September 14, 2021

Sixth Circuit Offers Guidance to Distinguish Single Continuing Misappropriation Claim from Multiple Claims

Holland & Knight Trade Secrets Blog
Caitlin A. Eberhardt
Trade Secrets Blog

In B&P Littleford, LLC v. Prescott Mach., LLC, No. 20-1449, 2021 WL 3732313 (6th Cir. Aug. 24, 2021) (unpublished), the U.S. Court of Appeals for the Sixth Circuit recently provided guidance as to factors courts should consider in determining whether a party's misappropriation of trade secrets constitutes a single continuing claim or multiple claims. The court emphasized the importance of identifying the underlying confidential relationship that was damaged by the disclosure, including the timing and circumstances of the disclosure, as well as who made the disclosure and to whom. Id. at *6. Because the disclosures at issue were made at different times by different individuals, the court held that a reasonable jury could conclude there were two distinct claims of misappropriation. Id. *7.

Plaintiff B&P Littleford, LLC (B&P) is a manufacturing company that designs and builds industrial equipment, including vertical batch mixers. B&P claimed that technical drawings of its machines and parts kept for manufacture and repair purposes were trade secrets. Defendant Ray Miller was president and CEO of B&P until 2008, when he was terminated for suspicion of misconduct. Miller subsequently started his own company, defendant Prescott Machinery, LLC (Prescott), which serviced and repaired the same types of equipment as B&P. From approximately 2012 to 2015, B&P learned from several industry sources that Prescott had been using drawings that closely resembled B&P's.

In late 2017, the U.S. Navy awarded Prescott a contract to repair a vertical batch mixer used to mix rocket fuel. A vendor on the project received drawings of the mixer from Miller and Prescott, and provided copies to B&P. After reviewing the drawings, B&P concluded they were its own. B&P then filed a complaint against Miller and Prescott alleging misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA) and the Michigan Uniform Trade Secrets Act (MUTSA) in May 2018. The district court entered summary judgment against B&P on the ground that its claims were filed after the expiration of the DTSA and MUTSA's three-year statutes of limitations. Id. *4.

On appeal, the Sixth Circuit reversed and remanded, holding that further factual development was required to determine whether B&P's claims constituted a single continuing misappropriation or multiple misappropriations, which may have been timely filed. Id. *8. The appeals court began its analysis by reviewing the general principle that statutes of limitations begin to run from the initial misappropriation and continue through each act of misappropriation thereafter. Id. *5. However, the court qualified that misappropriation of one trade secret does not trigger the limitations period "for a claim based on the misappropriation of a different trade secret." Id. *6 (emphasis in original). The court explained that because the DTSA and MUTSA focus on "the relationship between the parties at the time the secret is disclosed," courts should distinguish between separate trade secrets by considering factors such as "whether the same relationship has been ruptured in the same way," i.e., "who made the disclosure, to whom the disclosure was made, and the nature, timing, and reasons for the disclosure." Id.

The court then noted that Miller had acquired some of B&P's drawings of the mixer between 2012 and 2015, but the drawings used for the 2018 Navy project had initially been acquired by a former B&P salesman who was later hired at Prescott. Id. *7. The court explained "[t]hat a different relationship was damaged supports the conclusion that under the relationship-based approach of the UTSA, the later acquisition and use gave rise to a new claim of misappropriation." Id. In light of these conclusions, the Sixth Circuit held that a reasonable jury could find that Prescott's use of B&P's drawings for the Navy mixer project in 2018 was a new misappropriation that fell within the three-year limitations period, distinct from the acts of misappropriation that occurred from 2012 to 2015. Id. Additionally, the court noted that even if further factual development only supported the existence of a single continuing claim, the record contained evidence that B&P performed a "reasonable but unsuccessful investigation" into Prescott's suspected misappropriation, which may have tolled the statute of limitations and rendered the claim timely. Id. *8.

The case reflects the often complex and fact-driven analysis of limitation periods in trade secret disputes.

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