Madison Oslin Inc v. Interstate Resources, Inc. et al

Filing 136

MEMORANDUM AND ORDER granting 76 Defendants' Interstate Resources and Interstate Corrpack's Motion for Summary Judgment on Plaintiff's Contract Claims; granting 78 Defendants James Morgan and John Cristos's Motion for Summary Judgment on Fourth Cause of Action; denying as moot 81 Plaintiffs' Motion to Strike. Signed by Judge Marvin J. Garbis on 3/25/2015. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
MADISON OSLIN, INC.,
et al.,
Plaintiffs
vs.

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INTERSTATE RESOURCES, INC.,
et al.,
Defendants

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CIVIL ACTION NO. MJG-12-3041

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MEMORANDUM & ORDER RE: SUMMARY JUDGMENT
The Court has before it Defendants’ Interstate Resources
and Interstate Corrpack’s Motion for Summary Judgment on
Plaintiffs’ Contract Claims [Document 76], Motion of Defendants
James Morgan and John Cristos for Summary Judgment on Fourth
Cause of Action (Trade Secret Claim) [Document 78] and the
materials submitted relating thereto.1

The Court has held a

hearing and has had the benefit of the arguments of counsel.

I.

BACKGROUND
A.

Parties

Plaintiffs, Madison Oslin, Incorporated (“Madison Oslin”)
and Madison Oslin Research, Inc. (“Oslin Research”)
1

The Court also has before it Plaintiffs’ Motion to Strike
and Exclude the Opinions, Testimony, Report, and Declaration of
Defendants’ Expert, Joel Kendrick [Document 81], a motion that
is mooted by virtue of the grant of summary judgment to
Defendants.

(collectively, “Oslin” or “Plaintiffs”) are Alabama corporations
involved in the paper coating and corrugated box industry.
Defendant Interstate Resources, Inc. (“Interstate”) is a
Virginia corporation and the parent company of several companies
in the paper and packing industries that make paper, corrugated
containers, and related products.

Defendant Interstate

Corrpack, LLC (“Corrpack”)2 is a Maryland subsidiary of
Interstate that produces and sells corrugated boxes and sheets.
Defendant James Morgan (“Morgan”) is President and Chief
Operating Officer of both Interstate and Corrpack.

Defendant

John Cristos (“Cristos”) was, during the relevant time at issue,
the general manager of an Interstate affiliate.

B.

Procedural Posture

Plaintiffs filed this case in an Alabama state court
asserting claims in twelve counts3 against eight named
Defendants4 and six “John Doe” Defendants.

2

On March 15, 2011,

Named in error as Interstate Cambridge Container LLC.
Conversion, Fraudulent Concealment, Unjust Enrichment,
Misappropriation of Trade Secrets, Breach of Fiduciary Duty,
Breach of Contract, Breach of Implied Duty of Good Faith and
Fair Dealing, Misrepresentation, Suppression, Tortious
Interference with a Business Relationship, Breach of Implied
Contract, and Injunctive Relief.
4
Four remain as defendants: Interstate, Corrpack, Morgan, and
Cristos. Plaintiffs voluntarily dismissed all claims against
four former defendants, American Inks and Coating Company, Inc.,
3

2

the Northern District of Alabama dismissed the claims in all
Counts other than:


Count 4 – Misappropriation of Trade Secrets – against
Interstate, Corrpack, Morgan, and Cristos.



Count 6 – Breach of Contract – against Interstate.



Count 7 – Breach of Implied Duty of Good Faith and
Fair Dealing – against Interstate.



Count 11 – Breach of Implied Contract – against
Interstate and Corrpack.

By the instant motions, Defendants seek summary judgment on
all claims in the remaining four Counts.

II.

SUMMARY JUDGMENT STANDARD
A motion for summary judgment shall be granted if the

pleadings and supporting documents “show[] 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).
The well-established principles pertinent to summary
judgment motions can be distilled to a simple statement:

The

Court may look at the evidence presented in regard to a motion
for summary judgment through the non-movant’s rose-colored
glasses, but must view it realistically.

After so doing, the

Progressive Coatings, Inc., Mosely Holdings, Inc., and Jerry L.
Mosely.

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essential question is whether a reasonable fact finder could
return a verdict for the non-movant or whether the movant would,
at trial, be entitled to judgment as a matter of law.

See,

e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986);
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Shealy v. Winston, 929 F.2d 1009, 1012 (4th Cir. 1991).

Thus,

in order to defeat a motion for summary judgment, “the party
opposing the motion must present evidence of specific facts from
which the finder of fact could reasonably find for him or her.”
Mackey v. Shalala, 43 F. Supp. 2d 559, 564 (D. Md. 1999)
(emphasis added).
When evaluating a motion for summary judgment, the Court
must bear in mind that the “summary judgment procedure is
properly regarded not as a disfavored procedural shortcut, but
rather as an integral part of the Federal Rules as a whole,
which are designed ‘to secure the just, speedy and inexpensive
determination of every action.’”

Celotex, 477 U.S. at 327

(quoting Rule 1 of the Federal Rules of Civil Procedure).

III. DISCUSSION
A.

Prior History

At all times relevant hereto, producers of meat products,
including chicken, have often shipped their products in

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corrugated boxes cooled by ice.

In the 1990’s, and earlier,

manufacturers of these boxes traditionally used paraffin wax to
impregnate the box because it had near-perfect water holdout
properties.

However, wax boxes were expensive to produce and

are not recyclable, requiring costs for their disposal.
In about 1998, Oslin developed an original idea of using a
polyester coating to create a recyclable corrugated box as an
alternative to wax-coated boxes.

Oslin says that it was the

first company to pass the Fibre Box Association (“FBA”)
recyclability protocol5 with its recyclable corrugated box. In
2000, Oslin Research obtained process and apparatus patents6 for
applying polyester coating to rolls of paper board to create a
recyclable corrugated box.
By the 2000’s, Interstate became interested in producing
and marketing a recyclable corrugated box for sale to its
customers in the poultry and produce industries and began
researching recyclable wax-alternative coatings.
were unsuccessful.

Its attempts

Its supplier of coating materials, Scott

Seydel (“Seydel”), knowing of Oslin’s efforts with polyester
coatings, referred Interstate to Oslin.

5

In the early 1990’s, the FBA released a recyclability
protocol in an attempt to help recyclable box products enter the
marketplace and to standardize testing of recyclable boxes.
6
Patents No. 6,113,981 (process) (“Patent ‘981”) and No.
6,554,889 (apparatus) issued in 2000.

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B.

The Parties’ Interactions

In October 2007, Interstate representatives met with Oslin
representatives for dinner in Birmingham, Alabama and discussed
a possible joint venture relating to corrugated box coating.
The next day, the representatives met at Oslin’s facility
to look at the process and samples of Oslin’s coating.

However,

Oslin’s paper-coating machine was not operational, needing an
overhaul.

Interstate agreed to pay to get Oslin’s facility and

paper-coating machine operational so that they could run a trial
and test the boxes produced.
The first trial was run in March 2008 on the refurbished
machine at Oslin’s facility.

The parties hoped to produce

icepack boxes that could hold their shape without any internal
lining when packed with forty pounds of chicken and twenty
pounds of ice.
Oslin coated Interstate’s paper. The treated paper was
shipped to Corrpack and used to make trial icepack boxes.

A

second trial occurred a month later and the trial boxes were
sent to one of Interstate’s customers, Mountaire Farms
(“Mountaire”) for testing.

In Mountaire’s and Interstate’s

view, the trial boxes failed.7

Mountaire declined to participate

in any further trials.

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Reportedly, the bottoms of the boxes absorbed water, and

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Thereafter, the parties conducted no further trials
together, although they continued to discuss possible joint
ventures.

Interstate, however, continued to engage in

independent research towards producing a wax-alternative
recyclable box. It ran trials with another offline coater, and
considered a number of different coating providers.
Interstate ultimately produced boxes using a process
different from that used by Oslin.

Oslin used an offline

process in which the coating, impregnation, and corrugation of
liner are separate processes, often done in separate locations.
Interstate, however, used an inline process, whereby
impregnation, coating, and corrugating occur in a continuous,
multi-step process on a single production line.

Interstate

filed a patent application for its inline process in January
2009, and in February 2009, the FBA certified Interstate’s
product as recyclable.
On March 20, 2009, Oslin and Interstate met together with
an equity funding group in Washington, D.C.

Oslin alleges that

this is when it learned that Interstate had been trying to
create its own coating and had some success although not with

the boxes released debris into the box’s contents. These were
both serious problems that would potentially subject a food
packager to rejection of shipment and penalties. The lab
results were also unacceptable. In its Complaint, Oslin alleges
that the trials were successful. Compl. ¶ 22.

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the icepack boxes.

At a follow-up meeting in June 2009, Oslin

states that Interstate told it for the first time that
Interstate did not want to use Oslin’s coating for icepack boxes
but suggested that Oslin create a compostable box. In January
2011, Interstate began advertising that it had created a
recyclable corrugated poultry box.

C.

Plaintiff’s Claims

In the now pending Counts, Plaintiffs assert claims based
upon Defendants’ alleged theft of trade secrets related to the
process for creating a wax-alternative recyclable box and
infringement of a contract allegedly formed in October 2007,
requiring Interstate to enter into a joint venture.

1.

The Trade Secret Claims

Plaintiffs’ sued under the Alabama Trade Secrets Act.

The

parties agree that Alabama law applies to the claims in this
case.

The Alabama Trade Secrets Act defines a trade secret as

information that:
a. Is used or intended for use in a trade or
business;
b. Is included or embodied in a formula,
pattern, compilation, computer software,
drawing, device, method, technique, or
process;

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c. Is not publicly known and is not
generally known in the trade or business of
the person asserting that it is a trade
secret;
d. Cannot be readily ascertained or derived
from publicly available information;
e. Is the subject of efforts that are
reasonable under the circumstances to
maintain its secrecy; and
f. Has significant economic value.
Ala. Code § 8-27-2.
Oslin has the burden to show that it had a trade secret as
defined by the Alabama code.
2d 969, 971 (Ala. 1991).

Pub. Sys., Inc. v. Towry, 587 So.

Oslin contends that its coating

process and its ability to instruct corrugating companies about
the proper methods of corrugating and heating the coated paper
are protectable trade secrets.
Oslin analogizes its claim to the claim made by the
plaintiff in Saunders v. Florence Enameling Co., Inc., 540 So.
2d 651 (Ala. 1988).

In Saunders, the Alabama Supreme Court

recognized – under the Restatement of Torts § 757 (1939) rather
than the Alabama Trade Secrets Act – that a process for coating
pipe could constitute a trade secret.

However, the Saunders

plaintiff was able to prove the process at issue was “not
publicly known.”

Plaintiffs here cannot establish that element

of its claim.

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In 1998, Oslin obtained U.S. Patents No. 6,113,981
(process) (“Patent ‘981”) and No. 6,554,889 (apparatus) for
applying polyester coating to rolls of paper board to create a
recyclable corrugated box.

The patents disclosed, as was

required for their validity, enough about the process to enable
someone skilled in the art to duplicate it.

Thus, the contents

of the patent are public knowledge and cannot constitute trade
secrets.
Oslin alleges that there are specific, technical aspects
regarding the process that are proprietary and are not disclosed
in the Patents.

In the Complaint they state:

These specific, technical aspects include,
but are not limited to8: (1) the specific
temperatures necessary to heat the coating;
(2) the specific mixtures of materials to
produce the coating; (3) the ability to mix
the coating correctly and to do so
consistently; (4) the ability to apply the
coating to paperboard at the right
consistency and (5) the ability to instruct
corrugating companies about the proper
methods of corrugating and heating the
coated paper.
Compl. ¶ 19.
The first four of these “technical aspects” are disclosed
in the process patent.

The specific temperatures necessary to

heat the coating and the specific mixtures of materials to

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Plaintiffs have not presented evidence regarding any other
alleged technical aspects that could be trade secrets.

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produce the coating are stated to be part of the coating
process.

Hr’g Tr. 123:20-124:6.

Someone “skilled in the art”

would undoubtedly have the ability to mix the coating correctly
and consistently and apply the coating to paperboard at the
right consistency “without undue experimentation” for the patent
to be valid, which is presumed. See Patent ‘981 6:17-22, 8:2-3,
9:47-50.

These “technical aspects” are not trade secrets.

The remaining purported trade secret is “the ability to
instruct corrugating companies about the proper methods of
corrugating and heating the coated paper.”

However, of

necessity, Oslin provided this instruction to outsiders, its
customers and prospective customers.

Oslin produced neither

evidence, nor even a contention, that all of these disclosures
were protected by confidentiality agreements.

Moreover, this

“secret” method of instruction was described in open court in a
previous lawsuit and documented in a video presented to the
public on YouTube.
Certainly, as Oslin contends, there can be cases in which a
genuine issue of material fact exists regarding the status of
certain information as a trade secret.

Peat, Inc. v. Vanguard

Research, Inc., 378 F.3d 1154, 1158 (11th Cir. 2004) (citations
omitted).

However, the instant case is not one of these.

There

is no evidence adequate to enable a reasonable jury to find that

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the purported trade secrets were secret at any time relevant to
the instant case.9
Accordingly, Defendants shall be granted summary judgment
on Plaintiffs’ trade secret claims.

2.

Contract Claims

Oslin contends that an oral contract was formed on October
7, 2007 at the dinner meeting in Birmingham, Alabama.
Opp’n 6-7, ECF No. 83.

Pls.’

Defendants contend (1) that an agreement

was never formed because there was never any mutual assent to
essential terms, and (2) even if there had been an agreement, it
was oral so that the Statute of Frauds would bar Oslin’s claims.
The Court agrees with Interstate and shall grant summary
judgment on Oslin’s contract claims.

a.

Absence of Agreement

“No contract is formed without an offer, an acceptance,
consideration, and mutual assent to terms essential to the
contract.”

Steiger v. Huntsville City Bd. of Educ., 653 So. 2d

975, 978 (Ala. 1995)(citing Strength v. Alabama Dep’t of Fin.,
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The Court notes that there are also serious questions
presented regarding whether any information was
“misappropriated” or whether the claim was brought within the
statute of limitations period. These issues, however, do not
need to be addressed since Oslin cannot establish that it had a
trade secret to be protected.

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622 So.2d 1283, 1289 (Ala. 1993)).

“[A]n implied contract must

contain all of the essential elements of an express contract. .
. . The elements of a contract are: (1) agreement; (2)
consideration; (3) two or more contracting parties; (4) legal
object; and (5) capacity.” Freeman v. First State Bank of
Albertville, 401 So. 2d 11, 13 (Ala. 1981).
The evidence relied upon by Oslin consists of nothing more
than statements by Oslin and Interstate referring to a possible
joint venture.

The statements made by both sides unambiguously

establish that an agreement was never reached and that there was
never mutual assent to the essential terms of any agreement.
For example, after the dinner meeting, a conceptual outline was
provided by Interstate, with a cover email stating: “This is not
a ‘proposal’ or ‘offer.’”

Mot. Ex. 1, ECF No. 76.

The outline

stated that “[t]his is a working document and does not represent
the positions or obligations of either party.”

Mot. Exs. 2, 10.

In response, Oslin sent a communication to Interstate,
stating: “We are flexible and want to arrive at an arrangement
that Makes Sense for both of us . . . . A great deal of
discussion needs to take place . . . .”

Mot. Ex. 3.

At the very most, the evidence would support a finding that
the parties intended to reach an agreement in the future.
However, under Alabama law, an agreement to agree at some point

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in the future is not enforceable by a breach of contract claim.
Grayson v. Hanson, 843 So.2d 146, 150–51 (Ala. 2002).

b.

Statute of Frauds

Even if the parties had reached an agreement, it was not in
writing and would be unenforceable by virtue of the Statute of
Frauds.
The Alabama Statute of Frauds provides, in pertinent part:
In the following cases, every agreement
is void unless such agreement or some note
or memorandum thereof expressing the
consideration is in writing and subscribed
by the party to be charged therewith or some
other person by him thereunto lawfully
authorized in writing:
(1) Every agreement which, by its terms, is
not to be performed within one year from the
making thereof;
Ala. Code § 8-9-2.

Therefore, if the putative oral agreement

required performance beyond a one-year period, it was
enforceable by Oslin only if memorialized in writing and signed
by Interstate.
Oslin states that there was an oral agreement10 between the
parties to form a joint venture, the object of which was to

10

in a
2007
that
they

Oslin further contends that the agreement was memorialized
document that was initially emailed to Oslin on October 13,
and then enhanced in November 2007. However, Oslin agrees
the purported documents were never signed by Defendants so
do not represent a “writing” that would satisfy the Statute

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create a wax-alternative, recyclable corrugated box that
Interstate would manufacture and sell for a 50/50 share of
profits.

Oslin argues that even if not likely or not intended,

the contract was “capable of performance within one year.” Opp’n
19 (quoting Quimby v. Mem’l Parks, Inc., 667 So. 2d 1353, 1356
(Ala. 1995)).

Because the making and selling of a box could

have been completed within a year, or the contract could have
failed within a year, or Defendants could have fully paid Oslin
for the 50% ownership within a year, Oslin contends there is a
material question of fact that must be presented to a jury.

See

id. (“[W]hile it may not have been likely that the contract in
this case would have been performed within one year the contract
and the circumstances did not preclude its performance within
one year; thus a jury question is presented.”)
However, when determining whether an oral agreement is
incapable of being performed within a year, a court must
consider all the contractual obligations over the entire life of
the agreement. See Hornady v. Plaza Realty Co., 437 So. 2d 591,
593 (Ala. Civ. App. 1983).

Certainly, the agreement was

“intended to be a long-term agreement.”

See Mot. 21, ECF No.

of Frauds. Hr’g Tr. 73:5-15. A draft joint venture agreement
was drawn up, but not until 17 months after the October dinner
meeting when Oslin states the oral agreement was formed. Mot.
Ex. 46, 3-4, ECF No. 76.

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76, Ogilvie Dep. Ex. 8 at 295:1-12,294:3-8, 286:14-287:1;
Whatley Dep. Ex. 14 at 360:23-361:3, 320:13-21.
The record demonstrates that the purported oral agreement
would have required performance beyond a one-year period.

For

example, Oslin’s November 2007 “deal points” document includes a
“fill in the blank” for Interstate’s payment to Oslin of one
million plus a note for $5 million to be paid “$______
(annually/quarterly/monthly) plus interest . . . .”
Ex. 1, ECF No. 77-1.

Defs.’ Mem.

Plaintiffs testified that the agreement

was initially “a million down and then $5 million over four or
five years.”

Defs. Mem Ex. 14, Whatley Dep. at 320:4-19.

Further, in its Complaint, Oslin alleges that it had been told
by Defendants of a requirement to fill orders “as early as the
first quarter of 2009.”

Compl. ¶ 31.

The first quarter of 2009

is more than a year past October 7, 2007, the date on which the
purported oral agreement was reached according to Oslin.
Further, there were outstanding obligations from both
parties to the alleged agreement.
paid the $6 million.

Certainly, Interstate never

Oslin argues that it fully performed by

providing technology, operational know-how and expertise.
However, according to its own “deal points” document, Oslin was
also to license the patents, which it did not.

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Defs.’ Mem. Ex.

1, ECF No. 77-1.

The “contract” was, therefore, executory.

See Ex parte Ramsay, 829 So. 2d 146, 155 (Ala. 2002).
Oslin contends that Interstate represented to third
parties, for marketing and funding purposes, that a joint
venture existed.

Oslin seeks to rely on Conway v. Andrews to

support its contention that Interstate is estopped from using
the Statute of Frauds defense. 236 So. 2d 687, 692 (1970) (“It
is generally acknowledged in Alabama that the Statute of Frauds
may be waived by an affirmative act showing intention to affirm
the contract and bringing an action based on the unsigned
document is such an affirmative act.”).
Oslin misconstrues the estoppel waiver described in Conway.
A party surrenders its right to assert a Statute of Frauds
defense if it has taken “an affirmative act showing intention to
affirm the contract,” such as when the party who seeks to assert
the defense has itself brought suit on the unsigned agreement.
Durham v. Harbin, 530 So. 2d 208, 214 (Ala. 1988) (quoting
Conway, 236 So.2d at 692). Interstate has not taken any such
action.
Accordingly, if there were an oral agreement as alleged by
Oslin, it would not have been enforceable by virtue of the
Statute of Frauds.

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IV.

CONCLUSION
For the foregoing reasons:
1.

Defendants’ Interstate Resources and Interstate
Corrpack’s Motion for Summary Judgment on
Plaintiffs’ Contract Claims [Document 76] is
GRANTED.

2.

Motion of Defendants James Morgan and John
Cristos for Summary Judgment on Fourth Cause of
Action (Trade Secret Claim) [Document 78] is
GRANTED.

3.

Plaintiffs’ Motion to Strike and Exclude the
Opinions, Testimony, Report, and Declaration of
Defendants’ Expert, Joel Kendrick [Document 81]
is DENIED AS MOOT.

4.

Judgment shall be entered by separate Order.

SO ORDERED, on Wednesday, March 25, 2015.

/s/__________
Marvin J. Garbis
United States District Judge

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