Dana Limited v. American Axle and Manufacturing Holdings, Inc. et al
Filing
122
OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DANA LIMITED, an Ohio limited liability
company,
Plaintiff,
File No. 1:10-CV-450
v.
HON. ROBERT HOLMES BELL
AMERICAN AXLE AND
MANUFACTURING HOLDINGS, INC., a
Delaware corporation, AMERICAN AXLE
AND MANUFACTURING, INC., a
Delaware corporation, GARY TURNER,
JACOB ADLEMAN, and LEO WENSTRUP,
Defendants.
/
OPINION
This matter comes before the Court on motions filed by Defendants Gary Turner,
Jacob Adleman, and Leo Wenstrup (the “Individual Defendants”) (Dkt. No. 78) and by
Defendants American Axle and Manufacturing Holdings, Inc. and American Axle and
Manufacturing, Inc. (jointly referred to as “American Axle”) (Dkt. No. 80) for judgment on
the pleadings. Defendants contend that Counts VI and VII of Plaintiff’s first amended
complaint (Dkt. No. 73), alleging breach of fiduciary duty and unfair competition, are based
solely on misappropriation of trade secrets, and are accordingly displaced by § 1908 of the
Michigan Uniform Trade Secrets Act (“MUTSA”), Mich. Comp. Laws § 445.1901, et seq.
Plaintiff Dana Limited (“Dana”) opposes the motions. For the reasons that follow, the
motions will be denied.
I.
In reviewing a motion for judgment on the pleadings pursuant to Federal Rule of
Civil Procedure 12(c), “all well-pleaded material allegations of the pleadings of the opposing
party must be taken as true, and the motion may be granted only if the moving party is
nevertheless clearly entitled to judgment.”
Poplar Creek Dev. Co. v. Chesapeake
Appalachia, L.L.C., 636 F.3d 235, 240 (6th Cir. 2011) (quoting Tucker v. Middleburg-Legacy
Place, 539 F.3d 545, 549 (6th Cir. 2008)). Motions for judgment on the pleadings pursuant
to Rule 12(c) are analyzed under the same standard as motions to dismiss pursuant to Rule
12(b)(6). Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010). Accordingly, the Court must
construe the complaint in the light most favorable to Plaintiff, accept all well-pled factual
allegations as true, and determine whether the complaint states a plausible claim for relief.
Id. The court “need not accept as true legal conclusions or unwarranted factual inferences.”
JPMorgan Chase Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (quoting Mixon
v. Ohio, 193 F.3d 389, 400 (6th Cir.1999)). The factual allegations in the complaint must be
sufficient to give notice to the defendant as to what claims are alleged, and the plaintiff must
plead “sufficient factual matter” to render the legal claim plausible, i.e., more than merely
possible. Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949-50 (2009).
II.
Dana and American Axle compete in the automotive manufacturing marketplace. In
the first four months of 2010, Individual Defendants Wenstrup, Turner and Adleman, who
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had been Dana employees, accepted positions at American Axle. On May 11, 2010, Dana
filed this action against American Axle and the Individual Defendants. Count V of Dana’s
first amended complaint is claim for misappropriation of trade secrets in violation of
Michigan’s Uniform Trade Secrets Act (“MUTSA”), Mich. Comp. Laws § 445.1903, et seq.
(Dkt. No. 73, Am. Compl.) Count VI alleges breach of fiduciary duty against the Individual
Defendants, and Count VII alleges threatened or actual common law unfair competition
against the Individual Defendants and American Axle. (Id.) Defendants contend that they
are entitled to judgment on Counts VI and VII of Plaintiff’s first amended complaint because
they fail to state a claim on which relief may be granted.
MUTSA provides a statutory cause of action and remedies for the misappropriation
of trade secrets. M.C.L. § 445.1903, 1904. MUTSA explicitly “displaces conflicting tort,
restitutionary, and other law of this state providing civil remedies for misappropriation of a
trade secret.” Mich. Comp. Laws § 455.1908(1)(a). However, the Act does not displace
“[o]ther civil remedies that are not based upon misappropriation of a trade secret.” Mich.
Comp. Laws § 455.1908(2)(b). In determining whether a claim is displaced by MUTSA,
courts examine “whether the claim is based solely upon the misappropriation of a trade
secret. If so, the claim must be dismissed.” Bliss Clearing Niagara, Inc. v. Midwest Brake
Bond Co., 270 F. Supp. 2d 943, 946 (W.D. Mich. 2003) (Quist, J.); see also Wysong Corp.
v. M.I. Industries, 412 F. Supp. 2d 612, 623 (E.D. Mich. 2005) (“The MUTSA displaces
claims that are ‘based solely upon the misappropriation of a trade secret.”) (quoting Bliss,
270 F. Supp. 2d at 946).
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A. Count VI: Breach of Fiduciary Duty
Count VI of Plaintiff’s Amended Complaint, entitled “Breach of Fiduciary Duty,” is
alleged against Defendants Wenstrup, Turner and Adleman. The operative paragraphs of
Count VI provide:
152. Wenstrup, Turner’s and Adleman’s fiduciary duty included (but was not
limited to) the duty to guard and not misuse confidential and trade secret
information of Dana.
153. Wenstrup, Turner and Adleman breached their fiduciary duties to Dana
by, among other things: (1) failing to protect the interests of Dana; (2)
misusing Dana’s confidential information; (3) removing Dana’s proprietary
information and (4) failing to inform Dana that its information had been
removed from Dana.
(Am. Compl. ¶¶ 152-53.)
The Individual Defendants contend that Count VI is a common law tort claim “based
solely upon the misappropriation of a trade secret,” and, as such, must be dismissed because
this claim has been statutorily displaced by MUTSA.
There can be no dispute that the main focus of Count VI is on the misappropriation
of confidential and trade secret information. MUTSA broadly defines “trade secret” as
information that “derives independent economic value . . . from not being generally known”
and is “the subject of efforts . . . to maintain its secrecy.” Mich. Comp. Laws § 445.1902(d).
This definition encompasses the misuse of confidential information alleged in Count VI. To
the extent Court VI is based on the misuse of confidential and trade secret information, the
claim is barred by MUTSA.
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However, the breach of fiduciary duty in Count VI is not based solely on
misappropriation of trade secretes. Count VI also alleges that:
151. As high level employees at Dana, Wenstrup, Turner and Adleman had a
duty to act in good faith and solely for the benefit of Dana in all matters within
the scope of his employment.
(Am. Compl. ¶ 151.) Although paragraph 151 contains a legal conclusion without factual
content, Count VI realleges the preceding paragraphs, which include allegations that the
Individual Defendants removed1 and deleted files while they were still Dana employees.
(See, e.g., Am. Compl. ¶¶ 1, 9, 80, 82, 91, 92, 96, 102, 103, 105-11.) Dana has further
alleged that a large portion of the deleted data is either not recoverable, or can only be
recovered at great cost. (Am. Compl. ¶ 103.)
The Individual Defendants do not address the allegations regarding the deletion of
files. Construing these allegations in the light most favorable to Plaintiff, it appears that
Plaintiff has alleged a claim for breach of fiduciary duty claim that is separate and distinct
from the misappropriation claim. See Wysong Corp. v. M.I. Indus., 412 F. Supp. 2d 612,
623-24 (E.D. Mich. 2005) (holding that MUTSA did not displace breach of fiduciary duty
claim that was not based on misappropriation of secret information, but on allegations that
the defendant was secretly working to create a competing product line while employed by
1
Because Plaintiff has specifically alleged that the Individual Defendants deleted
information from Plaintiff’s computers, it is not necessary to determine, at this time, whether
Plaintiff uses the term “removed” to mean that information was copied and transported to
another computer, or whether Plaintiff also means that the information was deleted from
Plaintiff’s computers.
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the plaintiff). Accordingly, the Court will deny the Individual Defendants’ motion to dismiss
Count VI.
B. Count VII: Threatened or Actual Common Law Unfair Competition
Count VII of Plaintiff’s Amended Complaint, entitled “Threatened or Actual Common
Law Unfair Competition,” is alleged against all Defendants. Count VII incorporates by
reference the preceding paragraphs, and provides:
157. Wenstrup, Turner, Adleman and AAM wilfully undertook the foregoing
acts to gain an unfair competitive advantage over Dana, with knowledge of
and disregard for Dana’s rights, and with the intention of causing harm to
Dana and benefiting each of themselves.
158. Wenstrup, Turner, Adleman and AAM are unfairly competing in the
marketplace.
(Am. Compl. ¶¶ 157-58.)
Defendants contend that Plaintiff’s common law unfair competition claim is based
solely on misappropriation of trade secrets and is therefore displaced by MUTSA. Plaintiff
disagrees. Plaintiff notes that Count VII incorporates allegations that Defendants: (1)
targeted and solicited current Dana employees (Am. Compl. ¶¶ 8, 74, 77); (2) deleted
electronic files and computerized tracking information which put Dana at a competitive
disadvantage (Am. Compl. ¶¶ 1, 9, 102, 103-11); and (3) took information that might not
constitute a trade secret but that nonetheless could be used to a competitive advantage.
Plaintiff contends that these allegations are sufficient to state a valid unfair competition claim
that is independent of the misappropriation of trade secrets.
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The common-law cause of action for unfair competition prohibits a party from
engaging in unfair and unethical trade practices that are harmful to his or her competitors or
to the general public. Dura Global Techs., Inc. v. Magna Donnelly Corp., 2009 WL
3032594, at *4 (E.D. Mich. 2009) (citing A & M Records, Inc. v. MVC Distrib. Corp., 574
F.2d 312, 313 (6th Cir. 1978); Clairol, Inc. v. Boston Discount Ctr. of Berkley, Inc., 608 F.2d
1114, 1118 (6th Cir. 1979)). MUTSA does not displace a common law unfair competition
claim where the plaintiff alleges misconduct which could be deemed unethical or unfair
irrespective of whether trade secrets are involved. See Dura Global, 2009 WL 3032594 at
*4-5 (holding that allegations that the defendant encouraged the plaintiff’s employees to
leave so that the plaintiff’s ability to compete for contracts would be unfairly undermined
was sufficient to state a claim for unfair competition that was not solely based on
misappropriation of a trade secret); Kovesdy v. Kovesdy, No. C 10-020212, 2010 WL
3619826, at *3 (N.D. Cal. Sept. 13 2010) (holding that UTSA did not preempt the plaintiff’s
unfair competition claim where the plaintiff alleged that defendants unfairly solicited and
misled its clients); Bliss, 270 F. Supp. 2d at 950 (holding that, to the extent the unfair
competition claim was based on allegations that the defendant marketed its replica product
using the plaintiff’s trademark and name that were independent of the misappropriation
claim, the allegations would not be displaced by MUTSA); Wysong, 412 F. Supp. 2d at 623
(holding that palming-off claim survived because it was based on an allegation that the
defendants were selling confusingly similar products and not on the misappropriation of
secret information).
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To the extent Plaintiff’s unfair competition claim is based on allegations that
Defendants took information that may not constitute a trade secret, but that nonetheless could
be used to their competitive advantage, the Court concludes that these allegations are
displaced by MUTSA. As noted in Bliss, “the disputed status of information as a trade secret
does not preclude a court from determining whether a claim or claims are displaced by the
MUTSA.” 270 F. Supp. 2d at 948-49.
However, to the extent Plaintiff has alleged that Defendants unfairly solicited their
clients and unfairly deleted information which put Plaintiff at a competitive disadvantage,
the Court finds that the allegations survive Defendants’ motions for judgment on the
pleadings. While Defendants correctly point out that Plaintiff’s allegations do not necessarily
describe wrongful conduct beyond hiring the employees in an effort to get Plaintiff’s trade
secrets, Plaintiff’s allegations, construed in the light most favorable to Plaintiff, are broad
enough to to support an unfair competition claim against Defendants that is independent of
Plaintiff’s MUTSA claim. Of course, this ruling does not prohibit Defendants from moving
for summary judgment if they determine that Plaintiff lacks sufficient evidence to support
these claims based on conduct independent of Plaintiff’s MUTSA claim.
For the foregoing reasons, Defendants’ motions for judgment on the pleadings will
be denied. An order consistent with this opinion will be entered.
Dated: October 17, 2011
/s/ Robert Holmes Bell
ROBERT HOLMES BELL
UNITED STATES DISTRICT JUDGE
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