the facts “in the light
most favorable to the nonmoving party.” Id. (quoting Ricci v. DeStefano, 557 U.S. 557,
586 (2009)). “Where the record taken as a whole could not lead a rational trier of fact to
find for the nonmoving party, there is no genuine issue for trial,” and summary judgment
is appropriate. Ricci, 557 U.S. at 586 (quoting Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986)). “The nonmovant ‘must do more than simply
show that there is some metaphysical doubt as to the material facts’ . . . .” Torgerson, 643
F.3d at 1042 (quoting Matsushita, 475 U.S. at 586). Instead, “[t]o survive a motion for
summary judgment, the nonmoving party must substantiate his allegations with sufficient
probative evidence [that] would permit a finding in [his] favor based on more than mere
speculation, conjecture, or fantasy.” Barber v. C1 Truck Driver Training, LLC, 656 F.3d
782, 801 (8th Cir. 2011) (second and third alterations in original) (quoting Putman v. Unity
Health Sys., 348 F.3d 732, 733-34 (8th Cir. 2003)). Mere “self-serving allegations and
denials are insufficient to create a genuine issue of material fact.” Anuforo v. Comm’r of
Internal Revenue, 614 F.3d 799, 807 (8th Cir. 2010).
V. RELEVANT FACTUAL BACKGROUND
Viewing the evidence in the light most favorable to the nonmoving parties, and
affording them all reasonable inferences, the uncontested material facts are as follows.
A. The Parties and Players
CMI Roadbuilding, Inc. and CMI Roadbuilding, Ltd. are the current owners of a
series of assets related to the manufacturing of asphalt plants, concrete plants and landfill
and dirt compaction equipment.
See Second Amended Complaint ¶ 15.
Roadbuilding came to own these assets via a series of corporate mergers and acquisitions
stemming from a company known as Iowa Manufacturing Company, established in
approximately 1929, and which changed its name to Cedarapids, Inc. (“Cedarapids”) in
1985. Id. ¶ 8. In 1989, Cedarapids acquired Standard Havens, Inc. (“Standard Havens”),
which manufactured asphalt paving equipment and asphalt plans. Id. ¶ 9. This acquisition
included all of Standard Havens’s assets, including its intellectual property. Id. In 1999,
Terex Corporation (“Terex”) and its related corporations acquired Cedarapids, succeeding
in ownership to all of Cedarapids’s intellectual property and assets, including those assets
that Cedarapids had acquired from Standard Havens ten years prior. Id. ¶ 10. In 2001,
the Terex family of corporations acquired CMI Corporation, a company based in
Oklahoma City, Oklahoma. Id. ¶¶ 11-12. The resulting wholly owned subsidiary was
known as CMI Terex. In 2013, CMI Roadbuilding purchased assets from the Terex family
of corporations relating to the asphalt plants, concrete plants and landfill and dirt
compaction equipment. Id. ¶ 15. These assets included intellectual property owned by
Terex and its related corporations relating to Cedarapids, Standard Havens and CMI
Corporation’s line of asphalt plants. Id. Thus, CMI Roadbuilding is in the business of
manufacturing and selling asphalt plants and related equipment, including the sale of
replacement parts for such plants. See CMI Motion Statement of Facts (docket no. 146-1)
Iowa Parts is a corporation organized and existing under the laws of the State of
Iowa with its principal place of business in Cedar Rapids, Iowa. Id. ¶ 13. Iowa Parts was
incorporated in 2002 to sell replacement parts previously designed and manufactured by
Standard Havens, Cedarapids, CMI Corporation and Terex. Id. ¶ 14.
B. CMI’s Business Practices
At issue in this case are certain technical drawings, plans and specifications which
the parties refer to as “Engineering Documents.” These drawings, plans and specifications
are all purportedly required to manufacture an asphalt plant and the component parts
thereof. See Brief in Support of the CMI Motion1 (docket no. 153-1) at 4-5. Not at issue
are certain documents referred to as “Gray Books,” which are distributed to customers,
contain drawings, including layout drawings, of CMI Roadbuilding’s machinery and are
supposedly intended to assist with ordering replacement parts. See Iowa Parts Statement
of Additional Facts (docket no. 146-2) ¶ 67-69; see also CMI Response to Iowa Parts
Statement of Additional Facts (docket no. 147-2) at 7.
Shortly after Terex acquired Cedarapids in 1999 it significantly downsized its
operations, from approximately 1,200 employees to 200 employees. See Iowa Parts
Statement of Additional Facts ¶ 14. At that time, Terex informed Jay King, Terex’s parts
manager, that it would no longer support the after-market parts department of the operation
and the company was going to seek outside vendors to build replacement parts for the
After CMI Roadbuilding filed the CMI Motion, it informed the court that it had
erroneously omitted a page from its brief in support of the CMI Motion. The court
permitted the substitution of the amended brief over Iowa Parts’s objection and permitted
Iowa Parts to file the Sur Reply in response. See November 15, 2017 Order (docket no.
asphalt plant line. Id. ¶ 15. As a result, the parts department began to outsource as
rapidly as possible in order to maintain its supply of replacement parts for its customers.
Id. ¶ 16. This required CMI to send out packets of drawings containing specifications for
certain parts to multiple vendors on a daily basis. Id. ¶ 16. At least some of the drawings
that CMI sent out to vendors, either at that time or at some later time, bore a nomenclature
identifying Iowa Manufacturing Company, Cedarapids, CMI Corporation, Terex or CMI
Roadbuilding as the owner of the drawing and its contents. See CMI Motion Statement
of Facts ¶¶ 3-4; see also CMI Motion Appendix2 at 64. The parties dispute whether such
vendors were required to sign confidentiality agreements upon the receipt of the
Engineering Documents. Compare Iowa Parts Statement of Additional Facts ¶¶ 89-90,
with CMI Response to Iowa Parts Statement of Additional Facts at 9.
C. Iowa Parts’s Formation
On April 12, 2002, Michael Hawkins, the former head of the parts department for
Standard Havens, formed Iowa Parts. See CMI Motion Statement of Facts ¶ 14; see also
Iowa Parts Motion Statement of Facts (docket no. 139-2) ¶ 2; Iowa Parts Statement of
Additional Facts ¶ 5. Iowa Parts is in the business of selling replacement parts for, among
other things, asphalt plants designed and manufactured by Standard Havens, Cedarapids,
CMI Corporation and Terex. See CMI Motion Statement of Facts ¶ 14. It does not
manufacture any of its own parts, but instead contracts with various vendors to
manufacture such parts, and then sells the replacement parts to owners of Cedarapids,
Standard Havens and CMI Corporation asphalt plants and equipment. Id. ¶¶ 15-16. Iowa
Parts also does not employ any mechanical or electrical engineers, nor does it require that
CMI Roadbuilding has filed its appendix in support of the CMI Motion in separate
but consecutively paginated documents at docket nos. 134-4 through 134-19 and docket no.
137. The court shall cite to such consecutive pagination when referring to the CMI
Appendix in this Order.
any mechanical or electrical engineer verify any plans or specifications that it uses to
produce its replacement components. Id. ¶¶ 22-23.
Iowa Parts markets its replacement parts as specifically fitting and being compatible
with Cedarapids, Standard Haven and CMI Corporation asphalt plants and equipment. Id.
¶ 17. It also holds such parts out as meeting “OEM [original equipment manufacturer]
specifications,” though Iowa Parts has never explicitly obtained approval from CMI
Roadbuilding for such a statement. Id. ¶ 18. In fact, Iowa Parts advertises that it employs
several people who specialize in Cedarapids and Standard Havens asphalt plants and
equipment. Id. ¶ 21. Iowa Parts has maintained a website since July of 2011 which
advertises that it can provide parts to OEM specifications, including for Standard Havens
equipment. See Iowa Parts Motion Statement of Facts ¶ 21; see also Iowa Parts: Asphalt
Plant Equipment, http://www.iowapartsusa.com/ (last visited Dec. 2, 2017).
Iowa Parts employs several persons who used to work for CMI Roadbuilding’s
predecessors in interest in the assets and intellectual property at issue in this case. From
November of 1997 to April of 2002, King was employed by Cedarapids and, after
Cedarapids’s acquisition, Terex, in the engineering department of their asphalt plant
division. See CMI Motion Statement of Facts ¶ 24. Soon after King left Terex, he joined
Iowa Parts as the general manager. Id. ¶ 25. From September of 1995 to sometime in
2003 or 2004, Timothy Franck worked for Cedarapids and, after Cedarapids’s acquisition,
Terex. Id. ¶ 26. Franck subsequently left Terex and eventually gained employment with
Iowa Parts. Id. ¶ 28. Rick Merritt worked for Iowa Manufacturing and, after it was
renamed, Cedarapids as a draftsman in the engineering department’s asphalt plant area.
Id. ¶ 29. After leaving employment with Terex, Merritt went to work for Iowa Parts. Id.
¶ 30. Besides King, Franck and Merritt, Iowa Parts employs “many” former employees
of CMI and its predecessors. See Iowa Parts Motion Statement of Facts ¶ 34.
When Iowa Parts first incorporated, it lacked any plans, blueprints or specifications
of any kind. See Iowa Parts Statement of Additional Facts ¶ 24. Instead, in order to build
products, Iowa Parts approached certain vendors who had advised that they were willing
to manufacture products for Iowa Parts. Id. ¶ 25. At no time did any representative from
Iowa Parts actually obtain the Engineering Documents from CMI Roadbuilding or any
related corporation. See Iowa Parts Statement of Additional Facts ¶ 99. Subsequently,
some of those vendors provided certain drawings from CMI Roadbuilding and its
predecessors to Iowa Parts. See Iowa Parts Motion Statement of Facts ¶ 26. For other
components, Iowa Parts reverse engineered CMI Roadbuilding’s components using a string
line and measuring tape. Id. ¶ 27.
On May 29, 2002, shortly after Iowa Parts was founded and King gained
employment there, Terex sent King a letter. See Iowa Parts Motion Appendix (docket no.
139-3) at 53.
The letter generally informs King that he has continuing duties of
confidentiality to Cedarapids and Terex. Id. In relevant part, the letter reads as follows:
[W]e wish to remind you at this time of your obligations with
respect to Cedarapids’ and CMI Terex’s proprietary
information and other property. As we are sure you are
aware, all former employees owe a duty of loyalty to their
former employers. All Cedarapids’ [sic] and CMI Terex
employees (current and former) are obligated to keep
Cedarapids’ and CMI Terex’s proprietary and confidential
information in confidence and to use such information . . .
solely for Cedarapids’ and CMI Terex’s benefit.
Further, applicable federal law makes it a crime for either an
individual or an entity such as Iowa Parts to take any
Cedarapids’ or CMI Terex’s trade secrets without
authorization. If you have divulged any such information to
Iowa Parts, or used this information in any way other than
pursuant to your employment with Cedarapids and CMI Terex,
this is a violation of law. You must immediately cease using
such information and return any such property to Cedarapids
and CMI Terex.
Id. The letter further states that Iowa Parts’s use of the phrase “a Cedar Rapids Iowa
Company” as part of its letterhead was improper as it would lead customers to believe that
Iowa Parts was affiliated with Cedarapids. Id. at 54. Finally, the letter indicates that
Terex is “aware that [Iowa Parts] ha[d] been contacting Cedarapids’ customers and
suppliers in an attempt to interfere with the contractual relationships which currently exist
Id. Additionally, Cindy Ledford, the parts manager for CMI
Roadbuilding, testified at her deposition that Iowa Parts directly competed with CMI
Roadbuilding and its predecessors from its inception. See id. at 8-9. Ledford expressed
confusion as to how Iowa Parts was consistently able to provide quotes to CMI
Roadbuilding’s customers before CMI Roadbuilding. She testified, “I never understood
how I could struggle getting information, but they—and I know they knew the product line,
you know. They did know the product line, but it was—it just seemed funny to me how
they would always have the information quicker than I would.” Id. at 9.
Finally, Iowa Parts alleges that it has advertised its services in several trade
magazines between 2002 and 2014. See Iowa Parts Motion Statement of Facts ¶¶ 23-24.
It implies that Terex has also placed advertisements in the same publications. Id. ¶ 25.
Iowa Parts also attended a tradeshow, World of Asphalt, in 2003 wherein it displayed
poster-sized versions of its advertisements. Id. ¶ 26. Iowa Parts alleges that Steve O’Neil,
a Terex employee, was present at the World of Asphalt convention in 2003 and visited the
Iowa Parts booth. Id. ¶ 27.
Somewhat recently, Iowa Parts transitioned from selling smaller replacement
components to larger components. Id. ¶ 28. This transition changed the value of the
component parts at issue dramatically—from around $50 to $250 per part to $300,000 to
$400,000 per item. Id. ¶ 29. On February 4, 2016, Edwin Sauser, the product manager
for Terex Minerals Processing Systems, emailed David Emerson of CMI Roadbuilding
stating the following: “Iowa Parts is building silos and bag houses through Climate
Engineering using Cedarrapids drawings. Are they building these for your group?” See
CMI Motion Appendix at 87. Emerson attached several photographs to the email, in part
depicting several technical drawings. Id. at 88-90. Soon thereafter, on February 22,
2016, CMI Roadbuilding instituted the instant action.
CMI Roadbuilding seeks partial summary judgment on the issue of liability on all
of its claims. See CMI Motion at 1. The only issue remaining for trial would be the
measure of damages. In the alternative, CMI Roadbuilding requests that the court enter
an order, pursuant to Federal Rule of Civil Procedure 56(g), stating all of the material
facts not genuinely in dispute, such that the parties may treat them as established at trial.
Iowa Parts argues that genuine issues of material fact exist as to all of CMI
Roadbuilding’s claims arising under the DTSA and UTSA, and further argues that CMI
Roadbuilding cannot succeed as a matter of law on its conversion and unjust enrichment
claims. See generally Iowa Parts Resistance.
Iowa Parts argues that it is entitled to summary judgment on all of CMI
Roadbuilding’s claims because CMI Roadbuilding brought suit outside of the applicable
statutes of limitations on all claims. See Iowa Parts Motion at 1. It further argues that
summary judgment is appropriate because CMI Roadbuilding failed to take reasonable
steps to maintain the secrecy of its trade secrets, and cannot assert any claim under the
DTSA because the applicable conduct occurred prior to the DTSA’s passage. Id. at 1-2.
Finally, Iowa Parts argues that it is entitled to summary judgment on CMI Roadbuilding’s
conversion claim because CMI Roadbuilding cannot prove an essential element of the
claim. Id. at 2. CMI Roadbuilding argues that the discovery rule applies to its claims and
CMI Roadbuilding had no reason to know of Iowa Parts’s alleged misappropriation until
well within the statute of limitations. See generally CMI Resistance. It further argues that
it has taken reasonable steps to maintain its secrets and that Iowa Parts has admitted that
it committed some “act” after the passage of the DTSA, making the claim cognizable. Id.
Finally, it argues that it can establish each element of conversion. Id.
The court shall first briefly summarize the DTSA and UTSA and their protections.
The court will then consider whether Iowa Parts is entitled to summary judgment on its
statute of limitations defense. Finally, if appropriate, the court shall consider whether
CMI Roadbuilding is entitled to summary judgment on the issue of liability on its claims.
A. The DTSA and UTSA
The DTSA creates a federal private right of action for “[a]n owner of a trade secret
that is misappropriated . . . if the trade secret is related to a product or service used in, or
intended for use in, interstate or foreign commerce.” 18 U.S.C. § 1836. Under the
DTSA, trade secrets include “all forms and types of financial, business, scientific,
technical, economic, or engineering information, including patterns, plans, compilations,
program devices, formulas, designs, prototypes, methods, techniques, processes,
procedures, programs, or codes, whether tangible or intangible, and whether or
how stored, compiled, or memorialized physically, electronically, graphically,
photographically, or in writing.” Id. § 1839(3). However, such information only qualifies
as a trade secret if:
the owner thereof has taken reasonable measures to keep such
information secret; and . . . the information derives
independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable
through proper means by, another person who can obtain
economic value from the disclosure or use of the information.
In turn, the term “misappropriation” means “acquisition of a trade secret of another
by a person who knows or has reason to know that the trade secret was acquired by
improper means” or “disclosure or use of a trade secret of another without express or
implied consent” where such person “used improper means to acquire knowledge of the
trade secret,” “at the time of disclosure or use, knew or had reason to know that the
knowledge of the trade secret was . . . derived from or through a person who had used
improper means to acquire the trade secret; . . . acquired under circumstances giving rise
to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
. . . derived from or through a person who owed a duty to the person seeking relief to
maintain the secrecy of the trade secret or limit the use of the trade secret” or “before a
material change of the position of the person, knew or had reason to know that . . . the
trade secret was a trade secret; and . . . knowledge of the trade secret had been acquired
by accident or mistake.” Id. § 1839(5). As defined by the DTSA, “improper means”
“includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to
maintain secrecy, or espionage through electronic or other means,” but “does not include
reverse engineering, independent derivation, or any other lawful means of acquisition.”
Id. § 1839(6).
Similarly, the UTSA provides means for a trade secret holder to obtain an injunction
and monetary damages against an infringer. The UTSA allows the holder of a trade secret
to obtain an injunction when “actual or threatened misappropriation” of the secret occurs.
Iowa Code § 550.3(1). The measure of damages is “the actual loss caused by the
misappropriation, and the unjust enrichment caused by the misappropriation which is not
taken into account in computing the actual loss.” Id. § 550.4(1). If the misappropriation
is “willful and malicious,” courts “may award exemplary damages . . . not exceeding
twice the award made” for actual loss and unjust enrichment. Id. § 550.4(2).
Under the UTSA, a “trade secret” is “information, including but not limited to a
formula, pattern, compilation, program, device, method, technique, or process” that both
“[d]erives independent economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by a person able to obtain
economic value from its disclosure or use,” and that has been “the subject of efforts that
are reasonable under the circumstances to maintain its secrecy.” Id. § 550.2(4). This
inquiry is a mixed question of law and fact, with the legal portion of the inquiry being
whether the information is the type of information that can qualify, categorically, as a trade
secret. See Econ. Roofing & Insulating Co. v. Zumaris, 538 N.W.2d 641, 648 (Iowa
1995). The fact portion of the inquiry asks whether the information derives independent
economic value from its secrecy and whether reasonable efforts to maintain its secrecy
were expended. Id. at 648-69.
A person can misappropriate a trade secret in several ways laid out in the UTSA.
Misappropriation means: “Acquisition of a trade secret by a person who knows that the
trade secret is acquired by improper means;” “Disclosure or use of a trade secret by a
person who uses improper means to acquire the trade secret;” “Disclosure or use of a trade
secret by a person who at the time of disclosure or use, knows that the trade secret is
derived from or through a person who had utilized improper means to acquire the trade
secret;” “Disclosure or use of a trade secret by a person who at the time of disclosure or
use knows that the trade secret is acquired under circumstances giving rise to a duty to
maintain its secrecy or limit its use;” “Disclosure of a trade secret by a person who at the
time of disclosure or use knows that the trade secret is derived from or through a person
who owes a duty to maintain the trade secret’s secrecy or limit its use;” and “Disclosure
or use of a trade secret by a person who, before a material change in the person’s position,
knows that the information is a trade secret and that the trade secret has been acquired by
accident or mistake.” Iowa Code § 550.2(3). In turn, “improper means” includes “theft,
bribery, misrepresentation, breach or inducement of a breach of a duty to maintain
secrecy, or espionage, including but not limited to espionage through an electronic
device.” Id. § 550.2(1).
B. Statute of Limitations
Iowa Parts argues that it is entitled to summary judgment because CMI
Roadbuilding discovered, or should have discovered, that Iowa Parts was utilizing the
Engineering Documents at some time prior to the time permitted by the statute of
limitations.3 See Brief in Support of the Iowa Parts Motion (docket no. 139-1) at 18. In
particular, Iowa Parts argues that the number of employees who departed CMI
Roadbuilding and its predecessors4 to work for Iowa Parts, the fact that Ledford voiced her
concerns about Iowa Parts to her superiors, the letter from CMI Roadbuilding to King soon
after he began working at Iowa Parts informing him that he may not utilize CMI
Iowa Parts also argues that CMI Roadbuilding does not own the trade secrets at
issue because Terex never transferred any of the assets that it acquired from its acquisition
of Cedarapids to CMI Terex, which in turn sold assets to CMI Roadbuilding. See Iowa
Parts Resistance at 6-7. However, the testimony of Eric Cohen, the general counsel for
Terex, establishes the chain of ownership of the Engineering Documents and it is his
opinion that CMI Roadbuilding obtained an ownership interest in the intellectual property
related to the asphalt plants through the asset sale from CMI Terex to CMI Roadbuilding.
See CMI Motion Appendix at 53-56, 62; see also CMI Resistance Appendix (docket no.
144-3) at 29-30. Therefore, Iowa Parts cannot defeat the CMI Motion on these grounds.
CMI Roadbuilding does not argue that whatever knowledge its predecessors in
interest had of Iowa Parts's alleged misappropriation should not be imputed to it. See
generally CMI Resistance. Thus, the court shall assume, without deciding, that
information known by Terex, CMI Terex and/or Cedarapids could start the clock on the
statute of limitations. Even if the court reached the issue, it would conclude that CMI
Roadbuilding has imputed knowledge of everything that its predecessors in interest knew
with respect to the trade secrets. First, CMI Roadbuilding purchased the trade secrets
from CMI Terex, along with the rights and responsibilities thereto. Any information with
respect to the trade secrets should have been sought and disclosed during due diligence for
the acquisition. Furthermore, absolving CMI Roadbuilding of the knowledge of its
predecessors in interest could open the door to fraudulent transfers of trade secrets between
related business entities for the purpose of restarting the clock on stale claims of
misappropriation. However, because the parties do not argue this issue, the court need not
decide it, and instead shall simply assume that CMI Roadbuilding is charged with the
knowledge of its predecessors in interest.
Roadbuilding’s confidential information and the fact that Iowa Parts notoriously competed
with CMI Roadbuilding, including circulating advertisements and attending trade shows,
demonstrates that CMI Roadbuilding should have known, prior to the time permitted by
the statute of limitations, that Iowa Parts was allegedly utilizing the Engineering
Documents. See id. at 18-30.
CMI Roadbuilding argues that Iowa Parts must explicitly identify when it acquired
each individual Engineering Document and demonstrate that CMI Roadbuilding should
have known of its acquisition or use, otherwise it would essentially “give Iowa Parts
carte blanche authority to continue to steal the Engineering Documents in perpetuity.”
CMI Resistance at 7. CMI Roadbuilding also argues that the key turning point in the
instant action is when Iowa Parts recently began manufacturing larger component parts—it
was only at that time that CMI Roadbuilding was put on notice that Iowa Parts must have
been misappropriating the Engineering Documents. See id. at 8-9. CMI Roadbuilding
further asserts that it first became aware of Iowa Parts’s alleged misappropriation in
February of 2016, when it received the email from Sauser. Id. at 10. Finally, CMI
Roadbuilding argues that the 2002 letter to King “addresses many subjects that naturally
flowed from his departure from Terex employment” and did not necessarily imply that
CMI Roadbuilding knew that King was acquiring and using its trade secrets. Id. at 11.
CMI Roadbuilding further maintains that Iowa Parts has provided no evidence that any
employee of CMI Roadbuilding ever saw or was aware of Iowa Parts’s advertisements or
presence at trade shows. Id. at 12.
Under both the DTSA and UTSA, a party must commence an action within three
years of the time that the misappropriation is actually discovered or should have been
discovered. See 18 U.S.C. § 1836(d) (“A civil action under subjection (b) may not be
commenced later than 3 years after the date on which the misappropriation with respect
to which the action would relate is discovered or by the exercise of reasonable diligence
should have been discovered.”); Iowa Code § 550.8 (“An action for misappropriation
under this chapter must be brought within three years after the misappropriation is
discovered or should have been discovered by the exercise of reasonable diligence.”).
Both statutes treat a continuing violation as a single claim for the purposes of determining
when an action becomes time barred. See 18 U.S.C. § 1836(d) (“For purposes of this
subsection, a continuing misappropriation constitutes a single claim of misappropriation.”);
Iowa Code § 550.8 (“For purposes of this section, a continuing misappropriation
constitutes a single claim.”). The so-called discovery rule written into the UTSA and
DTSA tolls the statute of limitations for a party without actual knowledge of the
misappropriation if there exists no facts sufficient to demonstrate that the party should have
discovered the misappropriation at an earlier time.
Iowa law treats claims of conversion as injuries to property, making the statute of
limitations on such a claim five years. See, e.g., Husker News Co. v. Mahaska State
Bank, 460 N.W.2d 476, 477 n.2 (Iowa 1990) (assuming that a five-year statute of
limitations applied); see also Estate of Pepper ex rel. Deeble v. Whitehead, 686 F.3d 658,
665-66 (8th Cir. 2012). The Eighth Circuit has stated that the discovery rule should apply
to statutes of limitations on conversion claims arising under Iowa law. See Whitehead, 686
F.3d at 666 (“Iowa applies the discovery rule to toll a statute of limitations.” (citing Hallett
Constr. Co. v. Meister, 713 N.W.2d 225, 231 (Iowa 2006)). But see Husker News Co.,
460 N.W.2d at 479 (refusing to apply the discovery rule of claims of commercial
conversion arising under Iowa’s version of the Uniform Commercial Code). Iowa law
treats an unjust enrichment claim as a claim arising under an unwritten contract, and, thus,
is also subject to a five-year statute of limitations. See Dolezal v. City of Cedar Rapids,
326 N.W.2d 355, 360 (Iowa 1982) (“We hold plaintiff’s unjust enrichment claim is . . .
subject to the five-year statute of limitations on unwritten contracts.”). Both parties agree
that the discovery rule should apply to CMI Roadbuilding’s conversion and unjust
enrichment claims. See Brief in Support of the Iowa Parts Motion at 15.
Under the discovery rule, the statute of limitations on an action is tolled until such
time as the injured person has actual or imputed knowledge of all the elements of a cause
of action. See Gabelli v. S.E.C., 568 U.S. 442, 449 (2013) (“Under [the discovery] rule,
accrual is delayed ‘until the plaintiff has “discovered”’ his cause of action. . . . And we
have explained that ‘[a cause of action] is deemed to be discovered when, in the exercise
of reasonable diligence, it could have been discovered.’” (citations omitted)); Hook v.
Lippolt, 755 N.W.2d 514, 521 (Iowa 2008) (quoting Franzen v. Deere & Co., 377
N.W.2d 660, 662 (Iowa 1985)). If a party should have been aware of the existence of
their cause of action, they are said to be on inquiry notice of the same. “A party is placed
on inquiry notice when a person gains sufficient knowledge of facts that would put that
person on notice of the existence of a problem or potential problem.” Buechel v. Five Star
Quality Care, Inc., 745 N.W.2d 732, 736 (Iowa 2008).
After a party is placed on inquiry notice, it is charged with knowledge of all facts
that a reasonably diligent investigation would have disclosed. Id. Thus, inquiry notice
imposes a positive duty of investigation once a party becomes “aware that a problem
exists” and such duty arises “even though the person may not have knowledge of the
nature of the problem that caused the injury.” Id. (quoting Sparks v. Metalcraft, Inc., 408
N.W.2d 347, 352 (Iowa 1987)); see also Hallett Const. Co., 713 N.W.2d at 231 (“A
claimant can be on inquiry notice without knowing ‘the details of the evidence by which
to prove the cause of action.’” (quoting Vachon v. State, 514 N.W.2d 442, 446 (Iowa
1994))). Thus, “the duty to investigate does not depend on exact knowledge of the nature
of the problem that caused the injury. It is sufficient that the person be aware that a
problem existed.” Woodroffe v. Hasenclever, 540 N.W.2d 45, 48-49 (Iowa 1995) (quoting
Franzen, 377 N.W.2d at 662-63). “Issues of due diligence and constructive knowledge
depend on inferences drawn from the facts of each particular case. . . . When conflicting
inferences can be drawn from the facts, summary judgment is inappropriate.” Whitehead,
686 F.3d at 666 (alteration in original) (quoting Kraciun v. Owens-Corning Fiberglass
Corp., 895 F.2d 444, 447 (8th Cir. 1990)). “[I]gnorance of specific legal rights or failure
to seek legal advice should not toll the  notification period.” DeBrunner v. Midway
Equip. Co., 803 F.2d 950, 952 (8th Cir. 1986) (quoting McClinton v. Ala. By-Products
Corp., 743 F.2d 1483, 1486 (11th Cir. 1984)).
The instant action was filed on February 22, 2016. See Complaint (docket no. 2).
Thus, under the DTSA and UTSA, CMI Roadbuilding must not have had actual or imputed
knowledge of a violation prior to February 22, 2013 for the claim to survive summary
judgment. Similarly, CMI Roadbuilding must not have had actual or imputed knowledge
that Iowa Parts converted the trade secrets or was unjustly enriched by the same prior to
February 22, 2011 to survive summary judgment. Though Iowa Parts bears the burden
of demonstrating that the statute of limitations bars CMI Roadbuilding’s claims, the burden
rests on CMI Roadbuilding to adduce evidence that, even with reasonable diligence, a
genuine issue of fact exists as to whether it knew or should have known of the
misappropriation prior to 2011 or 2013. See John Q. Hammons Hotels, Inc. v. Acorn
Window Sys., Inc., 394 F.3d 607, 610 (8th Cir. 2005) (“While a statutory time bar is an
affirmative defense that must be established by the defendant, a plaintiff claiming the
application of the delayed discovery rule has the burden of proving it.” (quoting Estate of
Montag v. TH Agric. & Nutrition Co., 509 N.W.2d 469, 470 (Iowa 1993))); see also
Whitehead, 686 F.3d at 666 (“The plaintiff bears the burden of pleading and proving the
applicability of the discovery rule, but when a defendant claims a statute of limitations
defense in a summary judgment motion, the court reviews the evidence presented in the
light most favorable to the plaintiffs as nonmoving parties.” (alterations and quotation
marks omitted) (quoting Kraciun, 895 F.2d at 445-46)). Therefore, summary judgment
against CMI Roadbuilding is appropriate if a reasonable jury could only conclude that CMI
Roadbuilding knew or should have known of the potential violation before February 22,
2013 for the DTSA and UTSA claims, and before February 22, 2011 for the conversion
and unjust enrichment claims. See Hammons Hotels, 394 F.3d at 610.
Actual or Inquiry Notice
As an initial note, the court rejects CMI Roadbuilding’s contention that Iowa Parts
must, with specificity, list each Engineering Document obtained and tie each document to
facts suggesting that CMI Roadbuilding should have known that Iowa Parts was in
possession of the same. The DTSA and UTSA both explicitly state that, for the purposes
of application of the statute of limitations, a continuing misappropriation is treated as a
single claim. See 18 U.S.C. § 1836(d); Iowa Code § 550.8. In doing so, the statutes
reject the “continuing violation” theory, present in other statutory schemes, under which
continued disclosure or use of a trade secret would permit claims for other
misappropriations occurring within the limitations period, even if prior misappropriations
are not actionable, or would permit a claim for all misappropriations so long as one
occurred within the limitations period. The clear intent of the statutes is that a plaintiff
placed on notice that another may be utilizing its trade secrets may not sleep on its rights
and should understand that there is a risk that another may commit additional acts of
misappropriation, whether with the same trade secret or related trade secrets. See, e.g.,
Gognat v. Ellsworth, 224 P.3d 1039, 1046-47 (Colo. App. 2009), aff’d, 259 P.3d 497
(Colo. 2011) (applying Colorado’s version of the UTSA); Cadence Design Sys., Inc. v.
Avant! Corp., 57 P.3d 647, 651 (Cal. 2002) (applying California’s version of the UTSA);
Adcor Indus., Inc. v. Bevcorp, LLC, 411 F. Supp. 2d 778, 786 (N.D. Ohio 2005), aff’d,
252 F. App’x 55 (6th Cir. 2007) (applying Ohio’s version of the UTSA); Intermedics, Inc.
v. Ventritex, Inc., 822 F. Supp. 634, 654 (N.D. Cal. 1993) (applying California’s version
of the UTSA).
Here, the method and subjects of the claimed misappropriation are consistent—CMI
Roadbuilding alleges that Iowa Parts has consistently induced various third parties to
supply it with Engineering Documents related to the production of component parts for
asphalt plants and related equipment, allowing Iowa Parts to use the information in the
Engineering Documents to directly compete with CMI Roadbuilding in a manner in which
it could not otherwise compete. These alleged trade secrets5 are undoubtedly “related”
such that notice, either actual or constructive, that Iowa Parts was obtaining and using one
Engineering Document would start the statute of limitations as to all use of the Engineering
Documents. The reason for this is clear. If CMI Roadbuilding had become aware of the
alleged misappropriation the instant that Iowa Parts acquired its first Engineering
Document and taken prompt and successful remedial action, no further acts of
misappropriation would have occurred, either with respect to that Engineering Document
or others. The DTSA and UTSA’s rejection of the continuing violation theory require this
The court finds that no reasonable jury could find that CMI Roadbuilding should not
have discovered that Iowa Parts was using the Engineering documents prior to 2011. It
is uncontested that, shortly after Terex acquired Cedarapids, it was determined that the
aftermarket parts department was going to be shut down. King and those working for him
began sending out packets of information to numerous vendors on a daily basis. It is
further undisputed that CMI Roadbuilding viewed such documents as confidential and as
trade secrets. At his deposition, King testified that he believed that Terex was preparing
nondisclosure agreements for these vendors. See CMI Motion Appendix at 72. King
agreed that the nondisclosure agreement essentially stated: “we’re [Terex] giving you [the
The parties contest whether the Engineering Documents constitute trade secrets.
For the purposes of the statute of limitations defense, the court shall assume that the
Engineering Documents constitute trade secrets.
vendor] these confidential documents of the company for your use in giving us a quote to
potentially build this product for us and solely for us.” Id. After King and other
employees had contacted multiple vendors, his employment with Terex terminated and he
soon thereafter went to work for Iowa Parts in or about May of 2002, just one month after
Iowa Parts was incorporated. King also admitted that, since 2002, Iowa Parts has been
obtaining plans and specifications, including the Engineering Documents, from various
vendors and using the same to produce parts to compete with CMI Roadbuilding. See
Iowa Parts Reply Appendix (docket no. 150-3) at 4.
After moving to Iowa Parts, King received a letter from Terex reminding him of his
continuing obligations of confidentiality to the company and stating, that Terex was “aware
that [he] ha[d] been contacting Cedararpids’ customers and suppliers in an attempt to
interfere with the contractual relationships which currently exist with Cedarapids.” CMI
Motion Appendix at 184. While the court agrees with CMI Roadbuilding that the letter
may have been sent as a matter of course, it still demonstrates that CMI Roadbuilding was
aware of the potential for former employees to abscond with or utilize trade secrets and,
more importantly, was aware that King had been in contact with the company’s vendors
after he left its employ.
Iowa Parts established itself as a direct competitor to CMI Roadbuilding almost as
soon as it began operating. Cindy Ledford, who was employed by CMI Corporation and
later Terex, testified at her deposition that “right from the beginning” of her employment
at CMI Terex, roughly 2001 or 2002, Iowa Parts had been one of CMI Terex’s biggest
competitors. See Iowa Parts Resistance Appendix (docket no. 146-3) at 134. She stated
that she became aware of Iowa Parts when customers would mention Iowa Parts on phone
calls with her as she began to source parts for the new line. Id. She testified as follows:
That, I never understood. I never understood how the
customers could call me and be asking for a quote from
me, and I’m struggling to find the Cedar Rapids stuff
and the information, and they would tell me, “Well,
I’ve already got a quote from Iowa Parts, and it’s this
amount of money.”
So I never understood how I could struggle getting
information, but they—and I know they knew the
product line, you know. They did know the product
line, but it was—it just seemed so funny to me how they
would always have the information quicker than I
Id. Ledford further testified that she voiced her concerns to her immediate supervisor or
manager at that time. Id. Apparently, no further investigation was made.
Additionally, Joseph Musil, a former CMI Terex and Cedarapids employee and
consultant for CMI Roadbuilding, testified at his deposition that, based on his forty-five
years of experience, a person could not build component parts from the freely accessible
information available to Iowa Parts in 2002—namely, “assembly and erection drawings,”
“parts manuals” or “operator or maintenance manual[s].”
See Iowa Parts Motion
Appendix at 50. He opined that a person could not completely reverse engineer a part
because it would not tell the person “what material it was made out of, . . . what hardness
it was hardened to or tempered to . . . [or] many things you need to make a part of
identical quality and service to the part that was actually originally built.” Id. at 51. He
also noted that reverse engineering may produce “a part that looks somewhat like [the
original], but it would not be functionally equivalent to the part that was originally
provided or engineered.” Id. at 52. Musil further testified as follows:
. . . [W]e’re talking about someone skilled in the art, so
someone that has the same knowledge and experience
as yourself. Are you saying they wouldn’t be able to
. . . [reverse engineer a part]?
I myself would have a very difficult time even with
[forty-five] years experience, and in spite of all my best
efforts probably without originally being involved in the
design have trouble copying something that I hadn’t
Id. at 51. When confronted with a part that an Iowa Parts employee had supposedly
reverse engineered, Musil stated that the employee “had learned a great deal from [him].”
Further, even if CMI Roadbuilding was not actually aware of Iowa Parts’s website
and advertisements, it is still charged with knowledge of them because a reasonable
investigation would have uncovered the advertisements available at that time. See Buechel,
745 N.W.2d at 736; see also Woodroffe, 540 N.W.2d at 48-49. In particular, CMI
Roadbuilding would have uncovered Iowa Parts’s statements on its website that it can
provide parts for CMI Roadbuilding’s asphalt plants to OEM specifications. That King
admitted CMI Roadbuilding never gave Iowa Parts permission to use this phrase is
irrelevant, see Iowa Parts Motion Appendix at 44, because such a statement would
undoubtedly have tipped CMI Roadbuilding off that Iowa Parts was marketing its aftermarket parts as being, essentially, the exact same as CMI Roadbuilding’s OEM parts.
According to Musil in his deposition, such a fact would be impossible without access to
the original engineering specifications. See Woodroffe, 540 N.W.2d at 51-52. The fact
that Iowa Parts was touting the essential equivalence of its parts and CMI Roadbuilding’s
parts, along with the other facts adduced above, is sufficient as a matter of law to place
CMI Roadbuilding on notice that Iowa Parts may be misappropriating trade secrets. No
reasonable jury could find otherwise. That CMI Roadbuilding may not have actually
become aware that Iowa Parts was in possession of its trade secrets until 2016 after Sauser
sent the email inquiring about the silos is irrelevant. The statutes of limitations explicitly
incorporate the discovery rule, which the court has discussed at length.
Thus, shortly after Iowa Parts was formed, CMI Roadbuilding was aware that King
had left Terex to join Iowa Parts and had been in contact with certain Terex vendors, who
had recently and rapidly acquired a large number of Terex’s proprietary documents.
Ledford approached her superiors with a concern about the rapidity with which Iowa Parts
could prepare quotes of CMI Roadbuilding’s own parts. At least one employee at CMI
Terex believed that Iowa Parts could not have easily created component parts without
access to the company’s proprietary information, because the freely available information
and reverse engineering would not have been sufficient to create a quality component part.
Additionally, a reasonable investigation would have revealed that Iowa Parts was
advertising its parts as meeting OEM specifications, which it could not actually produce
without the use of trade secrets. That CMI Roadbuilding may not have actually been
aware of the advertisements does not defeat summary judgment, because any reasonable
investigation would have, at the very least, revealed Iowa Parts’s website and
advertisements. No reasonable jury could conclude that CMI Roadbuilding did not have
actual or imputed knowledge of the existence of a problem or potential problem. See
Buechel, 745 N.W.2d at 736. Shortly after incorporation, and certainly prior to eleven
years of continuous operation, competition and alleged misappropriation, CMI
Roadbuilding knew or should have known that Iowa Parts was utilizing the Engineering
The court is similarly unpersuaded by the distinction CMI Roadbuilding apparently
draws between the smaller component parts that Iowa Parts was originally producing and
the larger scale components that it subsequently began producing. CMI Roadbuilding
implies that the use of the Engineering Documents only occurred or became imperative
after such shift occurred. See CMI Resistance at 8-9. CMI Roadbuilding fails to identify
exactly when Iowa Parts shifted its focus from smaller to larger-scale components—thus
it is impossible for the court to determine whether such a shift occurred within the statute
of limitations in the first instance. Furthermore, this distinction is entirely without import.
It is undisputed that, from its inception, Iowa Parts was utilizing its contacts with CMI
Roadbuilding’s vendors to produce component parts. See, e.g., CMI Motion Appendix
at 75-77. Musil also testified that he believed that even simpler component parts would
require more than simple reverse engineering to properly produce. See Iowa Parts Motion
Appendix at 51-52. It is clear that Iowa Parts’s method of producing parts, whether they
be smaller component parts or the larger component parts, has remained constant
throughout the years. There was no significant shift in the way that Iowa Parts was
allegedly utilizing CMI Roadbuilding’s trade secrets, thus CMI Roadbuilding’s distinction
does not hold water.
Because the court has found that CMI Roadbuilding discovered or should have
discovered the misappropriation of the Engineering Documents well before the statute of
limitations cutoff, the court need not address whether Iowa Parts is entitled to summary
judgment because CMI Roadbuilding failed to maintain the secrecy of its trade secrets.
Furthermore, the court need not address whether CMI Roadbuilding is entitled to summary
judgment on the merits of its claims, nor need the court issue a Rule 56(g) order. The
parties shall bear their own costs and attorneys’ fees.
Even if the statute of limitations did not time bar CMI Roadbuilding’s conversion
claim, summary judgment on such claim is appropriate on an independent ground. Iowa
Parts argues that CMI Roadbuilding cannot prevail on its conversion claim as a matter of
law because conversion claims are unavailable for takings of information or intellectual
property and because CMI Roadbuilding cannot demonstrate all elements of its claim.
See Brief in Support of the Iowa Parts Motion at 34-36. CMI Roadbuilding argues that
Iowa courts have not foreclosed a cause of action for conversion based on intellectual
property and that it has sufficiently demonstrated all elements of its conversion claim. See
CMI Resistance at 16-19.
Conversion is the “civil equivalent” of theft. State v. Hollinrake, 608 N.W.2d 806,
808 (Iowa Ct. App. 2000). “The essential elements of conversion are: 1) ownership by
the plaintiff or other possessory right in the plaintiff greater than that of the defendant; 2)
exercise of dominion or control over chattels by defendant inconsistent with, and in
derogation of, plaintiff’s possessory rights thereto; and 3) damage to plaintiff.” Matter of
Estate of Bearbower, 426 N.W.2d 392, 394 n.1 (Iowa 1988); see also Hollinrake, 608
N.W.2d at 808 (“Conversion is the intentional exercise of control over property ‘which
so seriously interferes with the right of another to control it that the actor may justly be
required to pay . . . the full value of the chattel.’” (alteration in original) (quoting
Restatement (Second) of Torts § 222A(1))).
The parties discuss several Iowa cases at length when arguing whether Iowa law
recognizes a conversion claim based on intellectual property.
In one such case,
Kendall/Hunt Publ’g Co. v. Rowe, the Iowa Supreme Court affirmed the district court’s
ruling that conversion did not extend to protect “the design and layout” of a book. 424
N.W.2d 235, 247 (Iowa 1988). In Kendall/Hunt, the plaintiff, a publishing company
known as Kendall, sued its former employee, Rowe, after it learned that Rowe had
organized a competing business and had published a second edition of one of Kendall’s
books that was essentially “a photo-reproduction of the Kendall text, with only minor
changes.” Id. at 238. The Iowa Supreme Court held that the photo-reproduction and
publication of the text did not constitute conversion because “Kendall was never deprived
of the use of its design and layout of [the text] by either Rowe or [his competing
company]. No harm was done to their design and layout . . . . Their control of the layout
. . . was never removed from them. It is true that Rowe and [his company] made use of
Kendall’s design and layout but this usage was not incompatible with Kendall’s own
continuing usage.” Id. at 247 (alterations omitted). The Iowa Supreme Court also noted
the industry practice of photo-reproduction of texts, and opined that Rowe was acting in
good faith when he published the text. Id.
In Primmer v. Langer, the Iowa Court of Appeals found that shipping rate, contract
and customer information taken or destroyed by a former employee upon the termination
of his employment with the plaintiff was not properly the subject of a conversion claim.
856 N.W.2d 382, 2014 WL 4930456, at *7 (Iowa Ct. App. 2014). Primmer was a
corporation specializing in the brokerage of shipment loads for common carriers. Id. at
Langer was a broker for Primmer who, after relations with Primmer soured,
absconded with “rates and contract information and shredded information regarding
customer contracts, customer load history, quoted [freight] lanes, and future lanes.” Id.
at *2. The Iowa Court of Appeals noted that Primmer had retained a copy of “all
information” that Langer allegedly took or destroyed and that he “never deprived use of
the information” to Primmer. Id. at *7. The Iowa Court of Appeals, citing Kendall/Hunt,
concluded that “the information” at issue was not protected by conversion. Id.
Finally, in Sioux Biochemical, Inc. v. Cargill, Inc., the United States District Court
for the Northern District of Iowa eschewed a reading of Kendall/Hunt that categorically
foreclosed any claim of conversion based on intellectual property. 410 F. Supp. 2d 785,
802 (N.D. Iowa 2005). The Sioux Biochemical court noted that the Kendall/Hunt decision
was premised, not on an assumption that no intellectual property could ever be subject to
a conversion claim, but on a consideration of the factors relevant to determining the
seriousness of the interference with the plaintiff’s possessory rights. Id. at 800-01.
Kendall/Hunt’s statement that “the law of conversion does not apply,” Kendall/Hunt, 424
N.W.2d at 247, to the layout of the printed material in that case, according to the Sioux
Biochemical court, “relied on the specific application of the pertinent factors; it cannot be
read . . . to mean that no claim of conversion can ever involve intellectual property,”
Sioux Biochemical, 410 F. Supp. 2d at 801.
Based on a review of these cases, the court agrees with CMI Roadbuilding that
Kendall/Hunt and its progeny do not necessarily foreclose a plaintiff from asserting a
conversion claim for intellectual property or information. These cases generally focus on
the seriousness of the defendant’s interference with the plaintiff’s possessory rights in
determining whether a conversion claim is available. See, e.g., Kendall/Hunt, 424
N.W.2d at 247. Iowa courts consider a variety of factors in determining the seriousness
of a defendant’s interference with a plaintiff’s possessory rights, including the extent of the
defendant’s exercise of dominion or control, the intent to assert a right in fact inconsistent
with the plaintiff’s right of control, the extent and duration of the resulting interference
with the plaintiff’s right of control and the harm done to the chattel. See id. Cases such
as Kendall/Hunt rely on the fact that the defendant’s use of the intellectual property did not
actually interfere with the plaintiff’s right to independently control and utilize the
information at issue. See id. (“Kendall was never deprived of the use of its design and
layout of [the text] . . . No harm was done to their design and layout. Their control of
the layout was never removed from them.” (alterations omitted)); Primmer, 2014 WL
4930456, at *7 (“Richard Primmer admitted that Primmer retained a copy of all
information Langer took and never deprived use of the information.”). The same is true
here. CMI Roadbuilding has never lost the ability to control and utilize the documents that
it maintains. CMI Roadbuilding retains all of the Engineering Documents. Iowa Parts’s
use of the Engineering Documents, whether wrongful or otherwise, has not actually
deprived CMI Roadbuilding of any of its trade secrets. No reasonable jury could conclude
that Iowa Parts’s alleged interference with CMI Roadbuilding’s property was sufficiently
serious to support a claim of conversion. Thus, while conversion claims on intellectual
property are generally available, the undisputed facts of the instant action make summary
judgment in Iowa Parts’s favor appropriate.
D. Unjust Enrichment
Finally, even if CMI Roadbuilding’s claim of unjust enrichment was not time
barred, the court would find that Iowa Parts is entitled to judgment as a matter of law.
Iowa Parts argues that CMI Roadbuilding’s claim for unjust enrichment must fail because
an adequate remedy exists at law to rectify CMI Roadbuilding’s grievances, such that an
appeal to equity jurisdiction is unnecessary. See Brief in Support of the Iowa Parts Motion
at 36. CMI Roadbuilding appears to argue that, because it is possible that its claims under
the DTSA or UTSA may be foreclosed by one of Iowa Parts’s asserted affirmative
defenses, the court should not grant summary judgment on the unjust enrichment claim
because there would be no remedies available at law to provide it relief. See CMI
Resistance at 20-21. The court disagrees.
Unjust enrichment claims require that no adequate remedy at law exists to provide
relief to the complainant. Where a party seeks damages pursuant to both a statutory claim,
such as the DTSA claim or UTSA claim, and an equitable claim, such as the unjust
enrichment claim, the existence of the statutory claims bars recovery on the equitable
claim. This is true “even if recovery under the statutes is time-barred.” United States
v. Bame, 721 F.3d 1025, 1031 (8th Cir. 2013) (finding that, under Minnesota law, a timebarred cause of action arising under the fraudulent transfer statute precluded the plaintiff
from asserting an unjust enrichment claim). As the Eighth Circuit stated in Bame, “it is
the existence of an adequate legal remedy that precludes unjust enrichment recovery,” not
whether the plaintiff can pursue it in the present litigation. Id. CMI has cited no authority
that Iowa courts would not follow this well-reasoned rule and the court is aware of none.
Instead, the court is persuaded by Eighth Circuit precedent construing unjust enrichment
claims under Minnesota law, which is substantially similar to Iowa law.
ServiceMaster of St. Cloud v. GAB Bus. Servs., Inc., 544 N.W.2d 302, 305-07 (Minn.
1996) (listing the elements of an unjust enrichment claim under Minnesota law and noting
that no claim in equity can lie when an adequate remedy at law would suffice), with Stine
Seed Co. v. A&W Agribusiness, LLC, 862 F.3d 1094, 1101 (8th Cir. 2017) (listing the
elements of an unjust enrichment claim under Iowa law).
Furthermore, CMI’s argument appears to rest on the premise that its inability to
secure relief on its statutory causes of action render such causes of action an inadequate
remedy at law. See CMI Resistance at 21 (“Due to the number of defenses Iowa Parts has
raised, it may be possible CMI Roadbuilding will not, at the time for entry of judgment
in its favor, have an adequate legal remedy available to it.”). The adequacy of a remedy
at law is not determined after the merits of an underlying statutory claim has been
decided—for that to be true would be to essentially impose post hoc liability after the case
had already been litigated and give the plaintiff a proverbial second bite at the apple. The
adequacy of a remedy at law, instead, must be determined irrespective of whether the
causes of action available have been foreclosed on some other grounds. See, e.g., Bame,
721 F.3d at 1031. The statutory remedies provided under the DTSA and UTSA are
sufficient such that the court need not turn to equitable relief to remedy the wrong. See
Callender v. Skiles, 591 N.W.2d 182, 186 (Iowa 1999) (“[E]quity does not establish the
right to institute a particular action, but merely comes into play when such a right exists
and the legal principles do not provide the needed relief.”); see also 18 U.S.C.
§ 1836(b)(3)(B)(i)(II) (providing that a court may award “damages for any unjust
enrichment caused by the misappropriation of a trade secret”); Iowa Code § 550.4
(“Damages may include . . . the unjust enrichment caused by the misappropriation
. . . .”). Therefore, CMI Roadbuilding faces an insuperable bar to recovery on its unjust
enrichment claim, and summary judgment in Iowa Parts’s favor is appropriate.
For the foregoing reasons, it is hereby ORDERED:
The CMI Motion (docket no. 134) is DENIED;
The Iowa Parts Motion (docket no. 139) is GRANTED;
The Clerk of Court is DIRECTED to enter judgment in favor of Defendant
Iowa Parts, Inc. and against Plaintiffs CMI Roadbuilding, Inc. and CMI
Roadbuilding, Ltd.; and
The Clerk of Court is DIRECTED to terminate all outstanding motions.
The Final Pretrial Conference is CANCELLED and the trial date is VACATED.
The parties shall bear their own costs and fees.
IT IS SO ORDERED.
DATED this 8th day of December, 2017.
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