Thursday, April 4, 2019

U.S. Court of Appeals for the Eight Circuit, CMI Roadbuilding, Inc. v. Iowa Parts, Inc., Docket No. 18-1075


Trade Secrets
Defend Trade Secrets Act of 2016 (DTSA), 18 U.S.C. § 1836
Iowa Trade Secrets Law, Iowa Uniform Trade Secrets Act (UTSA), Iowa Code § 550
Statute of Limitations
Discovery Rule
Conversion ("Civil Equivalent" to Theft)
Unjust Enrichment
In Equity v. at Law
Equitable Claim
Iowa Law


Statutory Causes of Action

The DTSA creates a private right of action for an owner of a trade secret when that secret has been misappropriated, if the secret relates to a product used in interstate commerce. 18 U.S.C. § 1836. Trade secrets include, as relevant here, "scientific, technical . . . engineering information, including patterns, plans, . . . designs." Id. § 1839(3). However such information only qualifies as a trade secret if the owner has "taken reasonable measures to keep such information secret" and the information has economic value. Id. § 1839(3). "Misappropriation" essentially means to acquire the trade secret of another by improper means and without the owner's consent. Id. § 1839(5)-(6). The UTSA is similar and both statutes have a three-year statute of limitations for bringing a claim for trade secret misappropriation. See 18 U.S.C. § 1836(d); Iowa Code § 550.8.

The discovery rule tolls the statute of limitations until such time as the injured person knows or in the exercise of reasonable care should know, the fact and cause of the injury. Woodroffe v. Hasenclever, 540 N.W.2d 45, 47 (Iowa 1995). The rule extends when the plaintiff "first becomes aware of facts that would prompt a reasonably prudent person to begin seeking information as to the problem and its cause." Estate of Montag v. T H Agric. & Nutrition Co., 509 N.W.2d 469, 470 (Iowa 1993). The ultimate focus is whether the plaintiff was aware a problem existed. Franzen v. Deere & Co., 377 N.W.2d 660, 662 (Iowa 1985). Once a plaintiff is on inquiry notice, he is charged with knowledge that a reasonably diligent investigation would have disclosed, and has a duty to do such an investigation, regardless of the plaintiff's exact knowledge. Woodroffe, 540 N.W.2d at 48-49. The plaintiff need only know a problem exists. Id. While this can be an issue for the factfinder, it is not always so. See, e.g., Shams v. Hassan, 905 N.W.2d 158, 163 (Iowa 2017) (holding that this inquiry can be one for the factfinder "unless the issue is so clear it can be resolved as a matter of law"). While Iowa Parts has the burden of proving the statute of limitations bars the action, CMI Roadbuilding has the burden of proving the discovery rule tolls application of the statutory bar. John Q. Hammons Hotels, Inc. v. Acorn Window Sys., Inc., 394 F.3d 607, 610 (8th Cir. 2005).
(…) Application of the inquiry notice portion of the discovery rule. As stated above, the ultimate focus is whether the plaintiff was aware a problem existed. Franzen, 377 N.W.2d at 662.
(…) At the point it was on notice there was a possible problem, it had a duty to investigate, regardless of its exact knowledge. Woodroffe, 540 N.W.2d at 48-49.


Unjust Enrichment
Equitable Claim

Even if the unjust enrichment claim was not time-barred, which it likely was, see Iowa Code § 614.1(4), Iowa Parts was entitled to summary judgment because an equitable claim fails when there is an adequate remedy at law. Where a party seeks damages pursuant to both a statutory and an equitable claim, the very existence of the statutory claims bars recovery on the equitable claim, "even if recovery under the statutes is time-barred." United States v. Bame, 721 F.3d 1025, 1031 (8th Cir. 2013).
(…) Indeed, Iowa law recognizes that "equity generally will not provide relief where an adequate remedy at law existed and defendant was denied that relief for appropriate legal reasons." Mosebach v. Blythe, 282 N.W.2d 755, 761 (Iowa Ct. App. 1979). See also State ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 154 n.2 (Iowa 2001) ("The adequacy of a legal remedy is a general limitation on the exercise of equity jurisdiction . . . .").


(U.S. Court of Appeals for the Eight Circuit, April 4, 2019, CMI Roadbuilding, Inc. v. Iowa Parts, Inc., Docket No. 18-1075)

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