Loftness Specialized Farm Equip., Inc. v. Twiestmeyer

A breach of a non-disclosure agreement alone formed the basis of an action even though the information protected by the non-disclosure agreement would not otherwise be entitled to trade secret protection.

Opinion (Gruender): Loftness Specialized Farm Equipment, Inc. ("Plaintiff") manufactures farm equipment. Twiestmeyer & Associates ("Defendant") marketed and sold grain bagging equipment for plaintiff. In 2007, defendant approached plaintiff with a new grain bag loader design idea. Defendant had been working with Argentinean manufactured grain bag loaders, and had developed ideas relating both to improved loader designs and the potential market for American manufactured loaders. Prior to meeting with defendant, plaintiff signed a non-disclosure agreement with defendant promising to not disclose any of the confidential information they received from defendant to any third party and to not use the confidential information in competition with defendant for a period of 20 years. The meetings between defendant and plaintiff eventually produced an agreement to go forward with grain bag loader production under which defendant would receive an override payment of 2% over plaintiff's net sales for a period of two years. Plaintiff subsequently entered into an agreement with Brandt Agricultural Products. Plaintiff continued to pay defendant all monies owed under their deal. However, in 2011, plaintiff informed defendant that they would cease payments under the expired agreement. Plaintiff further sought a declaratory judgment stating that they had fulfilled their duties under both the override payment agreement and the non-disclosure agreement. Relying on a trade secret misappropriation test, the district court granted plaintiff's declaratory judgment. Defendant appealed. On appeal, the court noted that the district court granted the declaratory judgment in favor of plaintiff because the court concluded that the information transferred from defendant to plaintiff was in the form of a trade secret and that, because defendant did not take steps to protect the information, they were not entitled to recover for trade secret misappropriation against plaintiff. However, as the circuit court pointed out, defendant’s claim against plaintiff was premised on breach of the non-disclosure agreement, not on trade secret misappropriation. Because breach of a non-disclosure agreement is distinct, under Minnesota law, from trade secret misappropriation, the court VACATED the lower court judgment and REMANDED for further proceedings.