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nClosures Inc. v. Block & Co., Inc.

United States Court of Appeals, Seventh Circuit

October 22, 2014

NCLOSURES INC., Plaintiff-Appellant/Cross-Appellee,
v.
BLOCK AND COMPANY, INC., Defendant-Appellee/Cross-Appellant

Argued September 15, 2014.

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:12-cv-09358 -- Samuel Der-Yeghiayan, Judge.

For NCLOSURES INC. (13-3906, 14-1097), Plaintiff - Appellant: Matthew M. Wawrzyn, Attorney, Chicago, IL.

For BLOCK AND COMPANY, INC., doing business as MMF POS, doing business as MMF INDUSTRIES (13-3906, 14-1097), Defendant - Appellee: James Patrick White, Attorney, Louise T. Walsh, Attorney, HUSCH BLACKWELL LLP, Chicago, IL.

Before FLAUM, KANNE, and SYKES, Circuit Judges.

OPINION

Page 599

Flaum, Circuit Judge.

In May 2011, nClosures Inc. and Block and Company, Inc. began a business relationship in which nClosures designed and Block manufactured metal enclosures for electronic tablets, such as iPads. At the outset of the relationship, the parties signed a confidentiality agreement; nClosures then divulged its designs for the enclosure device to Block for manufacture. The first device--known as the Rhino Elite--entered the market for sale in October 2011. By March 2012, however, Block developed its own competing device, known as the Atrio.

Page 600

In November 2012, nClosures brought suit in diversity against Block alleging, among other claims, breach of contract and breach of fiduciary duty. The district court granted summary judgment to Block on both claims. On the breach of contract claim, the district court concluded that no reasonable jury could find that nClosures took reasonable steps to keep its proprietary information confidential, and therefore that the confidentiality agreement was unenforceable. The district court also concluded that no reasonable jury could find that a partnership existed between nClosures and Block that could give rise to a viable breach of fiduciary duty claim. However, the district court denied Block's motion for attorney's fees.

nClosures challenges the district court's rulings on summary judgment, and Block--as cross-appellant--challenges its denial of Block's motion for attorney's fees. We affirm in both respects.

I. Background

nClosures is an industrial design firm co-founded in 2011 by Daniel Gorman, Daniel McKean, and Kemper Barkhurst. After its formation, nClosures developed metal cases for electronic tablets, such as iPads. Designer and independent contractor Ian LeBlanc designed one such device--the Rhino Elite--for nClosures in early 2011. Later that year on May 24th, nClosures co-founders McKean and Gorman attended a trade show in Chicago to display prototypes of the Rhino (a precursor to the Rhino Elite). There, Block CEO Greg Carlson approached them about a potential business relationship. Block previously manufactured and sold metal devices like cash drawers, but had recently identified tablet enclosures as a potential new product line.

At the May 24th meeting between nClosures and Block, the companies signed a confidentiality agreement wherein they agreed to the following:

The Parties ... agree that the Confidential Information received from the other Party shall be used solely for the purposes of engaging in the Discussions and evaluating the Objective (the " Permitted Purposes" ). Except for such Permitted Purposes, such information shall not be used, either directly or indirectly, by the Receiving Party for any other purpose ... .

The agreement defines " the Objective" as " a potential business relationship with respect to iPad Enclosures." Outside of this initial agreement, nClosures did not require other Block employees or engineers to sign additional agreements in order to access Rhino or Rhino Elite design files. nClosures also did not enter into confidentiality agreements with Rhino Elite designer Ian LeBlanc, or with the manufacturers that produced Rhino Elite predecessors known as the Lab Shield and the Rhino. However, a declaration by nClosures co-founder Daniel McKean states, " It is nClosures's policy to not share its designs, know-how, or market knowledge with other parties unless ...


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