ILNews

Appeals court: Civil RICO claims not preempted

Jennifer Nelson
January 1, 2008
Keywords
Back to TopCommentsE-mailPrintBookmark and Share
The Indiana Uniform Trade Secrets Act does not preempt a civil Racketeer Influenced and Corrupt Organizations claim, the Indiana Court of Appeals ruled today.

In an issue of first impression, the court was asked to decide in AGS Capital Corp., Inc., et al. v. Product Action International, LLC, No. 49A02-0702-CV-176, whether civil provisions for treble damages based on certain criminal acts are covered by the Indiana Uniform Trade Secrets Act (IUTSA).

AGS Capital Corp., which owned Fast Tek Group and Superior Metal Technologies, was a direct competitor with Product Action International, which is in the business of quality control and most of whose customers are automotive industry manufacturers and suppliers. In order to gain an economic edge over Product Action, AGS owners Alan Symons and Scott Weaver decided to hire for Fast Tek employees of Product Action in order to gain access to confidential information in how Product Action operated. The company hired Anthony Roark and Chan Chanthaphone away from Product Action, and the two brought along confidential information regarding Product Action's systems, methods, and customer information. The company also had the secretary of Superior Metal contact Product Action to get a price quote sent to the company; Fast Tek used that information to set its prices.

Fast Tek copied the Product Action documents and replaced Product Action's name with their own.

Product Action filed a verified complaint for preliminary injunction, permanent injunction, and damages against AGS, Fast Tek, Superior Metal, Symons, Weaver, Roark, and Chanthaphone in May 2006. Product Action hired a consultant in computer forensics to perform discovery on Fast Tek's computers. The discovery returned numerous documents showing Fast Tek converted Product Action's documents to say "Fast Tek."

The trial court ruled Fast Tek and AGS are alter egos, making AGS liable for Fast Tek's actions; the defendants violated the IUTSA, which entitled Product Action to injunctive relief; and Product Action proved the defendants violated Indiana's civil RICO statute. The preliminary injunction ordered AGS, Symons, Weaver, Fast Tek, Roark, Chanthaphone, and all the company's agents and employees from contacting or soliciting new business from certain entities for two years, and they are all enjoined from participating in the business of Fast Tek in any form for a year. The injunction also ordered the computer consultant to expunge any information from the computers that was taken from Product Action. Product Action was required to post a $2,000 bond.

AGS appealed, arguing several issues, including the IUTSA preempts Product Action's claims under the state's RICO statute, the preliminary injunction was overbroad, and the bond posted by Product Action was unreasonably low.

The Indiana Court of Appeals ruled civil RICO actions are not preempted under the IUTSA. Indiana's RICO statute allows for a civil remedy for criminal activity. The IUTSA preemption provision refers to areas of law as a whole as opposed to the national Uniform Trade Secrets Act, which deals in terms of remedies provided. Because of this, the IUTSA preemption provision exempts criminal law and its concomitant criminal remedies, Judge L. Mark Bailey wrote. The court believes permitting a RICO claim along with an IUTSA claim provides for greater protection for the integrity of Indiana businesses.

"Because the RICO statute was designed to address the more sinister forms of corruption and criminal activity, the preemption provision of IUTSA should not prohibit RICO from fulfilling its purpose where the form of corruption involves the systematic acquisition of economically valuable information through the artifice of competitors' employees in order to gain an unlawful economic advantage in the marketplace," Judge Bailey wrote.

The appellate court also affirmed most of the trial court's earlier ruling, including the preliminary injunction and amount of bond posted, except for the barring of participation of AGS and its employees in the business of Fast Tek for one year and the length of time AGS may not solicit customers or business from entities listed in Product Action's Exhibit A in the preliminary injunction hearing. The provision goes far beyond what is reasonably necessary to protect Product Action's interests, he wrote. The court concluded prohibiting the participation of AGS, Symons, and Weaver in the operation of Fast Tek for a year is overbroad.

The court also remanded the trial court to revise its two-year ban on contacting customers to be effective until there is a final adjudication on the merits.

The Court of Appeals also overturned the grant of attorney's fees to Product Action because there is no judgment or settlement by the parties yet and the prevailing party is yet to be determined.

In a separate opinion, Judge Nancy Vaidik concurred in part and dissented in part regarding the majority's conclusions regarding the duration of the preliminary injunction and whether the bond is unreasonably low.

Judge Vaidik wrote no one argued that the injunction should be made longer regarding how long AGS can't contact certain companies, so she believes the two years imposed by the trial court isn't unreasonable.

Also, she wrote the $2,000 bond is unreasonably low and was an abuse of discretion by the trial court. She would remand for a new determination of an appropriate preliminary injunction bond.
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Oh my lordy Therapist Oniha of the winexbackspell@gmail.com I GOT Briggs BACK. Im so excited, It only took 2days for him to come home. bless divinity and bless god. i must be dreaming as i never thoughts he would be back to me after all this time. I am so much shock and just cant believe my eyes. thank you thank you thank you from the bottom of my heart,he always kiss and hug me now at all times,am so happy my heart is back to me with your help Therapist Oniha.

  2. Hail to our Constitutional Law Expert in the Executive Office! “What you’re not paying attention to is the fact that I just took an action to change the law,” Obama said.

  3. What is this, the Ind Supreme Court thinking that there is a separation of powers and limited enumerated powers as delegated by a dusty old document? Such eighteen century thinking, so rare and unwanted by the elites in this modern age. Dictate to us, dictate over us, the massess are chanting! George Soros agrees. Time to change with times Ind Supreme Court, says all President Snows. Rule by executive decree is the new black.

  4. I made the same argument before a commission of the Indiana Supreme Court and then to the fedeal district and federal appellate courts. Fell flat. So very glad to read that some judges still beleive that evidentiary foundations matter.

  5. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

ADVERTISEMENT