UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF INDIANA

HAMMOND DIVISION

APEX COLORS, INC., )

Plaintiff, )

)

v. ) CAUSE NO.: 2:14-CV-273-PRC

)

CHEMWORLD INTERNATIONAL LIMITED, )

INC., CHEMWORLD INTERNATIONAL )

LIMITED, LLC, ATUL MODI, and MANOJ )

MODI, )

Defendants. )

_____________________________________ )

)

APEX COLORS, INC., )

Plaintiff, )

)

v. )

)

PAUL BYKOWSKI, )

Defendant. )

OPINION AND ORDER

This matter is before the Court on Defendants’ Third Motion for Rule 11 Sanctions [DE

289], filed by Defendants on August 12, 2015. Defendants argue that Plaintiff Apex Colors, Inc.’s

inclusion of Apex’s “suppliers” as a “trade secret” is sanctionably frivolous. On September 4, 2015,

Plaintiff’s former attorneys filed a response, and on October 14, 2015, Plaintiff filed a response

through its new counsel. Defendants did not file a reply, and the time to do so has passed.

On August 5, 2014, Plaintiff Apex Colors, Inc. filed a Complaint against Defendants

Chemworld International Limited, Inc., Chemworld International Limited, LLC, Atul Modi, and

Manoj Modi. The Complaint alleged claims of civil conspiracy to misappropriate Plaintiff’s property

(Count I), civil conspiracy to tortiously interfere with Plaintiff’s prospective economic advantage

(Count II), and misappropriation of Plaintiff’s trade secrets in violation of the Indiana Trade Secrets
Act (Count III). On November 21, 2014, Judge Kent Lindquist filed a recommendation that the

reference for the Adversary Complaint in Paul Bykowski’s bankruptcy proceeding be withdrawn,

and on December 12, 2015, the Adversary Complaint was transferred to District Court with the

cause number 2:14cv456. On December 18, 2014, the Court consolidated cause number 2:14cv456

with the instant cause of action for all purposes. On April 8, 2015, Plaintiff filed an Amended

Complaint with leave of Court, adding Paul Bykowski as a named Defendant in this action and

adding claims of unfair competition (Count IV) and federal trademark infringement (Count V). 

On April 16, 17, and 21, 2015, the Court held a hearing on Plaintiff’s Motion for Preliminary

Injunction, which the Court denied on June 30, 2015.

Defendant filed two previous motions for Rule 11 sanctions, both of which the Court denied

on September 9, 2015. 

Federal Rule of Civil Procedure 11(b) provides:

(b) Representations to the Court. By presenting to the court a pleading, written

motion, or other paper--whether by signing, filing, submitting, or later advocating

it--an attorney or unrepresented party certifies that to the best of the person’s

knowledge, information, and belief, formed after an inquiry reasonable under the

circumstances:

(1) it is not being presented for any improper purpose, such as to harass,

cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by

existing law or by a nonfrivolous argument for extending, modifying, or

reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so

identified, will likely have evidentiary support after a reasonable opportunity

for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if

specifically so identified, are reasonably based on belief or a lack of

information.

2
Fed. R. Civ. P. 11(b).

The Rule further provides sanctions for a violation of Rule 11(b):

(c) Sanctions.

(1) In General. If, after notice and a reasonable opportunity to respond, the

court determines that Rule 11(b) has been violated, the court may impose an

appropriate sanction on any attorney, law firm, or party that violated the rule

or is responsible for the violation. Absent exceptional circumstances, a law

firm must be held jointly responsible for a violation committed by its partner,

associate, or employee.

(2) Motion for Sanctions. A motion for sanctions must be made separately

from any other motion and must describe the specific conduct that allegedly

violates Rule 11(b). The motion must be served under Rule 5, but it must not

be filed or be presented to the court if the challenged paper, claim, defense,

contention, or denial is withdrawn or appropriately corrected within 21 days

after service or within another time the court sets. If warranted, the court may

award to the prevailing party the reasonable expenses, including attorney’s

fees, incurred for the motion.

(3) On the Court’s Initiative. On its own, the court may order an attorney,

law firm, or party to show cause why conduct specifically described in the

order has not violated Rule 11(b).

Fed. R. Civ. P. 11(c).

The Court may impose sanctions under Rule 11(c) for “submissions that are filed for an

improper purpose or without reasonable investigation of the facts and law necessary to support their

claims.” Senese v. Chi. Area I.B. of T. Pension Fund, 237 F.3d 819, 823-24 (7th Cir. 2001) (citing

Fed. R. Civ. P. 11(b), (c); Fries v. Helsper, 146 F.3d 452, 458 (7th Cir. 1998); Mars Steel Corp. v.

Cont’l Bank N.A., 880 F.2d 928, 932-33 (7th Cir. 1989) (en banc)); Nat’l Wrecking Co. v. Int’l Bhd.

of Teamsters, Local 731, 990 F.2d 957, 963 (7th Cir. 1993); see also Cuna Mut. Ins. Soc’y v. Office

and Prof’l Emps. Int’l Union, Local 39, 443 F.3d 556, 561 (7th Cir. 2006) (recognizing that Rule

11(c) “allows courts to impose sanctions on a party if the requirements of Rule 11(b) are not met”). 

3
The burden is on the movant to show that Rule 11 sanctions are appropriate. Signature Retail

Servs., Inc. v. Darnell, No. 12 C 7657, 2013 WL 1767716, at *2 (N.D. Ill. Apr. 24, 2013) (citing

Packaging Supplies, Inc. v. Harley-Davidson, Inc., No. 08C400, 2011 WL 5373975, at *6 (N.D. Ill.

2011) (referencing the “‘high burden of showing that Rule 11 sanctions are warranted’”) (quoting

Lundeen v. Minemyer, No. 09 C 3820, 2010 WL 5418896, at *3 (N.D. Ill. 2010))). The Seventh

Circuit Court of Appeals has recognized that “‘[w]hile the Rule 11 sanction serves an important

purpose, it is a tool that must be used with utmost care and caution.’” Id. (quoting Fed. Deposit Ins.

Corp. v. Tekfen Const. and Installation Co., Inc., 847 F.2d 440, 444 (7th Cir.1988)).

In this motion, Defendants argue that Plaintiff has frivolously alleged in the Amended

Complaint that Paul Bykowski and the Chemworld Defendants have misappropriated the identity

of the suppliers of Plaintiff’s colorants on the basis that the identity of those suppliers is a trade

secret. As of January 27, 2015, on its website, Plaintiff identified its “associate manufacturing

partners” as “Aolunda High Tech Industries (China) and Retort Chemicals Ltd. (India).” (Def. Br.

3). Defendants equate these “associate manufacturing partners” with Plaintiff’s “suppliers” and

argue that Plaintiff cannot now claim that the identity of its “suppliers” is a trade secret because the

identities of Aolunda High Tech Industries (“Aolunda”) and Retort Chemicals Ltd. (“Retort”) were

available on Plaintiff’s website.

This same issue was the basis of a motion by Plaintiff to overrule Defendants’ objection to

Plaintiff’s Interrogatory No. 8 that asked Chemworld to disclose “all suppliers of colorants, dyes and

pigments to Chemworld . . . for use in the plastics, inks and coatings industries for the past five

years” and, for each supplier, to identify the date the supplier first supplied to Chemworld, the

products supplied to Chemworld, and an identification of the date first supplied for each product.

4
Chemworld objected to Interrogatory No. 8 based on the “Nondisclosure and Noncompetition”

provision of the employment contract between Plaintiff and Bykowski. The Court overruled the

objection on the basis that the nondisclosure provision is not necessarily coextensive with

information regarding Plaintiff’s trade secrets. Defendants then filed a motion to reconsider on

January 30, 2015, raising for the first time the very same basis raised in the instant motion for

sanctions, namely that Plaintiff had identified Aolunda and Retort on its website and, thus, could not

claim their identities as a trade secret. The Court denied the motion to reconsider as improperly

attempting to narrow the dispositive issues and noting that the Court’s January 21, 2015 Modified

Protective Order included an “attorney’s eyes only” provision that would protect Chemworld’s

confidential information.

In the instant motion, Defendants again equate the identity of Aolunda and Retort as

“suppliers” but offer no evidence to support this assumption. In contrast, in their response, Plaintiff’s

former attorneys explain, with citation to testimony from the preliminary injunction hearing, that

Aolunda and Retort are not Plaintiff’s suppliers. Aolunda and Retort are associated manufacturing

partners and provide due diligence alongside Plaintiff for Plaintiff’s overseas manufacturer

suppliers. At the hearing, Plaintiff provided generic testimony regarding its many manufacturer

suppliers and did not disclose the identity of those suppliers. In addition, Aolunda and Retort were

not involved with Plaintiff’s domestic supply chain, which Plaintiff alleges it has kept confidential,

and Defendants have not offered evidence to the contrary. Finally, former counsel represents that,

when counsel for Defendants made the allegation that Aolunda and Retort were Plaintiff’s suppliers,

Apex provided counsel with a list of Plaintiff’s suppliers and the list did not include either Aolunda

5
or Retort. In its response through current counsel, Plaintiff references prior counsel’s response and

reiterates that Aolunda and Retort are manufacturing partners and not suppliers. 

The Court finds that the Defendants have not demonstrated that Plaintiff or Plaintiff’s

attorneys violated Rule 11(b) by including allegations in the Amended Complaint that Defendants

misappropriated the identity of Plaintiff’s suppliers.

CONCLUSION

Based on the foregoing, the Court hereby DENIES Defendants’ Third Motion for Rule 11

Sanctions [DE 289].

So ORDERED this 30th day of November, 2015.

s/ Paul R. Cherry 

MAGISTRATE JUDGE PAUL R. CHERRY

UNITED STATES DISTRICT COURT

6