United States District Court, E.D. Michigan, Southern Division
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Stephanie Dawkins Davis, United States Magistrate Judge.
Furukawa, Inc., a distributor of automotive and electrical
components, including power cables and wires, filed this suit
against defendant Isthihar Hossain, a former employee,
alleging violation of the Computer Fraud and Abuse Act - 18
U.S.C. § 1030, fraud, breach of contract, breach of
fiduciary duty, misappropriation of trade secrets,
conversion, tortious interference with a business
relationship and expectancies and civil conspiracy. (Dkt.
65). With the exception of fraud, breach of contract and
breach of fiduciary duty, plaintiff asserts the same claims
against defendant HT Wire & Cable Americas, LLC (HT), the
American affiliate of defendant Hossain's new employer,
Hebei Huatong Electric and Cable Group, Ltd.
(“Huatong”). (Dkt. 65).
American Furukawa, Inc. (Furukawa) filed its complaint on
September 19, 2014. (Dkt. 1). At the inception of this
action, plaintiff obtained a temporary restraining order
(TRO) requiring Hossain to refrain from using, accessing,
altering, destroying, disclosing, copying, duplicating,
transferring, divulging or otherwise disseminating any of
plaintiff's information that had been electronically
stored on any device or account controlled by defendant, and
to return all of any such information to the plaintiff. (Dkt.
4, 7). By way of stipulated order on October 16, 2014, the
parties agreed to extend the terms of the TRO until further
order of the court, and established terms for a forensic
examination of defendant's devices and accounts by
plaintiff's expert. (Dkt. 18).
Court granted Furukawa leave to amend its complaint to add
defendant HT Wire, the American affiliate of Huatong that was
formed by Huatong (a Chinese corporation doing business in
the United States) and defendant Hossain, and to add claims
for tortious interference with business relationships and
civil conspiracy. (Dkt. 65). The court denied the
defendants' motion to dismiss for arbitration, finding
that the defendants had waived any right to arbitration that
may have existed. (Dkt. 97). On the parties' cross
motions for summary judgment, the court denied
plaintiff's motion, finding questions of fact remained as
to plaintiff's claims. The court denied in part and
granted in part the defendants' motion, dismissing only
the plaintiff's claim for conversion because it was
preempted by the Michigan Uniform Trade Secret Act (MUTSA).
after the court ruled on the parties' motions for summary
judgment, the parties stipulated to a trial before the bench,
and later consented to the referral of the case to the
undersigned for all proceedings, including the bench trial.
(Dkt. 144, 164). The Court held a five day bench trial which
was completed on December 22, 2016. The Court's ruling
American Furukawa, Inc. (alternately “AF” or
“The Company”) is the American subsidiary of the
Japanese corporation Furukawa Electric Company
(“FEC”). (Dkt. 184, Pg ID 4758). AF is the
distributor of automotive and electrical components including
power cables and wires. (Pl. Ex. 2; Dkt. 184, Pg ID 4762-64).
The Company operates three divisions known as the Automotive
Parts Division (“APD”), the Wire Harness Division
(“WHD”) and the Electronic Specialties Division
(“ESD”). (Pl. Ex.1, Dkt. 184, Pg ID 4761-62). The
dispute in this case involved the ESD division.
supplied power cables to AF's ESD division, which the
Company, in turn sold to its U.S. customers. (Pl. Ex. 3; Dkt.
184, Pg ID 4785-86, 4788-89). Huatong supplied insulated wire
products and overhead wire products under a Sales and
Purchase Agreement with AF dated March 12, 2012. (Pl. Ex. 3).
That agreement expired on March 7, 2013, but was
automatically renewed for successive one year periods unless
either party notified the other at least three months before
the expiration of the initial or any extended term.
(Id.). Aside from its arrangement with plaintiff,
Huatong did not otherwise have a sales or customer network
for its products in the U.S. market. (Dkt. 184, Pg ID
his employment with AF defendant Hossain worked variously as
a Power Systems Electrical Engineer, Product Manager and
Senior Product Manager until he resigned in April 2014. (Dkt.
184, Pg ID 4765, 4767-70). At the time he resigned, Hossain
was a Senior Product Manager responsible for taking orders,
building customer and supplier relationships, managing
customer accounts, monitoring customer developments,
coordinating with factories, processing customer orders and
preparing customer quotes. (Id.). In performing his
duties at AF, Hossain had access to the company's
confidential information, including business plans, financial
and pricing information [factory costs, shipping costs,
margins, pricing formulas], marketing plans, customer
targets, logistics [efficient and cost-effective methods for
expediently and safely delivering the product from factory to
customer], and manufacturing capacity. (Dkt. 184, Pg ID
4771-73, 4821-22; Dkt. 188, Pg ID 5791-93).
February 2014, while traveling in China on AF business,
Hossain met with a Huatong representative, without anyone
else from AF, FEC or any of its affiliates (e.g. Furukawa
Electric Industrial Cable and Shenyang Furukawa) being
present, in direct contravention of instructions from AF.
(Pl. Ex. 12; Dkt. 186, Pg ID 5335-41). Hossain also attempted
to meet with Huatong's general manager. (Pl. Ex. 11).
Hossain was unsuccessful in arranging a face-to-face meeting
with Huatong's general manager, but he did speak to him
after he returned to the U.S. from China. (Id.; Dkt.
186, Pg ID 5342). The next month, in early March 2014,
Hossain entered into employment negotiations with Huatong.
(Pl. Ex. 14; Dkt. 184, Pg ID 4802). The parties completed
negotiations and Hossain executed an employment agreement
with Huatong on March 10, 2014. (Pl. Ex. 15). The agreement
called for Hossain to begin employment with Huatong as the
CEO of the soon to be formed U.S. affiliate of Huatong on
March 17, 2014. (Id.). Hossain was to receive an
annual salary of $156, 000 and a signing bonus of $78, 000.
(Id.). Shortly thereafter, HT was established as a
Michigan limited liability company with Huatong and Hossain
as its members. (Pl. Ex. 24).
day he was scheduled to begin working as HT's CEO,
Hossain reported to AF that he was unable to report to work
because he had torn his Achilles tendon. (Pl. Ex. 14 -
“Employment Agreement” and Pl. Ex. 17; Dkt. 186,
Pg ID 5080-81). As a result, AF placed Hossain on a leave of
absence, during which time he collected short-term disability
benefits from AF's insurer. (Pl. Ex. 12; Dkt. 186, Pg ID
5082). In compliance with rules related to short-term
disability benefits, AF instructed Hossain not to perform any
work during his leave of absence. (Pl. Ex. 18, 19; Dkt. 186,
Pg ID 5082-85; Dkt. 188, Pg ID 5815). In spite of AF's
instruction, Hossain accessed, copied and downloaded several
e-mail messages from his AF (work) account to his personal
e-mail address. (Pl. Ex. 20). The e-mail transfer included
customer evaluation notes, prospective sales information and
customer contact information. (Pl. Exs. 20, 21). While still
employed by AF, Hossain also forwarded information regarding
AF's logistics and sales leads to his Huatong contact in
China. (Pl. Exs. 22, 25). Also while still employed by AF,
Hossain accessed and copied a list of sales leads developed
by plaintiff from a trade show. (Pl. Exs. 58, 71A). This list
included information about people who had expressed an
interest in buying from AF, including the degree to which the
person(s) identified could influence their respective
company's buying decisions. (Pl. Ex. 71A, Ln.16).
March 20, 2014, Huatong notified plaintiff that it would stop
supplying plaintiff with power cables, effective immediately.
(Dkt. 184, Pg ID 4827; Dkt. 187, Pg ID 5366-67). This abrupt
cessation had an immediate and direct impact on AF's
sales because AF did not have an alternate supplier for many
of the products Huatong was supplying. (Dkt. 184, Pg ID
4827-28, 4830-31; Dkt. 185, Pg ID 5050-52; Dkt. 187, Pg ID
5377-81). The products impacted by Huatong's decision
included those for a prospective customer,
Kingwire, which had committed to buying three types
of cable from AF, as well as those sold to existing customers
of AF such as WTEC. (Dkt. 187, Pg ID 5377-82).
on leave and collecting disability benefits, but still
employed by AF, Hossain started performing his duties under
his employment agreement with Huatong. The duties performed
during this period included hiring a consultant to assist in
entity formation, searching for office space, and forming a
website for the entity that would become HT. (Pl. Ex. 24).
during his leave of absence, Hossain affirmed his plan to
resume his duties with AF once he recovered from his injury,
but asked to be relieved of his travel obligations. (Dkt.
186, Pg ID 5085-86). AF accommodated Hossain's request,
replacing his travel obligations with other responsibilities
and making no change to his title or salary. (Pl. Ex. 10).
Hossain returned to active duty for AF on April 25, 2014 (Pl.
Ex. 29; Dkt. 186, Pg ID 5088-92), but after working for
several hours on Monday, April 28, he announced he was
resigning effective that Friday, May 2, 2014. (Pl. Ex. 30,
31, Dkt. 186, Pg ID 5094-97). AF agreed to pay Hossain
through May 2, 2014, but requested that he gather his
belongings and leave the workplace on Tuesday, April 29th.
(Pl. Exs. 32, 34; Dkt. 186, Pg ID 5097-5104). Hossain
protested, claiming he needed more time. (Id.). At
his exit interview, Hossain refused to sign an Employment
Certification & Agreement on Termination certifying that
he had returned all property belonging to AF and had complied
with and would continue to abide by the Invention Assignment
and Secrecy Agreement. (Pl. Ex. 37; Dkt. 186, Pg ID 5100).
After the exit interview, Hossain returned to his desk,
initially ignoring the instruction to pack his belongings and
exit the building within thirty minutes, but ultimately
packed and left later the afternoon of April 29th, following
a tense confrontation with AF's management. (Pl. Ex. 34;
Dkt. 186, Pg ID 5102-03).
weeks of Hossain's departure, AF learned from an errant
e-mail that Hossain was using a pricing template and
formulas, which it had developed, to solicit business from
one of its customers, WTEC. (Pl. Exs. 42, 81; Dkt. 184, Pg ID
4835-36; Dkt. 187, Pg ID 5392-93). AF lost much of WTEC's
business when Huatong stopped supplying the type of cable
that plaintiff sold to WTEC. (Dkt. 188, Pg ID 5665-67).
Hossain was soliciting WTEC to buy the same Huatong cable it
had been buying from plaintiff from HT. (Pl. Ex. 42; Dkt.
184, Pg ID 4835-36; Dkt. 187, Pg ID 5392-93).
conducted a forensic investigation of the two laptop
computers Hossain used during his employment with plaintiff.
(Dkt. 184, Pg ID 4799, 4853-54; Dkt. 186, Pg ID 5182-83). The
investigation revealed that Hossain had copied information,
including 27, 000 emails and thousands of business-related
attachments, to several external storage devices. (Dkt. 186,
Pg ID 5186-87, 5201-10). This revelation prompted the filing
of this suit as well as the requested TRO to which the
parties later stipulated. (Dkt. 1-4, 18). The court-ordered
inspection of plaintiff's personal computer and external
storage devices further revealed that Hossain had not only
copied these files, but had also organized the copied files
into folders and subfolders according to their content. (Pl.
Exs. 56, 57; Dkt. 187, Pg ID 5216-21, 5234, 5268-70).
Moreover, the forensic examination showed that Hossain
accessed plaintiff's information several times after he
resigned from his employment with plaintiff. (Pl. Exs. 57,
58, Dkt. 186, Pg ID 5239-49, 5268-70). The forensic
examination also revealed that “jump list files”
had been deleted and removed from the computer. (Dkt. 186, Pg
ID 5250-52). The forensic expert conducting the investigation
testified that this finding was significant for two reasons:
(1) because jump list files cannot be deleted inadvertently -
deletion requires user intervention; and (2) because the
deletion of such lists permits the transfer of files and
information without detection. (Id.; Dkt. 186, Pg ID
5264-66, 5307-10). The forensic expert also testified that
his investigation revealed that Hossain had transferred files
to external devices that he did not produce. (Pl. Ex. 57;
Dkt. 186, Pg ID 5256-63).
the forensic investigation AF also learned that, in May 2014,
after resigning from the company, Hossain shared meeting
minutes prepared by AF's vice president, Shuichi Takagi,
in June 2013 with Huatong. (Pl. Ex. 43; Dkt. 187, Pg ID
5476-77; Dkt. 188, Pg ID 5631-32). The investigation also
showed that in August 2014, just three days before preparing
HT's business plan, Hossain accessed the 2014 ESD sales
budget plan, the ESD actual profit and loss statement,
balance sheet and cash flow statement for 2013, the ESD 5
year plan summary and the midrange plan summary. (Pl. Ex. 58;
Dkt. 187, Pg ID 5477-78). The ESD budget plan included sales
projections, salary information, expense details, costs of
goods and cash flow information. (Pl. Ex. 71A, Ln. 9; Dkt.
187, Pg ID 5425-26). The HT business plan contains sales
projections for Kingwire identical to those prepared for AF
by Hossain's former colleague. (Pl. Ex. 47; Dkt. 187, Pg
ID 5463, 5482-84). The HT business plan reflects a commitment
from Kingwire to a monthly purchase of $500, 000 of the same
cables it had previously committed to purchase from AF. (Pl.
Ex. 47; Dkt. 185, Pg ID 5054; Dkt. 187, Pg ID 5484). The HT
business plan also indicates that HT had received purchase
orders from WTEC totaling $2, 000, 000, less than four months
after it started operating. (Pl. Ex. 47, 135).
forensic audit revealed that the information downloaded by
Hossain included business plans and financial information,
marketing information, pricing information, customer email,
quotation materials and engineering materials. (Pl. Ex. 72;
Dkt. 187, Pg ID 5414-24). Certain files also contained
forwarder information, shipper quotation information,
customer lead information, competitor price list information,
customer contact information and pricing information. (Pl.
Ex. 71A, Ln. 11, 16, 21, 22, 24; Dkt. 187, Pg ID 5430-5447).