Opinion ID: 2499988
Heading Depth: 1
Heading Rank: 5

Heading: Conspiracy to Misappropriate Trade Secrets

Text: Aeroflex's first argumentthat TIC and its agents committed a tortious act focuses on Aeroflex's claim that TIC and its agents misappropriated trade secrets. To establish this tort at trial, Aeroflex will have to prove the following elements of misappropriation of trade secrets: (1) the existence of a trade secret, (2) a confidential relationship between the parties, (3) disclosures by the plaintiff to the defendant concerning the trade secret, and (4) an unauthorized use of those disclosures by the defendant. See Koch Engineering Co., Inc. v. Faulconer, 227 Kan. 813, 826, 610 P.2d 1094 (1980); Mann v. Tatge Chemical Co., Inc., 201 Kan. 326, 332, 440 P.2d 640 (1968). If the actions of a person or that person's agent or instrumentality satisfy these elements and some or all of those actions occur in Kansas, the person could be subject to Kansas jurisdiction under K.S.A. 2011 Supp. 60-308(b). The agent or instrumentality clause encompasses civil conspirators. A civil conspiracy claim generally requires a plaintiff to establish `concert of action or other facts and circumstances from which the natural inference arises that the unlawful, overt acts were committed in furtherance of a common design, intention, or purpose of the alleged conspirators.' Waddoups v. Amalgamated Sugar Co., 54 P.3d 1054, 1064 (Utah 2002) (quoting 16 Am.Jur.2d, Conspiracy § 68 [1998]); see Stoldt v. City of Toronto, 234 Kan. 957, 967, 678 P.2d 153 (1984) (stating elements of civil conspiracy, which is an actionable tort). From a jurisdictional standpoint, if one conspirator commits acts in Kansas in furtherance of a conspiracy and that conspirator falls under the long-arm statute, jurisdiction can be obtained as to all conspirators. See Merriman, 282 Kan. at 464, 146 P.3d 162; Professional Investors Life Ins. Co. v. Roussel, 445 F.Supp. 687, 695 (D.Kan. 1978); see generally Althouse, The Use of Conspiracy Theory to Establish In Personam Jurisdiction: A Due Process Analysis, 52 Fordham L.Rev. 234 (1983). In the amended petition filed in this case, Aeroflex pleaded these elements. In response, TIC accepts that Aeroflex can establish some of the elements. Specifically, TIC does not dispute that (1) Aeroflex owns proprietary information, including trade secrets; (2) there were confidential relationships between Aeroflex and Filardo and Aeroflex and Allen when Filardo and Allen were employed by Aeroflex; and (3) Aeroflex disclosed trade secrets to Filardo and Allen while they were employed by Aeroflex. What TIC disputes is the fourth element; it argues Aeroflex has not demonstrated that TIC, either personally or through its agents or coconspirators, engaged in the unauthorized use of those trade secrets. The district court agreed with TIC, concluding: Despite conducting discovery the plaintiff has produced no evidence Filardo misappropriated plaintiff's confidential and proprietary business information while working in Kansas and in fact the U.S. Army's investigative report rejected the plaintiff's claims. The evidence supports a finding Filardo worked on developing TIC's own proprietary software for the bid. Aeroflex argues this conclusion was reached by a weighing of the evidence rather than by viewing the evidence in the light most favorable to Aeroflex. We agree. To explain our conclusion, it is necessary to parse the dueling affidavits that were presented. To put those affidavits in perspective, we begin with Aeroflex's verified petition. In it, Aeroflex alleged upon information and belief that TIC could not have modified the design of the TS-4530/UPM to meet the exact form, fit and function requirements of the Mode 5 Upgrade, and in turn successfully and cost-effectively have bid for the Mode 5 Upgrade, without access to Aeroflex Wichita proprietary and confidential information. The next two pages of the amended petition detailed reasons for this conclusion. (Because this portion of the pleading was based on information and belief these are mere allegations and not evidence even though the petition was verified under oath.) TIC countered this allegation with the affidavit of Jeffrey O'Hara, TIC's president and chief operating officer, and with the Army's report. O'Hara explained that the employment offers extended to Filardo and Allen included specific protections with respect to any disclosure of Aeroflex proprietary technology which have been strictly observed by all parties. To further substantiate that TIC observed the self-imposed restrictions on disclosures, O'Hara stated: TIC technical solution proposed to the Army includes a TIC designed interface that does not utilize any proprietary Aeroflex technology. O'Hara also indicated the TIC technical solution entails a much more radical upgrade. . . than the approach apparently taken by Aeroflex. Finally, O'Hara quoted at length from the report the Army submitted to the GAO in response to Aeroflex's protest. The Army's report stated, in part, that Aeroflex's conclusions regarding TIC's capabilities were reached without the benefit of reviewing TIC's proposal. After thoroughly reviewing TIC's proposal, the Army's evaluators found that TIC could fully meet the Army's stated requirements using TIC's own proprietary software currently used in another commercially available test set. As to Aeroflex's contention that TIC must have modified Aeroflex's proprietary hardware, the Army's report indicated that TIC completely gutted the [unit] and replaced the hardware with a single printed circuit board design utilizing new hardware components. Further, the Army report indicated that the software TIC utilized is based on software developed internal to TIC and currently being used on similar Mode 5 equipment used elsewhere. In ruling on the motion to dismiss, the district court gave credence to the Army's report. Aeroflex suggests this reliance was misplaced because the Army's report is not conclusive or binding. In fact, according to Aeroflex, the report was essentially a legal brief submitted by Army counsel to the GAO in defense of the Army's behavior. Further, Aeroflex disputed O'Hara's affidavit and the Army's conclusions with two affidavits, one from Jeffrey M. Gillum, the vice president and general manager of Aeroflex, and one from Guy Hill, the director of the avionics business unit of Aeroflex. Gillum, in his affidavit, provided sworn statements that presented a prima facie showing of the first three elements of the tort of misappropriation of a trade secret, that is (1) the existence of a trade secret, (2) a confidential relationship between the parties, and (3) disclosures by the plaintiff to the defendant concerning the trade secret. He did so by stating that the underlying design of the [TS-4530 project] was and is proprietary and confidential information owned by Aeroflex and was developed at great cost over at least the previous seven years, giving Aeroflex a competitive advantage with respect to the manufacture of the [TS-4530 project] and any upgrades. Gillum further stated that Filardo and Allen were critical to the development, maintenance, and use of this proprietary and confidential information. To support this statement, Gillum provided considerable detail about the job responsibilities each held at Aeroflex and identified the types of information that each had been provided. Gillum concluded: [V]aluable trade secrets and proprietary information developed at substantial cost were wrongfully used by TIC. TIC's access to Filardo's and Allen's knowledge compromised the technology that had been developed by Aeroflex and its predecessor and destroyed Aeroflex's competitive advantage, according to Gillum. Hill, in his affidavit, more directly addressed the disputed fourth element regarding the alleged unauthorized use of Aeroflex's trade secrets by TIC. Some of the statements, like those in the amended petition, were Hill's own conclusions or opinions rather than facts and must be disregarded. See Ten Mile Indus. Park v. Western Plains Service, 810 F.2d 1518, 1524 (10th Cir.1987) (providing that only the well pled facts of plaintiff's complaint, as distinguished from mere conclusory allegations, must be accepted as true). But the affidavit also contained Hill's personal knowledge of the facts and circumstances. For example, regarding the Army's report, Hill explained the procedure Aeroflex followed in bringing its protest. Citing statements made during meetings as well as in Army documents, Hill reported that [t]he Army assumed that TIC's representations were true, in accordance with the general Army policy of assuming that representations of contractors that it believes to be responsible are true. Further, Hill stated, the Army's report did not substantiate the contention that TIC did not need or use Aeroflex's proprietary and confidential information because the Army had no possible means of knowing or determining whether TIC had access to [Aeroflex's] trade secrets or proprietary information, [or] whether TIC misappropriated such information prior to, during or subsequent to the preparation of TIC's technical or price proposal. While this statement is itself conclusory, Hill supported it by looking to the circumstances surrounding the bid process, specifically stating: O'Hara's contention [and the Army's conclusion] that TIC's Mode 5 technology was completed and demonstrated before the hiring of Allen and Filardo cannot be true because: i. We understand that, until that time, TIC had been unable to produce or demonstrate a working prototype in a public forum; ii. TIC was unable to undergo the Navy's technical evaluation of TIC's Mode 5 technology in accordance with the Navy contract schedule. . . . iii. TIC was unable to achieve AIMS certification by the Department of Defense prior to the hiring of Allen and Filardo. Hill provided some technical reasons for his conclusion that TIC did not have the ability to successfully bid without appropriating some of Aeroflex's proprietary information. Additionally, he noted that O'Hara did not address nor deny the use by TIC of Aeroflex Wichita's proprietary and confidential information in connection with the development of TIC's price proposal to the Army. These are just a few points made in the affidavits but are sufficient to illustrate that the fourth element is highly contested. Yet, as the district court noted, Aeroflex did not present direct evidencethe metaphorical smoking gunthat TIC misappropriated Aeroflex's proprietary information. Nevertheless, when viewed in the light most favorable to Aeroflex, the affidavits provided circumstantial evidence of the disputed fourth element of the tort of misappropriation of proprietary information. Even with that, however, for jurisdictional purposes Aeroflex must also submit some evidence that the tort occurred in Kansas. That evidence was submitted in the form of Filardo's time sheets, which showed he worked on the upgrade while in Kansas. Filardo is, of course, an alleged coconspirator with the other defendants, and Filardo, as a Kansas resident, is subject to the jurisdiction of a Kansas court. In Merriman, this court held: [I]f one conspirator commits acts in Kansas in furtherance of the conspiracy and that conspirator falls under the act, jurisdiction can be obtained as to all conspirators. [Citation omitted.] Merriman v. Crompton Corp., 282 Kan. 433, 464, 146 P.3d 162 (2006); see generally Althouse, The Use of Conspiracy Theory to Establish In Personam Jurisdiction: A Due Process Analysis, 52 Fordham L.Rev. 234 (1983). Granted, once again, Aeroflex did not present the district court with direct evidence of Filardo applying an Aeroflex trade secret to a portion of his work for TIC while at his home in Kansas. Yet, there is direct evidence that Filardo worked on the project from his home in Kansas and there is circumstantial evidence from which a reasonable jury could infer that Filardo used Aeroflex's trade secrets to TIC's benefit when developing TIC's TS-4530 upgrade while in Kansas. Hence, we conclude that when the evidence is viewed in the light most favorable to Aeroflex, Aeroflex presented a prima facie case of jurisdiction by providing evidence from which it can be inferred that TIC, through its alleged coconspirator Filardo, acted in Kansas to misappropriate Aeroflex's trade secrets. As a result, there was a prima facie case of personal jurisdiction over TIC pursuant to K.S.A. 2011 Supp. 60-308(b)(1)(B). Having reached this conclusion, we need not address Aeroflex's alternative arguments for jurisdiction. It is not necessary for a party to establish multiple prima facie grounds for jurisdiction; one is sufficient, assuming other aspects of due process are satisfied.