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Advanced Fluid Systems, Inc. v. Huber

United States District Court, M.D. Pennsylvania

June 6, 2017

ADVANCED FLUID SYSTEMS, INC., Plaintiff
v.
KEVIN HUBER, INSYSMA INTEGRATED SYSTEMS AND MACHINERY, LLC, LIVINGSTON & HAVEN, LLC, CLIFTON B. VANN IV, and THOMAS AUFIERO, Defendants

          MEMORANDUM

          Christopher C. Conner, Chief Judge

         Plaintiff Advanced Fluid Systems Inc (“AFS”) brings this action against a former employee and several competitors asserting claims for misappropriation of trade secrets breach of fiduciary duty and aiding and abetting said breach AFS moves for judgment pursuant to Federal Rule of Civil Procedure 56 on each of its claims (Doc 156) Also before the court are cross-motions for summary judgment filed by defendants Integrated Systems and Machinery LLC Livingston & Haven LLC Clifton B Vann IV and Thomas Aufiero (Docs 171175)

         I. Factual Background & Procedural History[1]

         AFS is a Pennsylvania corporation that distributes, manufactures, and installs hydraulic components for engineering projects. (Doc. 165 ¶ 2). Defendant Kevin Huber (“Huber”) was employed at AFS as a full-time sales engineer between November 2006 and October 2012. (Doc. 169 ¶ 2). Huber left his position at AFS after incorporating his own firm, Integrated Systems and Machinery, LLC (“Integrated Systems”), in October 2012. (Id. ¶¶ 5, 181). This litigation arises from events circumambient to Huber's departure.

         A. The 2009 Contract

         In September 2009, AFS entered into a three-year contract with the Virginia Commonwealth Space Flight Authority (“the Authority”) to build and maintain equipment for the NASA rocket launch facility on Wallops Island, Virginia. (Id. ¶ 6). AFS designed, engineered, and installed a hydraulic and control launch system for the Authority at Wallops Island. (See Id. ¶¶ 6-7, 9). The system, referred to as the Teleporter/Erector/Launcher Hydraulic System (“Hydraulic System”), is comprised of many constitutent parts, including a component known as the “strongback.” (Id. ¶¶ 6-7). The strongback is the platform that carries rockets in a horizontal position to the launch pad. (Id. ¶ 7). A pair of “gripper arms” secure the rocket against the strongback. (Id. ¶ 111; see, e.g., Doc. 166-15). The Hydraulic System then lifts the rocket and strongback from a horizontal position to a vertical position and holds the rocket in place for launch. (Doc. 169 ¶ 7).

         Orbital Sciences Corporation (“Orbital”) launches its Antares rocket from Wallops Island using the Hydraulic System designed and installed by AFS. (Id. ¶ 6). The Antares rocket services and supplies the International Space Station. (See id.) Huber became aware of the Hydraulic System project and introduced AFS's management team to it through his friend and Orbital engineer Keith Fava (“Fava”). (Id. ¶ 15). Huber was intimately involved with the Hydraulic System project from its inception, and he was the main point of contact between AFS and Orbital. (Id. ¶¶ 16-18). Indeed, Orbital employees considered Huber to be the de facto manager of the project. (Id.)

         AFS supplied the Authority with a comprehensive package of engineering drawings generated during design and installation of the Hydraulic System. (Id. ¶¶ 12-13). Pursuant to the contract between AFS and the Authority, all materials generated during performance of the agreement are deemed “work for hire” and the “exclusive property” of the Authority. (Doc. 165 ¶ 12). The contract defers to a “Non Disclosure Agreement” for treatment of confidential information, but AFS and the Authority never executed such an agreement. (Id. ¶¶ 10-11). Nonetheless, the Authority's lead engineers testified that they released AFS's drawings only to those that “needed to know” the information. (Doc. 158-7, Reed and Nash Dep. 85:6-87:5, 88:3-89:25, 90:23-91:2, 92:3-95:15, Mar. 30, 2016 (“Reed/Nash Dep.”)).

         In September of 2012, the Authority experienced financial difficulty. (Doc. 169 ¶ 109). It sold both the strongback and Hydraulic System to Orbital to provide continued funding for launches at Wallops Island. (Id.) AFS did not execute a nondisclosure agreement with Orbital. (Doc. 165 ¶ 42). Consequently, Orbital considers itself to be the legal owner of AFS's engineering drawings. (Doc. 178 ¶¶ 128-29). This belief notwithstanding, Orbital maintained a practice of only disclosing AFS's drawings on a need-to-know basis. (See Doc. 172-28, Edwards Dep. 90:16-91:12, Mar. 22, 2016 (“Edwards Dep.”)).

         AFS employs security measures to safeguard its engineering files, including data related to the Hydraulic System. AFS secures its files on a password-protected server at its headquarters in York, Pennsylvania. (Doc. 169 ¶¶ 33-35). Its facility is monitored by security cameras. (Doc. 192-6, Burkhardt Dep. 24:10-23, May 25, 2016 (“Burkhardt Dep.”)). To access files on-site, employees must enter individualized usernames and passwords; to access them remotely via virtual private network requires two passwords. (Doc. 169 ¶¶ 33-36). Authority employees and others at Wallops Island have limited access to these materials through a password-protected online repository managed by the Mid-Atlantic Regional Spaceport. (Id. ¶ 37; see Reed/Nash Dep. 79:25-81:21). AFS's finalized engineering drawings bear its name as well as a statement that the drawings are proprietary and confidential. (Doc. 169 ¶¶ 13, 34).

         B. Huber's Relationship with the Livingston Defendants

         Defendant Thomas Aufiero (“Aufiero”) was a sales manager at AFS who worked closely with Huber on the initial Hydraulic System project. (Doc. 178 ¶ 48; see also Doc. 169 ¶ 39). In January 2011, Aufiero left AFS to work as a regional sales manager for defendant Livingston & Haven, LLC (“Livingston”). (Doc. 169 ¶¶ 39-41). Livingston “designs, assembles, and installs hydraulic fluid systems” and generally competes in the same market as AFS. (See Doc. 178 ¶¶ 8-9).

         Shortly after Aufiero began working for Livingston, he emailed Huber to request photos of the new Hydraulic System cylinders recently delivered to AFS's headquarters. (Doc. 169 ¶¶ 40-42). Huber emailed the requested photos to Aufiero. (Id. ¶ 41). Ten months later, in November 2011, Huber emailed Aufiero 10 photos and a video showing tests of the Hydraulic System. (Id. ¶¶ 43-44). Soon afterward, Huber requested that he and Aufiero maintain contact using Huber's personal email address. (See Id. ¶ 45).

         In late 2011 or early 2012, Huber began meeting with a team of Livingston employees at its headquarters in North Carolina. (Id. ¶¶ 46-47). The team consisted of Aufiero, defendant Clifton B. Vann, IV (“Vann”), president of Livingston, and Craig Hill (“Hill”), a Livingston engineer. (Id.) Huber met and communicated with this group on several occasions to discuss Orbital's needs regarding support work for and eventual upgrades to the Hydraulic System. (See Id. ¶¶ 53, 56, 71, 95-96, 129, 143, 178). Huber conveyed to the Livingston team that Orbital was unhappy with AFS's services and that it was seeking new vendors to service the Hydraulic System. (Doc. 178 ¶¶ 43-50).

         All told, Huber participated in 338 calls with Livingston employees on his AFS-issued cellular phone. (Doc. 169 ¶ 52). He also communicated electronically with the Livingston team. During a January 8, 2012 meeting, Livingston established an account for Huber with Dropbox.com, an online document-sharing service, and linked Huber's account with Hill's and Aufiero's Dropbox accounts. (Id. ¶¶ 53-55). A Livingston employee installed a virtual private network on Huber's AFS-issued laptop computer, allowing Huber to access Livingston's private network and AFS's private network on the same device. (Id. ¶¶ 57-58). The Livingston defendants also issued Huber a company email address. (Id. ¶ 59). By January 11, 2012, Huber's email signature on his Livingston account listed him as Livingston's “Program Manager.” (Id. ¶ 60).

         C. Huber's Departure from AFS

         Huber took affirmative steps to help the Livingston employees familiarize themselves with the Hydraulic System and Orbital's operations on Wallops Island after his first meeting at Livingston headquarters. For example, on March 6, 2012, Huber requested a list of Hydraulic System component parts from Dan Vaughn, AFS's vice president and engineering manager. (Id. ¶¶ 61-62). Huber emailed the list, along with attendant prices and profit margins, to Aufiero. (Id. ¶¶ 64-65). He also arranged a tour of Wallops Island for Aufiero, Vann, and Hill on March 21, 2012. (Id. ¶¶ 67-71). Huber showed the Livingston employees a rocket assembly room, a launch pad, and the Hydraulic System. (Id. ¶¶ 73-74).

         After the March 2012 tour, Huber continued to provide information about the Hydraulic System to Aufiero, Vann, and Hill via Dropbox and email. (See Id. ¶ 75). Huber created a new folder on Dropbox labeled “Orbital Sciences” and shared it with Aufiero. (Id. ¶¶ 85-91). The folder contained numerous files including the Hydraulic System cylinder assembly and arrangement drawings, a “majority” of the hydraulic schematics for the system, and AFS's pricing and billing information. (Id.) Huber later emailed Hill documents containing specifications the Authority provided to AFS in their original contract for the Hydraulic System. (Id. ¶ 94).

         Huber's discussions with the Livingston team continued after Huber turned over AFS's engineering files. Huber expressed frustration to Livingston that AFS was ostensibly contemplating an end to its service work on the Hydraulic System. (See Doc. 178 ¶¶ 50-51). Huber also indicated that Orbital was “nervous about not having a supplier” for necessary parts. (Id. ¶ 51). Consequently, Huber arranged another meeting between the Livingston defendants and Fava for April 12, 2012 to engage in “high level” discussions about the Hydraulic System. (Doc. 169 ¶¶ 95-97).

         Fava explained during the April 12 meeting that Orbital wanted to upgrade the Hydraulic System cylinder assembly. (Id.) He told Huber, Aufiero, Vann, and Hill that Orbital would either install a new cylinder system at the launch pad or modify the cylinders it already owned. (Id.) Fava noted Orbital would announce a competitive bidding process for the new contract. (Id.) In his meeting notes, Fava remarked that Livingston might have a “leg up” on the competition if it retained Huber. (Id. ¶ 96). He observed that AFS's “management doesn't support us or their own employees in the type of team atmosphere that we need on an R&D program like this.” (Id.)

         Huber, Vann, and Aufiero began discussing Livingston's prospective role in the anticipated upgrades after the meeting with Fava. (See Id. ¶¶ 101-04). Huber advised Orbital that if it selected Livingston to complete the cylinder upgrades, Livingston would likely hire Huber as project manager. (See Id. ¶ 103). He also discussed compensation with Vann and Aufiero. (Id. ¶ 104). Huber remained an employee at AFS for several months after having these discussions. (See Id. ¶ 190). Eventually, Huber resigned from AFS in October of 2012. (See Id. ¶¶ 187, 190). On October 18, 2012, eight days before his last day at AFS, Huber incorporated his own firm, Integrated Systems, with the Nevada Secretary of State. (Id. ¶¶ 181, 190).

         D. The Hydraulic System Upgrade Contracts

         Orbital issued two contracts for work relating to Hydraulic System upgrades after competitive bidding periods. Orbital granted one contract to Livingston for replacement of the system's strongback gripper arms in December of 2012. (Id. ¶ 138). In March of 2013, Orbital granted a second contract to Integrated Systems for manufacture of a new cylinder assembly. (Id. ¶ 254). Because AFS's claims implicate actions taken during these contracts' bidding periods, we recount the details of each in extenso.

         1. The Gripper Arms Contract

         Orbital's first upgrade concerned the Hydraulic System's gripper arms. Orbital decided to replace the gripper arms in the spring of 2012. (Id. ¶ 112). Fava contacted Huber at his AFS email address to provide design specifications for the project. (Id. ¶ 113). Fava indicated that the new gripper arms “would be designed and installed by AFS.” (Id.) Huber emailed AFS engineers on June 19, 2012 and requested “technical recommendations” for the gripper arms upgrade. (Id. ¶ 117). At the same time, he continued discussions about the upgrade with his Livingston contacts. (Id. ¶ 118).

         Orbital separately approached Livingston about the gripper arms upgrade. Michael Brainard (“Brainard”), an Orbital engineer, expressed interest in meeting with Livingston management to discuss details of the gripper arms proposal. (See Doc. 178 ¶¶ 60-62). Brainard surmised that Orbital could share information about AFS's prior work on the gripper arms upon belief that Orbital “own[ed] the rights to share that information.” (Id. ¶¶ 62-63). Fava contacted Aufiero and Hill to secure a non-disclosure agreement from Livingston so that Orbital could share information concerning its upgrade plans. (Doc. 172-23, Brainard Dep. 84:8-85:18, Apr. 12, 2016). Livingston executed the non-disclosure agreement on May 15, 2012. (Doc. 178 ¶ 60).

         Orbital's policy is to solicit bids from vendors that Orbital deems qualified to perform the work. (Doc. 169 ¶ 110). Orbital does not accept unsolicited bids. (See id.) Rather, it invites prospective vendors to the bidding process by sending them a request for quote. (Id.) Companies interested in bidding must then submit a rough order of magnitude (“rough order”) for Orbital's review. (Id.) Existing vendors will typically receive a quote request for future contracts. (Id.)

         Orbital requested quotes from both AFS and Livingston for the gripper arms contract. (See Id. ¶¶ 113-14). On August 10, 2012, Huber submitted a rough order on behalf of AFS totaling $277, 000. (Id. ¶ 119). One month later, the Livingston team submitted a firm fixed price of $320, 500. (Id. ¶ 120). Livingston's firm price included compensation for Huber. (Id. ¶¶ 130-31). In contemporaneous notes dated September 5 and 10, 2012, Fava observed that the decision will “likely come down to price, with a slight nudge towards AFS due to their experience with the current system.” (Id. ¶ 133).

         AFS authorized Huber to submit a final price of $277, 828.80 on September 12, 2012. (Id. ¶ 122). Notwithstanding this final quote duly authorized by AFS management, on September 17, 2012, Huber submitted a firm price on behalf of AFS for $410, 383. (Id. ¶¶ 123-24). Huber did not consult AFS management before presenting the inflated price to Orbital. (Id. ¶ 124). He specifically asked a new AFS sales manager not to mention the bid, noting that he “went extremely high on the quote for a reason.” (Id.)

         Orbital awarded the gripper arms contract to Livingston on September 24, 2012. (Id. ¶¶ 133-35). Orbital based its decision, in part, on the price differential between Livingston's and AFS's bids. (Id.) Fava cited AFS's quote and its track record of poor customer service as Orbital's reasons for deciding against AFS for the contract. (Doc. 178 ¶ 77). Livingston and Orbital eventually finalized a price of $285, 685. (Doc. 169 ¶ 138). Huber received $41, 322.15 from Livingston after the latter received the gripper arms contract. (Id. ¶ 132).[2]

         2. The Cylinder Upgrade Contract

         In addition to replacing the gripper arms, Orbital decided to upgrade the system's hydraulic cylinder assembly. (Id. ¶ 140). With this upgrade, the Hydraulic System would ostensibly support a heavier rocket and send a heavier “payload” to the International Space Station. (Id.) Orbital determined that it could obtain this result one of two ways: (1) by replacing its cylinders' component parts but not the cylinders themselves, or (2) by installing completely new cylinders and cylinder assemblies. (Id. ¶ 141).

         Huber, Aufiero, Vann, and Hill knew of Orbital's planned cylinder upgrade by March 2012. (Id. ¶ 143). After learning about Orbital's plan, Huber disclosed to Aufiero the prices AFS paid for the original hydraulic cylinders and all component parts. (Id. ¶ 149). Orbital requested a quote from Livingston for the construction of new cylinders on July 10, 2012. (Id. ¶ 153). Orbital sent a similar request to Huber to forward to AFS, specifically inquiring as to the cost of modifying and reusing the existing cylinders in lieu of manufacturing new ones. (Id. ¶¶ 153, 157-58). Huber did not deliver this request to AFS. (Id. ¶ 155).

         AFS's engineering team, unaware of Orbital's request to quote both alternatives, tasked Huber to begin developing a quote for upgrading the existing cylinders. (See Id. ¶ 159). The team also instructed Huber to obtain a formal quote request from Orbital. (Id.) AFS's engineers thereafter determined that cylinder modification would not safely accomplish Orbital's goal of increasing load capacity. (Id. ¶ 161). The engineers were also concerned that Orbital's desired three-month modification turnaround was not feasible. (Id.) Huber never informed AFS's management that Orbital also requested a quote for new cylinders. (Id. ¶ 155).

         On September 5, 2012, Huber provided a request for quotation to AFS for cylinder modification only and proposed a feasibility study to determine whether AFS could safely modify the existing cylinders. (Id. ¶¶ 164-65). Huber estimated the cost of the study to be between $15, 000 and $25, 000. (Id. ¶ 166). When Huber proposed the study to Orbital on September 6, Brainard responded that AFS must first provide a rough order. (Id. ¶ 167). That same day, Huber encouraged AFS to abandon the upgrade bid, stating that he did not “think this project is good business for AFS at this time.” (Id. ¶ 168). In an email five days later, Huber told Fava that Orbital should not use AFS for its cylinder upgrade and that Huber would “jump ship” if Orbital chose another vendor. (Id. ¶ 170). Fava understood the alternative vendor to mean Livingston. (Id. ¶ 171). Shortly thereafter, Orbital stopped seriously considering AFS for the cylinder contract. (See Id. ¶ 177).

         On September 27, 2012, Huber met with Aufiero and Hill to prepare a joint rough order proposal on Livingston's behalf. (Id. ¶¶ 178-80). Large sections of Livingston's proposal were copied verbatim from the rough order AFS submitted for the original cylinder contract. (Id. ¶ 178). Livingston's rough order totaled $2, 338, 322. (Id.) Huber, Aufiero, Vann, and Hill set pricing to align with the costs that AFS incurred when it installed the original cylinders. (See Id. ¶ 231).

         On October 8 and 9, 2012, as Livingston worked on its rough order for the cylinder contract, Huber used his AFS laptop and an external hard drive to download approximately 98 gigabytes of data from AFS's servers. (Id. ¶¶ 182-85). Huber downloaded materials pertaining to the Hydraulic System as well as files related to AFS's other projects. (Id.; Doc. 158-6, Huber Dep. 265:1-266:10, Feb. 10, 2016 (“Huber Dep.”)). On the morning of October 9, 2012, Huber submitted his resignation to AFS. (Doc. 169 ¶ 187). His resignation became final on October 26, 2012. (Id. ¶ 190).

         In the days following his resignation notice, Huber transferred many of the downloaded files to Livingston using Dropbox and his personal email address. (Id. ¶ 194). Huber began transmitting the files on October 15, 2012, nearly two weeks before his resignation took effect. (Id.) The shared information included weld history details, weld maps, tubing drawings, a spreadsheet of component parts, prices for the original gimbals, and AFS's “as built” drawings. (See Id. ¶¶ 196-99, 202-04, 206-17). On October 29, 2012, Huber shared drawings generated by AFS for both the new cylinders and the new gripper arms.[3] (Id. ¶¶ 218-21). Huber altered many of these documents, postdating them and identifying himself and Integrated Systems as the author. (Id. ¶¶ 203-04, 207-08, 220). The documents' substantive content was unchanged. (Id. ¶¶ 196-99, 202-04, 206-08, 218-21, 220).

         Livingston submitted its rough order to Orbital, with pricing for both cylinder upgrade alternatives, on November 2, 2012. (Id. ¶ 229). Two months later, Integrated Systems surprised the Livingston team by submitting its own bid for the cylinder contract. (See Id. ¶ 243). Like Livingston, Integrated Systems quoted both upgrade alternatives. (Id.) Huber never informed Livingston that he intended to bid on the cylinder contract. (Doc. 178 ¶ 100). Integrated Systems' bid explicitly cited drawings that Huber downloaded from AFS's servers as justification for its price quote. (Doc. 169 ¶ 243).

         Orbital tentatively awarded the cylinder contract to Integrated Systems on March 13, 2013 for $2, 028, 966. (Id. ¶ 246). Fava catalogued the potential risks and benefits of using Integrated Systems for the contract in several internal documents. Some of these risks included a lack of proper certification, Integrated Systems' dearth of other contracts, and its relative inexperience in handling procurements. (Id. ¶ 247). In support of the selection, Fava cited Orbital's frustration with AFS's customer service and management capabilities. (Id. ¶ 249). Fava observed that although the Hydraulic System “does what it's supposed to do, ” the Antares rocket suffered problems on “almost every . . . launch.” (Doc. 178 ¶ 20). Fava explained that he valued Huber's customer service skills and appreciated his prior experience with Orbital and NASA. (Doc. 169 ¶ 249). Orbital confirmed its decision to award the contract to Integrated Systems upon receiving its best and final offer. (Id. ¶ 254). The parties agreed to a contract price of $2, 028, 966. (Id.)

         Integrated Systems began work on the contract and obtained the new cylinders in 2014. (See Id. ¶ 259). Thereafter, in a separate lawsuit, Orbital accused Huber and Integrated Systems of obtaining the cylinder contract by fraud and concealment. (See Id. ¶¶ 265-66). Brainard testified that Orbital would not have awarded the cylinder contract to Integrated Systems had it known Huber developed the bid using AFS's engineering files. (Id. ¶ 270).

         AFS eventually subpoenaed Dropbox for access to accounts that Huber opened using his personal and business email addresses. (Id. ¶ 272). Dropbox reported that an account associated with Huber's personal email address contained 29 gigabytes of data. (Id. ¶ 273). Counsel for Huber, Integrated Systems, and AFS agreed to the hiring of a forensic computing expert to examine the Dropbox account linked to Huber's personal email address. (Id. ¶ 274). The analysis revealed that an unknown Dropbox user had attempted to delete files in Huber's Dropbox after AFS served its subpoena. (Id. ¶ 275). Dropbox restored the files, after which the parties documented the account's contents. (Id. ¶¶ 276-77). The deleted files included, inter alia, AFS's schematic for the new gripper arms, Huber's letter to Orbital submitting the inflated gripper arms quote without AFS's permission, and his consulting contract with Livingston for the gripper arms work. (Id. ¶ 277).

         E. The ...


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