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Mid-America Taping & Reeling, Inc. v. SMT Corp.

United States District Court, N.D. Illinois, Eastern Division

May 15, 2017

MID-AMERICA TAPING & REELING, INC. an Illinois Corporation, Plaintiff,
v.
SMT CORPORATION, a Connecticut Corporation, KIRSTEN SHARPE and TOM SHARPE, individually as owners of Corporation, and ROBERT LINGL, individually, Defendants.

          OPINION AND ORDER

          SARA L. ELLIS United States District Judge.

         In an apparent attempt to gain a strategic advantage, Plaintiff Mid-America Taping & Reeling, Inc. (“Mid-America”) filed suit against Defendants SMT Corporation (“SMT”), Kirsten Sharpe, Tom Sharpe (collectively, the “SMT Defendants”), [1] and Robert Lingl[2] several weeks after reaching an agreement in principle with SMT to settle SMT's claims against Mid-America and a day before SMT threatened to take legal action of its own. Mid-America claims that the SMT Defendants and Lingl violated the Defend Trade Secrets Act, 18 U.S.C. § 1831 et seq., that Lingl breached a non-disclosure agreement and his fiduciary duties to Mid-America, and that SMT, Kirsten, and Lingl tortiously interfered with Mid-America's prospective economic advantage. The SMT Defendants have moved to dismiss the complaint or, alternatively, to transfer the case to the District of Connecticut. Because the Court does not have personal jurisdiction over the SMT Defendants, the Court dismisses Mid-America's claims against them.

         BACKGROUND[3]

         I. Allegations in the Complaint

         Mid-America, a corporation owned by Barbara Pauls, manufactures, assembles, and sells taping and reeling products such as vacuum sealers, SMD covertape, SMD plastic reels, static shielding and moisture barrier bags, humidity indicating cards, and splicing supplies. It also provides services for surface mounting taping, lead forming, memory device and flash programming, baking and dry packing, and paper carrier taping. Mid-America began its operations in Illinois and then opened a facility in Florida as its business grew. According to Mid-America, only seven other corporations provide similar reeling and taping services, making the market extremely competitive.

         In 1991, Mid-America hired Lingl, Pauls' brother, to manage its Illinois facility. Lingl worked for Mid-America for approximately eight years before leaving to work for SMT, a Connecticut corporation.[4] He worked at SMT until he returned to Mid-America in November 2015. Corresponding roughly to the same time Lingl worked at SMT, Mid-America saw a decrease in its revenue. According to Mid-America, after Lingl returned to work for it in November 2015, Mid-America learned that Lingl had provided SMT with Mid-America's hardware and customer lists, which allowed SMT to pursue Mid-America's customers.

         II. The SMT Defendants' Version of the Facts

         The SMT Defendants present a different story. According to them, Lingl left Mid-America in 1999 to work for SND Electronics, a company unrelated to SMT, where he managed SND Electronics' tape and reel business for eight years. SND Electronics then sold its tape and reel business to an SMT affiliate in 2007, with Lingl becoming an employee of SMT's affiliate and ultimately SMT.[5] Pauls knew of Lingl's employment with SMT, frequently speaking with Lingl while he worked there. The SMT Defendants later learned that Pauls had Lingl ship her over 100 packages from SMT's tape and reel department without invoicing and openly discussed having Lingl resign from SMT and take SMT's tape and reel customer base to Mid-America. In early October 2015, Lingl put this plan into motion when he advised the Sharpes that he was resigning from SMT due to a serious medical condition and moving to Illinois for treatment. Lingl indicated that he had trained his daughter, Bethany, in all aspects of SMT's tape and reel business so that she could manage the department on her own when he left. On Lingl's recommendation, SMT promoted Bethany to head the department. But instead of leaving SMT to address health issues, Lingl took a position managing Mid-America's facility in Coconut Creek, Florida, living in a condominium that Pauls had purchased for him.

         In late 2015, the SMT Defendants learned of issues with Bethany's management of SMT's tape and reel department. This led them to review the department's records, including Bethany's emails. In doing so, they found evidence that Lingl sent packages from SMT without invoices, directed SMT customers to Mid-America or other competitors even though SMT could have handled the business, and misappropriated SMT's records and used those records after resigning to solicit customers for Mid-America. The SMT Defendants also found that Lingl directed Bethany to ship SMT products to him at Mid-America's Florida facility without charge and then sold these products to Mid-America customers. Based on these discoveries, SMT terminated Bethany on February 23, 2016, and both Bethany and Lingl were arrested in July 2016 and charged with larceny. A number of SMT-owned customer log books were seized from Lingl's residence and Mid-America's facility in Florida.

         On September 14, 2016, SMT's counsel sent a demand letter to Pauls as Mid-America's president and CEO, identifying claims it intended to assert against her and Mid-America arising out of the scheme to defraud SMT and take its property. Mid-America's counsel proposed a meeting in Connecticut to discuss resolution of the claims, which occurred on November 2, 2016. The parties reached an agreement in principle to settle the claims identified in SMT's demand letter, but Mid-America and Pauls thereafter failed to respond to SMT's counsel's attempts to memorialize the agreement. SMT's counsel indicated it would take action if it did not hear from Mid-America or Pauls by November 18, 2016. On November 17, 2016, Mid-America filed this case against the SMT Defendants and Lingl.

         III. Additional Jurisdictional Facts

         The Sharpes founded SMT in 1999. Kirsten holds all of SMT's outstanding shares and serves as President and Treasurer, while Thomas serves as SMT's Vice President. Together, they manage SMT's day-to-day operations. The Sharpes do not own any property in Illinois or personally conduct any business in Illinois.

         SMT's sole facility is in Newtown, Connecticut, with all of its employees working from that facility. SMT is not registered to do business in Illinois and does not manufacture or assemble products in Illinois. It has occasionally purchased inventory from Illinois suppliers or vendors, including Mid-America. In 2015, SMT purchased $7, 541.05 of products from Mid-America. That number dropped to $3, 781.07 in 2016. SMT's total purchases from Illinois vendors, excluding Mid-America, totaled $24, 002.57 in 2015 and $30, 967.62 in 2016, which represented less than 1% of its total purchases each year. Only SMT's purchases from Mid-America related to the tape and reel business. As for sales, between 2012 and 2015, SMT made less than 1% of its sales to Illinois customers, while in 2016 approximately 3.4% went to Illinois, with the vast majority of the Illinois sales composed of components and testing services to one customer. According to the SMT Defendants, SMT has not sold tape and reel products or services to Illinois customers. SMT also does not directly market or advertise in Illinois or target potential customers in Illinois, although it does maintain a website accessible from Illinois.

         LEGAL ...


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