Weather Shield Mfg., Inc. v. Drost, Daniel

Filing 142

OPINION & ORDER Denying Dkt. 106 Motion for Summary Judgment by Plaintiff Weather Shield Mfg., Inc. Signed by District Judge James D. Peterson on 08/10/2018. (MWR)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

WEATHER SHIELD MFG., INC.,
Plaintiff,
v.

OPINION & ORDER
17-cv-294-jdp

DANIEL DROST,
Defendant.

After nearly 24 years of employment at plaintiff Weather Shield Mfg., defendant
Daniel Drost accepted a position with Weather Shield’s competitor, Kolbe & Kolbe Millwork
Co. But before he resigned from Weather Shield, Drost copied thousands of documents from
its computer network and transferred them to his personal devices. Drost also surreptitiously
met with his new employer and transferred information from his Weather Shield iCloud
account to a new, Kolbe-provided iPhone. Then, when Drost finally did resign from Weather
Shield, he deleted the contents of his personal drive on the Weather Shield network, the
majority of the files from his work laptop, and notes that he saved on company devices and
company cloud storage.
Upset over the betrayal of a once-loyal employee, Weather Shield brought claims for
misappropriation of trade secrets, computer fraud, breach of the duty of loyalty, and
conversion of property. Dkt. 67. Weather Shield now moves for summary judgment on all
claims. Dkt. 107. Because there are manifestly disputed facts for all claims, the court will
deny Weather Shield’s motion.

ANALYSIS
The broad outline of Drost’s actions, recited above, is undisputed. But the facts
material to each claim are sharply and genuinely disputed. In its analysis of each claim, the
court will discuss any disputed facts that are relevant to its decision.
Summary judgment is appropriate only if there is no genuine dispute as to any
material fact. Fed. R. Civ. P. 56(a). In ruling on a motion for summary judgment, the court
views all facts and draws all inferences in the light most favorable to the non-moving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Summary judgment will not be
granted unless “the record taken as a whole could not lead a rational trier of fact to find for
the non-moving party.” Sarver v. Experian Info. Sols., 390 F.3d 969, 970 (7th Cir. 2004)
(quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).
A. Misappropriation of trade secrets
Trade secret misappropriation is easy to plead but hard to prove. Kuryakyn Holdings,
LLC v. Ciro, LLC, 242 F. Supp. 3d 789, 800 (W.D. Wis. 2017). To succeed on a trade secret
claim, Weather Shield must first prove that the misappropriated information constitutes a
trade secret. And because determining what constitutes a trade secret requires an evaluation
of numerous factors, the existence of a trade secret is ordinarily a question of fact that is
inappropriate for summary judgment. Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342
F.3d 714, 723 (7th Cir. 2003); see also N. Highland Inc. v. Jefferson Mach. & Tool Inc., 2017 WI
75, ¶ 67, 377 Wis. 2d 496, 898 N.W.2d 741. That’s the case here.
Weather Shield claims Drost misappropriated its trade secrets in violation of
Wisconsin’s Uniform Trade Secrets Act (UTSA), Wis. Stat. § 134.90, and the federal Defend

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Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1836. The UTSA supplies the definition of a
trade secret for both claims. Kuryakyn Holdings, 242 F. Supp. 3d at 797. A trade secret is:
[I]nformation, including a formula, pattern, compilation,
program, device, method, technique or process to which all of
the following apply:
1. The information derives independent economic value, actual
or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its disclosure or
use.
2. The information is the subject of efforts to maintain its
secrecy that are reasonable under the circumstances.
Wis. Stat. § 134.90(1)(c).
1. Identification of trade secrets
Weather Shield contends that all strategic plans, customer data, and pricing
information constitute trade secrets as a matter of law. Dkt. 107, at 7; Dkt. 123, at 2. But
such information is only potentially a trade secret. A strategic document may contain specific
information that a plaintiff can identify as a trade secret, but the plan itself is not a trade
secret. Encap, LLC v. Scotts Co., LLC, No. 11-C-685, 2014 WL 4273302, at *3 (E.D. Wis.
Aug. 28, 2014) (collecting cases). Customer lists are trade secrets only if the market consists
of identical or nearly identical products sold to a “small, fixed group of purchasers.”
Minuteman, Inc. v. Alexander, 147 Wis. 2d 842, 434 N.W.2d 773, 779 (1989). And pricing
lists are trade secrets only when prices are based on complicated or unique formulas that the
customers do not know about, or when the customers sign a contract prohibiting them from
disclosing the price. Burbank Grease Servs., LLC v. Sokolowski, 2005 WI App 28, ¶ 22, 278 Wis.
2d 698, 693 N.W.2d 89 (collecting cases), aff’d in part, rev’d in part on other grounds, 2006 WI
103.

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Here, Weather Shield does not identify what specific information within its strategic
planning documents contains trade secrets. Weather Shield does not explain exactly how
large its target market of dealers is. And although Weather Shield mentions a “discount
conversion formula” related to its prices, Weather Shield does not provide the formula nor
does Weather Shield describe it in detail. The claim that dealers maintained the
confidentiality of Weather Shield’s pricing is disputed. Dkt. 124, ¶ 44.
Furthermore, it is not enough to claim that the documents fall into broad categories of
confidential information. The party claiming trade secrets protection must identify the
specific information that it alleges contains trade secrets, and then show that the identified
information is valuable because it is not generally known and cannot be readily ascertained
by proper means. IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583 (7th Cir. 2002).
Weather Shield has not met this burden. Several of its identified trade secrets—such as
“internal meeting notes”—are too vague for the court to determine if they meet the statutory
definition. Dkt. 107, at 5. Weather Shield elaborates upon this description in its proposed
findings, but the longer description is no more specific: “meeting notes that highlight next
steps and persons responsible for certain Weather Shield’s strategic initiatives.” Dkt. 108, ¶
167(e). It is Weather Shield’s responsibility, not the court’s, to pin down the specific
information that Weather Shield considers a trade secret. IDX Sys, 285 F.3d at 583.
2. Reasonable precautions to maintain secrecy
Weather Shield must show it took reasonable precautions to maintain the secrecy of
its information. “[O]nly in an extreme case can what is a ‘reasonable’ precaution be
determined on a motion for summary judgment.” Rockwell Graphic Sys., Inc. v. DEV Indus.,
Inc., 925 F.2d 174, 179 (7th Cir. 1991). Although absolute secrecy is not required, the

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precautions must go beyond “normal business practices.” Starsurgical Inc. v. Aperta, LLC, 40
F. Supp. 3d 1069, 1082 (E.D. Wis. 2014). And though confidentiality agreements may be
evidence of a trade secret, such agreements do not alone establish reasonable precautions.
Fail-Safe, LLC v. A.O. Smith Corp., 674 F.3d 889, 893 (7th Cir. 2012) (citing ECT Int’l, Inc. v.
Zwerlein, 228 Wis. 2d 343, 597 N.W.2d 479, 484 (Ct. App. 1999)).
The reasonableness of Weather Shield’s precautions is disputed. Dkt. 124, ¶¶ 61–86.
Many of Weather Shield’s precautions consist of nothing more than standard business
practices, such as operating a password-protected computer system, requiring terminated
employees to return documents, and requiring digital customers to agree to boilerplate terms
and conditions. Weather Shield also had a confidentiality agreement, an employee handbook,
and an electronic communications policy. But Drost did not sign the confidentiality
agreement, Drost disputes whether the handbook was actually enforced, and Drost disputes
receiving the communications policy. Viewing the facts in the light most favorable to Drost, a
reasonable factfinder could find that Weather Shield did not make appropriate efforts to
maintain secrecy.
Because Weather Shield has not identified with particularity the information that it
alleges meets the statutory definition of a trade secret, and because the parties genuinely
dispute whether reasonable precautions were taken to protect the secrecy of Weather Shield’s
information, summary judgment is denied on the trade secrets claims.
B. Breach of duty of loyalty
When a claim for breach of a duty of loyalty is made against an employee, the first
question is whether the employee has a fiduciary relationship with the employer. Burbank
Grease Servs., LLC v. Sokolowski, 2006 WI 103, ¶ 42, 294 Wis. 2d 274, 717 N.W.2d 781. The

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parties agree that Drost was not an officer of Weather Shield. Dkt. 125, ¶ 4. Therefore, Drost
had a fiduciary relationship, and therefore owed a duty of loyalty, only if he was a “key
employee” of Weather Shield. Burbank Grease Servs., 2006 WI 103, ¶ 42. Under Wisconsin
law, a key employee is one whose job responsibilities are of such a nature, in the context of
the employer’s business, that they may be used to harm the employer. InfoCorp, LLC v. Hunt,
2010 WI App 3, ¶ 31, 323 Wis. 2d 45, 780 N.W.2d 178. A key employee breaches his duty
of loyalty if, during the course of employment, he uses his employer’s confidential
information to aid a competitor. Modern Materials, Inc. v. Advanced Tooling Specialists, Inc., 206
Wis. 2d 435, 557 N.W.2d 835, 839 (Ct. App. 1996).
Here, the undisputed facts show that Drost was a key employee of Weather Shield
because his job responsibilities gave him access to confidential information that, if shared
with a competitor, could harm Weather Shield. E.g. Dkt. 124, ¶¶ 23–25, 100. And while
employed with Weather Shield, Drost met with Robert Kasten, a Kolbe officer.
Dkt. 124, ¶¶ 102, 104–107; Dkt. 116 (Drost Dep. 102:3–103:24, 124:3–129:20). At that
meeting, Drost and Kasten discussed Firerock, a potential Weather Shield customer that
Drost met with the day before. Drost also received a new phone from Kolbe, and the Kolbe
IT staff connected it to Drost’s Weather Shield iCloud account.
But that is where the undisputed facts end. Weather Shield has not explained what
information was stored in the iCloud account, nor shown that it contained confidential
material. Weather Shield alleges that Drost used the meeting to share the details of his
negotiations with Firerock, but it cannot point to specific confidential information that Drost
shared. A reasonable factfinder could determine that, despite the appearance of impropriety,
Drost’s meeting with Kasten was limited to benign new-employee matters.

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C. Computer Fraud and Abuse Act
To have a right of action under the Computer Fraud and Abuse Act (CFAA), Weather
Shield must establish that it suffered at least $5,000 in losses during a one-year period as a
result of Drost’s actions. 18 U.S.C. §§ 1030(g), 1030(c)(4)(A)(i)(I). “Loss” is defined by the
CFAA as “any reasonable cost to any victim, including the cost of responding to an offense,
conducting a damage assessment, and restoring the data, program, system, or information to
its condition prior to the offense.” Id. § 1030(e)(11). Loss includes the reasonable costs of
investigating the offense, irrespective of whether there was an interruption of service. Brown
Jordan Int’l, Inc. v. Carmicle, 846 F.3d 1167, 1173–74 (11th Cir. 2017). But loss does not
include the costs of litigating a CFAA claim against the alleged offender. NCMIC Fin. Corp. v.
Artino, 638 F. Supp. 2d 1042, 1065 (S.D. Iowa 2009) (citing Wilson v. Moreau, 440 F. Supp.
2d 81, 110 (D.R.I. 2006), aff’d, 492 F.3d 50 (1st Cir. 2007)).
Drost asks the court to adopt the rule espoused in Jarosch v. Am. Family Mut. Ins. Co.,
837 F. Supp. 2d 980 (E.D. Wis. 2011), which states that loss must relate to the impairment
or unavailability of data. Id. at 1022–23. But the restrictive definition in Jarosch doesn’t
adequately reflect the broad statutory language which defines loss to include “any reasonable
cost to any victim, including the cost of responding to an offense.” 18 U.S.C. § 1030(e)(11).
And although the Seventh Circuit has not ruled on this issue, other appellate courts have
held that an interruption of service is unnecessary. Brown Jordan, 846 F.3d at 1173 (citing
cases); see also Facebook, Inc. v. Power Ventures, Inc., 844 F.3d 1058, 1066 (9th Cir. 2016) (lack
of damage to computer system was not a bar to claiming internal investigation costs as loss).
So to meet the $5,000 threshold, Weather Shield must identify the costs—apart from
this lawsuit—that it spent to investigate Drost’s actions, and then it must prove that those

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costs were reasonable. Weather Shield’s only evidence of loss is an invoice from Digital
Intelligence, Inc. Dkt. 112-1. Many, if not most, of the items on the invoice are expenses that
Weather Shield incurred as a result of this litigation. For example, the invoice includes
billings for communicating with Weather Shield’s counsel, drafting expert reports, and
reviewing items received in discovery. At this point, the court cannot tell whether at least
$5,000 from this invoice falls under the CFAA’s definition of loss, so the court cannot grant
summary judgment in Weather Shield’s favor.
D. Wisconsin Computer Crimes Act
Weather Shield contends that Drost violated the Wisconsin Computer Crimes Act
(WCCA) when (1) he downloaded confidential files before his resignation and took the files
to Kolbe; and (2) he deleted his personal drive from the Weather Shield laptop without
authorization. The WCCA makes it illegal to “willfully, knowingly and without
authorization” modify, destroy, take possession of, or copy data. Wis. Stat. § 943.70(2)(a).
To violate the WCCA, an offender must know that his actions are unauthorized.
Wis. Criminal Jury Instructions § 1504.
The Wisconsin Supreme Court has limited the WCCA’s applicability in cases against
former employees. Burbank Grease Servs., 2006 WI 103. In Burbank Grease, an employee
accepted a new job, obtained confidential information from his employer’s computer system
before resigning, and then disclosed the information to his new employer. Id., ¶ 6. The court
held that the WCCA did not apply because although the employee was not authorized to
disclose the information, he had been authorized to obtain the information in the first
instance. Id., ¶ 39.

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Weather Shield’s first claim, that Drost downloaded files before resigning, fails under
Burbank Grease. For Weather Shield’s second claim, that Drost deleted work files, the parties
dispute whether Drost had permission to delete the files. Dkt 124, ¶¶ 152–153. Because
Drost’s authorization is disputed, and because Weather Shield has not shown that Drost
knew that his actions were unauthorized, the court denies summary judgment on the WCCA
claim.
E. Conversion
Weather Shield’s final claim is for common law conversion. Conversion in Wisconsin
is limited to tangible property, Maryland Staffing Servs., Inc. v. Manpower, Inc., 936 F. Supp.
1494, 1507 (E.D. Wis. 1996), and the diversion of money. Methodist Manor of Waukesha, Inc.
v. Martin, 2002 WI App 130, ¶ 7, 255 Wis. 2d 707, 647 N.W.2d 409.
Weather Shield’s primary claim is that Drost misappropriated its intellectual property.
That action fails to state a claim for conversion under Wisconsin law. Weather Shield argues
that Drost also took hard copies of documents, but that would not entitle Weather Shield to
claim the intangible information printed on the documents. If Weather Shield intends to
claim damages for the paper and toner used to print these documents, Weather Shield has
not developed that claim. Weather Shield also argues that Drost took USB drives belonging
to Weather Shield. Again, this would not entitle Weather Shield to claim any intangible
information stored on the USB drives. As to Weather Shield’s claim to the USB drives
themselves, Drost disputes that he was required to return them. Dkt. 124, ¶ 71.
Weather Shield also claims that Drost misused company funds on two occasions.
Id., ¶¶ 131–132. First, Weather Shield alleges that Drost took his family with him on a
business trip to San Diego, then claimed company reimbursement for his family’s vacation

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costs. Second, Weather Shield alleges that Drost used company funds to purchase tickets to
events at local sporting clubs. Because the details of both events are disputed, the court will
deny summary judgment on these claims.

ORDER
IT IS ORDERED that plaintiff Weather Shield Mfg, Inc.’s motion for summary
judgment, Dkt. 106, is DENIED.
Entered August 10, 2018.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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