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Nedschroef Detroit Corp. v. Bemas Enterprises LLC

United States District Court, E.D. Michigan, Southern Division

May 22, 2015

NEDSCHROEF DETROIT CORPORATION, NEDSCHROEF HERENTALS N. V. and KONINKLIJKE NEDSCHROEF HOLDING B. V. Plaintiffs,
v.
BEMAS ENTERPRISES LLC, MARC A. RIGOLE, and BERNARD E. LEPAGE, Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

LINDA V. PARKER, District Judge.

Plaintiffs initiated this lawsuit after discovering that Defendants Marc A. Rigole ("Rigole") and Bernard E. LePage ("LePage"), former employees of Plaintiff Nedschroef Detroit Corporation ("Nedschroef Detroit"), had formed a competing company, Bemas Enterprises LLC ("Bemas") while still working for Nedschroef Detroit. According to Plaintiffs, Rigole and LePage used Plaintiffs' equipment, personnel, and trade secrets to start up and run Bemas. Presently before the Court is Plaintiffs' motion for summary judgment, filed pursuant to Federal Rules of Civil Procedure 56 on February 16, 2015. The motion has been fully briefed. Finding the facts and legal arguments sufficiently presented in the parties' pleadings, the Court dispensed with oral argument pursuant to Eastern District of Michigan Local Rule 7.1(f) on April 30, 2015. For the reasons that follow, the Court grants summary judgment to Plaintiffs on all but two of their claims.

I. Summary Judgment Standard

Summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). After adequate time for discovery and upon motion, Rule 56 mandates summary judgment against a party who fails to establish the existence of an element essential to that party's case and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

The movant has the initial burden of showing "the absence of a genuine issue of material fact." Id. at 323. Once the movant meets this burden, the "nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (internal quotation marks and citation omitted). To demonstrate a genuine issue, the nonmoving party must present sufficient evidence upon which a jury could reasonably find for that party; a "scintilla of evidence" is insufficient. See Liberty Lobby, 477 U.S. at 252.

"A party asserting that a fact cannot be or is genuinely disputed" must designate specifically the materials in the record supporting the assertion, "including depositions, documents, electronically stored information, affidavits or declarations, stipulations, admissions, interrogatory answers, or other materials." Fed.R.Civ.P. 56(c)(1). The court must accept as true the non-movant's evidence and draw "all justifiable inferences" in the non-movant's favor. See Liberty Lobby, 477 U.S. at 255.

II. Factual and Procedural Background

Nedschroef Herentals, N.V. is a Dutch manufacturer of industrial machines that produce metal fasteners, such as nuts, bolts, and screws. Dozens of North American fastener manufacturers use those machines. In order to service and provide replacement parts for the machines, Nedschroef Detroit was formed as a Michigan corporation in approximately 1991. Nedschroef Detroit and Nedschroef Herentals are subsidiaries of Nedschroef Holding B.V. (collectively "Nedschroef").

Rigole was assigned to run Nedschroef Detroit when it first opened. (Pls.' Mot., Ex. 2 at 13-16.) He served as the manager of Nedschroef Detroit from 1991-1996 and from 2004-2013. As the manager, Rigole was the highest ranking Nedschroef employee in North America, and supervised the other Nedschroef Detroit employees. ( Id. at 16, 27-28.) Rigole's job duties included servicing Nedschroef machines and providing replacement parts for those machines. Rigole had the authority to issue quotations, order replacement parts from suppliers, enter into contracts, and sign checks on behalf of Nedschroef. ( Id. at 27.) He also had access to Nedschroef's passcode-protected proprietary part design drawings, customer lists, supplier lists, pricing information, and financial information. ( Id. at 19, 21-24, 28, 55-56.)

In 2005, LePage was hired to work as a project and service engineer for Nedschroef Detroit. (Pl.'s Mot., Ex. 3 at 11.) His job duties included servicing Nedschroef machines and providing replacement parts for those machines. ( Id. at 19-20.) LePage also had the authority to issue quotations, order replacement parts from suppliers, enter into contracts, and sign checks on behalf of Nedschroef. ( Id. at 19-20, 23.) He also had access to Nedschroef's passcode-protected proprietary part design drawings, customer lists, supplier lists, pricing information, and financial information. ( Id. at 20, 22, 27.)

In December 2010 or January 2011, Rigole, LePage, and other Nedschroef Detroit employees were informed that Nedschroef Detroit would be closed within a year unless its business improved. (Pls.' Mot., Ex. 2 at 39-41, 74; Ex. 3 at 16-18, 31; Ex. 6 at 7.) Employees, including Rigole and LePage, received a pay cut at this time. ( Id., Ex. 2 at 40; Ex. 3 at 18.) About a month later, Rigole, LePage, Rigole's wife Christine Van Looveren ("Van Looveren"), and LePage's then girlfriend and now wife Cynthia Lupo ("Lupo"), began to discuss the idea of forming a company to service Nedschroef machines and supply replacement parts for those machines purportedly in the event that Nedschroef Detroit closed. (Pl.'s Mot., Ex. 2 at 39-40; Ex. 3 at 31, 36; Ex. 4 at 9; Ex. 5 at 10.) They formed Bemas a few months later, in about June 2011, naming Van Looveren and Lupo as its owners. ( Id., Ex. 6 at 6.)

According to Rigole, Bemas was formed under Van Looveren's and Lupo's names instead of Rigole's and LePage's names because an unidentified lawyer advised them that it was illegal for Rigole and LePage to open the company under their own names. (Pl.'s Mot., Ex. 2 at 42-43.) As reflected in Van Looveren's and Lupo's deposition testimony in this matter, they in fact never participated in the daily operations of Bemas and know little about Bemas' business. ( Id., Ex. 4 at 14-19, 24-25, 30; Ex. 5 at 9-17.) LePage acknowledged during his deposition that Van Looveren and Lupo were "not really active" in the business of Bemas and that they probably never sent an email from Bemas' address. ( Id., Ex. 3 at 40, 56.)

Rigole and LePage began selling goods and performing services on behalf of Bemas beginning in mid-June 2011, while they were still employed by Nedschroef Detroit.[1] The goods sold were replacement parts for Nedschroef machines and the services performed were on Nedschroef machines. ( Id., Ex. 2 at 204-05; Ex. 3 at 46-47.) Dozens of purchase orders, quotations, and invoices reflect that Rigole and LePage, on behalf of Bemas, competed directly with Nedschroef Detroit from mid-June 2011 forward. (Pl.'s Mot., Ex. 9; Ex. 2 at 119-73.)

Plaintiffs allege that Rigole and LePage used Plaintiffs' proprietary drawings of replacement parts in connection with Bemas' business. Steven Woloszyk, a former Nedschroef Detroit employee, testified during his deposition that Rigole instructed him to create "Bemas" drawings from original Nedschroef drawings, despite the warnings on the latter drawings that they not be reproduced. (Pls.' Mot., Ex. 13 at 35-39, 42-56, 67; Ex. 14.) Plaintiffs also retained an expert in engineering and design, Thomas DeAgostino, who concluded that Bemas drawings could have been created only by copying Nedschroef drawings and were not created through "reverse engineering"- a process by which a drawing is created by analyzing the part itself ( Id., Ex. 15.) Plaintiffs also hired a computer forensic expert who determined that Rigole and LePage downloaded multiple files from their Nedschroef computers, including proprietary drawings. ( Id., Ex. 25.)

Rigole and LePage testified during their depositions, however, that any drawings of parts were received from customers ordering parts from Bemas or through reverse engineering. (Pls.' Mot., Ex. 2 at 47-49, 54, 137-38, 199; Ex. 3 at 65, 66, 81; Ex. 6 at 17-18; 61-62, 6870; Defs.' Resp. Ex. 4 ¶ 4.) Rigole attests in an affidavit attached to Defendants' response brief that neither he nor Bemas removed, kept, or maintained drawings of parts of the like from Plaintiffs. (Defs.' Mot., Ex. 4 ¶ 3.) Rigole denies asking Woloszyk to make any drawings for Bemas based on Nedschroef drawings. (Pls.' Mot., Ex. 2 at 50, 108; Defs.' Resp., Ex. 4 ¶ 6.) According to Rigole, Woloszyk volunteered to create those drawings. (Pls.' Mot., Ex. 2 at 50, 108.) In his affidavit, Rigole states that Bemas never used any drawings made by Woloszyk for any purpose and that he believes Woloszyk made the drawings in an attempt to obtain a job with Bemas. (Defs.' Resp., Ex. 4 ¶¶ 8-9.)

Plaintiffs also allege that Rigole and LePage obtained from Plaintiffs' private server a list of all customers in North America that purchased a Nedschroef machine- the same customers which formed Nedschroef Detroit's customer list for replacement parts and service. (Pls.' Mot., Ex. 1.) This list was available only to authorized personnel on Plaintiffs' password-protected server. ( Id. ) At his deposition, LePage acknowledged that such a list was maintained on Plaintiffs' computer system ( Id., Ex. 3 at 20); however, Rigole states in his affidavit that he is unaware of such a list. (Defs.' Resp., Ex. 4 ¶ 5.) According to Rigole, through his years working at Nedschroef Detroit, he has learned the names of the North American companies with Nedschroef machines and has established "pretty good" relationships with individuals at those companies. (Pls.' Mot., Ex. 2 at 58.)

According to Rigole and LePage, when those individuals contacted them in their capacity as employees of Nedschroef Detroit and expressed that Nedschroef Detroit's price quote was too high or the delivery time too long for a part, Rigole or LePage would tell the customer about Bemas and provide a quote for the part or service from Bemas. ( Id. at 67-68; Ex. 3 at 47, 57, 58-59; Ex. 6 at 39.) Rigole and LePage maintain that they had little control over Nedschroef Detroit pricing, as pricing decisions were made at the corporate level in Belgium. ( Id., Ex. 2 at 23, 72; Ex. 3 at 22-23.) They had access to Plaintiffs' price list, however, and were aware of how Plaintiffs calculated their sales prices. ( Id., Ex. 2 at 28; Ex. 6 at 24.) LePage testified as Bemas' corporate representative that, when parts from Bemas are cheaper than from Nedschroef Detroit, it is because Bemas' profit margin is not as big. ( Id., Ex. 6 at 23-24.) Rigole describes Bemas as thus "filling up a gap" that was created by Plaintiffs' excessive prices. ( Id., Ex. 2 at 204.) It is not disputed that almost all of Bemas' customers were first customers of Nedschroef Detroit, and almost all of the goods and services offered by Bemas are offered by Nedschroef Detroit. ( Id. at 58, 64-70, 114, 116-17, 127, 133, 142, 144, 148, 167-68, 204-205; Ex. 3 at 46-47, 63-64, 74, 77-78, 80; Ex. 6 at 38-40.)

In addition to appropriating Plaintiffs' proprietary drawings and customer list, Plaintiffs allege that Defendants used Nedschroef Detroit's employees, equipment, warehouse and other resources to run Bemas and compete against Nedschroef Detroit. For example, for the first two and a half years of Bemas' existence, Rigole and LePage conducted the company's business while employed by Nedschroef Detroit and using their Nedschroef-owned computers. ( See, e.g., Pls.' Mot., Ex. 2 at 75-76, 157.) Bemas documents reflect, and Defendants confirmed during their testimony, that suppliers shipped parts to Bemas at Nedschroef Detroit's warehouse, where Bemas would use Nedschroef Detroit's forklift to unload the goods and then ship them to Bemas' customers. (Pls.' Mot., Ex. 23; Ex. 2 at 119-29, 140-41, 143, 148, 162-63, 165-55, 205-06; Ex. 3 at 64-65, 67, 81-93, 97, 104.)

Plaintiffs maintain that Rigole's and LePage's work for Bemas while employed by Nedschroef Detroit, ordering the same replacement parts from the same suppliers and offering the same goods and services to the same customers on behalf of Bemas and Nedschroef Detroit, led to customer confusion. As evidence of this confusion, Plaintiffs point to an email exchange between Rigole and Rich Wojtasik from Orttech. On March 15, 2012, Rigole wrote Wojtasik:

(Pls.' Mot., Ex. 20.) Wojtasik responded:

( Id. ) On October 18, 2013, Todd Miller of Kamax sent "Nedschroef Order PO XXXXXXXXX" to Bemas. (Pls.' Mot., Ex. 21.) When asked if it looked like Kamax was confused, LePage answered: "Most definitely." (Pls.' Mot., Ex. 3 at 106.) LePage and Rigole identified other instances where suppliers appeared confused with respect to the business with which they were dealing. ( Id. at 75-76, 98, 106-07; Ex. 2 at 148-49, 166-67, 177.)

After discovering their competing business, Nedschroef terminated Rigole's and LePage's employment on July 17, 2013.

According to Plaintiffs' expert in financial valuation and economic damages, Andrew M. Malec, Ph.D., from the time they started Bemas until their termination from Nedschroef Detroit, Rigole was paid $281, 143 in wages and LePage was paid $286, 749 in wages. (Pls.' Mot., Ex. 26 at 4.) Malec concludes that Bemas' net profits from 2011 through the end of 2013 were $393, 971. ( Id. ) Malec calculates Plaintiffs' total damages through December 31, 2013 to be $961, 863. ( Id. at 5.) Plaintiffs indicate that Defendants provided insufficient discovery responses and thus did not provide all documentation relevant to computing damages. For example, LePage failed to produce his W-2 for 2011 and no financial documentation for 2014 was provided.

In their Complaint, Plaintiffs assert that the above-described conduct by Defendants constitutes:

(I) false designation/false advertising in violation of the Lanham Act, 15 U.S.C. § 1125(a);
(II) violation of the Michigan Consumer Protection Act, Mich. Comp. Laws § 445.901 et seq.;
(III) violation of the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws § 445.1902;
(IV) unfair competition;
(V) conversion;
(VI) statutory conversion, Mich. Comp. Laws § 600.2919a;
(VII) tortious interference with Plaintiffs' business relationships and/or expectancies of business relationships;
(VIII) unjust enrichment;
(IX) civil conspiracy;
(X) breach of duty of loyalty by LePage and Rigole; and,
(XI) breach of fiduciary duty and misappropriation of corporate opportunities by LePage and Rigole.

(ECF No. 1.) In their pending motion, Plaintiffs seek summary judgment with respect to all counts of their Complaint and ask the Court to enter an award of damages and a permanent injunction precluding Defendants from providing replacement parts and services for Nedschroef machines in North America. With respect to damages, Plaintiffs ask that any award include interest, treble damages, and ...


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