SCHWAN’S COMPANY and SCHWAN’S SHARED SERVICES, LLC, Plaintiffs,
v.
RONGXUAN CAI and CONAGRA BRANDS, INC., Defendants.
CIVIL No. 20-2157 (JRT/HB)
United States District Court, D. Minnesota
December 2, 2021
Rachel Zimmerman Scobie, Annelise S. Mayer, and Joseph Dubis, MERCHANT & GOULD P.C., for plaintiffs.
Christopher D. Liguori and Amie Marie Bauer, TABET DIVITO & ROTHSTEIN LLC, S. Jamal Faleel, BLACKWELL BURKE PA, for Conagra Brands, Inc., defendant.
Rongxuan Cai, pro se defendant.
MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS
JOHN R. TUNHEIM, Chief Judge.
Plaintiffs Schwan’s Company and Schwan’s Shared Services, LLC (collectively “Schwan’s”) filed an action against Defendant Rongxuan Cai alleging violation of the federal and Minnesota trade secrets acts as well as breach of contract, conversion, unfair competition, and unjust enrichment under Minnesota law. Schwan’s filed an Amended Complaint to add Defendant Conagra Brands, Inc. (“Conagra”) as a defendant and to allege violations of the federal and Minnesota trade secrets acts as well as tortious
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interference with contractual relations and unjust enrichment under Minnesota law against Conagra. Conagra filed a Motion to Dismiss all claims against it pursuant to Federal Rule of Civil Procedure 12(b)(6).
Because the Amended Complaint (1) does not establish that the statute of limitations on the statutory claims began to run before April 20, 2018; (2) plausibly alleges all elements of a tortious interference with contractual relations claim and does not establish waiver; and (3) plausibly alleges Conagra was unjustly enriched by information not covered by the trade secrets statutes, the Court will deny Conagra’s Motion to Dismiss.
BACKGROUND
I. FACTS
Schwan’s Company is a food manufacturing company. (Am. Compl. ¶ 16, Apr. 20, 2021, Docket No. 62.) Schwan’s Shared Services, LLC is a wholly owned subsidiary of Schwan’s Company and provides Schwan’s Company with various management, information technology, human resources, finance, and legal services. (Id. ¶ 3.) Conagra is a food manufacturing company that competes with Schwan’s. (Id. ¶¶ 31, 51–53.) Schwan’s and Conagra produce several similar food products and distribute them into the same markets. (Id. ¶¶ 17, 33, 51–53.)
Cai worked for Schwan’s from June 30, 2003 until December 18, 2017 first as a Research Scientist and then as a Principal Research Scientist. (Id. ¶¶ 19, 28, 30–31.) While
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working at Schwan’s, Cai worked on research relating to the properties and performance of yeast and flour, dough, moisture and rheology, protein content in cheese, and development of ingredient technologies for use in pizza crusts and frozen pies. (Id. ¶ 27.)
On November 8, 2017, Conagra offered Cai a job which Cai accepted two days later. (Id. ¶ 32.) On Friday, December 15, 2017, Cai submitted a letter of resignation to Schwan’s requesting an effective date of January 5, 2018. (Id. ¶ 28; Am. Compl., Ex. D, Apr. 20, 2021, Docket No. 62-3.) When he came to work on Monday, December 18, 2017, Cai was asked by his supervisor if he intended to work for a competitor after leaving Schwan’s. (Am. Compl. ¶ 30.) Schwan’s alleges that Cai denied that he did. (Id.) Later that day, however, Schwan’s learned this was not true and that Cai had accepted a job with Conagra. (Id. ¶ 31.) Schwan’s immediately terminated Cai and escorted him from Schwan’s property. (Id.)
Cai and Schwan’s signed multiple agreements related to his employment throughout his time at Schwan’s. On his first day of work in 2003, Cai signed an “Employment, Confidentiality & Noncompete Agreement.” (Id. ¶ 20; Am. Compl., Ex. A, Apr. 20, 2021, Docket No. 62-1.) On March 22, 2005, Cai signed a Receipt and Acknowledgement of the Schwan’s Employee Handbook and Schwan’s Code of Ethics. (Am. Compl. ¶ 23.)[1] On February 15, 2011, Cai signed an updated but similar employment
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agreement to the one he signed in 2003 entitled “Employment, Confidentiality, Ownership & Noncompete Agreement.” (Id. ¶ 24; Am. Compl., Ex. C, Apr. 20, 2021, Docket No. 62-3.)
The 2011 updated agreement contains several relevant provisions including that (1) Cai will return all Schwan’s property upon termination; (2) during his employment, Cai will have access to confidential and proprietary information owned by Schwan’s; (3) Cai may not disclose that information without authorization by Schwan’s; (4) Cai may not use the information for his own or a third party’s benefit, including to seek employment, or to Schwan’s detriment; and (5) Schwan’s will retain sole ownership and benefits including rights to patents from any idea or product developed, created, or worked on by Cai during his employment and for one year afterwards unless Cai developed it on his own time, without Schwan’s equipment, supplies, facilities, or trade secrets, and does not relate Schwan’s business. (See Am. Compl., Ex. C ¶¶ 2–3.) The updated agreement contains a noncompete clause that bars Cai from working for “any business which competes with [Schwan’s] in the geographic or job function areas assigned to” Cai for twelve months after termination of his employment with Schwan’s. (Id. ¶ 4.)
Additionally, Cai’s resignation letter promised to transfer all his projects to other Schwan’s employees. (Am. Compl. ¶ 29; Am. Compl., Ex. D.)
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Schwan’s alleges it owns confidential and proprietary information and trade secrets in a wide range of technologies and areas at issue in this action. Schwan’s asserts that it has information and secrets on yeast, flour, and dough in particular frozen yeast, dough moisture, and dough rising. (Am. Compl. ¶ 42.) It also claims it has information and secrets on frozen bakery products and frozen dough. (Id. ¶ 43.) Schwan’s asserts it derives significant value especially competitive value from this information and its secrecy. (Id. ¶¶ 44–46.) Schwan’s claims to take significant physical, information technology, and legal steps to protect the security and secrecy of this information. (Id. ¶¶ 47–50.)
Schwan’s alleges that from the time Cai accepted the job at Conagra until he was escorted from Schwan’s property, he accessed files containing Schwan’s confidential and proprietary information and trade secrets on several projects related to grain, pizza crust, and encapsulated sugar, among other projects. (Id. ¶ 33.) According to Schwan’s, there was no job-related justification for him to access much of this information and that he did so outside business hours. (Id.) Cai allegedly copied files to external storage devices including files with confidential and proprietary information and trade secrets shortly before his termination. (Id. ¶ 34.)
Schwan’s also alleges that Cai took physical property and materials that belong to Schwan’s, including thirteen devices including storage devices containing Schwan’s information, lab notepads, and other research information. (Id. ¶¶ 35, 37.) Schwan’s
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claims it was unaware of any of these issues until after Cai was terminated. (Id. ¶ 36.) Schwan’s has sent Cai two letters-on January 26, 2018 and December 27, 2019-listing the property it believed he still had and requesting its return. (Id. ¶¶ 37, 40; Am. Compl, Ex. E, Apr. 20, 2021, Docket No. 62-5; Am. Compl, Ex. F at 2–3, 7–9, Apr. 20, 2021, Docket No. 62-6.)[2] Although Cai returned some materials, Schwan’s alleges that Cai has not returned all its property. (Am. Compl., Ex. E; Am. Compl. ¶ 41.)
On December 27, 2017-just nine days after Schwan’s terminated him-Cai filed two United States patent applications entitled (1) “Method of Making Frozen Dough and Products Made Using the Method” and (2) “Microwaveable Frozen Breads and Method of Making the Same.” (Id. ¶ 38.) Cai also filed a Chinese patent application for the first patent. (Id.) Schwan’s claims it was unaware that Cai had filed for the patents until the United States patent applications were published on June 27, 2019. (Id. ¶ 39.) Schwan’s asked Cai to assign the patents to Schwan’s because it claims they are rightfully Schwan’s property under Cai’s employment agreement. (Id. ¶ 40; Am. Compl., Ex. F.) Cai has not assigned them to Schwan’s. (Am. Compl. ¶ 41.)
Cai began working for Conagra on January 8, 2018. (Id. ¶ 55.) Three days before that on January 5, 2018, Schwan’s sent Conagra a letter notifying Conagra that Cai was a former Schwan’s employee and was in possession of confidential and proprietary
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information from Schwan’s and asked Conagra to ensure that Cai did not use this information for Conagra’s benefit. (Id. ¶ 54; Decl. of Christopher D. Liguori, Ex. 1, July 14, 2021, Docket No. 85.) Schwan’s alleges that Conagra was, therefore, aware of Cai’s exposure to Schwan’s confidential, proprietary, and trade secret information. (Am. Compl. ¶ 57.)
According to the Amended Complaint, Cai told Conagra about the employment agreement between Schwan’s and Cai, including informing Conagra about the noncompete clause. (Id. ¶ 56.)
Schwan’s alleges that despite Conagra’s knowledge that Cai possessed Schwan’s information and of the employment agreement including the noncompete clause, Conagra took no steps to ensure that Cai did not participate in projects for Conagra on similar products and technologies or to ensure that Cai did not use Schwan’s information and secrets. (Id. ¶¶ 58–59.) Cai allegedly disclosed and used Schwan’s confidential, proprietary, and trade secrets information to help Conagra develop products. (Id. ¶ 60.)
II. PROCEDURAL HISTORY
On October 13, 2020, Schwan’s filed this action but only named Cai as a defendant. (Compl., Oct. 13, 2020, Docket No. 1.) After Cai answered, Schwan’s and Cai began discovery. (Answer, Oct. 28, 2020, Docket No. 7; see...
