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Conxall Corporation v. Iconn Systems LLC

Court of Appeals of Illinois, First District, Sixth Division

September 2, 2016

CONXALL CORPORATION, an Illinois Corporation, Plaintiff-Appellant and Cross-Appellee,
v.
iCONN SYSTEMS, LLC, an Illinois Limited Liability Corporation; RICHARD REGOLE; KERRY NELSON; ROBERT SMITH; MANUAL SANCHEZ; MARIO CALDERA; and JEROME VOREL, Defendants-Appellees and Cross-Appellants (Mine Safety Appliances Company, a Pennsylvania Corporation, Third-Party Defendant).

         Appeal from the Circuit Court of Cook County No. 08-L-15396; the Hon. Gregory J. Wojkowski, Judge, presiding.

         Judgment Affirmed in part, vacated in part, and remanded with directions.

          Williams Montgomery & John, Ltd., of Chicago (Peter C. John and Alyssa M. Reiter, of counsel), and Howarth & Smith, of Los Angeles, California (Don Howarth, of counsel), for appellant and cross-appellee.

          Pedersen & Houpt, P.C., of Chicago (Marc D. Janser and Stan Sneeringer, of counsel), for appellees and cross-appellants.

          Panel JUSTICE DELORT delivered the judgment of the court as to Parts I, II, and III, with opinion.

          JUSTICE DELORT delivered the judgment of the court as to Part IV. Presiding Justice Rochford concurred in the judgment of the court as to Parts I, II, and III, and specially concurred as to Part IV, with opinion.

          Justice Hoffman concurred in the judgment of the court as to Parts I, II, and III, and dissented as to Part IV, with opinion.

          OPINION

          DELORT JUSTICE.

         ¶ 1 The plaintiff, Conxall Corporation, sued defendants iCONN Systems, LLC, Richard Regole, Kerry Nelson, Robert Smith, Manual Sanchez, Mario Caldera, and Jerome Vorel, alleging that they misappropriated trade secrets relating to a cable assembly and panel mount that Conxall produced and sold to third-party defendant Mine Safety Appliances Co. (MSA). After a four-week trial, a jury returned a general verdict in favor of defendants. Conxall filed a posttrial motion for judgment n.o.v. and new trial, and iCONN filed a motion for attorney fees pursuant to section 5 of the Illinois Trade Secrets Act (Act) (765 ILCS 1065/1 et seq. (West 2008)). The court denied both motions, precipitating Conxall's appeal and iCONN's cross-appeal. MSA is not a party to either appeal.

         ¶ 2 In its appeal, Conxall contends that the trial court erred by denying its posttrial motion for three reasons. First, it contends that the trial court tendered an instruction to the jury that misstated the law and prejudiced its case. Second, it argues that the court should have instructed the jury to limit its consideration of a special interrogatory that MSA propounded to its deliberations over iCONN's cross-claim against MSA. Third, it argues that the jury's answer to the special interrogatory was against the manifest weight of the evidence. In its cross-appeal, iCONN claims that the trial court abused its discretion by denying its motion for attorney fees.

         ¶ 3 BACKGROUND

         ¶ 4 Conxall manufactures cable and connector assemblies used in electronic devices. The third-party defendant, MSA, is a Pennsylvania corporation that manufactures safety equipment for firefighters. Defendant iCONN was formed by defendants Richard Regole, Kerry Nelson, and Robert Smith, who are all former executive-level Conxall employees. Regole worked at Conxall from 1991 to 2000, serving as general manager, director of sales and marketing, and manufacturing director; Nelson worked at Conxall from 1997 to 2004, serving as national sales manager and manager of industrial products; and Smith worked at Conxall from 1994 to 2006, serving as director of operations.

         ¶ 5 Defendants Jerome Vorel, Manual Sanchez, and Mario Caldera are former Conxall manufacturing employees who went to work for iCONN. Vorel worked at Conxall from 1993 to 2008. From 1993 to 2000, Vorel was a maintenance mechanic responsible for repairing leaky roofs, toilets that would not flush, and jammed doors. In 2000, he became an industrial engineer. Vorel left Conxall on June 24, 2008, and began working at iCONN on June 26. Sanchez and Caldera worked on Conxall's assembly line from 1988 and 1992, respectively, to November 8, 2007, when both men began working at iCONN.

         ¶ 6 The events that gave rise to this lawsuit began in March 2006. Around that time, Conxall secured a lucrative business opportunity to sell MSA cable assemblies and panel mounts for incorporation into the Firehawk, a firefighter's mask that MSA manufactured. Once MSA notified Conxall that it had been chosen to supply the components, Conxall and MSA collaborated on a design for the cable assembly and panel mount.

         ¶ 7 After the design process concluded, Conxall began shipping parts to MSA. MSA eventually became dissatisfied with the quality of Conxall's products. As a result, MSA sought out iCONN so that it could also supply MSA with cable assemblies and panel mounts for the Firehawk. In October 2007, Jim Flaherty, an MSA materials manager, contacted iCONN and spoke to Regole. Flaherty told Regole that MSA was experiencing problems with Conxall because Conxall was struggling to deliver enough quality products to MSA in a timely manner. Regole visited MSA's manufacturing facility on October 23, 2007. During the visit, MSA agreed to allow iCONN to submit a bid for the Firehawk cable assembly and panel mount.

         ¶ 8 To assist iCONN, Flaherty gave iCONN (1) a sample cable assembly and panel mount, (2) MSA's quality control specifications, (3) two-dimensional (2D) design drawings, and (4) three-dimensional (3D) models. Flaherty e-mailed Regole the 2D drawings and quality control documents on October 25. Jeremy Steck, an MSA engineer, e-mailed the 3D models to iCONN on October 29. Flaherty testified that the drawings MSA sent to iCONN "were the property of [MSA], " that the 2D drawings contained a proprietary title block with MSA's name on it, and that he told Regole the samples "were MSA parts." When Steck e-mailed the 3D models, he did not refer to Conxall, and the models themselves bore no indicia of ownership as to any party. According to Regole, he also asked Steck to send component drawings, but Steck refused because he believed that the component drawings belonged to Conxall.

         ¶ 9 Sometime around April 1, 2008, Conxall discovered that iCONN was also supplying MSA with cable assemblies and panel mounts. Later that month, Conxall filed this lawsuit.

         ¶ 10 On March 9, 2009, Conxall added two claims alleging that iCONN misappropriated trade secrets with respect to products that Conxall had sold to three additional companies-Skybitz, Hach, and Kustom Signals, Inc. (KSI). When all was said and done, Conxall had alleged that iCONN misappropriated four categories of purportedly secret information: (1) the overall design of the Firehawk products; (2) the designs and related information covering certain component parts that went into the Firehawk products; (3) the process that Conxall used to manufacture the Firehawk products; and (4) the overall designs of the Hach, Skybitz, and KSI products.

         ¶ 11 On November 16, 2009, defendants filed a motion to dismiss Conxall's amended complaint. The trial court denied the motion on May 27, 2010. On June 27, 2011, iCONN filed a third-party complaint against MSA. iCONN's complaint set forth claims for indemnity and fraud. The gist of iCONN's claims against MSA was that, assuming iCONN had misappropriated a trade secret by using the information contained in the 2D and 3D files that MSA gave iCONN, MSA had misled iCONN into believing that MSA owned the information in the files.

         ¶ 12 On October 26, defendants filed a motion for summary judgment against Conxall. The court denied the motion, and the case proceeded to a jury trial.

         ¶ 13 After the close of evidence, the trial court instructed the jury. Over Conxall's objection, the court tendered instruction No. 18 to the jury, a nonpattern instruction, which stated: "the plaintiff must show that specific secrets were misappropriated. It is not sufficient to point to broad areas of technology and assert that something there must have been secret and misappropriated."

         ¶ 14 The court also tendered six special interrogatories to the jury. Special interrogatory No. 4, which was proffered by MSA, asked "[d]id MSA own the information contained in the two drawings and two [3D] files relating to the panel mount and cable assembly that MSA produced to ICONN?" In chambers, Conxall specifically objected to a different interrogatory that is not at issue in this appeal, but it did not specifically object to special interrogatory No. 4. After that objection was overruled and immediately before the parties and judge returned to the courtroom, one of Conxall's attorneys lodged a general objection to all of MSA's special interrogatories, stating simply, "I think I better-just for the record, Conxall objects to all MSA's proposed special interrogatories."

         ¶ 15 Ultimately, the jury returned a general verdict in favor of iCONN and answered special interrogatory No. 4 "yes." Conxall filed a motion for a new trial and judgment n.o.v., and iCONN filed a motion for attorney fees. The trial court denied all three motions in a single order on December 20, 2013. With respect to iCONN's motion for attorney fees, the court stated: "Defendant iCONN's Motion for Attorney Fees is denied. The Court finds that Conxall's claims were not frivolous and not brought in bad faith. There was sufficient circumstantial evidence for this finding that Conxall's claims were not brought in bad faith and were not frivolous." Conxall appealed, and iCONN cross-appealed.

         ¶ 16 ANALYSIS

         ¶ 17 In its appeal, Conxall has raised three issues. First, Conxall contends that the trial court erred by tendering instruction No. 18. Second, Conxall argues that the trial court erred by refusing to restrict the jury's consideration of special interrogatory No. 4 to its deliberations with respect to iCONN's case against MSA. Finally, Conxall claims that the jury's answer to special interrogatory No. 4 was against the manifest weight of the evidence. In its cross-appeal, iCONN argues that the trial court erred by denying its motion for attorney fees. We consider these arguments in turn.

         ¶ 18 I. Instruction No. 18 Was Properly Granted

         ¶ 19 We first consider Conxall's claim that the trial court erred by tendering instruction No. 18. "The purpose of jury instructions is to provide the jury with correct legal rules that can be applied to the evidence to guide the jury toward a proper verdict." People v. Lovejoy, 235 Ill.2d 97, 150 (2009); Dillon v. Evanston Hospital, 199 Ill.2d 483, 507 (2002). To be proper, a jury instruction "must state the law fairly and distinctly and must not mislead the jury or prejudice a party." (Emphasis in original.) Dillon, 199 Ill.2d at 507. "The decision whether to give a nonpattern instruction rests within the sound discretion of the trial court." People v. Bannister, 232 Ill.2d 52, 81 (2008). "[A]s a court of review we will not disturb such a determination absent a clear abuse of discretion." Surestaff, Inc. v. Azteca Foods, Inc., 374 Ill.App.3d 625, 627 (2007). To determine if the trial court abused its discretion, "we look at the jury instructions, taken as a whole, to determine whether they fairly, fully, and comprehensively instructed the jury of the relevant legal principles." Holland v. Schwan's Home Service, Inc., 2013 IL App (5th) 110560, ¶ 139. "A reviewing court ordinarily will not reverse a trial court for giving faulty instructions unless they clearly misled the jury and resulted in prejudice to the appellant." Schultz v. Northeast Illinois Regional Commuter R.R. Corp., 201 Ill.2d 260, 274 (2002).

         ¶ 20 Conxall has proffered a complex, multifaceted argument setting forth its belief that instruction No. 18 inaccurately stated the law and was misleading. But we need not adopt its approach because we find that the instructions, taken as a whole, "fairly, fully, and comprehensively apprised the jury of the relevant legal principles." Schultz, 201 Ill.2d at 273-74. Specifically, instruction Nos. 15, 16, and 17, painstakingly set forth-in language almost indistinguishable from the relevant text of the Act-the definition of a trade secret, the elements of trade secret misappropriation, and Conxall's burden of proof. Of special relevance here, instruction No. 15 contained an extensive definition of the "trade secret." It stated, in relevant part:

"A trade secret is information which may include but is not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers. To prove its information is entitled to special protection as a trade secret, Conxall must show that:
1.The information is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its use or disclosure; and
2. Conxall took reasonable efforts under the circumstances to maintain the secrecy or confidentiality of the information.
In determining whether Conxall has proven that it possessed a trade secret, you may consider the following factors:
1. The extent to which the information was known outside of Conxall's business;
2. The extent to which the information was known by employees and others involved in Conxall's business;
3. The extent of measures taken by Conxall to guard the secrecy of the information;
4. The value of the information to Conxall and its competitors;
5. The amount of time, effort or money expended by Conxall in developing the information; and
6. The ease or difficulty with which the information could be properly acquired or duplicated by others."

         ¶ 21 In light of this extensive definition of trade secret, as well as the other instructions that largely tracked the text of the Act, we find that the jury could not have been misled by instruction No. 18. Accordingly, under these circumstances, the trial court's decision to tender instruction No. 18 did not constitute an abuse of discretion. We therefore reject Conxall's first claim of error.

         ¶ 22 II. Conxall Forfeited Its Objection to Special Interrogatory No. 4

         ¶ 23 Next, Conxall contends that the trial court erred by failing to limit the jury's consideration of special interrogatory No. 4 to iCONN's case against MSA. A party may object to a special interrogatory, but the objecting party must specifically object to an individual special interrogatory. See Struthers v. Jack Baulos, Inc., 52 Ill.App.3d 823, 826 (1977). In Struthers, the plaintiff lodged a general objection " 'for the record' " to a special interrogatory tendered by the defendant. Id. On appeal, this court held that the plaintiff forfeited any challenge to the interrogatory because, by lodging only a general objection, the plaintiff precluded the trial court from "mak[ing] a considered ruling" and prevented the defendant from propounding a corrected interrogatory. Id.

         ¶ 24 The record shows that Conxall only specifically objected to special interrogatory six on the basis that it was confusing and should only apply to iCONN's case against MSA. That specific objection was overruled. Immediately before the parties retired from the instruction conference in chambers, one of Conxall's attorneys lodged a general objection, stating, "I think I better-just for the record, Conxall objects to all MSA's proposed special interrogatories." Thus, just as in Struthers, Conxall forfeited any objection to special interrogatory No. 4.

         ¶ 25 III. The Jury's Answer to Special Interrogatory No. 4 Was Not Against the Manifest Weight of the Evidence

         ¶ 26 Next, Conxall argues that the trial court erred by failing to set aside the jury's answer to special interrogatory No. 4. A jury's answer to a special interrogatory will be set aside only if it is against the manifest weight of the evidence. Simmons v. Garces, 198 Ill.2d 541, 561 (2002). " 'A verdict is against the manifest weight of the evidence where the opposite conclusion is clearly evident or where the findings of the jury are unreasonable, arbitrary and not based upon any of the evidence.' " Maple v. Gustafson, 151 Ill.2d 445, 454 (1992) (quoting Villa v. Crown Cork & Seal Co., 202 Ill.App.3d 1082, 1089 (1990)).

         ¶ 27 Conxall argues that the jury's answer was against the manifest weight of the evidence because (1) there was testimony that the 3D models that MSA sent to iCONN contained some internal dimensions and (2) Uber testified that MSA was not claiming to own "the internal design structure" of the cable assembly and panel mount. We disagree.

         ¶ 28 Although Conxall is correct that there was testimony showing that the 3D models revealed some internal dimensions and Uber testified that MSA was not claiming to own that information, Flaherty testified clearly and without qualification that the 2D design drawings and 3D models he gave to iCONN were "the property of MSA." In addition, Flaherty testified that he "never sent [Regole] anything that wasn't MSA owned" and that no one from Conxall told him that any of the information in the files belonged to Conxall.

         ¶ 29 Moreover, there was evidence showing that when iCONN communicated with MSA regarding the various files that MSA sent to iCONN, MSA never said that some part of the information contained in the files belonged to Conxall or was subject to a confidentiality agreement it had with Conxall. In essence, Conxall asks this court to reweigh the evidence, substitute its judgment for the jury's, and answer special interrogatory No. 4 in its favor. This court, however, does not reweigh contested evidence. See Maple, 151 Ill.2d at 452-53 ("[T]he appellate court should not usurp the function of the jury and substitute its judgment on questions of fact fairly submitted, tried, and determined from the evidence which did not greatly preponderate either way."). We therefore affirm the trial court's denial of Conxall's posttrial motion.

         ¶ 30 IV. iCONN's Attorney Fee Request

         ¶ 31 We next consider iCONN's cross-appeal. iCONN contends that it is entitled to receive its attorney fees from Conxall pursuant to section 5 of the Act. Section 5 provides "[i]f *** a claim of misappropriation is made in bad faith ***, the court may award reasonable attorney's fees to the prevailing party." 765 ILCS 1065/5 (West 2008). The question dispositive of this issue is whether the trial court applied the correct legal standard when determining whether Conxall's claims were brought in "bad faith, " as that term is used and understood in the Act.

         ¶ 32 That question is one of first impression in this court, and it has generated a sharp difference of opinion among the members of this panel. As set forth below, I would apply the two-part test for bad faith articulated by the California Court of Appeals in SASCO v. Rosendin Electric, Inc., 143 Cal.Rptr.3d 828 (Ct. App. 2012). My esteemed colleagues, on the other hand, believe that, when assessing bad faith under section 5 of the Act, courts may "be guided"-but not "constrained"-"by the body of case law construing [Illinois Supreme Court] Rule 137 [(eff. July 1, 2013)]." Infra ¶ 99 (Rochford, P.J., specially concurring); infra ¶ 108 (Hoffman, J., concurring in part and dissenting in part). Accordingly, this court holds, by a majority of two to one, that the appropriate standard to determine bad faith under section 5 of the Act is the position taken by Presiding Justice Rochford and Justice Hoffman.

         ¶ 33 In Presiding Justice Rochford's view, the fee issue should be remanded to the trial court so that it can reconsider the issue under the standard articulated in Presiding Justice Rochford's concurring opinion. For the reasons expressed in infra ΒΆΒΆ 109-10, I cannot join Justice Hoffman's conclusion that "circumstantial evidence exists supporting" the trial court's conclusion that Conxall did not proceed in bad faith. Rather, I have a strong belief that the record is replete with evidence to the contrary. I would be inclined to simply reverse the trial court's denial of fees. However, prudence suggests that an appropriate course may simply be to allow the court below to itself reconsider the issue upon due consideration of our analysis. Accordingly, I concur ...


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