Array Techs., Inc. v. Mitchell

ARRAY TECHNOLOGIES, INC., Plaintiff, v. COLIN MITCHELL, and individual,NEXTRACKER, a Delaware corporation,MARCO GARCIA, an individual,DANIEL SHUGAR, an individual,SCOTT GRAYBEAL, an individual,FLEXTRONICS INTERNATIONAL U.S.A., INC.,a California corporation, Defendants.

Civ. No. 17-087 JCH/LF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

April 24, 2020

MEMORANDUM OPINION AND ORDER

On August 30, 2019, Plaintiff Array Technologies, Inc. ("Array" or "ATI") filed a Motion for Summary Judgment Dismissing Defendants' Unclean Hands Defense (ECF No. 479). Defendants Colin Mitchell, NEXTracker, Inc. ("NEXTracker" or "NX"), Marco Garcia, Daniel Shugar, Scott Graybeal, and Flextronics International U.S.A., Inc., ("Flex"), collectively "Defendants," oppose the motion. The Court, having considered the motion, briefs, evidence, applicable law, and otherwise being fully advised, concludes that the motion should be granted.

I. INTRODUCTION OF CLAIMS AND THE UNCLEAN HANDS DEFENSE¹

This case involves two competitors in the solar tracking equipment industry, Array and NEXTracker, a wholly-owned subsidiary of Flex. See Am. Compl. ¶¶ 16, 33. This dispute arosewhen Array's Business Development Manager, Colin Mitchell ("Mitchell"), left Array's employment and allegedly began working for NEXTracker and Flex. See id. at ¶¶ 27, 41-46. According to Array, Mitchell unlawfully disclosed Array's trade secrets and confidential information to NEXTracker, resulting in Array's loss of solar tracker projects to NEXTracker. See id. at ¶¶ 74-99, 155-57. Array alleges that the following constitutes valuable trade secrets: its marketing and business plans as well as details of its bid preparation and contract procurement process, including the details of the operations and maintenance ("O&M") costs for Array's solar tracking equipment, and its "distribution methods, pricing, consumer profiles, advertising strategies, customer lists, manufacturing processes, and engineering studies." Id. at ¶ 72. More specifically, according to Array's expert, Robert E. Parkins, Array asserts as trade secrets: (1) Array's sales strategy, pitch, and NPV tool²; (2) Array's benchmark pricing, costs, and margins; and (3) Array's customer and project pipeline information. See Parkins Report 1, ECF No. ECF No. 439-3. Array alleges that Mitchell disclosed its trade secrets to Defendants in October and November 2016. See Pl.'s Reply 6, ECF No. 501.

Array asserts the following claims against all Defendants: misappropriation of trade secrets under the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836 (Count One); misappropriation of trade secrets under the New Mexico Uniform Trade Secrets Act, N.M. Stat. Ann. § 57-3A-1, et seq. (Count Two); breach of fiduciary duty (Count Five); conversion (Count Seven); and fraud and constructive fraud (Count Nine). Array also has claims for breach of contract (Count Three) and breach of the covenant of good faith and fair dealing (Count Four) against Defendant Mitchell.³Array additionally alleges that Defendants NEXTracker, Garcia, Shugar, and Flex committed tortious interference with contract (Count Six). Finally, Array has a cause of action against Defendants NEXTracker, Garcia, Shugar, Graybeal, and Flex for unjust enrichment/restitution (Count Eight).

Defendants assert an unclean hands defense as its third affirmative defense: "ATI's recovery is barred by its own improper conduct or 'unclean hands,' including ATI's treatment of Mr. Mitchell and ATI's misuse of NEXTracker information, and other conduct that caused or contributed to the damages ATI alleges." Defs.' Answer ¶ 187, ECF No. 96. In its supplemental responses to interrogatories, NEXTracker elaborated on its unclean hands defense, asserting among other things that Array's own attempts to acquire and use NEXTracker's information and its possession of NEXTracker's quotes and bids to customers and potential customers barred Array's claims. See Def. NEXTracker's Supp. Resp. to Interrog., ECF No. 479-1 at 2-3 of 5.

Array filed a motion for summary judgment on the grounds that Defendants' unclean hands defense does not bar its recovery because Defendants have not shown inequitable conduct by Array that is related to its causes of action. Defendants respond that Array's claims are based on alleged misappropriation by NEXTracker of its sales strategy and NPV tool regarding comparative O&M costs, but that Array improperly obtained NEXTracker information and used it as a source of the comparative costs in its NPV tool and sales strategy. Defendants argue that the record in their favor shows that Array improperly obtained NEXTracker information from customers, including information marked "confidential," and used that information in its spreadsheet tool. Because Array disputes the facts supporting their defense, Defendants contend the Court cannot award summary judgment on this issue.

II. STANDARD

Defendants bear the burden of proof at trial on their affirmative defense. See Roberts v. Barreras, 484 F.3d 1236, 1241 (10th Cir. 2007) (noting that the common law presumes that the burden of proof for an affirmative defense rests with the defendant, as generally the burdens of proof and persuasion with regard to any given issue are allocated to the same party). On a motion for summary judgment, the moving party initially bears the burden of showing that no genuine issue of material fact exists. Shapolia v. Los Alamos Nat'l Lab., 992 F.2d 1033, 1036 (10th Cir. 1993). See also Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986) ("If the movant, however, does not bear the burden of proof, he should be able to obtain summary judgment simply by disproving the existence of any essential element of the opposing party's claim or affirmative defense."). Once the moving party meets its burden, the nonmoving party must show that genuine issues remain for trial as to elements essential to the non-moving party's case or affirmative defense. See Shapolia, 992 F.2d at 1036; Deutsche Bank National Trust Co. v. Martinez, Civ. No. 14-625 JCH/KK, 2016 WL 6304461, at *4 (D.N.M. Jan. 27, 2016) (unpublished) (and cases cited therein). The nonmoving party must go beyond the pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A court must construe all facts and reasonable inferences in the light most favorable to the nonmoving party. Quaker State Minit-Lube, Inc. v. Fireman's Fund Ins. Co., 52 F.3d 1522, 1527 (10th Cir. 1995). Only disputes of facts that might affect the outcome of the case will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Accordingly, the Court will construe evidentiarily supported facts and reasonable inferences in favor of Defendants, the non-moving party.

III. FACTUAL BACKGROUND

In May 2013, Array hired Colin Mitchell as its Business Development Manager. Compare Am. Compl. ¶ 27, ECF No. 52, with Answer ¶ 27, ECF No. 96. Mitchell resigned from Array on July 8, 2016. Compare Am. Compl. ¶ 41, with nAnswer ¶ 41, ECF No. 96.

Array created a preventative maintenance cost sheet that focused on O&M costs and included, for example, information about NEXTracker's battery component. See Ward Dep. 33:9-34:4, ECF No. 489-3. Customers provided Array with NEXTracker information that was ultimately incorporated into the O&M cost spreadsheet. Id. at 34:5-8.

In the solar tracking industry, sharing of O&M cost information by customers was common. Id. at 65:13-22. Information put out by Array and NEXTracker may be shared in the industry regardless of whether there was a non-disclosure agreement ("NDA") in place. See Orshan Dep. 227:4-15, ECF No. 489-8. Michael Orshan, Array's former Director of Sales, estimated roughly 30% of the information put out by Array and NEXTracker was shared in the industry. See id.; Defs.' Ex. A, ECF No. 489-1 (listing Orshan's title). Array's management, including Array's founder and Chief Executive Officer, Ron Corio, encouraged gaining competitive intelligence, including O&M costs and other pricing information about NEXTracker. Ward Dep. 131:17-25, ECF No. 489-3; Joint Status Report 6, ECF No. 37 (listing Corio's title).

Between April 2014 and February 2015, Array was in possession of NEXTracker documents after having been given access to a third-party customer's document repository. Compare Defs.' Resp. ¶ B, ECF No. 489, with Pl.'s Reply ¶ b, ECF No. 501. See also Defs.' Ex. E, ECF No. 489-5. Among the documents in Array's possession were a NEXTracker engineering drawing marked "CONTAINS PROPRIETARY INFORMATION," a NEXTracker O&M Manual marked "Confidential for NEXTracker Customers," and a NEXTracker Installation Manualmarked "Confidential for NEXTracker Customers." Defs.' Ex. E, ECF No. 489-5. As of September 2015, Array came into possession of additional NEXTracker information, including NEXTracker quotes with price information, warranty information, and terms and conditions of sale. Compare Defs.' Resp. ¶ C, ECF No. 489, with Pl.'s reply ¶ c, ECF No. 501. See also Defs.' Ex. D, ECF No. 489-4.

On December 14, 2015, Corio asked Orshan by email to send the O&M spreadsheet to another customer and request feedback from the customer because he would "like to get next tr cost numbers put into the spreadsheet." Defs.' Ex. A, ECF No. 489-1. In April 2016, while Mitchell was still working for Array, he shared with Array's Thomas Conroy "3 recent Pricing intel points" for his use in "our cost comparison tool." Defs.' Ex. B, ECF No. 489-2. Later, in an August 2016 "Sales Strategy Meeting," Array executives and employees discussed "Potential strategy: Price-match NT installed cost + add 10-year wrnty." Defs.' Ex. F (meeting minutes), ECF No. 489-6. On February 15, 2017, Orshan notified other Array executives in regard to a...