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Pelican Bay Forest Products, Inc. v. Western Timber Products, Inc.

Court of Appeals of Oregon

May 8, 2019

PELICAN BAY FOREST PRODUCTS, INC., an Oregon corporation, Plaintiff-Appellant,
v.
WESTERN TIMBER PRODUCTS, INC., an Idaho corporation; Andrew Hotmer; and Dan Seid, Defendants-Respondents, and Doug KELLEY, Defendant.

          Argued and submitted May 15, 2018

          Deschutes County Circuit Court 14CV0445; A164228Stephen P. Forte, Judge.

          Martin E. Hansen argued the cause for appellant. Also on the briefs were Christopher J. Manfredi and Francis Hansen & Martin LLP.

          Danielle Lordi argued the cause for respondents. Also on the brief was Peterkin and Associates.

          Before Ortega, Presiding Judge, and Lagesen, Judge, and Powers, Judge. [*]

         [297 Or.App. 418] Case Summary:

         Plaintiff and defendants are competitors in the lumber trading industry. Plaintiff's long-term employee, Kelley, gave a portion of the customer list that he used while employed by plaintiff to his son-in-law, Hotmer, so that he could obtain work in the lumber trading industry. Defendants hired Hotmer and Hotmer utilized the customer information that Kelley provided to him. Once plaintiff discovered the use of its customer information, it sent cease-and-desist letters to defendants. Defendants continued to use the customer information, which led to plaintiff's initiation of the underlying lawsuit. Plaintiff appeals from a general judgment, assigning error to the trial court's grant of summary judgment to defendants on plaintiff's claims for misappropriation of trade secrets and intentional interference with economic relations, and to its award of attorney fees to defendants.

         Held:

         The trial court erred in granting summary judgment to defendants on plaintiff's trade secrets claim. The evidence in the summary judgment record was sufficient to withstand summary judgment and permit a reasonable factfinder to find that the customer information that Kelley took from plaintiff constituted a "trade secret" under ORS 646.461(4) and that defendants engaged in conduct constitute Argued and ng "misappropriation" under ORS 646.461(2)(d)(C) by continuing to use the information taken from plaintiff after receiving a cease-and-desist letter alerting defendants that the information that Kelley had taken was plaintiff's confidential information. Because the trial court's grant of summary judgment on the intentional interference with economic relations claim was predicated on the grant of summary judgment on the trade secrets claim, the Court of Appeals reversed on that claim, as well. Consequently, defendants are no longer prevailing parties for purposes of ORS 646.467 and are not entitled to attorney fees.

          [297 Or.App. 419] LAGESEN, J.

         As Doug Kelley neared the end of his 14-year career as a lumber sales trader for Pelican Bay Forest Products, Inc. (Pelican Bay or plaintiff)-the plaintiff in this case- he gave his son-in-law, Andrew Hotmer, a portion of his Pelican Bay customer list, along with other information about those customers and their business with Pelican Bay Hotmer, with Kelley's assistance, parlayed that information into a timber sales job with one of Pelican Bay's competitors, Western Timber Products, Inc. (Western Timber). In that job, he used Kelley's customer information to make sales on behalf of Western Timber-something that, according to Pelican Bay, diminished its own sales and profits. That led to this lawsuit. Pelican Bay claims that, as a result of that course of events, Western Timber, its president, Seid, and Hotmer (collectively, defendants) have (1) misappropriated trade secrets belonging to Pelican Bay, in violation of ORS 646.461(2); and (2) intentionally interfered with Pelican Bay's economic relations. Defendants moved for summary judgment, and the trial court granted the motion, concluding that there was insufficient evidence to permit a reasonable factfinder to find in Pelican Bay's favor on certain elements of its claims. It then awarded attorney fees to defendants on the trade secrets claim, as allowed by ORS 646.467(1), concluding that Pelican Bay's claim of misappropriation was made in bad faith. We conclude that there are genuine issues of material fact on those claims and, accordingly, reverse and remand.

         FACTS

         This case was hard fought in the trial court, and the summary judgment record contains conflicting evidence on a number of points. However, our standard of review, discussed below, requires us to view the facts in the light most favorable to Pelican Bay, the nonmoving party. We therefore state the facts accordingly.

         Pelican Bay serves as a distributor between lumber mills and purchasers of their products. Kelley started working as a lumber sales trader for Pelican Bay in or around 2000. Kelley acted as an intermediary between lumber mills selling products and customers who desired to purchase [297 Or.App. 420] those products. Kelley built rapport with customers, determined their product needs, and then located and sold them that product. He had done similar work before working for Pelican Bay but did not bring a customer base with him. Rather, Pelican Bay provided him with customer information and accounts serviced by former Pelican Bay traders. That customer information consisted of customer names, contact persons, product preferences, mill information, pricing, customer payment information, shipping preferences, and costs. Over the 14-year course of his employment with Pelican Bay, Kelley's customer base grew to include roughly 40 nationwide customers.

         In 2007, Kelley signed an "Employee Acknowledgment" in which he agreed to abide by the policies contained in Pelican Bay's employee handbook. The handbook contained a "Confidentiality Policy" stating that plaintiff's confidential proprietary information, including plaintiff's customer list and "all information obtained by company employees during the course of their work," belonged to plaintiff and was not to be shared with third parties, "except as your job requires."

         Notwithstanding that policy, and his written acknowledgment of it, Kelley attempted to sell his customer list to other Pelican Bay traders in 2013. Around the same time, Kelley also contacted a timber company in Idaho to inquire whether it was interested in hiring his daughter to take over his customer list. Pelican Bay's president, Hanson, discovered Kelley's behavior, and reminded him that the customer list and related information was Pelican Bay's property and not Kelley's. Kelley acknowledged that reminder in writing, signing the following statement:

"I, Doug Kelley, have been reminded today by Ron Hanson, President, of Pelican Bay's Confidentiality Policy which I acknowledged and signed on January 29, 2007. He also reprinted a copy of the policy section we discussed.
"I understand that if I violate this policy, I will be subject to disciplinary action and possible legal recourse.
"The basis of our conversation today is that intangible property such as information and data belongs to Pelican Bay. Examples listed include customer lists, production information, and computer records. I may not disclose or [297 Or.App. 421] discuss proprietary or confidential information with anyone outside the company. It is understood that once I leave the employ of Pelican Bay, all company information that I gathered while working for ...

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