Law School Case Brief
Cemen Tech., Inc. v. Three D Indus., L.L.C. - 753 N.W.2d 1 (Iowa 2008)
Review of a ruling on a motion for summary judgment is for correction of errors at law. Iowa R. App. P. 6.4. Summary judgment is proper only 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. Iowa R. Civ. P. 1.981(3). A question of fact exists if reasonable minds can differ on how the issue should be resolved. In reviewing the district court's ruling, the evidence presented must be viewed in the light most favorable to the party opposing the motion for summary judgment. However, the opposing party may not rest upon the mere allegations of his pleading but must set forth specific facts showing the existence of a genuine issue for trial. Speculation is insufficient to create a genuine issue of material fact.
Defendants Dean Longnecker and David Enos, through their business, defendant Three D Company, L.L.C. ("Three D"), became interested in purchasing plaintiff Cemen Tech., Inc. ("CTI"), which manufactured concrete mixers. After a letter of intent and nondisclosure and confidentiality agreements were signed, CTI provided the competitor with various business information, such as organizational charts and lists of customers and suppliers. After negotiations ended, defendants Dan Jones, Brad Luhrs, Mark Dorman, Dan Pothast, and Scott Longnecker resigned from CTI and began working for Three D in developing concrete mixers in direct competition with CTI. Later, defendants exhibited a prototype cement mixer at the World of Concrete show closely resembling CTI's mixer. CTI filed a lawsuit against defendants in Iowa state court alleging causes of action for breach of contract, misappropriation of trade secrets, unfair competition, breach of fiduciary duty, and tortious interference with contract. Defendants filed a motion for summary judgment. The district court granted defendants' motion for summary judgment in part and denied it in part, and CTI appealed.
Was there misappropriation of CTI's trade secrets by defendants?
The appellate court reversed in part and affirmed in part the district court's judgment. The appellate court reversed the district court's grant of summary judgment as to the claims for misappropriation of trade secrets. Summary judgment was inappropriate as to those claims against Three D, its owners, and CTI's former employees, except Yelton, because, inter alia, CTI took steps to keep the information confidential, and there were factual questions regarding the economic value of the information, the difficulty in reverse engineering the mixer, and whether Three D's owners and the former employees acted improperly.
As to the breach of contract claims, the appellate court determined that: (1) Three D and its owners were entitled to summary judgment as to the claim regarding the first nondisclosure agreement because it was superseded by a later agreement; (2) the district court properly granted Three D and its owners summary judgment on the claim they breached a letter of intent because Enos did not sign the letter; Dean Longnecker signed in his representative capacity for Three D Company, L.L.C., and thus he could not be held liable individually; and Three D was not a party to the agreement. The appellate court further ruled that the district court properly concluded that a genuine issue of material fact existed as to whether Three D, its owners and the former employees engaged in unfair competition by palming off CTI's products and services as their own. However, the district court erred by ruling that CTI could not pursue a claim of reverse palming off because it had not pleaded that theory in its petition, and that part of the district court's judgment was reversed. Finally, the appellate court found that the district court properly granted Three D and its owners summary judgment on CTI's breach of fiduciary duty claims because none of those defendants were in a fiduciary relationship with CTI. Rather, their relationship was based on the potential purchase of CTI, and they were acting solely for their own benefit, not that of CTI. However, the district court erred by granting the former employees summary judgment on CTI's breach of fiduciary duty claims because genuine issues of material fact existed as to their fiduciary relationships with CTI. Thus, that part of the district court's judgment was reversed.
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