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Brass Metal Products, Inc. v. E-J Enterprises, Inc. et al. , No. 1580, Sept. Term 2008. HEADNOTE: CONVERSION; INTELLECTUAL PROPERTY; CUSTOM AND USAGE; TORTIOUS INTERFERENCE WIT H CONTRACT; CIVIL CONSPIRACY; INJURIOUS FALSEHOOD; INTENTIONAL MISREPRESENTATION; NON-DISCLOSURE; CONFIDENTIAL RELATIONSHIPS; CONSTRUCTIVE FRAUD. To establish a claim for conversion, the plaintiff must first demonstrate that he or she had a property interest in property that was allegedly converted. Where E-J Enterprises ordered and paid for aluminum railings to store for Brass Metal until Brass Metal requested delivery, E-J Enterprises owned the railings until it sold them to Brass Metal. When E-J Enterprises sold the railings to another company, it may have violated the business agreement between the parties, but its actions did not constitute conversion. The claim that E-J Enterprises converted Brass Metal's interest in the designs of the aluminum railings asserts intangible property rights. Conversion claims for intangible property rights are limited to situations where the intangible property rights are merged into a document that has been transferred. Where no such showing was made, the conversion claim failed. Brass Metal alleged that, based on custom and usage, E-J Enterprises converted the unpatented design of its railings. Brass Metal cites no case holding that custom and usage in an industry can create property rights that give rise to a conversion claim. Even if custom and usage could create property rights, Brass Metal failed to present sufficient evidence to establish that there was a uniform, definite, and well-established custom in the aluminum extrusion industry that a person who creates a die possesses a property right in the shapes created from the die. Brass Metal failed to produce sufficient evidence to create a jury question regarding whether a confidential relationship existed between the parties, such that E-J Enterprises had a duty to disclose its business dealings with Brass Metal's competitor. Where two businesses are engaged in an "arms-length" transaction to further their own separate business objectives, a confidential relationship does not exist. E-J Enterprises did not exercise the type of dominion and influence over Brass Metal that would establish a confidential relationship.

REPORTED IN THE COURT OF SPECIAL APPEALS OF MARYLAND

No. 1580

September Term, 2008

BRASS METAL PRODUCTS, INC.

v.

E-J ENTERPRISES, INC. ET AL.

Hollander, Graeff, Kenney, James A. III (Retired, Specially Assigned), JJ.

Opinion by Graeff, J.

Filed: November 30, 2009

This appeal arises from a dispute between appellant, Brass Metal Products, Inc. ("Brass Metal"), and appellees, E-J Enterprises, Inc. ("E-J Enterprises") and its President, Eric Johnson. E-J Enterprises, a wholesale metal distributor, entered into an agreement with Brass Metal to provide "just-in-time" inventory services, which entailed purchasing aluminum railings directly from aluminum extrusion mills, storing these railings, and selling them to Brass Metal as needed. The railings were designed by Brass Metal's owner and President, James Burger, but Mr. Burger did not patent his railing designs. In April 2006, E-J Enterprises sold railings that were being held for Brass Metal to another company, Parthenon Installations ("Parthenon"). Thomas Martin, a Brass Metal salesman, owned a majority interest in Parthenon. In July 2006, when Mr. Burger discovered that Parthenon had established a manufacturing facility that was a "duplicate" of his facility, Mr. Burger fired Mr. Martin. Mr. Burger then requested that E-J Enterprises stop selling railings based on Mr. Burger's design to Parthenon. E-J Enterprises declined M r. Burger's request. In October 2006, Brass Metal filed a complaint in the Circuit Court for Howard County against E-J Enterprises, Mr. Johnson, Parthenon, Mr. Martin, and

Anastasios Pantoulis, part-owner of Parthenon, requesting injunctive relief and damages. Prior to trial, Brass Metal settled with Parthenon, Mr. Martin, and Mr. Pantoulis, and they were dismissed from the case. Trial proceeded against E-J Enterprises and Mr. Johnson. On August 22, 2008, after six days of trial, at the close of Brass Metal's case, the circuit court granted appellees' motion for judgment.

Brass Metal appealed. It presents five questions for our review, which we have reorganized and rephrased: 1. Did the circuit court err in granting appellees' motion for judgment on Count I, conversion? Did the circuit court err in granting judgment on count II, tortious interference with contract, on the ground that there was insufficient evidence to present to the jury regarding damages or the existence of contracts with third parties? Did the circuit court err in granting appellees' motion for judgment on counts IV, V, VII, VIII, and IX, which asserted claims for injurious falsehood, civil conspiracy, false representations, non-disclosure or concealment, and constructive fraud and misrepresentation? Did the circuit court err in precluding Brass Metal from using the term "trade secret" in front of the jury and in finding that the Maryland Uniform Trade Secret Act ("MUTSA") preempted a common law claim for misappropriation of trade secrets? Did the court err in excluding from evidence: (1) two depositions; and (2) a non-disclosure agreement between Mr. Martin and Mr. Burger?

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For the reasons set forth below, we shall affirm the judgment of the circuit court. FACTUAL AND PROCEDURAL BACKGROUND Brass Metal is a manufacturer and distributor of aluminum railing products. Mr. Burger, President of Brass Metal, testified that he designed several aluminum railings for his company to sell. The railing system had interchangeable caps, which were named the Jersey Cap, the Senate Cap, the Waverly Cap, the Snap Cap, the Top Rail Cap, the Winchester Cap, the Maryland Cap, and the Slimline Cap, and each had a different shape and design. No patent was obtained for the designs of these aluminum railings. There was -2-

testimony that the shapes of at least some of these railings were similar to others in the aluminum industry. Brass Metal purchased its aluminum railings from four different mills: Tifton; Loxcreen; Bonnell; and Pennex. The mills created Mr. Burger's aluminum railings using an extrusion process. Brass Metal described this process as making "a shape by forcing the metal through a die or mold to give the railing its specific design." 1 A die is a tool or device "for imparting a desired shape, form, or finish to a material." W EBSTER' S T HIRD N EW INTERNATIONAL D ICTIONARY, U NABRIDGED 628 (2002). Mr. Burger testified that, per his agreements with the mills, Brass Metal was the only company that was allowed to "run the material" from his dies, and "if [he] wanted anybody else to have access to that material, [he] would have to give written permission . . . to allow [the mills] to take materials of those d[ies] and shapes." 2 Once a die was created, the mill retained possession of the die. Mr. Burger testified that he chose these mills because he received assurances that his "designs were going to be protected, and the designs and profiles were not going to be copied or distributed anywhere else."

Extrusion is the "[o]peration of forcing copper, aluminum, magnesium, their alloys or plastics at the optimum temperature through a die to manufacture specific shapes such as rods, tubes, and various hollow or solid sections." S CIENCE & T ECHNOLOGY E NCYCLOPEDIA 194 (Univ. of Chicago Press ed. 2000). Mr. Burger testified that five of his designs appeared in Loxcreen's catalog, but Loxcreen was prohibited from selling his designs "in the Delmarva area," Brass Metal's "primary area of manufacturing and distribution." In exchange, Loxcreen gave Mr. Burger "credit against more profiles being generated to offset the cost." -32

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In 1999, Mr. Martin contacted Mr. Burger to discuss the possibility of purchasing Brass Metal and operating the business. Mr. Burger was concerned that Mr. Martin lacked the money to purchase the business and the necessary experience in the industry. Mr. Burger and Mr. Martin agreed that Mr. Burger would train Mr. Martin, which he did for approximately a year and a half, during which time Mr. Martin was not paid. In March or April 2001, Mr. Burger formally hired Mr. Martin as a salesperson for Brass Metal. Mr. Burger initially paid Mr. Martin through his company, Thomas Martin & Associates, $5,000 per month. This was subsequently increased in 2002 to $8,000 per month. Brass Metal did not provide Mr. Martin with any employment benefits. During the time that Mr. Martin worked for Brass Metal, he also worked for three other companies. In 2001, Mr. Martin's son-in-law, Mr. Pantoulis, created Parthenon Installations, a company that provided installation services for Brass Metal's clients. Because Brass Metal did not provide installation services, Brass Metal would direct customers who requested installation services to Parthenon or one of the other two companies that performed installation work for Brass Metal. The companies that provided installation services for Brass Metal would install the railings and, once the companies received payment from the customer, they would pay Brass Metal for the railings. If a customer wanted to purchase the railings without installation services, it would purchase the railings directly from Brass Metal.

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Mr. Burger had been purchasing general materials for the railings from E-J Enterprises beginning in 1986 or 1987. In 2002, E-J Enterprises and Brass Metal agreed that E-J Enterprises would provide "just-in-time" inventory services for Brass Metal. E-J Enterprises became the exclusive supplier for Brass Metal's products, which involved ordering Brass Metal's products from various mills, stockpiling the railings, and supplying the material to Brass Metal as needed. Pursuant to this agreement, Brass Metal was required to pay E-J Enterprises for the inventory within 30 days of delivery to Brass Metal. Mr. Burger sent letters to Bonnell, Loxcreen, and Pennex authorizing these mills to sell E-J Enterprises' railings based on the dies created for Mr. Burger's designs.3 Mr. Burger testified that he advised E-J Enterprises that he would "buy all the dies that [E-J Enterprises] would need for [his] usage so [he] could keep control." In 2003, Mr. Martin and Mr. Pantoulis met with Mr. Burger to revisit the issue of purchasing Brass Metal. Mr. Burger did not agree to sell the business to Mr. Martin. In 2004, Mr. Martin purchased a 60 percent interest in Parthenon. Mr. Martin did not advise M r. Burger that he purchased a controlling interest in this company. In 2005, Mr. Martin visited E-J Enterprises' offices and advised Mr. Johnson that "he was planning to build a manufacturing facility to manufacture railing," and "he would like for EJ to do for his company what they did for Brass Metal Products." Mr. Johnson testified

The letter to Pennex authorized Pennex to sell E-J Enterprises railings made from the die "titled `Basic Snap Rail" and "1.650 Snap Cover" "at whatever pricing Pennex and E-J have agreed upon without further contact or confirmation from [Brass Metal]." -5-

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that, initially, he declined Mr. Martin's offer, and he instructed his wife, who was E-J's contact with Brass Metal, to advise Mr. Burger about Mr. Martin's proposal. In March 2006, Mr. Johnson reconsidered his earlier decision and decided to supply Parthenon with aluminum railings. Mr. Martin provided E-J Enterprises with drawings for the railings. E-J Enterprises determined that, once Parthenon paid for the rights to a die that was identical to that used to make the designs sold by Brass Metal, E-J Enterprises could immediately sell the identical railings in its inventory to Parthenon, as long as it could supply Brass Metal with the inventory it needed. E-J Enterprises provided an invoice to Parthenon, which included a "die service charge." After Parthenon paid the invoice, in April 2006, E-J Enterprises began to supply Parthenon with railings from its inventory. In July 2006, Mr. Burger required that Parthenon purchase railings on a cash on delivery basis. Parthenon was not paying Brass Metal for the materials it installed in 30 days, as agreed. Rather, it was waiting to pay until 120 to 150 days after completing the work. After Parthenon was "put on a COD" status, it did not purchase any more railings from Brass Metal. That same month, Mr. Burger learned that Mr. Martin and Parthenon had set up a "separate operation" to manufacture railings. Mr. Burger went to the address, and he discovered a "duplicate of [his] operation," which he described as six people "cutting, punching, welding . . . and powder coating, and all . . . [his] shapes were sitting there on the

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racks." After he discovered this facility, Mr. Burger terminated Mr. Martin's employment as a salesman with Brass Metal. Mr. Burger called Mr. Johnson to learn "how Tom had gotten my materials." Mr. Johnson advised Mr. Burger that he had sold Parthenon the materials. Mrs. Johnson subsequently asked if she and her husband could go to dinner with Mr. Burger and his wife to talk about the situation. On July 21, 2006, Mr. Burger and his wife met for dinner with Mr. and Mrs. Johnson to discuss the business relationship between Brass Metal and E-J Enterprises. Mr. Burger was upset that E-J Enterprises was supplying Mr. Martin's company with what he believed to be his railings, based on the shapes designed by him. He asked Mr. Johnson to stop selling aluminum railings to M r. Martin, but Mr. Johnson refused. In a letter dated August 30, 2006, Mr. Burger advised Pennex that it "revoke[d] the right" of E-J Enterprises to "order material" from his dies. Mr. Burger further advised that "[d]uplication of these shapes by E-J or anyone else would constitute infringement of our proprietary products." Mr. Burger similarly advised Pennex that E-J Enterprises was no longer permitted to purchase material based on M r. Burger's designs. On October 19, 2006, Brass Metal filed a complaint in the Circuit Court for Howard County against E-J Enterprises, Parthenon, Mr. Martin, Mr. Johnson, and Mr. Pantoulis.

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Brass Metal alleged the following claims: (1) breach of employment contract/obligation; (2) civil conspiracy; (3) breach of employment obligation; and (4) injunctive relief.4 On January 23, 2007, Brass Metal filed a first amended complaint, which did not reference the initial complaint. 5 Count I alleged that the defendants converted Brass Metal's "trade secrets, confidential information, unique dies, Product, customers and contracts[.]" Count II alleged that the defendants "deliberately interfered with/or converted several contracts of Plaintiff, including a lucrative NV Homes contract, for their sole benefit and to cause injury to Plaintiff . . . ." Count III alleged that the defendants "interfered with the economic relationships" of Brass Metal "by both interfering with contracts" and "by working with suppliers and extruders, wrongfully using Plaintiff's trade secrets, confidential information, dies, designs and business acronym (ACRS) to deceive said entities into believing that Architectural Columns and Rails Systems (ACRS), owned by Defendant Parthenon, was in fact Advanced Columns and Rails Systems (ACRS)." 6 Count IV alleged that the defendants engaged in "injurious falsehood" when they "falsely represented to customers, suppliers and extruders" that Brass Metal's "proprietary dies, designs and railings

There was a separate lawsuit involving Brass Metal and E-J Enterprises in Anne Arundel County, which settled prior to trial in this case. We note that "an amended complaint complete in itself, without reference to the complaint that preceded it, replaces an earlier complaint in its entirety, and the earlier complaint is regarded as withdrawn or abandoned." Priddy v. Jones, 81 Md. App. 164, 169 (1989), cert. denied, 319 Md. 72 (1990). Brass Metal conducts business under its trade name, Advanced Columns and Rails Systems ("ACRS"). -86 5

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. . . were properly available to Defendants for sale[.]" Count V alleged that the defendants engaged in a civil conspiracy to interfere with and convert Brass Metal's property, which involved "deceiving customers and suppliers regarding the ownership of trade secrets, confidential information, dies, Product and contracts . . . ." Count VI alleged that the defendants knowingly made "false representations" with the intent "that Plaintiff would act in reliance on said false representations[.]" Count VII alleged that the defendants made false representations and "intentionally created in the mind of customers, suppliers and extruders untrue and misleading material facts," which included "the representation [that] the Defendants were rightfully entitled to trade secrets, confidential information, dies, designs, products, acronym, and contracts which belonged to Plaintiff." Count VIII alleged that the defendants "deceived Plaintiff by intentionally concealing and/or not disclosing to Plaintiff" that the defendants "were planning to use Plaintiff's trade secrets, confidential information, proprietary dies, designs, acronym and Product to compete with Plaintiff and to wrongfully convert his contracts and customers for their own benefit[.]" Count IX alleged that the defendants engaged in constructive fraud when they "breached a legal and/or equitable duty owned to Plaintiff to avoid converting Plaintiff's property and customers fraudulently[.]" Count X requested an injunction because "Defendants continue to illegally use his trade secrets, confidential information, designs, Product and proprietary dies in their business." Count XI alleged that Mr. Martin breached his employment contract when he converted Brass Metal's "contracts and customers for his own benefit." Count XII alleged that

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Mr. Martin breached a fiduciary duty that he owed to Brass Metal when he "stole the Product and Product Methodology of Plaintiff in order to compete against Plaintiff." Brass Metal requested, among other things, $500,000 in compensatory damages, $1,500,000 in punitive damages, and an injunction against the defendants. Brass Metal filed subsequent amended complaints, but both parties assert that the first amended complaint "is the operative complaint" on appeal. 7 On February 8, 2007, Mr. Johnson and E-J Enterprises filed a motion to dismiss Brass Metal's first amended complaint. The court denied this motion. On March 23, 2007, after a hearing, Brass Metal voluntarily dismissed count VI, "overt, false representations," from the first amended complaint. On January 17, 2008, Brass Metal dismissed Parthenon, Mr. Martin, and Mr. Pantoulis as parties to the lawsuit. On February 21, 2008, E-J Enterprises and Mr. Johnson filed cross-

Plaintiff filed an original complaint and five amended complaints. The second amended complaint alleged claims against Parthenon, Mr. Martin, and Mr. Panatoulis. Brass Metal subsequently settled with these defendants. On October 1, 2007, Brass Metal filed a third amended complaint against E-J Enterprises and Mr. Johnson, alleging additional counts for breach of contract, unjust enrichment, quantum meruit, and fraud. Prior to trial, Brass Metal voluntarily dismissed the claims pled in the third amended complaint. On July 1, 2008, Brass Metal filed a fourth amended complaint, asserting, among other things, that Mr. Johnson "continues to be an individual Defendant in this lawsuit[.]" Brass Metal also amended its "prayer for relief," requesting, among other things, that E-J and Mr. Johnson, in his individual capacity, be held liable, jointly and severally, for $2,200,000 in compensatory damages, $2,000,000 in punitive damages, and injunctive relief. On July 25, 2008, Brass Metal filed a fifth amended complaint amending its "prayer for relief" to incorporate the original and amended complaints. The court dismissed this amended complaint on the ground that it was not filed timely. -10-

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claims against Parthenon, Mr. Martin, and Mr. Pantoulis, alleging claims for indemnification and contribution. Parthenon, Mr. Martin, and M r. Pantoulis filed a motion to strike the crossclaims, arguing that they were not filed within 30 days of E-J Enterprises' answer and that "the Dismissed Defendants have been prejudiced by the Remaining Defendants' failure to assert their cross-claim[s] until after they had reached a settlement with the Plaintiff." The court granted the motion to strike the cross-claims. On June 11, 2008, E-J Enterprises filed a motion for summary judgment. The court expressed doubt whether Brass Metal's evidence ultimately would persuade the jury, but it granted summary judgment only on counts eleven and twelve, which alleged claims solely against Mr. Martin. The court denied the motion on the other counts. On August 8, 2008, appellees filed a motion in limine , requesting that Brass Metal be prohibited from arguing that appellees violated trade secrets laws: Brass Metal Products has stated in discovery that it intends to argue at trial that E-J Enterprises violated the Maryland Uniform Trade Secrets Act [MUTSA][8] and or common law trade secrets laws. However, Brass Metal Products has never alleged a claim against E-J Enterprises under [MUTSA] or common law trade secrets laws. The First Amended Complaint, the operative Complaint in this case, clearly does not allege a cause of action under [MUTSA] or common law trade secrets law. . . . Any attempt by Brass Metal Products to argue such claims at trial in this case would unduly prejudice E-J Enterprises, because such claims have not been pled, and would simply serve to confuse the jury as to the claims alleged and in dispute. Therefore, Brass Metal Products must be prohibited from arguing any claims or causes of action under [MUTSA] or common law trade secrets at trial . . . .

The Maryland Uniform Trade Secrets Act is set forth at Md. Code (2005 Repl. Vol.),

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