JAMES T. MOODY, District Judge.
Plaintiffs and counter-defendants William Bodemer and Innovative Beverage Inc. have moved for summary judgment on their complaint for a declaratory judgment and on defendant and counter-claimant
Swanel is a privately held beverage corporation headquartered in Hammond, IN, that does business across the United States. Swanel's business consists of selling approximately fifty soft drink, juice drink, and energy drink products. Additionally, Swanel rents beverage dispensing equipment to restaurants, bars, and other establishments. Swanel's primary energy drink is a product called "Banzai Energy Blast." Swanel sells Banzai in both a can and in the bag-in-box format.
Prior to 1994, Bodemer worked for a beverage company called T & C Carbonics ("T & C"), holding positions that included sales representative and manager. A competitor of Swanel, T & C sold fountain beverages and juices. In 1994, Swanel purchased T & C, and Bodemer began working at Swanel as an outside sales manager. Bodemer was eventually promoted to Swanel's National Sales and Marketing Manager. Bodemer's duties in that role involved maintaining relationships with current and prospective Swanel clients, developing new products, and maintaining quality control. Bodemer was involved with almost every facet of Swanel's business.
After Bodemer had worked for Swanel for approximately three years, Swanel and Bodemer entered into an agreement that contained both non-compete and confidentiality provisions. Bodemer continued his employment with Swanel until February 2009. On February 13, 2009, Bodemer informed Swanel that he was leaving his position. Four days later, on February 17, Swanel management informed Bodemer that he did not need to finish out his remaining two weeks, and instructed him to stop working immediately. Swanel also had one of its attorneys send Bodemer a letter on that same day, which reminded Bodemer of the non-compete and confidentiality agreements he had signed, and stated in relevant part:
(DE # 1-2 at 5 (emphasis in original).)
In November 2008, Bodemer incorporated Innovative Beverage, Inc. (hereinafter "Innovative"). At some point in the months following Bodemer's departure from Swanel, Bodemer began operating Innovative. Bodemer initially ran Innovative out of his own home, but has since moved the business to a warehouse. Innovative produces an energy drink called BAM, a product similar to Swanel's Banzai energy drink.
Innovative has since started competing with Swanel. Innovative has successfully convinced at least one of Swanel's retail clients to switch its business to Innovative. That business, Kam's, located in Champaign, Illinois, was originally a client of T & C Carbonics, but became one of Swanel's clients after Swanel bought T & C Carbonics in 1994.
Bodemer has now moved for summary judgment on all of his claims requesting declaratory relief, and on both of Swanel's counterclaims. (DE ## 34, 35.)
The court will begin its analysis with Bodemer's motion for summary judgment on Swanel's two counterclaims. It will then conclude with an analysis of Bodemer's motion for summary judgment on his declaratory action claims.
FEDERAL RULE OF CIVIL PROCEDURE 56 requires the entry of summary judgment, after adequate time for discovery, against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[S]ummary judgment is appropriate — in fact, is mandated — where there are no disputed issues of material fact and the movant must prevail as a matter of law. In other words, the record must reveal that no reasonable jury could find for the nonmoving party." Dempsey v. Atchison, Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir.1994) (citations and quotation marks omitted).
The moving party bears the initial burden of demonstrating that these requirements have been met; it may discharge this responsibility by showing that there is an absence of evidence to support the non-moving party's case. Carmichael v. Village of Palatine, Ill., 605 F.3d 451, 460 (7th Cir.2010) (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548). To overcome a motion for summary judgment, the non-moving party must come forward with specific facts demonstrating that there is a genuine issue for trial. Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). The existence of a mere scintilla of evidence, however, is insufficient to fulfill this requirement. Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The nonmoving party must show that there is evidence upon which a jury reasonably could find for him. Id.
The court's role in deciding a summary judgment motion is not to evaluate the truth of the matter, but instead to determine whether there is a genuine issue of triable fact. Anderson, 477 U.S. at 249-50, 106 S.Ct. 2505; Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir. 1994). On summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder. Payne v. Pauley, 337 F.3d 767, 770 (7th Cir.2003) (citing Anderson, 477 U.S. at 255, 106 S.Ct. 2505). In viewing the facts presented on a motion for summary judgment, the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable
Count Two of Swanel's counterclaim asserts that Bodemer violated the Indiana Uniform Trade Secrets Act ("IUTSA"), IND.CODE 24-2-3, by misappropriating Swanel's trade secrets. Bodemer's first and only argument on this issue is that he is entitled to summary judgement because the "materials Swanel seeks to define as trade secrets are not covered under the [IUTSA's] definition" of trade secret. (DE # 35 at 20.)
The IUTSA defines a trade secret as:
IND.CODE 24-2-3-2. A protectable trade secret therefore has four characteristics: "(1) information, (2) which derives independent economic value, (3) is not generally known, or readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and (4) is the subject of efforts reasonable under the circumstances to maintain its secrecy." Steve Silveus Ins., Inc. v. Goshert, 873 N.E.2d 165, 179 (Ind.Ct.App. 2007). The determination of whether information constitutes a trade secret is a question of fact.
Here, Swanel contends that the following pieces of information constitute trade secrets under the IUTSA: (1) Swanel's list of distributors
Indiana courts have recognized that under certain circumstances, a customer list can constitute a protectable trade secret under the IUTSA.
Bodemer contends that the identities of Swanel's distributors are not trade secrets because their identities are attainable from other sources. (DE # 44 at 11.) Specifically, Bodemer argues that because Swanel solicits its distributors at trade shows, advertises in trade magazines, and cold calls its customers, the identity of Swanel's customers cannot be a trade secret because this information is ascertainable by other proper means. (Id.)
Bodemer is correct that information that is "generally known, or readily ascertainable by proper means" does not constitute trade secret information. Steve Silveus Ins., Inc., 873 N.E.2d at 179. The Indiana Supreme Court has held that "where the duplication or acquisition of alleged trade secret information requires a substantial investment of time, expense, or effort, such information may be found `not being readily ascertainable' so as to qualify for protection under the Indiana Uniform Trade Secrets Act." Amoco Prod. Co. v. Laird, 622 N.E.2d 912, 919 (Ind.1993).
Bodemer cites to M.K. Plastics Corp. v. Rossi in support of this argument. 838 N.E.2d 1068 (Ind.Ct.App.2005). In that case, the Indiana Court of appeals refused to disturb the trial court's ruling that certain customer information was not a trade secret because it was available on the internet and association directories. Id. at 1076-77. But in this case, the fact that Swanel advertises in trade publications does not mean that its distributors' identities are available through those publications. In the Rossi case, the customer information was actually listed in the trade publications. Id. Bodemer has not presented evidence that Swanel's distributors are listed in trade publications. He has only argued that Swanel advertises in trade publications.
Additionally, the fact that Swanel's distributors could possibly be identified by a competitor attending trade shows, advertising in trade publications, or cold calling businesses does not necessarily mean that those distributors' identities are readily ascertainable. As noted above, "where the duplication or acquisition of alleged trade
Moreover, Bodemer has presented no evidence that distributors in the beverage industry are willing to "shop around" or reveal competing bids from competitors. Cf. Standard Register Co. v. Cleaver, 30 F.Supp.2d 1084, 1094 (N.D.Ind.1998). Furthermore, the beverage industry is not one where the distributors are "a group of readily identifiable customers or clients." See Hydraulic Exch. and Repair, Inc. v. KM Specialty Pumps, Inc., 690 N.E.2d 782, 786 (Ind.Ct.App.1998). As Bodemer points out in his reply brief, there are "tens of thousands, if not hundreds of thousands" of distributors in the beverage industry. (DE # 44 at 14.)
In sum, the facts presented could allow a reasonable jury to conclude that Swanel's distributor list is a trade secret.
Swanel also contends that information regarding the supply requirements of Swanel's distributors constitutes a trade secret. (DE # 41 at 4.) Bodemer makes no argument that this information is not a trade secret in either his brief in support of his motion for summary judgment or his reply brief. Thus, Bodemer's motion for
As to the formula for Swanel's Banzai energy drink, which comes from Swanel's outside flavor house
Bodemer also argues that the Banzai's product recipe is not a trade secret. (DE # 44 at 12.) Bodemer bases this argument on testimony Swanel President Edward Roviaro gave during a deposition. Roviaro was asked if (other than the energy drink formula produced by the flavor house) there were any secrets involved in the energy drink production process. Roviaro responded: "No. I think the packing of it is I don't think any kind of big secret. Sugar and water and flavoring." (DE # 36-1 at 41.) Roviaro was then asked if he agreed that the secret of the energy drink was the "essence."
Bodemer has not, however, provided any case that indicates that one person's subjective belief about the secrecy of a potential trade secret is dispositive on the issue of trade secret protection. At best, this information indicates that there is still a question of fact regarding whether the product recipe is a trade secret. Therefore, Bodemer has not met his initial burden here and his motion as to the Banzai product recipe is
Bodemer makes a similar argument as to the Banzai production techniques. (DE # 44 at 13.) He points to the same "no big secret" testimony from Roviaro's deposition. (Id.) Additionally, he argues that Swanel has provided no evidence that Bodemer was familiar with the Banzai production process. (Id.)
The "no big secret" argument fails for the same reason stated above. As for the argument that Bodemer was not familiar with the production process, that argument is best saved for an analysis of whether Bodemer misappropriated this information. But, as Bodemer makes clear, his motion for summary judgment is limited to arguing that Swanel has no protectable trade secrets. (DE # 35 at 17.) Thus, Bodemer has not met his initial burden here, and his motion for summary judgment as to this piece of information is
Bodemer has made no arguments about recipes and production techniques for products other than Banzai, and to the extent that Swanel is asserting that this information constitutes trade secret information (DE # 41 at 5), Bodemer's motion for summary judgment is
Bodemer argues that the identity of Swanel's flavor house is not a trade
As noted above, one of the requirements for information to constitute a trade secret is that the information "is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." IND. CODE 24-2-3-2. "The owner of the alleged trade secret must take reasonable, though not overly extravagant, measures to protect its secrecy[,]" and absolute secrecy is not required. Zemco Mfg., Inc. v. Navistar Int'l Transp. Corp., 759 N.E.2d 239, 247 (Ind.Ct.App.2001).
In support of his argument that Swanel did not maintain the secrecy of its flavor house's identity, Bodemer points to the fact that one of Swanel's distributors learned the identity of Swanel's flavor house when the distributor received a shipment from Swanel that had a label identifying the flavor house. (DE # 50-3 at 3.) Additionally, potential Swanel distributors were often given tours of the Swanel warehouse that contained cartons labeled with the name of Swanel's flavor house. (DE # 36-2 at 21.) Taken alone, these facts would not allow a reasonable jury to determine that Swanel took reasonable efforts to protect the secrecy of its flavor house. Thus, Bodemer has met his initial burden of showing no genuine issue of material fact exists as to whether the identity of Swanel's flavor house is a trade secret.
Swanel, however, has presented evidence that it had all employees sign confidentiality agreements covering business information learned through employment with Swanel. (DE # 41 at 7; DE # 50-6 at 2.) As noted above, all that Swanel was required to do under Indiana law was to "take reasonable, though not overly extravagant, measures to protect its secrecy." Zemco, 759 N.E.2d at 247. Under the facts presented, a reasonable jury could conclude that the secrecy element of the trade secret test has been met.
Bodemer also makes an argument that because Swanel's flavor house is well known in the beverage industry for its energy drinks, the flavor house's identity is not a trade secret. (DE # 44 at 13.) Bodemer argues that this leads to the conclusion that the identity of this flavor house as a provider of formulas for energy would be readily ascertainable information, thus taking this information outside the protection of the IUTSA. Steve Silveus Ins., Inc., 873 N.E.2d at 179. Bodemer has not, however, provided evidence regarding whether the flavor house market is discrete or whether this particular flavor house would be readily identifiable by one of Swanel's competitors. KM Specialty Pumps, Inc., 690 N.E.2d at 786.
Additionally, any economic value that a competitor, like Bodemer, would gain from this information is not merely from the knowledge of the flavor houses's existence, but also from the knowledge that this flavor house was Swanel's flavor house. The fact that the flavor house was well known in the industry does not mean that the flavor house was well known in the industry for being Swanel's flavor house. A competitor seeking to replicate a Swanel product would be able to do so more quickly knowing which flavor house Swanel had used to develop that product.
A reasonable jury could conclude that the identity of Swanel's flavor house is a trade secret. Therefore, Bodemer has not
Swanel contends that the following pieces of information constitute trade secrets under the IUTSA: product cost /pricing information (DE # 41 at 5), product sales /profit information (id. at 7), and the areas where Swanel's products are sold more easily
First, Bodemer argues that pricing methods for energy drinks are well known throughout the beverage industry. (DE # 44 at 14.) That may be true, but Swanel contends that the actual pricing structure of its products is a trade secret (DE # 41 at 7), not the method that it uses to develop those pricing structures. Thus, Bodemer's argument on this issue is inapposite.
Bodemer also argues that he has not retained any sort of written documentation of any of this information. That may also be true, but Bodemer "need not possess this information in a tangible form or recall precise numbers for this type of information to qualify as trade secrets under Indiana law." Lockhart, 5 F.Supp.2d at 681.
A reasonable jury could conclude that this information constitutes protectable trade secret information, and thus, Bodemer has not met his initial burden on his motion for summary judgment. Bodemer's motion for summary judgment as to this information is
Bodemer has also moved for summary judgment on Swanel's counterclaim for breach of the confidentiality agreement. (DE # 35 at 17.) The language of the confidentiality agreement that is at issue here states:
Despite the fact that the confidentiality agreement at issue in this case is a separate provision from the agreement's covenant not to compete,
Covenants not to compete are restraints of trade and are not favored under Indiana law. Dicen v. New Sesco, Inc., 839 N.E.2d 684, 687 (Ind.2005); Inter-Ocean Ins. Co., 492 N.E.2d at 689. Covenants not to compete are strictly construed against the employer and are only enforced if reasonable. See Inter-Ocean Ins. Co., 492 N.E.2d at 688. In Inter-Ocean Insurance Co., the Indiana Supreme Court outlined the test Indiana courts apply in determining if a covenant not to compete is enforceable:
Inter-Ocean Ins. Co., 492 N.E.2d at 688-89
"To demonstrate a legitimate protectable interest, `an employer must show some reason why it would be unfair to allow the employee to compete with the former employer.'" Macy, 795 N.E.2d at 1110 (quoting Unger v. FFW Corp., 771 N.E.2d 1240, 1244 (Ind.Ct.App.2002). Indiana courts have found customers relationships and goodwill between a business and its customers to be protectable interests. See id.; see also Krueger, 882 N.E.2d at 729. Indiana courts, however, also recognize that "an employee signing a restrictive covenant not to compete is entitled to utilize the general skills he has acquired in performing his job, and can only be prevented from doing so under circumstances where their use adverse to his employer would result in irreparable injury." Macy, 795 N.E.2d at 1110 (citations and quotations omitted).
Covenants not to compete must be limited in scope. Indiana courts have struck down covenants not to compete that extend indefinitely. Inter-Ocean Ins. Co., 492 N.E.2d at 689-90 ("The lack of a reasonable time restraint is enough to render a non-competition covenant void and unenforceable."); see also Coll. Life Ins. Co. of Am. v. Austin, 466 N.E.2d 738, 744 (Ind. Ct.App.1984). Indiana courts have also struck down covenants not to compete that lack a geographic limitation. See Vukovich v. Coleman, 789 N.E.2d 520, 526 (Ind. Ct.App.2003); see also Austin, 466 N.E.2d
Although Indiana courts are reluctant to enforce covenants not to compete that lack geographic limitations, they are more willing to enforce broad restrictive covenants when those covenants protect trade secret or confidential information. See Donahue v. Permacel Tape Corp., 234 Ind. 398, 127 N.E.2d 235, 237 (1955) ("It is admitted that an employee who is entrusted with `trade secrets' may make a valid covenant against the competitive use or disclosure of such trade secrets to the full extent of the affected area of the business of the employer."); 4408, Inc. v. Losure, 175 Ind.App. 658, 373 N.E.2d 899, 902 (Ind.Ct.App.1978) ("Absent special circumstances, such as the employee's possession of trade secrets, a covenant not to compete which is broader in scope than the area of the employee's work will be deemed unenforceable."); Waterfield Mortg. Co. v. O'Connor, 172 Ind.App. 673, 361 N.E.2d 924, 927 (Ind.Ct.App.1977) ("However, if an employee obtained confidential information, he may be restricted in the competitive use and disclosure of such information to the full extent of the employer's business which is thereby affected.").
It is undisputed that the provision in the case at hand contains neither durational nor geographic limitations. If a covenant not to compete lacks a geographic limitation, but covers trade secrets, a court reviewing the provision must still go through the same analysis that it would for any other covenant not to compete. Ackerman v. Kimball Int'l, Inc., 652 N.E.2d 507, 510 (Ind.1995) ("We think that once it is established that trade secrets are involved, and when the covenant not to compete contains no geographic limitation, it must still be inquired further whether that lack of geographic limitation — together with all the other provisions of the covenant — is reasonably necessary to protect the employer, is not unreasonably restrictive of the employee, and is not against public policy."). For the purposes of this analysis, the court will assume that Swanel possesses trade secrets or other confidential information.
As to the first step of the analysis, Swanel asserts that it has legitimate protectable interests in the good will and relationships it has with its customers. Additionally, Swanel argues that it has a protectable interest in its trade secret and confidential information. (DE # 41 at 9-10.) Indiana courts have found that confidential information and goodwill between a business and its customers to be protectable interests. See Krueger, 882 N.E.2d at 729; Donahue, 127 N.E.2d at 237-41; see also Macy, 795 N.E.2d at 1110. Swanel also argues that Bodemer has developed a unique competitive advantage because Bodemer was so intricately involved with Swanel's business for so many years. (DE # 50-1 at 7.) Bodemer makes no argument that Swanel has failed to assert legitimate interests that can be protected by a covenant not to compete. Thus, the court will move on to determine whether the scope of the agreement is reasonable.
The provision in this case extends indefinitely and has no geographic limitation whatsoever. Although Indiana courts allow broader restrictions in covenants not to compete when those covenants protect trade secret or confidential information, they only do so to the "affected area of the business of the employer." Donahue, 127 N.E.2d at 237; see also O'Connor, 361 N.E.2d at 927 ("However, if an employee obtained confidential information, he may be restricted in the competitive use and
Swanel has presented no evidence that it does business outside of the United States. This provision, however, would prevent Bodemer from working for a beverage company in China or Germany. Thus, the provision as written "`could apply to the entire world[.]'" Vukovich, 789 N.E.2d at 526 (quoting Struever v. Monitor Coach Co., 156 Ind.App. 6, 294 N.E.2d 654, 656 (1973)).
Swanel argues that if the confidentiality provision in its contract with Bodemer is determined to be unreasonable, the court should strike, or "blue pencil," the unreasonable terms and enforce the rest of the provision. (DE # 41 at 16.) In Licocci v. Cardinal Assos., Inc., the Indiana Supreme Court summarized its position on blue penciling covenants not to compete:
445 N.E.2d 556, 561 (Ind.1983) (quotations omitted).
Since then, Indiana appellate courts have refined the "blue pencil" doctrine. For example, Indiana courts will not "add terms that were not originally part of the agreement." Burk v. Heritage Food Serv. Equip., Inc., 737 N.E.2d 803, 811 (Ind.Ct.App.2000). "Rather, `unreasonable restraints are rendered reasonable by scratching out any offensive clauses to give effect to the parties intentions.'" Id. (quoting Smart Corp. v. Grider, 650 N.E.2d 80, 83-84 (Ind.Ct.App.1995)).
For this provision to be reasonable, the court would need to add a provision that somehow restricted its scope geographically. The court, however, may not "add
Even if the court were to analyze this provision as a strict confidentiality agreement, it would still be unenforceable. In analyzing the provision as a strict confidentiality agreement, the court must determine how the Indiana Supreme Court would rule on this issue, Rodas, 656 F.3d at 626, even though the court has very limited guidance
Courts take differing approaches when analyzing the enforceability of confidentiality agreements.
The court believes that the Indiana Supreme Court would analyze a confidentiality agreement in a way similar to the way that Indiana courts analyze covenants not to compete. See Brunner, 603 N.E.2d at 159. Therefore, the court will look to the same test that Indiana courts look to in determining the reasonableness of covenants not to compete: confidentiality agreements "must be reasonable with respect to the legitimate interests of the employer, restrictions on the employee, and the public interest." Coffman, 906 N.E.2d at 207. The court will assume, for the sake of argument, that the Indiana Supreme Court would not require geographic or durational limits for a confidentiality agreement to be reasonable.
As to the first step of the analysis, as noted above, Swanel has asserted interests, customer relationships, good will, and confidential or trade secret information, that have been found to be protectable under Indiana law. (DE # 41 at 9); Krueger, 882 N.E.2d at 729; Macy, 795 N.E.2d at 1110. Therefore, the court will proceed to analyze the restrictions on the employee.
Even assuming the lack of any durational or geographic restrictions is not dispositive on the issue of the reasonableness of the scope of the confidentiality agreement, the agreement still covers too much information and is unduly restrictive. A confidentiality agreement "cannot make secret that which is not secret ...." Lanier Prof'l Servs., Inc. v. Ricci, 192 F.3d 1, 5
Additionally, many courts have held that confidentiality provisions cannot be used to restrict an employees use of general knowledge or experience. Kenyon Int'l Emergency, Servs., Inc. v. Malcolm, No. H-09-3550, 2010 WL 2303328, at *2 (S.D.Tex. June 7, 2010) ("[Confidentiality agreements] are legitimate when used to protect truly proprietary information. [Plaintiff] in contrast, attempted to restrict the defendants' use of their experience. Experience is not confidential."); Revere Transducers, 595 N.W.2d at 762-63 ("[T]he restrictions concerning disclosure are sufficiently narrow in scope such that they do not interfere with [the employees'] ability to use skills and general knowledge they acquired through employment with [former employer] in future employment.").
Indiana courts seem to be in harmony with other courts that prohibit the use of restrictive covenants to prevent employees from using general knowledge or experience during future employment. In the one Indiana case the court was able to find that analyzed the enforceability of a confidentiality agreement, the Indiana Court of Appeals summarized Indiana case law regarding restrictive covenants that limit employees using general knowledge or experience in future employment and concluded that "[a]lthough an employer has a protectible property interest in the good will of his business (including secret or confidential information), the same is not true regarding the general knowledge, information or skills gained by the employee in the course of his employment." Brunner, 603 N.E.2d at 160.
In sum, even analyzing the provision under the more lenient confidentiality agreement standard, the provision is unenforceable under Indiana law because it is overly broad and unreasonable in light of the interests sought to be protected, and thus, is a restraint of trade that violates public policy. See Austin, 466 N.E.2d at 744 ("[W]hatever restraint is larger than necessary for the protection of the party, is void, as being injurious to the interests of the party."); see also Dearborn, 486 F.Supp.2d at 816 (noting that Indiana has "a public policy against contracts that unreasonably restrain trade."); Fumo v. Med. Grp. of Mich. City, Inc., 590 N.E.2d 1103, 1109 (Ind.Ct.App.1992).
The blue pencil doctrine cannot be used to save this provision even when analyzed as a confidentiality agreement. Because the provision does not differentiate between confidential information and that information that is generally known, the court would have to insert language into the provision that would limit its enforceability to information that is actually confidential or trade secret information. Cf. Revere Transducers, 595 N.W.2d at 762-63 (upholding nondisclosure agreement and noting that employee was "only precluded from disclosing information that would not generally be known by the public."). Adding language that limited the provision's enforceability to confidential or trade secret information would also ensure that the provision would not prevent Bodemer from using general knowledge or skills in his future employment. But, as noted above, Indiana courts will not add terms that were not originally part of the agreement,
In sum, Bodemer has met his initial burden of showing that there is no genuine issue of material fact as to the enforceability of the confidentiality provision, and because the provision is unenforceable even if it covered trade secret or confidential information, Swanel has not met its burden of showing the presence of a genuine issue of material fact for trial.
As Swanel points out, however, under Indiana law, a covenant not to compete must be analyzed under the law of each state that has "a material interest in the transaction and the parties." See Inter-Ocean Ins. Co., 492 N.E.2d at 690-91. Bodemer has only moved for summary judgment on this issue under the law of Indiana, and thus, is not entitled to summary judgment under the law of any other state. Therefore, Bodemer's motion for summary judgment as to Swanel's breach of contract counterclaim is
A motion for summary judgment must be granted "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." FED. R. CIV. P. 56(c). The parties' burdens in the context of a motion for summary judgment depend on whether the movant or the non-movant would ultimately bear the burden of proof on a disputed issue at trial. Where the movant would bear the burden of proof, the movant "must show that the evidence ... is `so one-sided that ... [the movant] must prevail as a matter of law'" in order to obtain summary judgment in his favor. Reserve Supply Corp. v. Owens-Corning Fiberglas Corp., 971 F.2d 37, 42 (7th Cir.1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)); Addicks Servs., Inc. v. GGP-Bridgeland, LP, 596 F.3d 286, 293 (5th Cir.2010) (where movant also bears burden of proof, "movant must establish beyond peradventure" all essential elements in order to warrant judgment in his favor"); MOORE'S FED. PRACTICE 3d, § 56.13[1] (where party moves for summary judgment and bears the burden of proof on the issue, it must show that the evidence is so powerful that no reasonable jury would be free to disbelieve it).
"[T]he allocation of the burden of proof in a diversity case (or any other case governed by state law) is determined by state law." James River Ins. Co. v. Kemper Cas. Ins. Co., 585 F.3d 382, 384-85 (7th Cir.2009). Under Indiana law, "the party seeking the judgment in an action for declaratory judgment must carry the burden of proving its propriety." Sans v. Monticello Ins. Co., 718 N.E.2d 814, 819 (Ind.Ct. App.1999). Thus, on Bodemer's motion for summary judgment with regard to his declaratory judgment claims, Bodemer "must show that the evidence ... is `so one-sided that ... [the movant] must prevail as a matter of law'" in order to obtain summary judgment in his favor. Reserve Supply Corp., 971 F.2d at 42 (7th Cir.1992)
Bodemer has moved for summary judgment on his claim that seeks a declaration that he complied with the covenant not to compete that he entered into with Swanel. (DE # 35 at 4.) That covenant not to compete states:
(DE # 1-2 at 3.) Bodemer does not argue that this non-compete agreement is unreasonable. In fact, Bodemer concedes that the agreement is enforceable. (DE # 35 at 4.) Bodemer contends, however, that he has not violated the agreement, and seeks a declaratory judgment that states that he has complied with the non-compete agreement. (Id. at 4.)
In his statement of material facts, Bodemer makes clear that he "has not violated the terms of the [covenant not to compete]." (DE # 35-1 at 12; see also DE # 35 at 7 ("Bodemer has not solicited any Swanel customer within the limited geographic area within the specific time period.").) Swanel does not address this argument at all in its response brief. (DE # 41.) In fact, Swanel's only mention of the covenant not to compete comes in its statement of genuine issues, when Swanel states:
(DE # 50-1 at 10.) This mention comes under the section of Swanel's statement of genuine issues that deals with the issue of whether Swanel's confidentiality agreement is reasonable. (Id. at 7.)
Swanel's sole mention of this issue cites to the deposition testimony of Swanel President Edward Roviaro. (DE # 50-1 at 10.) During his deposition, Roviaro was asked about the covenant not to compete, (DE # 36-1 at 62), and he stated that although he was not sure which is longer, a statute mile or a nautical mile,
In his statement of material facts, Bodemer also states that he measured the straight line distance between Kam's and Swanel, and that Kam's is 110 statute miles away from Swanel. (DE # 35-1 at 14.) Swanel does not dispute that Kam's is not within 100 statute miles of its headquarters, as a statute mile is the shorter of the two measurements. (DE # 50-1 at 10; DE # 36-1 at 62.) Swanel also does not present any argument or direct the court to any evidence that Bodemer violated the covenant not to compete with any other distributor. Thus, the only way that Bodemer could have possibly violated the covenant not to compete is if the term "miles" in the agreement refers to nautical, and not statute miles.
Because Swanel does not contest the fact that Kam's is not within 100 statute miles of Swanel's headquarters, and because Swanel has not argued that Bodemer violated the covenant not to compete in any other way, Bodemer has shown "that the evidence ... is `so one-sided that ... [the movant] must prevail as a matter of law'" and may obtain summary judgment in his favor. Reserve Supply Corp., 971 F.2d at 42 (7th Cir.1992) (quoting Liberty Lobby, Inc., 477 U.S. at 251-52, 106 S.Ct. 2505). Thus, Bodemer's motion for summary judgement as to his claim seeking a declaratory judgment that he has complied with the covenant not to compete is
Bodemer also seeks a declaration that the confidentiality agreement is unenforceable. (DE # 35 at 4.) As explained in more detail above, the confidentiality agreement in this case is too broad and is thus unenforceable under Indiana law. There are no genuine issues of material fact as to the enforceability of the confidentiality agreement, and Bodemer has shown "that the evidence ... is `so one-sided that ... [the movant] must prevail as a matter of law'" and may obtain summary judgment in his favor. Reserve Supply Corp., 971 F.2d at 42 (7th Cir.1992) (quoting Liberty Lobby, Inc., 477 U.S. at 251-52, 106 S.Ct. 2505). Thus, Bodemer's motion for summary judgement as to his claim seeking a declaratory judgment confidentiality agreement is unenforceable is
Bodemer also seeks a declaration that Swanel lacks any protectable trade secrets. (DE # 35 at 26.) As explained in more detail above, genuine issues of material fact remain as to whether Swanel possesses trade secrets. Thus, Bodemer has not shown "that the evidence ... is `so one-sided that ... [the movant] must prevail as a matter of law'" and may not obtain summary judgment in his favor. Reserve Supply Corp., 971 F.2d at 42 (7th Cir.1992) (quoting Liberty Lobby, Inc., 477 U.S. at 251-52, 106 S.Ct. 2505). Therefore, his motion for summary judgment as to his claim seeking a declaration that Swanel does not possess trade secrets is
Swanel has also moved to file its statement of genuine issues and the accompanying documents under seal. (DE # 46.) The Seventh Circuit has stated that "[i]nformation that affects the disposition
Bodemer has also moved to strike Swanel's statement of genuine issues and portions of the affidavits supporting its statement of genuine issues. (DE # 45.) Although the court may have relied on portions of these documents at points in its analysis, it did not do so on any matter that was resolved against Bodemer. Therefore, Bodemer's motion to strike (DE # 45) is
For the foregoing reasons:
Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 723 (7th Cir.2003).
Although Bodemer may have known Kam's identity prior to his employment with Swanel, he has presented no evidence showing that Kam's identity as one of Swanel's distributors would be accessible to a reasonably diligent competitor. Laird, 622 N.E.2d at 918 ("`[t]he first and [most significant] consideration is whether the ... information is readily accessible to a reasonably diligent competitor.'" (quoting Surgidev Corp. v. Eye Tech. Inc., 648 F.Supp. 661, 682 (D.Minn.1986))).
Swanel has recognized the effect of the provision's broad language. In a letter sent by Swanel's counsel to Bodemer dated March 10, 2009, Swanel's counsel wrote: "We believe it probably would not be possible for you to avoid violation of the NonCompete/Confidentiality Agreement and/ or the [IUTSA] should you decide to work with any business in direct competition with Swanel ...." (DE # 1-2 at 9); Harvest Ins. Agency, Inc. v. Inter-Ocean Ins. Co., 492 N.E.2d 686, 689 (Ind. 1986) (Indiana courts look to entire contract and the "situation to which it is related" in determining the validity of a covenant not to compete); see also Press-A-Dent, Inc. v. Weigel, 849 N.E.2d 661, 669-70 (Ind.Ct.App.2006) (taking note of letter threatening legal action).
In another letter from Swanel's attorneys to Bodemer, Swanel made it clear that it believes that opening a competing company is itself a breach of the confidentiality agreement: "Furthermore, because the information you possess is confidential and integral to the operation of Swanel .... your operation of a competing business is a de facto breach of your promise in the Agreement to maintain the confidentiality of Swanel's confidential corporate and business information." (DE # 1-2 at 8.)
906 N.E.2d 201, 207 (Ind.Ct.App.2009) (quoting Pathfinder Commc'ns Corp. v. Macy, 795 N.E.2d 1103, 1109 (Ind.Ct.App.2003)).
127 N.E.2d at 240-41 (citations omitted) (emphasis added).
127 N.E.2d at 241 (quoting Roy v. Bolduc, 140 Me. 103, 34 A.2d 479, 480-81 (1943)). The Indiana Court of Appeals has also stated: "[The employer], however, is not entitled to protection from an employee's use of his knowledge, skill or general information acquired or increased through experience or even instructions while in the employment." Captain and Co. v. Towne, 404 N.E.2d 1159, 1162 (Ind.Ct.App.1980).
Although the facts of that case may be similar to the facts of the case at hand, it lends Swanel little support. The former employee in Redmond did not argue, as Bodemer argues here, that the confidentiality agreement was unenforceable. Id. at 1271-72. Instead, the employee argued that "inevitable breaches" of confidentiality agreements may not be enjoined. Id. at 1272. Swanel, however, does not seek an injunction here, and Redmond does not support its argument that the provision in this case is reasonable.
