Wysong Corp. v. M.I. Industries

412 F.Supp.2d 612

WYSONG CORPORATION, Plaintiff, v. M.I. INDUSTRIES d/b/a/ Natures Variety, and Scott Freeman, Defendants.

No. 02-10173-BC.

United States District Court, E.D. Michigan, Northern Division.

July 29, 2005.

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Craig W. Horn, Braun, Kendrick, Saginaw, MI, for Plaintiff.

David B. Meyer, Andrew D. Concannon, Smith, Bovill, Saginaw, MI, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

LAWSON, District Judge.

Although it has been said that imitation is the highest form of flattery, Dr. Randy L. Wysong, a doctor of veterinary medicine, took offense when a former consultant, Scott Freeman, left the Wysong Corporation to join co-defendant M.I. Industries in developing and marketing a line of pet foods allegedly copying the "healthy pet diet" concept that Dr. Wysong developed. Wysong Corporation filed a complaint in this Court alleging claims of misappropriation of trade secrets, conspiracy, unjust enrichment, breach of fiduciary duty, and deceptive packaging. Wysong Corporation alleges that M.I. Industries and Freeman took unfair advantage of negotiations for the sale of Wysong Corporation by stealing trade secrets and creating a line of premium pet food that unfairly uses elements of Wysong Corporation's product trade dress. Defendants M.I. and Freeman have filed a motion for summary judgment contending that Wysong Corporation's putative trade secrets are publically available, they had no access to the alleged trade secrets, the plaintiff's intellectual property rights are not protectable, they received no unjust benefit from the plaintiff, and they owed no duty to the plaintiff. The defendants further argue that the misappropriation claim under Michigan's Uniform Trade Secrets Act (MUTSA) displaces all of the other claims, and there is no genuine issue of material fact on any of the plaintiff's claims. The motion does not challenge the plaintiff's claim based on a breach of duty of loyalty that was added by amendment after the defendants filed the motion. The Court heard arguments from the parties in open court on September 11, 2003 and allowed supplemental filings thereafter. The Court now finds that the defendants are entitled to judgment as a matter of law on the claims for misappropriation on grounds of pet food concepts, marketing information, packaging information, and customer information; breach of fiduciary duty as to defendant M.I. Industries; and confusingly similar trade dress. However, material fact issues preclude summary judgment on the claims of misappropriation of financial and supplier information; unjust enrichment; conspiracy; and breach a fiduciary duty as to Freeman. Therefore, the Court will grant the defendants' motion in part and deny it in part.

I. Facts

Randy L. Wysong, D.V.M. holds himself out as a leading expert in the premium pet food industry. He developed a "healthy pet diet" concept that consists of the idea of feeding animals with a rotating diet of a various of raw, fresh meats and vegetables instead of supplemented processed foods, which are common in the industry. Defs.' Br. Summ. J. Ex. 4, Wysong Corp. Sales Literature at 32; Defs.' Reply Br. Ex. 10, Dr. Wysong Dep. at 69-72. Dr. Wysong has published extensively on the subject. Id. at 69-70. He owns the plaintiff Wysong Corporation, a company that manufactures pet foods adhering to his dietary precepts. Id. at 37. He teaches his concepts as a "logical framework," marketable to consumers. Id. at 74. Wysong Corporation developed special packaging procedures known as "fresh batching, oxygen and light barrier packaging, [and] natural oxidants" to protect the freshness of food sold to consumers. Id. at 91-92. Among the plaintiffs products is a brand of horse food marketed as "Wysong Enhanced Forage." Defs.' Mot. Summ. J. Ex. 4, Wysong Corp. Sales Literature at 15. The plaintiff has confidentiality agreements in place with each one of its suppliers, Id. at 118-119, and also requires employees to sign confidentiality agreements. Defs.' Br. Summ. J. Ex. 4, E-mail to Scott Freeman (Sep. 13, 2000) at 68.

The defendant, Scott Freeman, acted as a consultant and a representative for the plaintiff from January 1998 through August 2001. Freeman's consulting/sales agreement provided that he would "assist Wysong Corporation with marketing, sales, and customers relations" beginning January 1, 1998. He was to be paid a monthly consulting fee that diminished over time as his compensation was augmented by commissions. He was identified as "an independent contractor not under the direct employment of [Wysong Corporation]." Defs.' Supp. Br. Ex. 11, Consulting/Sales Agreement.

Freeman held himself out to be the plaintiff's "National Sales Manager." Second Amended Compl. Ex. A, Facsimile from Freeman to Mulligan (Dec. 3, 2000). The plaintiff provided Freeman marketing information, new product information, and customer and supplier information. Defs.' Reply Ex. 10, Dr. Wysong Dep. at 107-108, 119-20. According to Dr. Wysong, he told Freeman in confidence about his intention to develop a line of premium pet food called "variety" and to describe a product with the term "Prairie Forage." Id. at 67-69, 81-82. Dr. Wysong did not use the "variety" label because Freeman had advised that the term would have a bad impact on the market; Wysong will not use the term in a product description now, he says, because the defendants began producing a "Nature's Variety" pet food line in 2002. Id. at 67-69.

Sometime in 1999, Dr. Wysong requested that Freeman find someone to purchase Wysong Corporation. Pl.'s Resp. Ex. E, Scott Freeman Dep. at 41. Thereafter, Freeman introduced the plaintiff to Robert Milligan, the president of defendant M.I. Industries ("M.I."). The plaintiff and M.I. began purchase negotiations in 1999. M.I. agreed to a confidentiality agreement dated May 6, 1999 to facilitate the talks, which states in part:

1. Confidential Information. RW [Dr. Randy Wysong] shall deliver to MI certain information, which may include, but not be limited to, financial information, copies of agreements, production and marketing plans, technical information, customer lists, and other information concerning RW's conduct of his business. All of such information ("Confidential Information") is confidential and proprietary to RW and his affiliates.

2. Obligations Relating to Confidential Information. With respect to the Confidential Information, MI warrants and represents the following:

(a) MI will limit access to the Confidential Information to itself and to only those individuals who have a need for such access in order to enable MI to work with RW. Individuals within MI's organization and its attorneys and professional advisors will use the Confidential Information only for working with RW and MI and for no other purpose.

(b) Upon request of RW, MI shall return all of the Confidential Information, including all copies thereof, and related materials prepared by MI and RW reflecting the Confidential Information.

(c) MI and RW acknowledge that their businesses are unique, and agree that in no event will they make any use of the Confidential Information to develop or operate a business that is competitive with each other's businesses and will not disclose the Confidential Information to anyone without each other's written authorization.

. . . . .

4. Nonapplicability. MI's and RW's obligations under this Agreement shall not apply to any information which: (a) was or becomes published, or can reasonably be considered part of the public domain; (b) was previously known by MI or RW prior to the receipt of such confidential information; or (c) subsequent to disclosure, is obtained or developed by MI or RW or any affiliate or subsidiary of MI or RW through independent research without use of the disclosed information or from a third party having an independent right to disclose such Confidential Information.

. . . . .

Defs.' Mot. Summ. J. Ex. 4, Confidentiality Agreement (May 6, 1999) at 21-23. In addition, the plaintiff contends that M.I. entered into another confidentiality agreement dated on the next day, but only Dr. Wysong signed the document. Id., Confidentiality Agreement (May 7, 1999) at 20. The plaintiff alleges that Freeman agreed to essentially the same confidentiality agreement over a year after he started employment with the plaintiff. Freeman's agreement, which is dated May 7, 1999, states:

Scott Freeman desires financial and other business information from Wysong Corporation (WC) to determine the feasibility of purchasing parts of Wysong business.

WC considers all information not published in Wysong literature, including even consideration to sell parts, to be sensitive and proprietary.

Scott Freeman agrees to hold all such information confidential unless written authorization is given for specific named exceptions. If such exceptions are permitted, Scott Freeman will take full responsibility for their adherence to this Agreement.

All documents from WC and any copies will be deleted or returned immediately by Scott Freeman at WC's request.

WC will be entitled to damages for any unauthorized party receiving confidential WC information through Scott Freeman. Such relief to WC will not require proofs of financial loss by WC.

Should breach of this agreement occur, and the parties are not able to resolve matters between them, WC and Scott Freeman agree to arbitration/mediation by the American Arbitration Association in Midland, MI.

Id., Confidentiality Agreement (May 7, 1999) at 18. In addition to the Confidentiality Agreement, Dr. Wysong believed that he had both implicit and explicit agreements with Freeman to keep secret anything that Freeman did not discover in the public forum. Pl.'s Resp. Ex. B., Dr. Wysong Dep. at 120.

The 1999 negotiations did not last long, but purchase negotiations resumed in the...