North Highland Inc. v. Jefferson Machine & Tool Inc.
North Highland Inc. v. Jefferson Machine & Tool Inc.
Opinion of the Court
f 1. Petitioner, North Highland, Inc., seeks review of an unpublished per curiam opinion of the court of appeals affirming a circuit court grant of summary judgment in favor of Frederick A. Wells ("Wells").
f 2. North Highland contends that the court of appeals erred and that it is entitled to summary judgment in its favor. It alleges that Wells conspired to breach a fiduciary duty that Dwain Trewyn ("Trewyn"), a former North Highland employee, owed to the company. North Highland further contends that Wells misappropriated a trade secret in violation of Wis. Stat. § 134.90 (2013—14) (Uniform trade secrets act).
¶ 3. In this review of a grant of summary judgment, we examine the conspiracy and misappropriation claims through the lens of sufficiency of evidence. We determine that North Highland has not met its burden to show that there exists a genuine issue of material fact as to either claim. Consequently, due to insufficiency of evidence, both of North Highland's claims fail to survive Well's summary judgment motion.
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¶ 5. This review originates from a lawsuit North Highland brought against Frederick Wells, Dwain Trewyn, Bay Plastics, Inc., and Jefferson Machine & Tool Inc. ("Jefferson Machine").
¶ 7. When Wells decided that he wanted to form a company to manufacture the parts Bay Plastics sold, he asked Trewyn to be his partner in the new business. While Trewyn was still employed at North Highland, he and Wells formed their new manufacturing company, Jefferson Machine.
¶ 8. The underlying dispute arose when both North Highland and Jefferson Machine submitted confidential bids on a manufacturing project for Tyson Foods Inc. ("Tyson").
¶ 9. Jefferson Machine was awarded the Tyson project, but its contract was cancelled after North Highland threatened to seek an injunction, blocking the performance of the contract. Ultimately, neither Jefferson Machine nor North Highland was awarded the Tyson contract.
¶ 11. The affidavits on file demonstrate that during litigation, both Wells and Trewyn repeatedly testified at their depositions that Wells had no knowledge that Trewyn was bidding on behalf of North Highland. For example, Wells testified:
Q: Did you know that [Trewyn] was doing bidding on behalf of North Highland to some customers—
A: No.
Q: —from September to December of 2011?
A: No.
¶ 12. Wells also repeatedly testified that he had no knowledge that Trewyn was bidding specifically on the Tyson project for North Highland. For example, he testified:
Q: Did you know that [Trewyn] submitted a bid for trolleys to Tyson?
A: No, I did not.
Q: Did you know that [Trewyn] submitted any other bids to Tyson for trolleys?
A: Any other bids?
*504 Q: On North Highland's behalf.
A: No.
f 13. Trewyn similarly testified that Wells had no knowledge Trewyn was bidding on the lyson project for North Highland:
Q: And [Wells] knew about your work with Tyson, for example?
A: I didn't discuss Tyson stuff with him, no.
[[Image here]]
Q: Did you tell [Wells] that you had submitted the bid [for North Highland] in Exhibit 1?
A: No.
Q: Why not?
A: Because there was really no reason to discuss that with him.
[[Image here]]
Q: Is there any reason why you didn't mention your work on the trolleys at North Highland to [Wells]?
A: There was no reason to.
Q: You didn't think it was important?
A: No.
f 14. In addition, Wells repeatedly denied that he formed Jefferson Machine to compete against North Highland:
Q: Did you understand that Jefferson Machine & Tool was a competing business of North Highland?
*505 A: No, no, not necessarily.
[[Image here]]
Q: But you knew when you started Jefferson Machine & Tool that it would be a competing business to North Highland?
A: I did not know that, no.8
¶ 15. Wells further testified that he left the bidding at Jefferson Machine up to Trewyn:
Q: When [Trewyn] was doing bids for you at Jefferson Machine & Tool, did you leave quoting entirely up to him?
A: Yes.
Q: And you didn't have any oversight over his bidding, right?
A: No.
Q: Did you ever ask him about how he formulated bids?
A: No, I did not.
Q: So you just left quoting at Jefferson Machine & Tool up to [Trewyn]?
A: Yes.
¶ 16. The circuit court granted in part and denied in part the defendants' motion for summary judgment. Pursuant to the circuit court order, Bay
¶ 17. Two days before trial on the fiduciary duty claims, Trewyn filed a Chapter 7 bankruptcy petition. In response, North Highland filed an adversary claim against Trewyn arguing that its state law claims were non-dischargeable in bankruptcy. Ultimately, North Highland and Trewyn entered into a settlement agreement that dismissed North Highland's claims against Trewyn with prejudice. The settlement allowed North Highland to maintain its state law claims against Wells and Jefferson Machine.
f 18. Wells moved to dismiss the remaining claims against both him and Jefferson Machine, arguing that a litigant may not maintain a derivative conspiracy claim when it has settled and dismissed all claims against the actual tortfeasor. The circuit court granted Wells' motion to dismiss. North Highland appealed the circuit court's decision, naming Wells as the only respondent.
¶ 19. The court of appeals issued a per curium opinion affirming the circuit court order. It determined that the circuit court properly entered summary judgment in favor of Wells because North Highland failed to set forth any facts establishing there was a conspiracy. N. Highland, No. 2015AP643, unpublished slip op., |¶ 16-17. Likewise, it determined that North Highland did not meet its burden of establishing that the amount of its bid for the Tyson project constituted a trade secret. Id., ¶ 26.
¶ 21. On review, we apply the same two-step analysis the circuit court applies pursuant to Wis. Stat. § 802.08(2). It provides that the "judgment sought shall be rendered if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Wis. Stat. § 802.08(2). We examine the record in the light most favorable to the non-moving party. Lambrecht, 241 Wis. 2d 804, ¶ 3 (citation omitted).
f 22. "The mere allegation of a factual dispute will not defeat an otherwise properly supported motion for summary judgment." Helland v. Kurtis A. Froedert Mem'l Lutheran Hosp., 229 Wis. 2d 751, 756, 601 N.W.2d 318 (Ct. App. 1999). A party opposing a motion for summary judgment must demonstrate that there exists a genuine issue of material fact. Id. "It is not enough to rely upon unsubstantiated conclusory remarks, speculation, or testimony that is not based upon personal knowledge." Id. (citation omitted).
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¶ 24. We address first North Highland's claim that Wells and Trewyn conspired to breach a fiduciary duty that Trewyn owed to North Highland.
¶ 26. North Highland, therefore, has the burden to "set forth specific evidentiary facts that are admissible in evidence showing that there is a genuine issue for trial" of such overt acts taken in furtherance of the conspiracy. Buckett v. Jante, 2009 WI App 55, ¶ 29, 316 Wis. 2d 804, 767 N.W.2d 376 (citations omitted). To survive summary judgment, "there must be facts that show some agreement, explicit or otherwise, between the alleged conspirators on the common end sought and some cooperation toward the attainment of that end." Augustine v. Anti-Defamation League of B'Nai B'Rith, 75 Wis. 2d 207, 216, 249 N.W.2d 547 (1977).
f 28. North Highland cannot sustain this burden because it points to no evidence that Wells was aware that Trewyn formulated both Jefferson Machine's and North Highland's bid on the Tyson project. If Wells was not aware that Trewyn had allegedly breached his fiduciary duty to North Highland, Wells could not take overt acts in furtherance of the conspiracy. See, e.g., Bruner v. Heritage Companies, 225 Wis. 2d 728, 736, 593 N.W.2d 814 (Ct. App. 1999) ("In short, a civil conspiracy entails two or more persons knowingly committing wrongful acts.").
f 29. However, North Highland contends that the evidence submitted to the circuit court on summary judgment is sufficient to allow a reasonable inference that Wells conspired with Trewyn. It asserts that the evidence demonstrates that there was a conspiracy because: (1) Wells and Trewyn combined to form Jefferson Machine and compete against North Highland; (2) Wells purchased the manufacturing space and equipment and materials necessary for the Tyson project; (3) Wells incorporated Jefferson Machine; and (4) Wells told Trewyn that he should bid on the Tyson project.
f 30. Based on this evidence of Wells and Trewyn's working relationship at Jefferson Machine,
Q: Did you understand that Jefferson Machine & Tool was a competing business of North Highland?
A: No, no, not necessarily.
[[Image here]]
Q: But you knew when you started Jefferson Machine & Tool that it would be a competing business to North Highland?
A: I did not know that, no.
¶ 31. Wells also repeatedly testified that he had no knowledge that Trewyn was bidding specifically on the Tyson project for North Highland. For example, he testified:
Q: Did you know that [Trewyn] submitted a bid for trolleys to Tyson?
A: No, I did not.
Q: Did you know that [Trewyn] submitted any other bids to Tyson for trolleys?
A: Any other bids?
Q: On North Highland's behalf.
A: No.
¶ 33. Not only is the first element of a conspiracy not met, there is no evidence that Wells told Trewyn to bid on the Jefferson Machine project. Indeed, Wells testified to the contrary during his deposition:
Q: When [Trewyn] was doing bids for you at Jefferson Machine & Tool, did you leave quoting entirely up to him?
A: Yes.
Q: And you didn't have any oversight over his bidding, right?
A: No.
Q: Did you ever ask him about how he formulated bids?
A: No, I did not.
Q: So you just left quoting at Jefferson Machine & Tool up to [Trewyn]?
A: Yes.
f 34. Without any contradictory evidence in the record, North's Highland's allegation that Wells and Trewyn conspired to breach a fiduciary duty claim is speculative at best. However, speculation is insufficient to create a genuine issue of material fact on
f 35. North Highland has produced no evidence that Wells and Trewyn entered into an agreement, explicit or otherwise, to conspire to breach TVewyn's fiduciary duty to North Highland. There is no evidence that Wells knowingly intended to compete with North Highland for the Tyson project, let alone by improper means. North Highland makes arguments aplenty in support of its position, but arguments are not facts.
¶ 36. Accordingly, we determine that North Highland has failed to provide sufficient evidence to support its conspiracy to breach a fiduciary duty claim.
IV
¶ 37. For the same reasons that North Highland's conspiracy to breach a fiduciary duty claim fails, it also cannot succeed on its claim that Wells misappropriated a trade secret in violation of Wis. Stat. § 134.90.
¶ 38. According to North Highland, its confidential bid amount on the Tyson project constitutes "information" under Wis. Stat. § 134.90(l)(c)(l)-(2). Pursuant to Wis. Stat. § 134.90(l)(c), a trade secret is defined as a specific type of information:
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:
1. The information derives independent economic value, actual or potential, from not being*514 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. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
¶ 39. The court of appeals observed that as the party seeking trade secret protection, North Highland has the burden of establishing that its bid amount for the Tyson project constitutes a trade secret. N. Highland Inc. v. Jefferson Mach. & Tool Inc., No. 2015AP643, unpublished slip op. (Wis. Ct. App. Apr. 28, 2016) (citing Wis. Elec. Power Co. v. Pub. Serv. Comm'n of Wis., 106 Wis. 2d 142, 146, 316 N.W.2d 120 (Ct. App. 1981), aff'd, 110 Wis. 2d 530, 329 N.W.2d 178 (1983)). However, we need not wade into the discussion addressing whether a bid amount constitutes a trade secret, and, if so, under what circumstances. Even if North Highland could present evidence that its bid amount constitutes "information" as that term is used in Wis. Stat. § 134.90(1)(c), it has not provided sufficient evidence demonstrating misappropriation.
¶ 40. Wisconsin Stat. § 134.90(2) provides that a person may not use or disclose a trade secret when it was acquired through improper means:
Misappropriation. No person, including the state, may misappropriate or threaten to misappropriate a trade secret by doing any of the following:
(a) Acquiring the trade secret of another by means which the person knows or has reason to know constitute improper means.
(b) Disclosing or using without express or im*515 plied consent a trade secret of another if the person did any of the following:
1. Used improper means to acquire knowledge of the trade secret.
2. At the time of disclosure or use, knew or had reason to know that he or she obtained knowledge of the trade secret through any of the following means:
a. Deriving it from or through a person who utilized improper means to acquire it.
b. Acquiring it under circumstances giving rise to a duty to maintain its secrecy or limit its use.
c. Deriving it from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use.
d. Acquiring it by accident or mistake.
¶ 41. It is apparently undisputed that Trewyn formulated the confidential bids for the Tyson project on behalf of both North Highland and Jefferson Machine. However, the parties dispute whether Wells was aware that Trewyn had access to North Highland's confidential bid amount at the same time he was formulating Jefferson Machine's bid. See Wis. Stat. § 134.90(2)(b)2. According to North Highland, it is reasonable to infer from Trewyn's testimony that he told Wells he was bidding on the Tyson contract and that Wells aided Trewyn in breaching his fiduciary duty to North Highland.
¶ 42. Contrary to North Highland's assertions, the evidence in the record fails to establish that Wells had knowledge of, let alone "acquired," "disclosed," or
¶ 43. As set forth above, both Wells and Trewyn repeatedly testified that Wells had no knowledge that Trewyn was also bidding on behalf of North Highland.
V
¶ 44. In sum, we determine that North Highland has not met its burden to show that there exists a genuine issue of material fact as to whether Wells and Trewyn conspired to breach a fiduciary duty. The evidence of record is insufficient to support a conspiracy claim.
1 45. We likewise conclude that North Highland has not met its burden of demonstrating that there exists a genuine issue of material fact regarding its claim that Wells misappropriated a trade secret. Again, the evidence of record fails to support such a claim. Consequently, both of North Highland's claims fail to survive Well's summary judgment motion.
f 46. Accordingly, we affirm the decision of the court of appeals affirming the circuit court's grant of summary judgment in favor of Frederick Wells.
By the Court.—The decision of the court of appeals is affirmed.
N. Highland Inc. v. Jefferson Mach. & Tool Inc., No. 2015AP643, unpublished slip op. (Wis. Ct. App. Apr. 28, 2016) (affirming judgment and order entered by the circuit court for Jefferson County, William F. Hue, J., presiding).
Because the court of appeals opinion is an unpublished per curium, it provides neither precedential nor persuasive value. Wis. Stat. (Rule) § 809.23(3)(b).
All subsequent references to the Wisconsin Statutes are to the 2013-14 version unless otherwise indicated.
In its petition for review, North Highland framed the issues as a question of whether it could maintain suit against Wells for any of the following: (a) conspiracy with Trewyn to violate Trewyn's breach of fiduciary duties to North Highland, (b) aiding and abetting Trewyn's breach of fiduciary duties to North Highland, (c) interference with Trewyn's contractual or fiduciary obligations to North Highland, or (d) for interference with North Highland's prospective contract with another person. In its brief, it asserts that the circuit court incorrectly dismissed these claims on the basis of claim preclusion.
Although we affirm the court of appeals determination that North Highland's claim for misappropriation of a trade secret fails for lack of evidence, we do so with a different focus on the inquiry. The court of appeals focused on whether there was sufficient evidence to demonstrate that a bid amount constitutes a trade secret. See N. Highland Inc. v. Jefferson Mach. & Tool Inc., No. 2015AP643, ¶¶ 25 (Wis. Ct. App. Apr. 28, 2016) (determining that North Highland "fails to explain to this court why its bid amount constitutes 'information' as that term is used in Wis. Stat. § 134.90(l)(c).).
In contrast, the focus of our inquiry addresses whether there is sufficient evidence to show misappropriation. Because our determination that there is insufficient evidence to show misappropriation is dispositive, we need not further address the court of appeals' per curium disposition of this claim.
Likewise, because our determination that there is insufficient evidence to support a claim for conspiracy to breach a fiduciary duty is dispositive, we need not reach North Highland's argument that the circuit court erred in determining that its civil conspiracy claim is barred under the doctrine of claim preclusion.
As set forth more fully below, Trewyn filed a Chapter 7 bankruptcy petition, which ultimately led to a settlement agreement dismissing North Highland's claims against Trewyn with prejudice. See infra ¶ 17.
Trewyn did not have a non-compete agreement with North Highland.
The Tyson project was for the manufacture of 3,000 stainless steel trolley assemblies for use in food production.
As set forth above, Wells asserts that he formed Jefferson Machine in order to manufacture the parts that Bay Plastics sold. See supra ¶ 7.
Given that the claims against Jefferson Machine were dismissed and not raised on appeal, we are not reviewing any claims that may apply to Jefferson Machine.
The reliance Chief Justice Roggensack's dissent places
The dissent further misreads Leske, stating that "[if] a mo-vant's submissions do not establish by undisputed facts that the nonmoving party has no claim or defense, the movant has failed to meet its burden. Roggensack, C.J., dissent, ¶ 94 (citing Leske, 197 Wis. 2d at 96-97). Quite the contrary, Leske instructs that "the moving party need not support its motion with affidavits that specifically negate the opponent's claim." 197 Wis. 2d at 97 (quotation and citations omitted).
"[Tjhere is no such thing as a civil action for conspiracy." Singer v. Singer, 245 Wis. 191, 195, 14 N.W.2d 43 (1944). Instead, there is only an action for damages caused by acts pursuant to a conspiracy, but none for the conspiracy alone. Id. Thus, "[i]n a civil action for damages for an executed conspiracy, the gist of the action is the damages." Id. "It is only the existence of overt acts which is critical, in order that damages occur, not the actionability of overt acts themselves." Radue v. Dill, 74 Wis. 2d 239, 244, 246 N.W.2d 507 (1976).
Chief Justice Roggesack's dissent maintains that the circuit court improperly granted summary judgment because Wells "failed to make a prima facie showing of sufficient undisputed, material facts ...." Roggensack, C.J., dissent, ¶ 48.
Rather than offering disputed facts, however, the dissent creates its own facts that are unsupported by the evidentiary record.
For example, the dissent asserts that Wells "knew that the company he and Trewyn owned were making use of North Highland's bid information, but he thought North Highland had no right to object to this." Id., ¶ 109. To the contrary, Wells denied any knowledge of North Highland's bid information:
Q: This is Exhibit 3. It is a quote from Dwain Trewyn on North Highland's behalf to Tyson for trolleys, right?
A: Yes.
[[Image here]]
Q: And you didn't know about either Exhibit 1 or Exhibit 3?
A: Yes, I did not know about these.
Q: And just like for Exhibit 1, you didn't think to ask?
A: No, I did not ask.
Again, the dissent tells the reader only part of the story, leaving the reader not merely ill-informed, but misinformed. Resting its analysis and conclusion on only a cherry-picked portion of the testimony about whether Trewyn had a non-compete agreement with North Highland, together with unsupported inferences, the dissent asserts that "Wells knew that the company he and Trewyn owned were making use of North Highland's bid information." C.J. Roggensack, Dissent, ¶ 109.
Dissenting Opinion
{dissenting).
¶ 47. The review before us arises from sum-
mary judgment. I conclude that defendants,
f 48. Defendants also failed to make a prima facie showing of sufficient undisputed, material facts that Wells, Jefferson Machine and Dwain D. Trewyn (Trewyn) did not obtain or use North Highland's Trolley Contract bid information contrary to Wis. Stat. § 134.90(2). Id. Accordingly, I conclude that summary judgment was improperly granted dismissing North Highland's claim for trade secret misappropriation against Wells and Jefferson Machine.
f 49. And finally, I conclude that claim preclusion cannot be applied against North Highland based on the Stipulation and Order that dismissed Trewyn from this lawsuit. Therefore, I would reverse the decision of the court of appeals and remand for a jury trial of North Highland's claim against Wells and Jefferson Machine for misappropriation of a trade secret.
1. Parties
f 50. The Trolley Contract to fabricate and deliver 3,000 stainless steel twin trolley assemblies for Tyson's Council Bluff, Iowa facility is central to this dispute.
¶ 51. Trewyn worked for North Highland as a salesman until the end of December 2011. As part of his job, he bid, sometimes referred to as "quoted," on potential contracts for work that North Highland hoped to obtain.
¶ 52. Trewyn agreed to be subject to the confidentiality restrictions contained in North Highland's Associate Handbook. It provided in relevant part:
[D]o not discuss confidential business with anyone who does not work for North Highland Inc. Such confidential information includes, but is not limited to ... pending projects and proposals, pricing or costing information .... Anyone who discloses trade secrets or confidential business information will be subject to disciplinary action, up to and including termination of employment and legal action, even if he/she does not actually benefit from the disclosed information.!3 ]
¶ 53. In September of 2011, Wells incorporated Jefferson Machine. Trewyn and Wells were the sole shareholders, with Wells owning 75% and Trewyn owning 25%. Wells and Trewyn also were the sole employees of Jefferson Machine.
¶ 54. This lawsuit arose out of actions of Trewyn, while he was employed by North Highland, and of Wells, who knew that Trewyn was a salesman for North Highland at the time Trewyn and Wells prepared the Trolley Contract bid for Jefferson Machine
2. Bidding process
f 55. On November 11, 2011, Tyson sent a RFQ (request for quotes) on the Trolley Contract to a number of businesses. North Highland was on the RFQ list. Jefferson Machine was not.
¶ 56. However, on December 1, 2011, Trewyn faxed Jefferson Machine's bid on the Trolley Contract to Tyson. On the cover sheet of the bid Trewyn said, "I received permission to quote the trolley assy's from Ray R. I hope that is not a problem."
Q And Dwain was the one who got the opportunity for Jefferson Machine & Tool to bid on the trolley contract?
A Yes.[7 ]
f 57. Trewyn and Wells
*521 Q That's Exhibit 5. That is Dwain's quote on Jefferson Machine & Tool's behalf for the trolleys.
A Okay.
Q Do you remember that?
A Yes, Dwain put this together.
Q And Dwain told you about it?
A Yes.t9 ]
¶ 58. It is undisputed that Trewyn was an employee of North Highland when he and Wells submitted Jefferson Machine's bid.
Q Do you remember when you got the trolley contract?
A I don't recall the date.
Q It was in December of 2011, right?
A I believe so.
Q Do you know when Dwain quit his job at North Highland?
A In December, end of December.
Q The end of December?
A Yes.
Q After Jefferson Machine & Tool got the trolley contract?
*522 A Yes.[11 ]
¶ 59. Wells also acknowledged that he knew that Jefferson Machine was a competing business of North Highland. He testified:
Q So Jefferson Machine & Tool was a competing business of North Highland?
A It's the American way. You can compete. There's competitors all up and down the highway here for machine houses, injection molders, vacuum formers, fabricators. Look in the phone book.
Q So you'd like to change your answer, yes, they are competing businesses?
A They could be.[12 ]
¶ 60. However, we can infer from Wells' testimony that he believed he and Trewyn could use North Highland's bid information because Trewyn did not have a non-compete agreement with North Highland. He testified:
Q Did you think that North Highland had any right to have its employees not compete with them at the same time as they were employed at North Highland?
A Say that again.
Q Did you think that North Highland had any right to have its employees not compete against them while they were still employed at North Highland?
A There was no non-compete form with them.
[[Image here]]
*523 Q And the reason why you think they don't have that right is because they didn't have an express non-compete clause in their employment contract?
A Yes.[13 ]
¶ 61. Wells was actively involved in bidding on the Trolley Contract. He testified:
Q This is Exhibit 2. I'm going to show you email 6. That is an email from Gordon Slothower to you and Dwain, right?
A Yes.
Q And the email right on the top, it starts, "Attached is the revised," do you see where I'm pointing to?
A Yes.
Q Why was he giving you a revised trolley drawing?
A I don’t know. He copied me on whatever he sent to Dwain.
[[Image here]]
Q Well, when you're putting together the quote, the number, how much you would bid on the trolley contract, how would you formulate the number?
A By the quotes on the raw material and the machining time and the assembly time to put the part together.
[[Image here]]
Q For the trolley contract at Jefferson Machine & Tool, were you aware that Tyson asked for samples of the trolleys to be created?
*524 A Yes.[14 ]
¶ 62. Jefferson Machine underbid North Highland and was awarded the Trolley Contract. This lawsuit followed. North Highland claimed for misappropriation of trade secrets, alleging that Trewyn took its Trolley Contract bid and Wells, who had reason to know that it was improper for Trewyn to disclose and use North Highland's bid, aided and abetted Trewyn and Jefferson Machine in the misappropriation of North Highland's trade secret. A jury trial was demanded in the complaint.
f 63. The circuit court granted summary judgment to defendants, dismissing the complaint. The court of appeals affirmed, based on its conclusion that North Highland had not proved that a bid was the type of information set forth in Wis. Stat. § 134.90(1)(c). North Highland Inc. v. Jefferson Mach. & Tool Inc., No. 2015AP643, unpublished slip op. (Wis. Ct. App. April 28, 2016). The court of appeals opined, "As the party seeking trade secret protection, it is North Highland's burden to establish that the amount of its bid for the Tyson project constitutes a trade secret." Id., ¶ 26 (citing Wisconsin Elec. Power Co. v. PSC, 106 Wis. 2d 142, 146, 316 N.W.2d 120 (1981), which interpreted Wis. Stat. § 943.205(2)(1975) and not § 134.90).
II. DISCUSSION
A. Standard of Review
¶ 64. Whether a bid is a trade secret because it is a compilation of costs, labor and profit that has independent economic value from not being generally
f 65. Wisconsin Stat. § 134.90 is Wisconsin's enactment of the Uniform Trade Secrets Act. Id. at 851. Sub section (7) provides:
UNIFORMITY OF APPLICATION AND CONSTRUCTION. This Section shall be applied and construed to make uniform the law relating to misappropriation of trade secrets among states enacting substantially identical laws.
We have recognized and followed the statutory directive for Wisconsin's enactments of uniform laws in other decisions. For example in Estate of Matteson, we said,
The purpose of uniform laws is to establish both uniformity of statutory law and uniformity of case law construing the statutes, ensuring certainty and guidance to litigants who rely on courts to interpret uniform statutes in a predictable and consistent manner.
Estate of Matteson v. Matteson, 2008 WI 48, ¶ 42, 309 Wis. 2d 311, 749 N.W.2d 557.
¶ 66. It is the majority view of those courts that have considered the standard of review that whether a trade secret exists is a question of fact. See, e.g., All West Pet Supply v. Hill's Pet Products, 840 F. Supp. 1433, 1437—38 (D. Kan. 1993); Network Telecommunications, Inc. v. Boor-Crepeau, 790 P.2d 901, 902 (Colo. App. 1990); Defiance Button Mach. Co. v. C&C Metal Products Corp., 759 F.2d 1053, 1063 (2d Cir. 1985).
¶ 67. In order to provide the benefits of the Uniform Trade Secrets Act to Wisconsin litigants, Wisconsin courts should employ the majority interpre
¶ 68. We independently review whether North Highland's complaint was properly dismissed on summary judgment. Burbank Grease Services, LLC v. Sokolowski, 2006 WI 103, ¶ 6, 294 Wis. 2d 274, 717 N.W.2d 781. In order to affirm summary judgment dismissing North Highland's trade secret claim, we would be required to conclude that the defendants made a prima facie showing of sufficient, undisputed material facts that North Highland's bid for the Trolley Contract was not a trade secret, which Wells, Jefferson Machine and Trewyn did not misappropriate. Leske, 197 Wis. 2d at 97-98. "A statement that the plaintiff lacks evidence is insufficient" to meet the moving party's burden at summary judgment. Id. at 97.
f 69. Here, the interpretation of Wis. Stat. § 134.90 is intertwined with summary judgment. The interpretation and application of a statute present questions of law that we review independent of the decisions of the court of appeals and circuit court, but benefitting from their discussions. State v. Duchow, 2008 WI 57, ¶ 11, 310 Wis. 2d 1, 749 N.W.2d 913 (citing Marder v. Bd. of Regents of the Univ. of Wis. Sys., 2005 WI 159, ¶ 19, 286 Wis. 2d 252, 706 N.W.2d 110).
¶ 70. And finally, whether claim preclusion was correctly applied by the circuit court is a question of law for our independent review. Lindas v. Cady, 183 Wis. 2d 547, 552, 515 N.W. 458 (1994).
1. General principles
¶ 71. Trade secret law in Wisconsin is established by Wis. Stat. § 134.90. Section 134.90 made significant changes in trade secret law from that which was formerly set out in Wis. Stat. § 943.205(2) (1975). For example, Wisconsin courts interpreted § 943.205(2) (1975) by following Restatement (First) Torts § 757, cmt. b (1939). See, e.g., Abbott Laboratories v. Norse Chemical Corp., 33 Wis. 2d 445, 147 N.W.2d 529 (1967) and Gary Van Zeeland Talent, Inc. v. Sandas, 84 Wis. 2d 202, 267 N.W.2d 242 (1978).
¶ 72. The Restatement (First) of Torts § 757, cmt. b (1939) engrafted a "continuous use requirement" onto the statutory definition of trade secret, as did Wisconsin's appellate courts. For example, Wisconsin Elec. Power Co., 106 Wis. 2d at 147-48, directed that in order to find protection under Wisconsin's trade secret law a party must show that the information does not relate "to single or ephemeral events in the conduct of the business, as, for example, the amount or other terms of a secret bid for a contract," but rather the information must be "continually used in the operation of the business." Id. at 147-48 (quoting Restatement of Torts (First) § 757, cmt. b (1939)).
¶ 73. In Corroon v. Hosch, 109 Wis. 2d 290, 295, 325 N.W.2d 883 (1982), we affirmed that Wisconsin's former trade secret statute, Wis. Stat. § 943.205(2) (1975), incorporated the definition of Restatement (First) Torts § 757, cmt. b (1939). Many other states did the same before the Uniform Trade Secret Act was promulgated by the Uniform Law Commission. See Richard F. Dole, Jr., The Contours of American Trade
¶ 74. However, the continuous use doctrine no longer affects trade secret law in Wisconsin. This is so because in 1986, Wisconsin enacted the Uniform Trade Secret Act. Wis. Stat. § 134.90 (1986). Section 134.90 created a new definition of trade secret that changed the Restatement's definition in part because § 134.90 eliminated the continuous use requirement from trade secret law. Minuteman, 147 Wis. 2d at 852-53 (citing Uniform Trade Secrets Act, sec. I, comment, 14 U.L.A. 543 (1985)).
¶ 75. In Minuteman, we carefully examined the Uniform Trade Secret Act as set out in Wis. Stat. § 134.90, and explained that by enacting § 134.90, Wisconsin "created a new definition of trade secret." Id. We addressed specific provisions of Wis. Stat. § 134.90 in order to emphasize that in addition to adopting a new definition of trade secret, legal principles that may have affected trade secret law in the past were no longer applicable in Wisconsin. We identified § 134.90(6) as we explained that trade secret law had been changed significantly. Subsection (6) provides:
(6) Effect on other laws. . . (a) Except as provided in par. (b), this section displaces conflicting tort law, restitutionary law and any other law of this state providing a civil remedy for misappropriation of a trade secret.
Id. at 852 (footnote omitted).
f 76. Because we had employed Restatement (First) of Torts' definition of trade secret in Corroon and Wis. Stat. § 134.90 changed the definition of trade secret, we directed that "[t]he test established in
2. Bid as a trade secret
¶ 77. We have not considered whether a bid may be found to be a trade secret since Wisconsin enacted the Uniform Trade Secrets Act. Other states that have enacted the Uniform Trade Secrets Act have litigated whether bids for prospective work qualify as trade secrets. And, numerous courts have concluded that a confidential bid is a trade secret. USA Power, LLC v. PacifiCorp, 372 P.3d 629 (Utah 2016) is a recent example. In USA Power, a region served by the utility, PacifiCorp, was in need of additional power generation. USA Power was aware of the opportunity to design and construct an additional facility, and it spent two years and nearly $1 million studying, purchasing consultant's advice and formulating how and where to construct such a facility. Id. at 638.
f 78. USA Power disclosed its development plans to PacifiCorp under a confidentiality agreement when PacifiCorp was a potential purchaser of USA Power's development plan for the power generation facility. Id. After USA Power's disclosure, PacifiCorp terminated its negotiations to purchase USA Power's development plan and issued a Request for Proposal (RFP) for development of a power generation facility sufficient to serve the region's need. Id.
¶ 79. USA Power bid in response to the RFP, but PacifiCorp submitted its own competing bid. Pacifi-Corp's proposal was very similar to the bid for devel
¶ 80. The jury agreed with USA Power. On motions after verdict, the court concluded that because PacifiCorp knew all the components of USA Power's development plan it could anticipate its bid and make that bid a "price to beat." Id. at 654-55. As the court explained, "It can hardly be argued that, in a bidding contest, for one competitor to have access to another competitor's internal financial calculations— calculations that will certainly bear upon that competitor's ultimate bid—would have obvious value. Such financial information is a paradigmatic example of a trade secret." Id. at 655. In upholding the jury's finding that USA Power's bid was a trade secret, the court held "there was sufficient evidence in the record from which the jury could infer that a trade secret existed." Id.
¶ 81. In Ovation Plumbing, Inv. v. Furton, 33 P.3d 1221 (Colo. Ct. App. 2001), a jury found that a plumbing subcontractor's bid was a trade secret. Fur-ton appealed claiming that a bid does not qualify as a trade secret. Id. at 1223. The appellate court relied on the definition of trade secret under the Colorado statute, Colorado's enactment of the Uniform Trade Secrets Act. Id.
f 82. The court began by pointing out that "[w]hat constitutes a trade secret is a question of fact." Id. at 1224. Therefore, it considered whether sufficient evidence had been presented to the jury from which it could have found that the bid was a trade secret. Id.
¶ 84. In CDC Restoration & Const., LC v. Tradesmen Contractors, LLC, 369 P.3d 452 (Utah Ct. App. 2016), a concrete contractor sued Tradesmen, the employer of a former employee, Paul Carsey. It also sued Carsey, and Keith Allen, all for misappropriation of trade secret under Utah's enactment of the Uniform Trade Secrets Act. The suit claimed misappropriation of CDC Restoration's bid for a Kennecott project for repair and restoration work. Id. at 455.
¶ 85. CDC Restoration did business with Kenne-cott under a Preferred Provider Agreement (PPA), a confidential document that set forth CDC Restoration's rates for work, pricing information for hourly employees and hourly rates for use of various types of equipment. Id. Carsey had been a CDC Restoration foreman for a number of years. Id. He regularly delivered confidential information to Kennecott for CDC Restoration, but he never signed a confidentiality agreement. Id.
¶ 86. In mid-2005, Keith Allen, who was then a subcontractor at Kennecott, met with Carsey to discuss forming a company to do work at Kennecott. Later in 2005, while he was employed by CDC Restoration, Carsey and Allen became co-owners of a new company, Tradesmen. Id. At that time, Allen was a subcontractor
f 87. In late 2005, Kennecott opened a competitive bidding process on a project known as E-Bay. Id. Carsey and another CDC Restoration employee, Ralph Midgley, developed CDC Restoration's bid for E-Bay. Shortly before the bid was submitted to Kennecott, Carsey told Midgley to increase the bid price because more hours of labor were needed than had been calculated initially. Midgley did so. Id.
¶ 88. In the meantime, Carsey and Allen put together a bid on Kennecott's E-Bay project for Tradesmen, which they submitted after CDC Restoration submitted its bid. Id. at 456. Tradesmen underbid CDC Restoration and got the contract. Id.
¶ 89. CDC Restoration sued Tradesmen, Carsey and Allen, alleging "misappropriation of trade secrets for improper use of its labor and equipment rates and bid information." Id. The trial court granted summary judgment for the defendants on all claims. Id. The court of appeals concluded that the record contained "enough evidence to create a genuine issue of material fact to preclude summary judgment regarding CDC's claim for misappropriation of bid information." Id.
f 90. Ajury trial was held, and CDC Restoration prevailed. Id. Again, review was sought. The court of appeals reasoned that misappropriation of trade secrets had two elements: a finding that the bid was a trade secret and a finding that the bid had been misappropriated. Id.
¶ 91. In order to satisfy the first element, the court held that there must have been proof from which the jury could have found: (1) the bid had indepen
¶ 92. In sum, each of these courts reasoned that whether a confidential bid is a trade secret is a question of fact. However, each court also concluded that sufficient evidence had been presented to prove that the confidential bid at issue was a trade secret under the Uniform Trade Secrets Act.
3. North Highland's claim
¶ 93. In this review of the court of appeals' decision that affirmed the dismissal of North Highland's claim, it is important to remember that we are at the summary judgment stage, not after a trial, because the analyses are very different at those two different stages.
¶ 94. Upon review of summary judgment, we begin by testing the legal sufficiency of the complaint. As we have explained, "Every decision on a motion for summary judgment begins with a review of the complaint to determine whether, on its face, it states a claim for relief." Hoida, Inc. v. M & I Midstate Bank, 2006 WI 69, ¶ 16, 291 Wis. 2d 283, 717 N.W.2d 17 (citing Westphal v. Farmers Ins. Exch., 2003 WI App 170, ¶ 9, 266 Wis. 2d 569, 669 N.W.2d 166). "If it does,
¶ 95. Therefore, when defendants move for summary judgment dismissing plaintiffs claims, the burden of proof is on the defendants to have proved sufficient undisputed, material facts in the submissions in support of their motion that establish a prima facie showing from which the circuit court is required to conclude that plaintiffs claims must be dismissed. Id. at 97-98.
¶ 96. Although the movant is not required to submit affidavits, the movant must make submissions sufficient to "demonstrate the absence of a genuine issue of material fact." Id. at 97. Stated otherwise, the movant has the burden to demonstrate a basis in the record that shows the plaintiff lacks evidence to support the claim made. Id. at 97-98. It is only after the movant has made a prima facie showing for dismissal of the nonmoving party's claim, that the burden shifts to the nonmoving party to provide submissions opposing the submissions of the movant. Hoida, 291 Wis. 2d 283, ¶ 16.
¶ 97. Leske involved a claim of misappropriation of a " 'program designed to establish a business to manufacture, distribute, and sell ice for commercial use in Dane County and the surrounding area,'" which Leske claimed was a trade secret that defendants misappropriated. Leske, 197 Wis. 2d at 95. Id. at 96. The issue presented on appeal was whether the circuit
¶ 98. The court of appeals began by examining the complaint. The court concluded the complaint stated a claim for violation of Wis. Stat. § 134.90, Wisconsin's trade secret law, which the answer denied. Id. at 96. The court then examined the submissions by defendants in support of their motion for summary judgment. Id. at 96-97. The court explained that defendants' understanding of their burden as the movants for summary judgment was not correct because defendants asserted that "we should immediately review the plaintiffs material to determine whether he produced evidence in support of his claims." Id. at 97. In reversing the circuit court's grant of summary judgment to defendants, the court explained, "[t]he defendants must demonstrate that the claimed trade secrets do not meet the definition of trade secret." Id. at 98. Although the defendants did make submissions in support of their motion, those submissions were insufficient to make a prima facie showing that plaintiffs claimed trade secret did not meet the definition of a trade secret. Therefore, the court of appeals reversed the circuit court's grant of summary judgment. Id. at 99.
¶ 99. Given the required summary judgment methodology, I begin by examining the complaint.
¶ 100. North Highland had a confidentiality policy that was expressly set out in its Associate Handbook.
1 101. I conclude that the allegations in the complaint are sufficient to state a claim for trade secret misappropriation.
f 103. I next review Wells and Jefferson Machine's submissions in support of . their motion for summary judgment that requested dismissal of North Highland's trade secret misappropriation claim to determine if they established a prima facie defense. Id. at 98. Wells and Jefferson Machine submitted the affidavit of one of their attorneys, Vincent J. Scipior.
¶ 104. The defendants' brief before us is based on the attachments to the Scipior affidavit. Defendants argue in their brief that North Highland's bid on the Trolley Contract was not a trade secret under Wisconsin law.
f 105. Wisconsin Elec. Power was issued by the court of appeals in 1981; it interprets Wis. Stat. § 943.205(2) (1975). It was issued before Wisconsin adopted the Uniform Trade Secrets Act, Wis. Stat. § 134.90.
¶ 106. Furthermore, the continuous use requirement relied on in defendants' brief was specifically removed from Wisconsin's trade secret law by Minuteman, a 1989 decision grounded in Wisconsin's enactment of the Uniform Trade Secrets Act. Minuteman, 147 Wis. 2d at 852-53.
f 107. There is no citation to Minuteman in defendants' brief. Furthermore, and much more troubling, there is no citation to Minuteman in the majority opinion even though North Highland clearly makes a claim for misappropriation of trade secret.
¶ 108. Minuteman is our thorough explanation of the changes brought about by Wisconsin's enactment of the Uniform Trade Secrets Act. Instead of citing Minuteman, the defendants cite cases from other jurisdictions, many of which were issued by jurisdictions that had not enacted the Uniform Trade Secrets Act.
¶ 109. Wells also argues that "North Highland has not presented sufficient evidence to support a trade secret misappropriation claim against [hrm.]"
Q This is Exhibit 2. I'm going to show you email 6. That is an email from Gordon Slothower to you and Dwain, right?
A Yes.
Q And the email right on the top, it starts, "Attached is the revised," do you see where I'm pointing to?
A Yes.
Q Why was he giving you a revised trolley drawing?
A I don't know. He copied me on whatever he sent to Dwain. [35 ]
Wells' involvement in the bidding is further demonstrated; for example, he testified:
Q What did you know about the trolley contract in November of 2011?
A We had an opportunity to quote on it.
Q And you were in conversation with Tyson personnel about that quoting?
A Yes.
*540 Q And in December of 2011 you were also still communicating with Tyson and with Dwain about the trolley contract?
A Dwain was talking with Tyson on the trolley contract.
Q And you were talking with Dwain?
A About the trolley contract?
Q Yes.
A Yes.[36 ]
Furthermore, Wells knew that the company he and Trewyn owned were making use of North Highland's bid information, but he thought North Highland had no right to object to this. He explained:
Q Did you think that North Highland had any right to have its employees not compete with them at the same time as they were employed at North Highland?
A Say that again.
Q Did you think that North Highland had any right to have its employees not compete against them while they were still employed at North Highland?
A There was no non-compete form with them.
[[Image here]]
Q And the reason why you think they don't have that right is because they didn't have an express non-compete clause in their employment contract?
A Yes.[37 ]
f 110. When considering the entirety of defendants' submissions, I conclude that they do not provide
¶ 111. My conclusion is required by Wis. Stat. § 134.90(l)(c), which provides:
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:
1. The information 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. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
¶ 112. In order to satisfy Wis. Stat. § 134.90(l)(c)'s criteria and be found to be a trade secret, the bid: (1) must be information that is a compilation; (2) must derive independent economic value from not being generally known by competitors; (3) amount presented to Tyson must not be generally known or readily ascertainable by proper means; (4) must have been subject to reasonable efforts under the circumstances to protect its secrecy.
Q The only person you would disclose how much you were bidding was the customer?
A Correct.[41 ]
The reason for not sharing bid information is self-apparent: if competitors knew the amount of North Highland's bid, that amount becomes the "price to beat." USA Power, 373 P.3d at 654-55. However, whether North Highland took reasonable efforts under the circumstances to protect the bid's secrecy, is a question of fact. Minuteman, 147 Wis. 2d at 849.
¶ 114. The court of appeals assigned the burden of proof to North Highland in response to defendants' motion for summary judgment. North Highland, No. 2015AP643, ¶ 11 ("[W]e agree with Wells that summary judgment is appropriate because North Highland has failed to establish that there is sufficient evidence to support the claim."). While North Highland has the burden of proof at trial, it was error to assign the burden to North Highland on defendants' summary judgment motion when the defendants did not meet their obligation to make a prima facie showing that North Highland's bid did not meet the statutory definition of trade secret or that defendants did not have
¶ 115. The court of appeals also erred when it relied on Wisconsin Elec. Power, which provides an interpretation of Wis. Stat. § 943.205(2) (1976). That statute no longer has any relevance to trade secret law. Minuteman, 147 Wis. 2d at 852-53.
¶ 116. Furthermore, the court of appeals appeared not to recognize that the determination of whether a bid is a trade secret as set out in Wis. Stat. § 134.90(1)(c) is a question of fact. Id. at 849, 854; Ovation, 33 P.3d at 1224; USA Power, 372 P.3d at 655. Similarly, if the jury determines that the bid is a trade secret, it also will be required to determine whether defendants misappropriated it. Minuteman, 147 Wis. 2d at 854-55. Both are factual findings under the Uniform Trade Secrets Act, and as we implied in Minuteman, they are factual findings under § 134.90(1).
C. Claim Preclusion
¶ 117. The court of appeals chose not to address claim preclusion. North Highland, No. 2015AP643, ¶ 11. However, defendants continue to argue that North Highland's claim for misappropriation of trade secret is barred by claim preclusion because of the
f 118. "Claim preclusion prevents relitigation of the same claim when: (1) there is an identity of parties or their privies in a prior lawsuit; (2) there is an identity of claims for relief that were brought, or should have been brought; and (3) a final judgment on the merits in a court of competent jurisdiction resolved the first lawsuit." Mrozek v. Intra Financial Corp., 2005 WI 73, ¶ 28, 281 Wis. 2d 448, 699 N.W.2d 54 (citing Kruckenberg v. Harvey, 2005 WI 43, ¶ 21, 279 Wis. 2d 520, 694 N.W.2d 879; Northern States Power Co. v. Bugher, 189 Wis. 2d 541, 551, 525 N.W.2d 723 (1995)).
f 119. Wells and Jefferson Machine create a bootstrap argument under which they assert that North Highland's misappropriation of trade secret claim is precluded. First, they contend that due to its Stipulation with Trewyn, North Highland cannot proceed on its conspiracy claim against them. They cite numerous cases on which I do not comment because I address only the misappropriation of trade secret claim. Then defendants bootstrap North Highland's trade secret claim as a "matter [] arising out of the same facts and occurrences," concluding that all claims against them are precluded.
¶ 121. Second, the defendants are not privies of Trewyn. As we have explained, "[p]rivity exists when a person is so identified in interest with a party to former litigation that he or she represents precisely the same legal right in respect to the subject matter involved." Pasko v. City of Milwaukee, 2002 WI 33, ¶ 16, 252 Wis. 2d 1, 643 N.W.2d 72. The burden of proving the elements of claim preclusion is on the party asserting dismissal of claims based on claim preclusion. Id.
¶ 122. Although Trewyn was obligated to make certain payments to North Highland under the Stipulation, Wells and Jefferson Machine were not similarly obligated. For example, if Trewyn defaulted on the payments due under the Stipulation, the obligation for payment could not be enforced against Wells or Jefferson Machine. Wells and Jefferson are not privies of Trewyn.
f 123. Here, Trewyn, Wells and Jefferson Machine are alleged to be joint tortfeasors. North Highland sued each of them individually for misappropriation of trade secrets. The Stipulation and release entered with Trewyn is similar to releases that often are used when there is a settlement with one tortfeasor and the lawsuit continues against the remaining tortfeasors.
III. CONCLUSION
¶ 125. I conclude that defendants, as the moving party to whom summary judgment was granted, failed to make a prima facie showing of sufficient undisputed, material facts that North Highland's bid to construct and supply Tyson with 3,000 trolleys, did not meet the definition of a trade secret as set out in Wis. Stat. § 134.90(1)(c), which Wells and Jefferson Machine misappropriated. Leske, 197 Wis. 2d at 96-97.
¶ 126. Defendants also failed to make a prima facie showing of sufficient undisputed, material facts that Wells, Jefferson Machine and Trewyn did not obtain or use North Highland's Trolley Contract bid information contrary to Wis. Stat. § 134.90(2). Id. Accordingly, I conclude that summary judgment was improperly granted dismissing North Highland's claim for trade secret misappropriation against Wells and Jefferson Machine.
¶ 127. And finally, I conclude that claim preclusion cannot be applied against North Highland based on the Stipulation and Order that dismissed Trewyn from this lawsuit. Therefore, I would reverse the decision of the court of appeals and remand for a jury trial of North Highland's claim against Wells and Jefferson Machine for misappropriation of a trade secret.
Initially Dwain D. Trewyn, Frederick A. Wells and Jefferson Machine & Tool, Inc. were defendants. On this review, only Wells and Jefferson Machine remain.
Although I do not address North Highland's breach of fiduciary duty claim, a reversal by this court would abrogate the court of appeals' decision in full. Blum v. 1st Auto & Cas. Ins. Co., 2010 WI 78, ¶ 46, 326 Wis. 2d 729, 786 N.W.2d 78 ("Unless this court explicitly states otherwise, a court of appeals opinion overruled by this court no longer retain[s] any precedential value."). Therefore, all North Highland's claims against Wells would be available for trial upon remand. Id.
R. at 187:6.
Affidavit of Vincent J. Scipior, made in Support of Defendants Frederick A. Wells, Bay Plastics Inc., and Jefferson Machine & Tool Inc.'s Motion for Summary Judgment. Vincent Scipior is an attorney for the defendants.
R. at 76:4.
R. at 65:6.
R. at 47:15-16.
Wells had a sample trolley made at Tyson's request, and he purchased the equipment necessary to perform the Trolley Contract.
R. at 47:20.
Jefferson Machine's bid, R. at 65:7.
R. at 47:11.
R. at 47:9.
R. at 47:12.
R. at 47:19-27.
This is the same issue, at the same stage of the proceedings, as has been presented by North Highland in the case now before the court.
I refer to the complaint, even though there is an amended complaint in the record because the two documents do not differ in regard to the allegations relating to North Highland's trade secret claim.
Complaint, see pp. 6-7.
Complaint, ¶¶ 7-9.
Complaint, f 6.
Complaint, ¶¶ 16, 17.
Complaint, ¶ 18.
Complaint, ¶ 19.
Complaint, f 11.
Complaint, ¶ 21.
Complaint, ¶ 20.
Complaint, ¶ 20.
Complaint, ¶¶ 22, 23.
Answer, ¶¶ 1-19. Although Trewyn is no longer a party, his Answer, too, was sufficient to join issues of law and fact.
R. at 47.
Resp. Br. 39-45.
Resp. Br. 42.
Resp. Br. 43.
Resp. Br. 45.
Resp. Br. 45-46.
R. at 47:19.
R. at 47:10-11.
R. at 47:12.
"Reason to know" is the Wis. Stat. § 134.90(2) standard that Wells' submissions must be sufficient to set aside in regard to misappropriation. As the quotes above show, he has not done so.
A compilation is an assemblage or gathering. Compilation, Roget's Thesaurus, 51 St. Martin's Press (1965).
R. at 47:19.
R. at 47:28.
Minuteman v. Alexander, 147 Wis. 2d 842, 434 N.W.2d 773 (1989), is not addressed by the court of appeals.
Resp. Br. 17-26.
Resp. Br. 23.
See, e.g., Pierringer v. Hoger, 21 Wis. 2d 182, 124 N.W.2d 106 (1963).
Dissenting Opinion
(■dissenting).
¶ 128. The circuit court's dismissal of North Highland, Inc.'s complaint against Frederick Wells reflects an improperly narrow conception of what constitutes a "trade secret" as well as a misapplication of the doctrine of claim preclusion.
i—i
A
¶ 129. Historically, Wisconsin has held that "[w]hether a trade secret exists is a mixed question of fact and law. Once the historical facts are found by the circuit court, whether those facts meet the legal standard is a question of law which we review without deference to the circuit court's decision." B.C. Ziegler & Co. v. Ehren, 141 Wis. 2d 19, 26, 414 N.W.2d 48 (Ct. App. 1987) (citation omitted) (citing Corroon & Black-Rutters & Roberts, Inc. v. Hosch, 109 Wis. 2d 290, 294, 325 N.W.2d 883 (1982)). Notwithstanding Wisconsin's adoption of a version of the Uniform Trade Secrets Act (UTSA), I would not cast this standard aside.
¶ 130. In Minuteman, Inc. v. Alexander, 147 Wis. 2d 842, 434 N.W.2d 773 (1989), this court properly acknowledged that when the legislature adopted the UTSA, it replaced the common law definition of "trade secret" with the statutory definition in Wis. Stat § 134.90(1)(c). Minuteman, 147 Wis. 2d at 851-52. Accordingly, the six-factor test from Corroon & Black-Rutters & Roberts, Inc. v. Hosch, 109 Wis. 2d 290, 325
f 131. The Minuteman court, however, did not discuss whether the statutory abrogation of the common law definition of "trade secret" had a similar impact on the standard of review in trade secret cases. Instead, the Minuteman court set forth a standard of review before discussing Wis. Stat. § 134.90:
The construction of a statute or the application of a statute to a particular set of facts is a question of law. Bucyrus-Erie Co. v. ILHR Dep't., 90 Wis. 2d 408, 417, 280 N.W.2d 142 (1979). This court decides questions of law without deference to the circuit court's determination. Ball v. Dist. No. 4, Area Bd. of Vocational, Technical & Adult Education, 117 Wis. 2d 529, 537, 345 N.W.2d 389 (1984). This court, however, accepts the circuit court's findings of fact unless they are clearly erroneous. Section 805.17(2), Stats.
Minuteman, 147 Wis. 2d at 853. Although the Minuteman court did not specifically identify the "mixed" standard of review derived from Corroon & Black, its statement of separate standards for statutory interpretation, on the one hand, and circuit court findings of fact, on the other, suggests an implicit acknowledgement of the mixed nature of the questions raised in trade secret cases.
¶ 132. Among state and federal courts interpreting various enactments of the UTS A, the majority of jurisdictions characterize the existence of a trade secret as a "question of fact." See, e.g., Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 723 (7th Cir. 2003) ("The existence of a trade secret ordinarily is
¶ 134. North Highland argues that the circuit court and court of appeals erred by failing to conclude that a confidential bid may satisfy the definition of "trade secret" in Wis. Stat. § 134.90. Because the plain language of § 134.90 supports North Highland's broad interpretation of "trade secret," I would reverse the decision of the court of appeals and remand for the circuit court to consider North Highland's trade secret misappropriation claim under the proper standard of law.
¶ 135. Assessment of Wis. Stat. § 134.90 begins with its text. State ex rel. Kalal v. Cir. Ct. for Dane Cty., 2004 WI 58, ¶¶ 44-51, 271 Wis. 2d 633, 681 N.W.2d 110. Section 134.90(1). defines "trade secret" as follows:
(c) "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:
1. The information 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. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.
¶ 136. Dictionary definitions of "information" suggest that the term encompasses a broad class of knowledge. See Information, The American Heritage Dictionary of the English Language 901 (5th ed. 2011) ("Knowledge or facts learned, especially about a certain subject or event."); Information, Webster's Third New International Dictionary 1160 (1986) ("knowledge of a particular event or situation"; "facts or figures ready for communication or use"). These definitions indicate that "information" consists of facts, figures, or general knowledge regarding a particular subject matter and capable of practical application or use. Given the breadth of the term's scope, a business might possess any number of pieces of "information" that it wishes to protect, and a confidential bid price certainly consists of a figure that a business develops and communicates for the practical purpose of securing a contract.
¶ 137. Despite the broad reach of the term "information," Wells points to the remainder of the definition of "trade secret": "information, including a formula, pattern, compilation, program, device, method, technique or process." Wis. Stat. § 134.90(1)(c) (emphasis added). Wells argues that State v. Popenhagen, 2008 WI 55, 309 Wis. 2d 601, 749 N.W.2d 611, and Village of Hobart v. Oneida Tribe of Indians of Wisconsin, 2007 WI App 180, 303 Wis. 2d 761, 736 N.W.2d 896, hold that when a list introduced by "including" follows a general term, the list limits the scope of the
¶ 138. The plain language of Wis. Stat. § 134.90(1) also defeats Wells's argument that the definition of "trade secret" includes a "continuous use" requirement. Wisconsin courts defining "trade secret" at common law held that "[a] trade secret is a process or device which is continually used in the operation of the business and thereby differs from secret information which may refer only to an isolated transaction." Wis. Elec. Power Co. v. Pub. Serv. Comm'n, 106 Wis. 2d 142, 148, 316 N.W.2d 120 (Ct. App. 1981) (internal quotation mark omitted) (quoting Future Plastics, Inc. v. Ware Shoals Plastics, Inc., 340 F. Supp. 1376, 1383 (D.S.C. 1972)). The court of appeals even went so far as to observe that a trade secret "differs from other secret
f 139. Wisconsin Stat. § 134.90(7) also commands courts to apply and interpret § 134.90 in a manner that will "make uniform the law relating to misappropriation of trade secrets among states enacting substantially identical laws." Refusing to graft a renewed "continuous use" requirement onto the definition of "trade secret" aligns with other jurisdictions, which already protect some types of business information as trade secrets, even if used only for a short period of time—or just once, in the case of a confidential bid. See, e.g., Economy Roofing & Insulating Co. v. Zumaris, 538 N.W.2d 641, 646-47 (Iowa 1995) (holding that complaint alleging misappropriation of "bid information" and "bid estimates" properly stated claim because "information" included "such [business] mat
f 140. Categorically excluding confidential bids from trade secret protection contradicts the legislature's decision to bring all "information" within the definition of "trade secret," provided the other statutory parameters are met:
Almost any subject matter may be a trade secret, including a secret formula or process, computer software, digital databases, the passcode for a website, biotechnology, mechanical configurations, information relating to the finding and extraction of oil and gas, plans, layouts and design drawings, recipes, boat hull molds, customer lists, instructional materials, internal*557 business practices, manufacturing cost data, sales histories and forecasts, materials and plans for advertising, marketing, and distribution, and membership and employee information. Even religious material is eligible for trade secret protection.
3 Louis Altman & Malla Pollack, Callmann on Unfair Competition, Trademarks and Monopolies § 14:14, at 160 (4th ed. 2016) (footnotes omitted). Applying "information" to a broad spectrum of facts, figures, and knowledge, does not, however, infinitely expand the scope of trade secret protection. After all, any individual piece of "information" satisfies the definition of "trade secret" only if it also meets the independent economic value and secrecy requirements in Wis. Stat. § 134.90(1)(c)1 and 2.
¶ 141. In this case, the parties focused their arguments on the threshold question of whether a confidential bid can be "information." Because I conclude, as a matter of law, that a confidential bid certainly constitutes "information" within the meaning of Wis. Stat. § 134.90,1 would reverse the decision granting summary judgment to Wells on North Highland's trade secret misappropriation claim, and I would remand the matter to the circuit court for a jury trial on the remaining factual issues, including whether North Highland took reasonable measures to maintain the bid's secrecy and whether Wells misappropriated North Highland's bid.
HH I—I
¶ 142. The circuit court also ruled that claim preclusion barred North Highland's claims against Wells. I disagree. Courts apply the doctrine of claim preclusion to prevent "vexatious, repetitious and needless claim[s]" between the same parties on the same
¶ 143. The factual scenario presented here involves not only North Highland's state court claims against Trewyn, Jefferson Machine & Tool Inc., and Wells but also a separate adversary proceeding by North Highland against Trewyn in federal bankruptcy court challenging the dischargeability of Trewyn's debt to North Highland. Ultimately, North Highland settled the dischargeability issue in bankruptcy court on its merits. Shortly after the settlement in that adversary proceeding, North Highland and Trewyn entered a stipulation in the state court case dismissing Trewyn alone but reserving North Highland's claims against
37 144. Claim preclusion applies where there is "(1) an identity between the parties or their privies in the prior and present suits; (2) an identity between the causes of action in the two suits; and, (3) a final judgment on the merits in a court of competent jurisdiction." Id., ¶ 35 (quoting N. States Power Co., 189 Wis. 2d at 551). The absence of any element renders the doctrine inapplicable. See N. States Power Co., 189 Wis. 2d at 551. Under the circumstances presented in this case, there is clearly no identity of parties or final judgment on the merits.
¶ 145. There is no identity of parties because Wells was not a party to the bankruptcy proceeding involving Trewyn, which precipitated the settlement between North Highland and Trewyn leading to the dismissal of Trewyn alone as a party in this case. It remains uncontroverted that Trewyn and Wells are not privies.
¶ 146. Furthermore, there is no final judgment on the merits. Instead, Trewyn and North Highland settled the issue of whether any debt Trewyn may owe North Highland was dischargeable in bankruptcy, and this settlement included North Highland's agreement not to maintain suit against Trewyn. The settlement agreement dismissing the adversary proceeding in bankruptcy court, which led to the stipulated dismissal of Trewyn in the state court proceedings, does not even come close to an "adjudication on the merits by a court of competent jurisdiction." As this court explained in Mrozek v. Intra Financial Corp., 2005 WI 73, 281 Wis. 2d 448, 699 N.W.2d 54, a bankruptcy judgment may be a "final judgment on the merits" sufficient to satisfy the third prong under the claim preclusion doctrine, but only when the subject of the pending lawsuit was a "core proceeding" resolved by the bankruptcy court. Id., ¶¶ 29-31.
f 147. Of course, litigation in bankruptcy courts can preclude claims in subsequently filed lawsuits. See, e.g., Matrix IV, Inc. v. American Nat'l Bank and Trust Co. of Chi., 649 F.3d 539, 542, 547-52 (7th Cir. 2011) (holding that claim preclusion barred plaintiffs subsequent RICO and common law fraud action against same defendants involved in bankruptcy case where plaintiff fully "litigated and lost the very same fraud claims"). But the settlement here was unlike the cases applying claim preclusion following bankruptcy litigation. Indeed, some courts adopt a unique approach for determining whether claim preclusion
"Because a 'bankruptcy case' is fundamentally different from the typical civil action, however, comparison of a bankruptcy proceeding with another proceeding is not susceptible to the standard [claim preclusion] analysis." Rather, a court must "scrutinize the totality of the circumstances in each action and then determine whether the primary test of. . . essential similarity in the underlying events!] has been satisfied." Also, the court must "properly tailor []" the claim preclusion doctrine to the "unique circumstances that arise when the previous litigation took place in the context of a bankruptcy case." Ultimately, "a claim should not be barred unless the factual underpinnings, theory of the case, and relief sought against the parties to the proceeding are so close to a claim actually litigated in the bankruptcy that it would be unreasonable not to have brought them both at the same time in the bankruptcy forum."
Haskell v. Goldman, Sachs & Co., 355 B.R. 438, 449 (Bankr. D. Del. 2006) (citations and quoted sources omitted; fourth alteration in original).
¶ 148. Here, the claims North Highland pursues against Wells were not "actually litigated" in the bankruptcy case—Wells was not even involved in the bankruptcy proceeding. Nor would it have been reasonable or possible for North Highland to litigate its claims against Wells within Trewyn's bankruptcy proceeding. North Highland's agreement to forgo its state court lawsuit against a bankruptcy debtor whose obligations were dischargeable does not bar it from pointing the finger at Trewyn to establish a conspiracy with Wells, even though Trewyn cannot be held legally liable should the jury find in North Highland's favor.
hH HH
I 151. In sum, I conclude that a confidential bid can be a trade secret. I would reverse the court of appeals' determination otherwise and remand to the
¶ 152. For these reasons, I respectfully dissent.
¶ 153. I am authorized to state that Justice DANIEL KELLY joins this dissent.
Unfortunately, the court conducts its review of this case without the benefit of the circuit court's reasoning on the dispositive decisions. Although the record includes the circuit court's orders resolving the relevant motions for summary judgment and dismissal, those orders merely state the court's conclusions with a note that the orders were entered "[flor the reasons stated on the record." But the transcripts of the relevant hearings are absent from the record on appeal.
The appellant has the initial responsibility to request transcripts for the record, Wis. Stat. § (Rule) 809.11(4)(a), and any other party also has the opportunity to request that transcripts be included in the record, Wis. Stat. § (Rule) 809.11(5). Appellate counsel for each party have a responsibility to identify all transcripts necessary for appellate review.
When the record on appeal lacks transcripts relevant to the circuit court's orders under review and the circuit court has not issued a written order explaining the reasons for its decision, appellate courts do not receive sufficient information to review the case in its entirety. Although I conduct my review in this opinion because the case raises questions of law and we do have the circuit court's conclusions, a future appellate court may not have sufficient information to proceed if appellate counsel fail to satisfy their responsibilities under the Wisconsin Rules of Appellate Procedure.
Chief Justice Roggensack's dissent comprehensively sets forth facts from the record, which, viewed in the light most favorable to the party opposing summary judgment (here, North Highland), show genuine issues of material fact properly resolved at trial.
For example, working backward from Ovation Plumbing, Inc. v. Furton, 33 P.3d 1221, 1224 (Colo. App. 2001), the Colorado Court of Appeals successively cited the following cases for the principle that "[w]hat constitutes a trade secret is a question of fact": Gold Messenger, Inc. v. McGuay, 937 P.2d 907, 911 (Colo. App. 1997); Network Telecomms., Inc. v. Boor-Crepeau, 790 P.2d 901, 902 (Colo. App. 1990); Mulei v. Jet Courier Serv., Inc., 739 P.2d 889, 893 (Colo. App. 1987), rev'don other grounds 771 P.2d 486 (Colo. 1989) (en banc); Porter Indus., Inc. v. Higgins, 680 P.2d 1339, 1341 (Colo. App. 1984); Telex Corp. v. Int'l Bus. Machines Corp., 510 F.2d 894, 928 (10th Cir. 1975). The Tenth Circuit's opinion in Telex Corp. merely states that "what constitutes a trade secret... is a question of fact for the trial court." 510 F.2d at 928. In turn Telex Corp. refers to Kodekey Electronics, Inc. v. Mechanex Corp., 486 F.2d 449 (10th Cir. 1973), which offers no more justification for the standard than the fact that trade secrets are a "nebulous concept," id. at 453-55 & n.3, the same
This court's fundamental responsibility to interpret a Wisconsin statute also means Wis. Stat. § 134.90(7) does not mandate the jettisoning of our uniquely descriptive phrasing of the standard of review. Subsection (7) dictates that Wis. Stat. § 134.90 "shall be applied and construed to make uniform the law relating to misappropriation of trade secrets among states enacting substantially identical laws." In articulating the standard of review, however, we do not "apply" or "construe"
Confirming this plain meaning, an explanatory note accompanying the enactment of Wis. Stat. § 134.90(1) quotes from a report by the national conference of commissioners on uniform state laws, which observed that the UTSA's recommended definition of "trade secret" "contains a reasonable departure from the Restatement of Torts (first) definition which required that a trade secret be 'continuously used in one's business.'" 1985 Wis. Act. 236, § 6 note.
A "privy" refers to "[a] person having a legal interest of privity in any action, matter, or property; a person who is in privity with another." Privy, Black's Law Dictionary 1394 (10th ed. 2014). Privity can arise from various relationships. Id. (listing six types of privity). "The term also appears in the
But see Matrix IV, Inc. v. American Nat'l Bank and Trust Co. of Chi., 649 F.3d 539, 549-52 (7th Cir. 2011) (noting a split of authority on the core versus non-core reasoning).
See Mrozek v. Intra Fin. Corp., 2005 WI 73, ¶ 21, 281 Wis. 2d 448, 699 N.W.2d 54 (observing that the guilty plea "inquiry is not the same as a fully litigated trial between adversarial parties resulting in the fact-finder determining that the facts prove" the allegations).
See Discon Inc. v. NYNEX Corp., 86 F. Supp. 2d 154, 165-66 (W.D.N.Y. 2000) (district court previously dismissed underlying alleged violation of Sherman Act); Barrios v. Paco Pharm. Servs., Inc., 816 F. Supp. 243, 252 (S.D.N.Y. 1993) (noting conspiracy claim precluded after considering and rejecting merits of claim against alleged co-conspirator); Richard B. LeVine, Inc. v. Higashi, 32 Cal. Rptr. 3d 244, 253-54 (Ct. App. 2005) (holding that derivative liability precluded "where plaintiff has already arbitrated or litigated against the direct tortfeasor and lost" (emphasis added)).
North Highland also directs our attention to Muchow v. Goding, 198 Wis. 2d 609, 623, 544 N.W.2d 218 (Ct. App. 1995),
Since Wells has focused his argument for dismissal on a theory of claim preclusion, I will not discuss issue preclusion in great detail. I do note, however, that the doctrine likely would not bar North Highland's claim against Wells because the extent of Wells's alleged liability to North Highland was never actually litigated during the federal dischargeability proceedings or as part of Trewyn's stipulated dismissal from this state-court action.
Reference
- Full Case Name
- North Highland Inc., Plaintiff-Appellant-Petitioner, v. Jefferson MacHine & Tool Inc. and Steven M. Homann, Defendants, Frederick A. Wells, Defendant-Respondent
- Cited By
- 19 cases
- Status
- Published