Excel Manufacturing, Inc. v. Todd Wondrow ( 2016 )

This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2014).
STATE OF MINNESOTA
IN COURT OF APPEALS
A15-1325
Excel Manufacturing, Inc.,
Appellant,
vs.
Todd Wondrow, et al.,
Respondents.
Filed April 18, 2016
Affirmed
Randall, Judge *
Winona County District Court
File No. 85-CV-15-502
Patrick W. Michenfelder, Gries Lenhardt Michenfelder Allen, PLLP, St. Michael,
Minnesota (for appellant)
Kay Nord Hunt, Keith J. Broady, Lommen Abdo, P.A., Minneapolis, Minnesota (for
respondents)
Considered and decided by Rodenberg, Presiding Judge; Hooten, Judge; and
Randall, Judge.
*
Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to
Minn. Const. art. VI, § 10.
UNPUBLISHED OPINION
RANDALL, Judge
Appellant challenges the district court’s summary-judgment dismissal of its lawsuit.
We affirm.
FACTS
Respondents Todd Wondrow and Aaron Krueger are former employees of appellant
Excel Manufacturing Inc. (Excel). Excel is a Minnesota business that designs and
manufactures horizontal balers for the recycling industry. Excel was founded in 1991 by
Bryan Fisher. Fisher hired Wondrow in 2005 to serve as President of Excel. Wondrow
hired Krueger in 2005 to serve as the company’s sales manager. Fisher died in 2010, and
his son, Andrew Archer, became the new owner and CEO of Excel. Archer fired Wondrow
in June 2010. Krueger resigned from Excel in March 2011. Shortly after Wondrow left
Excel, respondent Maren Engineering Corp. (Maren) hired him to serve as its president.
Maren is an Illinois company that also designs and manufactures horizontal balers for the
recycling industry. Maren later hired Krueger to serve as its director of sales and
marketing.
In January 2012, Maren introduced a new baler called the ProPAK60. After
learning of the ProPAK60, Excel brought a lawsuit against Maren, Wondrow, and Krueger,
alleging that the ProPAK60 was virtually identical to Excel’s EX63 baler and that Maren
relied on Excel’s trade secrets and other confidential information provided by Wondrow
and Krueger to develop the ProPAK60. The district court dismissed the lawsuit without
prejudice in September 2012.
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Excel served a second complaint on Maren, Wondrow, and Krueger on January 30,
2015. Excel’s complaint alleged that during the course of employment at Excel,
Wondrow and Krueger’s duties and responsibilities required
them to be exposed to and gain knowledge of [Excel’s]
confidential, proprietary and trade secret business information
including, but not necessarily limited to, books, records, notes
and other information relative to customers, their needs and the
products used by them; customer lists, supplier lists and
distributor lists; product sales and other performance
information; business policies; financial information, sales
forecasts, accounts payable and receivable; engineering prints,
product specifications, pricing information, marketing plans,
customer orders, models, product manuals, equipment, bills of
materials, nesting information, and business and
manufacturing methods and processes.
Excel alleged that Wondrow and Krueger were exposed to, and gained knowledge of “the
EX62/63 design prints, product specifications, pricing information, marketing plans and
potential customers, product manuals, manufacturing methods and processes, supplier lists
and distributor lists, product performance information, bills of materials, and nesting
information.” Excel stated that it put measures in place to protect its “confidential,
proprietary and trade secret information,” including
allowing access to such information only on a need-to-know
basis, requiring employees to sign confidentiality agreements,
requiring employees to use a unique user name and password
to access information maintained on [Excel’s] computers and
servers, keeping documents in locked offices and in locked
cabinets, and keeping documents in a safe-deposit box at
Eastwood Bank in St. Charles, Minnesota.
In its complaint, Excel further alleged that after Wondrow and Krueger departed,
Excel discovered that employment agreements and confidentiality agreements they had
signed were missing from their personnel files. Excel asserted that “[u]pon information
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and belief, those documents have been removed from Wondrow’s and Krueger’s personnel
files by Wondrow and/or Krueger or at their direction.”
Excel asserted that Maren’s ProPAK60 is “virtually identical to [Excel’s] EX63
baler.” Excel alleged that Maren “could not have independently designed and
manufactured a horizontal two ram closed-door baler with such uncanny similarities to the
EX62/63 in such a short amount of time without the benefit of [Excel’s] confidential,
proprietary and trade secret information relative to the EX62/63.” Lastly, Excel’s
complaint alleged that, “[b]ased upon the foregoing, the ProPAK60 was engineered and
manufactured based on confidential information and trade secrets stolen by Wondrow and
Krueger from Excel Manufacturing.”
Based on these facts, Excel alleged misappropriation of trade secrets under the
Minnesota Uniform Trade Secrets Act (MUTSA), misappropriation of confidential
information, conversion, breach of the employment agreements, breach of the
confidentiality agreements, tortious interference with contract, unfair competition, unjust
enrichment, and civil conspiracy.
In their joint answer, respondents stated that Excel’s baler “has not undergone a
substantial modification or change since the mid-1990s; that the Excel baler and how it
operates is generally known in the marketplace, is readily ascertainable, there are no patents
for the Excel baler and the information is not novel; that since the mid-1990s substantial
advances have been made in the design, manufacture and operation of balers; [and] that the
Excel baler has become out of date.” Respondents further stated that “any alleged secrets
or confidential information of the Excel baler are generally known and readily
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ascertainable from a cursory inspection of the Excel baler.” Respondents attached a
printout of Excel’s web page, which provided photographs and general specifications for
Excel’s baler model EX62 and model EX63.
Respondents moved to dismiss on the grounds that the complaint failed to state a
claim upon which relief could be granted. Respondents also moved, in the alternative, for
summary judgment. Respondents submitted affidavits from Wondrow, Krueger, and
Miranda Muller, a former Excel human resources employee. In his affidavit, Wondrow
stated that he and Fisher were personal friends and that “[n]either Bryan Fisher nor anyone
at Excel ever asked me to sign any employment agreement or [confidentiality] agreement
and I do not recall ever signing such agreements.” Krueger stated that Wondrow hired him
and that “[n]either Todd Wondrow nor anyone at Excel ever asked me to sign any
employment agreement or [confidentiality] agreement and I never signed such
agreements.” Muller stated that Excel’s employee personnel files were kept in her office
and she did “not recall seeing an employment contract or confidentiality agreement signed
by Todd Wondrow or by Aaron Krueger.” Excel submitted an affidavit from Archer in
which he repeated verbatim many of the allegations contained in Excel’s complaint.
The district court treated respondents’ motion as a motion for summary judgment.
The district court granted summary judgment and dismissed all of Excel’s claims with
prejudice. Excel appeals.
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DECISION
I.
Excel argues that the district court erred by converting respondents’ motion to
dismiss under rule 12 into a summary-judgment motion under rule 56. Under the rules of
civil procedure,
[i]f, on a motion asserting the defense that the pleading fails to
state a claim upon which relief can be granted, matters outside
the pleading are presented to and not excluded by the court, the
motion shall be treated as one for summary judgment and
disposed of as provided in Rule 56, and all parties shall be
given reasonable opportunity to present all material made
pertinent to such a motion by Rule 56.
Minn. R. Civ. P. 12.02. We review a district court’s compliance with rule 12.02 de novo.
See Shamrock Dev., Inc. v. Smith, 754 N.W.2d 377, 382 (Minn. 2008) (stating that appellate
courts “review the construction and application of the Minnesota Rules of Civil Procedure
de novo”).
Excel argues that “the district court improperly applied a Rule 56 analysis and
dismissed [its] claims before any discovery could be conducted,” and “[b]ecause Excel was
not permitted to conduct any discovery, it was not permitted a ‘reasonable opportunity to
present all relevant materials’ and therefore should . . . have been judged by rule 12
standards.” But respondents put Excel on notice that they were seeking summary judgment
in the alternative, and both parties submitted affidavits.
Minn. R. Civ. P. 56.06 states:
Should it appear from the affidavits of a party opposing the
[summary-judgment] motion that the party cannot for reasons
stated present, by affidavit, facts essential to justify the party’s
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opposition, the court may refuse the application for judgment
or may order a continuance to permit affidavits to be obtained
or depositions to be taken or discovery to be had or may make
such other order as is just.
“An affidavit filed pursuant to rule 56.06 must be specific about the evidence expected, the
source of discovery necessary to obtain the evidence, and the reasons for the failure to
complete discovery to date.” Molde v. CitiMortgage, Inc., 781 N.W.2d 36, 45 (Minn. App.
2010) (quotation omitted). When determining whether to grant a continuance to allow
discovery prior to a determination of a summary-judgment motion, “the court considers
first, whether the moving party has been diligent in obtaining or seeking discovery and,
second, whether the moving party seeks further discovery with the good faith belief that
material facts will be uncovered, or is merely engaging in a fishing expedition.” Cargill
Inc. v. Jorgenson Farms, 719 N.W.2d 226, 231 (Minn. App. 2006) (quotation omitted).
Even though Excel knew respondents were seeking summary judgment, and both
parties submitted matters outside the pleadings, Excel did not seek a continuance and did
not submit an affidavit providing reasons why it could not present facts essential to justify
its opposition to summary judgment. See Molde, 781 N.W.2d at 45 (stating that “failure to
submit . . . an affidavit [under rule 56.06], by itself, justifies the district court’s decision to
rule on the motion without granting relief under rule 56.06”). Moreover, on appeal Excel
does not identify what facts it believes it could have uncovered that would have been
pertinent to the summary-judgment determination. In sum, Excel has not demonstrated
that the district court erred. The district court properly treated respondents’ motion as a
motion for summary judgment.
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II.
Excel argues that the district court should not have granted summary judgment. “A
motion for summary judgment shall be granted when the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue of material fact and that either party is entitled to a judgment as a
matter of law.” Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993). “[Appellate courts]
review a district court’s summary judgment decision de novo. In doing so, [they]
determine whether the district court properly applied the law and whether there are genuine
issues of material fact that preclude summary judgment.” Riverview Muir Doran, LLC v.
JADT Dev. Grp., LLC, 790 N.W.2d 167, 170 (Minn. 2010) (citation omitted). “On appeal,
the reviewing court must view the evidence in the light most favorable to the party against
whom judgment was granted.” Fabio, 504 N.W.2d at 761. There is no genuine issue of
material fact for trial “when the nonmoving party presents evidence which merely creates
a metaphysical doubt as to a factual issue and which is not sufficiently probative with
respect to an essential element of the nonmoving party’s case to permit reasonable persons
to draw different conclusions.” DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn.1997). “[T]he
party resisting summary judgment must do more than rest on mere averments.” Id.MUTSA
MUTSA prohibits the improper acquisition, use or disclosure of trade secrets.
Minn. Stat. §§ 325C.01, subd. 3, .02-.03 (2014). Respondents argue that summary
judgment was appropriate because Excel failed to establish the existence of a trade secret.
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“Trade secret” means information, including a formula,
pattern, compilation, program, device, method, technique, or
process, that:
(i) 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, and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Minn. Stat. § 325C.01, subd. 5 (2014).
Excel presented a laundry list of items related to the EX63, such as the design prints,
product specifications, pricing information, marketing plans and potential customers.
Excel also alleged that Maren’s ProPAK60 was “virtually identical” to the EX63. But
Excel never specified exactly which items were trade secrets or how any such items
constituted trade secrets under the statute. General categories of information are not
sufficiently specific to qualify as trade secrets under the statute. See Electro-Craft Corp.
v. Controlled Motion, Inc., 332 N.W.2d 890, 898 (Minn. 1983) (concluding that district
court findings of “trade secrets in the general ‘design procedures’ for [a] brushless motor”
lacked sufficient specificity and that “[t]his lack of clarity is fatal to [plaintiff’s] claim”);
see also Luigino’s, Inc. v. Peterson, 317 F.3d 909, 912 (8th Cir. 2003) (concluding that
“research and development information,” “financial information,” and “income statements
and documents reflecting volume and sales margins” were “merely general categories of
information, insufficiently specific to qualify as trade secrets”). Excel presented only
general categories of information, which do not qualify as trade secrets.
Moreover, to constitute a trade secret, information must “not be generally known
or readily ascertainable.” Electro-Craft Corp., 332 N.W.2d at 898. Respondents submitted
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evidence that the EX63 product specifications were online and generally available. Excel
did not present any evidence to create a genuine issue of material fact on this issue. See
DLH, Inc., 566 N.W.2d at 71 (“[T]he party resisting summary judgment must do more than
rest on mere averments.”). Summary judgment on this claim was appropriate. 1
Breach of Employment and Confidentiality Agreements
Excel stated in its complaint that, after Wondrow and Krueger left the company,
their personnel files did not contain employment and confidentiality agreements, and that
“[u]pon information and belief, those documents have been removed from Wondrow’s and
Krueger’s personnel files by Wondrow and/or Krueger or at their direction.” In support of
their motion to dismiss, respondents submitted affidavits from Wondrow and Krueger
stating that they did not sign employment or confidentiality agreements. Excel did not
submit any evidence to dispute Wondrow’s and Krueger’s statements to create a genuine
issue of material fact on these claims. “To forestall summary judgment, the nonmoving
party must do more than rely on unverified or conclusionary allegations in the pleadings
or postulate evidence which might be produced at trial.” W.J.L. v. Bugge, 573 N.W.2d
677, 680 (Minn. 1998) (quotation omitted). Excel failed to present more than the
1
Respondents also argue that summary judgment on Excel’s MUTSA claim was proper
because it was time-barred. Minn. Stat. § 325C.06 (2014), states: “An action for
misappropriation must be brought within three years after the misappropriation is
discovered or by the exercise of reasonable diligence should have been discovered.” Excel
presented an affidavit from Archer, who stated that he “did not become aware of the
manufacture and sale of the ProPAK60 until after January 2012.” Because Archer’s
affidavit creates a genuine issue of material fact as to whether Excel’s MUTSA claim is
time-barred, we do not affirm summary judgment on the MUTSA claim on this basis.
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conclusory allegations in its complaint. Summary judgment was appropriate on the breach-
of-contract claims.
Tortious Interference With Contract
“A cause of action for wrongful interference with a contractual relationship requires:
(1) the existence of a contract; (2) the alleged wrongdoer’s knowledge of the contract;
(3) intentional procurement of its breach; (4) without justification; and (5) damages.”
Kjesbo v. Ricks, 517 N.W.2d 585, 588 (Minn. 1994) (quotation omitted). Excel alleged
that Maren interfered with Wondrow’s and Krueger’s employment and confidentiality
agreements. Because Excel did not present evidence sufficient to establish an issue of fact
as to whether those contracts existed, summary judgment was appropriate on this claim.
Misappropriation of Confidential Information, Conversion, Unfair Competition, Unjust
Enrichment, and Civil Conspiracy
Excel failed to present sufficient evidence to establish a genuine issue of material
fact with respect to these claims. In his affidavit, Krueger stated: “During my employment
with Excel and Maren, my responsibilities were always in sales and never included any
work on the design or manufacture of balers.” Wondrow stated in his affidavit: “Neither
I nor anyone else on the team [at Maren] used any confidential, proprietary or trade secret
information from Excel or any other baler manufacturer in the design and manufacture of
the ProPAK60.” In response, Archer’s affidavit merely restated the allegations from the
complaint and added:
Based on my years of experience in the baler industry,
including but not limited to the engineering and manufacturing
of industrial balers as well as the circumstances described
herein, I believe the ProPAK60 was engineered and
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manufactured based on confidential information and trade
secrets misappropriated by Wondrow, Krueger, and [Maren]
from [Excel].
Archer’s statements amount to unverified and conclusory allegations. See W.J.L., 573
N.W.2d at 680. Moreover, “affidavits [must] be based on personal knowledge.” City of
Faribault v. One 1976 Buick LeSabre, 408 N.W.2d 584, 586 (Minn. App. 1987); see also
Minn. R. Civ. P. 56.05 (“Supporting and opposing affidavits shall be made on personal
knowledge, shall set forth such facts as would be admissible in evidence, and shall show
affirmatively that the affiant is competent to testify to the matters stated therein.”). Archer
does not claim personal knowledge as to what information Wondrow and Krueger had
access to when they worked at Excel, whether Wondrow or Krueger took confidential
information with them when they left Excel, or whether they or anyone else used Excel’s
confidential information to engineer and manufacture the ProPAK60. The allegations
contained in Archer’s affidavit amount to speculation. “[M]ere speculation, without some
concrete evidence, is not enough to avoid summary judgment.” Osborne v. Twin Town
Bowl, Inc., 749 N.W.2d 367, 371 (Minn. 2008) (quotation omitted). Again, summary
judgment on these issues was appropriate.
Affirmed.
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