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Hanwha Azdel, Inc. v. C&D Zodiac, Inc.

United States District Court, W.D. Virginia, Lynchburg Division

June 2, 2014

HANWHA AZDEL, INC., Plaintiff,
v.
C&D ZODIAC, INC., Defendant.

MEMORANDUM OPINION

NORMAN K. MOON, District Judge.

Among other things, Plaintiff claims that Defendant breached a contractual obligation to maintain confidentiality regarding the development of a thermoformable composite sheet product that was to be manufactured by Plaintiff and then formed by Defendant into sidewalls for installation in aircraft cabin interiors. Plaintiff alleges that Defendant provided a third-party, Crane & Co. ("Crane"), with confidential information related to Plaintiff's product and wrongfully placed Crane in Plaintiff's intended role as Defendant's supplier of raw material for aircraft sidewalls. In Plaintiff's view, Crane used the confidential information to develop a product that has shown great promise and is expected to generate substantial profits for Defendant. Plaintiff seeks disgorgement of Defendant's profits and other damages.

The matter is before me upon consideration of Defendant's motion for summary judgment and Plaintiff's motion for partial summary judgment. My review of the record discloses the following: Plaintiff never manufactured a usable product; the undisputed material facts present matters of contract interpretation that I must decide in Defendant's favor; and Plaintiff has not produced any evidence that Defendant breached any obligation of confidentiality to Plaintiff in connection with Defendant's more recent contractual relations with Crane. Accordingly, Defendant's motion will be granted, and Plaintiff's motion will be denied.

I. THE COMPLAINT

According to Plaintiff, over several years Plaintiff developed a thermoplastic composite sheet product, "Aero-lite™" ("Aero-lite"), with an intended end-use application as an interior liner for airplane cabins. Given Defendant's expertise in the end-use application, Plaintiff began working with Defendant to further develop Aero-lite for that purpose. In March 2008, Plaintiff and Defendant negotiated and executed a Memorandum of Understanding ("MOU"), which established the terms and conditions upon which Defendant would purchase Aero-lite from Plaintiff. The MOU included the parties' agreement to collaborate on the design and development of Aero-lite.

Plaintiff's original complaint presented a straightforward breach of contract case: two causes of action alleging that Defendant failed to pay Plaintiff for sheets of Aero-lite delivered pursuant to the MOU. Defendant answered, asserting that it did not pay for the Aero-lite sheets referred to in Count I of the complaint because those Aero-lite sheets were delivered in a warped condition and produced warped, brittle aircraft interior sidewall panels that (i) failed to conform to Defendant's "Specification" and the terms of the purchase orders, (ii) could not be used to form aircraft sidewalls, and (iii) were rejected by Defendant's customer, American Airlines. Regarding Count II, the answer asserted that Defendant did not pay for 8 (out of 20 ordered) sample sheets of lighter weight Aero-lite because Plaintiff could not reliably produce the lighter weight sheets, which were also non-conforming and unusable for aircraft sidewalls.

Thereafter, Plaintiff was granted leave to amend the complaint to include two additional claims, Counts IV and V, based upon the allegation that Defendant had breached confidentiality provisions contained in a separate Mutual Confidentiality and Non-Disclosure Agreement ("NDA") by wrongfully disclosing to a third-party - Crane, as previously mentioned - Plaintiff's confidential information.[1] Plaintiff alleged that Defendant's disclosures regarding the manufacturing problems with Aero-lite allowed Crane to successfully develop Composite Aerospace Board (or "CAB"), a viable thermoformable plastic sheet material that, unlike Aero-lite, could be used to form acceptable aircraft sidewalls. Plaintiff sought damages and injunctive relief.

After that amendment, Plaintiff supplemented its original discovery requests with 4 new interrogatories and 50 new document requests focused primarily on the two new claims. Defendant's responses to this second round of document requests produced over 600 pages of paper documents and more than 15, 000 pages of electronic discovery. Thereafter, Plaintiff was granted a second motion for leave to amend the complaint. The amendments included 5 new forms of relief under Counts IV and V: lost profits, restitution, disgorgement, an accounting or constructive trust of proceeds of sale of CAB, and a request for an "Order that the MOU and NDA have been and are lawfully canceled by Azdel, and AZDEL is released from all obligations thereunder." The amendments also added language identifying the Specification attached as Exhibit B to the MOU, CDM005-05, as Plaintiff's confidential information, which Defendant allegedly wrongfully disclosed to Crane. Thus, the wrongful disclosure claims became focused upon disclosures to Crane of information about the problems with Aero-lite, plus Defendant's Specification, which Defendant contends is proprietary to it.[2]

Thereafter, the damages portion of Counts IV and V were bifurcated from the liability issues.

To recapitulate the complaint, as presently amended, Counts I through III seek compensatory damages for Defendant's alleged failure to pay for the Aero-lite product Plaintiff manufactured pursuant to purchase orders issued by Defendant. Counts IV and V pursue additional damages and injunctive relief arising from Defendant's alleged breach of purported contractual confidentiality and non-disclosure obligations - specifically, Defendant's alleged wrongful disclosure of confidential information to an unauthorized third party, Crane, Plaintiff's supposed competitor, in connection with Crane's development, manufacture, sale, and use of CAB, a competing product that Defendant has purchased and incorporated into its products in place of Aero-lite.

II. CROSS-MOTIONS FOR SUMMARY JUDGMENT

A.

Federal Rule of Civil Procedure 56(a) provides that a court should grant summary judgment (or partial summary judgment) "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." "As to materiality... [o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In order to preclude summary judgment, the dispute about a material fact must be "genuine, ' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id .; see also JKC Holding Co. v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). However, if the evidence of a genuine issue of material fact "is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 250. In considering a motion for summary judgment under Rule 56, a court must view the record as a whole and draw all reasonable inferences in the light most favorable to the nonmoving party. See, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir. 1994).

When faced with cross-motions for summary judgment, the standard is the same. The court must consider "each motion separately on its own merits to determine whether either of the parties deserves judgment as a matter of law." Rossignol v. Voorhaar, 316 F.3d 516, 523 (4th Cir. 2003) (quotations omitted). If the court finds that there is a genuine issue of material fact, both motions must be denied. "But if there is no genuine issue and one or the other party is entitled to prevail as a matter of law, the court will render judgment." Trigo v. Travelers Commercial Ins. Co., 755 F.Supp.2d 749, 752 (W.D. Va. 2010).

B.

The material facts in this case, as derived from the record and aired at the hearing on the instant motions, and regarding which there are no genuine disputes, are as follows:

• Plaintiff contracted with Defendant to produce sheets made of 2, 000 grams-per-square-meter ("gsm") Aero-lite material to be molded by Defendant into aircraft sidewalls for American Airlines' B757 refurbishment program.
• Plaintiff warranted to Defendant that the material would meet the performance Specification, CDM005-05, which had been previously drafted by Defendant and which was attached to the MOU.
• The Specification expressly disavowed any interest in the vendor's proprietary and intellectual information and contained no description of Plaintiff's method of production of Aero-lite, only the performance criteria that the Aero-lite sheets and molded sidewall would have to achieve.
• Plaintiff agreed that Defendant would have the right to terminate and cancel open purchase orders if Plaintiff breached the terms of the MOU; if the material did not perform as predicted and was not suitable for Defendant's intended use; and/or Defendant's customer rejected the Aero-lite sidewalls in favor of conventional sidewalls.
• Although Defendant's purchase order for the material called for delivery of 40 pre-production Aero-lite sheets in June of 2008, Plaintiff manufactured or partially manufactured 2, 393 sheets even before Plaintiff knew whether the pre-production sheets were suitable for use as sidewalls by Defendant and would be accepted by American Airlines.
• The Aero-lite sheets initially delivered to Defendant were warped, brittle, and suffered from other defects, and Defendant promptly advised Plaintiff in writing that they definitely could not be used for American Airline's sidewalls as intended.
• A second order for a lot of 20 sheets of lighter weight 1, 320 gsm Aero-lite material was not completely fulfilled by Plaintiff even after Defendant gave Plaintiff an opportunity to cure its partial delivery.
• Defendant was not restricted under its agreement with Plaintiff from working with any alternative supplier of thermoformable plastic sheet material; it did not give Plaintiff any guaranty of exclusivity.
• Plaintiff has not shown that Defendant provided any of Plaintiff's confidential information - whether labeled confidential or otherwise - to another supplier of thermoformable plastic sheet material after Plaintiff failed to produce a viable product that Defendant could commercialize.
• Plaintiff has not shown (and has not attempted to show) any lost profits that resulted from Defendant's alleged disclosures of information to Crane, a non-party to this lawsuit.

Plaintiff attempts to create the appearance of material factual disputes by mis-characterizing testimony, building inferences upon each other, or drawing unwarranted conclusions from isolated excerpts of testimony, devoting 17 pages of its opposition to Defendant's motion to the recitation of allegedly disputed facts. However, given the applicable summary judgment standard, and to the extent Plaintiff correctly acknowledges the record evidence, these alleged factual disputes lie on the periphery of the case and do not create any "genuine" dispute with respect to any "material" fact. It is well-established that the mere existence of " some " factual disputes will not defeat summary judgment; the dispute must be "genuine" and concern "material" facts. Anderson, 477 U.S. at 247-248 (emphasis in original); see also Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. ...


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