Niemi v. NHK Spring Co Ltd

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 08a0349p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
X
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RICHARD K. NIEMI, doing business as RICHARD K.
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NIEMI DESIGN AND ENGINEERING SERVICES; and
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RKN TECHNOLOGY, L.L.C.,
Plaintiffs-Appellants, -
No. 07-3536
,
>
v. -
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NHK SPRING CO., LTD.; NHK INTERNATIONAL,
Defendants-Appellees. -
LTD.; and NEW MATHER METALS, INC.,
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N
Appeal from the United States District Court
for the Northern District of Ohio at Toledo.
No. 03-07512—James G. Carr, Chief District Judge.
Argued: July 31, 2008
Decided and Filed: September 19, 2008
Before: DAUGHTREY and McKEAGUE, Circuit Judges; VAN TATENHOVE, District Judge.*
_________________
COUNSEL
ARGUED: Robin H. Kyle, ROBIN H. KYLE, J.D., LL.M., Detroit, Michigan, for Appellants.
Patrick F. Hickey, DYKEMA GOSSETT, Detroit, Michigan, for Appellees. ON BRIEF: Robin
H. Kyle, ROBIN H. KYLE, J.D., LL.M., Detroit, Michigan, Donald E. Schlyer, SCHLYER &
ASSOCIATES, Merrillville, Indiana, for Appellants. Patrick F. Hickey, Michael A. Little,
DYKEMA GOSSETT, Detroit, Michigan, for Appellees.
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OPINION
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McKEAGUE, Circuit Judge. Plaintiff Richard K. Niemi devised a new method of
manufacturing stabilizer bars for automobiles in 1990, a “trade secret.” He alleges he disclosed this
method to defendant New Mather Metals, Inc., only after entering into an oral confidentiality
agreement. Pursuant to this agreement, New Mather was allowed to use the manufacturing process
in exchange for its promise to maintain its secrecy and to grant plaintiff the exclusive right to
*
The Honorable Gregory F. Van Tatenhove, United States District Judge for the Eastern District of Kentucky,
sitting by designation.
1
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 2
perform all design work for New Mather. In 1998, Niemi learned that New Mather had breached
the agreement by entering into design contracts with other parties. Niemi brought suit for
misappropriation of trade secret, breach of contract, and promissory estoppel. The district court
dismissed the claims against New Mather’s parent corporation, NHK Spring Co., Ltd., for lack of
personal jurisdiction and awarded summary judgment to New Mather on all of Niemi’s claims.
Niemi has timely appealed these rulings.
On careful consideration of the record, we uphold the district court’s dismissal of the claims
against NHK Spring Co., but conclude there is sufficient evidence to create genuine issues of
material fact on the trade secret and promissory estoppel claims. For the reasons that follow, the
summary judgment rulings on these two claims are vacated and the matter remanded for further
proceedings.
I. FACTUAL BACKGROUND
Despite having little more than a high school education, plaintiff Richard K. Niemi has, since
the 1960s, made a living in the engineering design business in the metropolitan Detroit area.
Although his employment situation has been subject to numerous changes over the years, his
involvement in the “bender business,” i.e., creating machines and tools to manufacture stabilizer bars
for automobiles, has been a constant, as he has serviced customers like New Mather Metals, Inc. of
Toledo, Ohio (defendant herein), General Motors Corporation, and Chrysler Corporation. Niemi
performed engineering design work for New Mather from 1967 to 1998. During this period, Niemi
conducted his business operations informally; apart from quotations, purchase orders and invoices,
written documentation was rarely used. During the early 1990s, when the transactions giving rise
to this action took place, Niemi operated under the name “Richard K. Niemi Design and
Engineering,” as a sole proprietorship. Since 1997, Niemi has conducted business, as “50/50
partners” with his son Mark, under the name “RKN Technology, LLC.” RKN Technology operates
out of Mark’s home in South Lyon, Oakland County, Michigan.
In 1990, Niemi approached Denzil Sheckler, of New Mather, to discuss a new method of
manufacturing stabilizer bars for automobiles. New Mather was interested in the new method and,
in September 1990, issued the first purchase order requesting Niemi to incorporate the new method
design into the manufacturing tooling. Although the purchase order was accompanied by a
statement of standard terms and conditions providing that “no other or different terms or conditions
shall apply to this order unless specifically agreed to in writing by the authorized officer of
Purchaser,” Niemi contends he obtained New Mather’s assurance that the new method “would
remain confidential” even before he disclosed it. Niemi aff. ¶ 3, JA 37. He did not reduce this
“confidentiality agreement” to writing in the form of a license because he trusted New Mather as
“honorable people of integrity I’ve dealt with for thirty years.” Niemi dep. at 238-39, JA 98.
Thereafter, in 1993 or ‘94, Niemi remembers that Albert Blackwood, New Mather’s
Engineering Manager, approached him with a request that he sign a reciprocal “exclusivity
agreement.” Blackwood explained that New Mather, cognizant of the competitive advantage it had
gained by using the new bar-forming method, wanted to ensure that its use remained exclusive and
that Niemi would not disclose the method to other manufacturers. In exchange for this restriction,
Niemi sought assurance that he would continue to receive all of New Mather’s design work, as he
had for the previous 25 or 30 years, as well as the opportunity to bid on design needs of New
Mather’s parent corporation, NHK Spring Co., Ltd. After receiving the requested assurance from
Blackwood, Niemi signed the exclusivity agreement, but was not given a copy.1 Although New
Mather’s reciprocal assurance was not reduced to writing, Niemi believed that he and Blackwood
1
No copy of this exclusivity agreement was ever produced in discovery or made a part of the record.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 3
both understood that New Mather was obligated to continue using Niemi for its design needs
perpetually as long as Niemi maintained the confidentiality of the design. No further writing was
needed, in Niemi’s estimation, because New Mather’s obligation represented a continuation of an
arrangement that had been in place for 25 or 30 years, an arrangement with people who Niemi had
come to believe were honest and trustworthy.2
In 1998, Niemi learned of reason to believe New Mather had disclosed his trade secret to,
and ordered design work from, other designers, actions which he believed were in violation of the
parties’ reciprocal exclusivity agreement. Niemi confronted Blackwood and New Mather’s
President, Ron Malcolm. He learned that Raul Cornieles was the new Engineering Manager. When
he confronted Cornieles, Cornieles said he was unaware of any agreement, but would look into it.
In his next conversation with Mark Niemi, Cornieles asked whether RKN Technology wanted to be
New Mather’s design source. Mark Niemi responded affirmatively and “assumed” that Cornieles
was thereby ratifying and reaffirming the preexisting mutual exclusivity agreement. Yet, apparently,
New Mather did not live up to Niemi’s understanding of the exclusivity agreement and Niemi
commenced this action.
II. PROCEDURAL HISTORY
Niemi filed suit in the Eastern District of Michigan on February 28, 2002, invoking federal
jurisdiction based on the parties’ diversity of citizenship. Named plaintiffs include Niemi, d/b/a
Richard K. Niemi Design and Engineering Services, and RKN Technology, LLC (referred to
collectively as “Niemi”). Named defendants include New Mather, its parent corporation NHK
Spring Co., Ltd. (a Japan corporation), and another subsidiary of NHK Spring, NHK International
Ltd. (a Delaware corporation). The original complaint included two counts, asserting claims for
misappropriation of trade secret and breach of contract. On August 8, 2003, the district court,
Honorable John Feikens, ruled on NHK Spring’s motion to dismiss for lack of personal jurisdiction.
The court concluded that personal jurisdiction over NHK Spring was lacking. Rather than
dismissing the claims against NHK Spring, however, the district court transferred the case to the
Northern District of Ohio, where the actions giving rise to Niemi’s claims took place.
On transfer of the case to the Northern District of Ohio, NHK Spring again moved to dismiss
for lack of personal jurisdiction on November 21, 2003. 3 The district court, Honorable James G.
Carr, Chief Judge, granted the motion on April 12, 2006. In the meantime, the district court had
on September 2, 2005, granted New Mather’s motion for summary judgment on the
misappropriation of trade secret claim, but allowed the breach of contract claim to proceed and
allowed Niemi to amend the complaint so as to add a promissory estoppel claim. After a further
period of discovery on the remaining claims, New Mather filed a second motion for summary
judgment on December 1, 2006. The district court granted the motion on March 23, 2007, awarding
judgment to New Mather on the breach of contract and promissory estoppel claims and, to the extent
Niemi tried to advance a claim for quantum meruit relief in his briefing, dismissed the claim as
untimely. On appeal, Niemi challenges the dismissal of NHK Spring, the summary judgment rulings
on the trade secret and promissory estoppel claims, and the summary dismissal of his quantum
meruit theory.4
2
Blackwood testified that he is unaware of any agreement between New Mather and Niemi restricting New
Mather’s use of Niemi’s drawings or obligating New Mather to send all of its design needs exclusively to Niemi. It was
Blackwood’s understanding, however, that Niemi had been New Mather’s “primary, if not exclusive designer.”
3
Plaintiffs had voluntarily dismissed the claims against NHK International on September 22, 2005.
4
The district court’s ruling that Niemi’s breach of contract claim is barred by the statute of frauds is not
challenged on appeal.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 4
III. ANALYSIS
In challenging the district court’s summary judgment rulings, Niemi contends the court failed
to view the entire the record in the light most favorable to him and insists that he presented sufficient
evidence to create genuine issues of material fact on both his trade secret and promissory estoppel
claims. The court of appeals reviews de novo an order granting summary judgment. Johnson v.
Karnes, 398 F.3d 868, 873 (6th Cir. 2005). Summary judgment “should be rendered if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c). The court must view the evidence in the light most favorable to the
non-moving party and draw all reasonable inferences in its favor. Id. Not just any alleged factual
dispute between the parties will defeat an otherwise properly supported motion for summary
judgment; the dispute must present a genuine issue of material fact. Leadbetter v. Gilley, 385 F.3d
683, 689-90 (6th Cir. 2005). A dispute is “genuine” only if based on evidence upon which a
reasonable jury could return a verdict in favor of the non-moving party. Hedrick v. W. Reserve
Care Sys., 355 F.3d 444, 451 (6th Cir. 2004). A factual dispute concerns a “material” fact only if
its resolution might affect the outcome of the suit under the governing substantive law. Id.
A. Misappropriation of Trade Secret
There is no dispute between the parties as to the legal standards governing Niemi’s claim for
misappropriation of his trade secret, set forth in Count I of the first amended complaint. The
viability of the claim depends fundamentally on whether Niemi’s stabilizer bar manufacturing
method is a “trade secret.” Under Ohio law, “trade secret” is defined as follows:
(D) "Trade secret" means 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.
Ohio R.C. § 1333.61. Focusing on the last element in this definition, the district court held that5
Niemi had presented “no evidence of affirmative acts . . . to maintain the secrecy of the designs.”
The court held that Niemi’s allegation of an oral confidentiality agreement between himself and
New Mather was “entirely unsupported.” Niemi objects to this characterization of the record and
points to several items which he insists give rise to genuine issues of material fact.
First, Niemi contends the district court totally ignored his affidavit, in which he details the
measures he took to safeguard the secrecy of his trade secret. Specifically, Niemi states that he
maintained complete control over his drawings and blueprints for the new manufacturing process
in a secret, locked location in his house. Niemi aff. at ¶¶ 2-4, JA 36. He did not disclose them to
anyone other than his son and partner Mark Niemi, and agents of New Mather—and to them only
after receiving assurances of confidentiality. Id. at ¶ 3. When drawings were transported to and
5
New Mather has not contested the assertion that Niemi’s method derived independent economic value from
not being generally known and not being readily ascertainable by others.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 5
from New Mather’s place of business in Toledo, they were always personally hand-delivered either
by Niemi or his son or by New Mather personnel, who were required to sign for them. Id. at ¶ 11.
No trade secret information was ever communicated by Niemi via electronic media. Id. at ¶ 12. In
addition, Niemi was well aware of the security measures consistently employed by New Mather at
its facility. Id. at ¶¶ 5-10.
New Mather contends the affidavit is entitled to little weight, arguing it was manufactured
in response to the motion for summary judgment. New Mather has not, however, otherwise refuted
the contents of the affidavit. Granted, apart from Niemi’s affidavit statement that he received
assurances of confidential treatment before he disclosed the method to Sheckler, there appears to
be no evidence of a confidentiality agreement. Still, Niemi’s statement has not been contradicted
on the record. Though Sheckler was deposed and expressly acknowledged the manufacturing
improvement effected by Niemi’s new method, neither side has identified evidence of Sheckler’s
recollection of the asserted assurance of confidentiality. Blackwood testified that he was unaware
of any restriction on New Mather’s use of Niemi’s drawings, but he did not directly refute the
allegation that Niemi was given assurance of confidentiality before disclosing the method to
Sheckler. In sum, Niemi’s affidavit averment regarding the existence of an oral confidentiality
agreement is unrefuted and is not “no evidence.”
Second, Niemi relies on his deposition testimony detailing the conversation he had with
Blackwood in 1993 or ‘94, when he remembers signing the exclusivity agreement and Blackwood
reportedly assured him that New Mather would continue to direct its design needs to him as long
as he maintained the secrecy of his new method. There is otherwise no substantiation of a written
exclusivity agreement. Blackwood testified that he is unaware of any such written agreement and
he doesn’t recall agreeing that Niemi would be New Mather’s exclusive designer. However,
Blackwood acknowledged that Niemi had been New Mather’s “primary, if not exclusive designer.”
Hence, although Blackwood’s testimony does not directly corroborate Niemi’s averment that there
was an exclusivity agreement, his recollection6of the parties’ relationship and course of dealing from
1991 to 1997 affords de facto corroboration.
Third, in support of the argument that his reliance on New Mather’s oral assurances of
confidentiality was reasonable, Niemi points to the declarations of three experts. Phillip S. Szuba,
Ph.D., P.E. (automotive systems engineer), James R. Childs, Jr. (automotive design supervisor), and
Eugene Friedman (patent lawyer), have all stated that it is customary in the automotive industry for
small companies such as RKN Technology to rely on oral assurances of confidentiality regarding
proprietary information when dealing with large automotive companies.
New Mather has not contested the contents or significance of these declarations, except to
argue they are not relevant because Niemi has submitted no evidence of an oral confidentiality
agreement. As explained above, Niemi’s affidavit, albeit arguably self-serving, is not “no
evidence.” Given that Niemi’s sworn averment of an oral confidentiality agreement is probative
evidence and is not refuted, the experts’ opinions afford facially significant evidence of the
reasonableness of Niemi’s reliance on such an oral agreement. Absent such evidence of customary
6
New Mather argues that even if there were an oral reciprocal exclusivity agreement, its enforcement would
be barred by the statute of frauds. The argument misperceives the nature of Niemi’s misappropriation of trade secret
claim. It is not a breach of contract claim. The evidence of the exclusivity agreement is not asserted—in this context—
in furtherance of enforcing its specific terms, but as evidence of the reasonableness of Niemi’s efforts to secure the
secrecy of his trade secret. The protection afforded by trade secret laws is not a function of property interests or contract
rights, but of “equitable principles of good faith applicable to confidential relationships.” Valco Cincinnati, Inc. v. N
& D Machining Service, Inc., 492 N.E.2d 814, 817 (Ohio 1986). Whether the statute of frauds would bar enforcement
of the agreement is therefore irrelevant to the question whether the agreement nonetheless evidences a confidential
relationship such that unauthorized use of information disclosed in that relationship would be inequitable. The statute
of frauds defense plays a more significant role, however, in relation to the promissory estoppel claim, discussed below.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 6
practice in the industry, reliance on an oral promise could well be deemed not to represent a
“reasonable effort” to maintain secrecy. Yet, when Niemi’s statement is viewed in the light of this
customary practice and the parties’ 25-to-30 year relationship, a genuine issue of material fact
begins to emerge.
Fourth, relying on his own deposition testimony and that of Denzil Sheckler, Niemi contends
that he created standardized drawings of standardized manufacturing machine parts. This enabled
New Mather to order the fabrication of different tools by different manufacturing or “build” shops
without needing to disclose the complete set of prints to any one shop, thereby preserving the
secrecy of the trade secret method.
New Mather has not identified any record evidence refuting this testimony. Instead, New
Mather proposes a different view of the evidence. New Mather contends that Niemi’s knowledge
of New Mather’s disclosure of his drawings to different shops without requiring that the drawings
be labeled “confidential” evidences his carelessness. To this, Niemi responds that his
standardization of the drawings, facilitating distribution of tool manufacturing jobs to different
shops, obviated the need to label drawings “confidential.” He contends that drawings of individual
machine part designs alone, unaccompanied by a complete set of drawings, failed to disclose the
overall method. Hence, this standardizing technique is said to represent a reasonable and effective
effort to preserve secrecy even without labeling the individual drawings “confidential.”
At oral argument, however, counsel for New Mather interjected a new argument—again
without record support—contending that a complete set of the drawings was disclosed, with Niemi’s
knowledge and without being labeled “confidential,” to at least two design shops. Counsel for
Niemi quickly responded that any such disclosure would have been in direct breach of the parties’
confidentiality agreement. In our opinion, it suffices at this stage to observe that the parties’
positions, though finding disappointingly little support in the record, are7 conflicting and
irreconcilable. Their dispute substantiates the existence of a genuine fact issue.
In further support of his argument that summary judgment was premature, Niemi relies
heavily on Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714 (7th Cir. 2003).
Learning Curve teaches simply that whether efforts taken to maintain the secrecy of a trade secret
are reasonable under the circumstances depends on the circumstances; that what is reasonable for
a small company may be different from what is reasonable for a large company; and that the
determination ordinarily represents a question for the jury. Id. at 724-25. The court observed that
“only in an extreme case can what is a ‘reasonable’ precaution be determined as a matter of law,
because the answer depends on a balancing of costs and benefits that will vary from case to case.”
Id. at 725 (quoting Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 925 F.2d 174, 179 (7th Cir.
1991) (internal brackets omitted).
In Learning Curve, the Seventh Circuit upheld a jury verdict for the smaller company,
PlayWood, on its misappropriation of trade secret claim, thereby reversing the trial court’s contrary
judgment as a matter of law. The court upheld the jury’s verdict based on evidence of an oral
confidentiality agreement, coupled with evidence that oral confidentiality agreements were
customarily relied on. Id. at 725-26. The court readily acknowledged that PlayWood could and
should have done more to protect its secret, but concluded the evidence was sufficient for the jury
to determine that PlayWood, the smaller and less sophisticated of the parties, took reasonable
precautions under the circumstances. Id.
7
New Mather contends this fact issue is not material, because under Valco Cincinnati, Inc. v. N & D Machining
Service, Inc., 492 N.E.2d 814 (Ohio 1986), Niemi’s standardization of drawings is not recognized as a reasonable effort
to maintain secrecy. For the reasons set forth below in our discussion of Valco, we disagree.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 7
New Mather contends first that Learning Curve does not apply Ohio law and is therefore not
controlling. Yet, both the Illinois and Ohio versions of the Uniform Trade Secrets Act include the
same definition of “trade secret.” Further, the Ohio Revised Code expressly provides that its trade
secrets provisions “shall be applied and construed to effectuate their general purpose and to make
uniform the law with respect to their subject.” Ohio R.C. § 1333.68. It follows that the Learning
Curve analysis, though certainly not controlling, is probative.
New Mather’s attempt to factually distinguish Learning Curve also falls short. New Mather
contends that the Learning Curve jury’s verdict was based in part on evidence (1) of a written
confidentiality agreement, and (2) that PlayWood stamped documents “confidential.” A careful
reading of Learning Curve reveals, however, that this evidence pertained to PlayWood’s efforts, in
its dealings with its own manufacturer, to protect the confidentiality of materials it had received
from Learning Curve. Learning Curve, 342 F.3d at 719. The evidence did not pertain to efforts
taken by PlayWood to protect the trade secret disclosed to and misappropriated by Learning Curve.
The pertinent analysis in Learning Curve includes neither reference to nor reliance on any such
evidence in its recapitulation of the evidence deemed sufficient to support the jury’s verdict. Id. at
725-26. In truth, the operative facts in Learning Curve, consisting essentially of an oral
confidentiality agreement and evidence of customary usage in the industry, are very similar to the
instant facts.
Neither has New Mather identified any Ohio authority suggesting that Learning Curve is
contrary to or inconsistent with Ohio law. Ohio law recognizes that a party claiming trade secret
status has the burden of demonstrating that it took reasonable steps to maintain the secrecy of the
protected information. State ex rel. Carr v. Akron, 859 N.E.2d 948, 955 (Ohio 2006); Valco
Cincinnati, Inc. v. N & D Machining Service, Inc., 492 N.E.2d 814, 819 (Ohio 1986). New Mather
argues that Valco presents an example of the kinds of reasonable efforts that are required to make
out a valid claim under Ohio law and contends that Niemi’s efforts do not measure up.
In Valco, the court upheld the trial court’s issuance of an injunction, holding that the security
measures undertaken by Valco at its manufacturing plant and in relation to its drawings were
sufficient (notwithstanding Valco’s failure to obtain a non-disclosure agreement from the
misappropriating employee) to create a question for the trier of fact, the resolution of which was
entitled to deference by the reviewing court. Id. Yet, while the efforts taken by Valco were
deemed sufficient to create a triable fact issue, the Ohio Supreme Court’s opinion cannot be read
as establishing a mandatory minimum standard below which any efforts taken are necessarily
deemed insufficient or unreasonable as a matter of law. The instant record indicates that some of
the measures identified in Valco were used and some were not. On the other hand, the record also
evidences measures taken in this case that were not employed in Valco, e.g., a pre-disclosure
confidentiality agreement between the parties.
Yet, our task is not to compare and contrast the quantum and quality of reasonable efforts
taken in the two cases to determine which set of facts is superior. The question before us is whether
the instant record, viewed in the light most favorable Niemi, contains sufficient evidence to enable
a reasonable fact finder to conclude that Niemi took reasonable steps to safeguard the secrecy of his
method, such that New Mather’s alleged unauthorized use of the information could be deemed a
breach of good faith in the parties’ confidential relationship. Valco, 492 N.E.2d at 817. And on this
question, Valco, like Learning Curve, honors the fact finder’s prerogative to determine
reasonableness.
New Mather also cites Hoffman-La Roche Inc. v. Yoder, 950 F. Supp. 1348 (S.D. Ohio
1997). In Hoffman-La Roche, the district court denied injunctive relief, finding that controverted
evidence of a confidentiality agreement and other reasonable efforts was insufficient to sustain the
plaintiff’s burden. In some respects, the factual record presented in Hoffman-La Roche is analogous
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 8
to the instant record. However, the Hoffman-La Roche court premised its award of judgment to the
defendant on detailed fact findings only after conducting a full-blown trial, making credibility
determinations, and carefully weighing the evidence. The plaintiff in Hoffman-La Roche thus
received precisely what Niemi wants: his day in court. Although Niemi’s showing of reasonable
efforts, on paper, may appear to be no stronger than that described in Hoffman-La Roche, it is
nonetheless sufficient to win for Niemi what Hoffman-La Roche was granted, the opportunity to tell
his story in a trial.
In R & R Plastics, Inc. v. F.E. Myers Co., 637 N.E.2d 332 (Ohio App. 6 Dist. 1993), we find
an example of an Ohio court ruling against a trade secret claimant as a matter of law. The R & R
Plastics court upheld summary judgment for the defendant where there was “no evidence” of a
confidentiality agreement, express or implied, and “no evidence” of “effective security measures.”
Id. at 341-43. In other words, the record contained so little evidence supporting the plaintiff’s claim
that “reasonable minds [could] only conclude” that the defendant was entitled to judgment as a
matter of law. Id. at 342-43. R & R Plastics represents what Learning Curve characterized as the
“extreme case,” where the evidence of reasonable efforts is so utterly lacking in substance as to
warrant judgment as a matter of law. In our opinion, for all the reasons set forth above, Niemi’s
showing of reasonable efforts is not such an “extreme case.” It is not as weak as the showing made
in R & R Plastics. Contrary to the lower court’s characterization, Niemi’s showing is not “no
evidence.”
In sum, then, we conclude that the teaching of Learning Curve is entirely consistent with
Ohio law. The lesson is that, except where the evidentiary showing of reasonable efforts could not
conceivably support a judgment in favor of the plaintiff, the reasonableness of the efforts is a
question for the trier of fact. Because, depending on the credibility of the witnesses, it is
conceivable, based on the present record, that a reasonable jury could find that Niemi’s efforts to
maintain the secrecy of his trade secret were reasonable, in light of his long term relationship with
New Mather and the relative sophistication of the parties, we conclude that the district court’s
summary judgment ruling on the claim for misappropriation of trade secret was in error.
B. Promissory Estoppel
In Count III of the first amended complaint, Niemi asserts a promissory estoppel claim based
on the alleged exclusivity agreement. Under Ohio law, “[a] promise which the promisor should
reasonably expect to induce action or forbearance on the part of the promisee or a third person and
which does induce such action or forbearance is binding if injustice can be avoided only by
enforcement of the promise.” Shampton v. City of Springfield, 786 N.E.2d 883, 887 (Ohio 2003)
(quoting Restatement 2d, Contracts (1981), Section 90). To prevail on his promissory estoppel
claim, Niemi must show that he reasonably relied on New Mather’s representations in such a way
as to change his position for the worse. Id. The district court rejected New Mather’s statute of
frauds defense, finding Ohio law unsettled, but awarded summary judgment to New Mather on the
ground that Niemi’s reliance was not shown to be reasonable.
1. Statute of Frauds
The statute of frauds provides in relevant part:
No action shall be brought whereby to charge the defendant . . . upon an agreement
that is not to be performed within one year from the making thereof; unless the
agreement upon which such action is brought, or some memorandum or note thereof,
is in writing and signed by the party to be charged therewith or some other person
thereunto by him or her lawfully authorized.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 9
Ohio R.C. § 1335.05. The exclusivity agreement asserted by Niemi appears to have been indefinite
in duration and there is no evidence that it was ever reduced to writing. Yet the district court refused
to apply the statute of frauds to bar the claim because Ohio courts have sometimes allowed
promissory estoppel claims to proceed in avoidance of the statute of frauds.
Indeed, Ohio law is unsettled on the application of the statute of frauds to a promissory
estoppel claim. In McCarthy, Lebit, Crystal & Haiman Co., LPA v. First Union Mgmt., Inc., 622
N.E.2d 1093, 1102 (Ohio App. 8 Dist. 1993), the Eighth District Court of Appeals purported to
adopt a rule restricting the extent to which promissory estoppel could be used to avoid the statute
of frauds. Under its formulation, “the doctrine of promissory estoppel may be used to preclude a
defense of statute of frauds, but only when there has been (1) a misrepresentation that the statute’s
requirements have been complied with or (2) a promise to make a memorandum of the agreement.”
Id. at 1102. This rule has been followed in Spectrum Benefit Options, Inc. v. Medical Mutual of
Ohio, 880 N.E.2d 926, 937 (Ohio App. 4 Dist. 2007), and Landskroner v. Landskroner, 797 N.E.2d
1002, 1016 (Ohio App. 8 Dist. 2003). If the teaching of McCarthy were followed in this case, the
statute of frauds would operate to bar Niemi’s promissory estoppel claim. Despite the bald
allegation in the first amended complaint of “representations regarding execution of a written
agreement which would meet the requirements of the law,” Niemi has not identified any
representation by Blackwood or anyone else to the effect that the alleged reciprocal exclusivity
agreement was or would be reduced to writing.
However, the Ohio courts have not been uniform in their approach to the interplay of
promissory estoppel and the statute of frauds. See Heffner Investments, Ltd. v. Piper, 2008 WL
2168781 at *4-5 (Ohio App. 3 Dist.) (recognizing conflict among courts of appeals decisions, but
refraining from reaching issue); Martin v. Friedberg, 2007 WL 2206019 at *3 (Ohio App. 5 Dist.)
(acknowledging McCarthy, but concluding that defendant was nonetheless estopped from asserting
statute of frauds defense); ESKE Properties, Inc. v. Sucher, 2003 WL 22880782 at *13 (Ohio App.
2 Dist.) (implying that continued vitality of McCarthy is in doubt); Connolly v. Malkamaki, 2002
WL 31813040 at *4-5 (Ohio App. 11 Dist.) (refusing to apply McCarthy limitations due to patent
unfairness to unsophisticated plaintiff); Poskocil v. Cleveland Inst. of Music, 1997 WL 209265 at
*3-4 (Ohio App. 8 Dist.) (holding McCarthy limitations inapplicable to employer-employee
relationships due to unequal bargaining positions and resultant injustice). Despite this apparent
inconsistency, the Ohio Supreme Court has not had occasion to clarify the matter.
Given this uncertainty in Ohio law, and recognizing that “Niemi was relatively less
sophisticated than Mather,” the district court refused to enforce the statute of frauds to bar the
promissory estoppel claim. In this we find no error. Ultimately, all of the Ohio appellate decisions,
irrespective of their particular construction of the promissory-estoppel exception to the statute of
frauds, may be viewed as turning on the specific equities of the claims and parties at issue. Indeed,
McCarthy itself recognizes that both the statute of frauds and the doctrine of promissory estoppel
are designed to prevent fraud and that “the statute of frauds may not be interposed in furtherance of
fraud.” McCarthy, 622 N.E.2d at 1100. The willingness of the Ohio courts to enforce the statute
of frauds in the face of a promissory estoppel claim thus appears to depend fundamentally on
consideration of the totality of the circumstances.
Considering the totality of the present circumstances, we conclude that the equities favor the
result reached by the district court. Niemi was less sophisticated than his bargaining partner. His
belief that a reciprocal exclusivity agreement had been reached was based on oral representations
by a representative of New Mather whom he had come to trust during a long-term course of dealing.
In reliance on the parties’ agreement, Niemi assertedly refrained from pursuing other business
opportunities that would otherwise have been available to him. Further, New Mather undoubtedly
benefitted from Niemi’s having granted it exclusive permission to use the stabilizer bar
manufacturing method. Considering these circumstances and the relative equities of the parties, we
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 10
find no error in the district court’s rejection of the statute of frauds in defense of the promissory
estoppel claim.
2. Reasonable Reliance?
Upon addressing the merits of the claim, the district court concluded, however, that Niemi
had failed to demonstrate reasonable reliance. This conclusion is based largely on Niemi’s supposed
admission that Blackwood lacked authority to bind New Mather. If Niemi knew that a mid-
management-level employee like Blackwood lacked authority to enter into the exclusivity agreement
on behalf of New Mather, the district court reasoned, then Niemi’s reliance on Blackwood’s oral
representation could not have been reasonable. Niemi contends the district court ignored his
argument that his reliance on Blackwood’s apparent authority was reasonable and ignored other
evidence corroborating the reasonableness of his reliance, such as Blackwood’s acknowledgment
that Niemi had in fact been New Mather’s exclusive designer and Cornieles’s recognition of his
exclusive designer status after having been confronted by Niemi with the parties’ earlier agreement.
In Master Consol. Corp. v. BancOhio Nat’l Bank, 575 N.E.2d 817 (Ohio 1991), the contours
of the apparent authority doctrine are defined as follows:
“Apparent authority” has been defined as “. . . the power to affect the legal relations
of another person by transactions with third persons . . . arising from . . . the other's
manifestations to such third persons.” 1 Restatement of the Law 2d, Agency (1958)
30, Section 8. This court, in Miller v. Wick Blg. Co., 154 Ohio St. 93, 93 N.E.2d 467
(1950), paragraph two of the syllabus, held that:
“Even where one assuming to act as agent for a party in the making of a contract has
no actual authority to so act, such party will be bound by the contract if such party
has by his words or conduct, reasonably interpreted, caused the other party to the
contract to believe that the one assuming to act as agent had the necessary authority
to make the contract.” See also, Cascioli v. Central Mut. Ins. Co., 4 Ohio St. 3d 179,
181, 448 N.E.2d 126, 128 (1983).
Further, this court in General Cartage & Storage Co. v. Cox, 74 Ohio St. 284, 294,
78 N.E. 371, 372 (1906), explained that, “‘[w]here a principal has by his voluntary
act placed an agent in such a situation that a person of ordinary prudence, conversant
with business usages, and the nature of the particular business, is justified in
assuming that such agent is authorized to perform on behalf of his principal a
particular act, such particular act having been performed the principal is estopped as
against such innocent third person from denying the agent’s authority to perform it.’
. . .”
Id. at 822.
Applying these standards, we hold there is a question of fact as to the reasonableness of
Niemi’s reliance on Blackwood’s apparent authority, based on:
(1) Blackwood’s representation that his principal, New Mather, to maintain its competitive
edge, wanted to “tie Niemi up” through the exclusivity agreement;
(2) Niemi’s extensive dealings with New Mather through its agent Blackwood, who served
New Mather in a variety of capacities and ostensibly enjoyed his superiors’ favor;
(3) Niemi’s understanding that the exclusivity agreement was merely a perpetuation of a
relationship that had been in existence since 1967;
(4) Blackwood’s corroboration that Niemi had in fact been New Mather’s primary, if not
exclusive, designer;
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 11
(5) Niemi’s familiarity with New Mather over a 25-30 year course of dealing, in which he
had come to view New Mather as an honorable and trustworthy business partner;
(6) record evidence that oral agreements are a matter of customary usage in the automotive
industry; and
(7) Cornieles’s “ratification” or renewal of the exclusivity agreement in 1998 after Niemi
brought it to his attention and Cornieles had a chance to confer with his superiors.
In concluding there is no question of fact, the district court did not consider Blackwood’s
apparent authority or the significance of the above considerations under the teaching of Master.
New Mather has not effectively refuted these facts. New Mather argues about the significance of
some of the above considerations, but fails to demonstrate that, considering the totality of the
circumstances in the light most favorable to Niemi, no reasonable jury could find for Niemi on the
question of Blackwood’s apparent authority. If Blackwood were shown to have had apparent
authority, the basis for the district court’s holding that Niemi’s reliance was not reasonable would
be undercut. Niemi’s factual showing may not be compelling, or even strong, but it is more than a
mere scintilla of evidence. The promissory estoppel claim, like the misappropriation of trade secret
claim, presents questions that simply call for live testimony and an opportunity for the fact finder
to see and hear the witnesses and assess their credibility. The summary judgment ruling on the
promissory estoppel claim is therefore vacated as well.
C. Quantum Meruit Relief
The first amended complaint does not include a claim for quantum meruit relief. In response
to New Mather’s motion for summary judgment, however, Niemi argued that the record evidence
substantiated his entitlement to quantum meruit relief based on a quasi-contract, or contract-implied-
at-law, theory. As no such claim had been pleaded, the district court correctly treated Niemi’s
argument as an implicit motion to amend the complaint. See Super Sulky, Inc. v. U.S. Trotting Ass’n,
174 F.3d 733, 740 (6th Cir. 1999). The court examined the elements of such a quantum meruit
theory and concluded that permitting the “eleventh hour” amendment (i.e., after the court had just
concluded the properly pleaded claims were meritless) would result in unfair prejudice to New
Mather. In particular, the court noted that discovery had been limited to liability issues and had not
included matters of damages which are integral to a quantum meruit theory of relief.
Under Fed. R. Civ. P. 15(a)(2), leave to amend is to be freely given when justice so requires.
The district court’s decision to disallow amendment is reviewed for abuse of discretion. Super
Sulky, 174 F.3d at 740. Considering the context in which the district court ruled, it cannot be said
to have abused its discretion in denying the implied motion for leave to amend. Given our remand
of the case for further proceedings on the trade secret and promissory estoppel claims, however, the
discretionary equation changes dramatically. Remand will almost certainly entail a re-opening of
discovery on damages, which may legitimize Niemi’s prospective request for leave to assert a claim
for quantum meruit relief without causing unfair prejudice to New Mather. This is particularly true
in connection with continued proceedings on the promissory estoppel claim, the elements of which
are analogous to the elements of a claim for quantum meruit relief based on a quasi-contract theory.
Compare Anderson, Inc. v. Consol, Inc., 348 F.3d 496, 503 (6th Cir. 2003) (defining elements of
promissory estoppel under Ohio law as including a promise, reasonable reliance, and resulting injury
under circumstances where injustice can be avoided only by enforcing the promise), and Reisenfeld
& Co. v. Network Group, Inc., 277 F.3d 856, 860 (6th Cir. 2002) (defining elements of quasi-
contract claim under Ohio law as “(1) a benefit conferred by the plaintiff upon the defendant;
(2) knowledge by the defendant of the benefit; and (3) retention of the benefit by the defendant
under circumstances where it would be unjust to do so without payment.”). In addition, continued
proceedings on the trade secret claim, which also implicates “equitable principles of good faith in
confidential relationships,” Valco, 492 N.E.2d at 817, might also justify reconsideration of a
prospective quantum meruit claim.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 12
Accordingly, though the district court did not abuse its discretion when it denied Niemi’s
implied motion for leave to amend the complaint so as to state a claim for quantum meruit relief, if
Niemi were to renew his motion on remand, the district court may entertain it afresh.
D. Personal Jurisdiction over NHK Spring
Finally, Niemi challenges the district court’s dismissal of his claims against New Mather’s
parent corporation, NHK Spring, for lack of personal jurisdiction. The district court noted that
although Niemi presented evidence of NHK Spring’s interactions with its subsidiary New Mather
in Ohio, Niemi failed to show that such actions by NHK Spring caused tortious injury to Niemi. In
challenging this ruling, Niemi argues first that the district court was precluded, pursuant to the law-
of-the-case doctrine, from revisiting an issue already decided by the District Court for the Eastern
District of Michigan before the case was transferred to the Northern District of Ohio.
Under the law-of-the-case doctrine, rulings made at one point in the litigation should
continue to govern in subsequent stages of that litigation. Scott v. Churchill, 377 F.3d 565, 569 (6th
Cir. 2004); Rouse v. DaimlerChrysler Corp. UAW, 300 F.3d 711, 715 (6th Cir. 2002). The doctrine
merely directs the court’s discretion; it does not limit the court’s power. Scott, 377 F.3d at 569. The
doctrine has no application where the issue in question was not previously decided. United States
v. Graham, 327 F.3d 460, 464 (6th Cir. 2003).
When Judge Feikens, in the Eastern District of Michigan, transferred the case, he was ruling
on a motion to dismiss by NHK Spring, contending that it was not amenable to suit in Michigan.
Judge Feikens agreed, holding that Niemi had not shown that the cause of action arises out NHK
Spring’s contacts in Michigan. Judge Feikens did not purport to rule that NHK Spring is amenable
to suit in Ohio. Rather, the case was transferred to the Northern District of Ohio because it was
undisputed that New Mather is located in Toledo and that NHK Spring’s interactions with New
Mather, whether or not sufficient to support exercise of personal jurisdiction in Ohio, occurred in
Ohio. Because Judge Feikens was not asked to, and did not, in fact, rule on the sufficiency of NHK
Spring’s contacts in the State of Ohio, Chief Judge Carr was not constrained by any such ruling after
the case was transferred.
In ruling on NHK Spring’s new motion to dismiss the claims against it, however, Chief
Judge Carr did hold that Judge Feikens’s ruling was, in one respect, controlling as the law of the
case. That is, Chief Judge Carr acknowledged Judge Feikens’s holding that New Mather was not
an alter ego of NHK Spring. 8 Consequently, Niemi had the burden to show that NHK Spring was
subject to the court’s exercise of personal jurisdiction in Ohio based on its own conduct in Ohio,
rather than New Mather’s. The court concluded that Niemi had not carried this burden because he
failed to demonstrate that NHK Spring’s conduct in Ohio caused him tortious injury, as required by
Ohio R. C. § 2307.382(A). The court held that Niemi’s evidence of a causal connection between
NHK Spring’s conduct and his claims was too speculative.
Niemi has not shown that this ruling was in error. His perfunctory argument is effectively
undermined by one of the very cases he relies on, Dean v. Motel 6 Operating L.P., 134 F.3d 1269
(6th Cir. 1998). In Dean, the court recognized that a company does not purposefully avail itself of
the privilege of doing business in the forum state merely by owning a corporation subject to
jurisdiction. Id. at 1273-74. Further, like the plaintiff in Dean, Niemi has failed to show, despite
extensive discovery, that NHK Spring, through a network of simultaneous board memberships or
otherwise, actually controlled New Mather or controlled the decisions and actions made by New
Mather that resulted in Niemi’s alleged injuries. Id. at 1274-75. Though the “evidence” adduced
8
This holding has not been challenged by Niemi.
No. 07-3536 Niemi, et al. v. NHK Spring Co., Ltd., et al. Page 13
by Niemi is to be viewed in the light most favorable to him, here, as in Dean, the evidence is simply
too amorphous and speculative to justify stretching the long arm of personal jurisdiction across
national borders to reach a Japanese corporation. See id. at 1275.
Accordingly, the district court’s dismissal of NHK Spring from the action for lack of
personal jurisdiction was proper.
IV. CONCLUSION
In sum, for the reasons set forth above, the district court’s order dismissing the action against
NHK Spring is AFFIRMED, but the summary judgment rulings in favor of New Mather on Niemi’s
misappropriation of trade secret and promissory estoppel claims are VACATED, and the case is
REMANDED for further proceedings on these two claims.