Court Opinion

ID: 1012942
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:52:50.96471+00
Date Added: 2024-06-11T09:48:27.779606
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                 FOR THE FOURTH CIRCUIT

IVS HYDRO, INCORPORATED, a West          
Virginia corporation; GENERAL
MANAGEMENT SERVICES,
INCORPORATED, a West Virginia
corporation,
                Plaintiffs-Appellants,
                  v.                        No. 03-1827
JACKIE RAY ROBINSON; ONYX
INDUSTRIAL SERVICES, INCORPORATED,
a Delaware corporation; ONYX
PRECISION SERVICES, INCORPORATED, a
Delaware corporation,
              Defendants-Appellees.
                                         
IVS HYDRO, INCORPORATED, a West          
Virginia corporation; GENERAL
MANAGEMENT SERVICES,
INCORPORATED, a West Virginia
corporation,
                 Plaintiffs-Appellees,
                  v.                        No. 03-1898
JACKIE RAY ROBINSON; ONYX
INDUSTRIAL SERVICES, INCORPORATED,
a Delaware corporation; ONYX
PRECISION SERVICES, INCORPORATED, a
Delaware corporation,
             Defendants-Appellants.
                                         
2                   IVS HYDRO, INC. v. ROBINSON
           Appeals from the United States District Court
     for the Southern District of West Virginia, at Charleston.
              Joseph Robert Goodwin, District Judge.
                         (CA-01-1296-2)

                    Argued: February 25, 2004

                     Decided: March 31, 2004

    Before WILKINS, Chief Judge, MICHAEL, Circuit Judge,
            and HAMILTON, Senior Circuit Judge.

Affirmed by unpublished per curiam opinion.

                            COUNSEL

ARGUED: Bryant Jonathan Spann, ALLEN, GUTHRIE, MCHUGH
& THOMAS, P.L.L.C., Charleston, West Virginia, for Appellants/
Cross-Appellees. John Philip Melick, JACKSON KELLY, P.L.L.C.,
Charleston, West Virginia, for Appellees/Cross-Appellants. ON
BRIEF: Robert B. Allen, ALLEN, GUTHRIE, MCHUGH &
THOMAS, P.L.L.C., Charleston, West Virginia, for Appellants/
Cross-Appellees. Stephanie H. D. Mullett, JACKSON KELLY,
P.L.L.C., Charleston, West Virginia, for Appellees/Cross-Appellants.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
                      IVS HYDRO, INC. v. ROBINSON                        3
                               OPINION

PER CURIAM:

   IVS Hydro, Incorporated (IVS) and General Management Services,
Incorporated (GMS) appeal the district court’s grant of summary
judgment in favor of Jackie Ray Robinson (Robinson), Onyx Indus-
trial Services, Incorporated, and Onyx Precision Services, Incorpo-
rated on IVS and GMS’s claims under West Virginia law for
misappropriation of trade secrets, tortious interference with contract,
and breach of fiduciary duty.1 We affirm.

                                     I

                                    A

   IVS is a West Virginia corporation headquartered in Waverly,
West Virginia. Since its founding in 1972, IVS has provided cleaning
services for industrial facilities, including hydro-blasting and indus-
trial vacuuming. Although IVS has served numerous businesses in the
mid-Ohio valley, only its relationship with four customers, Solvay
Advanced Polymers (Solvay), Kraton Polymers (Kraton), American
Municipal Power (AMP), and Allegheny Power (Allegheny), are rele-
vant to this case. GMS likewise is a West Virginia corporation and
is the largest shareholder of IVS. GMS is owned by Fred Clark
(Clark), who has served as IVS’s general manager since 2000 and as
IVS’s corporate secretary since its founding.2 Onyx is a Delaware cor-
poration based in Texas, with office locations that include Vienna and
Nitro, West Virginia.

   IVS and Onyx compete vigorously in the provision of industrial
cleaning services to customers in the mid-Ohio valley. They solicit
each other’s customers, including AMP, Solvay, Kraton, and Alle-
gheny. Both IVS and Onyx had no guarantee of work under its "blan-
  1
    Onyx Precision Services, Incorporated has been merged into Onyx
Industrial Services, Incorporated. For ease of reference, we will refer to
the corporate defendants as Onyx.
  2
    For ease of reference from this point on, we will refer to both IVS and
GMS as IVS.
4                   IVS HYDRO, INC. v. ROBINSON
ket orders." Rather, each customer was non-exclusive and could and
did call on competing vendors in its sole discretion.

   IVS and Onyx also compete for the hiring of competent employees
who have established relationships with customers. Indeed, the record
reflects that, not only did Onyx routinely seek to employ personnel
from its competitors, so did IVS. Both IVS and Onyx held outings,
such as picnics, to recruit employees. These efforts by IVS and Onyx,
as well as other industrial cleaning services companies operating in
the mid-Ohio valley, resulted in the frequent movement of salesper-
sons and superintendents from one industrial cleaning services com-
pany to another. As a consequence of this frequent movement,
ballpark rates for industrial cleaning services were common knowl-
edge in the mid-Ohio valley industrial cleaning services marketplace.

   From 1977 to 1985, Robinson served as a field worker and part-
time foreman for IVS, performing high-pressure water cleaning. After
pursuing another career for the next seven years, Robinson returned
to IVS in 1992, where he initially worked in the equipment repair
shop. After approximately eight months, Robinson was promoted to
a sales position and he remained involved in sales for the next nine
years. On October 1, 2001, Robinson went to work for Onyx perform-
ing substantially the same job as he performed at IVS. In large part,
this case concerns the circumstances surrounding Robinson and some
other IVS employees’ decision to go to work for Onyx in October
2001. Of note, the IVS employees at issue in this case were hired as
at-will employees. Not a single employee whose departure was at
issue in this case had any written confidentiality or non-compete
agreement with IVS.

   According to IVS, its greatest confidence at issue in this case was
its confidential pricing information. Some of IVS’s pricing proposals
were marked confidential, but others were not. Some of IVS’s pricing
proposals were kept under lock and key, but others were not. IVS’s
pricing and billing rates were contained on a computer network that
was password protected. However, every IVS employee that had
access to IVS’s computer network had access to IVS’s pricing infor-
mation.

   In 2000, Clark instituted an aggressive expansion effort, and, by
the summer of 2000, many employees were unhappy with the contro-
                    IVS HYDRO, INC. v. ROBINSON                     5
versial changes in the company’s management style. Robinson, in
particular, was upset when Clark hired two bankers as vice-presidents
over all the other longstanding employees. By the summer of 2001,
many IVS employees began to look for work elsewhere. In fact,
shortly before the departures at issue, about a dozen employees left
IVS to work for a competitor of both IVS and Onyx.

   By the late summer of 2001, Robinson and fellow IVS employees
James Eddy (Eddy), Steven Hicks (Hicks), Marty McBrayer
(McBrayer), and Fred Cline (Cline) were investigating alternative
employment opportunities.3 In early September 2001, Robinson
approached Eddy after an IVS meeting and told him that he, Hicks,
McBrayer, and Cline were displeased with Clark’s leadership and
were looking to go somewhere else to work. Eddy said he knew peo-
ple at Onyx and would give them a call.

   A short time later, Eddy called Daniel Wright (Wright), an Onyx
vice-president, to tell him about the IVS employees’ interest in leav-
ing IVS. Later that week, Eddy called Wright again and set up a lunch
meeting for a few days later in Wheelersburg, Ohio. Present at the
lunch meeting were Wright, Eddy, and Cline. During the meeting,
Eddy and Cline told Wright that they, along with other IVS employ-
ees, wanted to leave IVS and work elsewhere.

   Eddy and Wright then arranged for a second meeting, this time at
Eddy’s farm in Belpre, Ohio. Present at that meeting were Cline,
Eddy, Hicks, Robinson, Wright, and Ronnie Burdette (Burdette), who
was the Onyx manager whose territory encompassed the mid-Ohio
Valley. During the meeting, the IVS employees said they were going
to leave IVS, were looking for another employer, and had already
talked to some others. Wright and Burdette made no offers of employ-
ment, but made sure that none of the IVS employees had any confi-
dentiality or non-compete agreements with IVS. The IVS employees
complained about Clark’s poor management and said that many other
employees were upset and that some had already left, as, in fact, they
had. Those present also discussed which customers might wish to pur-
chase services from Onyx if these employees were to be hired by
  3
   Eddy was IVS’s operations manager; Hicks and McBrayer were IVS
supervisors; and Cline was an IVS salesman.
6                    IVS HYDRO, INC. v. ROBINSON
Onyx. At this meeting, Robinson provided "a rough figure of what the
rates were in the valley." However, Robinson deliberately was not too
specific because he did not know if he was going to go to work for
Onyx.

   After obtaining authority to proceed, Wright, on September 10,
2001, sent offers to Cline, Eddy, Hicks, McBrayer, and Robinson. On
September 17, 2001, Wright met with the five to discuss the offers.
On September 18, 2001, Cline and Eddy resigned from IVS. Thereaf-
ter, Burdette, Wright, and Connie Johnson (Johnson), who was
responsible for Onyx’s human resources in the territory encompassing
the mid-Ohio Valley, had a conference call with Cline, Eddy, Hicks,
McBrayer, and Robinson so that Johnson could answer questions
about benefits and other details of employment. On September 24,
2001, Wright sent a revised employment offer to Robinson, articulat-
ing some of the changes that Robinson had requested.

   On September 28, 2001, Robinson, Hicks, and McBrayer resigned
from IVS. The following day, Cline, Eddy, Hicks, McBrayer, and
Robinson met with Burdette and Wright to pick up their Onyx com-
pany vehicles so they could start work for Onyx on October 1, 2001.
At this time, the former IVS employees indicated that many of IVS’s
hourly employees who had been working under their supervision may
also want to come to work for Onyx. John Bills (Bills), an IVS techni-
cian, contacted many of these IVS hourly employees and encouraged
them to go to Onyx’s Vienna, West Virginia facility on October 1,
2001 to find out about working for Onyx.

   On October 1, 2001, Cline, Eddy, Hicks, McBrayer, and Robinson
arrived for their first day of work at Onyx. Numerous IVS hourly
employees arrived at Onyx as well. Johnson and her assistant enrolled
Cline, Eddy, Hicks, McBrayer, and Robinson in Onyx’s various bene-
fit programs and provided employment information and applications
to the IVS hourly employees who arrived. Numerous IVS hourly
employees applied for work at Onyx and were hired; some of them
decided not to move, including Bills.4
    4
   According to IVS, when the IVS hourly employees went to Onyx on
October 1, 2001, Robinson allegedly told the employees that they
intended to "destroy" IVS. Robinson allegedly told another attendee that
IVS would be "shut down" by January 1, 2002.
                     IVS HYDRO, INC. v. ROBINSON                       7
  On his first day of employment, Robinson drafted a pricing pro-
posal for industrial cleaning services for Solvay, a company at which
Robinson had an established relationship.5 The Onyx pricing proposal
submitted to Solvay proved to be similar, in many respects, to the
most recent proposal IVS submitted to Solvay, only with lower prices.
Robinson, along with another Onyx employee, later called on Solvay
and Onyx was awarded the work. According to IVS, Robinson drafted
similar low-price proposals and submitted them to Kraton, AMP, and
Allegheny, resulting in IVS losing business with these companies.

                                   B

   On December 19, 2001, IVS filed suit against Robinson and Onyx
in the United States District Court for the Southern District of West
Virginia. IVS’s complaint set forth the following claims under West
Virginia law: (1) civil conspiracy; (2) two causes of action for tortious
interference with contract; (3) defamation; (4) breach of fiduciary
duty; (5) misappropriation of trade secrets; (6) conspiracy in restraint
of trade; (7) interference with prospective business advantage; and (8)
fraud.

   In May 2002, the district court dismissed IVS’s conspiracy in
restraint of trade claim and IVS later abandoned its interference with
prospective business advantage claim. On May 31, 2002, Onyx and
Robinson answered IVS’s complaint and Robinson counterclaimed,
seeking certain unpaid commissions. The parties later settled Robin-
son’s counterclaim.

  After completing discovery, Onyx and Robinson moved for sum-
mary judgment as to each of IVS’s remaining claims. IVS likewise
moved for summary judgment as to its misappropriation of trade
secrets and tortious interference with contract claims. On May 29,
  5
   Each year, Robinson took Solvay representatives to play golf, at
IVS’s expense. Of note, at one point during the August 2001 outing,
Robinson asked a Solvay representative whether he could get on Sol-
vay’s bidder’s list for future business in the event that he were to pur-
chase Hydro Power, a company that provided industrial cleaning services
and competed with both IVS and Onyx. Robinson never purchased
Hydro Power.
8                    IVS HYDRO, INC. v. ROBINSON
2003, the district court granted summary judgment to Robinson and
Onyx as to each of IVS’s remaining claims. IVS filed a timely noticed
of appeal from that order.

   On June 12, 2003, Onyx and Robinson moved the district court to
award to them their attorney’s fees incurred in defending IVS’s claim
for misappropriation of trade secrets. The district court denied that
motion on July 22, 2003, and Onyx and Robinson filed a timely
notice of cross-appeal.

                                   II

   On appeal, IVS argues that the district court erred when it granted
summary judgment in favor of Robinson and Onyx on IVS’s claims
under West Virginia law for misappropriation of trade secrets, tor-
tious interference with contract, and breach of fiduciary duty. Only
the district court’s grant of summary judgment on IVS’s misappropri-
ation of trade secrets claim warrants discussion.6

   IVS argues that the district court erred when it granted summary
judgment in favor of Robinson and Onyx on IVS’s misappropriation
of trade secrets claim because Robinson and Onyx misappropriated
IVS’s trade secrets when Robinson used IVS’s "confidential" pricing
information in formulating the Onyx bids submitted to Solvay, Kra-
ton, AMP, and Allegheny. The district court rejected IVS’s misappro-
priation of trade secrets claim, reasoning that the information
Robinson had from his experience at IVS did not qualify as a trade
secret and the efforts IVS took to maintain the secrecy of its pricing
information did not rise to the level necessary to qualify the pricing
information as a trade secret. Moreover, the court concluded that Rob-
inson and Onyx did not misappropriate the alleged trade secret.

  We review the district court’s grant of summary judgment de novo.
Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir.
2002). Summary judgment is appropriate only when "there is no gen-
    6
   We have reviewed IVS’s arguments attacking the district court’s grant
of summary judgment to Robinson and Onyx on IVS’s claim for breach
of fiduciary duty and its two claims for tortious interference with con-
tract and find those arguments to be without merit.
                     IVS HYDRO, INC. v. ROBINSON                       9
uine issue as to any material fact and . . . the moving party is entitled
to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In reviewing
the grant of summary judgment, we view the facts in the light most
favorable to IVS, the nonmoving party, drawing all justifiable infer-
ences in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255
(1986).

   In evaluating the district court’s decision regarding IVS’s misap-
propriation of trade secrets claim, we agree with the parties that we
look to West Virginia law in this diversity case. Under the West Vir-
ginia Uniform Trade Secrets Act, a trade secret is defined as "infor-
mation" that (1) derives "independent economic value" from "not
being generally known" or "readily ascertainable" by others who can
obtain economic value from its use or disclosure; and (2) is the sub-
ject of "efforts that are reasonable under the circumstances to main-
tain" the secrecy of the information. W. Va. Code Ann. §§ 47-22-
1(d)(1), (2). If IVS’s pricing information constitutes a trade secret, we
must then determine whether the pricing information was misappro-
priated by Robinson and Onyx. Id. §§ 47-22-1(b), 47-22-3.

   In State ex rel. Johnson v. Tsapis, 419 S.E.2d 1 (W. Va. 1992), the
Supreme Court of Appeals of West Virginia adopted the six-factor
test found in § 757 of the Restatement of Torts to determine whether
there was good cause to issue a protective order to prevent the disclo-
sure of the defendant’s trade secrets. Id. at 3. The factors set forth in
Tsapis are as follows:

    (1) [T]he extent to which the information is known outside
    of the defendant’s business;

    (2) [T]he extent to which it is known by employees and
    others involved in the defendant’s business;

    (3) [T]he extent of the measures taken by the defendant to
    guard the secrecy of the information;

    (4) [T]he value of the information to the defendant and
    competitors;
10                   IVS HYDRO, INC. v. ROBINSON
     (5) [T]he amount of effort or money expended by the
     defendant in developing the information; and

     (6) [T]he ease or difficulty with which the information
     could be properly acquired or duplicated by others.

Id. A similar formulation of this six-factor test has been applied by
other courts in determining whether a trade secret exists. See, e.g.,
Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 722
(7th Cir. 2003) (applying similar six-factor test under Illinois law to
determine whether a trade secret existed); Harvey Barnett, Inc. v.
Shidler, 338 F.3d 1125, 1129 (10th Cir. 2003) (applying similar six-
factor test under Colorado law to determine whether a trade secret
existed). Under the six-factor test set forth above, which we believe
the West Virginia Supreme Court of Appeals would apply in deter-
mining whether a trade secret exists in this case, the absence of evi-
dence on any single factor does not necessarily preclude a finding of
a trade secret. Learning Curve Toys, Inc., 342 F.3d at 722; Harvey
Barnett, Inc., 338 F.3d at 1129. Rather, the factors should be weighed
together in making that determination. Learning Curve Toys, Inc., 342
F.3d at 722.

   When examining these six factors, it becomes readily apparent that
no trade secret existed in this case. With regard to the extent to which
IVS’s pricing information was known outside of its business, the
record reflects that ballpark rates for industrial cleaning services in
the mid-Ohio valley were common knowledge. Moreover, the cus-
tomers of both IVS and Onyx were non-exclusive and could and did
call on competing vendors in their sole discretion. The record also
reflects that both IVS and Onyx, as well as other companies similarly
situated, aggressively hired competent employees from each other and
their competitors. Consequently, employees, including salesman,
flowed freely from company to company like the tides. These market
conditions made pricing information, including the manner in which
it was compiled, no big secret in the mid-Ohio valley industrial clean-
ing services marketplace.

   With regard to the second factor, the record reflects that IVS’s pric-
ing information was widely known by its employees. Indeed, every
                     IVS HYDRO, INC. v. ROBINSON                       11
IVS employee that had access to IVS’s computer network had access
to IVS’s pricing information.

    With regard to the third factor, while it is true that some steps were
taken to keep IVS’s pricing information confidential, these steps did
little to keep IVS’s pricing information confidential. Not a single
employee whose departure was at issue had a written confidentiality
or non-compete agreement with IVS. Id. at 724-26 (stressing the
importance of confidentiality agreements in determining whether
information should be regarded as a trade secret). Some IVS propos-
als were marked confidential, but others were not. Finally, as a matter
of practice, IVS did not require its customers to refrain from disclos-
ing IVS’s pricing information to other potential sources of industrial
cleaning services. Cf. Motor City Bagels, L.L.C. v. The American
Bagel Co., 50 F. Supp.2d 460, 480 (D. Md. 1999) (company did not
meet secrecy requirement when it failed to exact secrecy agreements
from potential investors and the exclusivity language was ineffective).

   With regard to factor four, there is little doubt that this factor
weighs in IVS’s favor, as its pricing information was undoubtedly an
asset to IVS and was a weapon that could be used by a competitor.
With regard to factor five, the record does not reflect that IVS
expended a great deal of money in formulating its pricing informa-
tion; rather, IVS heavily relied on the practical experience of its sales
force, which included Robinson and his lengthy background in the
industrial cleaning services industry. Moreover, IVS’s pricing infor-
mation is not patented nor is it licensed to others for their use. With
regard to factor six, the record does not reflect that IVS’s approach
to pricing was in any way unique so as to prevent a competitor from
easily duplicating IVS’s pricing techniques.

   Weighing the six factors in their totality, we conclude that IVS’s
pricing information does not constitute a trade secret. IVS’s approach
to pricing was not unique and IVS did not expend a great deal of
money developing its pricing techniques. Moreover, IVS only took
minimal steps to ensure the confidentiality of its pricing information
and there is little doubt that every IVS employee that had access to
IVS’s computer network had access to its pricing information.
Finally, rates for industrial cleaning services were common knowl-
edge in the marketplace as evinced by the market conditions in the
12                   IVS HYDRO, INC. v. ROBINSON
mid-Ohio valley. Based on this evidence, we agree with the district
court that IVS’s pricing information does not constitute a trade secret.
Accordingly, we need not address whether Robinson and Onyx mis-
appropriated IVS’s pricing information.

                                  III

    On cross-appeal, Robinson and Onyx argue that the district court
abused its discretion when it denied their motion for attorney’s fees
incurred in defending IVS’s claim for misappropriation of trade
secrets. We review "the denial of an award for attorney fees for abuse
of discretion." People for Ethical Treatment of Animals v. Doughney,
263 F.3d 359, 370 (4th Cir. 2001). An abuse of discretion only arises
if the district court’s "conclusions are based on mistaken legal princi-
ples or clearly erroneous factual findings." Id.

   Robinson and Onyx seek the attorney’s fees award pursuant to the
West Virginia Uniform Trade Secrets Act, which permits recovery of
attorney’s fees by a prevailing party if the court determines that a
claim of misappropriation of trade secrets was made in bad faith. W.
Va. Code Ann. § 47-22-4. In this connection, Robinson and Onyx
concede that the issue of bad faith is to be determined by the court,
utilizing an objective reasonableness standard.

   In rejecting Robinson and Onyx’s motion for attorney’s fees, the
district court primarily relied on the West Virginia rules governing
attorney conduct in litigation. According to the court, the action was
not brought in bad faith because at no time before or during the litiga-
tion was it apparent to counsel that the misappropriation of trade
secrets claim was frivolous or lacked a good faith basis.

   The gist of Robinson and Onyx’s argument is that the district court
erred when it looked to the West Virginia rules governing attorney
conduct in litigation to provide the standard governing its decision.
Specifically, Robinson and Onyx argue that the West Virginia rules
governing attorney conduct in litigation evaluate only the good faith
of an attorney bringing a claim, not the good faith of the client on
whose behalf the attorney acts. This distinction has no relevance in
this case. Obviously, an attorney cannot ethically bring and maintain
a claim on behalf of a client who is pressing the same claim in bad
                    IVS HYDRO, INC. v. ROBINSON                     13
faith. Thus, by finding that IVS’s trade secret arguments were not
frivolous and were made in good faith before and during the litiga-
tion, the district court necessarily concluded that IVS itself was not
pursuing that claim in bad faith.

  In summary, we simply cannot conclude that the district court
abused its discretion in refusing to grant attorney’s fees to Robinson
and Onyx in this case.

                                  IV

   For the reasons stated herein, the judgment of the district court is
affirmed.

                                                          AFFIRMED