SULFO TECHNOLOGIES LLC V THOMAS E SCHMOYER
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STATE OF MICHIGAN
COURT OF APPEALS
SULFO TECHNOLOGIES, L.L.C.,
UNPUBLISHED
February 8, 2011
Plaintiff-Appellant,
v
THOMAS E. SCHMOYER, SURFACE
ACTIVATION TECHNOLOGY, L.L.C., and SO3
PLUS, L.L.C.,
No. 294246
Oakland Circuit Court
LC No. 08-091167-CB
Defendants-Appellees.
Before: TALBOT, P.J., and SAWYER and M. J. KELLY, JJ.
PER CURIAM.
This case deals with two companies seeking to perfect a commercially viable use of the
chemical process referred to as “sulfonation.”1 Sulfo Technologies, L.L.C. (hereinafter “Sulfo”)
alleges that its previous shareholder, Thomas E. Schmoyer, in complicity with Surface
Activation Technology, L.L.C. (hereinafter “SAT”) and SO3 Plus, L.L.C., misappropriated
Sulfo’s trade secrets and were in violation of an arbitration award and judgment regarding
commercial applications of this chemical process. The trial court ruled that the arbitration
agreement was not applicable to SAT and also found in favor of Schmoyer on Sulfo’s
contentions regarding the misappropriation of trade secrets and use of confidential information.
We affirm.
Sulfo contends that the trial court’s opinion and order fails to meet the requirements of
MCR 2.517(A). Sulfo argues that the trial court’s findings of fact and conclusions of law are
inadequate because they fail to sufficiently delineate the trial court’s reasoning and lack
specificity regarding what aspects of Sulfo’s sulfonation process was proprietary or confidential.
In discussing the adequacy of judicial fact finding, our Supreme Court has indicated:
1
The trial court defined sulfonation as “the system or process of using sulfur trioxide (SO3) to
interact with another chemical, such as a polymer like plastic to alter the chemical properties of
the plastic.”
-1-
The primary purpose of both administrative and judicial fact finding is to
facilitate appellate review. “Findings of fact in a nonjury case serve a function
paralleling the judge's charge in a jury case, that of revealing the law applied by
the fact finder.” Findings of fact map the path taken by a trial court through
conflicting evidence. Brevity in the articulation of factual findings is not fatal, as
long as the appellate body is not forced to draw so many inferences that its review
becomes merely speculative.2
The trial court provided a 12-page written opinion and order. The opinion outlined the issues for
trial, the history of the litigants and referenced pertinent wording of the arbitration award that
served as the basis for Sulfo’s argument that the award and subsequent judgment were being
violated. The trial court was not required, as Sulfo implies, to recount every piece of evidence or
testimony. In the six-page exposition of testimony, the trial court summarized the information it
found to be pertinent. The trial court also cited the Michigan Uniform Trade Secrets Act
(“MUTSA”), MCL 445.1901 et seq. as the applicable law and clearly concluded that Sulfo failed
to prove violation of the statute with regard to the disclosure of trade secrets and its reasoning for
reaching that conclusion.
The trial court specifically defined the sulfonation process, successfully demonstrating its
understanding of its rather complex chemistry and applicability in the manufacturing process. It
distinguished between the general process and the various “subtleties” in application. The trial
court explained that information pertaining to sulfonation and the sulfonation process is readily
available in the public domain and that numerous publications and patents are accessible and
available for review. The same was found to be true regarding Sulfo’s vendors and customers,
all of which are readily identifiable on the internet and within the manufacturing community. As
such, it was reasonable for the trial court to conclude that Sulfo had failed to demonstrate that
Schmoyer used any proprietary information in his work with SAT. Contrary to Sulfo’s
contention, the trial court’s ruling is exceptionally detailed regarding its reasoning and
conclusions.
To be in compliance with the court rule, the findings of the trial court need only be brief,
definite, and pertinent, and must demonstrate an awareness of the issues and correctly apply the
law.3 Because the trial court’s findings of fact and conclusions of law were more than sufficient
to show that it was aware of the issues and correctly applied the law, this Court’s review would
not be facilitated by requiring any further explanation. As the trial court issued a detailed
opinion that adequately delineated its findings of fact and conclusions of law, we reject Sulfo’s
contention that the opinion failed to meet the requirements of MCR 2.517(A).
2
Woody v Cello-Foil Prod, 450 Mich 588, 599; 546 NW2d 226 (1996) (internal citations and
footnotes omitted).
3
Triple E Produce Corp v Mastronardi Produce, Ltd, 209 Mich App 165, 176; 530 NW2d 772
(1995).
-2-
Sulfo next contends the trial court’s opinion and order fails to give full effect to the
earlier arbitration award and judgment. At the outset it is important to review the precise
wording contained in the arbitration award. In pertinent part, the arbitration award precluded:
Using and/or disseminating, in any manner that is not for the sole and exclusive
benefit of Sulfo and with the prior permission of Sulfo, any confidential or
proprietary information of Sulfo acquired by Mr. Schmoyer as a result of his
being, or having been, a member of Sulfo. [Emphasis added.]
Of further relevance is the wording in the award that Schmoyer remained subject to the
provisions of Sulfo’s operating agreement, but that such agreement only required “members to
maintain the confidentiality of Confidential Information” as it is later defined, and requires them
to “use Confidential Information only for the benefit of the LLC.” The arbitration award defined
what constituted propriety information as “information, which Mr. Schmoyer could not have
known of or otherwise engaged in but for his association with Sulfo.” Based on the language
and wording of the arbitration award, Sulfo’s contention that Schmoyer was precluded from the
use of any knowledge he retained regarding sulfonation or the process of sulfonation is overly
broad and expansive. To constrict Schmoyer’s use of general information regarding the
chemical process and manufacturing use of sulfonation would be to, effectively, impose a lifelong preclusion on his involvement or participation in a specific field of manufacturing. Such a
prohibition would be beyond the confines contemplated by the actual non-competition agreement
executed by Schmoyer and Sulfo and act as an improper restraint of trade.
As with any document, the arbitration award and the judgment affirming it are to be
enforced or interpreted in accordance with the language contained therein. It is a wellrecognized precept that “[c]lear and unambiguous language . . . must be given its plain meaning
and enforced as written.”4 Furthermore, a trial court maintains the authority to enforce its own
directives.5 The judgment to be enforced, which incorporates the arbitration award, speaks only
to the preclusion of using “any confidential or proprietary information of Sulfo acquired by Mr.
Schmoyer as a result of being, or having been, a member of Sulfo.” To suggest, as Sulfo does,
that this language encompasses general information regarding sulfonation or the sulfonation
process that is known or ascertainable to the public at large is inconsistent with the arbitration
language, as incorporated by the trial court in the judgment adopting that award.
The same is true with regard to the language of the operating agreement. Schmoyer was
only required to “maintain the confidentiality of Confidential information,” which is defined as
“[i]nformation that [Sulfo] maintains in confidence and that is [sic] actual or potential economic
value to [Sulfo] because it is not generally known to others and is not readily ascertainable by
4
Greater Bethesda Healing Springs Ministry, 282 Mich App 410, 412; 766 NW2d 874 (2009),
citing Fleet Business Credit, LLC v Krapohl Ford Lincoln Mercury Co, 274 Mich App 584, 591;
735 NW2d 644 (2007).
5
Walworth v Wimmer, 200 Mich App 562, 564; 504 NW2d 708 (1993).
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them.” It is disingenuous on the part of Sulfo to assert that information on a chemical process
that is readily available and accessible within the public domain through the internet, written
publications, vendor websites and patents could be construed as comprising “confidential
information.” Further, if Sulfo actually did purport to purchase Schmoyer’s “general knowledge
or information” regarding sulfonation that is commensurately available to the public through
other sources, it is to be assumed that Sulfo merely made a bad deal by paying money for
information that could have been obtained for free.
A close reading of the arbitration award also demonstrates that Schmoyer’s “general
knowledge” was not encompassed by the ruling that Schmoyer used “information . . . which
could not have been known of or otherwise engaged in . . . .” Reviewing the arbitrator’s findings
of fact it is noteworthy that Schmoyer had written materials and equipment pertaining to
sulfonation that he had acquired from Dow Corning before his involvement with Sulfo. The
operating agreement signed by Schmoyer with Sulfo indicated that Schmoyer “agreed to sell all
of his right, title and interest in the sulfonation technology described in Attachment ‘A’ of
Exhibit ‘a’ of the Operating Agreement.” “Attachment A” was comprised “of a Bill of Sale and
a Bankruptcy Schedule B . . . . listing various items.” The reference to the “items” sold by
Schmoyer included the concrete or tangible things he had obtained from Dow. According to the
arbitrator’s findings, when Schmoyer left Sulfo he removed files and equipment and attempted to
change designation of ownership on a pending patent. The arbitrator determined that such
actions were “not authorized.” The restraining order that was entered when the first lawsuit was
initiated by Sulfo prohibited Schmoyer and others “from communicating with any actual or
prospective customers of Sulfo or any other person regarding the business affairs of Sulfo by
using confidential information or trade secrets.” Contrary to Sulfo’s position regarding the
proscriptive nature of the arbitration award language, there is a conspicuous absence of any
reference to Schmoyer’s “general knowledge” regarding sulfonation. Rather, in all of the
documents and evidence in this matter, prohibitions and restraints on Schmoyer were limited to
his use of “confidential” information or “trade secrets” garnered during his time with Sulfo.
The trial court’s ruling in this matter is consistent not only with the language of the
arbitration award and judgment, but also with the law applicable between employers and
employees in the related area of noncompetition agreements. While it is recognized that an
employer may have a “reasonable competitive business interest” to protect through such
agreements they cannot be so broad or encompassing to result in the restraint or monopolization
of trade or commerce.6 Rulings by our Supreme Court regarding the validity of noncompetition
agreements are consistent with the trial court’s determination in this instance. As discussed by
the Court:
While an employee is entitled to the unrestricted use of general
information acquired during the course of his employment or information
generally known in the trade or readily ascertainable, confidential information,
6
MCL 445.774a.
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including information regarding customers constitutes property of the employer
and may be protected. . . .
***
“It has been uniformly held that general knowledge, skill, or facility
acquired through training or experience while working for an employer appertain
exclusively to the employee. The fact that they were acquired or developed
during the employment does not, by itself, give the employer a sufficient interest
to support a restraining covenant, even though the on-the-job training has been
extensive and costly.7
While “[r]easonable covenants may protect such legitimate interests as trade secrets, confidential
information, close contact with the employer’s customers or customer lists, or cost factors and
pricing . . . . [a]n employer may not unreasonably prohibit future use of general knowledge or
skill.”8 This was acknowledged during the trial by Lawrence Gladchun, one of the owners of
Sulfo, when he stated that Schmoyer “can use nonconfidential information for whatever purpose
he chooses to.”
Of greater significance is the fact that Sulfo failed to demonstrate that Schmoyer or SAT
had or used any confidential or proprietary information in designing and operating their own
sulfonation system. While the chemical process of sulfonation is readily ascertainable to anyone,
it is the manufacturing or application of the process to specific parts or types of plastic that is
subject to variance and subtle manipulation. The process of sulfonating a plastic gas can to
prevent permeation by carbon based fuels would be vastly different from the use of this same
general process to prepare plastic parts for metallization or plating. As both Sulfo and SAT
acknowledge, the commercial use of sulfonation involves trial and error to ascertain the right
timing for exposure and saturation levels to successfully treat an item based on its unique
configuration, material and size. Any confidential or proprietary information would necessarily
be related to determinations or adjustments to the process to account for the composition and
size, or any other specific characteristics of the item for sulfonation and the unusual or unique
configuration of the equipment used in the process.
At trial Sulfo did not come forward with any evidence to contradict the testimony of John
Wallace, William Aikens, Brad Radke and Schmoyer that Schmoyer had no technical input into
the design, construction, development or running of the sulfonation equipment or process
constructed by SAT. All of these individuals consistently and repetitively averred that Schmoyer
served as a conduit to ask questions of vendors and procure information, making inquiries or
contact only at the direction of Wallace and Radke and that Schmoyer did not initiate or
7
Follmer Rudzewicz & Co v Kosco, 420 Mich 394, 402 n 4; 362 NW2d 676 (1984).
8
Certified Restoration Dry Cleaning Network, LLC v Tenke Corp, 511 F3d 535, 547 (CA 6,
2007) (citation omitted).
-5-
determine the content of communications with vendors or have any say or input in the selection
of equipment procured or how the individual components were engineered and assembled.
Theodore Fattal, Jr., a salesman with Duall, which fabricates ventilation and air pollution control
systems, testified that the equipment they supplied to SAT was different with regard to the
“sizing, the air flow” that it provided to Sulfo. Fattal indicated that similar equipment was also
provided to other manufacturing companies in the plating industry. It was also uncontradicted
that although both SAT and Sulfo used Linde/Air Gas, that Wallace “chose this vendor and . . .
chose the machinery . . . and approved the machinery” for SAT. Radke testified that many
components had changed regarding the SAT system, but that the basic configuration or
equipment remained stable. Radke, as a “special machine builder,” asserted that he was able to
ascertain how the equipment was to be put together based on his experience and the various
manuals accompanying the equipment, along with independent research on the internet regarding
sulfonation. He denied any conversations with or input by Schmoyer regarding what machines
to purchase or how they were to be configured for SAT.
With regard to the sulfonation process, John McCaskie, Ph.D. indicated that he had been
involved in research in the treatment of plastics and various applications since the 1970’s. He
asserted that the process used by the Chemithon generator, which both Sulfo and SAT use, was
developed in the “mid-nineteenth century.” McCaskie contradicted Sulfo’s contention that the
temperature and concentration of certain chemicals comprise their “secrets.” Aikens specifically
denied input by Schmoyer, stating:
I learned nothing about this process that – from Tom Schmoyer that wasn’t
available from research in publicly available sources or well known within the
industry.
Other than mere conjecture, Sulfo has failed to produce any evidence that Schmoyer,
SAT or others used or disclosed confidential or proprietary information. Sulfo assumes that
because SAT used the same vendors to procure equipment to develop a sulfonation process that
the configuration of the equipment or nuances of use were the product of Sulfo’s earlier
development of a sulfonation system or process. This is merely an assumption and based solely
on speculation as testimony demonstrated that the vendors used by both companies are wellknown within the manufacturing industry and that various members of SAT had previous
experience or interactions with these vendors for other applications or that the vendor’s own
web-sites provided information to the general public. The equipment procured was not unique as
the components were described as “off the shelf” and were recommended by the vendor based on
the purchaser’s own specifications. The actual sulfonation of parts by either Sulfo or SAT was
subject to trial and error and there was no demonstration that either company was treating the
same parts for the same purpose, resulting in the use of trial and error rather than mere
duplication. Ultimately, Sulfo challenges the credibility of SAT’s witnesses, but such a
determination is within the purview of the trial court and not subject to this Court’s review.9 To
9
Ambs v Kalamazoo Co Rd Comm, 255 Mich App 637, 651; 662 NW2d 424 (2003).
-6-
the extent that Sulfo suggests insufficiency of the evidence to support the trial court’s
determination, such an assertion must be rejected given the plethora of testimony and evidence
submitted consistent with the trial court’s ruling.
Sulfo also takes issue with the trial court’s failure to enforce language of the arbitration
award purporting to restrain not only Schmoyer, but “all others acting in concert with him” from
the “use and/or dissemination . . . of . . . any confidential or proprietary information of Sulfo
acquired by Mr. Schmoyer as a result of his being, or having been, a member of Sulfo.” Because
Sulfo has failed to demonstrate a violation by Schmoyer of the arbitration award it is impossible
to find infringement by “others acting in concert with him.”
Next, Sulfo contends that the trial court erred by concluding, as a matter of law, that a
person cannot contract for the sale or non-use of knowledge that exists within the public domain.
Sulfo’s assertion of error on this issue is problematic on several levels. First, Sulfo fails to cite to
specific language in the trial court’s order or opinion regarding its contention that it ruled that
Schmoyer “could not have sold his ‘knowledge’ of sulfonation to Sulfo.” In actuality, the trial
court found that Schmoyer had not violated the arbitration award or judgment because Sulfo
failed to demonstrate his use or dissemination of any confidential or proprietary information
obtained through his association with Sulfo. At most, the trial court indicated:
[Sulfo] has failed to establish that Schmoyer took anything beyond the knowledge
he acquired from his years in the industry—this information was not purchased by
the bill of sale since it was not proprietary or confidential since the information is
in the public domain.
Any contention that such a statement by the trial court is erroneous is irrelevant and rendered
moot by our determination that Schmoyer was only restricted from sharing confidential or
proprietary information by the arbitration award and that Sulfo had failed to demonstrate any
such violation. The assertion by Sulfo that the trial court failed to uphold the arbitrator’s
decision is erroneous based on the actual language of the arbitration award.
The second problem with Sulfo’s contention is the failure to support it by any citation to
legal authority. “[T]his Court will not search for authority to support a party's position, and the
failure to cite authority in support of an issue results in its being deemed abandoned on appeal.”10
Even accepting the well recognized precept that competent parties are free to contract for
whatever terms they wish11, Sulfo cannot overcome the fact that the arbitration award only
precludes Schmoyer from using or disseminating confidential or proprietary information or trade
10
Flint City Council v Mich, 253 Mich App 378, 393 n 2; 655 NW2d 604 (2002).
11
Wilkie v Auto-Owners Ins, Co, 469 Mich 41, 62; 664 NW2d 776 (2003).
-7-
secrets that he obtained while with Sulfo. Schmoyer left Sulfo in November of 2003 and did not
become associated with SAT until 2005. Sulfo’s members acknowledged that the sulfonation
process they developed was a matter of trial and error and that Schmoyer lacked access to
changes in their process, equipment or use after the working relationship was severed. Sulfo
failed to demonstrate that Schmoyer used any confidential or proprietary information in his work
with SAT. Williams, Aikens and Radke specifically averred that they received no direction or
input from Schmoyer and developed SAT’s sulfonation process and equipment based on
information obtainable in the public domain and through publications and manuals of equipment
suppliers in the manufacturing and plating industry. Even if Sulfo and Schmoyer negotiated or
contracted to sell his “general knowledge,” there is no restriction on being the recipient of the
bad end of such a bargain. To suggest that Sulfo paid Schmoyer for all of his past, current and
future “general knowledge” of information that was readily available and accessible for free to
the general public suggests a poor or, at least, inadvisable use of Sulfo’s monetary resources.
Finally, Sulfo fails to recognize the distinction between what was “sold” or purchased from
Schmoyer and what was legally restrained or restricted from use, in accordance with the actual
language of the arbitration award.
Finally, Sulfo takes issues with the trial court’s determination that Schmoyer and SAT
did not violate or usurp its trade secrets. A “trade secret” is statutorily defined as:
[I]nformation, including a formula, pattern, compilation, program, device,
method, technique, or process, that is both of the following:
(i) 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.
(ii) Is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy.12
In accordance with MUTSA, the term “misappropriation” is defined as either of the following:
(i) Acquisition of a trade secret of another by a person who knows or has reason
to know that the trade secret was acquired by improper means.
(ii) Disclosure or use of a trade secret of another without express or implied
consent by a person who did 1 or more of the following:
(A) Used improper means to acquire knowledge of the trade secret.
(B) At the time of disclosure or use, knew or had reason to know that his
or her knowledge of the trade secret was derived from or through a person who
12
MCL 445.1902(d).
-8-
had utilized improper means to acquire it, acquired under circumstances giving
rise to a duty to maintain its secrecy or limit its use, or derived from or through a
person who owed a duty to the person to maintain its secrecy or limit its use.
(C) Before a material change of his or her position, knew or had reason to
know that it was a trade secret and that knowledge of it had been acquired by
accident or mistake.13
To be deemed a “trade secret,” “the information must, of necessity, be a secret. Trade secrets do
not ‘encompass information which is readily ascertainable, i.e., capable of being acquired by
competitors or the general public without undue difficulty or hardship.’”14 In a trade secrets
case, the burden of proof is on the plaintiff to plead and prove “the specific nature of the trade
secrets.” “A party alleging trade secret misappropriation must particularize and identify the
purported misappropriated trade secrets with specificity.”15
First and foremost, Sulfo has failed to demonstrate the misappropriation or use of a trade
secret by Schmoyer. Contrary to Sulfo’s assertions, the overwhelming evidence indicated that
SAT did not obtain information from Schmoyer regarding Sulfo’s particular process of
sulfonation and that SAT precluded his participation in the design and engineering of their
process. The testimony demonstrated that much of the information obtained by SAT and its
various members was through public sources or trial and error and thus, could not constitute the
use of a “trade secret.” Aikens denied any knowledge of the intricacies of Sulfo’s system and
testified regarding the inherent simplicity of the sulfonation process and the ability to develop a
system based on publically available information. Although Dwayne Back disputed the
simplicity of designing and implementing such a process, such credibility determinations are for
the trier of fact.16 Gladchun acknowledged that SAT’s sulfonation system was not identical to
that of Sulfo, but was merely “in principal the same system.”
Second, other individuals, such as Don Corning, were not subject to any confidentiality
agreement with Sulfo. Corning freely came and went from their facility, worked on their
equipment without compensation, and was not restrained in any manner from disclosing
information he obtained from that association, demonstrating a rather lackadaisical approach on
the part of Sulfo to protecting confidential information.
Finally, and perhaps most devastating to their position, is the fact that Sulfo never fully
explains what about its process comprised a “trade secret.” It suggests its particular
13
MCL 445.1902(b).
14
Dura Global Technologies, Inc v Magna Donnelly Corp, 662 F Supp 2d 855, 859 (ED Mich,
2009), quoting Kubik, Inc v Hull, 56 Mich App 335, 347-348; 224 NW2d 80 (1974).
15
Id. (internal citations omitted).
16
Ambs, 255 Mich App at 651.
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configuration of the machinery was a “trade secret,” but the overall process of sulfonation to a
large extent dictates the sequence and type of equipment required. All of the equipment used by
both Sulfo and SAT was readily available in the public domain, advertised by the individual
vendors, and were not demonstrated to have been built to any unusual specifications. As the
parties all acknowledged that the sulfonation process is a matter of trial and error and dependent
on the particular characteristics of the item to be treated, there was no assertion that Schmoyer or
SAT was using a formulation specifically developed and verified by Sulfo.
The same reasoning is applicable to any claims by Sulfo that the identity of its vendors
and clients comprised trade secrets. While the parties used many of the same vendors, they were
all identified as advertising their services in the public domain and recognized within the
manufacturing industry as predominant in their respective fields. Williams specifically denied
that Schmoyer suggested he use any particular vendor and that Williams determined which
suppliers SAT would use based on his own previous experience and research.
Addressing knowledge obtained regarding Sulfo’s customers, Aikens acknowledged
knowing the identity of one customer because they advertised and were a well-known
automotive supplier. Regarding contact with Alfmeier, a specific customer of Sulfo, Aikens’
undisputed testimony indicated that SAT obtained this contact through Wallace and Global Tech,
having met an individual named Dino Ferhatovic an employee of Inergy. According to
documentary evidence and Aikens’ testimony, Ferhatovic suggested that Wallace communicate
with Alfmeier and gave SAT “a list of all of Energy’s [sic] customers.” Dwayne Back
acknowledged that Sulfo had only one customer, Inergy Automotive, before Schmoyer left. As
it is uncontested that the one Sulfo customer that Schmoyer was privy to before terminating his
association with Sulfo was identified and procured through other individuals, there is no support
for the contention that such information was attained through inappropriate means.
Because there is simply no evidence, even assuming the involvement of trade secrets, to
sustain Sulfo’s contention that Schmoyer or SAT misappropriated or disclosed any information
or materials, Sulfo’s claims must fail as a matter of law.
Affirmed.
/s/ Michael J. Talbot
/s/ David H. Sawyer
/s/ Michael J. Kelly
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