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Roeslein & Associates, Inc. v. Elgin

United States District Court, E.D. Missouri, Eastern Division

March 2, 2018




         This matter is before the Court on Defendant Thomas Elgin's (“Elgin”) Motion to Dismiss and for More Definite Statement[1] (ECF No. 29), Plaintiffs Roeslein & Associates, Inc.'s (“Roeslein”) and Roeslein Alternative Energy, LLC's (“RAE”) (collectively “Plaintiffs”) Motion for Leave to File Their Amended Complaint (ECF No. 40), and Defendants Elgin Meyer Bioenergy Co.'s (“EMB”) and J.S. Meyer Engineering, P.C.'s (“JSME”) (collectively “Meyer Defendants”) (all Defendants collectively “Defendants”) Motion to Dismiss the Complaint (ECF No. 45). The Court heard oral argument on November 30, 2017, and the motions are fully briefed and ready for disposition. The parties consented to the jurisdiction of the undersigned pursuant to 28 U.S.C. § 636(c). For the reasons set forth below, the Court grants in part and denies in part Plaintiffs' motion to amend their Complaint and denies as moot Defendants' motions to dismiss due to the filing of the amended complaint.

         I. Background

         On April 18, 2017, Plaintiffs filed a Complaint, alleging misappropriation of trade secrets under the Defend Trade Secrets Act (“DSTA”) (Count I), declaratory judgment of ownership of U.S. Patent Application No. 2016/0096761 entitled “Systems and Methods for Processing Organic Compounds” (“patent application”) (Count II), constructive trust over the patent application (Count III), breach of the Missouri Uniform Trade Secrets Act (“MUTSA”) (Count IV), breach of contract by Elgin (Count V), and breach of fiduciary duty by Elgin (Count VI) (ECF No. 1). After learning of additional instances of alleged misconduct and disclosure of their trade secrets and confidential information by Defendants and M&K Chemical Engineering Consultants, Inc. (“M&K”), Plaintiffs filed the instant motion seeking leave to file an amended complaint, adding M&K as a defendant and asserting the additional instances of misconduct and disclosures by Defendants and M&K. One of the new allegations asserted in the amended complaint is that Defendants used Roeslein's confidential information and trade secrets provided by M&K to assist in the construction of a facility in New Mexico, and M&K obtained this information while performing engineering services for Roeslein at the Ruckman, Missouri facility. In opposition, Meyer Defendants focus on the alleged futility of Plaintiffs' proposed amended complaint, asserting that Plaintiffs, even with the proposed amendments, still cannot establish the requisite elements to establish a misappropriation of trade secrets.

         II. First Amended Complaint (ECF No. 41-1)

         For purposes of the motions now before the Court, the record set forth in the First Amended Complaint (ECF No. 41-1) establishes the following facts:[2]

         A. Elgin's Employment with Plaintiffs

         Plaintiffs develop and design energy production facilities that use agricultural and industrial wastes to create green renewable alternate energy solutions to help landowners promote ecological and economic sustainability and restore native prairie lands. (ECF No. 41-1, Exh A, First Amended Complaint at ¶¶ 1-2) RAE is in the business of renewable energy through a process using anaerobic digestion to convert livestock waste into natural gas. (Id. at ¶ 34) Roeslein is an engineering company that designs and builds modular and unitized systems. (Id. at ¶ 28) Roeslein and RAE are affiliated entities with common ownership. (Id. at ¶ 29) Plaintiffs, with their partner, Murphy-Brown of Missouri, a wholly owned subsidiary of Smithfield, Inc., invested significant financial resources to refine and perfect these processes, including the construction of the Ruckman facility located in northern Missouri. (Id. at ¶¶ 35-36)

         On June 7, 2010, Roeslein hired Elgin as the Director of the Process & Energy Business Unit. Elgin's job duties included assisting in the development of renewable energy facilities, new technology methods, and energy solutions, including heading Plaintiffs' efforts to develop a process for converting animal waste to energy. (Id. at ¶¶ 4, 29-30) During his employment with Roeslein, Elgin became RAE's Director and Business Unit Leader, and his job duties and responsibilities remained the same. In 2014, Elgin became Vice President of Roeslein Alternative Energy of Missouri, LLC (“RAEM”), an affiliated entity of RAE. RAE is the sole member of RAEM. (Id. at ¶¶ 5, 32-33)

         During his employment, Elgin had confidential access to proprietary and scientific and technical information regarding Plaintiffs' energy solutions, restoration methodologies, and finances. (Id. at ¶ 42) During the construction of the Ruckman facility, Elgin received confidential, proprietary and trade secret information relating to the operations of that facility. In addition to the design of the facility, Elgin also had confidential access to the scientific means to manage anaerobic digestion to create biogas, the profit analysis, the equipment analysis, the vendor proposals, and the results of testing, including analysis of biogas outpurt under various conditions. (Id. at ¶ 43) Plaintiffs assert that their trade secret information was protected from improper disclosure or unauthorized use in a reasonable manner by limited distribution and access, confidentiality agreements and policies, and password protections. (Id. at ¶ 44)

         On June 7, 2010, Elgin entered into an Employment Agreement with Roeslein that included a Confidential Information and Ownership of Inventions provision. (Id. at ¶¶ 37, 39) The Confidential Information provision provides as follows:

Employee will not, except as authorized by [Roeslein], during and for a period of five (5) years after the termination of [Elgin's] employment with [Roeslein], directly or indirectly, use for himself or others, or disclose, communicate, divulge, furnish to, or convey to any other person, firm, or corporation, any secret or confidential information, knowledge or data of [Roeslein] or that of third parties obtained by [Elgin] during the period of his employment with [Roeslein] (hereinafter, “Confidential Information”).

         Confidential information includes, without limitation, the following:

* Secret or confidential matters of a technical nature such as, but not limited to, methods, know-how, formulae, compositions, processes, discoveries, machines, inventions, computer programs, and similar items or research projects involving such items,
* Secret or confidential matters of a business nature such as, but not limited to, information about costs, purchasing profits, market, sales or lists of customers,
* Secret or confidential matters pertaining to future developments such as, but not limited to, research and development or future marketing or merchandising, and
* Secret or confidential matters pertaining to the unitizing or pre-assembly of systems.
[Roeslein] may notify any person, firm, or corporation employing [Elgin] or evidencing an intention to employ [Elgin] as to the existence and provision of this Agreement.
[Elgin] understands and acknowledges that the Inventions and the Confidential Information are unique and that the disclosure or use of such Inventions and Confidential Information other than in furtherance of the business of [Roeslein] would reasonably be expected to result in irreparable harm to [Roeslein]; and that in addition to whatever other remedies [Roeslein] and/or its successors or assigns may have at law or in equity, [Elgin] specifically covenants and agrees that, in the event of default under or breach of this Agreement, [Roeslein] and/or its successors and assigns shall be entitled to apply to any court of competent jurisdiction to enjoin any breach, threatened or actual, of the foregoing covenants and promises by [Elgin], and/or to sue to obtain damages for default under or any breach of this Agreement, [Elgin] hereby agrees to pay all costs of enforcement and collection of any and all remedies and damages under this Agreement, including reasonable attorneys' fees.

(Id. at ¶ 38, ECF No. 48-1, Employment Agreement: Confidential Information at 6)

         The Ownership of Inventions provision provides as follows:

Any Invention disclosed by [Elgin] to a third person or described in a patent application filed by [Elgin], or on [Elgin's] behalf, within six (6) months after the date of termination of [Elgin's] employment with [Roeslein] shall be presumed to have been conceived or made by [Elgin] during the period of [Elgin's] employment with [RAE].

(Id. at ¶ 39; Employment Agreement: Ownership of Inventions at 6)

         Plaintiffs allege that they shared the following trade secrets, or protectable proprietary information, with Elgin during his employment:

• process technology, such as details and information regarding how Plaintiffs' facilities combine biological and mechanical energy conversion to create natural biogas in a significantly more efficient process than conventional processing plants and different from the parasitic methods used in conventional anaerobic digesters;
• facilities overview information, such as studies of the proprietary modeling process for future plants and competitively sensitive information relating to hog feeding and operations, environmental impact, revenue, risk, profitability and other information used to determine plant viability; and
• financial information, such as financial impact of the various proprietary processes used by Plaintiffs in producing natural gas and fertilizer.

(collectively referred to as Plaintiffs' “trade secret information”). (Id. at ¶ 40)

         B. Elgin's Employment with JSME

         On January 12, 2015, Elgin left his employment at Roeslein and began working for JSME as Vice-President, Chief Financial Officer, Secretary, and Treasurer. (Id. at ¶¶ 6, 18, 47, 49) Elgin, along with Jason and Stanley Meyer, formed EM Bioenergy using Plaintiffs' confidential and trade secret information and also shared this information with JSME, EMB, M&K, Kolb Grading, Elgin-Kolb Bioenergy of New Mexico, Stern Brothers & Co., and Smithfield, Inc. (Id. at ΒΆΒΆ 17, 50, 53) Plaintiffs allege that Kolb Grading and Elgin-Kolb Bioenergy used Plaintiffs' trade secret information to construct the ...

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