Boehm v. Black Diamond Casino Events, LLC , 116 N.E.3d 704 ( 2018 )

[Cite as Boehm v. Black Diamond Casino Events, LLC, 2018-Ohio-2379.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
ROGER BOEHM, JR., : APPEAL NO. C-170339
TRIAL NO. A-1406309
Plaintiff/Third-Party :
Defendant-Appellee, O P I N I O N.
:
vs.
:
BLACK DIAMOND CASINO EVENTS,
LLC, :
Intervenor/Third-Party
Plaintiff-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Affirmed
Date of Judgment Entry on Appeal: June 20, 2018
Eugene R. Butler, for Plaintiff/Third-Party Defendant-Appellee,
Edward J. Collins and Zachary D. Bahorik, for Intervenor/Third-Party Plaintiff-
Appellant.
OHIO FIRST DISTRICT COURT OF APPEALS
M ILLER , Judge.
{¶1} Intervenor/third-party plaintiff-appellant Black Diamond Casino Events,
LLC (“Black Diamond”) appeals the decision of the trial court to grant plaintiff/third-
party defendant-appellee Roger Boehm, Jr.’s (“Boehm”) motion for involuntary
dismissal under Civ.R. 41(B)(2). For the following reasons, we affirm.
Facts and Procedural History
{¶2} Black Diamond operates a casino-games-themed events business for
corporate and private parties. Roger Boehm, Jr., a former employee of Black Diamond,
approached the owners about buying two of the four members’ interests in Black
Diamond. In connection with his due diligence, Boehm signed a nondisclosure
agreement to review Black Diamond’s business records. Boehm obtained Black
Diamond customer information, tax returns, financial statements, and vendor
information. Boehm elected to move forward on the purchase of the two members’
interests, but the members refused to sell. Boehm commenced this action, alleging that
the members breached an oral agreement to sell him their membership interests. Black
Diamond intervened, asserting counterclaims for breach of contract and violations of
the Ohio Uniform Trade Secrets Act. Boehm ultimately dismissed his complaint. Black
Diamond moved for partial summary judgment on its breach-of-contract claim, which
was granted. The trial court held a bench trial on the trade-secrets claim and rendered
an oral judgment of dismissal under Civ.R. 41(B)(2) finding in favor of Boehm at the
conclusion of Black Diamond’s case.
Analysis
{¶3} The dismissal of a plaintiff’s case under Civ.R. 41(B)(2) during a bench
trial allows the trial court to weigh the evidence, resolve any conflicts therein, and
render judgment for the defendant at the close of the plaintiff’s case if the plaintiff
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OHIO FIRST DISTRICT COURT OF APPEALS
has shown no right to relief. Bank One, Dayton, N.A. v. Doughman, 59 Ohio App. 3d
60, 63, 571 N.E.2d 442 (1st Dist.1988). On appeal, the dismissal will be set aside
only if erroneous as a matter of law or against the manifest weight of the evidence.
Id.
Black Diamond’s Client List and Financial Data are Trade Secrets
{¶4} Black Diamond presents three assignments of error for review. In its
first assignment of error, Black Diamond contends that the trial court erred as a
matter of law in finding that no trade secrets existed. A trade secret is defined as
information, including the whole or any portion or phase of any scientific
or technical information, design, process, procedure, formula, pattern,
compilation, program, device, method, technique, or improvement, or
any business information or plans, financial information, or listing of
names, addresses, or telephone numbers, that satisfies both of the
following:
(1) It 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) It is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
R.C. 1333.61(D). The following factors should be considered when analyzing a trade-
secrets claim:
(1) The extent to which the information is known outside the business;
(2) the extent to which it is known to those inside the business, i.e., by
the employees; (3) the precautions taken by the holder of the trade secret
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to guard the secrecy of the information; (4) the savings effected and the
value to the holder in having the information as against competitors; (5)
the amount of effort or money expended in obtaining and developing the
information; and (6) the amount of time and expense it would take for
others to acquire and duplicate the information.
State ex rel. The Plain Dealer v. Ohio Dept. of Ins., 80 Ohio St. 3d 513, 687 N.E.2d 661
(1997), citing Pyromatics, Inc. v. Petruziello, 7 Ohio App. 3d 131, 134-135, 454 N.E.2d
588 (8th Dist.1983).
{¶5} Here, Black Diamond claims that its client list, tax returns, and quarterly
profit and loss statements are trade secrets under the Ohio Revised Code. “An entity
claiming trade secret status bears the burden to identify and demonstrate that the
material is included in categories of protected information under the statute and
additionally must take some active steps to maintain its secrecy.” State ex rel. Besser v.
Ohio State Univ., 89 Ohio St. 3d 396, 732 N.E.2d 373 (2000).
{¶6} Testimony established that Black Diamond’s client list, which the parties
also referred to as an event bid calendar, was not known to the public or those outside
of the business. “A customer list is an intangible asset that is presumptively a trade
secret when the owner of the list takes measures to prevent its disclosure in the
ordinary course of business to persons other than those selected by the owner.” State
ex rel. Lucas Cty. Bd. of Commrs. v. Ohio Environmental Protection Agency, 88 Ohio
St.3d 166, 724 N.E.2d 411 (2000). The client list was primarily on a password-
protected computer, though some information pertaining to clients was occasionally
posted on clipboards inside the business’s warehouse that employees could see in order
to prepare for that client’s event. Evidence established that the complete client list was
not accessible to nonemployees unless a nondisclosure agreement was signed. Repeat
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OHIO FIRST DISTRICT COURT OF APPEALS
clients made up approximately 25 to 30 percent of Black Diamond’s clientele.
Testimony established that at one time a former member of Black Diamond opened up
a competing business and Black Diamond lost approximately 25 to 30 percent of its
business revenue, in part, through the loss of clients. Black Diamond obtained a
judgment against the former member for a misappropriation of trade secrets, including
the client list.
{¶7} With respect to the tax returns and quarterly profit-and-loss statements,
evidence established that this financial information was not known to the public or
those outside the business. The financial information was also not generally accessible
by employees of Black Diamond, except for those employees who helped create it. The
financial information was primarily on a password-protected computer, and the
financial records were not available to anyone unless a nondisclosure agreement was
signed. Testimony established that the judgment against the former member of Black
Diamond was also based on the loss of the financial information. Accordingly, we find
that Black Diamond’s client list, tax returns, and quarterly profit-and-loss statements
are trade secrets under the Ohio Revised Code. We sustain Black Diamond’s first
assignment of error.
Damages Are Not Necessary To Establish Misappropriation
{¶8} In its second assignment of error, Black Diamond claims that the trial
court erred as a matter of law in requiring proof of damages for a claim of
misappropriation of trade secrets. Under R.C. 1333.61, “misappropriation” means any
of the following:
(1) Acquisition of a trade secret of another by a person who knows or has
reason to know that the trade secret was acquired by improper means;
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(2) Disclosure or use of a trade secret of another without the express or
implied consent of the other person by a person who did any of the
following:
(a) Used improper means to acquire knowledge of the trade
secret;
(b) At the time of disclosure or use, knew or had reason to know
that the knowledge of the trade secret that the person acquired
was derived from or through a person who had utilized improper
means to acquire it, was acquired under circumstances giving rise
to a duty to maintain its secrecy or limit its use, or was derived
from or through a person who owed a duty to the person seeking
relief to maintain its secrecy or limit its use;
(c) Before a material change of their position, knew or had reason
to know that it was a trade secret and that knowledge of it had
been acquired by accident or mistake.
Misappropriation of trade secrets is a recognized tort in Ohio for which damages may
be obtained. Fred Siegel Co., L.P.A. v. Arter & Hadden, 85 Ohio St. 3d 171, 707 N.E.2d
853 (1999), citing Wiebold Studio, Inc. v. Old World Restorations, Inc., 19 Ohio App. 3d
246, 484 N.E.2d 280 (1st Dist.1985); see R.C. 1333.63. But, as evident from the text of
the statute, proof of damages is not an element for a valid claim of misappropriation.
Therefore, we sustain Black Diamond’s second assignment of error.
Misappropriations Occurred, but the Trial Court Was Correct Not To
Afford Additional Relief beyond the Return of the Trade Secrets
{¶9} In its third assignment of error, Black Diamond claims that the trial
court erred in finding that no misappropriation of trade secrets occurred, as that
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OHIO FIRST DISTRICT COURT OF APPEALS
finding was contrary to the manifest weight of the evidence. Black Diamond argues
that misappropriations occurred when Boehm refused to return some of Black
Diamond’s records for over a year and again when Boehm shared confidential
information covered under the nondisclosure agreement with an employee of Black
Diamond, Drew Winter, and with his accountant, Ronald Evans.
{¶10} In the first instance, Boehm retained the records to prepare for litigation
and later returned them, after being ordered to do so by the trial court. It is undisputed
that Boehm initially acquired the records properly as part of his due diligence and
pursuant to his nondisclosure agreement with Black Diamond. Black Diamond claims
that retaining the records, however, violated a clause in the nondisclosure agreement
regarding the return of confidential information, and was therefore an improper use of
a trade secret. The “use of trade secrets of another without the express or implied
consent of the other person by a person who * * * [u]sed improper means to acquire
knowledge of the trade secret” is a misappropriation. “Improper means” includes * * *
breach * * * of a duty to maintain secrecy * * *. R.C. 1333.61(A). Boehm breached his
duty to maintain secrecy of the records by retaining them for himself beyond the period
for which he had Black Diamond’s consent. Boehm’s retention of records that he had
an obligation to return, even though he kept them to prepare for litigation, was a
misappropriation under Ohio’s Uniform Trade Secrets Act.
{¶11} In the second instance, Boehm denied sharing the records with Drew
Winter. There is no evidence in the record that Boehm shared the records with Winter.
Black Diamond only presented evidence that Boehm discussed an audit of the company
by the Ohio Department of Job and Family Services, which Boehm argued was a public
record. The trial court agreed with Boehm. There is no indication that the trial court so
lost its way in weighing the evidence presented with regards to Winter as to cause a
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OHIO FIRST DISTRICT COURT OF APPEALS
manifest miscarriage of justice warranting a reversal. See State v. Thompkins, 78 Ohio
St.3d 380, 387, 678 N.E.2d 541 (1997), citing State v. Martin, 20 Ohio App. 3d 172,
175, 485 N.E.2d 717 (1st Dist.1983).
{¶12} Boehm admitted to sharing the records with his accountant as part of his
due diligence and claimed his accountant did not retain a copy of the documents. This
was permitted so long as Boehm had his accountant also sign a nondisclosure
agreement. This was a technical misappropriation under Ohio’s Uniform Trade Secrets
Act. Boehm shared records that he was under obligation to keep secret without
obtaining an executed nondisclosure agreement. Accordingly, we sustain Black
Diamond’s third assignment of error in part.
{¶13} While we have sustained Black Diamond’s three assignments of error,
Black Diamond has still not demonstrated a right to relief warranting a reversal of the
trial court’s judgment. The trial court found that Black Diamond was no longer entitled
to injunctive relief under R.C. 1333.62, because Boehm had already returned the
financial records during the litigation, and there was no other action to enjoin. The trial
court found that Black Diamond was not entitled to damages under R.C. 1333.63,
because there was no evidence put forth demonstrating actual loss or unjust
enrichment from Boehm sharing the records with his accountant, and insufficient
evidence put forth to award a reasonable royalty. Nor was there a liquidated-damages
clause upon which Black Diamond could rely. Our review fails to persuade us that the
factfinder clearly lost its way and created such a manifest miscarriage of justice that we
must reverse the judgment of the trial court and order a new trial. See Thompkins at
386-387.
{¶14} The trial court did not explicitly address whether Black Diamond was
entitled to attorney fees under R.C. 1333.64, which Black Diamond argued it was
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because Boehm’s appropriation was willful. Under R.C. 1333.64, a court may award
attorney fees to the prevailing party if the misappropriation is willful and malicious.
Black Diamond did not argue before the trial court that Boehm’s misappropriation was
malicious. “Willful and malicious” has been interpreted as meaning “actual malice,”
given the common and ordinary meaning of the words. Becker Equip., Inc. v. Flynn,
12th Dist. Butler No. CA 2002-12-313, 2004-Ohio-1190, ¶ 16.
“Willful” means voluntary and intentional, but not necessarily malicious.
“Malicious” is the adjective for “malice,” which is defined as the intent,
without justification or excuse, to commit a wrongful act; reckless
disregard of the law or of a person’s legal rights; ill will; wickedness of
heart. The combined definitions of “willful” and “malicious” are, in turn,
similar to the definition of “actual malice” used for purposes of
determining the appropriateness of a punitive damages award at
common law * * *.
(Internal quotations omitted.) Id.
{¶15} Here, it is undisputed that Boehm allowed his accountant to view the
financial records in order to assess the profitability of an investment with Black
Diamond. Boehm protected the information to some extent by not allowing the
accountant to keep the information. Black Diamond knew that Boehm shared the
records, and merely wanted Boehm’s accountant to sign a nondisclosure agreement. It
was not against the manifest weight of the evidence for the trial court to conclude that
Black Diamond did not prove Boehm’s misappropriation was malicious or without just
cause. Consequently, Black Diamond was not entitled to attorney fees. We, therefore,
determine that the trial court’s entry of judgment in favor of Boehm at the close of
Black Diamond’s case was proper under the standards set forth under Civ.R. 41(B)(2).
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OHIO FIRST DISTRICT COURT OF APPEALS
Conclusion
{¶16} Although we sustain Black Diamond’s first and second assignments of
error in full and third assignment of error in part, we nonetheless affirm the judgment
of the trial court.
Judgment affirmed.
M OCK , P.J., and Z AYAS , J., concur.
Please note:
The court has recorded its own entry on the date of the release of this opinion.
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