Pawelko v. Hasbro, Inc.

Filing 242

ORDER adopting 219 Report and Recommendations; granting in part and denying in part 113 Motion for Summary Judgment and dismissing Counts 2,3,5,6 and 7; and sustaining 224 Objection to Magistrate Judge Decision to District Court - So Ordered by District Judge John J. McConnell, Jr. on 1/18/2019 (Barletta, Barbara)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND

MARISA PAWELKO, cl!b/a
THE MODERN SURREALIST
Plaintiff,
v.

HASBRO, INC.
Defendant.

)
)
)
)
)
)
)
)
)
)

C.A. No. 16-201-JJM-LDA

ORDER
Mter reviewing the extensive record, the Magistrate Judge issued a Report
and Recommendation (ECF No. 219) that this Court grant in part and deny in part
Hasbro's Motion for Summary Judgment. ECF No. 113. He recommends that Counts
2, 3, 5, 6, and 7 be dismissed and that Counts 1 (breach of the nondisclosure
agreement) and 4 (misappropriation) go to trial.

Before the Court is Defendant

Hasbro's partial objection, asking that the Court reject the recommendation denying
summary judgment on Counts 1 ancl4. ECF No. 221. PlaintiffMarisa Pawelko does
not object to the recommendation_! Hasbro also objects to the Magistrate Judge's
Text Order elated November 19, 2018 about expert opinions and evidence of industry
standards. ECF No. 224.

1

Ms. Pawelko does not object to the Magistrate Judge's recommendation that
the Court grant summary judgment as to Count 2 (breach of the implied covenant of
good faith and fair dealing), Count 3 (breach of implied-in-fact contract), and Count
6 (Federal Defend Trade Secrets Act). She conceded in papers before the Magistrate
Judge that the Court should dismiss Count 5 (unfair competition) and acknowledges
that Rhode Island law does not support the claim in Count 7 (unjust enrichment)
under these circumstances.

R&R on Motion faT SummaTy Judgment
After a thorough review of the record, the briefing, and the thoughtful Report
and Recommendation from the Magistrate Judge, the Court is convinced that there
are disputes over issues of material facts, and how those facts are applied to the law,
so that a jury, not this Court, must weigh the evidence and make those
determinations. In summary, there is sufficient disagreement about whether Ms.
Pawelko's product (Liquid Mosaic) was a protectable trade secret and whether Hasbro
violated the nondisclosure agreement.

There is a dispute about whether< Liquid

Mosaic was generally known to others including Hasbro; Liquid Mosaic was readily
ascertainable to others; Liquid Mosaic had independent economic value by remaining
secret; Ms. Pawelko disclosed Liquid Mosaic to others; and/or Hasbro breached its
contractual obligations.
While summary judgment is a valid mechanism for parties to use to dismiss
legally deficient claims, it cannot substitute for a party's right to have their legitimate
disputes resolved by a jury.

Motion to StTike and Exclude Expel't Testimony on IndustJy StandaTds
Ms. Pawelko argued in opposition to Hasbro's original motion to strike that the
Catn"t should permit her experts, Suzanne Mills·Winkler and Lynn Rosenblum, to
testify about industry standards because "Hasbro's breach of the industry standards
of confidentiality is circumstantial evidence of its own misappropriation of the [Liquid
Mosaic], in violation of the NDA. ... " ECF No. 157 at 4. The Magistrate Judge agreed
with Ms. Pawelko and denied Hasbro's motion, finding that "[t]he industry standard

2

evidence in dispute may be relevant and admissible at trial on the factual issue of
misappropriation." Text Order elated November 19, 2018. Hasbro again challenges
the proposed testimony on industry standards governing the confidentiality of
inventor submissions.

Hasbro claims that the confidentiality guidelines in the

nondisclosure agreement (NDA) the parties signed controls the obligations between
the parties on the issues of trade secret and misappropriation so any testimony on
industry standards of confidentiality is irrelevant.
Because Hasbro's motion to strike is a non-dispositive, pretrial matter and
Hasbro has objected to the Magistrate Judge's ruling on its motion as "contrary to
law," the Court review is de novo. PowerShare, h1c. v. Syntel, Inc., 597 F.3d10, 15
(1st Cir. 2010).
The Court finds the United States Court of Appeals for the Federal Circuit's
analysis and conclusion in Convolve, h1c. v. Compaq Computer C01poration case
persuasive in the outcome of this motion to strike. 2 The Federal Circ11it held that
Trade Secret Misappropriation Claim

* * * [Plaintiff] also pled a separate claim for trade secret
misappropriation; [Plaintiff] argues that its failure to comply with the
NDA is irrelevant to that tort claim. Instead, [Plaintiff] contends that
[state law] controls its misappropriation claims against [Defendant].
And, because [state law] does not require trade secrets to be disclosed in
writing, the NDA does not define the entirety of the parties' relationship.

*****

2

For unknown reasons, no party cited the Convolve case in its initial briefing
that the Magistrate Judge considered. Hasbro finally included it in its argument to
this Court in its objection to the Magistrate Judge's Order.
3

... we have found no [state] case law that "discuss[es] the relationship
between [NDAs] and implied duties of confidentiality." [citation omitted]
... the most relevant authority is from the Ninth Circuit (applying
Oregon law), that "a written n01rdisclosure agreement supplants any
implied duty of confidentiality that may have existed between the
parties."

*****
"The reason for the rule is simply that where the parties have freely,
fairly and voluntarily bargained for certain benefits in exchange for
undertaking certain obligations, it would be inequitable to imply a
different liability." [citation omitted] Common sense leads to the same
conclusion. If the parties have contracted the limits of their confidential
relationship regarding a particular subject matter, one party should not
be able to circumvent its contractual obligations or impose new ones over
the other via some implied duty of confidentiality.

Convolve, Inc. v. Compaq Computer C01p., 527 F. App'x 910, 924-925 (Feel. Cir. 2013)
Ms. Pawelko and Hasbro bargained for the rights and obligations in the NDA.
The NDA governs the obligations between the parties-not "industry standards" that
are not in the NDA. This is true whether Ms. Pawelko is trying to prove her claims
for breach of contract or misappropriation.

The testimony from experts about

standards of confidentiality and misappropriation in the industry is irrelevant to the
claims under the NDA. Their testimony on industry standards should be stricken as
irrelevant to any issue in dispute.
CONCLUSION
The Court GRANTS Hasbro's Motion for Summary Judgment (ECF No. 113)
on Counts 2, 3, 5, 6, and 7 and DENIES the Motion for Summary Judgment as to
Counts 1 and 4.
The Court SUSTAINS Hasbro's Objection (ECF No. 224) to the Text Order
dated November 19, 2018, and GRANTS Hasbro's Motion to Strike and Exclude
4

Expert Opinions and Testimony Concerning Alleged Industry Standards of
Confidentiality. ECF No. 122.

John J. McConnell, Jr.
United States Dist rict Judge
January 18, 2019

5