Gold Medal Products Co v. Bell Flavors and Fragrances, Inc. et al

Filing 27

ORDER granting in part and denying in part 13 Motion to Dismiss. The Motion is granted insofar as Counts I and II against both Defendants and Count V against Bell Flavors are dismissed. The Motion is denied insofar as Counts III and IV against Sunderhaus are not dismissed.. Signed by Judge Susan J. Dlott on 4/13/17. (wam)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

GOLD MEDAL PRODUCTS CO.,
1:16-CV-00365
Plaintiff,
DISTRICT JUDGE SUSAN J. DLOTT
vs.
ORDER GRANTING IN PART AND
DENYING IN PART MOTION TO DISMISS

BELL FLAVORS AND FRAGRANCES, INC.,
et al.,
Defendants.

This matter is before the Court on Defendants’ Motion to Dismiss. (Doc. 13.) Plaintiff, a
flavor company, has sued Defendants, its former employee and his new employer, for
misappropriation of trade secrets and confidential information. Defendants move to dismiss for
lack of personal jurisdiction, failure to join an indispensable party, and failure to state a claim
upon which relief can be granted. For the reasons that follow, the Court will GRANT IN PART
AND DENY IN PART the Motion to Dismiss.
I.

BACKGROUND

A.

Factual Allegations
The following facts are derived from the well-pleaded allegations in the First Amended

Complaint and the documents attached thereto or referenced therein. (Doc. 9.)
1.

The Parties
a.

Gold Medal Products Co.

Plaintiff Gold Medal Products Co. (“Gold Medal”) is an Ohio corporation that makes
flavored food products for the concessions industry, including Glaze Pop® popcorn coatings.
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(Id. at PageID 123–24, 126.) Glaze Pop® is sold throughout the United States and the world.
(Id. at PageID 136.) Glaze Pop® recipes include multiple separate flavor ingredients that the
company combines in specific ratios to create one overall flavor. (Id. at PageID 128.) Gold
Medal’s recipes “are not readily ascertainable by inspection, testing, or other proper means.” (Id.
at PageID 136.) The specific flavor ingredients and the flavor ingredient ratios in each recipe are
closely guarded secrets by Gold Medal. (Id. at PageID 128, 136.)
b.

William Todd Sunderhaus

Defendant William Todd Sunderhaus worked at Gold Medal from March 2005 to March
2014 as the company’s sole food technologist. (Id. at PageID 127.) He worked in product
development and application to help update and develop recipes for Gold Medal food products.
(Id.) He also worked with flavor companies to develop custom flavor ingredients for Gold
Medal products. (Id. at PageID 128.) His responsibilities included the security of the flavor
department. (Id.) He had access to recipes for the popcorn coatings, including the identity of
each flavor ingredient, the supplier of each flavor ingredient, and the amounts and ratios of each
flavor ingredient. (Id.)
Gold Medal alleges that Sunderhaus, during his employment with Gold Medal,
“repeatedly promised orally and in writing” not to disclose the company’s confidential
information to third parties. (Id. at PageID 129.) Specifically, Gold Medal alleges that
Sunderhaus agreed in writing in March 2005 and November 2010 “to comply” with the policies
and procedures stated in a written company handbook. (Doc. 1-2.)1 The handbook included a
confidentiality provision stating that “confidential information is a valuable asset of the

1

Gold Medal attached to the initial Complaint a copy of the company handbook containing the confidentiality
provisions as well as a copy of the written acknowledgment of receipt dated November 22, 2010. (Doc. 1-2 at
PageID 18–103, 106.)

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Company, the development of which required a great investment of human and financial assets
and resources by the Company.” (Id. at PageID 100.) Confidential information was defined to
include “company accounts, trade secrets, customer and price lists, formulas, company records,
contract quotations and bids, financial information and computer generated information.” (Id.)
It further stated that the employees will not “during their employment with the Company or any
time thereafter, disclose or disseminate confidential information to third parties without written
consent of the Company.” (Id.) However, the handbook contained a provision both disclaiming
its enforcement as a binding contract and authorizing Gold Medal to modify its terms at any
time:
This employee handbook is presented for informational purposes only, and can be
changed at any time by Gold Medal Products Company with or without notice.
This handbook is not an employment contract, expressed or implied.
(Doc. 1-2 at PageID 22.) In reliance on his non-disclosure promises, Gold Medal alleges that it
“gave [Sunderhaus] access to Gold Medal recipes and allowed him to help develop and update
them.” (Doc. 9 at PageID 130.)
c.

Bell Flavors and Fragrances, Inc.

Defendant Bell Flavors and Fragrances, Inc. (“Bell Flavors”) is an Illinois flavor
company with its principal place of business in Illinois and several international business
locations. (Id. at PageID 124.) It works with food companies to develop flavors for a variety of
applications including beverages and bakery, confections, dairy, and savory food products. (Id.
at PageID 130–31.) At an unspecified date, but prior to March 2014, Gold Medal engaged Bell
Flavors to help develop flavors for multiple food products. (Id. at PageID 131–32.) Bell Flavors
repeatedly visited Gold Medal in Ohio and had access to Gold Medal’s confidential information.
(Id. at PageID 132.) Bell Flavors entered into a written confidentiality agreement with Gold

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Medal in April 2014 pursuant to that engagement. (Doc. 13-3 at PageID 271.) 2 Bell Flavors
promised to maintain in strict confidence during and after performance of their services
information related to Gold Medal’s business, product formulations, and other intellectual
property. (Id.)
2.

Sunderhaus Joins Bell Flavors and Allegedly Discloses Confidential
Information

In March 2014, Sunderhaus left employment with Gold Medal and joined Bell Flavors as
a savory flavorist. (Doc. 9 at PageID 130–31.) Gold Medal asked Sunderhaus during his exit
2

The confidentiality agreement stated as follows:
Whereas Gold Medal Products Co. (“Gold Medal”) wishes to engage Bell Flavors and Fragrances,
Inc. (“Bell”) to develop color systems, flavors and/or formulations for use in Gold Medal products
and/or sell existing color systems, flavors and formulations (the “Project”), Bell agrees that they
will maintain information related to the Gold Medal business, as well as information related to the
equipment and/or methods utilized and formulations developed, sold and/or produced for Gold
Medal (including the fact that Gold Medal is engaged in any project), in strict confidence.
Gold Medal has commercially valuable information that is vital to the success of Gold Medal’s
business, including but not limited to, the names and addresses of the customers and suppliers of
Gold Medal, product formulations and ingredients, intellectual property, trade secrets and
manufacturing processes, personnel information, financial information and the marketing needs,
habits and strategies of Gold Medal. Bell recognizes and acknowledges that this and other
information related to the Gold Medal business are valuable, special and unique assets. Bell will
not, during or after the performance of their services, disclose to any person, firm, corporation,
association, or other entity, or use for their own benefit, any of Gold Medal’s confidential business
information or intellectual property that may be revealed to them, for any reason or purpose
whatsoever, including any attempts by Bell to “knock-off” any Gold Medal product.
Furthermore, new or unique formulations discovered, conceived or developed, either individually
or in collaboration with Gold Medal, during the course of and for the purposes of their services,
will not be used for, shared with or disclosed to other clients of Bell or competitors of Gold
Medal. Bell assigns to Gold Medal as its exclusive property all intellectual property and
contractual rights, if any, pertaining to the particular application of products created, formulated
and manufactured for Gold Medal by Bell.
The provisions of this agreement shall supersede and prevail over any other arrangements, either
oral or written, as to all Gold Medal information disclosed or received in connection with the
services above mentioned. This agreement shall be construed in accordance with the laws of the
State of Ohio. Bell agrees that any breach of this agreement, whether intentionally or
unintentionally, will give rise to all remedies and damages available under the law, including
injunctive relief.

(Doc. 13-3 at PageID 271.)

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interview on March 4, 2014 whether his employment at Bell Flavors would relate to products
that compete with Gold Medal food products. (Id. at PageID 131.) Sunderhaus stated that he
would be working with savory flavors and unrelated products, and he assured Gold Medal that he
would not use or disclose Gold Medal’s confidential information. (Id.)
Bell Flavors met with Shanghai Angke Foods Co., Ltd., a Chinese competitor of Gold
Medal, in May 2015 at Bell Flavors’s headquarters in Illinois. (Id. at PageID 133.) Upon
information and belief, Bell Flavors assigned Sunderhaus to meet and work with Shanghai
Angke for the purpose of developing a product to compete with Gold Medal’s Glaze Pop®
product. (Id.) Gold Medal contacted Bell Flavors to express its concern that Sunderhaus would
divulge or use its confidential information if he worked on competitors’ popcorn glaze products.
(Id.at PageID 133–35.) Bell Flavors responded that Gold Medal’s recipes were not trade secrets,
but that Sunderhaus had not disclosed any Gold Medal confidential information to Bell Flavors.
(Id.) Shanghai Angke changed its caramel-flavored popcorn glaze product. (Id. at PageID 135.)
Gold Medal alleges upon information and belief that Bell Flavors caused Sunderhaus to work on
popcorn glaze products for competitors of Gold Medal, including the Shanghai Angke caramelflavored popcorn glaze product. (Id. at PageID 135.)
B.

Procedural Posture
Gold Medal initiated this suit against Sunderhaus and Bell Flavors on March 8, 2016.

(Doc. 1.) It filed the First Amended Complaint on June 10, 2016. (Doc. 9.) Gold Medal asserts
the following causes of action:
I.
II.
III.
IV.

Misappropriation of trade secrets pursuant to 18 U.S.C. § 1836, et seq.
[Defend Trade Secrets Act] against both Defendants;
Misappropriation of trade secrets pursuant to Ohio Revised Code § 1333.61,
et seq. against both Defendants;
Breach of contract against Sunderhaus;
Promissory estoppel against Sunderhaus; and
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V.

Breach of contract against Bell Flavors.

(Doc. 9 at PageID 136–41.)
On July 5, 2016, Defendants filed the pending Motion to Dismiss alleging a lack of
personal jurisdiction as to Counts I, II, and V, failure to join an indispensable party as to Counts I
and II, and failure to state a claim upon which relief can be granted as to Counts I and III–V.
(Doc. 13-1 at PageID 154–56, 159.) The Motion is fully briefed, and the Court held an oral
argument hearing on March 21, 2017.
II.

LEGAL STANDARDS FOR MOTIONS TO DISMISS
Federal Rule of Civil Procedure 12(b)(2) authorizes a defendant to move for dismissal

based on lack of personal jurisdiction. The plaintiff bears the burden of proving that the court
can exercise personal jurisdiction over the defendant. Intera Corp. v. Henderson, 428 F.3d 605,
615 (6th Cir. 2005). When a district court exercises its discretion to hold an evidentiary hearing
on the jurisdiction issue, then the plaintiff must establish jurisdiction by a preponderance of the
evidence. Dean v. Motel 6 Operating L.P., 134 F.3d 1269, 1272 (6th Cir. 1998). On the other
hand, where facts are disputed and the district court bases its decision solely on the basis of
written submissions without an evidentiary hearing, then “the plaintiff’s burden is solely to make
a prima facie showing that jurisdiction exists.” Stolle Mach. Co., LLC v. RAM Precision Indus.,
605 F. App’x 473, 479–80 (6th Cir. 2015). “Under these circumstances, this court will not
consider facts proffered by the defendant that conflict with those offered by the plaintiff, and will
construe the facts in the light most favorable to the nonmoving party.” Neogen Corp. v. Neo Gen
Screening, Inc., 282 F.3d 883, 887 (6th Cir. 2002) (citations omitted). The Court will apply the
prima facie standard to this case with the agreement of the parties.
Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss a complaint
for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). To
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withstand a dismissal motion, a complaint must contain “more than labels and conclusions [or] a
formulaic recitation of the elements of a cause of action.” Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 555 (2007). Courts do not require “heightened fact pleading of specifics, but only
enough facts to state a claim for relief that is plausible on its face.” Id. at 570. “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). A district court examining the sufficiency of a complaint must accept
the well-pleaded allegations of the complaint as true. Id.; DiGeronimo Aggregates, LLC v.
Zemla, 763 F.3d 506, 509 (6th Cir. 2014).
III.

ANALYSIS

A.

Counts I and II: Misappropriation of Trade Secrets
Gold Medal asserts claims for misappropriation of trade secrets in violation of the

Defend Trade Secrets Act (“DTSA”) in Count I and of Ohio’s codification of the Uniform Trade
Secrets Act, Ohio Revised Code § 1333.61, et seq., in Count II. Defendants assert that the Court
cannot exercise personal jurisdiction over Sunderhaus or Bell Flavors as to the misappropriation
of trade secret claims, that Bell Flavors is an indispensable party to these claims, and that the
DTSA claim fails as a matter of law because the alleged acts of misappropriation occurred before
the its effective date.3 The Court will begin by examining the personal jurisdiction issue.
1.

Personal Jurisdiction Legal Standard

A district court’s exercise of personal jurisdiction is valid only if it meets both the state
long-arm statute and constitutional due process requirements. Brunner v. Hampson, 441 F.3d

3

A party can bring a claim under the DTSA only “with respect to any claim for misappropriation of a trade
secret . . . for which act occurs on or after the date of enactment of this [DTSA].” Pub. L. No. 114-153 § 2(e). The
DTSA was enacted on May 11, 2016.

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457, 465 (6th Cir. 2006); Calphalon Corp. v. Rowlette, 228 F.3d 718, 721 (6th Cir. 2000).
Ohio’s long-arm statute, Ohio Revised Code § 2307.382, does not extend to the constitutional
limits of the Due Process Clause. Calphalon Corp., 228 F.3d at 721; Goldstein v. Christiansen,
70 Ohio St. 3d 232, 638 N.E.2d 541, 545 n.1 (1994). Defendants do not dispute that their
activities satisfy Ohio’s long-arm statute. (Doc. 13 at PageID 161–62.) Therefore, the Court in
this case must determine only whether the exercise of jurisdiction over Bell Flavors and
Sunderhaus satisfies constitutional due process.
To satisfy the Due Process Clause, a defendant must have had “minimum contacts” with
the forum state “such that the maintenance of the suit does not offend traditional notions of fair
play and substantial justice.” Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945) (internal
quotation and citation omitted). A defendant’s contacts with the forum state can give rise to
either general or specific jurisdiction. Gold Medal asserts that this Court has specific jurisdiction
over Defendants. Specific jurisdiction subjects a defendant to jurisdiction only for claims that
arise from or relate to the defendant’s contacts with the state. Id.
The Sixth Circuit applies the following test for specific jurisdiction:
First, the defendant must purposefully avail himself of the privilege of acting in
the forum state or causing a consequence in the forum state. Second, the cause of
action must arise from the defendant’s activities there. Finally, the acts of the
defendant or consequences caused by the defendant must have a substantial
enough connection with the forum state to make the exercise of jurisdiction over
the defendant reasonable.
AlixPartners, LLP v. Brewington, 836 F.3d 543, 549–50 (6th Cir. 2016) (emphasis in the
original) (citation omitted). “[M]ore than mere but-for causation is required to support a finding
of [specific] personal jurisdiction.” Beydoun v. Wataniya Restaurants Holding, Q.S.C., 768 F.3d
499, 507 (6th Cir. 2014). “[O]nly consequences that proximately result from a party’s contacts
with a forum state will give rise to jurisdiction.” Id. at 508 (emphasis added). “[I]t is axiomatic
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that, in assessing a defendant’s relationship with a given forum, the Court must evaluate the
defendant’s contacts at the time of the alleged wrongdoing.” Stolle Mach. Co., LLC v. RAM
Precision Indus., No. 3:10-CV-155, 2011 WL 6293323, at *4 (S.D. Ohio Dec. 15, 2011), aff’d,
605 F. App’x 473. To have specific jurisdiction over a defendant, the plaintiff must prove that
the defendant had “sufficient contacts with the forum with respect to the claim at issue.” Dull v.
Energizer Personal Care, LLC, No. 3:14-cv-195, 2015 WL 5308871, at *8 (S.D. Ohio Sept. 11,
2015).
The Supreme Court examined the minimum contacts necessary to create specific
jurisdiction in Walden v. Fiore, 134 S. Ct. 1115 (2014). It stated that the “inquiry whether a
forum State may assert specific jurisdiction over a nonresident defendant focuses on the
relationship among the defendant, the forum, and the litigation.” Id. at 1121 (internal quotation
and citation omitted); see also Calder v. Jones, 465 U.S. 783, 788 (1984) (same). It instructed
that the district court must focus on the defendant’s contacts with the forum state, not on the
plaintiff’s contacts. Walden, 134 S. Ct. at 1119, 1122. “[A] plaintiff’s contacts with the forum
State cannot be decisive in determining whether the defendant’s due process rights are violated.”
Id. at 1122 (internal quotation and citation omitted). The Supreme Court also instructed that the
district court must examine “the defendant’s contacts with the forum State itself, not the
defendant’s contacts with persons who reside there.” Id. at 1122. That is, “the plaintiff cannot
be the only link between the defendant and the forum.” Id. It follows that a plaintiff’s injury is
“jurisdictionally relevant only insofar as it shows that the defendant has formed a contact with
the forum State.” Id. at 1125.

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2.

Personal Jurisdiction over Bell Flavors as to Counts I and II

Defendants argue that the Court lacks personal jurisdiction over Bell Flavors as to Counts
I and II. Bell Flavors has a more attenuated connection to Ohio than does Sunderhaus
personally. Gold Medal asserts in Counts I and II that Bell Flavors caused Sunderhaus to use the
trade secret information that he acquired during his employment for Gold Medal for the benefit
of Bell Flavors. Notably, Counts I and II are not based on Bell Flavors’s performance of
services for Gold Medal. Gold Medal does not allege that Bell Flavors wrongfully disclosed or
used confidential information it learned directly from performing services for Gold Medal.
Accordingly, the Court will examine only Bell Flavors’s contacts with Ohio related to
Sunderhaus’s disclosure or use of trade secret information to determine whether the Court has
specific jurisdiction over Bell Flavors as to those claims. See Dull, 2015 WL 5308871, at *8
(stating that specific jurisdiction must be based on contacts with the forum related to the claim at
issue).
Taking all inferences in favor of Gold Medal, Gold Medal alleges that Bell Flavors hired
Sunderhaus to work as a savory flavorist knowing he had been employed by Gold Medal in Ohio
and had acquired Gold Medal trade secrets. It further alleges that Bell Flavors directed
Sunderhaus to work on popcorn glaze products competitive with Glaze Pop® product. It alleges
that Gold Medal and Bell Flavors engaged in pre-suit correspondence in early October 2015
about Gold Medal’s concerns that Sunderhaus would violate his confidentiality obligations to it.
(Doc. 9 at PageID 133.) Gold Medal alleges that Bell Flavors disavowed Sunderhaus’s
confidentiality obligations, refused to deny Sunderhaus’s involvement in projects involving
competitive popcorn glazes, refused to remove Sunderhaus from popcorn glaze projects, and
denied that Sunderhaus had disclosed confidential information regarding Gold Medal’s recipes.

10

Therefore, at least since October 2015, Bell Flavors has known that Gold Medal accused
Sunderhaus of disclosing or utilizing its trade secret information originating from Ohio.
Gold Medal asserts that the Court can assert jurisdiction over Bell Flavors because its
employee, Sunderhaus, worked for Gold Medal in Ohio, Sunderhaus obtained Gold Medal’s
trade secrets in Ohio, and Bell Flavors instructed Sundershaus to use or disclose those trade
secrets for its benefit knowing that Gold Medal would suffer tortious injury in Ohio. Two
aspects of this argument bear close examination. First, Gold Medal is arguing that the state in
which the plaintiff felt the effects of the tortious conduct is materially relevant to the jurisdiction
argument. Second, Gold Medal is arguing that the conduct of Sunderhaus in Ohio, before he was
Bell Flavors’s agent, is attributable to Bell Flavors.
To begin, Gold Medal errs by placing too much emphasis on the fact that Gold Medal felt
the effect of Bell Flavors’s allegedly tortious conduct in Ohio. The Supreme Court in Walden
“rejected” the theory that personal jurisdiction can be based on intentional acts taken outside a
forum state which the defendant knows will cause effects inside the forum state. Maxitrate
Tratamento Termico E Controles v. Super Sys., Inc., 617 F. App’x 406, 408 (6th Cir. 2015), cert.
denied sub nom. Maxitrate Tratamento Termico E Controles v. Allianz Seguros S.A., 136 S. Ct.
336 (2015); see also Campinha-Bacote v. Wick, No. 1:15-cv-277, 2015 WL 7354014, at *4–5
(S.D. Ohio Nov. 20, 2015) (quoting Maxirate for same principle); Zellerino v. Roosen, 118 F.
Supp. 3d 946, 951 (E.D. Mich. 2015) (concluding that, after Walden, specific jurisdiction does
not exist over a defendant in a forum “solely because the effects of the intentional act are felt
there”); but see Horter Investment Mgmt., LLC v. Cutter, No. 1:15-CV-477, 2016 WL 339927, at
*4 (S.D. Ohio Jan. 28, 2016) (not addressing Walden, but holding that jurisdiction was proper
over a defendant who “purposefully directed tortious conduct to an Ohio citizen and caused

11

substantial injury to an Ohio citizen”). Rather, jurisdiction over Bell Flavors must be based on
the contacts that “defendant [it]self” creates with Ohio. Walden, 134 S. Ct. at 1122 (emphasis in
the original). Here, Bell Flavors itself had no direct contacts with Ohio giving rise to trade
secrets claims.
As to whether Sunderhaus’s connections to Ohio can be imputed to Bell Flavors, the
Sixth Circuit in one case did impute the conduct of an agent in the forum state to his principal
when the principal subsequently ratified that conduct. Stolle Mach., 605 F. App’x at 481. In that
case, Stolle Machinery accused its former employee, Shu An, of misappropriating trade secrets
to benefit a new company, SLAC, formed by Shu An. Id. at 476–78. The court concluded that
Stolle Machinery had stated a prima facie case of jurisdiction over Shu An and SLAC:
Stolle has made a prima facie showing that An purposefully availed himself of the
privilege of employment in Ohio and that he took drawings and other information
from Stolle while he was there. Stolle has also made a prima facie showing that
An caused a consequence in Ohio by his subsequent actions in China—founding
SLAC, allegedly with the aid of confidential information that he took from Stolle,
and soliciting Stolle’s customers. Furthermore, Stolle’s entire cause of action
arises from An’s actions while he was in Ohio. And on both of the first two
prongs of this jurisdictional analysis, the contacts that An, the agent, had with
Ohio can be imputed to SLAC, the principal that has subsequently ratified his
conduct in Ohio.
Id. at 481.
The facts in this case are distinguishable in two ways. First, the Sixth Circuit suggests
that Shu An wrongfully took Stolle Machinery’s drawings and information when he was in Ohio
and SLAC ratified that wrongful conduct. Gold Medal has not alleged that Sunderhaus took
wrongful acts in Ohio which Bell Flavors could have ratified. Sunderhaus obtained Gold
Medal’s trade secrets lawfully during the normal course of his employment for the company.
Second, the wrongful conduct of Shu An was attributed to a principal entity, SLAC, which Shu
An personally formed. The relationship between Shu An and SLAC was significant, as was
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recognized by a sister district court in the time between the district court and the Sixth Circuit
decisions in Stolle Machinery:
[I]n the context of a trade secret claim, the operative facts relate to Ohio where the
defendant acquires trade secrets by virtue of his employment with an Ohio-based
company and the misappropriation causes harm in Ohio. Such facts may also tie
in a company formed by the former employee by virtue of the company’s
ratification of the misappropriation.
Dayton Superior Corp. v. Yan, 288 F.R.D. 151, 164, 168 (S.D. Ohio 2012) (citing Stolle
Machinery district court opinion) (emphasis added). The Dayton Superior court applied Stolle
Machinery to impute a defendant employee’s acts to the new company he helped form before
leaving employment with the plaintiff when those acts were performed “on behalf of and were
ratified by” the new company. Id. at 168. Here, conversely, Sunderhaus did not form Bell
Flavors; he is a mere employee. Sunderhaus did not commit any tortious acts while working for
Gold Medal in Ohio, nor did he take any acts on behalf of Bell Flavors while working in Ohio.
The Court, therefore, will not exercise jurisdiction over Bell Flavors solely on the authority of
Stolle Machinery or Dayton Superior.
A comparison of the facts alleged in this case with other trade secret misappropriation
cases is useful. For example, in Nucor Corp. v. Bell, 482 F. Supp. 2d 714 (D.S.C. 2007), the
district court held that personal jurisdiction could be asserted in South Carolina over SeverCorr,
a Mississippi company, and its employee, John Bell, who had previously worked for the plaintiff,
Nucor Corporation, a South Carolina company. Nucor alleged that SeverCorr and Bell conspired
for Bell, while he was still an employee of Nucor, to take Nucor’s confidential information and
computer records and to solicit away Nucor’s employees to join ServerCorr. Id. at 720, 722–23.
Bell allegedly took the tortious acts in favor of the conspiracy in South Carolina. The Court held
that ServerCorr had sufficient minimum contacts with South Carolina to satisfy due process
when it, “through its agent Bell, intentionally and specifically directed communications into
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South Carolina for the purpose of enticing Nucor employees to join its employ and to solicit
Nucor employees to misappropriate Nucor's trade secrets.” Id. at 723.
Conversely, a district court in North Dakota held that it lacked jurisdiction over an
Oklahoma distributor who allegedly obtained trade secrets about a North Dakota bakery from its
employee, Myron Dunker, a former employee of the bakery. Drayton Enters., LLC v. Dunker,
142 F. Supp. 2d 1177 (D.N.D. 2001). Significantly, Dunker lived in Minnesota and was not
employed by the North Dakota bakery when he was hired by the Oklahoma distributor. Id. at
1183. Dunker’s only remaining connection to North Dakota was a non-compete agreement he
had signed with the bakery. Id. The district court found that the distributor’s contact with North
Dakota were fortuitous and attenuated because the distributor did not enter into North Dakota to
solicit Dunker, and because Dunker had obtained the trade secret information by legitimate
means in North Dakota before moving out of the state. Id. at 1184. The district court concluded
that “the hiring of Dunker for the alleged purpose of obtaining trade secrets gained in North
Dakota and protected by a North Dakota contract” was not sufficient to create jurisdiction over
the Oklahoma distributor. Id. at 1183. The fact that the injury was felt in North Dakota also was
not sufficient to create jurisdiction. Id. at 1184–85; see also Air Prod. & Controls, Inc. v.
Safetech Int’l, Inc., 503 F.3d 544, 552 (6th Cir. 2007) (“[T]he mere allegation of intentional
tortious conduct which has injured a forum resident does not, by itself, always satisfy the
purposeful availment prong.”)
The facts here relevant to Bell Flavors are more similar to Drayton Enterprises than to
Nucor Corp. Gold Medal does not allege that Bell Flavors traveled to Ohio to recruit, interview,
or hire Sunderhaus. It does not allege that Sunderhaus took actions in Ohio as Bell Flavors’s
agent. More specific to the misappropriation claims, Gold Medal does not allege that Bell

14

Flavors hired Sunderhaus for the purpose of obtaining Gold Medal’s trade secret information nor
for the purpose of helping Gold Medal’s competitors formulate competing food products.
Similar to the facts in Drayton Enterprises, Sunderhaus acquired the trade secret information in
Ohio by legitimate means and only is alleged to have taken wrongful acts outside of the forum
state more than one year later. For all of these reasons, the Court concludes that it cannot—
consistent with due process—exercise personal jurisdiction over Bell Flavors as to the
misappropriation of trade secrets claims stated in Counts I and II.
3.

Conclusion as to Counts I and II

The Court must dismiss Counts I and II against Bell Flavors for lack of personal
jurisdiction. Defendants argue that the Court should dismiss Counts I and II against Sunderhaus
also on the basis that Bell Flavors is an indispensable party to those claims for purposes of
Federal Rule of Civil Procedure 19. Gold Medal conceded at the oral argument hearing that Bell
Flavors is an indispensable party as to Counts I and II. A judgment rendered in Bell Flavors’s
absence against its employee, Sunderhaus, would prejudice it. The parties have not suggested
and the Court is not aware of any means by which that prejudice could be ameliorated.
Therefore, the Court cannot in equity and good conscience proceed with Counts I and II against
Sunderhaus, even assuming the Court can exercise personal jurisdiction over Sunderhaus. See
Fed. R. Civ. P. 19 (“If a person who is required to be joined if feasible cannot be joined, the
court must determine whether, in equity and good conscience, the action should proceed among
the existing parties or should be dismissed.”) The Court will dismiss Counts I and II against
Sunderhaus also. The Court expresses no opinion as to whether personal jurisdiction exists over
Sunderhaus for Counts I and II, nor as to whether any acts of misappropriation occurred after the
effective date of the DTSA.

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B.

Count III and IV: Breach of Contract Claim and Promissory Estoppel Claim
Against Sunderhaus
Defendants next argue that Counts III and IV fail as a matter of law because Gold Medal

has not adequately pleaded a breach of contract or promissory estoppel claim against
Sunderhaus. Defendants suggest that Gold Medal cannot base either claim solely on
Sunderhaus’s written agreement to abide by confidentiality provisions in the company handbook
because it contains a contractual disclaimer and a provision authorizing Gold Medal to
unilaterally modify the handbook. Defendants argue that these provisions vitiate the mutual
assent needed for a contract and the reasonable reliance needed for a promissory estoppel claim.
See, e.g., Stanich v. Hissong Group, Inc., No. 2:09-cv-143, 2010 WL 3732129, at *4–6 (S.D.
Ohio Sept. 20, 2010) (“[D]isclaimers that handbooks are not intended to form a contract vitiate
the mutual assent required for contract formation.”); Senter v. Hillside Nursing Center of
Willard, Inc., 335 F. Supp. 2d 836, 843 (N.D. Ohio 2004) (stating that mutual assent is absent
when the handbook disclaims intent to create a contract or allows one party to unilaterally amend
the provisions); Karnes v. Doctors Hosp., 51 Ohio St. 3d 139, 555 N.E.2d 280, 282 (1990)
(stating that contractual disclaimers in an employment manual preclude its enforcement as a
contract); Finsterwald-Maiden v. AAA S. Cent. Ohio, 115 Ohio App. 3d 442, 685 N.E.2d 786,
790 (1996) (“Courts have considered provisions permitting the employer to unilaterally alter the
handbook at any time as an indication of a lack of mutual assent.”)
The Court will not grant dismissal on this basis because it relies on too narrow a
construction of the Amended Complaint. Gold Medal’s claims are based not only on his written
agreement to abide by the confidentiality provisions in the handbook, but also on Sunderhaus’s
oral promises. (Id. at PageID 129.) Gold Medal alleges that it demonstrated its reliance on those
promises, and it provided consideration to Sunderhaus for his promises, by continuing to employ
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him and by offering him access to its confidential flavor recipes. The allegations in the
Amended Complaint are sufficient at this pleading stage to state claims for breach of contract
and promissory estoppel. The Court will deny the Motion to Dismiss as to Counts III and IV
against Sunderhaus.
C.

Count V: Breach of Contract Claim Against Bell Flavors
In Count V, Gold Medal alleges that Bell Flavors breached its obligations under the

written confidentiality agreement it signed on April 24, 2016. (Doc. 9 at PageID 140–41.) In the
written agreement, Bell Flavors promised to not use or disclose any of the Gold Medal
confidential business information or intellectual property revealed to it in connection with its
engagement to provide services to Gold Medal. (Doc. 13-3 at PageID 271.) Bell Flavors agreed
that the protected information included “the names and addresses of the customers and suppliers
of Gold Medal, product formulations and ingredients, intellectual property, trade secrets, and
manufacturing processes, personnel information, financial information and the marketing needs,
habits and strategies of Gold Medal.” (Id.) Defendants move to dismiss the claim arguing that
Gold Medal failed to state a plausible claim for relief and that the Court cannot exercise personal
jurisdiction over Bell Flavors. The Court agrees with Defendants that Gold Medal has not stated
a plausible claim for relief regardless of whether the Court could exercise personal jurisdiction
over Bell Flavors for this claim.
To begin, the Court rejects Gold Medal’s argument that the confidentiality agreement
was intended to bar Bell Flavors from using or disclosing confidential information that
Sunderhaus separately learned during his employment at Gold Medal. The agreement makes
several references to the fact that it arises from “services” Bell Flavors provided to Gold Medal.
(Doc. 13-3 at PageID 271.) For example, Bell Flavors promised in the agreement to not “during

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or after the performance of its services” disclose or use Gold Medal’s confidential information
for its benefit. (Id.) Also, the parties agreed that the written agreement would supersede and
prevail over any other arrangement “as to all Gold Medal information disclosed or received in
connection with the services above mentioned.” (Id.) Moreover, Gold Medal and Bell Flavors
signed the agreement after Sunderhaus had left employment with Gold Medal. Gold Medal
could have, but did not, include explicit language barring Bell Flavors from using or disclosing
confidential information Sunderhaus had obtained.
The bare allegation in Court V that “[o]n information and belief, Bell Flavors used for its
own benefit Gold Medal’s confidential business information” is not sufficient. (Doc. 9 at
PageID 141.) Allegations based upon information and belief are appropriate only “where a
complaint contains supporting factual allegations.” Cassidy v. Teaching Co., LLC, No. 2:13-CV884, 2014 WL 1599518, at *3 (S.D. Ohio Apr. 21, 2014). A plaintiff “must plead facts that
create a permissible inference of wrongdoing.” In re Darvocet, Darvon, & Propoxyphene Prods.
Liab. Litig., 756 F.3d 917, 931 (6th Cir. 2014) (internal quotation and citation omitted). “The
mere fact that someone believes something to be true does not create a plausible inference that it
is true.” Id.
Gold Medal does not state any facts to support its allegation. It does not assert that Bell
Flavors used or disclosed any information it learned from performing services for Gold Medal.
Instead, Gold Medal asserts facts suggesting that Sunderhaus used the information he obtained as
a Gold Medal employee to benefit Bell Flavors and Shanghai Angke, including specifically
helping to develop a caramel-flavored popcorn glaze to compete with Gold Medal’s Glaze Pop®.
(Doc. 9 at PageID 133–36.) Sunderhaus’s alleged disclosure or use of confidential information
does not constitute a breach of Bell Flavors’s separate written agreement with Gold Medal. The

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breach of contract claim against Bell Flavors lacks “facial plausibility” because Gold Medal has
not pleaded “factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678.
IV.

CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss (Doc. 13) is GRANTED IN

PART AND DENIED IN PART. The Motion is granted insofar as Counts I and II against both
Defendants and Count V against Bell Flavors are dismissed. The Motion is denied insofar as
Counts III and IV against Sunderhaus are not dismissed.
DATED this 13th day of April, 2017.

BY THE COURT:

S/Susan J. Dlott
Susan J. Dlott
United States District Judge

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