Denson International Limited v. Liberty Diversified International, Inc.
Order Granting 124 Plaintiff's Motion for Summary Judgment; Granting 127 Defendant's Motion for Summary Judgment; Denying as Moot 146 Plaintiff's Motion to Exclude. Signed by Senior Judge David S. Doty on 9/1/2015.(DLO)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 12-3109(DSD/JSM)
Denson International Limited,
International, Inc., d/b/a
Safco Products Company,
Tiffany A. Blofield, Esq., Wintrop & Weinstine, PA, 225
South 6th Street, Suite 3500, Minneapolis, MN 55402, for
William R. Stoeri, Esq. and Meghan L. DesLauriers, Esq.,
Dorsey & Whitney LLP, 50 South 6th Street, Suite 1500.
Minneapolis, MN 55402, for defendant.
This matter is before the court upon the cross-motions for
summary judgment by defendant Liberty Diversified International,
International Limited (Denson).
Based on a review of the file,
record, and proceedings herein, and for the following reasons, the
court grants both motions.1
This commercial dispute arises out of the parties’ business
Denson also moves to strike the testimony and report of
LDI’s expert witness, Arthur Hill. ECF No. 146. Because the court
grants summary judgment without relying on Hill’s report or
testimony, it denies as moot the motion to exclude.
LDI is the parent company of Safco Products Co.
(Safco), which sells office furniture and equipment.
and July 2012, LDI also owned and operated Valley Craft, Inc.,
which manufactures and sells metal hand trucks.2
Denson, a now-
manufacturers to produce office equipment and furniture.
then sold the finished products to companies like LDI.
The Parties’ Business Relationship
In 1992, LDI retained Denson to coordinate with several
factories in China to manufacture office products.
Generally, LDI would send drawings or samples of its desired
manufacturer to manufacture the products. Mandigo Dep. at 35:9-23.
Denson also negotiated wholesale prices with the manufacturer and
conducted quality control.
Duffy Decl. ¶ 9.
These tasks were
primarily performed by Denson’s former Operations Manager, Vincent
Duffy Decl. ¶¶ 9-13.
Two Chinese factories - EKO Factory and Nanjing Lanqu Import
& Export Limited factory (Nanjing Factory) - manufactured the “vast
majority” of the products that Denson sourced on behalf of LDI, and
For ease of reference, the court will refer to LDI, Safco,
and Valley Craft collectively as “LDI” unless a finer distinction
coordinate with other brokers when it believed that Denson’s prices
were too high.
Mandigo Dep. at 30:2-6, 32:5-15.
In April 2008,
LDI opened an office in Shanghai and began directly purchasing
products without Denson’s involvement.
DesLauriers Decl. Exs. 8-12.
Id. at 29:15-18, 33:18-21;
LDI eventually stopped purchasing
through Denson altogether.
Facts Relating to Denson’s Claims
In March 2007, Vincent To contacted LDI employees Phil Mandigo
and Pam LaFontaine to discuss potential employment with LDI.
Krummen Decl. Ex. 32, at LDI 2495. To maintain confidentiality, To
communicated through a private email account, over the telephone,
and in person.
See, e.g., id. at LDI2495, LDI2493; Ex. 36.
Initially, To offered to manage LDI’s planned operations in China.
On April 17, 2008, LaFontaine asked To make estimates of LDI’s
responded with general ideas on salary, staffing, and production
control, and estimated that he could save LDI ten percent annually.
Id. Ex. 15.
LaFontaine responded that “when we have taken product
lines and quoted them elsewhere we have seen around 35% savings.”
Duffy Decl. Ex. 8, at DENSON 432.
LaFontaine rejected To’s
proposal on May 22, 2008, stating that LDI had already opened an
office in Shanghai and expected to begin operations by the end of
DesLauriers Decl., Ex. 17.
Approximately two years later, To offered to work for LDI as
a consultant and help move “the Safco manufacturing business from
Denson and direct to the original vendors and factories.”
18, at DENSON 33.
When LDI rejected this proposal, To offered to
serve as a broker for the three smaller Chinese factories that made
products for Safco.
Id. Ex. 19.
LaFontaine asked if To could
provide a list of items and prices that would be covered under the
DesLauriers Decl. Exs. 20, 21. On April 21, 2011, To
sent LaFontaine a “prices list of the remaining products from the
Id. Ex. 23, at DENSON 1.
The document stated
that “specification, requirement, quality and packaging will be
[the] same as Denson shipments ....”
Id. at DENSON 3.
were between five and fifteen percent lower than the prices that
Denson charged LDI.
Weil Affirmation ¶ 42(ii-iii).
the proposal, and TO resigned from Denson in May 2011.
Id. ¶ 32.
Denson sued To in Hong Kong shortly thereafter, and the parties
settled in August 2012.
DesLauriers Decl. Exs. 24, 25.
As part of
the settlement, To admitted that he breached his fiduciary duties
disclosed, divulged or provided copies or extracts of any of
[Denson’s] confidential information or trade secrets.”
Id. Ex. 27
III. Facts Relating to LDI’s Counterclaims
In December 2004, the United States Department of Commerce
issued an antidumping order that set a 383.6 percent duty rate on
most Chinese exporters and manufacturers of hand trucks.
coordinating with Chinese factories to manufacture and ship hand
trucks for Valley Craft. Some of the hand trucks were manufactured
by nonparty Qindao Taifa Group Co. (Taifa), a factory in northern
approximately thirty percent.
Id. Ex. 2
Other hand trucks,
however, were manufactured by a factory subject to the higher duty
Taifa would only fulfill large quantity orders, so when
coordinated the orders with EKO Development, a distributor located
in Guangzhou, China.
See Duffy Dep. at 148:3-17, 149:21-24.
would purchase hand truck orders in bulk from Taifa, and Denson
would then sell them to Valley Craft.
Vincent To informed Valley Craft that Denson could move the
manufacture of all of its hand trucks to Taifa to avoid the higher
Second DesLauriers Decl. Ex. 2.
In order to comply
with the Customs order, Valley Craft asked that Denson provide the
name and address of the factory, and to include the applicable
anti-dumping case number on each invoice.
Id. Ex. 4, at DENSON
Valley Craft agreed that it would be sufficient to “send a
declaration letter” for each shipment that would include “Taifa’s
name, address, the case number and all the models and quantities
Id. at DENSON 7549.
From 2005 to 2007, the invoices for all transactions stated
that the hand trucks were “produced by Qingdao Taifa Group Imp[.]
& Exp. Co., Ltd. with the Anti-Dumping Case Number A56-891-004.”
See Handler Decl. Ex. 5; Second DesLauriers Decl. Exs. 7-12; Duffy
At least some of these shipments also included a
certificate stating that the hand trucks were sold by Taifa to
See, e.g., Handler Decl. Exs. 4, 35, 36.3
In January 2008, Customs rejected a shipment to Valley Craft
because the invoice did not include an antidumping clause. Handler
Decl. Ex. 6; Second DesLauriers Decl. Ex. 13, at DENSON 7590-91.
Valley Craft contacted Vincent To to inquire about the missing
clause. Second DesLauriers Decl. Ex. 13, at DENSON 7590. To first
responded that Denson believed the higher duty rate did not apply
to the particular hand trucks purchased by Valley Craft.
later admitted, however, that he had make a mistake and that the
Specifically, To explained that the hand trucks at issue were
manufactured by a “sister company (in south China) of Taifa (in
North China)” and that “Taifa would not accept orders for new items
Denson claims that it cannot locate certain documents,
including specific certificates of sale, that are almost a decade
old. Countercl. Def.’s Reply Mem. at 9. As a result, although
Denson has produced a number of certificates of sale, only a few
correspond to the 2005 to 2007 transactions at issue in this case.
See, e.g., Handler Decl. Ex. 35, at DENSON 553, 7393 (corresponding
to purchase order numbers 91229 and 97189).
and in small quantities and our factory in the south could not add
the clause any more.”
LaFontaine told Valley Craft that she
could use LDI’s collective buying power to ensure that Denson put
the clause back on the invoices.
Id. Exs. 8-9.
That same day, LDI
asked Denson to include language indicating that the orders were
“exempt from the anti-dumping clause.”
Id. Ex. 10.
To responded on April 3, 2008, stating “[p]ursuant to your
request, [Denson] will arrange the shipment of this order and will
put the statement that these carts are exempt from the anti-dumping
series.” Id. Ex. 11.
Denson’s next invoice, dated April 10, 2008,
stated simply that “these carts are exempt from the anti-dumping
Id. Ex. 13.
The invoice did not state, however, that the
hand trucks were manufactured by Taifa, nor did it include Taifa’s
specific antidumping case number. Id. On October 14, 2008, Denson
sent a second invoice that included identical language.
Before the shipment, Valley Craft asked To if the hand trucks
would be subject to the higher antidumping rate.
Id. Ex. 15, at
To responded that the hand trucks were “in the list”
but that “there should be no problem” because “this factory in
south China is not famous (compare[d] with Taifa) and lastly your
order quantity is small.”
In December 2008, customs rejected the hand truck shipment
corresponding to the October purchase order.
Id. Ex. 18.
Craft contacted To, who disclosed that Yangjiang Shunhe Industrial
Co. Ltd (Yangjiang) had produced the hand trucks.
Second DesLauriers Decl. Ex. 15.
Id. Ex. 19;
To further explained that the
“products were manufactured in south China ... and all shipped
products are [on] the anti-dumping list.”
Handler Decl. Ex. 19.
He claimed that he “just followed the instruction from Valley Craft
to add the statement in the shipping documents[.]” Id.
informing the company that it was under investigation for failing
to pay antidumping duties.
Id. Ex. 23, at LDI 246.
an internal investigation and responded to Customs on October 13.
Id. at LDI 237.
LDI informed Customs that there was “inconsistent
and/or incomplete underlying documentation” to prove that certain
hand trucks shipped between 2005 and 2009 were manufactured by
Id. at LDI 241.
On July 23, 2012, Customs sent a Notice of
Penalty to LDI, alleging that the company failed to identify or
Id. Ex. 26, at LDI 2916.
The notice further alleged
that the “violation ... occurred as a result of negligence.”
On August 2, 2012, LDI sent a letter and check for $1,252,045 to
Customs, stating that the payment was to “resolve all liabilities
with respect to importations made by Valley Craft, Inc.”
Denson filed suit against LDI on December 13, 2012, alleging
alleging fraudulent misrepresentation, fraudulent omission, and
breach of contract.
Denson moved for summary judgment on the
counterclaims and the court granted the motion only as to the
Denson now again moves for summary
Standard of Review
“The court shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
Fed. R. Civ.
P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
A fact is material only when its resolution affects the outcome of
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
A dispute is genuine if the evidence is such that it could
cause a reasonable jury to return a verdict for either party.
On a motion for summary judgment, the court views all evidence
and inferences in a light most favorable to the nonmoving party.
Id. at 255.
The nonmoving party, however, may not rest upon mere
denials or allegations in the pleadings but must set forth specific
facts sufficient to raise a genuine issue for trial.
U.S. at 324.
A party asserting that a genuine dispute exists - or
cannot exist - about a material fact must cite “particular parts of
materials in the record.”
Fed R. Civ. P. 56(c)(1)(A).
plaintiff cannot support each essential element of a claim, the
court must grant summary judgment because a complete failure of
proof regarding an essential element necessarily renders all other
Celotex, 477 U.S. at 322-23.
Misappropriation of Trade Secrets
Denson argues that LDI misappropriated its trade secrets in
violation of the Minnesota Uniform Trade Secrets Act (MUTSA).
prevail on this claim, Denson must show the existence of a trade
secret and improper acquisition, disclosure, or use of the trade
Minn. Stat. § 325C.01, subd. 3; Electro-Craft Corp. v.
Controlled Motion, Inc., 332 N.W.2d 890, 897 (Minn. 1983). A trade
secret is information that must (1) not be generally known or
readily ascertainable, (2) derive independent economic value from
its secrecy, and (3) be the subject of reasonable efforts to
maintain its secrecy.
Minn. Stat. § 325C.01, subd. 5; Electro-
Craft, 332 N.W.2d at 899.
Denson argues that LDI, via To, misappropriated the following
(1) “price lists by factory, customer, and product
type, price discounts, and shipping and invoice processes”; (2)
“financial information, including profit margins, direct costs and
expenses, salaries, payroll expenses, office rent, office overhead,
and other internal expenses”; (3) “quality control procedures,
“engineering drawings of the manufacturing process.”
Decl. Ex. 28, at 7-8.
Failure to Identify Alleged Trade Secrets
LDI argues that Denson’s claim fails because it has not
adequately identified its alleged trade secrets.
“To succeed on a
trade secret misappropriation claim, a plaintiff must first define
its alleged trade secrets with sufficient specificity.”
Recycling Co., LLC v. SKB Envtl., Inc., No. 14-4550, 2014 WL
6772908, at *10 (D. Minn. Dec. 1, 2014).
defendants’ actions were wrongful.”
“Without a proven trade
Electro-Craft, 332 N.W.2d at
LDI argues that Denson has not sufficiently described what
“engineering drawings of the manufacturing process” are. The court
First, Denson director David Weil admitted that even he did
not know what the term “engineering drawings of the manufacturing
Weil Dep. at 149:22-150:2.
Denson’s 30(b)(6) witness identified one product for which the
company created drawings, he did not provide an example of the
drawings or explain their content with any particularity.
Dep. at 80:15-25; see CHS Inc. v. PetroNet, LLC, No. 10-94, 2011 WL
1885465, at *8 (D. Minn. May 18, 2011) (finding no trade secret
where plaintiff “fail[ed] to explain what the allegedly secret
processes reflected in the documents are” and only gave “a few
specific examples of the documents it claims are trade secrets”).
Under these circumstances, the engineering drawings cannot form the
basis of a misappropriation claim.
LDI next argues that Denson fails to adequately specify the
financial information that it alleges to be a trade secret. Denson
claims that this category covers information “about our employment,
our staff levels, our salaries, our overhead, our expenses, ... our
viability, profitability of a business.”
Duffy Dep. at 47:11-17.
Such generalizations are insufficient to establish a trade secret
as a matter of law.
See Menzies Aviation (USA), Inc. v. Wilcox,
978 F. Supp. 2d 983, 994-95 (D. Minn. 2013) (denying temporary
employment matters and financial condition were confidential”); CHS
Inc., 2011 WL 1885465, at *7 (granting summary judgment where
plaintiff did nothing more than “list general areas of information
submitted recent annual financial statements in response to LDI’s
motion, see Krummen Decl. Exs. 70-73, it does not specify the
information included within those reports that should be considered
a trade secret.
See AMP, Inc. v. Fleischhacker, 823 F.2d 1199,
1203 (7th Cir. 1987) (finding insufficient “six single-spaced,
typewritten pages listing by general item and category hundreds of
pieces of ... internal information”); U.S. Gypsum Co. v. LaFarge N.
Am., Inc., 508 F. Supp. 2d 601, 636 (N.D. Ill. 2007) (stating
plaintiff cannot “point to an 11,000-page document covering many
diverse topics and assert that the entire document constitutes a
The court therefore cannot conclude that Denson’s
engineering drawings and financial information, as identified by
Denson, are trade secrets.
Remaining Trade Secrets
The court also finds that Denson has not established that the
remaining categories of information are trade secrets.4
Denson fails to show that it adopted any measures, let alone
reasonable ones, to maintain the confidentiality of any of its
alleged trade secrets.
Denson provides no evidence that its
To establish that its information is entitled to trade
secret status, Denson relies heavily on a declaration submitted by
its 30(b)(6) witness.
Many of the allegations made in the
declaration are either conclusory or contradict the witness’s
See, e.g., Duffy Decl. ¶ 27 (“These
engineering drawings were not generally known or reasonably
ascertainable and provided Denson with a competitive advantage.”);
id. ¶ 37 (“Denson had a policy against disclosing this information
to outside sources.”). As a result, the court will not consider
these statements. See Ballard v. Heineman, 548 F.3d 1132, 1136
(8th Cir. 2008) (“[C]onclusory affidavits devoid of specific
factual allegations rebutting the moving party’s evidence cannot
defeat a summary judgment motion.”); City of St. Joseph v. Sw. Bell
Tel., 439 F.3d 475-76 (8th Cir. 2006) (disregarding affidavit that
contradicts prior deposition testimony without explanation).
employees signed confidentiality or non-disclosure agreements, that
Duffy Dep. at 128:3-129:2; Weil Dep. at 176:18-21,
Instead, Denson simply argues that the importance
of confidentiality is widely understood among Hong Kong businesses.
Weil Dep. at 180:17-181:21.
This is insufficient as a matter of
See Nw. Airlines v. Am. Airlines, 853 F. Supp. 1110, 1115 (D.
Minn. 1994) (“Mere intention to keep material confidential is not
enough to confer trade secret protection.”); Electro-Craft, 332
N.W.2d at 901-09 (finding no violation where plaintiff did not
Moreover, Denson has not adequately shown that its wholesale
price list derived economic value from its secrecy.
this element, the list “must provide a competitive advantage” to
Denson. Wyeth v. Natural Biologics, No. 98-2469, 2003 WL 22282371,
at *19 (D. Minn. Oct. 2, 2003).
Denson argues that its wholesale
prices were valuable because the price list that To provided to LDI
was allegedly derived from Denson’s prices.
Even if this is true,
however, the record shows that LDI engaged in its own price
negotiations with manufacturers long before To provided his list,
and compared its prices against those that Denson offered LDI.
LaFontaine Dep. at 39:1-40:24.
Indeed, LDI conducted a review of
To’s list and noted that his proposed savings were close to those
that LDI had obtained from negotiating directly with the Nanjing
and EKO factories.
See id. at 43:4-6, Krummen Decl. Ex. 56.
LDI next argues that Denson’s quality control procedures and
training processes were readily ascertainable.
The court agrees.
Although Denson’s inspectors made detailed observations regarding
each product, Denson used a procedure known as “MTD-STD-105E S2 AQL
1.0 & 4.0,” a military standard that is readily available on the
Internet. See Weil Dep. at 47:5-25, 51:20-52:16; DesLauriers Decl.
Exs. 31, 32; Krummen Decl. Exs. 74-77.
Thus, there is no credible
dispute that each of Denson’s alleged trade secrets fail to meet at
least one of the required elements under Minnesota law.
result, summary judgment is warranted on Denson’s misappropriation
III. LDI’s Fraud Counterclaims
LDI’s first counterclaim alleges that Denson fraudulently
misrepresented the manufacturer of certain hand truck shipments,
which directly caused LDI’s liability to customs authorities.
specifically argues that Denson lied when it claimed that certain
hand trucks shipped between 2005 and 2008 were manufactured by
Taifa, which triggered lower antidumping duties than otherwise
Because the court grants summary judgment on the
misappropriation claim, summary judgment is also warranted on the
claim for willful and malicious misappropriation.
would have applied. To establish fraudulent misrepresentation, LDI
must demonstrate that
(1) there was a false representation by a
party of a past or existing material fact
susceptible of knowledge; (2) made with
knowledge of the falsity of the representation
or made as of the party’s own knowledge
without knowing whether it was true or false;
(3) with the intention to induce another to
act in reliance thereon; (4) that the
representation caused the other party to act
in reliance thereon; and (5) that the party
suffer[ed] pecuniary damage as a result of the
Hoyt Props., Inc. v. Prod. Res. Grp., LLC, 736 N.W.2d 313, 318
As an initial matter, the court finds that the shipments made
between 2005 to 2007 cannot form the basis of a fraud claim,
because there is no evidence in the record establishing that hand
trucks shipped during that period were not manufactured by Taifa.
certificates showing that Taifa sold the hand trucks to Denson.
See, e.g., Handler Decl. Ex. 36, at DENSON 553.
LDI notes that
shipping orders for every purchase from 2005 to 2008 state that all
hand trucks were shipped from the port of Huangpu, which is more
than 1,000 miles from Taifa.
See, e.g., Second DesLauriers Decl.
Exs. 7 at DENSON 25888, 12 at DENSON 22646.
As explained by
Denson, however, Taifa often accepted Valley Craft’s smaller orders
Development, a distributor located near Huangpu.
Decl. ¶¶ 6, 20-21; Duffy Dep. at 148:3-15, 149:21-24.
location of the shipping port does not necessarily preclude a
Further, the fact that Denson regularly relied on EKO Development
between 2005 and 2008 does not credibly suggest that the same
manufacturer produced all of the hand trucks at issue.
LDI also alleges that Customs determined the hand trucks were
not produced by Taifa.
The court disagrees.
In its Notice of
Penalty, Customs alleged that LDI failed to state the correct
antidumping codes on some of the shipments.
at LDI 2923.
There was no determination as to where the hand
trucks were manufactured.
Handler Decl. Ex. 24,
Indeed, LDI admits that the result of
inconclusive, and it settled the matter before Customs could make
any final determination.
Id. Ex. 26, at LDI 2915.
The only actual
evidence in the record suggests that the hand trucks ordered
between 2005 and 2007 were in fact manufactured by Taifa.
result, those orders cannot form the basis of LDI’s fraud claim.
The court also finds that Denson did not make fraudulent
statements regarding who manufactured the hand trucks delivered in
Denson did not state that the hand trucks were manufactured
by Taifa on its January 2008 invoice, nor did it claim that they
were subject to a lower antidumping duty rate.
Handler Decl. Ex.
manufactured by a separate factory in south China “who could not
add the clause anymore.”
Id. Ex. 7.
Despite this, LDI asked
Denson to place the clause on all future orders, and Denson
Thereafter, all invoices included a
clause but did not indicate Taifa as the manufacturer.
When LDI later asked whether specific hand trucks were
subject to the higher duty rate, To confirmed that they were, but
that “there should be no problem” because they were manufactured by
a “south China” factory “that is not famous (compare[d] with
Id. Ex. 15, at DENSON 7655.
Because Denson did not
represent to LDI that any of the hand trucks delivered in 2008 were
manufactured by Taifa or subject to the lower antidumping duty
rate, LDI cannot now claim to have been misled in that regard.
LDI’s fraudulent omission claim also fails because there is no
manufacturer of the hand trucks shipped in 2008.
January 2008 invoice did not state that the hand trucks were
subject to the higher antidumping duty, nor did it state that they
were manufactured by Taifa. There is simply no evidence to support
the contention that Denson concealed the manufacturing location.
As a result, summary judgment is warranted on the fraudulent
Accordingly, based on the above, IT IS HEREBY ORDERED that:
Denson’s motion for summary judgment [ECF No. 124] is
LDI’s motion for summary judgment [ECF No. 127] is
Denson’s motion to exclude [ECF No. 146] is denied as
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: September 1, 2015
s/David S. Doty
David S. Doty, Judge
United States District Court
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