Theisen v. Inventive Consulting, LLC

T.J. THEISEN and THE THEISEN GROUP, LLC, Plaintiffs/Counterdefendants-Appellants/Cross-Appellees, v. INVENTIVE CONSULTING, LLC, Defendant/Counterplaintiff-Appellee/Cross-Appellant, and MOHAMAD ZEIDAN and SLOBDAN PAVLOVIC, Defendants-Appellees/Cross-Appellants. T.J. THEISEN and THE THEISEN GROUP, LLC, Plaintiffs/Counterdefendants-Appellees, v. INVENTIVE CONSULTING, LLC, Defendant/Counterplaintiff-Appellant, and MOHAMAD ZEIDAN and SLOBDAN PAVLOVIC, Defendants-Appellants.

Nos. 352952, 353990

Court of Appeals of Michigan

August 12, 2021

UNPUBLISHED

Oakland Circuit Court LC No. 2018-165067-CB

Before: Letica, P.J., and Servitto and M. J. Kelly, JJ.

PER CURIAM.

In Docket No. 352952, plaintiffs/counterdefendants, T.J. Theisen (Theisen) and The Theisen Group, LLC (TTG) (referred to collectively as plaintiffs), appeal as of right a February 13, 2020 judgment of no cause of action on plaintiffs' remaining claims and on the remaining counterclaims of defendant/counterplaintiff, Inventive Consulting, LLC (IC) following a jury trial in this case alleging breach of contract and related claims and counterclaims pertaining to an invention in the automotive industry. IC and defendants Mohamad Zeidan (Zeidan) and Slobdan Pavlovic (Pavlovic) (all three collectively referred to as "defendants") have filed a cross-appeal in Docket No. 352952 from the February 13, 2020 judgment. In Docket No. 353990, defendants appeal as of right a March 24, 2020 order denying IC's postjudgment motion for attorney fees and costs. The appeals were consolidated. Theisen v Inventive Consulting LLC, unpublished order of the Court of Appeals, entered July 8, 2020 (Docket Nos. 352952 and 353990). In Docket No 352952, we affirm in part, reverse in part, and remand for further proceedings. In Docket No. 353990, we dismiss the appeal as moot.

This case arises out of a dispute concerning an invention in the automotive industry. Theisen is the sole member of TTG. Pavlovic and Zeidan are members of IC and are actively involved in managing and operating IC. According to plaintiffs, in February 2016, the parties began negotiations regarding a joint business venture in which plaintiffs would help develop certain intellectual property (IP) created by defendants. According to their complaint, plaintiffs have "extensive experience in sales, marketing, development, business planning and successful implementation of new products in the automotive parts industry worldwide." Before being introduced to plaintiffs, defendants had "a business development/fundraising agreement with nonparty company Global Eagle. Defendants were not satisfied with the lack of progress by Global Eagle."

According to plaintiffs, on or about May 26, 2016, the parties reached an oral agreement whereby plaintiffs would purchase the IP from defendants for $1 million; as part of this arrangement, Pavlovic and Zeidan would each receive 10% of equity in TTG and thus would each receive 10% of the future net profits of the venture. Theisen then began developing a three-year business plan with an executive summary and related business development documents; he also began reaching out to possible investors to raise the funds needed to fulfill the agreement.

At a July 18, 2016 meeting of the parties, Theisen presented his full PowerPoint presentation, which the parties refer to as a "deck," setting forth his business plans, executive summaries, cost analysis, and other items to be used in developing and marketing the IP. Each page of the deck contained language stating, "HIGHLY CONFIDENTIAL PROPERTY OF THE THEISEN GROUP." According to plaintiffs, the deck included Theisen's ideas and work product that reflected "his years of extensive, high level experience in the development of products for this industry and the ramp up for production of those products." After defendants reviewed the deck, they allegedly demanded alterations of the May 26, 2016 agreement. On September 12, 2016, defendants sent plaintiffs a new written proposal. On October 3, 2016, Zeidan informed Theisen that the patent application had been filed and that a serial number had been issued. At an October 13, 2016 meeting of the parties, defendants indicated that other investors were interested in the project.

On October 26, 2016, plaintiffs provided to IC a letter of intent (LOI) regarding the terms of a proposed agreement. IC rejected the LOI and indicated that, if plaintiffs did not provide $1 million by the end of November 2016, then plaintiffs would be excluded from the project. On November 15, 2016, IC informed plaintiffs that the $1 million payment could be made by the end of December 2016, but that plaintiffs must memorialize their financial commitment by the end of November 2016. On December 2, 2016, plaintiffs provided a second LOI to IC, confirming plaintiffs' financial commitment and accepting IC's September 12, 2016 offer. IC rejected the second LOI and demanded a fully executed contract. On December 5, 2016, plaintiffs submitted to defendants a proposed written contract called a technology purchase agreement (TPA). On December 9, 2016, IC instructed plaintiffs to delay payment until January 2017.

According to plaintiffs, by January 2017, the possible investors that plaintiffs had recruited grew wary and frustrated because of defendants' continued delays and unwillingness to sign or accept written documentation of an agreement; the possible investors thus were unwilling to fund a payment to defendants in January 2017. On February 18, 2017, Theisen received a letter from attorney Thomas Heed on behalf of IC stating that the project was no longer open to plaintiffs and that plaintiffs no longer had authority to raise funds for the project.

Plaintiffs commenced this action against defendants, alleging claims of breach of contract, promissory estoppel, unjust enrichment, fraud, misappropriation of trade secrets, and breach of fiduciary duty in a joint venture. IC filed a countercomplaint alleging fraud, breach of contract, tortious interference with business relationships, statutory conversion, defamation, and civil conspiracy. Most of the claims and counterclaims were dismissed by summary disposition or directed verdict. At the conclusion of trial, the jury rejected the remaining claims and counterclaim. The trial court entered a judgment in accordance with the jury verdict. IC filed a postjudgment motion for costs and attorney fees, which the trial court denied. These appeals and the cross-appeal ensued.

I. PLAINTIFFS' ARGUMENTS ON APPEAL IN DOCKET NO. 352952

A. TRADE SECRET

Plaintiffs first argue that the trial court erred in granting summary disposition to defendants under MCR 2.116(C)(8) on plaintiffs' trade-secret claim because the complaint set forth factual allegations that would satisfy the definition of a trade secret under the Uniform Trade Secrets Act (UTSA), MCL 445.1901 et seq. We agree.

This Court reviews de novo a trial court's decision regarding a motion for summary disposition. El-Khalil v Oakwood Healthcare, Inc, 504 Mich. 152, 159; 934 N.W.2d 665 (2019).

A motion under MCR 2.116(C)(8) tests the legal sufficiency of a claim based on the factual allegations in the complaint. When considering such a motion, a trial court must accept all factual allegations as true, deciding the motion on the pleadings alone. A motion under MCR 2.116(C)(8) may only be granted when a claim is so clearly unenforceable that no factual development could possibly justify recovery. [Id. at 159-160 (quotation marks and citations omitted).]

Under Michigan's UTS A, misappropriation of a trade secret "includes the disclosure or use of a trade secret without consent." CMI Int l, Inc v Intermet Int l Corp, 251 Mich.App. 125, 132; 649 N.W.2d 808 (2002), citing MCL 445.1902(b)(ii). MCL 445.1902(d) provides:

(d) "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:

(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.

(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The existence of a trade secret is an element of a claim for misappropriation of a trade secret under Michigan law. See Nedschroef Detroit Corp v Bemas Enterprises, LLC, 106 F.Supp.3d 874, 884 (ED Mich, 2015), aff d 646 F Appx 418 (CA 6, 2016) (quotation marks and citations omitted).^[1]"It is the plaintiffs burden of pleading and proving the specific nature of the trade secrets." Apex Tool Group, LLC v Wessels, 119 F.Supp.3d 599, 608 (ED Mich, 2015) (quotation marks and citation omitted).

The "extent of measures taken to guard secrecy of information" is among the factors used to determine whether a trade secret exists. Dura Global Technologies, Inc v Magna Donnelly Corp, 662 F.Supp.2d 855, 859 (ED Mich, 2009) (quotation marks and citations omitted). The UTSA requires reasonable efforts under the circumstances to maintain secrecy; perfection is not required. Giasson Aerospace Science, Inc v RCO Engineering, Inc, 680 F.Supp.2d 830, 840 (ED Mich, 2010).

Whether the measures taken by a trade secret owner are sufficient to satisfy the [UTSA's] reasonableness standard ordinarily is a question of fact for the jury. . . . [O]nly 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. (quotation marks, brackets, and citation omitted).]

Plaintiffs' complaint alleged that Theisen "is the sole member of TTG, which is a limited liability...