US Polymers-Accurez, LLC v. Kane International Corporation et al

Filing 82

MEMORANDUM AND ORDER - IT IS HEREBY ORDERED that Defendants Kane International Corp., Parker Ingredients, LLC, Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 34 ), Defendant Maclan Indus tries, Inc.'s Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 38 ), Defendant Matthew Grodd's Motion to Dismiss Pursuant to F.R.C.P. 12(B)(6) (ECF No. 48 ), Plaintiff/Counter-Defendant US Polymers-Accurez, LLC's Motio n to Dismiss Kane's Counterclaim (ECF No. 53 ) are DENIED without prejudice. IT IS FURTHER ORDERED that Third-Party Defendants' Motion to Dismiss ThirdParty Complaint (ECF No. 55) is GRANTED. Kane's Third-Party Complaint against Mey ers and Agliata is DISMISSED. Kane is GRANTED until September 26, 2018 to file an amended pleading against Meyers and Agliata. IT IS FINALLY ORDERED that Defendants Kane International Corporation, Parker Ingredients, LLC, Thomas Kohlbert, & Jeremy Eisele's Unopposed Request for a Hearing on Pending Motions to Dismiss (ECF No. 75 ) is DENIED as moot. ( Amended/Supplemental Pleadings due by 9/26/2018.) Signed by District Judge Ronnie L. White on 9/19/18. (KJS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
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US POL YMERS-ACCUREZ, LLC,
Plaintiff,

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V.

KANE INTERNATIONAL CORP., et al,

Defendants.

No. 4:17-CV-2371 RLW

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)
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)

MEMORANDUM AND ORDER

This matter is before the court on Defendants Kane International Corp., Parker
Ingredients, LLC, Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R.
Civ. P. 12(b)(6) (ECF No. 34), Defendant Maclan Industries, Inc.'s Motion to Dismiss Pursuant
to Fed. R. Civ. P. 12(b)(6) (ECF No. 38), Defendant Matthew Grodd's Motion to Dismiss
Pursuant to F.R.C.P. 12(B)(6) (ECF No. 48), Plaintiff/Counter-Defendant US Polymers-Accurez,
LLC's Motion to Dismiss Kane's Counterclaim (ECF No. 53), and Third-Party Defendants'
Motion to Dismiss Third-Party Complaint (ECF No. 55). These matters are fully briefed and
ready for disposition.
BACKGROUND 1

Kane International Corporation ("Kane") supplies urethane ink resms to the ink
manufacturing industry.
1

US Polymers-Accurez, LLC ("USPA") and Kane had an ongoing

In deciding a motion to dismiss under Rule 12(b)( 6), a court assumes all facts in the complaint
(or counterclaim) to be true and construes all reasonable inferences most favorably to the
complainant (or counterclaim). US. ex rel. Raynor v. Nat'! Rural Utilities Co-op. Fin., Corp.,
690 F.3d 951, 955 (8th Cir. 2012); Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008).

business relationship, entering into at least two different contractual arrangements. The Secrecy
Agreement purports to deem as "trade secrets" all information provided by Kane and USP A to
each other, subject to three exceptions. After entering into the Secrecy Agreement, USP A began
producing urethane ink resins that it sold only to Kane for use by Kane's customers.
By 2009, the parties' business relationship had grown to such a level that USPA was
manufacturing the majority of Kane's urethane product line. On January 16, 2009, the parties
entered into a Supply Agreement, under which the parties "reaffirmed" the Secrecy Agreement,
and USPA agreed to continue manufacturing Kane's proprietary urethane ink resins.
In the Complaint, USP A alleges long-running and wide-ranging illegal conduct,
occurring over several states and multiple years. USP A brings this action against the Defendants
regarding their conspiracy (the "Kane Conspiracy"), led by ringleaders Thomas Kohlberg and his
grandson Matthew Grodd, on behalf of Kane International Corporation ("Kane"), Maclan
Industries ("Maclan"), and Parker Ingredients, LLC ("Parker Ingredients"), "to misappropriate
USP A's trade secrets and other confidential and proprietary information, deceive end user
customers in the ink resin market, tortuously interfere with USP A's contracts with its employees,
and induce those employees to breach their fiduciary duties to USPA." (Complaint, ECF No. 1,
~1). USPA alleges claims under the Defend Trade Secrets Act ("DTSA"), 2 Missouri Uniform

2

The DTSA defines
the term "trade secret" means all forms and types of financial, business, scientific,
technical, economic, or engineering information, including patterns, plans,
compilations, program devices, formulas, designs, prototypes, methods,
techniques, processes, procedures, programs, or codes, whether tangible or
intangible, and whether or how stored, compiled, or memorialized physically,
electronically, graphically, photographically, or in writing if(A) the owner thereof has taken reasonable measures to keep such
information secret; and
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Trade Secrets Act ("MUTSA"), New York trade secrets law and asserts other common law
claims. In turn, Kane brought claims against USPA and USPA's managing members Maurice S.
Meyers ("Meyers") and Nick J. Agliata, Jr. ("Agliata") for breach of contract, misappropriation
of trade secrets, tortious interference with business relationships, and indemnification. (ECF No.
30).
STANDARD OF REVIEW

To survive a motion to dismiss, a complaint "must contain sufficient factual matter,
accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556
U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp., v.

Twombly, 550 U.S 544, 570 (2007). A "formulaic recitation of the elements of a cause of
action" will not suffice. Twombly, 550 U.S. at 555. "The plausibility standard is not akin to a
'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted
unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

DISCUSSION
I.

Defendants Kane International Corp., Parker Ingredients, LLC, Thomas
Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R. Civ. P.
12(b)(6) (ECF No. 34) and Defendant Maclan Industries, Inc.'s Motion to
Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (ECF No. 38) 3
A. Counts VII-X, XVI, XVII, and XX-XXVII

(B) the information derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable through proper means by, another person who can obtain
economic value from the disclosure or use of the information.
18 U.S.C. §1839(3).
Defendant Madan Industries, Inc. joined Defendants Kane International, Parker Ingredients,
Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss and accompanying memorandum in
support, without providing any additional argument. Therefore, the Court does not address
Maclan Industries, Inc.'s Motion to Dismiss (ECF No. 38) separately.

3

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1. MUTSA Preemption

This district has outlined what is required for preemption under MUTSA:
The MUTSA "displace[s] conflicting tort, restitutionary, and other laws
providing civil remedies for misappropriation of a trade secret." Mo.Rev.Stat. §
417.463 .1. Federal courts in Missouri have interpreted this provision to preempt
"civil claim[ s] that are derivative of a claim of misappropriation of trade secrets."
Bancorp Servs., L.L.C. v. Hartford Life Ins. Co., No. 4:00CV70 CEJ, 2002 WL
32727076, at *4 (E.D.Mo.Feb.25, 2002). Common-law claims are preempted as
derivative "if they are based on facts related to the misappropriation of trade
secrets claim." Reliant Care Mgmt., Co. v. Health Sys., 2011 WL 4369371 at *34 (internal citations omitted); see also Bancorp Servs., L.L. C., 2002 WL
32727076, at *4; and Hallmark Cards v. Monitor Clipper Partners, 757
F.Supp.2d 904, 917 (W.D.Mo.2010)). "The crucial question is whether 'the
claims are no more than a restatement of the same operative facts' that formed the
basis of the plaintiffs statutory claim for trade secret appropriation." Secure
Energy, Inc. v. Coal Synthetics, LLC, No. 4:08CV1719 JCH, 2010 WL 1691454,
at *2 (E.D. Mo. Apr. 27, 2010) (internal citations omitted). In determining
whether to find a claim preempted under MUTSA, courts must "look beyond the
label of the claims to the facts being asserted in support of the claims." Id. at * 1
(internal quotations omitted). However, "[f]or preemption to be triggered, the
property that has been stolen/misappropriated must be a trade secret: otherwise,
the Trade Secret Act has no application." Hallmark Cards, 757 F.Supp.2d at 917.
Put another way, MUTSA will not preempt a claim if the information at issue
does not rise to the level of a statutorily-defined trade secret.

Level One Techs., Inc. v. Penske Truck Leasing Co., L.P., No. 4:14 CV 1305 RWS, 2015 WL
1286960, at *4 (E.D. Mo. Mar. 20, 2015).
Defendants claim that USPA's allegations based upon the MUTSA are barred by the
statutory provisions of Missouri law. The Court holds that it is premature to dismiss USPA's
claims in Counts VII-X, XVI, XVII, and XX-XXVII based upon pre-emption. The Court has not
determined as a matter of law that the underlying information qualifies as a trade secret.

Until

that time, it would be premature to find that USPA's claims pre-empted by the MUTSA.

Hallmark Cards, Inc. v. Monitor Clipper Partners, LLC, 757 F. Supp. 2d 904, 917 (W.D. Mo.
2010) ("For preemption to be triggered, the property that has been stolen/misappropriated must

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be a trade secret: otherwise, the Trade Secret Act has no application."). The Court denies the
Motion to Dismiss on this basis.
2. Counts XVI and XVII
"A claim for tortious interference with a contract or business expectancy requires proof
of each of the following: (1) a contract or a valid business expectancy; (2) defendant's knowledge
of the contract or relationship; (3) intentional interference by the defendant inducing or causing a
breach of the contract or relationship; (4) absence of justification; and (5) damages resulting
from defendant's conduct." Community Title Co. v. Roosevelt Fed. Sav. & Loan Ass'n, 796
S.W.2d 369, 372 (Mo. bane 1990); Graham v. Hubbs Mach. & Mfg., Inc., 92 F. Supp. 3d 935,
943 (E.D. Mo. 2015); see also Glob. Packaging Servs., LLC v. Glob. Printing & Packaging, 248
F. Supp. 3d 487, 494 (S.D.N.Y. 2017) ("To state a claim for tortious interference with business
relations, a plaintiff must adequately allege that: "(1) the plaintiff had business relations with a
third party; (2) the defendant interfered with those business relations; (3) the defendant acted for
a wrongful purpose or used dishonest, unfair, or improper means; and (4) the defendant's acts
injured the relationship.").
Defendants assert that Counts XVI (tortious interference with Eisele Agreement) and
XVII (tortious interference with Gaal Agreement)4 are preempted because the allegations
contained therein "focus on Defendants' intent to interfere with the Eisele and Gaal Agreements

4

Around 2005, USPA was purchased by its current owners and is managed by Meyers and
Agliata. Around the time of the purchase of USPA, Gaal (USP A's long-time Technical Director
and lead chemist) executed a Confidentiality, Intellectual Property and Non-Solicitation
Agreement with USPA (the "Gaal Agreement"). (Complaint, ECF No. 1, ~29). Similarly, Eisele
worked for USP A as a technical specialist and bench chemist. "At all relevant times, Eisele was
restricted on his use of confidential information, physically and by policy, and was otherwise
subject to a Confidentiality, Intellectual Property and Non-Solicitation Agreement ('the Eisele
Agreement'), which included limitations on the use of Confidential Information." (Complaint,
~41).

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to accomplish trade secret misappropriation" and is derivative of the MUTSA claim made in
Count VII. (ECF No. 47 at 8).
The Court denies the Motion to Dismiss Counts XVI and XVII because the Court holds
that USPA's claim extends beyond the misappropriation of trade secrets and alleges tortious
interference with the Eisele and Gaal Agreements through inducement of disclosure of
confidential information and co-opting USP A employees to work for Kane to compete with
USP A. (Complaint,

~219,

232). USP A's claim for tortious interference with contracts "may be

based upon 'additional facts aside from the alleged misappropriation of trade secrets.'" Lasco

Foods, Inc. v. Hall & Shaw Sales, Mktg., & Consulting, LLC, No. 4:08CV01683 JCH, 2009 WL
3523986, at *6 (E.D. Mo. Oct. 26, 2009) (quoting Trinity Hospice, Inc. v. Miles, No.
4:06CV1674, 2007 U.S. Dist. LEXIS 18805, at *8 (E.D. Mo. Mar. 16, 2007)). USPA has not
limited its claim only to interfering with its business expectancies through utilization of trade
secrets. At this stage of the litigation, this Court denies Defendants' motion to dismiss Counts
XVI and XVII.
3. Count XX (Breach of Eisele's Duty of Loyalty)

In Count XX, USP A alleges that Defendant Eisele "breached his duty of loyalty to
USP A, while employee by USP A, by engaging in direct competition with USP A, on behalf of
Kane, as part of the Kane Conspiracy, Kohlberg Trade Secret Theft and other conduct."
(Complaint,

~254).

Defendants assert that Defendant Eisele's alleged breach of loyalty in Count

XX is based upon trade secret misappropriation and is derivative of the MUTSA claim made in
Count VII.
At this stage of the litigation, the Court cannot hold that Count XX is derivative of the
MUTSA claim made in Count VII.

The Court notes that the Complaint contains several

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allegations that Eisele breached his duty of loyalty by performing actions other than
misappropriating trade secrets, such using a Kane business card and email and representing to
end user ink resin customers that he was a Kane employee. Therefore, the Court denies the
motion to dismiss Count XX based upon preemption. See Porters Bldg. Centers, Inc. v. Sprint
Lumber, No. 16-06055-CV-SJ-ODS, 2017 WL 4413288, at *6 (W.D. Mo. Oct. 2, 2017)
("Plaintiffs tort claims are more expansive. Specifically, Plaintiffs tort claims are based, in part,
on Defendants' alleged misuse, misappropriation, and/or destruction of confidential information
that does not rise to the level of statutorily-defined trade secret. Such claims are not preempted
by the MUTSA"").
4. Counts XXI-XXVI (Contributory Liability Breaches)
Counts XXI-XXIII are based upon accomplice and conspiracy liability theories of breach
of loyalty by Eisele and Gaal. Counts XXIV-XXVI are contributory liability theories based
upon Gaal' s breach of his heightened fiduciary duties to USP A. Defendants assert that "[ eJach
of Counts XXI-XXIII is also based on operative facts alleged in the trade secret misappropriation
claim made in Count VII." (ECF No. 47 at 10). As a result, Defendants assert that Counts XXIXXIII are preempted as derivative of Count VIL Likewise, Defendants aver that Counts XXIVXXVI are preempted because the breach of fiduciary duty is derivative of Count VIL
Defendants maintain that USPA's claim is based on Defendants' alleged trade secret
At the motion to dismiss stage of the litigation, the Court holds that these claims cannot
be dismissed as derivative of Count VII.

USPA's allegations extend beyond trade secret

misappropriation and include actions such as participating in telephone calls, providing technical
advice, and sending message on Kane emails and letterhead. (Complaint,
the Court denies the motion to dismiss Counts XXI-XXVL

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~65(e)).

Therefore,

5. Count XXVII (Unjust Enrichment)
In Count XXVII, USP A alleges a claim of unjust enrichment, asserting that Defendants
obtained certain "Benefits" through their alleged "numerous acts." (Complaint, ifif287-290).
Defendants maintain the only identified act is the "usurpation of the USPA Trade Secrets."
(Complaint, if288). As a result, Defendants assert that the unjust enrichment allegations of Count
XXVII depend entirely on the misappropriation of trade secrets, and Count XXVII is preempted.
The Court holds that USP A's unjust enrichment claim is more expansive than just the
usurpation of the USPA Trade Secrets. Rather, the unjust enrichment claim incorporates all
factual allegations (Complaint, if287), including the conduct of the "Kane Conspiracy"
(Complaint, if288). Thus, the unjust enrichment claim allegations include numerous acts beyond
misappropriation of trade secrets, and the Court denies the motion to dismiss Count XXVII.
6. Count XXVIII (Civil Conspiracy)
In Missouri, a civil conspiracy is "an agreement or understanding between persons to do
an unlawful act, or to use unlawful means to do a lawful act." Gibson v. Brewer, 952 S.W.2d
239, 245 (Mo.1997). "To make a prima facie case of civil conspiracy, one must show: (1) two or
more persons; (2) with an unlawful objective; (3) a meeting of the minds; (4) the commission of
at least one act in furtherance of the conspiracy; and (5) resulting damage to the plaintiff."
Insituform Techs., Inc. v. Reynolds, Inc., 398 F. Supp. 2d 1058, 1065 (E.D. Mo. 2005) (quoting
Oak Bluff Partners, Inc. v. Meyer, 3 S.W.3d 777, 781 (Mo.1999) (en bane) (citation omitted)). A
plaintiff must provide factual support of a meeting of the minds and the act in furtherance of the
conspiracy. Croskey v. Cty of St. Louis, No. 4:14CV00867 ERW, 2014 WL 3956617 at *5 (E.D.
Mo. Aug. 13, 2014); Blair v. City of Hannibal, 179 F. Supp. 3d 901, 915 (E.D. Mo. 2016).

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In Count XXVIII, USP A alleges the Defendants plotted together for the purpose of:
(1) injury and destruction of USPA's business; (2) misappropriation of the
USPA Trade Secrets; (3) breach of the 2014 Confidentiality Agreement; (4)
failure to pay $307,870.62 in outstanding net receivables; (5) breach of the
Gaal Agreement and the Eisele Agreement; (6) breach of Gaal's and Eisele's
duty of loyalty to USPA; and (7) breach of Gaal's fiduciary duties to USPA.

(Complaint,

~292).

Defendants argue that all but the third purpose is based upon the same

operative facts as Count VII and related to trade secret misappropriation. Defendants contend
that the civil conspiracy allegations of Count XXVIII depend "almost entirely on the
misappropriation of trade secrets and thus derive from that cause of action." (ECF No. 47 at 13).
Defendants implore the Court to find Count XXVIII is preempted and dismiss it.
The Court holds that Count XXVIII is not preempted by the MUTSA.

The only

enumerated act from paragraph 292 of the Complaint that is based upon trade secret is the second
act: misappropriation of the USPA Trade Secrets. The remaining acts supporting USP A's civil
conspiracy claim do not relate exclusively to trade secret misappropriation, and the motion to
dismiss Count XXVIII is denied.
B. Counts XI, XII, XIII and XIV

Defendants maintain that USP A cannot state a claim for trade secret misappropriation
(Counts XI-XIV) under New York law because USPA's claims arise from contracts governed by
Missouri law. The Complaint, however, alleges trade secret misappropriation occurred in New
York, Missouri, and elsewhere. For example, Kane, Parker, and Kohlberg are located in New
York and they allegedly masterminded their conspiracy in New York. The Court holds that this
choice of law analysis is premature until the Court resolves the existence of any trade secrets and
when, where, and how such trade secrets were misappropriated. The Court denies the motion to
dismiss Counts XI, XII, XIII, and XIV as premature.

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C. All Counts against Kohlberg

Defendants assert that the claims against Kohlberg should be dismissed because he
cannot be found personally liable for the conduct alleged herein. (ECF No. 47 at 20 (citing
Grothe v. Helterbrand, 946 S.W.2d 301, 304 (Mo. Ct. App. 1997) (citing Boyd v. Wimes, 664
S.W.2d 596, 598[1] (Mo.App.1984) ("In Missouri, merely holding a corporate office will not
subject one to personal liability for the misdeeds of the corporation.").
The Court holds that the Complaint sufficiently alleges a claim against Kohlberg as an
individual. The Complaint alleges that Kohl berg is an officer of Kane and serves as its President
and CEO.

(Complaint, ifif3, 43).

Kohlberg can be liable if he had actual or constructive

knowledge of the tortious corporate conduct and participated in the wrong. See Grothe v.
Helterbrand, 946 S.W.2d 301, 304 (Mo. Ct. App. 1997) (citing Lynch v. Blanke Baer & Bowey
Krimko, Inc., 901 S.W.2d 147, 153[15] (Mo.App.1995); Boyd, 664 S.W.2d at 598[1];
Osterberger v. Hites Constr. Co., 599 S.W.2d 221, 229[20] (Mo.App.1980) ("corporate officers
may be held individually liable for tortious corporate conduct if they have actual or constructive
knowledge of, and participated in, an actionable wrong."). The Complaint alleges, "[a]s Kane's
President, Kohlberg is and has been ultimately responsible for all aspects of Kane's business.
Kohlberg was also the mastermind behind the Kane Conspiracy."

(Complaint, if43).

The

Complaint alleges Kohl berg performed tortious conduct and, contrary to Defendants' assertions,
he cannot be shielded from liability simply because he served as a corporate officer. See State ex
rel. Doe Run Res. Corp. v. Neill, 128 S.W.3d 502, 505 (Mo. 2004) (quoting Curlee v.
Donaldson, 233 S.W.2d 746, 754 (Mo. App. 1950) ("An individual is not protected from liability
simply because the acts constituting the tort 'were done in the scope and course, and pertained to,

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the duties of his employment."'). Because the Complaint alleges tortious acts performed by
Kohlberg individually, the Court denies the motion to dismiss as to Kohlberg.
II.

Defendant Matthew Grodd's Motion to Dismiss Pursuant to F.R.C.P.
12(B)(6) (ECF No. 48) 5

The Complaint purports to allege a claim against Grodd for civil conspiracy. Grodd
asserts that he cannot be found personally liable. Grodd asserts that USPA's claim against him
fails because an employee cannot conspire with his employer. (ECF No. 48-1 at 3-5); see Metts
v. Clark Oil & Ref Corp., 618 S.W.2d 698, 702 (Mo. Ct. App. 1981) ("the general rule holds

that a corporation cannot conspire with its own employees"). 6 Grodd states that the Complaint
only alleges that he conspired for the benefit of his employer (Kane), not for any personal
benefit. Likewise, Grodd contends that the Complaint does not allege a meeting of the minds
between any of the other Defendants and Grodd (or Kohlberg, Kane and Parker) to commit an
unlawful act to the detriment ofUSPA. (ECF No. 65 at 4). Grodd maintains that the conclusory
allegations that all Defendants conspired with each other are insufficient. (ECF No. 65 at 4).
The Court holds that USP A sufficiently alleges a claim against Grodd for civil
conspuacy.

The Court holds that USPA's claims against Grodd are not barred by the intra-

corporate conspiracy doctrine because USP A has alleged that Grodd had a personal stake in the
conspiracy. The Complaint alleges Grodd wanted his new company, Star Glaze to succeed. See
Insituform Techs., Inc. v. Reynolds, Inc., 398 F. Supp. 2d 1058, 1065 (E.D. Mo. 2005) (citing
Mika v. Cent. Bank of Kansas City, 112 S.W.3d 82, 94 (Mo. Ct. App. 2003)) ("a corporation

5

Grodd joins in the previously filed motions to dismiss filed by co-defendants Kane
International, Parker Ingredients, Thomas Kohlberg, Jeremy Eisele, and Maclan Industries and
their accompanying memoranda in support thereof. The Court incorporates by reference its
holding denying these motions to dismiss and addresses only the arguments specific to Grodd.
6
This rule is generally referred to as the "intra-corporate conspiracy doctrine." (ECF No. 58 at
3).
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cannot conspire with one of its own employees unless that employee has an independent personal
stake in achieving the object of the conspiracy"). The Complaint clearly states that Star Glaze
benefitted from the conspiracy, particularly though misappropriating USPA's trade secrets.
(Complaint, ififl, 3, 12, 65). Further, USPA alleged that Grodd conspired with entities outside of
the employer/employee relationship, which also bars application of the intra-corporate
conspiracy doctrine. That is, Grodd conspired with Maclan and Eisele, who are not agents of
Kane, in addition to Kane, Parker and Kohlberg. Finally, the Court holds that the Complaint
sufficiently alleges a meeting of the minds between Defendants and Grodd. The Complaint
alleges that the parties worked together to misappropriate USP A's trade secrets. (Complaint, ifif 1,
3, 12, 65). At this stage of the litigation, the Court holds these allegations are sufficient to allege
meeting of the minds for purposes of civil conspiracy. Thus, USPA alleges a claim for civil
conspiracy against Grodd, and this Court denies the motion to dismiss on this basis.
III.

Plaintiff/Counter-Defendant US Polymers-Accurez, LLC's Motion to Dismiss
Kane's Counterclaim (ECF No. 53)

Plaintiff/Counter-Defendant USPA filed this Motion to Dismiss Defendant/CounterPlaintiff/Third-Party Plaintiff Kane's Counterclaim and Third-Party Complaint (ECF No. 30). In
the Counterclaim, Kane alleges breach of the Secrecy Agreement and Supply Agreement (Count
I), DTSA violations (Count II), misappropriation under New York common trade secret law
(Count III), tortious interference with business relationships (Count IV), and for indemnification
(Count V).
A. Supply Agreement (Counts I and IV)

USP A argues that the Supply Agreement is unenforceable for two reasons: "(1) it wholly
lacks any consideration, including because the only obligations it imposes consist of pre-existing

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duties from the Secrecy Agreement; and (2) it 1s so vague and ambiguous as to be
unenforceable." (ECF No. 54 at 6).
The Supply Agreement reaffirms the Secrecy Agreement. USP A argues that the Supply
Agreement can be separated into three categories.

First, the Supply Agreement states that

"[b]oth companies operate and do business under a mutual NDA dated November 19, 1997,
Kane and USPA will not disclose the supply relationship to Kane's customers ... [Further,]
USPA agrees not to produce any of Kane's proprietary formulas for any purpose other than for
use by Kane." USP A asserts that no consideration flowed from Kane or to USP A to support the
benefit in the Supply Agreement to Kane. Second, Kane and USP A agreed to "work together" to
maintain "adequate capacity" and "determine some level of rapid response capability to be
agreed upon by both parties," while Kane "may perform an annual quality audit."

USPA

maintains that these are vague and unenforceable agreements to agree. See United States v.
518. 77 Acres of Land, More or Less, Situate in Henry Cty., State of Mo:., 545 F. Supp. 1246,
1248 (W.D. Mo. 1982) ("because the essential terms of the option are expressly left open for
future negotiation, the clause creates merely an agreement to agree and is unenforceable under
Missouri law"). Third, the Supply Agreement states that "Kane and USP A agree further not to
compete with each other for a period of three (3) years after the termination of this agreement as
agreed to in the current mutual NDA [the Secrecy Agreement] dated November 19, 1997." (ECF
No. 30-2). USPA asserts that this provision merely reaffirmed the Secrecy Agreement's mutual
non-disclosure provision, which was a pre-existing legal duty. Accordingly, USPA maintains
that said pre-existing legal duty cannot be adequate consideration upon which a valid contract
could be based. (ECF No. 54 at 8).

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The Court holds that Kane has provided sufficient factual support for its contract claims
under the Supply Agreement. The Court holds that the Supply Agreement included a mutual
agreement to compete with each other for a period of three years after the termination of the
Supply Agreement. That is, USP A would not compete with Kane in the urethane ink resin
market and Kane would not compete with USPA on USPA's other lines of businesses. "It has
been stated over and over again that consideration sufficient to support a simple contract may
consist of a detriment to the promisee or a benefit to the promisor, and it is sufficient if either
exists." Wells v. Hartford Accident and Indem. Co., 459 S.W.2d 253, 260 [1 O] (Mo. bane 1970).
"This consideration may consist of some right, interest, profit, or benefit accruing to one party,
or some forbearance, loss, or responsibility given, suffered, or undertaken by the other party."
Carter v. St. John's Reg'! Med. Ctr., 88 S.W.3d 1, 10 (Mo. Ct. App. 2002) (citing Perbal v.
Dazor Mfg. Corp., 436 S.W.2d 677, 697[55] (Mo. 1968)). The Court holds that this mutual
forbearance from competing against one another after termination of the Supply Agreement
constitutes adequate consideration to support the enforceability of the Supply Agreement. In
addition the Court holds that, at this stage of the litigation, the terms of the Supply Agreement
are sufficiently definite to survive a motion to dismiss. The Court notes that the parties followed
the Supply Agreement for over seven years. See Branson Land Co. v. Guilliams, 926 S.W.2d
524, 526 (Mo. Ct. App. 1996) ("Even if a contract is ambiguous, it should not be held void for
uncertainty if there is a possibility of giving meaning to the agreement."). Therefore, the Court
denies USPA's motion to dismiss Count I and IV of the Counterclaim.
B. Trade Secrets (Counts I, II and III)

As previously stated, Kane alleges breach of the Secrecy Agreement and Supply
Agreement (Count I), DTSA violations (Count 11), misappropriation under New York common

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trade secret law (Count III) in the Counterclaim. USPA argues that these counts should be
dismissed because Kane simply recited the definition of trade secret under New York law and
DTSA without providing sufficient supporting facts.

(ECF No. 54 at 9 (comparing

Counterclaim, if60 ("Kane's trade secret information compnses formulas, patterns, or
compilations of information used in Kane's business."); Sofie!, Inc. v. Dragon Med. & Sci.

Commc'ns, Inc., 118 F.3d 955, 968 (2d Cir. 1997) ("Under [the New York trade secret]
definition, a trade secret is 'any formula, pattern, device or compilation of information which is
used in one's business, and which gives him an opportunity to obtain an advantage over
competitors who do not know or use it."'). By simply reciting the statutory language, USP A
maintains that Kane does not satisfy the pleading standard generally or with particularity, and
should be dismissed.
First, the Court finds that Kane sufficiently pleaded its trade secret claims. Kane alleged
that its trade secrets are formulas and manufacturing protocols and processes, as contemplated 18
U.S.C. § 1839(3). (Counterclaim, ifif59, 60). Kane also alleges that it took reasonable steps to
maintain the confidentiality of its trade secret information. (Counterclaim, ifif61, 62). Finally,
Kane alleged that it expended significant effort and expense in acquiring the trade secret
information and developing the formulas and manufacturing protocols and processes, that these
formulas and manufacturing process and protocols are not easily duplicated and could not have
been developed by USP A without Kane's trade secret information, and that the trade secret
information has independent economic value. (Counterclaim, ifif64-66). The Court holds that
Kane's allegations adequately state a claim for trade secrets at this stage of the litigation. See

Medtech Prod. Inc. v. Ranir, LLC, 596 F. Supp. 2d 778, 789 (S.D.N.Y. 2008) ("specificity as to
the precise trade secrets misappropriated is not required" to defeat a motion to dismiss).

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C. Tortious Interference with Business Relationships

In its motion to dismiss Kane's tortious interference counterclaim, USP A reiterates that
the Supply Agreement is unenforceable and, therefore, no contract or asserted "non-competition
clause" exists with which USPA (or its members) can interfere. (ECF No. 54 at 12). Absent any
purported non-competition provision of the Supply Agreement, USP A maintains that its
competitive conduct is "wholly justified and cannot support a claim for tortious interference with
business relationships." (ECF NO. 54 at 13). In addition, USPA asserts that Kane's allegations
of false statements are all "upon information and belief' and are insufficient under the pleading
standards of Twombly and Iqbal. (ECF No. 54 at 13-14) (citing Counterclaim, ifif45-46) (Kane
alleges "upon information and belief' USPA "informed Kane's customers that USPA was the
owner of the formulas and protocols ... and Kane had no right to those formulas.").
The Court holds that Kane has adequately alleged a counterclaim for tortious
interference. Kane states that USP A's alleged breach of the Supply Agreement, wherein USP A
expressly agreed not to disclose the supply relationship to Kane's customers, forms the basis of
its tortious interference claim. (ECF No. 71 at 15-16). Kane alleges that USPA interfered with
Kane's relationship with its customers by misappropriating Kane's trade secrets and then directly
contacting Kane's customers in violations of the non-compete and non-disclosure provisions of
the Supply Agreement. These allegations are sufficient to state a claim at the motion to dismiss
stage.

Further, the Court holds that allegations based upon "information and belief' are

sufficient because Kane either supplied adequate factual support for the allegations and/or
because the specific information is within the particular control of USP A. See Drobnak v.
Andersen Corp., 561 F .3d 778, 784 (8th Cir. 2009) ("Rule 9(b) is deemed satisfied if the

allegations are accompanied by a statement of facts on which the belief is founded."); Energizer

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Brands, LLC v. Procter & Gamble Co., No. 4:16-CV-223 (CEJ), 2016 WL 2894708, at *3 (E.D.
Mo. May 18, 2016) (internal citation omitted)("The Twombly plausibility standard ... does not
prevent a plaintiff from pleading facts alleged 'upon information and belief where the facts are
peculiarly within the possession and control of the defendant."). The Court denies USPA's
motion to dismiss Kane's counterclaim for tortious interference.
D. Indemnification

In Count V, Kane seeks damages and declaratory relief against USPA based on an
alleged duty to indemnify. Kane alleges that, under the direction of Meyers and Agliata, USPA
manufactured KFILM 7890 ink resin, to be sold under Kane's name. Thereafter, the KFILM
7890 ink resin was found to contain dangerous levels of methanol, which caused Kane to incur
liability to its customer. (Counterclaim,

irin 00-110). Kane alleges that USPA, Meyers, and

Agliata knew or should have known of the methanol content of the resin and failed to disclose it.
(Id.). Kane brings a claim against USP A for indemnification on this basis.

USP A notes that Kane does not allege any contractual basis or oral agreement for USP A
to indemnify Kane.

(ECF No. 54 at 14).

Because there is no contractual basis for

indemnification, USP A asserts Kane fails to state a claim for indemnification as a matter of law.
The Court holds that Kane alleges a common law claim for indemnification at this stage
of litigation.

Kane alleges that it is being held responsible for the reckless and dangerous

conduct of USP A, which supports indemnification under common law. "When a party, without
any fault of its own, is exposed to liability and compelled to pay damages because of the
negligence of another, that party has an action against the active tortfeasor on the theory of
indemnity." Simply Thick, LLC v. Thermo Pac, LLC, No. 4:13-CV-1036 CAS, 2015 WL
5734920, at *3 (E.D. Mo. Sept. 29, 2015) (citing SSM Health Care St. Louis v. Radiologic

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Imaging Consultants, LLP, 128 S.W.3d 534, 539 (Mo. Ct. App. 2003)). The Court denies the
motion to dismiss Count V of Kane's Counterclaim on this basis.

IV.

Third-Party Defendants' Motion to Dismiss Third-Party Complaint (ECF
No. 55)

The third-party defendants, Maurice S. Meyers and Nick J. Agliata, Jr. (collectively,
"Third-Party Defendants") move to dismiss the claims against them for the same reasons that
USPA moved to dismiss Kane's Counterclaim (except for Count I which is not addressed to the
Third-Parties), but also because (1) the Third-Parties were improperly joined under Fed. R. Civ.
P. 14 and (2) the Third-Parties cannot be held personally liable for their actions on behalf of
USP A under the facts pleaded by Kane.
A. Improper Joinder under Fed. R. Civ. P. 14

Third-Party Defendants assert that they were improperly joined under Fed. R. Civ. P. 14.
Rule 14 provides "A defending party may, as third-party plaintiff, serve a summons and
complaint on a nonparty who is or may be liable to it for all or part of the claim against it." That
is, "Rule 14 'permits a defending party (usually a defendant) to bring a new party into a pending
case, but only if that absentee is or may be liable to the defending party for all or part of the
plaintiffs claim against it."' Advanced Lipa Dissolve Ctr., LLC v. Karkkainen, No. 406-CV-199
CAS, 2007 WL 844822, at *3 (E.D. Mo. Mar. 19, 2007) (citing 3 James Wm. Moore, et al.,
Moore's Federal Practice§ 14.03[1] (3d ed.2006)). "The liability of the third-party defendant to
the party that impleaded it must be for losses sustained by that party as a result of plaintiffs
claim; unrelated liability to the defendant is not a basis for impleader." Id., § 14.04[2]. Rule 14
impleader cannot be used to assert third-party claims that arise out of the "same general set of
facts as the main claim,'' i.e., are transactionally related. United States v. Olavarrieta, 812 F.2d

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640, 643 (I Ith Cir. 1987). Instead, Rule 14 can only be used for derivative liability or indemnity
situations. United States v. Olavarrieta, 812 F.2d 640, 643 (I Ith Cir.1987). Accord Gaines v.

Sunray Oil Co., 539 F.2d 1136, 1139 n. 7 (8th Cir.1976) ("Sunray's claim could not be
maintained as a third-party claim since it is not one for indemnity."); Stewart v. American

Internat'l Oil & Gas Co., 845 F.2d 196, 199 (9th Cir.1988) ("Thus, a third-party claim may be
asserted only when the third party's liability is in some way dependent on the outcome of the
main claim and is secondary or derivative thereto."); Mattes v. ABC Plastics, Inc., 323 F.3d 695,
698 (8th Cir. 2003). Third-Party Defendants assert that Kane's purported claims against them do
not depend on or derive from USPA's claims in the Complaint.

For example, Third-Party

Defendants note that the USP A does not assert in its Complaint any liability due to tainted
products, as alleged by Kane in Count V of the Third-Party Complaint. (ECF No. 56 at 3).
In response, Kane claims that its Counterclaim and Third-Party Complaint demonstrate
the Kane has "multiple claims against Plaintiff USP A, each of which is the result of the wrongful
acts of Meyers and Agliata personally." (ECF No. 66 at 1). 7 Kane maintains that it filed a
counterclaim against USP A under Rule 13(a), which requires that "[a] pleading must state as a
counterclaim any claim that-at the time of its service-the pleader has against an opposing
party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the
opposing party's claim[.]" (ECF No. 66 at 2). Kane further states that it joins Meyers and
Agliata as "third-party defendants" pursuant to Rule 20 which provides that any persons "may be
joined in one action as defendants if: (A) any right to relief is asserted against them jointly,
severally, or in the alternative with respect to or arising out of the same transaction, occurrence,

7

Kane maintains it has a compulsory counterclaim against USPA under Rule 13(a). (ECF No.
66 at 1-2).
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or series of transactions or occurrences; and (B) any question of law or fact common to all
defendants will arise in the action." Fed. R. Civ. P. 20(a)(2).
The Court holds that Kane has improperly joined Meyers and Agliata as third-party
defendants. Kane has joined Meyers and Agliata under the counterclaim rules (Rules 13 and 20),
not under the rules governing third party practice. Likewise, Kane does not allege a third-party
claim against Meyers and Agliata that depends on or derives from USPA's claims in its
Complaint. See Fed. R. Civ. P. 14. Therefore, the Court grants Meyers and Agliata's Motion to
Dismiss the Third-Party Complaint, and grants Kane until September 26, 2018 to file an
amended pleading against Meyers and Agliata. Advanced Lipa Dissolve Ctr., LLC, 2007 WL
844822, at *3 (dismissing third-party complaint that purported to be brought under Rule 14).
Accordingly,
IT IS HEREBY ORDERED that Defendants Kane International Corp., Parker

Ingredients, LLC, Thomas Kohlberg, and Jeremy Eisele's Motion to Dismiss Pursuant to Fed. R.
Civ. P. 12(b)(6) (ECF No. 34), Defendant Maclan Industries, Inc.'s Motion to Dismiss Pursuant
to Fed. R. Civ. P. 12(b)(6) (ECF No. 38), Defendant Matthew Grodd's Motion to Dismiss
Pursuant to F.R.C.P. 12(B)(6) (ECF No. 48), Plaintiff/Counter-Defendant US Polymers-Accurez,
LLC's Motion to Dismiss Kane's Counterclaim (ECF No. 53) are DENIED without prejudice.
IT IS FURTHER ORDERED that Third-Party Defendants' Motion to Dismiss Third-

Party Complaint (ECF No. 55) is GRANTED. Kane's Third-Party Complaint against Meyers
and Agliata is DISMISSED. Kane is GRANTED until September 26, 2018 to file an amended
pleading against Meyers and Agliata.

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IT IS FINALLY ORDERED that Defendants Kane International Corporation, Parker
Ingredients, LLC, Thomas Kohlbert, & Jeremy Eisele's Unopposed Request for a Hearing on
Pending Motions to Dismiss (ECF No. 75) is DENIED as moot.

Dated thifi th day of September, 2018.

RONNIE L. WHITE
UNITED STATES DISTRICT JUDGE

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