Opinion
No. CV 00 0177440 S
October 22, 2003
MEMORANDUM OF DECISION
This is an action brought by News America Marketing In-Store, Inc. ("News America") against its fanner employee, Steven Marquis and his current employer Floorgraphics, Inc. ("Floorgraphics") alleging breach of fiduciary duty, violation of the Connecticut Uniform Trade Secrets Protection Act ("CUTSA"), violation of the Connecticut Unfair Trade Practices Act ("CUTPA"), tortious interference with contractual relations, statutory theft, conversion, and violation of the Computer Crime Act.
Findings of Fact
News America and Floorgraphics are competitors in the in-store advertising and promotional products industry. Both companies are in the business of providing in-store advertising to retail chain stores. In-store advertising companies lease space in retail stores for advertising products such as shopping cart placards, shelf advertising, floor decals and coupon dispensers, which are in turn sold to product manufacturers for advertising of their products. The in-store marketing companies receive their revenue from the manufacturers and advertisers, and pay the retail stores for the use of space.
On Monday, March 6, 2000, Steven Marquis submitted his resignation to News America. Prior to March 6, 2000, Marquis was employed by News America as a vice president of retail marketing for the north/central region of the United States. Marquis was not bound by a confidentiality, non-competition or non-solicitation agreement with News America. As vice president, Marquis was responsible for contracting with retailers to acquire space in which to place News America's products. He also was the chairperson of a committee that studied the way News America paid retailers.
Marquis then began employment with the defendant, Floorgraphics, Inc. ("Floorgraphics") on March 8, 2000 as a vice president of retail sales and general manager of new programs and products. Marquis' employment with Floorgraphics was defined in part by an offer memorandum dated March 4, 2000. In the offer memorandum signed between Marquis and Floorgraphics, Floorgraphics required Marquis not to bring or pass along any written materials of any type from News America. Specifically, the agreement provided as follows:
Departure from a competitor — The Corporation has recently received communication from a law firm of Mr. Marquis's current employer warning us against acquiring confidential information and trade secrets. The Corporation's interest in hiring Mr. Marquis is based solely on his industry relationships and our shared vision for the future of the in-store marketing industry-not confidential information or trade secrets. Specifically, the Corporation directs, and Mr. Marquis agrees, that he is not to bring or pass along written materials of any type from his current employer to the Corporation.
On Sunday, March 5, 2000, the day before he submitted his resignation, Marquis had gone to the offices of News America in Norwalk, Connecticut. Marquis made copies of e-mail messages that he had sent or received and made a copy of store list material. It is unclear from the testimony how much of the store list he actually took. Because this material was ultimately destroyed by Marquis when he learned that a lawsuit had been filed, the court finds that he took the News America comprehensive store list which is separated into three subsets, supermarkets, drug chains and mass merchandise.
News America purchased its basic store lists from an independent company called Trade Dimensions and then customized it with additional information. Trade Dimensions did not furnish store lists to News America under an exclusive contract, but rather would sell the News America store list to any buyer. The customized aspect of the store lists is valuable to a company in that it takes time and effort to accumulate and update information regarding the retailers.
Marquis also made copies of material that had been used by him in presentations to retailers. It is unclear whether he took generic or customized presentations that included revenue projections. Because this information was destroyed by Marquis the court finds that he did take customized presentations containing revenue information. News America did not require retailers to sign confidentiality agreements as part of the presentations.
Marquis made photocopies of some of these materials, printed some from his personal computer, and downloaded some material from the personal computer onto computer disks.
Plaintiff has not proven that Marquis removed a copy of a News America document called "Retail At a Glance." This document contained detailed information regarding negotiations and contracts with retailers. While one binder copy of the report was reported missing after Marquis' departure, plaintiff has not demonstrated that Marquis took it.
Marquis was given a laptop computer by News America for use in his employment. News America had no knowledge of what material, if any, was stored on Marquis' laptop computer. Accordingly, News America has not demonstrated that Marquis deleted any files that were stored in the laptop computer furnished to him by News America. When Marquis left News America's premises on Monday, March 6, 2000, he returned his laptop computer.
Marquis placed all of the material that he had copied in a copy paper box, and transported the box, along with his personal effects, to his home in Kensington, Connecticut. After arriving at home, Marquis took the box containing the copies and placed it in his garage. At some point by March 21, 2000, Marquis learned that he was going to be sued by News America. Upon learning that he was going to be sued, Marquis decided not to retain the copies of News America material that he had taken. Either on the evening of March 21, 2000, or early in the morning of March 22, 2000, Marquis placed the box containing all of the copies made at News America for pickup by the trash collector which occurred on March 22, 2000.
Marquis did not look at any of the copies made at News America from the time he copied them until the time he threw them out, did not make any copies of such copies, and did not discuss any of these copies with anyone at Floorgraphics. Furthermore, there was no evidence presented that he provided any News America documents to Floorgraphics.
Marquis was hired by Floorgraphics principally because he had experience with in-store advertising programs other than just floor advertising. The initial in-store marketing product of Floorgraphics had been solely a floor advertising decal. In late 1999, Floorgraphics entered into a contract with the AP retail chain to supply other in-store advertising products such as coupon dispensers, cart advertising and shelf advertising products. In order to meet the demands of AP, Floorgraphics hired Marquis, who had experience regarding all types of in-store advertising products from his employment at News America. Marquis devoted most of his time in his first year of employment at Floorgraphics to developing the new advertising and promotional products, such as coupon dispensers, and obtaining vendors for the supply of new products. In fact, the primary motivation for Floorgraphics to hire Marquis was his knowledge of the development of in-store advertising programs and products.
On or about June 18, 2000, Marquis created a document for Floorgraphics known as the In-Storeplus Retailer Status Report. The Retailer Status Report consisted of several columns of information concerning the status of Floorgraphics' relationships with retailers which were clients or potential clients of Floorgraphics. The report also contained information regarding News America's business relationships with various retailers.
Floorgraphics and News America have similar staffing models for maintaining relationships with retail chains in that News America maintains a staff of employees known as account executives, and Floorgraphics has a similar staff known as zone vice presidents, who are each dedicated to a specific set of retail chains. Floorgraphics' zone vice presidents maintain regular contact with retail chains, including those with whom Floorgraphics does not do business, for the purpose of attempting to obtain new business.
Marquis received most of the information on the Retailer Status Report from the Floorgraphics' zone vice presidents. This is because retailers with contracts with News America wishing to receive proposals from a competing in-store marketing company such as Floorgraphics would often indicate a time frame in which they were available to receive competing bids. Retail chains would alert marketing companies like Floorgraphics to the possibility of negotiations for a new contract, and disclose the time frame in which a new contract would go into effect.
Even without divulging specific revenue amounts offered by competing in-store marketing companies, retailers would negotiate with competing companies by also indicating when they were available to accept competitive bids, by acknowledging guarantees, and by stating whether an offer was adequate or needed to "do better." It was not uncommon for a retailer whose contract was close to expiration to request competitive proposals in order to maximize revenue and to obtain bargaining leverage.
Additionally, the information under the fifth column of the Retailer Status report, entitled "Product Participation," was received by Mr. Marquis from the Floorgraphics' zone vice presidents, and can be observed by anyone entering the stores.
All of the information under the seventh column, entitled "Recommendations/Next Steps," including the information regarding the expiration dates and existence of guarantees in News America contracts, was received by Marquis from the Floorgraphics' zone vice presidents.
The "Rates" information contained in the sixth column of the Retailer Status Report showed percentage rates of revenue sharing by product in News America contracts with retailers. Typically, the retailer receives a specified proportion of the advertising revenue received for placing advertisements in the retailer's store. `This revenue share rate in News America's contracts is often different for the different advertising products. Floorgraphics, however, offered retailers only one rate, which is 25% of the gross revenue realized from advertisers for the advertising products placed in the stores. Retailer contracts currently almost always also include guarantee provisions which ensure that the retailers will receive certain amounts regardless of the advertising revenue attributable to their stores.
The majority of the rates contained in the report were "nine/twenty-five," which was the basic rate structure used by Act Media, an in-store marketing company that had been purchased by News America in 1998. Some of the information in the Rates column was provided to Marquis by the Floorgraphics' zone vice presidents. Some of the information in the Rates column was information learned by Marquis while at News America and remembered by him at the time he created the Report. Knowledge of the revenue sharing rates provided in a News America contract does not allow any person to know the net revenue that would actually be earned by the retailer pursuant to the contract. More importantly, knowledge of the revenue share rates contained in News America's retail contracts had no competitive value to Floorgraphics because Floorgraphics offers every retailer 25% of advertising revenue attributable to the products placed in the stores.
Based on the evidence presented, the court finds that Floorgraphics did not made any actual use of or derive any benefit from the information contained in the Retailer Status Report.
The court also finds that neither Marquis nor Floorgraphics utilized any such information in communications with any retail chain concerning in-store marketing.
News America keeps its contracts under lock and key and access to details of the contracts are restricted to a limited group. Information contained in the computers are password protected. Additionally, the retailers under contract with News America have a confidentiality agreement which prohibits them from communicating the information contained in their contracts to third parties. As will be discussed further below, however, retailers do let other competitors of News America know when contracts are coming up for renewal and also let them know what the parameters are for competitive bids.
There is only one specific contract for which plaintiff contends it was forced to increase its bid because of Marquis' and Floorgraphics' alleged misconduct. This contract involved Royal Ahold. Marquis was involved in negotiating the Ahold contract on behalf of News America before his departure. Marquis played no part in the negotiations between Ahold and Floorgraphics, however, which had begun before Marquis joined Floorgraphics. Moreover, the court finds that News America and Ahold did not have an agreement prior to Marquis' departure from News America which Ahold then reneged upon. Instead, on or about March 4, 2000, News America made a "final offer" of 3.6 million dollars which was not accepted by Ahold. Accordingly, there was no agreement between News America and Ahold at the time of Marquis' departure. Instead, News America unilaterally increased its "final offer" from 3.6 million dollars to 4.5 million dollars after Marquis left and after Ahold asked for a delay in the negotiations. The increase in annual revenue guarantees to $4.5 million was ultimately agreed to by Dennis Hopkins in a meeting on March 17, 2000 after it was offered by a senior News America executive, Dominic Porc.
Marquis did attend a Floorgraphics presentation to another retailer cooperative known as Wakefern on or about March 9, 2000. News America did have a business relationship with Wakefern. Marquis did not personally solicit business while at the meeting and was there solely for the purpose of observing the style of presentation. There was no evidence presented that Floorgrapbics used any confidential information from Marquis in trying to solicit business from Wakefern.
Interestingly, while there was some evidence presented that Floorgraphics made a new offer to Ahold after Marquis became employed by it, this offer was only 1.6 million dollars, well below the offer of 3.6 million dollars tendered by News America while Marquis was still employed by News America. This non-competitive offer by Floorgraphics makes clear that Floorgraphics was not relying on any confidential information obtained from Marquis regarding what the status of the negotiations were with News America at the time he left the company.
The only other act that plaintiff submitted in support of its claims was that Marquis arranged to meet Laura Sutherland, another News America vice president of retail marketing, on the morning of March 6, 2000, the day he tendered his resignation. Mr. Marquis did discuss with Ms. Sutherland leaving the employ of News America and going to work for Floorgraphics. Laura Sutherland did not change her employment, however, and is still an employee of News America.
News America paid $4,990 to a third party to investigate the contents of Marquis' computer. One News America employee dedicated two weeks of his time to the investigation. His annual salary was $225,000 and therefore approximately $8653 of his salary was dedicated to this investigation.
Discussion of Law I. There Was No Breach of the Duty of Loyalty.
Marquis, as an officer and employee of News America, owed a duty of loyalty to the Company. "The defendant, as an agent of the plaintiff, was a fiduciary with respect to matters within the scope of his agency. Taylor v. Hamden Hall School, Inc., 149 Conn. 545, 552 (1962), 182 A.2d 615; Santangelo v. Middlesex Theatre, Inc., 125 Conn. 572, 578, 7 A.2d 430; Restatement (Second), 1 Agency 13. The very relationship implies that the principal has reposed some trust or confidence in the agent and that the agent or (employee) is obligated to exercise the utmost good faith, loyalty and honesty toward his principal or employer. 3 Am.Jur.2d, Agency, 199. In the absence of clear consent or waiver by the principal, an agent during the term of the agency, is subject to a duty not to compete with the principal concerning the subject matter of the agency. 3 C.J.S., Agency, 143; Restatement (Second), 2 Agency 393.
Once a fiduciary duty is found to exist, a shifting of burdens occurs; Proof of a fiduciary relationship imposes a twofold burden on the fiduciary. First, the burden of proof shifts to the fiduciary; and second, the standard of proof is clear and convincing evidence. "Once a fiduciary relationship is found to exist, the burden of proving fair dealing properly shifts to the fiduciary . . . Furthermore, the standard of proof for establishing fair dealing is not the ordinary standard of proof of fair preponderance of the evidence, but requires proof either by clear and convincing evidence, clear, and satisfactory evidence or clear, convincing and unequivocal evidence." (Citations omitted; internal quotation marks omitted.) Dunham v. Dunham, 204 Conn. 303, 322-23 (1987).
See also Oakhill Associates v. D'Amato, 30 Conn. App. 356, 358 (1993), 620 A.2d 1294, cert. granted, 225 Conn. 926, 625 A.2d 826 (1993).
There was no evidence presented that Marquis used confidential information to compete with News America before his resignation from News America on March 6, 2000. The only evidence submitted by plaintiff that supports a claim for breach of fiduciary duty was that Marquis did solicit Laura Sutherland for employment while he was still employed by News America. She, however, did not leave the employment of News America.
The Court has reviewed all of the Connecticut cases it could locate regarding breach of fiduciary duty in the employment context. None of these cases found that there was a breach of fiduciary duty where there was no injury to the plaintiff. Consistent with the holding of the Supreme Court in the analogous claim of tortious interference with contract, Appleton v. Board of Education, 254 Conn. 205, 214 (2000), it appears that an essential element of a claim of breach of a duty of loyalty is identification of a specific loss even though no Connecticut Court has specifically stated this requirement. Meehan v. Shaughnessy, 535 N.E.2d 1255, 1264 n. 14 (Mass. 1989). Gibbs v. Breed, Abbott Morgan, 710 N.Y.S.2d 578, 585 (N.Y.App.Div. 2000); Restatement (Second) of Torts § 874 (1979) (proof of actual harm). Accordingly, because there was no loss to the plaintiff, defendant has demonstrated by clear and convincing evidence that he has not breached a fiduciary duty.
Moreover, in Lux v. Environmental Warranty, Inc., 59 Conn. App. 26 (2000), the Court discussed the need for some type of damages to be established in a breach of fiduciary duty case. In this case, no such loss was demonstrated when only one conversation took place with another employee and she ultimately did not leave her employment. Accordingly, even if liability was found on this Count there are no recoverable damages since Sutherland did not leave the employ of News America.
II. There Was No Violation of the Connecticut Uniform Trade Secrets Act
The Uniform Trade Secrets Act defines a trade secret as: "Information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data, or customer list that derives independent economic value, actual or potential from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use." Conn. Gen. Stat. § 35-51(d).
There are two essential elements to this definition. The first concerns the nature of material that the plaintiff claims has been misappropriated pursuant to UTSA. The material misappropriated must be "information," broadly defined as including, but not limited to, a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list. Second, that information must derive independent economic value, either real or potential, as a result of it not being generally known to those who could obtain value from its disclosure or use. Conn. Gen. Stat. § 35-51(d); Allen Mfg. Co. v. Loika, 145 Conn. 509 (1958).
Whether the particular information at issue constitutes a trade secret is a fact bound determination entrusted to the discretion of the trial court. Town Country House Homes Service, Inc. v. Evans, 150 Conn. 314 (1963). Factors used to determine whether given information is a trade secret include:
a. The extent to which the information is known outside the business;
b. The extent to which the information is known by employees and others involved in the business;
c. The information's value to the employer and to its competitors;
d. The resources the employer expends in developing the information;
e. The ease or difficulty with which the information could be properly acquired or duplicated by others.
The information also must "be the subject of efforts that are reasonable under the circumstances to maintain its secrecy." Connecticut General Statutes § 35-51(d). This is a fact bound determination dependent on an analysis of factors such as the nature of the relationship between the employer and employee; the availability of the information in the market place; the extent of prior disclosure of the information; the efforts of the employer to maintain its confidential nature and any written covenants or agreements specifically identifying the information, process or item as secret.
Matters of public knowledge or of general knowledge, in an industry cannot be appropriated by one as his secret. A trade secret is known only in the particular business in which it is used. It is not essential that knowledge of it be restricted solely to the proprietor of the business. He may, without losing his protection, communicate the secret to employees or to others who are pledged to secrecy. Nevertheless, a substantial element of secrecy must exist, to the extent that there would be difficulty in acquiring information except by the use of improper means.
Town Country House Homes Service v. Evans, Inc., supra, 150 Conn. 318.
The alleged trade secrets at issue in this case are the customized store lists, the presentations and the data contained in the Retailer Status Report.
The court finds that the customized store lists constituted a trade secret. They derived economic value potentially as a result of their not being generally known to a competitor who could obtain value from their use.
The presentations were not a trade secret because they were provided to third parties and were not subject to any confidentiality requirements.
The data contained in the Retail Status Report did not constitute a trade secret because the court found credible the testimony that Floorgraphics could not obtain value from its use and that the majority of the information contained in the report was already known or readily available to it. In sum, the only trade secret taken from News America by Marquis was the customized store lists.
The next question is whether the information has been misappropriated. While General Statutes § 35-51(b) provides a detailed definition of misappropriation, in most cases an allegation of misappropriation will occur under one of two circumstances: (1) acquisition of trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of another's trade secret by a person who has used improper means to acquire the trade secret or who acquired the trade secret under circumstances giving rise to a duty to maintain its secrecy or limit its use.
Defendant Marquis did acquire the customized store list and therefore, misappropriated a trade secret. There was no evidence that he disclosed this trade secret to anyone before he threw it in the trash. More specifically, News America has not furnished sufficient evidence to support inference of utilization of a trade secret by Mr. Marquis for the following reasons:
(a) The printed material taken by Mr. Marquis on Sunday, March 5, 2000 was discarded by him without any use being made of it. CT Page 11640
(b) The Floorgraphics offer memo to Mr. Marquis precluded use by Floorgraphics of any written materials from News America.
(c) Mr. Jensen admitted that Mr. Marquis could not be expected to remember any of the details of News America confidential information relating to transactions with retailers.
(d) The retailers Wakefern, Meijer and Eckerd did not transfer their business to Floorgraphics.
(e) Floorgraphics has actually seen its total store coverage diminish since Mr. Marquis became employed.
(f) Retailers often disclose availability for competing offers and revenue goals to competing marketing companies.
There was no evidence presented that Floorgraphics acquired or disclosed any trade secrets of News America and therefore, there has been no misappropriation of a trade secret by this defendant.
A person claiming violation of the Uniform Trade Secrets Act may recover damages only for the actual loss or unjust enrichment caused by misappropriation of a trade secret. Conn. Gen. Stat § 35-53(a). News America adduced no evidence of any damages suffered from conduct by Mr. Marquis taking the customized store lists and therefore, cannot recover any damages under this count.
A person claiming a violation of the Uniform Trade Secrets Act may not receive punitive damages or reasonable attorneys fees as a prevailing party unless the court finds willful and malicious misappropriation. A finding of willful and malicious misappropriation should depend on a finding that actual use was made of a trade secret, and that there was animosity between the parties which motivated the defendant to act with malice. Elm City Cheese Company, Inc. v. Federico, supra at 92-93. In this case no use was made of any trade secrets and therefore, punitive damages and attorneys fees are not recoverable.
III. There was no violation of CUTPA.
CUTPA provides in relevant part:
CT Page 11641 No person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. Conn. Gen. Stat. § 42-110b.
There was nothing unscrupulous, unethical, unfair, or deceptive in Floorgraphics' hiring of Marquis, an experienced individual with relevant industry knowledge who was subject to no contractual covenant against competition or solicitation. Nor was there a showing that Marquis or Floorgraphics made any unfair use of any trade secrets of News America. There was no unfair competition. Accordingly, Floorgraphics did not violate CUTPA.
Likewise, Plaintiff is not entitled to punitive damages or attorney fees under CUTPA because it has not proved the necessary elements of a violation of the statute. It has not proved that Floorgraphics committed an unfair or deceptive trade practice, and it has not proved an "ascertainable loss." Contrast Service Road Corp. v. Quinn, 241 Conn. 630 (1997). In Contrast Service Road Corp., the plaintiff satisfied the ascertainable loss requirement by establishing that the defendant's conduct caused the plaintiff to lose potential customers, although the exact number of such customers and the monetary amount of the loss could not be calculated with certainty. Here, in contrast, the plaintiff failed to satisfy the ascertainable loss requirement because it has not shown any loss whatsoever caused by defendants' conduct, calculable or not.
IV. There was no Interference with Contractual Relations
News America has failed to prove an essential element of interferences with contractual relations because Laura Sutherland did not leave her employment with News America. Existence of an actual loss is an essential element of the tort of unlawful interference with business relations. Appleton v. Board of Education, 254 Conn. 205, 214 (2000). Further, New America has not proven that any contracts with retailers were effected by any acts of Marquis or Floorgraphics.
V. There was no Statutory Theft
Conn. Gen. Stat. § 52-564 provides that: "Any person who steals any property of another, shall pay the owner treble his damages." When Marquis destroyed the copies of documents (not originals) he made on March 5, 2000, News America was restored to the status quo, and suffered no loss. Moreover, News America adduced no evidence of damages resulting from the copies made by Mr. Marquis and therefore Conn. Gen. Stat. § 52-564, allowing treble damages for theft, is not applicable to this claim.
Moreover, with respect to the Fifth and Sixth Counts, punitive damages for common-law intentional torts may be awarded in Connecticut only when the evidence shows a reckless indifference to the rights of others or an intentional and wanton violation of those rights, Collens v. New Canaan Water Co., 155 Conn. 477, 489 (1967), Arnone v. Enfield, 79 Conn. App. 501 (2003). This cannot be found with respect to Marquis making copies on Sunday, March 5, 2000, because he made no use of the copied materials and discarded them shortly after he made them.
VI. There was no Conversion.
The tort of conversion requires the owner to be harmed by the defendant's conduct. Suarez-Negrete v. Trotta, 47 Conn. App. 517, 521 (1998). When Mr. Marquis destroyed the copies, any purported conversion ceased, and News America has not established that it suffered any loss.
VII. There was no Computer Related Offense by News America
A person claiming to be aggrieved by a computer crime in violation of Conn. Gen. Stat., § 53a-251, has a civil cause of action for injury to person, business or property. Conn. Gen. Stat. § 52-570b(c); Blue Cross Blue Shield of Connecticut v. DiMartino, 1991 WL 127094 (July 2, 1991).
Specifically, Conn. Gen. Statutes § 52-570b(c) provides in relevant part: [A]ny person who suffers any injury to person, business or property may bring an action for damages . . . A person claiming to be aggrieved by a computer crime in violation of Section 53a-251 may recover in a civil action only actual damages or damages for unjust enrichment, also described in the statute as "actual loss" and "pecuniary loss." Section 52-570b(c), (d).
Because the information taken from the computer was destroyed and never utilized, the record contains no evidence of injury, actual damages, unjust enrichment, actual loss and/or pecuniary loss suffered by News America.
News America cannot seek expense reimbursements for the investigation, such as its research into Mr. Marquis' laptop computer, as damages, since it is a settled principle of Connecticut common law that parties are required to bear their own litigation expenses. Arnone v. Town of Enfield, supra, 79 Conn. App. 501 (2003); Summit Valley Industries, Inc. v. Local 112, 456 U.S. 717, 721 (1982).
Without proof of injury or loss, and having formally withdrawn any claim for injunctive relief, News America is not a prevailing party within the meaning of Section 52-570b(e), and therefore is not eligible for costs or reasonable attorneys fees.
Conclusion
Judgment is entered in favor of the defendants on Counts One through Seven of the Second Amended Complaint.
CHASE T. ROGERS, SUPERIOR COURT JUDGE.