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Radiant Global Logistics, Inc. v. Furstenau
Citation: 368 F. Supp. 3d 1112Docket: Case No. 18-cv-12783
Court: District Court, E.D. Michigan; February 19, 2019; Federal District Court
On September 7, 2018, Radiant initiated a six-count Verified Complaint against Charles "Chad" Furstenau, Jr. and BTX Air Express of Detroit. The claims include: 1. Declaratory Judgment against Furstenau. 2. Breach of Fiduciary Duty against Furstenau. 3. Misappropriation of Trade Secrets under the Federal Defend Trade Secrets Act and the Michigan Uniform Trade Secrets Act against both Furstenau and BTX Detroit. 4. Tortious Interference against BTX Detroit. 5. Aiding and Abetting against BTX Detroit. 6. Common Law and Statutory Conversion against Furstenau. Subsequently, on September 14, 2018, Radiant filed a Motion for Preliminary Injunction and a Motion to Expedite Discovery. BTX Detroit responded to the Motion to Expedite on September 18, with Furstenau concurring. The Court established a Stipulated Order for expedited discovery on October 5. Both BTX Detroit and Furstenau filed their Answers and Affirmative Defenses by October 11. A Preliminary Injunction evidentiary hearing was scheduled for December 14, 2018. BTX Detroit responded to the Motion for Preliminary Injunction on November 21, with Furstenau's concurrence following. Radiant replied on November 28. During the December 14 hearing, a dispute arose over the introduction of an expert report by Scott Polus, leading Radiant to move to strike it. The Court required further briefing and continued the hearing to December 21, where it granted Radiant's motion to strike Polus's report and affidavit. Radiant operates as a third-party logistics and supply chain management company, serving various sectors, including automotive. Furstenau, previously the general manager at Radiant's Detroit location, was the highest-ranking manager there and held the title of "Director of Automotive." He has a long history in the logistics industry, having worked for United American and its successor, Stone Path, before joining Radiant after its acquisition of Stone Path's assets in 2005. Furstenau did not sign a specific non-compete or non-solicit contract during his employment at Radiant and refused to sign a non-compete contract presented in May 2018. However, he and all Radiant employees acknowledged and agreed to the company's Code of Ethics, which included provisions on confidentiality and conflicts of interest. Employees are required to maintain the confidentiality of non-public information and must not use their position for personal gain. Any conflicts of interest must be reported to management, with additional reporting required for officers or directors to the Board of Directors or a designated committee. Furstenau also signed an acknowledgment of receiving Radiant's Employee Handbook, which included a Computer Policy mandating the confidentiality of company data and proper handling of computers containing sensitive information. The Handbook is described as an overview of company policies and indicates that the company can modify its provisions at its discretion. Furstenau expressed dissatisfaction with Radiant regarding compensation and the implementation of a new software system, sharing his concerns with company executives. He felt that his termination was imminent, especially after seeing a job advertisement for his position on LinkedIn, though Radiant denies any intention to terminate him. Furstenau terminated his employment with Radiant on August 24, 2018, and opened a BTX Detroit office on August 27, 2018, having engaged in discussions with BTX Global Logistics CEO Rosario Bacarella for seven months prior. These discussions led to the opening of the Detroit office, equipped and staffed, with Furstenau bringing five key employees from Radiant, including Angela Dupree and Chris Higgins, who resigned from Radiant the day before the office opening. Notably, on August 14, 2018, while still employed at Radiant, Furstenau emailed Bacarella listing the employees he intended to bring and requested computers for them, which were set up at the new office upon their arrival. BTX had previously serviced the Detroit market indirectly since 2005 but aimed to establish a physical presence due to market opportunities in the automotive sector. Bacarella had intended to open a Detroit office in fall 2019 but accelerated the timeline after discussions with Furstenau, believing he could provide the necessary experience and team. Furstenau had initiated contact about opening a contractor store in Detroit in February 2018 and confirmed to Bacarella via email that he met the criteria to be considered for ownership, including having a sales and operations team capable of generating $3 million in gross revenue. The court concluded that "we" in Furstenau's response referred to a sales team capable of meeting these requirements. Furstenau provided testimony indicating that he completed a business plan for BTX Global in February 2018, which supported his claim of generating $3 million in gross revenue. His communications with Bacarella continued until his resignation from Radiant on August 24, 2018. At BTX Global's request, he also created a pro forma and budget for BTX Detroit and was involved in selecting the office location, performing tasks such as installing countertops and selecting carpets, purportedly outside of his Radiant work hours. In the months leading up to his departure, Furstenau forwarded around 300 emails from his Radiant account to his personal Comcast account, which included sensitive business information such as financial forecasts, customer lists, and employee salaries. Although he initially denied opening these emails, he later admitted to accessing some. Following his resignation, he immediately began soliciting Radiant clients for BTX Detroit, which officially launched on August 27, 2018. Several former Radiant employees, including Chris Higgins and Angela Dupree, resigned and joined BTX Detroit shortly after Furstenau, while three others followed soon after. Only one of these employees, Ben Watkins, had signed non-competition and non-solicitation agreements with Radiant. Watkins was transitioned to George P. Johnson to facilitate business for BTX Detroit. Radiant contended that the former employees performed identical roles at BTX Detroit as they did at Radiant. The Court expressed skepticism towards the testimonies of Furstenau and Dupree, who claimed they had not discussed leaving Radiant prior to Furstenau’s resignation, particularly given Furstenau's prior email listing Radiant employees who would join BTX Detroit. By the time of the preliminary injunction hearing, all employees at BTX Detroit were identified as former members of Furstenau's team at Radiant. Furstenau acknowledged that he had been planning to recruit specific employees to move to BTX prior to August 24, 2018, as evidenced by an email he sent to Bacarella on August 14, 2018, where he inquired about a 401(k) plan, suggesting prior discussions with his Radiant team. When questioned about his reference to "some folks" in this context, Furstenau absurdly claimed it referred to himself. Bacarella, present during Furstenau's testimony, supported this interpretation but noted that "some folks" could refer to others if phrased differently. The Court found both Furstenau and Bacarella's testimonies to be inherently incredible, particularly regarding the claim that five Radiant employees resigned without knowing their future employment details, including job roles and compensation, with Dupree even stating she did not know BTX's name until her first day. Bacarella testified about BTX's precautions to prevent access to Radiant's confidential information and emphasized that the former employees were instructed not to use any such information. Additionally, the former employees were required to sign BTX's Terms and Conditions of Employment, which included clauses on the non-disclosure of confidential information from previous employers. Furstenau was expressly instructed not to use Radiant's information and assured Bacarella that he complied. Bacarella's attempts to justify BTX's actions in allegedly conspiring with Furstenau to take over Radiant's Detroit office are contradicted by court testimony and evidence. A June 22, 2018 email from Bacarella outlines an agreement for Furstenau to join BTX as a salaried employee at $175,000, hire four operational support staff, and establish a Detroit office after his employment starts. Benefits for the new team would commence on day one, and Furstenau would receive credit for any customers he brought over from Radiant. The email indicates that BTX had already secured office space before August 27, 2018, suggesting that Furstenau was intended to become a BTX employee before leaving Radiant on August 24, 2018. His claims of leaving due to unfulfilled compensation demands are characterized as a "smoke screen" for a premeditated departure to BTX. Additionally, Bacarella acknowledged a "handshake deal" with Furstenau prior to signing the BTX Detroit lease, indicating prearranged plans for the office and team setup after Furstenau's departure from Radiant. Furstenau has counterclaimed against his former employer, which will be addressed in the proceedings. A preliminary injunction is an extraordinary remedy requiring the plaintiff to clearly demonstrate entitlement, with a substantial burden of proof (Winter v. Natural Resources Defense Council, Inc.). Courts evaluate four balancing factors: 1) strong likelihood of success on the merits; 2) risk of irreparable injury without the injunction; 3) potential substantial harm to others if granted; and 4) impact on the public interest (Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp.). The burden of proof for a preliminary injunction is more stringent than that for summary judgment; a plaintiff must prove more than just a likelihood of success (Leary v. Daeschner). Radiant's request for a preliminary injunction focuses on two claims: breach of fiduciary duty and misappropriation of trade secrets. The analysis begins with the likelihood of success on the merits for each claim. For the misappropriation of trade secrets, Radiant cites the Michigan Uniform Trade Secrets Act (MUTSA) and the Federal Defend Trade Secrets Act (DTSA). The plaintiff must specifically identify the trade secret and explain its economic value (Dura Global Techs. Inc. v. Magna Donnelly Corp.). A departing employee can violate MUTSA by disclosing confidential information, even without a non-compete agreement, provided they agreed to protect such information (PrimePay v. Barnes; Henkel Corp. v. Cox). In this case, the defendant signed a confidentiality agreement and allegedly used the former employer's secret formula for a new employer, indicating a likelihood of success on the misappropriation claim under MUTSA. An injunction to protect a trade secret requires a substantial threat of imminent harm; mere suspicion or speculation is insufficient (Allis-Chalmers Mfg. Co. v. Continental Aviation and Engineering Corp.). A "trade secret" under the Michigan Uniform Trade Secrets Act (MUTSA) is information that has economic value from being secret and is subject to reasonable efforts to maintain its secrecy (MCL. 445.1902(d)). Factors Michigan courts consider when determining if information qualifies as a trade secret include its external knowledge, employee accessibility, secrecy measures, economic value, development efforts, and ease of acquisition by others. Information must be secret; readily ascertainable data does not qualify. The identification of trade secrets is critical since general employee knowledge does not constitute a trade secret, and misappropriation claims should not infringe on employees' rights to change jobs. To establish a trade secret claim, the plaintiff must demonstrate more than the existence of generalized secrets and a competitor's hiring of a former employee with such knowledge. Radiant asserts that approximately 300 emails sent by Furstenau to his personal Comcast account contain misappropriated trade secrets, with O'Brien, Radiant's Vice President, testifying that these emails are central to the claim. Radiant must specifically identify the alleged misappropriated secrets to be granted preliminary injunctive relief, which is a substantial burden (Dura Global; Compuware Corp. v. Int'l Business Machines). O'Brien cites an inadvertently sent email to Radiant by a carrier, shortly after August 24, 2018, to demonstrate that BTX Detroit utilized a carrier/agent list circulated in a batch of 300 emails. Radiant's Motion identifies four highly confidential emails: 1. A spreadsheet analyzing all Radiant's U.S. customers over the past year, detailing customer identities, pricing, revenue, and shipment origins/destinations. 2. A spreadsheet listing employee identities and compensation in the Detroit office. 3. An email from Radiant's CEO to Furstenau, containing an Excel file with detailed customer analysis for the Detroit market, including revenue and gross margin data, as well as assessments on internal software improvements. 4. An email with sensitive financial projections and employee compensation information for the Detroit facility. These emails were included in the Joint Exhibit Book for the Preliminary Injunction hearing, with specific information found across three exhibits. O'Brien describes Radiant's proprietary "secret sauce" as involving financial data, customer activity history, and human capital information. The Court recognizes this information as trade secrets, with Furstenau and Dupree acknowledging its confidentiality during the hearings. Legal precedents affirm that a trade secret can consist of a unique combination of publicly available elements, which, when aggregated, create a competitive advantage. The financial documents in question provide detailed insights into Radiant's top customers during Furstenau's tenure, underscoring their proprietary nature. Furstenau's actions involving the emailing of proprietary information to himself are characterized as a significant misuse of trade secrets rather than a mere compilation of publicly available customer data. The court notes that the information Furstenau accessed and forwarded to his personal email does not belong to him and was acquired through his managerial position at Radiant. Furstenau explicitly stated he did not want Radiant's information transferred to his new phone, indicating an acknowledgment of the confidential nature of that information. The court recognizes that the emails Furstenau sent to himself contain valuable proprietary content, termed Radiant's "secret sauce," which is not commonly known or easily obtainable, thereby holding independent economic value. Radiant implemented adequate measures to protect its confidential information, including restricted access based on employee roles and explicit confidentiality agreements. Testimony from O'Brien indicates that information was selectively shared on a need-to-know basis, with only senior management, including Furstenau, having access to sensitive data. Additionally, Radiant utilized password protection for confidential documents and Furstenau acknowledged his obligation to maintain confidentiality by signing the company’s Code of Ethics. Overall, the evidence supports Radiant's claims of misappropriation and the protection of its trade secrets. The Handbook's Computer Policy prohibits the disclosure of confidential information and mandates that employees must log out or lock their computers and secure their work areas to protect sensitive data. Radiant asserts it made adequate efforts to safeguard its confidential information. The company claims actual and threatened misappropriation of trade secrets, as defined by the Michigan Uniform Trade Secrets Act (MUTSA). Misappropriation occurs when a person acquires a trade secret through improper means or discloses it without consent, particularly if they know it was obtained improperly. Radiant argues against the defendants’ portrayal of the case as typical employee competition, asserting that Furstenau did not merely leave to compete but planned to replicate Radiant's operations with BTX Global. Over six months, Furstenau collaborated with BTX to establish an office in Detroit, which began operations immediately after his departure, utilizing key Radiant staff and proprietary information. Evidence shows that this transition was premeditated, as BTX sought to regain a presence in Detroit after a failed attempt in the 1990s. Testimony indicated that Radiant experienced a decline in business following Furstenau's exit, including loss of key clients and specific financial downturns as a result of BTX's rapid engagement with Radiant's customers. Revenue for the period leading up to October 2018 decreased by approximately $400,000, with gross profit down over $300,000 compared to the same quarter in the previous fiscal year. O'Brien admitted a lack of direct evidence of disclosure as of December 2018, and Radiant was unable to access Furstenau's phone or BTX computer for further information. At a Preliminary Injunction hearing on December 14, 2018, Furstenau initially denied accessing Comcast emails but later acknowledged accessing at least 24, claiming none pertained to Radiant. Bacarella testified that he and Furstenau had discussed the inappropriateness of recruiting Radiant employees, which was contradicted by an email from Furstenau listing potential team members for BTX. Bacarella confirmed he would hire Furstenau's team immediately without standard employment procedures and that he ensured proper staffing for the BTX Detroit office based on prior knowledge of the team members. The evidence, including emails and the accumulation of 300 Radiant emails in Furstenau’s personal account, suggested a conspiracy to misappropriate trade secrets. Although "threatened misappropriation" is not explicitly recognized in Michigan law, it requires identifying specific trade secrets at risk and demonstrating employee duplicity. The court found Furstenau's testimony lacking credibility regarding the formation of BTX Detroit, supporting the likelihood of Radiant's success in asserting threatened misappropriation. Furstenau's credibility is questioned due to several inconsistencies in his claims regarding his actions before leaving Radiant for BTX. He denied accessing 300 emails, claimed no prior deal with BTX despite a handshake agreement with Bacarella, and immediately contacted Radiant clients without discussing employment terms with his team. His assertion that a list he created on August 14, 2018, for computers for his team was coincidental is disputed by evidence indicating it was premeditated, as the list included specific names of Radiant employees transitioning to BTX. The court finds his testimony about having no exit plans or discussions about moving to BTX implausible, highlighted by the setup of the BTX office prior to his resignation. Correspondence from February 2018 suggests he may have already discussed moving with his team. The court concludes that Furstenau's claims of lacking a pre-planned exit strategy are not credible, given the evidence of his prior communications and the organized transition to BTX. Furstenau violated the "Conflicts of Interest" provision of the Radiant Code of Ethics by not disclosing his intentions to join BTX Detroit, undermining his credibility. A forensic analysis revealed he deleted files related to his undisclosed interest in BTX while still employed at Radiant. The court found Bacarella's testimony regarding his knowledge of staffing at BTX Detroit to be inherently incredible, particularly in light of a prior agreement with Furstenau to conduct business together before Bacarella signed the lease for the office. Bacarella denied any inquiries about Radiant employees potentially joining BTX and claimed ignorance of their presence, despite evidence to the contrary. His assertion of merely forwarding an email from Furstenau without discussing its contents was also deemed not credible, given his active involvement in the office's establishment. The court concluded Furstenau's lack of candor indicated a willingness to misuse trade secrets for BTX Detroit, drawing parallels to a similar case (PepsiCo v. Redmond) that supported the issuance of a preliminary injunction against potential misappropriation of trade secrets. A plaintiff can prove trade secret misappropriation by showing that a defendant's new employment will inevitably lead to reliance on the plaintiff's trade secrets. The Seventh Circuit upheld a preliminary injunction, noting that the plaintiff demonstrated a likelihood of success despite lacking evidence of the defendant's actual or intended use of trade secrets. The district court highlighted the new employer's unusual interest in hiring employees from PepsiCo, suggesting an intent to access proprietary information. In a similar case, Furstenau's actions, including sending Radiant team members' names to BTX and forwarding 300 emails containing confidential information to his personal account, indicate a high likelihood of using that information for BTX. Radiant identified specific trade secrets in the forwarded emails and presented evidence of deception from Furstenau and Bacarella, establishing a likelihood of success for misappropriation claims against both BTX and Furstenau. Regarding the breach of fiduciary duty claim against Furstenau, it is likely to be overshadowed by the Michigan Uniform Trade Secrets Act (MUTSA), which preempts overlapping claims. MUTSA provides a statutory cause of action for trade secret misappropriation and displaces conflicting claims. However, claims not based on trade secret misappropriation are not affected by MUTSA. Although Radiant's breach of fiduciary duty claim may share similar facts with the MUTSA claim, it could still proceed if it involves actions unrelated to trade secret misappropriation. Nonetheless, sufficient evidence of Furstenau's misconduct as Radiant's office manager supports granting a preliminary injunction for breach of fiduciary duty, particularly given BTX's knowledge of Furstenau's breach and his collusion with Bacarella. Radiant must prove that it is likely to suffer irreparable harm without an injunction, adhering to the standard that requires a clear demonstration of such harm rather than mere speculation. Irreparable injury is defined as harm that is not fully compensable by monetary damages, including loss of customer goodwill. Testimony from O'Brien indicates that customers have expressed concerns about Radiant's ethics, leading to a decline in business relationships, which establishes sufficient evidence of irreparable harm at this preliminary stage. In evaluating a preliminary injunction, the court must also consider potential harm to others. The injunction would negatively impact Furstenau and other BTX Detroit employees by restricting their ability to engage with former Radiant clients for six months. However, BTX Detroit could still solicit other customers, and the presence of multiple competing 3PL companies in Detroit suggests that the market would remain competitive despite the injunction. The public interest favors the protection of trade secrets and the enforcement of laws enacted by legislation. While defendants argue for the right to freely seek employment, the court acknowledges that restricting legitimate competition and job mobility through trade secret litigation is inappropriate. The public's interest in protecting trade secrets has been violated, as evidenced by the actions of former Radiant employees, particularly Charles Furstenau, who, despite not having signed non-competition or non-solicitation agreements, acknowledged a Code of Ethics with confidentiality provisions. A significant breach occurred when Furstenau, along with BTX Global Logistics CEO Rosario Bacarella, orchestrated a planned recruitment of Radiant employees in August 2018, following extensive prior communications. Furstenau forwarded 300 Radiant emails containing sensitive data to Bacarella, leading to the establishment of a BTX Detroit office staffed by former Radiant employees who left their positions immediately after Furstenau's resignation. The Court found the testimonies of Furstenau and Bacarella unconvincing and characterized them as implausible. As a result, Radiant successfully demonstrated the necessary elements for a preliminary injunction against Furstenau and BTX Detroit for misappropriation of trade secrets under the Michigan Uniform Trade Secrets Act and the Federal Defend Trade Secrets Act, as well as for breach of fiduciary duty. The Court ordered the following: 1) Furstenau and former Radiant employees at BTX Detroit are preliminarily enjoined from soliciting or contacting customers they engaged with during their last year at Radiant for six months; 2) they are similarly enjoined from interacting with carriers/agents from that period for six months; 3) they are prohibited from disclosing or using any confidential or trade secret information belonging to Radiant; and 4) discovery will continue, including forensic examination of Furstenau's Comcast email account. Defendant Furstenau's case involves the use of his Radiant and BTX-issued cell phones, as well as his personal and BTX Detroit-issued computers. The Court will require the Plaintiff to provide security for potential costs and damages to Defendants, should they be wrongfully enjoined, as per Fed. R. Civ. P. 65(c). At the Preliminary Injunction hearing, the Parties submitted 79 stipulated joint exhibits, including the Radiant Code of Ethics and Employee Handbook. Radiant accuses Furstenau and BTX Detroit of misappropriation under both Michigan Uniform Trade Secrets Act (MUTSA) and the Defend Trade Secrets Act (DTSA), with similar legal elements outlined in MCL 445.1902(b) and DTSA 1839(5). The hearing referenced a case where the defendant, McKesson, developed client contacts through various personal methods. During the December 21, 2018 evidentiary hearing, Radiant's Counsel Patrick Hickey presented arguments, while Defense Counsel Andrew Marquis represented both Furstenau and BTX Detroit. Evidence indicated that BTX Detroit was obligated to fund Furstenau’s defense against confidentiality claims from his former employer, with BTX providing legal counsel. However, this counsel, Kurt Kobiljak, did not participate in the hearing. The Court confirmed Furstenau's consent for Marquis to represent him, ensuring that this agreement was recorded.