United States District Court, D. South Dakota, Southern Division
POET, LLC, POET RESEARCH, INC., and POET PLANT MANAGEMENT, LLC, Plaintiffs,
NELSON ENGINEERING, INC., JERRY BAKER, KEVIN HOWES, and HOMELAND ENERGY SOLUTIONS, LLC. Defendants.
LAWRENCE L. PIERSOL, UNITED STATES DISTRICT JUDGE
POET, LLC, POET Research, Inc., and POET Plant Management
(collectively, "POET"), brought this action for
injunctive relief and damages against two of its former
employees, Jerry Baker (Baker) and Kevin Howes (Howes), and
the businesses the men joined some time after they left POET,
Nelson Engineering, Inc. (NEI) and Homeland Energy Solutions,
LLC (Homeland) (collectively, the "Defendants").
Baker and NEI counterclaimed against POET, seeking
declaratory relief and damages. Pursuant to Federal Rule of
Civil Procedure 56, POET (doc. 80), Baker and NEI (doc, 79),
and Howes and Homeland (doc. 91) all move for summary
judgment on various claims. The parties also filed a No. of
hearing on May 31, 2019, the Court heard argument on the
motions. Appearing on behalf of POET were Tara Norgard,
Alexandra Olson, Jamie Hendrickson, Sander Morehead and Marty
Jackley. Mitchell Peterson and Shane Eden appeared on behalf
of Baker and NEI. Representing Howes and Homeland were
Alexander Johnson and Tyler Haigh.
commenced this lawsuit against Baker and NEI after learning
NEI was marketing a process called Hydrolysis Utilization
("HU") to address the volume drop and additional
headspace in fermentors caused by the release of carbon
dioxide. POET later amended its complaint to add Howes and
Homeland as defendants. POET claims that Baker and Howes
misappropriated trade secrets and confidential information,
including but not limited to POET's Delayed Dilution
("DD") technology, and used those to develop HU
Which POET contends is exactly the same as POET's DD.
alleges that (1) all Defendants violated the Defend Trade
Secrets Act, 18 U.S.C. § 1831 et seq.; (2) all
Defendants violated the South Dakota Uniform Trade Secret
Act, SDCL 37-29, the Iowa Uniform Trade Secret Act, IA Code
550.2-.4, and the Minnesota Uniform Trade Secret Act, Minn.
Stat. 325C.01-.03; (3) Baker breached a confidentiality
agreement with POET; (4) Baker breached a duty of loyalty to
POET; (5) NEI tortiously interfered with the confidentiality
agreements between POET and Baker and Howes; (6) Howes
breached a confidentiality and a non-compete agreement with
POET; (7) Howes breached a duty of loyalty to POET; (8)
Homeland tortiously interfered with the confidentiality
agreement between Howes and POET. (Doc. 45.)
Baker and NEI filed an amended counterclaim against POET for
defamation, tortious interference with business
relationships, tortious interference with NEI's
contractual rights with Glacial Lakes Energy, and declaratory
relief. (Doc. 21.)
moves for summary judgment on the breach of contract claims
against Baker and Howes and the tortious interference claims
against NEI and Homeland. POET also requests summary'
judgment on Baker and NEI's counterclaim alleging that
POET tortiously interfered with NEI's contract with
Glacial Lakes. Energy. Baker and NEI do not object to summary
judgment in favor of POET on the counterclaim for tortious
interference with the Glacial Lakes Energy contract.
and NEI move for summary judgment on POET's
misappropriation of trade secrets claims under both federal
and state law. Baker requests summary judgment on POET's
breach of contract and breach of duty of loyalty claims
against him. NEI asks for summary judgment on POET's
claim that it tortiously interfered with Baker's contract
moves for summary judgment on the portion of POET's
breach of contract claim alleging he breached a noncompete
agreement. Howes and Homeland also ask for summary judgment
on POET's claim that Homeland was unjustly enriched.
Baker and NEI's motion for summary judgment on POET's
misappropriation of trade secrets claims under both federal
and state law is denied.
and NEI argue that POET has failed to sufficiently describe
what the trade secret is as a matter of law. POET asserts
that their trade secret is a process of combined elements,
that they have sufficiently described it and, at a minimum,
there is a fact dispute about whether a trade secret exists,
together with other factual disputes on material issues.
Viewing the record in the light most favorable to POET, for
the reasons stated at the hearing on May 31, the Court finds
that fact questions exist and that Baker and NEI are not
entitled to summary judgment on the misappropriation of trade
Is the Issue Whether a Trade Secret Exists a Question of Law
for the Court?
hearing, the Court cited AvidAir Helicopter Supply, Inc.
v. Rolls-Royce Corp., 663 F.3d 966, 972 (8th Cir. 2011).
There, the Eighth Circuit stated, "Though the existence
of a trade secret is a fact-intensive inquiry, it is
ultimately a question of law determined by the court."
Id. at 971 (citing Steve Silvern Ins., Inc. v.
Goshert, 873 N.E.2d 165, 179 (Ind.Ct.App.2007);
Lyn-Flex West, Inc. v. Dieckhaus, 24 S.W.3d 693, 698
(Mo.Ct.App.1999)). In a 2014 decision, the Eighth Circuit
reviewed the issue "whether the jury correctly found
that Hallmark's PowerPoint presentations constituted
trade secrets under Missouri law." Hallmark Cards,
Inc. v. Monitor Clipper Partners, LLC, 758 F.3d 1051,
.1056 (8th Cir. 2014). Later, in 2015, the Indiana Court of
Appeals acknowledged that there is tension between "who
is to determine whether information is a trade secret,"
but the court determined it was not necessary to decide at
that time "whether information constitutes a trade
secret is a matter of law or a question of fact." Think
Tank Software Development Corp, v. Chester, Inc., 30
N.E.3d 738, 746 (Ind.Ct.App. 2015).
Weins v. Sporleder, 569 N.W.2d 16 (S.D. 1997), the South
Dakota Supreme Court held that it is a question of law
whether a trade secret is "information, including a
formula, pattern, compilation, program, device, method,
technique or process." Id. at 20 (citing SDCL
37-29-1(4)). The court held that the remaining subsections of
the South Dakota Trade Secrets Act are questions of fact.
the Court cited these cases, the parties requested time to
research and brief: 1) whether it is for the court or the
jury to decide if a trade secret exists, and 2) if the court
is to make a preliminary decision if a trade secret exists
before submitting that issue to the jury for purposes of
closing the court or records during trial, whether a lower
burden or standard of proof applies to the Court's
decision on that issue.
receiving the written argument and authority from the
parties, the Court will decide before the July 15 hearing
whether the existence of a trade secret is a question of law
for the Court or a question of fact for the jury, or a mixed
question as is the case at least under South Dakota law.
See Weins, supra.
are two reasons for a trade secret determination by the
Court. The Court has to make a preliminary trade secret
determination on the court closure question. If the Court
determines that there is no trade secret, then there is no
basis for closing the records or portions of the trial. It is
for this purpose that the Court has suggested that possibly
the Court should consider a lower burden of proof. The Court
made this suggestion given the fact that "trade secrets
partake of the nature of property, the value of which is
completely destroyed by disclosure." In re Iowa
Freedom of Info. Council, 724 F.2d 658, 664 (8th Cir.
1983). The information claimed to be a trade secret has to be
preserved for appellate review, among other concerns, thus a
lower standard for finding a trade secret for this purpose
appears to be warranted. The briefing to be received from the
parties will assist the Court in making this determination.
second reason for the Court to make a pretrial determination
of whether or not a trade secret exists is for the purpose of
determining what issues get submitted to the jury. If after
receiving the requested briefing, the Court concludes that
the existence of a trade secret is a law question, then the
Court will hear evidence on that issue on July 15. If it is
instead a jury question, then evidence on whether there is a
trade secret will still be heard on July 15 with regard to
the Court closure issue discussed above. If the trade secret
issue is a mixed issue of law and fact, then on July 15 the
Court will hear evidence on the law issue with the two
factual issues to be presented to the jury if the Court finds
for POET on the law issue.
POET's Breach of Contract Claims ...