Dana Limited v. American Axle and Manufacturing Holdings, Inc. et al
Filing
433
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.,
et al.,
Defendants.
/
OPINION
In April 2010, Defendants Jacob Adleman and Gary Turner left their employment at
Plaintiff Dana Ltd., and began working for Defendant American Axle and Manufacturing
Holdings, Inc. Prior to leaving their employment at Dana they had downloaded numerous
Dana files. On May 11, 2010, Dana filed this action alleging theft of trade secrets.
Following a hearing on Dana’s motion for preliminary injunction, this Court entered an order
preliminarily enjoining Defendants from using Dana’s information, and requiring Defendants
to preserve, account for and return all Dana files and data and to make computers and storage
devices available for inspection. (Dkt. No. 24.) Defendant Dana filed an amended complaint
on April 7, 2011, adding Leo Wenstrup as a defendant after it learned that he had also
downloaded numerous files from Dana before accepting employment at American Axle.
Dana’s amended complaint asserted the following claims: violation of the Computer
Fraud and Abuse Act, 18 U.S.C. § 1030, et seq., against Turner and Adleman (Count 1);
breach of contract against Turner, Adleman and Wenstrup (Counts 2, 3, 4); misappropriation
of trade secrets under Michigan’s Uniform Trade Secrets Act, Mich. Comp. Laws
§ 445.1903, et seq., against all defendants (Count 5); breach of fiduciary duty against
Wenstrup, Turner, and Adleman (Count 6); tortious interference against American Axle
(Count 7), and unfair competition against all defendants (Count 8). (Dkt. No. 73.) On June
23, 2012, this Court entered partial summary judgment in favor of the individual defendants
and dismissed Counts 1 and 6. (Dkt. Nos. 282, 283.)
The remaining claims were tried to the Court without a jury over a five-day period
from February 21, 2013, to February 27, 2013. The Court heard the testimony of Rebecca
R. Hendricks, Mark Davis, Jacob Adleman, Gary Turner, Leo Wenstrup, Thomas Frazee,
Kevin Ripa, John Sofia, Hector Orozco, Bruce Knapp, and Robert Gerlach.1 The Court has
also reviewed the parties’ designated excerpts from the deposition testimony of Gregory
Parent, Robin Pillars, Winston Platt, Janie Sre, Gregory Andres, Kristen Nowak, and Herbert
Larsen.2 This opinion contains the Court’s findings of fact and conclusions of law in
accordance with Fed. R. Civ. P. 52(a).
1
Transcript references in this opinion refer to the transcripts of the bench trial found
at Docket Nos. 375-79.
2
Deposition references in this opinion refer to the deposition transcripts found at
Docket Nos. 385, 386.
2
I. BACKGROUND AND FINDINGS OF FACT
Dana is a manufacturer of axles, driveshafts, and chassis for the automotive industry.
In 1998, Dana purchased the Eaton axle division and continued Eaton’s commercial vehicle
engineering operation in Kalamazoo, Michigan. (Davis, Tr. 113.) Dana has been in the
business of manufacturing commercial axles for over 100 years. (Sofia, Tr. 781.) Dana and
Meritor, Inc. are the two leading manufacturers of heavy-duty axles (classes 4-8) in the North
American market. (Sofia, Tr. 778, 781-82.)
Defendant American Axle was formed in 1994 with the purchase of assets from
General Motors. (Sofia, Tr. 765.) American Axle has a manufacturing facility in Three
Rivers, Michigan. The original focus of American Axle’s business was on axles and
driveline systems for passenger cars and light trucks (class 1-3), but its goal from the
beginning was to service the entire range of vehicles on a global basis. (Sofia, Tr. 766.) In
1998, American Axle purchased the assets of Albion Automotive in Scotland, a company
involved in the manufacture of heavier axles (classes 4-8), including tandem axles, for
commercial vehicle applications. (Sofia, Tr. 767-69.) In 2007, American Axle formed a
commercial vehicle business unit within the corporation. (Sofia, Tr. 782.) In 2008,
American Axle brought Winston Platt, chief engineer of Albion’s commercial vehicle
division, to Fort Wayne, Indiana, to head up American Axle’s new commercial vehicle
division. (Platt Dep. 15-16; Sofia, Tr. 785-86.) As auto industry began rebounding from the
2008-09 economic downturn, American Axle began to expand its commercial vehicle
3
business unit. (Sofia, Tr. 782, 789-90). American Axle’s target markets are the emerging
growth markets of China, India and Asia. (Sofia, Tr. 705-06, 812.) It has never been
American Axle’s intention to compete head-to-head with Dana and Meritor in the North
American market with respect to axles for vehicles in classes 4-8 due to the maturity of the
market. (Sofia, Tr. 777-78, 782; Orozco, Tr. 837.)
Defendant Leo Wenstrup had been employed as an engineer by Dana and its
predecessor, Eaton, at the Kalamazoo facility for over 30 years. (Wenstrup, Tr. 490-91.)
From 1996-2005 he was Dana’s Chief Engineer for Commercial Vehicle Drive Axles.
(Wenstrup, Tr. 512.) On April 30, 2009, Wenstrup lost his job at Dana as part of a reduction
in force that had been triggered by the 2008-09 downturn in the automotive market.
(Wenstrup, Tr. 491.)
When Wenstrup was terminated, he had an exit meeting focused on severance and
health care benefits, and a release of liability. (Wenstrup, Tr. 493.) Wenstrup was not
reminded of his confidentiality obligations. (Id.) Following each exit meeting, Dana either
escorted the discharged employees to their offices to gather their belongings, or allowed them
to make an appointment to retrieve them at a later date. (Pillars Dep. 12.) On May 7, 2009,
a week after his separation, Wenstrup returned to Dana to retrieve items from his office.
Wenstrup testified that Robin Pillars, a payroll coordinator in the Dana Human Resources
department, accompanied Wenstrup to his office. (Wenstrup, Tr. 380.) Pillars has no
memory of escorting Wenstrup to his office. She does recall escorting others to their offices
4
on the day they were terminated, but she testified that she did not monitor those who came
back with an appointment because, to the best of her knowledge, they were handled after
hours or on weekends and were overseen by the Facilities Security manager or the HR
manager. (Pillars Dep. 8-12, 26.)
Whether or not Pillars accompanied Wenstrup, the Court has no doubt that someone
from Dana’s HR or Security department accompanied and monitored Wenstrup as he
connected his Dana computer to his Western Digital MyBook external hard drive digital
storage device (the MyBook device), logged onto his Dana computer, and copied the entire
contents of the “My Documents” portion of the hard drive onto his MyBook device.
(Wenstrup, Tr. 380.) Many of the files Wenstrup downloaded were personal, but there were
also many Dana files. (Wenstrup, Tr. 447, 498; Ripa, Tr. 726.) Wenstrup testified that he
did not have time to separate his personal files from his work files, and that he also wanted
to preserve his work files in case he returned to Dana. (Wenstrup, Tr. 498.) Wenstrup did
in fact apply for multiple positions at Dana before he finally obtained the position at
American Axle. (Wenstrup, Tr. 509.) The Dana monitor did not ask Wenstrup what he was
downloading or remind him of his obligations under his Employee Agreement (Ex. 191) or
any employment policies. (Wenstrup, Tr.494-98, 560-61.) Wenstrup also packed a box of
paper files including personal items, journals, and the Eaton Engineering Data Book.
(Wenstrup, Tr. 498-500.) The monitor inspected the box, but did not object to anything he
5
took. (Wesnstrup, Tr. 500.) After Wenstrup was terminated, Damir Yaksic of the Dana IT
department offered to copy Wenstrup’s computer hard drive for him. (Tr. 508.)
Wenstrup’s testimony regarding Dana’s lack of concern regarding the copying of files
is corroborated by Robert Gerlach, another former Dana engineer who was terminated on
April 30, 2009. Gerlach testified that when he left Dana, Dana’s IT department copied the
contents of his Dana computer hard drive onto CDs which were delivered to Gerlach by his
manager. (Gerlach, Tr. 914-16, 925-26.) Gerlach also took three banker boxes of Dana
information while an HR representative was watching him. (Gerlach, Tr. 917.) Gerlach
testified that his hard drive contained several thousand Dana-specific files that included
warranty data, test procedures, test results, and engineering data sheet PDFs he had
downloaded from the internet. Although he subsequently attempted to return the CDs to
Dana, no one at Dana showed any interest in having them returned. (Gerlach, Tr. 920, 92829.)
Dana contends it made efforts to protect its information during the April 30, 2009,
layoffs, as evidenced by Pillars’ testimony. Pillars testified that on the day of the April 30
layoffs, one employee was prevented from taking a manual, and another employee had to
obtain special permission to download personal photos off of her work computer. (Pillars
Dep. 22-23.) Dana’s efforts at protecting its information in April 2009 were haphazard at
best. Whatever steps were taken with other employees, Pillars’ testimony does not cast doubt
on Wenstrup’s description of what occurred on the occasion of his own departure from Dana.
6
Wenstrup was unemployed for approximately nine months. During this time, he
pursued employment with a number of prospective employers, including Dana and its chief
competitor, Meritor. (Tr. 508-510.) In February 2010, American Axle hired Wenstrup in
February 2010 to work at its Three Rivers facility, with the expectation that he might
eventually replace Winston Platt upon his retirement. (Platt Dep. 77; Orozco, Tr. 841-42.)
In January 2010, Dana announced that it would be closing its Kalamazoo engineering
operations, and consolidating its commercial vehicle engineering operations in Maumee,
Ohio. (Tr. 262.) Around the same time, American Axle was in the midst of launching three
axle models for Mack trucks, and needed additional engineers. (Wenstrup, Tr. 516-17;
Orozco, Tr. 843.) When John Sofia and Hector Orozco at American Axle learned about the
closing of Dana’s Kalamazoo facility, they saw it as a potential opportunity for American
Axle to hire experienced commercial vehicle engineers. (Sofia, Tr. 791; Orozco, Tr. 843-44.)
On February 5, 2010, after Wenstrup was hired by American Axle, but before he began
working there, Sofia asked Wenstrup to compile a list of Dana engineers whose skills
matched American Axle’s commercial vehicle needs and who might become available based
on Dana’s closing of the Kalamazoo facility. (Orozco, Tr. 844; Wenstrup, Tr. 375-76.)
At this time, Defendants Gary Turner and Jacob Adleman were employed by Dana in
its Advanced Engineering Group for Commercial Vehicles.
Turner was a Product
Engineering Manager, and Adleman was a Product Design Engineer. Soon after Dana
announced the closing of its Kalamazoo facility, Turner advised Dana that he would not be
7
accepting a Maumee job and that he would be seeking employment elsewhere, as he did not
want to relocate to Ohio. (Davis, Tr. 222-23.)
Adleman was the most junior and least experienced of the three individual defendants.
Adleman was told he had a job in Maumee, but he was not told what title he would have.
(Tr. 262.) When Dana announced the closing of the Kalamazoo facility, Adleman did not
want to move because he was working on a masters degree at Western Michigan University
and was engaged to marry a woman who was also employed in the area. Adleman began to
seek employment outside of Dana that would not require him to move. (Tr. 307-09.) He
posted his resume online on February 3, 2010. (Adleman, Tr. 271.)
Wenstrup prepared a list of potential engineering resources on behalf of his
supervisor, Sofia. (Wenstrup, Tr. 376-77; Ex. 372B.) Wenstrup identified eight people
under the headings “Dana’s A Team” and “Dana’s B Team.” He listed each individual’s
title, years of experience, and telephone number, and commented on each individual’s
abilities. Wenstrup spoke to most of the individuals before placing their names on the list,
and confirmed that they had expressed an interest in not going to Maumee when Dana shut
down its Kalamazoo operation. (Wenstrup, Tr. 377-78.) Wenstrup asked Turner if there was
a junior engineer that he would recommend for an entry-level engineer position, and Turner
recommended Adleman. (Turner, Tr. 331.) On April 22, 2010, Wenstrup updated the chart
to reflect each individual’s technical expertise, interpersonal qualifications, and availability.
(Ex. 42.) The title of the chart is “Dana Engineering Pool from Kalamazoo Tech Center
8
Move.” (Id.) On this chart Wenstrup noted that Turner’s wife was a Michigan teacher with
many years of service, and that he planned to stay in Michigan to protect her retirement.
(Id.). Wenstrup noted that Adleman’s wife was a nurse and that he wanted to stay in the area.
(Id.) Wenstrup identified Mark Davis, Defendant’s representative at trial, as the target
candidate for steer axle, and Greg DeWald as the target candidate for off-highway.
(Wenstrup, Tr. 488.)
On March 11, 2010, 2,000 files, the entire contents of Turner’s MyDocuments folder,
were accessed on Turner’s Dana work computer over a three hour period. (Hendricks, Tr.
46; Ex. 199; Turner, Tr. 360.) Turner had not yet received a job offer from American Axle.
That same day, Turner met Wenstrup for lunch and interviewed with Armstrong, a
manufacturing company in Three Rivers, Michigan. (Turner, Tr. 329, 359-60.) Turner does
not recall accessing the files. Because some unusual program files called registry files were
accessed at the same time, Turner wondered if the files might have been accessed during an
automatic virus scan. (Id. at 339, 361.) However, he testified that it was also possible that
he accessed the files to move them to the network drives for the other engineers within
Kalamazoo to access. (Id. at 361.)
Adleman also copied volumes of Dana information in March, during the same period
of time that he was interviewing with American Axle. Adleman did not have a laptop at
Dana. Accordingly, to prepare for out-of-town meetings, he would copy files and bring them
on his personal laptop to the meetings. (Adleman, Tr. 281.) Adleman’s co-worker, Gregory
9
Parent, similarly testified that he would copy Dana engineering files onto portable storage
devices when he needed to take Dana information to meetings or to out-of-town activities.
(Parent Dep. 13-14.)
On March 26, Adleman downloaded a significant amount of
information in preparation for a scheduled meeting with the engineering team in Maumee,
Ohio, to talk about the integration of the Maumee and Kalamazoo engineering departments.
(Adleman, Tr. 264-65, 282-83.) Adleman placed the files into folders and zipped the folders
to make them smaller. (Id. at 282.) Although Adleman was hoping to stay in Kalamazoo, he
accepted the job in Maumee until he was able to find a job that would eliminate the need to
move. (Id. at 284-85.)
Turner and Adleman accepted employment offers from American Axle and resigned
from Dana on April 23 and April 26, 2010, respectively. On April 22, 2010, the day before
he resigned from Dana, Turner copied numerous files from his Dana computer onto a flash
drive. (Turner, Tr. 340.) He testified that he took the documents as a memento or scrapbook
of his work at Dana over the 11 years that he had worked there. (Id. at 341.)
On April 23, 2010, during Turner’s exit interview, Kristen Nowak of the Dana Human
Resources (“HR”) department expressly asked Turner whether he had any Dana property at
home, including documents, files, or computer information. He answered “no.” (Ex. 201,
Q 30.) She also asked him whether he had returned all of Dana’s property, including
documents, files and computerized information, and he answered “yes.” (Ex. 201, Q 31.)
Turner admitted that he was not truthful during the exit interview. (Turner, Tr. 326, 328.)
10
Nowak had Turner review the terms of his Employee Invention and Disclosure Agreement
(“Employee Agreement”) (Ex. 5) which he had signed when he began his employment. After
reviewing that Agreement, Turner signed an Acknowledgement Agreement in which he
promised that he would “review my personal and home files, including computer files and
disks, and promptly return to Dana any confidential or proprietary information that I may
discover is in my possession.” (Ex. 45.)
After Turner’s resignation, Dana sent Turner’s computer to Rebecca Hendricks, an
independent forensic computer expert for analysis. (Nowak Dep. 33.) Dana learned from
Hendricks that Turner’s files had recently been copied onto a flash drive, and that the flash
drive was not among the materials Turner returned. On Wednesday, April 28, at Nowak’s
direction, Janie Sre from Dana’s HR department contacted Turner about the missing flash
drive and asked him to return it if he had it. (Turner, Tr. 342; Sre Dep. 69, 72-76; Nowak
Dep. 45-46.) Turner returned the flash drive to Dana on Thursday, April 29, less than a week
after his resignation. (Turner, Tr. 342.) After leaving Dana, Turner inserted the flash drive
into his computer on one occasion to verify that it was the flash drive that Sre had identified.
(Turner, Tr. 350.) However, he testified that he did not use or disclose the Dana information
he downloaded that day. (Turner, Tr. 344-45.)
On April 25, the night before he resigned, Adleman also copied large quantities of
Dana information onto a flash drive. Adleman said he copied the files so that he could
review all the projects he had worked on before he updated his resume. (Adleman, Tr. 269,
11
279.) Adleman testified that when he prepared his resume for American Axle, he did it
under haste and had not reviewed all of the projects he had worked on. (Adleman, Tr. 27980.)
Mark Davis, Dana’s director of engineering for commercial vehicle products (Davis,
Tr. 112), conducted Adleman’s exit interview. During the interview, Davis had Adleman fill
out an exit questionnaire. In response to the questions of whether he had any Dana property,
and whether he had returned all Dana’s property, including documents, files and computer
information, Adleman answered that he did not know. (Ex. 205, Qs 30, 31.) In response to
the question of what he removed from his office, he answered that he had removed personal
pictures and textbooks. (Ex. 205, Q 33.) Adleman did not disclose that he had been at Dana
the night before downloading over 2,700 files. (Ex. 205; Tr. 262.) Adleman testified that
he did not take the questionnaire seriously. (Adleman, Tr. 322.) After reviewing his
Employee Agreement (Ex. 10), Adleman signed the Acknowledgement Agreement and
agreed to review his personal and home files, including files and disks, and promptly return
any confidential or proprietary information in his possession to Dana. (Adleman, Tr. 258-59;
Ex. 49.) At the conclusion of the interview, Davis understood that Adleman might have
Dana files which needed to be returned. (Adleman, Tr. 259, 261; Davis, Tr. 183-84.)
Adleman testified that the exit interview had the effect of reminding him of his
obligations, and he was beginning to sort through the information when he was served with
this lawsuit. He took a final exam in his engineering masters program on April 26, the same
12
date that he resigned from Dana. (Adleman, Tr. 285-87). He started his new job with
American Axle on May 3, and was married on May 15. (Adleman, Tr. 274, 284.) Adleman
testified that he although this was an extremely busy time in his life, he still managed to
return all Dana information in his possession on May 14, and May 20, 2010, less than three
weeks after his resignation. (Adleman, Tr. 297.)
As illustrated above, Dana was significantly more proactive about protecting its trade
secrets in April 2010, when Turner and Adleman left than it had been in April 2009, when
Wenstrup and Gerlach left. In anticipation of the closing of the Kalamazoo facility and the
likely departure of engineers, Dana had prepared an extended exit interview questionnaire
and a new procedure for a forensic analysis of the computers of those who were going to a
competitor. (Nowak Dep. 37-39, 41, 54-55.) Turner and Adleman were the first two
engineers from the Kalamazoo facility who accepted employment at a competitor, and theirs
were the first two computers that were sent to an expert for a forensic analysis. (Nowak Dep.
37-38.)
American Axle initially assigned Turner and Adleman to complete the launch of the
Mack build-to-print product. (Turner, Tr. 331.) Because this suit was filed within days of
their employment, American Axle kept Turner and Adleman in the Mack group. The Mack
project involves working on designs created by Volvo for the Mack axle. Accordingly,
Turner and Adleman’s work has not involved designing heavy-duty axles. Turner has spent
99 percent of his time at American Axle on the Mack project and the remaining one percent
13
on general engineering support or input that is not project-specific. (Turner, Tr. 331-32,
352.)
Turner and Adleman testified that they returned all of the files they copied, and that
they did not use or disclose any Dana confidential or proprietary information, (Adleman, Tr.
296-977, 305; Turner, Tr. 344-45, 365), and there is no evidence to the contrary. No Dana
information was found on any of the American Axle computers analyzed by Hendricks,
Dana’s computer expert. (Hendricks, Tr. 81-82.) Davis had no knowledge of any Dana files
still being available to Turner or Adleman after they turned their computers and storage
devices over to Dana. Neither did Davis have any personal knowledge of any of the
individual defendants or American Axle ever using any of the downloaded Dana files.
(Davis, Tr. 193-94.) Dana’s experts, Larsen and Frazee, similarly could not identify any use
of Dana confidential files. (Frazee, Tr. 655; Larsen Dep. 97-98, 101, 115, 120, 130.)
Like Turner and Adleman, Wenstrup also took large quantities of Dana information.
However, in contrast to Turner and Adleman, Wenstrup had the files in his possession for
a longer period of time, and there is evidence that Wenstrup accessed at least some of the
Dana information after he began working for American Axle. However, the extent of the
access is minimal. None of the Dana files were found on any of the American Axle
computers Dana investigated. Moreover, of all the documents downloaded by Wenstrup,
Dana has shown that Wenstrup accessed only ten of them.
Dana has presented evidence that Wenstrup accessed Dana documents on his MyBook
14
on three dates in 2010: January 26, February 17, and February 23. With respect to the
January 26 date, Hendricks testified that she could not tell whether the files were accessed
by Wenstrup or whether they were accessed by some computer function without human
involvement. (Hendricks, Tr. 70, 83.) She could not tell how long a file was accessed. It
could have been only for a fraction of a second. (Id.) She did not find any evidence of
printing, forwarding, or subsequent accessing of any of these files by Wenstrup. (Id. at 71.)
Wenstrup testified that the large number of files were accessed by a computer function or
process and not by him. (Wenstrup, Tr. 533-34.) Kevin Ripa, Defendants’ computer expert,
also testified that, in his opinion, the access was “automated access” without human
involvement. (Ripa, Tr. 723-24.)
On February 17 and February 23, 2010, Wenstrup accessed ten Dana files on his
personal computer. (Hendricks, Tr. 72, 73, 78; Ex. 188V-Z; Ex. 188 AA-AF; Ex. 212; Ex.
214; Ex. 216; Ex. 218.) Wenstrup does not deny accessing these documents. (Wenstrup, Tr.
404.) The total time spent on these files was 17 minutes: 5 minutes on February 17 and 12
minutes on February 23. (Hendricks, Tr. 72, 73, 78.) Other files were also accessed during
that 17-minute time-frame. (Id. at 78.) The computer experts agreed that the only time
Wenstrup accessed these files was on February 17 and 23. Wenstrup never revisited any of
these files, and there is no evidence that he copied or forwarded any of these files.
(Hendricks, Tr. 76; Ripa, Tr. 724-25.)
Although Dana’s investigation of Wenstrup’s MyBook revealed that he only accessed
15
ten documents in February 2010, and that he has not accessed any of the documents since
then, Dana contends that this merely shows that Wenstrup did not access the documents on
his MyBook. Dana contends that there is circumstantial evidence that Wenstrup kept
confidential Dana files on another computer and failed to turn them over to Dana. Dana
contends that Wenstrup must have accessed the documents from another computer because
he referenced Dana confidential information in his emails and engineering journal and
because there is evidence that he delayed turning over another computer.
The Court’s review of Wenstrup’s emails and engineering journal entries does not
persuade the Court that Wenstrup accessed confidential Dana files after February 2010. The
information contained in the emails and engineering journal is largely generic, and is more
likely based on Wenstrup’s memory than on a review of the detailed Dana files that were in
his possession.3
Dana asserts that during discovery Wenstrup failed to timely produce his wife’s
personal computer referred to as “Mom’s PC” in violation of the Court’s preliminary
injunction order. Dana presented evidence that some of the files on Wenstrup’s MyBook
external hard drive referenced Mom’s PC in their file path history. (Hendricks, Tr. 29-30.)
Wenstrup testified that, to the best of his knowledge, he did not store Dana documents on
Mom’s PC. (Wenstrup, Tr. 514-16.) Wenstrup’s explanation for Mom’s PC showing up in
3
Whether or not the information disclosed in the emails or considered in the
engineering journal was a trade secret will be addressed in part II(A)(1) below, in the
discussion of MUTSA trade secrets.
16
the file path history of a number of Dana files accessed on February 7, 2009, and February
14, 2009, is that he used the MyBook external hard drive to back up files from all the
computers in his house, and he may not have paid attention to where his laptop directory was
created. (Wenstrup, Tr. 516.) Wenstrup’s testimony is supported by the testimony of
Defendant’s computer expert, Ripa. Ripa testified that although some of the Dana files on
Wenstrup’s MyBook external hard drive referenced Mom’s PC in their file path history, there
was no evidence to show that any Dana files were ever on Mom’s PC. (Ripa, Tr. 735.) Ripa
testified that it was more likely that Dana files on the MyBook had merely been stored in the
Mom’s PC folder on the MyBook. (Id.)
Dana further asserts that before finally turning over Mom’s PC, Wenstrup erased the
Dana files that had been stored on Mom’s PC.
Dana has presented evidence that file-
cleaning software called CCleaner and File Shredder were run on Mom’s PC on May 20,
2010, the day of the preliminary injunction hearing, and again on August 3, 2011, the day of
Wenstrup’s deposition. (Hendricks, Tr. 37-38.) Dana contends that this is evidence that
Wenstrup downloaded files he had removed from Dana onto Mom’s PC and then tried to
destroy them. Hendricks did not know how many times CCleaner was used on Mom’s PC,
and she did not have an opinion as to whether or not any files or data was deleted from
Mom’s PC as a result of the use of CCleaner. (Hendricks, Tr. 90.)
The evidence regarding the emails, engineering journal, and Mom’s PC is not
sufficient to persuade the Court that Wenstrup stored Dana files on another computer, that
17
he accessed Dana files after February 2010, or that he attempted to destroy material evidence.
Dana’s argument assumes, first, that Wenstrup kept Dana files on his wife’s computer, and
second, that he intentionally ran the programs with the intent of removing those Dana files.
Based on the discussion above, the evidence is equivocal at best as to whether Wenstrup ever
placed Dana files on Mom’s PC. Second, Dana has not shown by a preponderance of the
evidence that Wenstrup intentionally ran the file-cleaning programs. Wenstrup has no
recollection of running these cleaning programs. (Wenstrup, Tr. 381.) Hendricks discussed
access of the cleaning software, but admitted that she had no evidence that any one ever used
the programs to target the removal of any computer files, and she never completed her
investigation of the possible use of the two software programs. (Hendricks, Tr. 39, 89-90.)
Ripa testified that because there were files in the recycle bin of Mom’s PC which were years
old, neither CCleaner nor File Shredder had ever been run on Mom’s PC. (Ripa, Tr. 742-45.)
According to Ripa, Mom’s PC was hardly working, so the cleaning programs were likely
accessed as a result of a virus scan rather than by human activity. (Ripa, Tr. 727, 740-41.)
Upon review of the evidence presented, the Court concludes that the evidence does
not support a finding that Wenstrup stored Dana files on Mom’s PC or that he erased any
Dana files from Mom’s PC. The Court finds that Wenstrup accessed ten Dana files after he
began working for American Axle, and those are the files accessed on February 16 and
February 23, 2010.
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II. ANALYSIS
A. Michigan Uniform Trade Secrets Act (“MUTSA”)
In Count 5 Dana alleges a claim against all of the defendants under the MUTSA. The
MUTSA provides a statutory cause of action and remedies for the misappropriation of trade
secrets. Mich. Comp. Laws 445.1903, .1904; Bliss Clearing Niagara, Inc. v. Midwest Brake
Bond Co., 270 F. Supp. 2d 943, 946 (W.D. Mich. 2003).
The MUTSA defines “trade secret” as follows:
(d) “Trade secret” means information, including a formula, pattern,
compilation, program, device, method, technique, or process, that is both of the
following:
(i) Derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its
disclosure or use.
(ii) Is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
Mich. Comp. Laws § 445.1902. “For information to constitute a trade secret under Michigan
law, the information must (1) derive economic value from the fact that it is not known to
others who could make use of it, and (2) be the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.” Mike’s Train House, Inc. v. Lionel, L.L.C., 472
F.3d 398, 410 (6th Cir. 2006) (citing Mich. Comp. Laws § 445.1902(d)); see also Kelly
Servs., Inc. v. Noretto, 495 F. Supp. 2d 645, 658 (E.D. Mich. 2007) (“Information constitutes
a protectable trade secret under the MUTSA if the information derives independent economic
19
value from not being generally known to others and the employer took reasonable steps to
protect the confidentiality of the information.”). “[T]he essence of a trade secret is that it
derives its value from secrecy . . . .” Stromback v. New Line Cinema, 384 F.3d 283, 305 (6th
Cir. 2004). Michigan courts consider the following factors in determining if information is
a trade secret:
(1) extent to which information is known outside of owner’s business, (2)
extent to which information is known by employees and others involved in
business, (3) extent of measures taken to guard secrecy of information, (4)
value of information to owners and competitors, (5) amount of effort and
money expended in developing information, and (6) ease or difficulty with
which information could be properly acquired or duplicated by other.
Dura Global Techs., Inc. v. Magna Donnelly Corp., 662 F. Supp. 2d 855, 859 (E.D. Mich.
2009) (quoting Wysong Corp. v. M.I. Indus., 412 F. Supp. 2d 612, 626 (E.D. Mich. 2005));
see also Hayes-Albion v. Kuberski, 364 N.W.2d 609, 614 (Mich. 1984) (quoting Restatement
of Torts, § 757). Information is not a trade secret if it is generally known in the industry,
accessible through publicly available sources, or readily ascertainable through other proper
means.
To be actionable, there must be a “misappropriation” of the trade secret.
“Misappropriation” is defined in the MUTSA as follows:
(b) “Misappropriation” means either of the following:
(i) 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.
(ii) Disclosure or use of a trade secret of another without express or implied
consent by a person who did 1 or more of the following:
20
(A) Used improper means to acquire knowledge of the trade secret.
(B) At the time of disclosure or use, knew or had reason to know that
his or her knowledge of the trade secret was derived from or through a
person who had utilized improper means to acquire it, acquired under
circumstances giving rise to a duty to maintain its secrecy or limit its
use, or derived from or through a person who owed a duty to the person
to maintain its secrecy or limit its use.
(C) Before a material change of his or her position, knew or had reason
to know that it was a trade secret and that knowledge of it had been
acquired by accident or mistake.
Mich. Comp. Laws § 445.1902 (emphasis added).
Mark Davis, the current director of engineering for commercial vehicle applications
and products at Dana (Davis, Tr. 112), testified on behalf of Dana. Davis testified that the
Dana information taken by the individual defendants included files concerning each of
Dana’s four categories of axles – medium-duty, line-haul, heavy-duty, and specialty – and
dealt with all components of those axles, including housings, gears, bearings, the power
dividers, and wheel diff. (Davis, Tr. 120.) The files contained information on gear ratios,
gear geometry, drawings, forgings, finishes, and man hours. (Davis, Tr. 120-21.) They also
included information regarding design solutions, improvements, development concepts,
testing, gear development, pricing, and costs.
It is generally understood that such
information is proprietary in nature and would constitute a company’s trade secrets. See, e.g.,
Veteran Med. Prods., Inc. v. Bionix Dev. Corp., 1:05-CV-655, 2008 WL 696546 (W.D.
Mich. Mar. 13, 2008) (Brenneman, M.J.) (noting that manufacturing costs and production
forecasts are not generally known or readily ascertainable, and would have value to a
competitor). Davis estimated that 30-50% of the files downloaded by Adleman were
21
proprietary to Dana. (Davis, Tr. 125.) The individual defendants acknowledged that some
of the files they downloaded contained Dana’s confidential and proprietary information.
(Wenstrup, Tr. 415, 558; Turner, Tr. 341; Adleman, Tr. 277.)
It is clear that some of the information taken by the individual defendants from Dana
constitutes trade secrets, but not to the extent suggested by Dana. “[T]he general knowledge
of an employee does not constitute a trade secret.” Lowry Holding Co., Inc. v. Geroco Tech
Holding Corp., No. 303694, 2012 WL 1890231, at *3 (Mich. Ct. App. 2012). The concept
of misappropriation of trade secrets “must not compromise the right of employees to change
jobs.” Degussa Admixtures, Inc. v. Burnett, 277 F. App’x 530, 535 (6th Cir. 2008); see also
Hayes-Albion v. Kuberski, 364 N.W.2d 609, 617 (Mich. 1984) (noting that the public policy
of Michigan is to protect and encourage the right of the individual to pursue his livelihood
in the vocation he chooses, including the right to migrate from one job to another).
Accordingly, to establish a trade-secrets claim, the party “must establish more than the
existence of generalized trade secrets and a competitor’s employment of the party’s former
employee who has knowledge of trade secrets.” Id. (quoting CMI Int’l, Inc. v. Intermet Int’l
Corp., 649 N.W.2d 808, 813 (Mich. Ct. App. 2002)).
Information is also not a trade secret if the company does not use reasonable measures
to maintain its secrecy.
“Sufficient measures” taken to protect the secrecy of confidential information
as a “trade secret” under MUTSA have been found to include “either an
express agreement between the employer and employee restricting or
prohibiting disclosure by the latter to third parties; a disclosure by employer
22
to employee in confidence or with a tacit understanding, inferable from the
attendant circumstances, that the information is confidential; or security
precautions utilized by the employer to insure that only a limited number of
authorized individuals have access to the information.”
Veteran Med. Prods., 2008 WL 696546, at *3 (quoting Wysong, 412 F. Supp.2d at 626. Use
of non-disclosure agreements, using password and log-in protections, and limiting access to
data constitute reasonable measures to maintain the secrecy of trade secrets. Veteran Med.,
2008 WL 696546, at *8; Kelly Servs v. Noretto, 495 F. Supp. 2d 645, 658 (E.D. Mich. 2007).
1. Trade Secrets
Dana asserts that Defendants used Dana’s confidential trade secret information in the
areas of testing, development of the 40K axle, product improvement, gear development, and
pricing and cost, all in an effort to develop competitive products. Dana also asserts that the
Eaton Engineering Data Book was a trade secret.
(a) Eaton Engineering Data Book
The Court concludes that the Eaton Engineering Data Book does not qualify as a trade
secret. The Engineering Data Book contains information on all of Dana’s commercial drive
axle products. (Gerlach, Tr. 912; Ex. 198.) It is a looseleaf document that is constantly
updated. (Davis, Tr. 122.) The purpose of the Engineering Data Book is primarily to enable
Dana’s application engineers to work with Dana’s customers, original equipment
manufacturers (OEMs) that build trucks using Dana components, so that they can engineer
in Dana products. (Davis, Tr. 122.)
23
Davis testified that the Engineering Data Book is solely for the use by the OEMs and
Dana’s internal application engineers, and that Dana does not publish it on the internet or
distribute it randomly. (Davis, Tr. 123.) Regardless of what Dana may have intended, Dana
did not take care to maintain the confidentiality of the Engineering Data Book. In practice,
the contents of the Engineering Data Book were widely shared without any regard to
confidentiality. The Data Book was prepared for use by non-Dana users, and there is no
evidence that Dana kept a record of such non-Dana users, or that the non-Dana users were
required to agree to keep the information confidential. (Wenstrup, Tr. 501-507). From 2005
to 2009, substantial portions of the information in the Engineering Data Book was publicly
available online at the Roadranger.com website. (Gerlach, Tr. 913; Wenstrup, Tr. 506.)
Gerlach did not consider the information in the Engineering Data Book to be confidential;
he believed it fell within the scope of what Dana employees were able to share. (Gerlach,
Tr. 913.) Gerlach, through his work in Dana’s technical support center, would regularly fax
or email copies of pages from the Engineering Data Book to anyone who called the
Roadranger 800 number with questions about Dana axles, including direct customers (the
OEMs), their customers, such as dealerships and large fleets, repair shops, and end users,
such as truck owners. (Gerlach, Tr. 913-15.) Dana also permitted both Gerlach and
Wenstrup, upon their terminations in April 2009, to take their copies of the Engineering Data
Book. (Wenstrup, Tr. 498-500; Gerlach, Tr. 911-912.) Because Dana did not take sufficient
steps to preserve the confidentiality of the information in the Engineering Data Book, the
24
Engineering Data Book was not a trade secret.
(b) Testing
Dana asserts that Wenstrup disclosed confidential testing information. In support of
this contention, Dana refers to the following emails. On July 19, 2010, Wenstrup sent the
following email to Turner:
Please review this spreadsheet which is my recollection of the tests run on new
axle development projects. It is a combination of hvy tandem and med single
tests. Can you review and add tests I missed?
(Ex. 222.) After Turner responded with some additions, Wenstrup sent the following email
to Orozco and Platt:
Here is a list of tests I am familiar with running as part of the development of
a new commercial axles. This includes tests for both forward and rear axle as
well as noise sensitive applications which may not always apply but this will
give a template for test we should consider when developing axles in the
future.
(Ex. 73.) Wenstrup admitted that the chart disclosed one or two component elements from
Dana’s protocols for some of its tests that he recalled from memory. (Wenstrup, Tr. 519.)
He also admitted that these test parameters were not available on a public website.
(Wenstrup, Tr. 573.) He only provided a couple parameters in order to identify the tests, and
did not disclose adequate information to duplicate the tests. (Wenstrup, Tr. 520-23.) Orozco
testified that it was merely a generic list of tests with minor details and descriptions to
identify what the test were, but no test protocols or anything of significance. (Orozco, Tr.
868.) Turner confirmed that there was insufficient data identified to run any of the tests.
25
(Turner, Tr. 358-59.) Turner and Platt confirmed that the same or similar tests are used by
every axle manufacturer. (Turner, Tr. 358-59; Platt Dep. 78-82.) Platt also testified that
Wenstrup’s email (Ex. 73) was so general that it probably would not have influenced him.
(Platt Dep. 78-82.)
It appears that the tests fall within the scope of general knowledge gained in the
course of Wenstrup and Turner’s professional experience. Wenstrup had spent his entire 30year career in the commercial axle field. The fact that all of his experience came from Dana
does not make all of his knowledge and experience confidential or off limits.
His
engineering experience included his knowledge of what tests are used. Even though Dana
does not publish its tests, Dana has not presented evidence that any of the tests listed in
Wenstrup’s email were unique to Dana, or that there was an understanding that any
identification of a specific test was subject to secrecy. The Court finds that Wenstrup’s
naming of the tests from memory and his identification of the tests by naming a couple of
parameters was not secret. If the scope of protectable of trade secrets were as comprehensive
as Dana suggests, no engineer would be able to accept a job with a competitor without fear
that any stray comments about their past experience would expose them to a legal action.
Dana claims that Wenstrup disclosed more in the area of testing that what was
identified in the email. Dana contends that American Axle had no commercial vehicle
testing, and that when it subsequently developed a list of tests, it likely relied on information
provided by Wenstrup. Dana bases this assertion on Platt’s testimony that in 2008 American
26
Axle did not have a list of tests that it would run for commercial vehicles. (Platt Dep. 79.)
Dana’s argument does not follow from Platt’s testimony. Platt only addressed the state of
affairs in 2008. Wenstrup was not hired until 2010. Platt further testified that the list of tests
was created in the Fort Wayne office, probably by Mike Follis and Ed Stuart, and that he did
not recall Wenstrup having any input into American Axle’s testing protocol. (Platt Dep. 79.)
Platt’s testimony does not cast doubt on Wenstrup’s testimony that when he sent the email
about a list of tests in July 2010, American Axle had its own testing procedures and did not
implement the protocols identified by Wenstrup and Turner. (Wenstrup, Tr. 424.) The
unrebutted evidence is that none of the axle tests summarized by Wenstrup were adopted by
American Axle. (Wenstrup, Tr. 519-20, 523; Turner, Tr. 359.) Dana’s assertion that
Wenstrup disclosed additional trade secret testing information that was used by American
Axle is based on speculation, not facts.
Dana’s additional claims that Wenstrup disclosed trade secret testing fail for similar
reasons. In an email dated February 23, 2010, responding to Platt’s proposal for the Volvo
medium duty (Euro 6) Axles, Wenstrup stated as follows:
At 36T, what would be the dyno torq. and min. B10 cycle life? For 36T / 80K
CGW, I would expect dyno torq. to be around 19,000 ft-lbs. which is just scary
for a 380 mm. ring gear. Are the brgs. up to this GCW rating?
(Ex. 22.) Wenstrup acknowledged that his expectations on torque values were based on his
experience at Dana. (Wenstrup, Tr. 396.) He also indicated that these are the same torque
values used at American Axle. (Id.) It is not surprising that he would have engineering
27
discussions on torque values. These are engineering principles he learned during his
professional life. He cannot be expected to ignore what he learned.
In an email dated July 22, 2010, Wenstrup discussed Dana’s impact machines.
Wenstrup acknowledged that this was information that Dana does not publish to the public.
(Wenstrup, Tr. 422-23, Ex. 77.) However, aside from showing that it was not published,
Dana did not present any evidence to suggest that this was information that derived economic
value from the fact that it is not known, or was the subject of efforts to maintain its secrecy.
See Mike’s Train House, 472 F.3d at 410. Thus, this information does not constitute a trade
secret.
On August 1, 2011, in an email string relating to a commercial vehicle test
specification, Wenstrup asked, “Why do we only go to a min load of 4,400 Kg? In the world
I came from, we were using a number more like 200Kg.” (Wenstrup, Tr. 465-66; Ex. 1384.)
The world Wenstrup came from was his 30 years at Dana. It is also his 30 years of
experience in engineering. Wenstrup explained that American Axle had two different tests,
one for Albion and one for Mack, and he was attempting to get American Axle to adopt a
consistent test for both the Mack product and the Albion product. (Wenstrup, Tr. 465-66.)
He also explained in the email the engineering considerations in setting a minimum load and
his concerns regarding the higher number. (Ex. 1384.)
Dana argues that when this email is placed in the context of the volumes of testing
documents removed, such as DVP&R files, DFMEA files, and DOE Supertruck Power Point,
28
there can be no doubt that Wenstrup used Dana’s trade secrets while an employee of and for
the benefit of American Axle.
The Court finds no merit to Dana’s argument. Wenstrup’s discussion in the August
1, 2011, email is essentially an engineering discussion about general engineering principles
he learned during his 30 years at Dana. Moreover, there is no reason to view this email in
the context of the “volumes of testing documents” that were copied by defendants because
there is no evidence that those volumes of testing documents were accessed or used.
The Court finds that Dana has not shown that Wenstrup (or any of the Defendants)
disclosed or used any secret testing information.
(c) Development of the 40K Axle
Dana asserts that Wenstrup disclosed confidential trade secret information concerning
development of the 40K axle. In support of this assertion, Dana presented evidence that
Orozco, Wenstrup’s immediate supervisor at American Axle, asked Wenstrup, who had been
chief engineer in the development of Dana’s 40K axles, what it would take to develop the
15.3 tandem. (Ex. 24.) The 15.3 tandem is comparable to the Dana 170/190 40K.
(Wenstrup, Tr. 394.) Wenstrup responded with an estimate of the resources expended in
developing heavy axles at Dana, including the number of man-years (27.7), divided between
engineers (17.2), CAD (5), and techs (5.5). (Ex. 24; Wenstrup, Tr. 399.) Wenstrup testified
that the numbers he gave were estimates based on his memory of the resources used by Dana
in 2003 to 2005, more than five years before. (Wenstrup, Tr. 400-01.) Orozco testified that
29
he did not believe this was trade secret, confidential, or proprietary information because it
was only a crude approximation.
Furthermore, his only purpose for asking for the
information was to try to convince his supervisor to provide additional resources during a
difficult economic climate. (Orozco, Tr. 846-48.) Davis testified that the number of manhours used is information Dana would not want to share because it is “proprietary to our
process and how we design and develop products,” and one with access to that information
could understand Dana’s cost structure, time to develop products, and available resources.
(Davis, Tr. 121.) Davis has overstated the use a competitor could make of Wenstrup’s rough
estimate. Dana has not persuaded the Court that this crude approximation constituted a trade
secret.
Dana notes that American Axle included Turner and Adleman on discussions relating
to the 40K development. (Ex. 87, email requesting that Turner and Adleman be provided
access to program files for the 40K development; Wenstrup, Tr. 468; Ex. 194, at 253, note
in Wenstrup’s engineering journal to “set up DFMEA review with Gary [Turner] and Jake
[Adleman].”); Exs. 91,300, 333, including Turner in email discussions regarding design and
development of the 15.3 axles.)
The hiring of individuals with expertise in a certain area is not sufficient to show that
those individuals used confidential information. None of the individuals had a covenant not
to compete with Dana. Moreover, Turner testified that his receipt of emails relating to the
15.3 or other non-Mack projects did not result in his doing any engineering work on those
30
projects. (Turner, Tr. 355.) Dana has not shown by a preponderance of the evidence that
Defendants used or disclosed confidential trade secret information relating to development
of the 40K axle.
(d) Product Improvement Information
Dana asserts that the individual defendants disclosed Dana’s confidential product
improvement information. Dana has presented evidence that Adleman attended a May 4,
2010, meeting relating to axle redesign where a suggestion was made to use powdered metal
on an IAD spider. (Ex. 382.) Dana suggests that because one of the design failure DVP&R’s
removed by Adleman included testing the use of powdered metal on the IAD spider (Davis,
Tr. 132; Ex. 254), American Axle’s discussion of using powdered metal is evidence that
Adleman or Wenstrup disclosed this confidential information. Adleman testified that the
meeting occurred on his second day at American Axle and that the suggestions were not his.
His role at the meeting was to meet other American Axle employees and to take notes
because he was “the lowest man on the totem pole.” (Adleman, Tr. 274-75.) Wenstrup
testified that the idea of using powdered metal originated in 1992, and came from a supplier
for Dana’s 404 axle. (Wenstrup, Tr. 480.) Although Dana has shown that it used powdered
metal, Dana has not shown that using powdered metal was a concept unique to Dana, that it
was not known in the industry, or that it was a concept that Dana or its supplier kept secret
or confidential. The Court does not have sufficient evidence to support a finding that the use
of powdered metal was a trade secret.
31
Dana presented evidence that in an email dated May 5, 2010, Wenstrup stated that
“from his experience” reducing the banjo housing wall thickness to 14 mm “should be worth
about $30/axle in cost.” (Ex. 56.) Wenstrup’s engineering notes for May 3, 2010, show
costs for 5 axle wall thicknesses. (Ex. 194, at 72.) Although Dana has not presented
evidence challenging Wenstrup’s testimony that the wall thicknesses reflected in the email
and in his engineering journal notes are not unique to Dana (Wenstrup, Tr. 570), Dana notes
that one of the documents Wenstrup removed from Dana was a 35-page 2006 Dana Volvo
pricing matrix that included information about the housing wall thickness option on a certain
Dana axle, the optional materials, and the prices and materials used in some Dana parts. (Ex.
188AE; Davis, Tr. 154-55.) Davis testified that the information in the pricing document
could be useful to a competitor because the competitor would have the information necessary
to enable it to underbid Dana.
Davis testified to the trade-secret status of the entire pricing document. However,
there was no showing that the pricing document was accessed after February 2010, there was
no showing that it was copied or printed, and there was no showing that American Axle used
any information from the 2006 Volvo pricing matrix in any way. The Court is not persuaded
that the isolated statements in Wenstrup’s email were trade secrets, and Dana has not
attempted to refute Wenstrup’s assertion that he disclosed nothing more than publicly-known
wall thicknesses.
Dana contends that Wenstrup again disclosed design improvements undertaken at
32
Dana in a July 21, 2010, email summarizing proposed housing and flange design
modifications. (Ex. 75.) Wenstrup testified that although these improvements were made
at Dana, they were also the subject of a 1954 patent. (Wenstrup, Tr. 483.) Dana faults
Defendants for failing to produce corroborating documentation. However, Dana has the
burden, in the first instance, to show that a particular piece of information is a trade secret.
Dana has not met its burden. Dana has not shown that the improvements were unique to
Dana or that they were kept secret.
Dana presented evidence that in a June 7, 2010, email Wenstrup stated “[w]e found
that ratios deeper than 5:1 were very susceptible to score if not Lubrited.” (Ex. 78)
Wenstrup admitted that this was a statement of what he learned at Dana, (Wenstrup, Tr.
485), but contends that this falls within the realm of general engineering knowledge. Dana
contends that if it was in fact general engineering knowledge, Wenstrup should not have had
to explain it to a fellow engineer. Dana interprets general engineering knowledge too
narrowly. General engineering knowledge is not only what is learned in engineering school.
General engineering knowledge includes what is learned on the job regarding what might
cause gear failures. Dana has not shown that the kind of information shared in the June 7
email was subject to secrecy.
In an email discussion on the 18" drivehead for a bus application in China, Wenstrup
stated that “[p]revious experience shows diff. takes a beating in a bus application,” that the
spider should be lubrited, and that nickel plating was used in abusive diff. applications. (Ex.
33
136.) He further stated that the carrier to housing joint should be reviewed, and that
“[c]ompetitive carriers thicken flange at these locations to increase bolt stretch.” (Ex. 136.)
Dana contends that this email discloses Dana’s confidential product improvement
information. Wenstrup does not deny learning this information at Dana, but he testified that
everybody in the industry lubrites the spider, and using nickel plating on the differential to
improve spinoff performance was information he learned from GM as part of a product GM
sold to Dana. (Wenstrup, Tr. 453-54.) He testified that the recommendation to thicken
flanges was the subject of several field bulletins issued by Dana to educate the industry on
the problem. (Id. at 454.) There is no showing that Wenstrup disclosed the details of Dana’s
improvements, and best engineering practices do not become confidential merely because the
practices were used at Dana. Dana has not shown that this email contains anything more than
general engineering information,
In a November 4, 2010, email, Wenstrup attached a design idea for a Volvo Asia
Truck program. (Ex. 133.) Dana contends that his idea used the same material changes and
design structures implemented by Dana as one of its top ten VA/VE projects. (Ex. 188V.)
Dana provided no testimony as to what was secret about the information in this email or how
the information was protected.
On June 11, 2011, in response to Turner’s summary of a conference call regarding the
Mack differential bearing project, Wenstrup wrote:
As you know, a large reason for using the fixed curvic clutch with diff lock
was to pursue I.H. ductile iron on the diff. case v. today’s H.T. steel
34
construction. I would estimate savings to be in the $25-$40/axle (w diff lock).
Is Matt open to pursuing a ductile iron case with current spline/clutch design?
John if not, how to [sic] we report this lost costs savings opportunity to Mack
purchasing?
(Ex. 344.)
Dana contends that such cost savings measures are the type found in the Engineering
Cost Estimate Request Matrix 5-10-0.pdf, which was one of the documents Wenstrup took
from Dana and accessed in February 2010. (Ex. 188V.) Wenstrup testified that the idea of
using ductile iron came from a diff lock that American Axle had benchmarked in 2008,
before Wenstrup was at American Axle, and that the cost savings estimate was based on his
industry experience that ductile iron is cheaper than cast iron, a matter which is generally
known. (Wenstrup, Tr. 475-77.)
Dana has not provided sufficient evidence that the
information in Wenstrup’s June 11, 2011, email was Dana’s trade secret information.
Dana has not shown by a preponderance of the evidence that Defendants used or
disclosed Dana’s confidential or trade secret product improvement information.
(e) Gear Development Information
Dana asserts that Wenstrup disclosed confidential gear development information.
Wenstrup admitted accessing Dana’s Set-gear & Pinion Chart (Ex. 212). Of the ten
documents Wenstrup opened, the Set-gear and Pinion Chart is the only document Wenstrup
acknowledges using. (Wenstrup, Tr. 415-49, 447-49, 524-28, 530-32, 534-48.) Davis
testified that a competitor who obtains Dana’s trade secret gear information would save
considerable time and expense as gear development takes three to four years and Dana
35
expends approximately $8 million a year on such projects. (Davis, Tr. 138-39.) Teh Court
is satisfied that the Set-Gear and Pinion Chart is a confidential or trade secret document.
Wenstrup testified that he only opened the document to count the gear ratios for a line
of Dana commercial axle products so that he could incorporate that information in a February
24, 2010, email. (Ex. 24; Ex. 212; Wenstrup, Tr. 536.) The gear ratio information, however,
is not a confidential trade secret because it is publicly available on the Roadranger.com
website. (Wenstrup, Tr. 536-39; Ex. 1447, Roadranger Specification Guide.)
Dana accuses Wenstrup of disclosing gear forging materials because Wenstrup twice
suggested that American Axle use 20 magnesium chromide 5 (20MnCr5) for Volvo Asia and
Volvo Mack products as a cost savings measures. (Wenstrup, Tr. 433-44; Ex. 159).Wenstrup
testified that the use of 20 McCr5 is not a trade secret because 20MnCr5 is a standard
material known in the industry for years, and not unique to Dana. (Wenstrup, Tr. 532.) Dana
does not contest this testimony. Instead, Dana points to Davis’s testimony that forging
materials are confidential, that the compilation of all of its gearing materials is not publicly
known, (Davis, Tr. 135), and to the fact that the Forging Material Chart (Ex. 3) was one of
the documents on Wenstrup’s MyBook.
The Forging Material Chart was one of the documents accessed on January 26, 2010,
but even Dana’s computer expert could not confirm that it was accessed by a human rather
than a program. (Hendricks, Tr. 70, 83; Ripa, Tr. 723-24.) Moreover, there is no evidence
that the Forging Material Chart was ever disclosed or used at American Axle. Dana has
36
attempted to blur the distinction between the generic information that was disclosed or used
with the trade secret information that was downloaded.
Dana has not shown by a preponderance of the evidence that Defendants used or
disclosed Dana’s confidential or trade secret gear development information.
(f) Pricing and Cost Information
Dana asserts that Wenstrup disclosed Dana’s confidential pricing and cost
information. Dana has presented evidence that on February 17, 2010, the same day that
Wenstrup was invited to attend a Hino quote meeting, Wenstrup accessed Dana’s Hino pro
forma chart. (Wenstrup, Tr. 404; Ex. 188X.) The Hino pro forma chart describes margins
used in 2006 by Dana to determine the prices to bid on Hino work. Having a competitor’s
bid is a valuable guide to where a product needs to be priced in order to obtain the business,
and despite the passage of time, the information is not obsolete because material indices can
be used to account for changes in the cost of commodities. (Ex. 39; Davis, Tr. 152-54, 18993, 198-201; Wenstrup, Tr. 405.) Dana has shown that Wenstrup accessed the trade secret
Hino pro forma on February 17, 2010.
In a March 11, 2010, email to his supervisor, Wenstrup stated: “Here is first pass at
Ankai gear development program timing . . . My costs are based on a quote for tooling from
Gleason with 25% premium for expediting . . . Tooling costs and expedited freight are
guesses based on past experience.” (Ex. 31.) Wenstrup testified that he provided the
information on lines 9-12 of the chart attached to the email, which are the costs associated
37
with raw materials: pinion forging tool ($15,000), gear forging tool ($15,000), pinion forging
- 100 pcs ($5,000), and gear forging - 100 pcs ($7,500). (Wenstrup, Tr. 459.) Dana asserts
that its tooling costs and freight costs are not publicly known. However, although Dana
provided testimony that costs are generally subject to confidentiality, Dana provided no
testimony that the limited information actually disclosed in this email was information that
derived economic value from the fact that it is not known, or that it was the subject of efforts
to maintain its secrecy. See Mike’s Train House, 472 F.3d at 410.
On October 27, 2010, Wenstrup sent an email with a cost breakdown for American
Axle’s 40K tandem axle at two different profit margins. (Ex. 98.) Dana contends that the
information on costs came from a confidential Dana pricing document downloaded by
Wenstrup and accessed by him in February 2010. Dana points out that the $3,000 price on
Wenstrup’s email is close to the $2,960 price on the DD404P model reflected on the Dana
pricing sheet. (Ex. 188Z.) Wenstrup testified that the cost information came from John
Matton, not from the Dana pricing document. (Wenstrup, Tr. 415.) Wenstrup also testified
that Dana’s attempt to show a similarity in the cost figures was a comparison of apples to
oranges. (Wenstrup, Tr. 410, 525-28.) The Dana pricing sheet was 4 years old, and the
comparison axle was not similar because it had an optional diff lock, an optional wheel diff
lock, and an optional pump, while Wenstrup’s $3,000 price estimate was for a stripped down
axle. (Wenstrup, Tr. 526-27.) Wenstrup testified that the axle he discussed in his October
2010 email was more similar to the Dana DS404, which had a price of $2,350. (Id. at 525-
38
28.) The pricing document was accessed only once, in February 2010, and was too detailed
to be recalled ten months later. Moreover, Dana has not convinced the Court that it was
comparing similar products.
On December 23, 2010, Wenstrup sent an email confirming that estimated prices for
components discussed at a Daimler banjo housing business case review “work out pretty
close to numbers I remember for similar housing configurations.” (Ex. 122.) Wenstrup
admits that he was relying on his experience at Dana.
(Wenstrup, Tr. 416, 464.)
Manufacturing costs are confidential. (Gerlach, Tr. 923-24.) Nevertheless, Wenstrup’s mere
confirmation that American Axle’s estimated prices were close to what he recalled from
Dana is an application of general knowledge rather than the disclosure or use of trade secret
information.
Dana has not shown by a preponderance of the evidence that Wenstrup (or any other
Defendant) used or disclosed Dana’s confidential or trade secret pricing or cost information.
(g) Other Information
In a November 24, 2011, email, Wenstrup disclosed to John Coster, manager of the
procurement group at American Axle, that Sypris was Dana’s sole supplier for axle shafts.
(Ex. 183; Wenstrup, Tr. 435.)
Although Dana contends that this information was
confidential, Dana has made no showing that the information was confidential, that it had
independent economic value, or that Dana used reasonable efforts to maintain the identity
of its supplier as a secret. Wenstrup disclosed this information because American Axle was
39
sourcing one hundred percent of its Mack axle shafts to Sypris, and Wenstrup had been asked
if there were other suppliers besides Sypris that American Axle might deal with. Information
that Sypris was Dana’s sole supplier was information that was available on the internet.
(Wenstrup, Tr. 436.) It had been discussed in the public record in an article concerning the
terms of Dana’s sale of its axle shaft plant in Marion Ohio to Sypris. (Wenstrup, Tr. 528-29.)
Moreover, Sofia confirmed that it is well known in the industry that Sypris supplies Dana.
(Sofia, Tr. 802-03.)
2. Misappropriation
Based upon the discussion above, the Court finds that some of the Dana information
downloaded by Turner, Adleman, and Wenstrup is properly characterized as trade secrets.
This includes, without limitation, the Price Matrix Index (Ex. 188AE), the Engineering Cost
Estimate Request Matrix 5-10-0.pdf (Ex. 188V), the Hino pro forma chart (Ex. 188X), and
the Dana Pricing Sheet (Ex. 188Z). However, to prevail on its MUTSA claim, Dana must
also show misappropriation.
The parties appear to be in agreement that to state a claim for misappropriation, Dana
must show either that Defendants acquired its trade secrets by improper means, or that
Defendants used or disclosed the trade secrets.4 See Sys. 4, Inc. v. Landis & Gyr, Inc., 8 F.
4
This Court has reservations about applying the acquisition prong, § 1902(b)(i), to the
individual defendants. Subsection (b)(1) requires that the secret be acquired by a person
“who knows or has reason to know” it was acquired by improper means. Because “improper
means”requires intentional conduct, the addition of “knows or has reason to know” suggests
(continued...)
40
App’x 196, 200 (4th Cir. 2001) (“[A] plaintiff can state a claim for misappropriation simply
by demonstrating that the defendant acquired its trade secret by improper means, even if the
plaintiff cannot show use of that trade secret.”) (interpreting the Maryland UTSA); Nora
Beverages, Inc. v. Perrier Grp. of Am., Inc., 164 F.3d 736, 750 (2d Cir. 1998) (“[A] violation
of CUTSA occurs only if the defendant either wrongfully acquired the plaintiff’s trade secret
or used or disclosed the trade secret.”) (interpreting the Connecticut UTSA).
(a) Acquisition by Improper Means
Acquisition of Dana’s secret information alone is not sufficient for a MUTSA
violation. For liability to attach under the acquisition prong, MUTSA requires acquisition
by “improper means.” Mich. Comp. Laws § 1902(b)(i). “‘Improper means’ includes theft,
bribery, misrepresentation, breach, or inducement of a breach of a duty to maintain secrecy
or espionage through electronic or any other means.” Mich. Comp. Laws § 445.1902(a).
4
(...continued)
that subsection (b)(1) applies to a person who obtains the secret from the one who improperly
acquired it. Moreover, if the mere acquisition by improper means is sufficient to constitute
a violation of the MUTSA, there would be no need for subsection (b)(ii)(A), which prohibits
the disclosure and use by a person who used improper means to acquire the trade secret. The
cases that have interpreted the UTSA to require acquisition or disclosure or use have not
addressed the application of subsection (b)(i) to the one improperly acquires the information
in the first instance. See Sys. 4, Inc. v. Landis & Gyr, Inc., 8 F. App’x 196, 200 (4th Cir.
2001) (involving a suit against the company that acquired the information from its employee,
and not against the employee who acquired the information); Nora Beverages, Inc. v. Perrier
Grp. of Am., Inc., 164 F.3d 736, 750 (2d Cir. 1998) (finding neither acquisition nor use of
a trade secret). Nevertheless, because the Court does not find that any of the defendants
acquired the information by improper means, this distinction does not affect the outcome of
this proceeding. The Court will accordingly apply subsections (b)(i) and (b)(ii) to all
defendants.
41
While this list is not exhaustive, it generally requires intentional conduct involving some sort
of stealth, deception or trickery. Sys.4, 8 F. App’x at 200.
(i) Individual Defendants
The evidence does not support a finding that Wenstrup acquired Dana information by
theft, bribery, misrepresentation, or any other improper means. Wenstrup acquired the
information from his Dana computer with Dana’s knowledge, and Dana’s IT department
even offered to provide him with a copy of his hard drive.
The evidence similarly does not support a finding that Turner and Adleman stole
Dana’s information, or that they obtained it by stealth, deception, or trickery. Turner and
Adleman copied the information while they were employees of Dana. As Davis admitted,
Dana had no policy against employees storing Dana information on their personal computers
or personal storage devices, or backing up their work computers. (Davis, Tr. 178.) All of
the information copied by Adleman and Turner was information which they had authority to
access in the normal course of their employment at Dana. (Davis, Tr. 178.) The most Dana
has shown is that they violated Dana’s Standards of Business Conduct (“Standards”) (Ex.
220) by copying and removing the files without an appropriate business purpose. The Court
does not find, however, that this impropriety rises to the level of “improper means” as
defined by the MUTSA. As evidenced by Dana’s conduct when Wenstrup and Gerlach were
laid off, Dana had not previously enforced any prohibition against copying Dana files for
personal use.
42
(ii) American Axle
Under MUTSA, misappropriation occurs not only by the person who removes and
uses the material but also an employer “who knows or has reason to know that the trade
secret was acquired by improper means.” Mich. Comp. Laws § 445.1902(b). Dana contends
that American Axle is liable for violating the MUTSA because it planned and instigated the
coordinated raid on Dana’s engineers and data and repeatedly sought and accepted Dana’s
confidential information. The evidence does not support Dana’s contentions.
First, there is no evidence that American Axle used Wenstrup, Turner and Adleman
to obtain Dana’s trade secrets. Wenstrup was not employed by American Axle until nine
months after he left Dana, so he clearly did not act on behalf of American Axle when he
copied the Dana files. As to Turner and Adleman, Dana has presented some evidence in
support of its suspicion that Turner and Adleman copied files on behalf of American Axle.
However, the suspicions were based solely on Turner and Adleman’s actions. Turner and
Adleman denied that anyone at American Axle asked them to bring Dana information to
American Axle or to use such information in their work at American Axle. (Adleman, Tr.
305, Turner, Tr. 365.) Davis corroborated this with his testimony that when he interviewed
with American Axle he was not asked for any Dana information. (Davis, Tr. 221, 223.)
Sofia and Orozco testified that no such information was requested, that the use of such
information would not be tolerated by American Axle policy, and that such information was
not known to have been in the individual defendants’ possession. (Orozco, Tr. 850; Sofia,
43
Tr. 794-95.) Dana has presented no evidence to the contrary. Dana presented no evidence
to suggest that anyone from American Axle encouraged or pressured Turner or Adleman to
copy Dana files or that American Axle encouraged or pressured any of the individual
defendants to use Dana confidential information at American Axle. For the reasons stated
above in connection with the individual defendants, the Court is not persuaded that the
individual defendants copied files at the behest of or on behalf of American Axle.
Second, based on the Court’s findings with respect to the individual defendants, the
Court also finds that Dana has not proved that American Axle acquired any confidential
Dana information, much less that it acquired those trade secrets with knowledge that they
were improperly acquired. Although the information copied by the individual defendants
included trade secrets, there is no evidence that any of the trade secret information was ever
acquired by American Axle. There is no evidence that any of the Dana confidential or
proprietary information was downloaded onto any of the American Axle computers, and
there is no evidence that American Axle ever used any of Dana’s confidential information.
In fact, the only evidence produced at trial regarding American Axle’s reaction to the
availability of Dana’s information is a clear direction not to use confidential information.
(Ex. 1326.) The issue arose when Wenstrup noted in an email to Orozco on April 25, 2010,
that he had been asked for an example of a Dana product presentation. Wenstrup indicated
that he had found one on his home computer, and asked for Orozco’s thoughts on sharing it.
Orozco responded that if the presentation had intellectual property that is not of public
44
knowledge Wenstrup could not use it, and that he should call the legal department if he had
any doubts. (Ex. 1326.)
The only information Dana has established that American Axle acquired was the
information contained in Wenstrup’s emails. Even if some of Wenstrup’s emails could be
viewed as containing trade secrets, there is no showing that American Axle knew or should
have known that they were acquired by improper means. First, as noted above, they were not
in fact acquired by improper means. Second, even if Wenstrup had acquired the information
by improper means, there is nothing in Wenstrup’s emails that would have alerted Dana that
the information had been acquired by improper means, or that it was information that
Wenstrup had a duty to keep secret. Wenstrup’s emails indicated that information came from
his “experience” or from the “world he comes from.” The fact that Wenstrup based his
engineering advice on his past experience is not evidence that the information was a trade
secret or that it was acquired by improper means. Wenstrup had no covenant not to compete
with Dana and was free to use his general engineering knowledge in a job with a competitor.
The evidence presented does not persuade the Court that any of the Defendants
acquired Dana information by improper means.
(b) Disclosure or Use
The evidence also does not support a finding that any of the defendants disclosed or
used confidential Dana information.
45
(i) Turner and Adleman
The preponderance of the evidence shows that Turner and Adleman returned all of the
Dana information in their possession within three weeks of leaving their employment, and
that they did not disclose or use any Dana information. Dana has attempted to show use or
disclosure based solely on Adleman’s presence at a meeting where powdered metal on an
IAD spider was discussed, on Turner’s contribution to Wenstrup’s list of tests, and on Turner
and Adleman’s inclusion on emails regarding commercial vehicle axle design. As discussed
in Part II(A)(1) above, Dana has not shown that any of these activities constitutes the use or
disclosure of trade secrets. Turner and Adleman denied using or disclosing any confidential
Dana information and Dana has not presented any evidence sufficient to cast doubt on their
testimony. Moreover, as previously noted, Dana had not obtained a covenant not to compete
from Turner or Adleman, and they were free to share their general engineering expertise in
their new job.
(ii) Wenstrup
Dana has presented some evidence in support of its contention that Wenstrup used or
disclosed Dana trade secret information. Specifically, Dana has presented evidence that
Wenstrup accessed the trade secret Hino pro forma chart on February 17, 2010, which was
the same day Wenstrup was invited to attend a “tentative” “Hino expanded Guidance Quotes
CR Kickoff Meeting.” (Ex. 19.) Wenstrup’s response to the invitation to attend the meeting
was tentative. He stated that he was in a manufacturing conference, but that he would try to
46
call in. (Id.) Wenstrup does not recall whether he participated in the teleconference.
(Wenstrup, Tr. 448.) Wenstrup denied disclosing any information from the Hino pro forma
in his work at American Axle. (Wenstrup, Tr. 531-32.) He also testified that the prices
quoted by American Axle to Hino were set by American Axle before Wenstrup was hired and
the American Axle pricing never changed. (Wenstrup, Tr. 532.) Dana has not challenged
Wenstrup’s testimony and has not produced sufficient evidence to support a finding that
Wenstrup attended the meeting, much less that he disclosed or used any confidential
information from the Hino pro forma at the meeting.
Dana has also produced evidence that Wenstrup used the confidential Set-Gear and
Pinion Chart. (Ex. 212.) As previously noted, although this document qualifies as a trade
secret, Dana has made no showing that Wenstrup disclosed anything more from this
document that the publicly available gear ratios. There is no evidence that Wenstrup ever
accessed the document after February 2010 or used any additional information from it.
Dana’s remaining proofs as to Wenstrup’s disclosure or use concern matters that this
Court has determined were not trade secrets. Throughout this case it has been Dana’s
practice to take one small piece of information from an email or engineering notebook that
references the subject matter of one of the trade secret documents taken by the defendants,
and then to request the Court to infer that the trade secret documents were disclosed or used.
The Court is not persuaded that such an inference is warranted. None of the Dana references
in Wenstrup’s emails signal a greater use of the confidential documents. The Court finds no
47
basis for finding that Wenstrup (or any other defendant) made wholesale use of Dana’s
confidential information. The evidence is simply not sufficient to support this theory.
(iii) American Axle
Dana did not produce any direct evidence that American Axle used any of Dana’s
trade secrets.
Dana contends that even if there is no direct evidence of use, circumstantial
evidence may be used to establish the misappropriation of a trade secret under the MUTSA.
Veteran Med., 2008 WL 696546, at *9. “[C]ourts may properly consider circumstantial
evidence concerning similarity of design plus access to the design to imply use by a
defendant of a trade secret.” Stratienko v. Cordis Corp., 429 F.3d 592, 600 (6th Cir. 2005)
(interpreting the Tennessee UTSA); see also Brake Parts, Inc. v. Lewis, 443 F. App’x 27, 31
(6th Cir. 2011) (permitting circumstantial evidence to establish use under Kentucky UTSA
for purposes of a preliminary injunction). According to Dana, Defendants’ admitted theft,
coupled with American Axle’s efforts to introduce competitive commercial axles,
demonstrates misappropriation of Dana’s trade secrets.
The circumstantial evidence in this case is not sufficient to establish misappropriation.
As previously noted, the Court does not find that Dana’s trade secrets were stolen or
otherwise improperly acquired by the individual defendants.
Not only was use of Dana’s
confidential information against company policy, but, as Sofia testified, the Dana information
was not of particular relevance or importance to American Axle, which had its own history
of developing axles, and was competing in a different market. Moreover, Dana has made no
48
showing that American Axle has adopted competitive designs, quotes, tests, or materials that
would suggest a use of Dana’s trade secrets. The manner in which the evidence was
presented tended to blur the distinctions between what was confidential and what was not,
what was reasonably protected and what was not, what was used and what was merely
downloaded, what was copied and what was returned. Now that the Court has sifted through
the evidence, the Court is satisfied that Dana has not presented sufficient circumstantial
evidence to establish misappropriation by a preponderance of the evidence.
Dana faults Defendants for failing to come forward with evidence of independent
development to support their commercial vehicle axle program. Evidence of independent
development may be used to rebut an inference of misappropriation. See Wrench LLC v.
Taco Bell Corp., 256 F.3d 446, 459-60 (6th Cir. 2001); Kienzle v. Capital Cities/Am. Broad.
Co., 774 F. Supp. 432, 436 (E.D. Mich. 1991); Adv. Analytics, Inc. v. Citigroup Global
Markets, Inc., No. 04-3531, 2009 WL 7133660, at *20 (S.D.N.Y. Aug. 5, 2009). However,
because there is insufficient evidence to support an inference of misappropriation,
Defendants are not required to produce evidence of independent development.
The Court finds no basis for holding any of the defendants liable under the MUTSA
because Dana has not shown acquisition by improper means, nor has Dana shown use or
disclosure of any trade secrets.
49
B. Breach of Contract
Dana asserts in Counts 2, and 3 that Turner and Adleman breached their contracts with
Dana by taking its confidential information without permission and for their personal use and
not for any Dana business purpose, and by failing to return that information to Dana. (Dkt.
No. 407, Dana’s Post-Tr. Mem. 37.) Dana asserts in Count 4 that Wenstrup breached his
contract with Dana by disclosing Dana’s confidential information.
To establish a breach of contract claim under Michigan law, a plaintiff must prove by
a preponderance of the evidence (1) the existence of a valid contract, (2) the terms of the
contract, (3) that defendant breached the contract, and (4) that the breach caused the plaintiff
injury. In re Brown, 342 F.3d 620, 628 (6th Cir. 2003).
Dana bases its breach of contract claims on the Employee Agreements signed by
Turner, Adleman, and Wenstrup (Exs. 5, 10, 191), the Acknowledgement Agreements signed
by Turner and Adleman (Exs. 45, 49), the Dana Standards of Business Conduct
(“Standards”) (Ex. 220), and the Dana IT policy (Ex. 221).
As a preliminary matter, the Court notes that neither the Standards nor the IT Policy
provide the basis for a breach of contract action. The Standards exhort Dana employees to
conduct Dana’s business in a “legal, ethical and responsible manner,” and address topics
including workplace safety, protection of the environment, accurate record keeping, insider
trading, gifts, conflicts of interest, and public relations. (Ex. 220.) The Standards were
adopted by Dana’s Board of Directors in 2008, after the individual defendants were
50
employed. The Standards provide that “any Dana employee who is found to have violated
these Standards . . . or who refuses to acknowledge his or her willingness to comply with
these Standards, can expect disciplinary action up to and including termination . . . .” (Ex.
220, at 1.)
The Standards certainly governed Defendants’ employment while they were at Dana,
and violation of the Standards might have formed the basis for an employment action against
them. Nevertheless, the Standards do not provide the basis for a breach of contract action
because they do not constitute a valid enforceable contract. They are not signed by
Defendants, there is no mutuality of agreement, and the terms of the contract are too vague.
See Detroit Trust Co. v. Struggles, 286 N.W. 844, 846 (Mich. 1939) (citing John v. Douglas,
274 N.W. 780, 784 (Mich. 1937) (holding that the essentials of a valid contract are parties
competent to contract, a proper subject-matter, a legal consideration, mutuality of agreement,
and mutuality of obligation)).
Like the Standards, the IT Policy is also a set of work guidelines rather than a
contract. It was not signed by the individual defendants, and similarly provides, under
“Enforcement,” that “[a]ny breach of these requirements will be considered a very serious
matter and may result in disciplinary action including, in some cases, dismissal.” (Ex. 221,
at 5.)
Because the Standards and IT Policy are not enforceable contracts, the individual
defendants are entitled to judgment on Dana’s breach of contract claim to the extent that it
51
is based on their breach of the Standards5 and the IT Policy.6
Accordingly, Dana’s breach of contract claim is limited to the Employee Agreements
and the Acknowledgement Agreements.
The Employee Agreements signed by Turner and Adleman provide:
I further agree that I will not, either during or any time after my employment
by Dana, use or disclose to any third party any confidential information
including, without limitation, technical, financial, marketing, and other
business information known to or created by me as a result of my employment
5
Dana has asserted that the individual defendants breached the following provision
of the Standards by copying Dana information for non-business purposes:
Dana people have the responsibility to protect Dana’s physical assets from
theft, misuse and abuse. Likewise any public or non-public information,
including technology and intellectual property, owned by Dana or entrusted
to us by our business partners, customers and suppliers, should be properly
protected, handled on a strict need-to-know basis, and only used for
appropriate business purposes.
(Ex. 220, at 3 (emphasis added).)
6
Dana has asserted that Turner and Adleman breached the following provision of the
IT Policy by failing to return all Dana files “on the termination of [their] employment”:
All files and information on your company computer must be delivered
to us on the termination of your employment or at any time upon our
request, including any personal files. This includes information you have
created or stored on your PC, or on other equipment, whether during or outside
of normal office hours. Any duplicate copies that are not returned to us
must be deleted or destroyed.
(Exhibit 221, at 2 (emphasis added).) The IT Policy was adopted in November 2002, and
revised in January 2010 (Ex. 221, at 6), after Wenstrup had left Dana. Only the revised
policy was introduced as evidence, and Dana does not assert that Wenstrup breached the IT
Policy.
52
by Dana.
(Exs. 5, 10 (emphasis added).)
Wenstrup’s Employee Agreement contains a similar
provision:
Unless I shall first secure written consent of [Dana], I shall not disclose or use
at any time either during or subsequent to my employment, except as required
in my duties to [Dana] any secret or confidential information of [Dana]
which I have acquired during said employment, whether or not developed by
me.
(Ex. 191 (emphasis added).)
When Turner and Adleman left their employment at Dana, they each signed an
Acknowledgement Agreement (“Acknowledgement”), which provided in pertinent part that
they reviewed the terms of their Employee Agreement, and further provided:
I certify that I understand my obligations pursuant to that Agreement to
maintain the confidentiality of trade secrets and other confidential information
of Dana. I further Certify that I have honored these obligations and I have not
and will not disclose to anyone outside of Dana or use trade secrets and
confidential information of Dana. I also understand that such information
may be contained in documents, computer files or disks, or in my own head.
I also promise that I will review my personal and home files, including
computer files and disks, and promptly return to Dana any confidential or
proprietary information that I may discover in my possession.
(Exs. 45, 49 (emphasis added).)
1. Turner
Dana contends that Turner breached his Acknowledgement by failing to return a USB
device that was plugged into his Dana computer on March 16, 2010, and by failing to
promptly return other Dana information.
53
Dana presented evidence that on March 16, 2010, five weeks before Turner left Dana,
a flash drive was connected to Turner’s Dana computer. This flash drive was not turned over
to Dana during discovery.
Turner testified that he turned over to Dana all USB devices in his possession. Turner
does not know who inserted the flash drive into his computer. (Turner, Tr. 362.) Turner
testified that USB devices were used extensively at Dana to share files. Participants in
program review meetings and engineering meetings, who included engineers, program
manufacturers, and representatives from purchasing or manufacturing, would frequently
bring information to be discussed on USB drives because the USB drives could be installed
in a computer that was connected to a projection system. (Turner, Tr. 362-64.) Turner had
a laptop, so in many cases, he would bring his computer to connect it to the projector. (Id.
at 364.) Dana did not have a system for identifying which employees used which USB
device. (Id. at 365.) Hendricks did not know whether the unaccounted for flash drive
belonged to Turner or to one of his Dana co-workers. (Hendricks, Tr. 79.) The evidence
presented does not convince the Court that Turner failed to return any Dana information.
Turner resigned on April 23, and returned the downloaded information six days later,
on April 29. Dana contends that because Turner did not return the data until after Dana
contacted him seeking its return, he did not return the data “promptly” as required by the
Acknowledgement Agreement.
There is no suggestion that Turner or Adleman was aware of any requirement to return
54
Dana materials promptly until the day they resigned. The Employee Agreement only
prevented them from using or disclosing information, and the IT Policy suggested that copies
did not have to be returned as long as they were destroyed.
Davis, Dana’s spokesperson at trial, admitted that “promptly” is not defined in the
Acknowledgement Agreement. (Davis, Tr. 182-84.) According to Davis, what constituted
the prompt return of information was a matter left to the departing employee’s discretion.
(Davis, Tr. 180-81.) Kristen Nowak, Dana’s HR director, and Janie Sre, Dana’s HR
coordinator for the heavy vehicle division in Kalamazoo, conducted portions of Turner’s exit
interview. (Nowak Dep. 9, 68-72; Sre Dep. 15, 64-68.) Nowak, who gave Turner the
Acknowledgement Agreement to sign, did not give Turner a date by which he needed to
return information.
(Nowak Dep.72.) Nowak had never used the Acknowledgement
Agreement prior to Turner’s exit interview and had not been given any training or direction
on how to collect the documents or equipment during an exit interview. (Id. at 47, 68.) She
did not feel qualified to interpret what Dana meant by prompt, but thought it was a
“reasonable time period.” (Id. at 72) She testified that the return of documents within two
or three weeks would probably qualify as prompt, but conceded that the period could be
lengthened if an employee was out of town or otherwise unable to return the documents. (Id.
at 50-51, 72.)
Sre was similarly unaware of any Dana procedure for how departing
employees were to isolate and return any computer files on their personal computers. (Sre
Dep. 107-08.) Sre contacted Turner on April 28, at Nowak’s direction, to request him to
55
return the missing flash drive. (Id. at 76.)
Turner returned the flash drive on April 29. Given the lack of clarity regarding the
expectations on how and when the information should be returned, the Court finds no basis
for finding a breach of the Acknowledgement Agreement based on the timing of Turner’s
return of the flash drive.
Dana contends that Turner breached the Employee Agreement by disclosing Dana’s
confidential test and test parameter information. The only confidential information that Dana
contends Turner used or disclosed was the list of tests and test parameters that were the
subject of the emails between Wenstrup and Turner. (Ex. 220; Ex. 73.) For the same reasons
explained in Part II(A) above, the Court does not find the list of tests and the skeletal
descriptions to constitute the disclosure of confidential data.
The evidence is not sufficient to support Dana’s breach of contract claim against
Turner. Turner is accordingly entitled to judgment on Dana’s breach of contract claim.
2. Adleman
Dana contends that Adleman breached the Acknowledgement by failing to return
Dana’s information until after Dana filed this lawsuit and the Court ordered him to do so, and
by making multiple copies of the information. Dana presented evidence that Adleman
accessed the Dana files in his possession on April 29, May 7, and May 11, 2010. (Hendricks,
Tr. 58; Adleman, Tr. 277-79). He did not return the files until May 14 and May 20.
(Adleman, Tr. 258.) Hendricks testified that there is evidence that Adleman plugged two
devices into his computer. Files were put into a “Dana” folder on one device, and into a
56
“Return to Dana” folder on another device. (Hendricks, Tr. 59-60.) Dana contends that
Adleman was making multiple copies of the information on these dates for his own purposes.
Unlike Turner, Adleman did not simply have Dana files on a single flash drive that
he could return. Adleman did not have a Dana laptop computer, so during the course of his
employment, when he went to out-of-town meetings, he would copy the files he would need
and bring them on his personal laptop. (Adleman, Tr. 281.) Davis acknowledged that Dana
had no protocol related to, or prohibition against, employees storing Dana information on
their personal computers or personal storage devices, or backing up their work computers.
(Davis, Tr. 178.) At his exit interview, Adleman said he did not know if he had Dana
property that needed to be returned. (Ex. 205.) His answer was not fully truthful because
he was well aware that he downloaded information the previous evening and that he had
information on his personal computer. However, Davis acknowledged that his answer was
sufficient to put Dana on notice that he possessed files to review. Nevertheless, Davis never
instructed Adleman on how or when he should return the Dana information, nor did he, or
anyone else at Dana, call Adleman as they called Turner, to indicate that his “review and
return” process was exceeding what they considered to be a reasonable time period.
Following his resignation from Dana, Adleman accessed some of the zip folders
containing his Dana files on April 28, May 7, and May 11. (Hendricks, Tr. 49-55, 56-68.)
Adleman testified that he accessed the files as part of his review and return process required
by the Acknowledgement Agreement. (Adleman, Tr. 296-98.) He had a box in his office
57
where he placed books and journals to be returned to Dana. (Id. at 298.) He also began
reviewing files and transferring them to a flash drive. On May 7 he placed some files on a
flash drive with the intention of giving them to a Dana employee at a housewarming party,
but he left the flash drive in his glovebox. (Id. at 299.) He explained that he created new
files when he tried to measure how much space the information would take up on a flash
drive. (Id. at 299-300.) On May 11 Dana filed this action, and on May 20, Dana obtained
a preliminary injunction. (Dkt. Nos. 1, 21.) Adleman testified that he returned all of the
Dana material in his possession on May 14 and May 20, 2010. Adleman never unzipped any
of the Dana folders in his possession and never opened any of the confidential files contained
in those zipped folders. (Adleman, Tr. 296-97; Ripa, Tr. 723.) The only file he opened was
an Excel spreadsheet that he had downloaded from the Internet. (Adleman, Tr. 297.)
Nothing in Hendricks’ testimony contradicts Ripa’s testimony that Adleman did not open
any of the individual confidential files. (Hendricks, Tr. 49-68.)
Adleman’s testimony that he had difficulty finding time to sort through the Dana
information on his personal laptop and figuring out how to return it during this busy time in
his life was credible, and the Court is inclined to believe him. Adleman had been given no
direction on when or how the material was to be returned, and his return of documents within
three weeks, was consistent with Nowak’s understanding of what was reasonable under the
circumstances. Dana does not accuse Adleman of breaching the Employee Agreement by
using or disclosing Dana’s confidential information and there is no evidence that he used or
58
disclosed any Dana information at American Axle. Furthermore, he showed no bad faith
toward Dana at the end of his employment there. He made sure that the engineers he was
working with at Dana had the materials they needed to continue the work Adleman had been
involved in. (Parent Dep. 10-12; Andres Dep. 11-13; Adleman, Tr. 292.) Adleman’s
explanation for how the extra files were created is understandable, and his return of
everything within three weeks of his resignation was not unreasonable.
Dana has not proved, by a preponderance of the evidence, that Adleman made copies
of the Dana information for his own use, or that he failed to return the information promptly.
Accordingly, the Court finds in favor of Adleman on the breach of contract claim.
3. Wenstrup
Dana asserts that Wenstrup breached his Employee Agreement with Dana by
consistently disclosing Dana’s confidential information to American Axle, including
information regarding testing, test parameters, product development, product improvement,
gear development, and cost and pricing information.
Defendants contend that Dana waived the contractual provisions in the Employee
Agreement and Standards by virtue of its permissive conduct toward Wenstrup’s retention
of Dana materials at the conclusion of his employment. (Dkt. No. 416, Indvl. Defs.’ Post-Tr.
Br. 26-27.) While Dana’s permissive attitude certainly can be understood as a waiver of any
requirement to return or to avoid reviewing documents, it is not a waiver of Wenstrup’s
agreement not to “disclose or use at any time either during or subsequent to my employment
. . . any secret or confidential information of [Dana] which I have acquired during said
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employment . . . .” (Ex. 191.) However, for the same reasons explained in Part II(A) above,
the Court does not find that Wenstrup disclosed or used any secret or confidential
information of Dana during his employment at American Axle. Accordingly, all of the
Individual Defendants are entitled to judgment on Dana’s breach of contract claims.
C. Tortious Interference and Unfair Competition
Counts 7 and 8 of Dana’s amended complaint allege claims for unfair competition and
tortious interference. The unfair competition claim is asserted against all defendants, and the
tortious interference claim is asserted against only American Axle. Both claims are based
on Dana’s assertion that Defendants engaged in a concerted effort to improperly compete
against Dana in the marketplace by raiding Dana employees and procuring and utilizing
Dana’s confidential and trade secret information as part of a coordinated plan. (Dkt. No.
387, Dana Post-Tr. Mem. 43.)
The elements of a tortious interference claim are: (1) the existence of a valid
relationship or expectancy; (2) knowledge of the relationship or expectancy on the part of the
interferer: (3) an intentional interference inducing or causing a breach or termination of the
relationship or expectancy; and (4) resulting damages to the party whose relationship or
expectancy has been disrupted. Wausau Underwriters Ins. Co. v. Vulcan Dev., Inc., 323 F.3d
396, 404 (6th Cir. 2003). Proof of intentional interference requires showing purposeful or
knowing behavior and that the interference was either: (1) a per se wrongful act; or (2) a
lawful act done with malice and unjustified in law for the purpose of invading the contractual
rights or business relationships of another. Id. Where a defendant’s actions are motivated
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by legitimate business reasons its actions do not constitute improper motive or interference.
Mino v. Clio Sch. Dist., 661 N.W.2d 586, 597 (Mich. Ct. App. 2003).
Wenstrup had been terminated from his position at Dana approximately nine months
before he was hired by American Axle. Accordingly, Dana did not have a valid interest or
expectancy in a continued employment relationship with Wenstrup. Wenstrup did not have
a covenant not to compete with Dana. Accordingly, Dana did not have a valid interest or
expectancy that Wenstrup would not be employed by a competitor such as American Axle.
Dana asserts, however, that it had a legitimate and continuing expectancy that Wenstrup
would not divulge Dana’s confidential information based on Wenstrup’s Employee
Agreement, which provided that he would not disclose or use Dana’s secret or confidential
information “at any time either during or subsequent to my employment.” (Ex. 191.) This
claim fails because the Court finds no evidence to support any attempt by American Axle to
induce Wenstrup to breach his confidentiality agreement. The only evidence regarding
American Axle’s position regarding the use of Dana’s information is its direction to
Wenstrup that such information could not be used if it was confidential.
Dana also contends that by appointing Wenstrup as the Chief Engineer, and then
turning a blind eye to his methodology, American Axle allowed Wenstrup to infuse the entire
American Axle commercial vehicle axle group with Dana’s material usage, testing protocol,
customer data, product cost, customer price strategies, and application techniques. (Dana
Post-Tr. Mem. 60.) This claim also fails for lack of evidentiary support. There simply has
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been no showing that Wenstrup infused the American Axle commercial group with Dana’s
trade secrets. If the Court were to accept Dana’s argument based on the evidence presented,
the Court would essentially be imposing on American Axle a duty to prevent Wenstrup from
working in his field of expertise, even though Dana itself never obtained a covenant not to
compete from Wenstrup.
Dana did make a prima facie showing that it had a valid relationship with Turner and
Adleman,7 and that American Axle had knowledge of that relationship. However, Dana has
not met the third element of its tortious interference claim with respect to these individuals.
Dana has not shown that American Axle intentionally interfered with that relationship and
induced or caused a breach or termination of that relationship.
The evidence at trial showed that neither Turner nor Adleman was inclined to move
to Maumee. They were both looking for alternative employment so that they could stay in
the area.
Dana HR representative Nowak testified that Dana anticipated that when
announced that it was closing its Kalamazoo facilities, it would lose some of the 60 engineers
at its Kalamazoo plant, chiefly because of their desire not to relocate to Maumee, Ohio.
(Nowak Dep. 11, 41, 112.) Dana was aware that its competitors had been contacting Dana
engineers with employment opportunities.
(Nowak Dep. 111-12.)
Dana specifically
understood the risk that engineers might relocate to American Axle’s facility in nearby Three
7
As this Court previously noted, the fact that Turner and Adleman had decided that
they would not continue to work for Dana after the Kalamazoo office was closed does not
necessarily show that Dana did not have a valid business relationship with them. (Dkt. No.
282, 6/29/2012 Op. at 29).
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Rivers.
(Nowak Dep. 41.)
Davis testified that Dana engineers were free to accept
employment with other companies, including Dana’s competitors, rather than relocate.
(Davis, Tr. 235.)
There was also no evidence to suggest that the manner in which American Axle
reached out to Turner and Adleman was wrongful per se or that it was done maliciously or
without legal justification. American Axle learned of Dana’s decision to close its Kalamazoo
facility during the same time frame that American Axle was looking for engineers with
commercial experience to work at Three Rivers on the Mack launch. (Sofia, Tr. 790-91;
Orozco, Tr. 843.) Sofia and Orozco assumed, based on what had happened when Dana
closed its Fort Wayne facility, that not all of Dana’s engineers in Kalamazoo would be
offered jobs in Maumee, and others would not want to relocate to Ohio.
American Axle put out a feeler to individuals who might be looking for a job when
Dana moved out of the area. There is nothing improper or malicious about requesting or
compiling a list of affected Dana engineers, or to attempting to recruit experienced personnel
who Dana had already anticipated might leave its employ. None of the individual defendants
was bound by a non-competition agreement or covenant not to compete. There is no
evidence that American Axle put undue pressure on any Dana employee, or that they enticed
anyone to switch jobs by making any improper promises. Davis himself considered moving
to American Axle, and testified that when he interviewed with Sofia about a job at American
Axle, Sofia did not make any disparaging remarks about Dana, and did not ask Davis to bring
63
Dana information to American Axle . (Davis, Tr. 233, 236.) Dana has not identified
anything about American Axle’s conduct that suggests an illegitimate attempt to gain an
unfair competitive advantage.
American Axle hired Wenstrup, Turner and Adleman to fill specific needs for
personnel within its commercial vehicle business unit. Their recruitment of engineers who
were knowledgeable in the field of commercial axles was motivated by legitimate business
reasons. At the time Dana announced that it was closing its Kalamazoo facility, there were
50-60 engineers at the Kalamazoo facility. Almost half of the engineers employed by Dana
at its Kalamazoo facility left Dana rather than relocate to Maumee, Ohio. (Davis, Tr. 234;
Nowak, Tr. 114.) American Axle interviewed only three, and hired only two of them. The
evidence simply does not support Dana’s assertion that American Axle conducted an
orchestrated raid of its engineers.
Turner and Adleman downloaded information that would be beneficial to American
Axle immediately before resigning from Dana. Based on the quantity and the nature of the
information downloaded by Turner and Adleman, the coincidences regarding dates of
copying and interviews, and their lack of candor at their exit interviews, Dana’s suspicions
regarding their intentions was reasonable. However, the evidence produced at trial did not
support Dana’s suspicions.
The fact that Turner and Adleman copied their work files before departing their
employment does not create an inference that they did so in an attempt to steal confidential
64
information from Dana or to bring that information to American Axle. Copying work files
at the conclusion of employment does not, in and of itself, support an inference of suspect
behavior. As evidenced by the testimony of Wenstrup and Gerlach, and by Dana’s IT
department’s offer to copy hard drives for departing employees, it is not unusual for
employees to want to take evidence of their work when they leave their employment. Turner
and Adleman’s copying and removal of Dana information may not have been appropriate,
but it does not support an inference that American Axle encouraged them to take the files or
that they intended to share the information with American Axles or others.
Turner and Adleman were credible witnesses. At most, Dana showed that some of
the information downloaded by the individual defendants could have been useful to
American Axle and harmful to Dana. But Dana failed to show that any of the information
downloaded by Turner and Adleman was solicited by American Axle, disclosed to American
Axle, or used by American Axle. There is no evidence that American Axle even knew that
Turner and Adleman had downloaded information before this suit was filed. The Court
simply finds no evidence that anyone at American Axle encouraged Turner and Adleman to
steal Dana information, or otherwise targeted Turner and Adleman so that they would bring
confidential Dana information to American Axle. Accordingly, the Court finds in favor of
American Axle on Dana’s tortious interference claim.
As noted above, Dana’s unfair competition claim against all of the Defendants is
based on the same allegations. “[U]nfair competition ‘prohibits unfair and unethical trade
65
practices that are harmful to one’s competitors or to the general public.’” Consol. Rail Corp.
v. Grand Trunk W. R.R.Co., No. 09-10179, 2009 WL 3460334, at *14 (E.D. Mich. Oct. 22,
2009) (quoting ATCO Indus., Ins. v. Sentek Corp., Nos. 232055 & 235398, 2003 WL
21582962, at *3 (Mich. Ct. App. July 10, 2003). “‘The term unfair competition may
encompass any conduct that is fraudulent or deceptive and tends to mislead the public.’” Id.
(quoting ATCO, 2003 WL 21582962, at *3). Each unfair competition case “is determined
upon its own facts and relief is based upon the principles of common business integrity.”
Good Housekeeping Shop v. Smitter, 236 N.W. 872, 873 (Mich. 1931). In ATCO Industries,
the court found that Sentek’s hiring of some of ATCO’s former employees and obtaining a
workforce familiar with their job, which resulted in savings to Sentek, was not unfair
competition where the employees were not under contract with ATCO and were free to seek
other employment. 2003 WL 21582962 at *4.
The evidence admitted at trial does not support Dana’s theory that American Axle
raided Dana’s employees or that it conspired to obtain Dana information in order to unfairly
compete against or to harm Dana. The evidence shows nothing more than that American
Axle hired available engineers at a time when it had positions open in its commercial vehicle
unit. Just as there was a lack of evidence to support a tortious interference claim, there is
also a lack of evidence to support an unfair competition claim against any of the defendants.
D. Damages
Dana contends that Defendants’ wrongful conduct resulted in at least $6 million in
damages to Dana, which should be allocated 90% to American Axle, 5% to Wenstrup, 2.5%
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to Turner, and 2.5% to Adleman. Dana also contends that an award of punitive damages and
attorneys’ fees is warranted. Dana also seeks entry of a permanent injunction.
Because the Court has determined that Plaintiff has not shown that Defendants are
liable on any of Plaintiff’s claims, the Court need not address the issue of damages.
However, even if Dana had established liability on any of its claims, Defendants would still
be entitled to judgment in their favor because Dana has failed to present evidence that it has
suffered any damages as a proximate result of any defendant’s conduct under any of its
theories of liability or that it needs injunctive relief.
Dana presented only two damages witnesses: Davis, and Dana’s retained expert,
Thomas Frazee. Frazee’s expert report and trial testimony related solely to alleged damages
incurred by Dana as a result of claimed misappropriation of trade secrets. To the extent
Davis discussed damages, his testimony was similarly limited to the misappropriation claim.
Dana presented no evidence as to any damages associated with its claims for breach of
contract, tortious interference, or unfair competition. For purposes of this discussion,
however, the Court will assume that the same method for calculating damages under the
MUTSA could also be an acceptable way to measure damages under Dana’s other claims.
The MUTSA allows for damages as follows:
Damages can include both the actual loss caused by misappropriation and the
unjust enrichment caused by misappropriation that is not taken into account in
computing actual loss. In lieu of damages measured by any other methods, the
damages caused by misappropriation may be measured by imposition of
liability for a reasonable royalty for a misappropriator’s unauthorized
disclosure or use of a trade secret.
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Mich. Comp. Laws § 445.1904.
The Sixth Circuit has recognized that damages in trade secrets cases are often difficult
to calculate. See Mid-Michigan Computer Sys., Inc. v. Marc Glassman, Inc., 416 F.3d 505,
510 (6th Cir. 2005) (quoting Avery Dennison Corp. v. Four Pillars Enter. Co., 45 F. App’x
479, 485 (6th Cir. 2002)). Nevertheless, there are recognized principles that apply to the
calculation of damages:
When the misappropriated trade secret is used to field competing products, the
best measure of damages is the plaintiff’s lost profits or the defendant’s illicit
gains. However, where the misappropriated secrets were not directly used to
field competing products, but were used, for example, to save research and
manufacturing resources, plaintiffs have used a number of different methods
of calculation to determine damages.
Id. (quoting Avery Dennison, 45 F. App’x at 485). “Where a trade secret has not been
destroyed and where the plaintiff is unable to prove specific injury, courts measure the value
of the secret to the defendant.” Avery Dennison, 45 F. App’x at 486 (citing Univ. Computing
Co. v. Lykes-Youngstown Corp., 504 F.2d 518, 535-36 (5th Cir. 1974)). The value of the
secret to the defendant may be “based on the value to the defendant of the secret at the time
of misappropriation, the value derived from savings because of increased productivity, or the
value derived from savings in research costs.” Id. (citing Univ. Computing, 504 F.2d at
535-36).
Frazee testified that for purposes of measuring damages in this case, he was unable
to apply the lost profits or the illicit gains approach because he lacked evidence to support
those methodologies. (Frazee, Tr. 591-92.) He was not aware of any contracts or customers
68
lost or gained as a result of American Axle’s alleged use of Dana’s trade secrets. (Frazee,
Tr. 640-41.) Frazee also testified that he could not apply the reasonable royalty approach
because he lacked the relevant evidence. (Frazee, Tr. 592, 640.) Frazee ultimately selected
“a methodology that is focused on the value of the information that was utilized by the
defendants.” (Frazee, Tr. 593.) He identified his test as the cost avoidance test. (Frazee, Tr.
641.)
In applying the cost avoidance test, Frazee considered what Dana expended in order
to develop those trade secrets, and then determined what percentage of those costs inured to
the benefit of American Axle by the use of the information. (Frazee, Tr. 593, 612.) His fivestep analysis involved the following determinations: (1) the amount Dana spent to create
deliverables; (2) the proportion of those deliverables that have potential value to American
Axle if used; (3) the types of information American Axle is alleged to have used; (4) the
context of that use; and (5) what proportion of Dana’s spend has a value to American Axle.
(Frazee, Tr. 619-20.) Frazee ultimately concluded that Dana expended $30 million over a
four-year period to develop commercial drive axle “deliverables,” and that 20% of that
expense, or $6 million, benefitted American Axle. (Frazee, Tr. 595, 599, 616, 622-24.)
Under Frazee’s methodology, the value of the information to Defendants depended
on Defendants’ use of the information. As Frazee testified, in applying the cost avoidance
methodology, a relevant consideration was what information was used by the defendants.
(Frazee, Tr. 641-42.) “The value of that information is a measure of the cost that American
69
Axle avoided by instead using that information. Instead of developing itself, it used it. The
value of that used information was the measure of damage.” (Frazee, Tr. 593.) Although
Frazee subsequently testified that use was not a necessary or critical requirement (Frazee, Tr.
643), his testimony was not credible in light of his prior testimony focusing on use.
Dana contends that it is not required to show use because courts look to “the value of
the secret to the defendant at the time that it was misappropriated, regardless of the
commercial success of the enterprise.” Avery Dennison, 45 F. App’x at 487. The language
Dana relies on does not refute the need to show use. It merely provides that under the
reasonable royalty approach, an approach admittedly not used by Frazee, the use does not
have to result in profit. In University Computing, the case relied on in Avery Dennison, the
court specifically required use, even under the reasonable royalty measure of damages. As
that court noted, “the defendant must have actually put the trade secret to some commercial
use.” Univ. Computing, 504 F.2d at 539. “The law governing protection of trade secrets
essentially is designed to regulate unfair business competition, and is not a substitute for
criminal laws against theft or other civil remedies for conversion.” Id.
Dana has not suggested how cost avoidance can be established in the absence of use.
Cost avoidance necessarily contemplates use. Nevertheless, in arriving at his damages
calculation, Frazee did not consider what information was actually used by American Axle.
He simply assumed that all of the proofs offered by Dana were examples of confidential or
trade secret information utilized by a defendant. (Frazee, Tr. 655.) In other words, he
70
assumed that American Axle used all of the computer files copied by Turner, Adleman, and
Wenstrup. This Court determined, in Part I above that Defendant Wenstrup only accessed
ten Dana documents, and that none of Dana’s confidential information was disclosed or used.
Because Dana has not persuaded the Court that American Axle used any of Dana’s trade
secrets, Dana has failed to show that American Axle avoided any costs.
Moreover, even if Defendants had disclosed or used some of Dana’s trade secrets, that
would not save Frazee’s calculations because his assumption that all of the information was
used affected every step of his analysis, from what Dana spent to create deliverables, to the
proportion of those deliverables that had value to American Axle. As Frazee testified, in
concluding that 20% of the deliverables had value to American Axle, he “considered the fact
that the degree of usage or the types of information that was being allegedly used was
different for each of those different departments, and so it’s not a uniform 20 percent for
each department.” (Frazee, Tr. 616.) Because Frazee did not consider what documents were
used, his damages calculation is speculative and is not supported by the evidence. Dana did
not produce evidence to support its contention that American Axle avoided costs, benefitted
from, or was unjustly enriched by Dana’s confidential or trade secret information.
Neither has Dana shown that it is entitled to injunctive relief. The MUTSA provides
that “[a]ctual or threatened misappropriation may be enjoined.”
Mich. Comp. Laws
§ 445.1903(1). Injunctive relief is not appropriate in this case because Dana has not proved
that Defendants used Dana’s confidential information or that they failed to return any of
71
Dana’s confidential information. See Mich. One Funding, LLC v. MacLean, No. 303799,
2012 WL 4210424, at *3 (Mich. Ct. App. Sept. 20, 2012) (“Because defendant returned
PrimeOne’s property and had it permanently deleted from his home computers and electronic
storage devices, there was no risk of real and imminent danger to plaintiffs. Thus, permanent
injunctive relief would not have been appropriate.”) Furthermore, the individual defendants
are all still bound by their Employee Agreements not to use or disclose Dana’s confidential
information.
III. CONCLUSION
Based on the copying of substantial Dana confidential information by employees who
were leaving to work for a competitor, Dana’s concerns about the misuse of confidential
information were justified. However, after engaging in exhaustive discovery and strenuously
litigating this case, Dana has not managed to support its suspicions with concrete evidence.
Dana’s voluminous exhibits do not support the conclusions Dana requests the Court to draw.
Despite Dana’s continual assurances that it would link the Defendants to the violations
alleged, Dana failed to do so. At the end of the case, after careful and thoughtful reflection,
the Court concludes that Dana has not come close to preponderating on any of its claims.
The Court will accordingly enter a judgment of no cause of action on all of Dana’s claims
in favor of all of the Defendants.
An order and judgment consistent with this opinion will be entered.
Dated: August 19, 2013
/s/ Robert Holmes Bell
ROBERT HOLMES BELL
UNITED STATES DISTRICT JUDGE
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