The opinion
UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF OKLAHOMA
GWACS ARMORY, LLC, )
)
Plaintiff, )
)
v. ) Case No. 20-CV-0341-CVE-CDL
) BASE FILE
KE ARMS, LLC, RUSSELL ) Consolidated with:
PHAGAN, SINISTRAL SHOOTING ) Case No. 21-CV-0107-CVE-JFJ
TECHNOLOGIES, INC., )
BROWNELLS, INC., and )
SHAWN NEALON, )
)
Defendants, )
)
and )
)
KE ARMS, LLC, )
)
Plaintiff, )
)
v. )
)
GWACS ARMORY, LLC, GWACS )
DEFENSE INCORPORATED, )
JUD GUDGEL, RUSSELL ANDERSON, )
DOES I through X, and ROE )
CORPORATIONS I through X, )
)
Defendants. )
OPINION AND ORDER
Now before the Court are the following motions: Plaintiff’s Motion for Reconsider[ation of]
Partial Granting of Summary Judgment (Dkt. # 198); Plaintiff GWACS Armory, LLC’s Motion in
Limine (Dkt. # 205); Defendant KE Arms, LLC’s Motion to Exclude Evidence Regarding Investor
Packets (Dkt. # 207); Defendant KE Arms, LLC’s Motion to Exclude Evidence Regarding the CAV-
15 MKI and MKII Designs (Dkt. # 208); and Defendant KE Arms, LLC’s Motion to Exclude Expert
Testimony of Brian Haygood (Dkt. # 209). Plaintiff GWACS Armory, LLC (GWACS) asks the
Court to reconsider its summary judgment ruling to the extent that the Court found that design of the
MKI and MKII receivers were not trade secrets under state and federal law. Dkt. # 198. KE Arms,
LLC (KEA) responds that GWACS has not provided any new evidence or identified an intervening
change in the law, and there is no basis for the Court to reconsider its summary judgment ruling.1
Dkt. # 201. GWACS and KEA have filed motions in limine asking the Court to exclude evidence
at trial. Dkt. ## 205, 207, 208, 209. The parties are advised that motions in limine are not the
appropriate forum for the Court to resolve disputed issues of fact, and the evidentiary issues raised
by the parties must be capable of resolution based on undisputed facts in order for the Court to rule
on the admissibility of evidence before trial.
I.
This case arose out of a dispute between KEA and GWACS concerning the design,
manufacture, and distribution of a part for the AR-15 rifle known as the lower receiver.2 GWACS
claims that it purchased the exclusive rights to designs and equipment for the manufacture of a lower
receiver, identified as the CAV-15, from Sinistral Shooting Technologies (SST), which had
previously purchased the same items from Cavalry Arms Corporation (Cavalry). SST was owned
1 KEA argues that reconsideration would be appropriate only if the Court were to grant
summary judgment in favor of KEA on all claims. However, KEA has not filed a motion to
reconsider and requests for reconsideration are disfavored. The Court declines KEA’s
invitation to reconsider its summary judgment ruling.
2 The Court will provide a brief summary of the factual background based on the summary
judgment record and the Court’s opinion and order (Dkt. # 191). This is not intended to be
a complete recitation of the relevant factual background contained in the Court’s prior
opinion and order, and is provided merely to provide context for the motions currently
pending before the Court.
2
by Russell Phagan, and Cavalry was owned by Shawn Nealon. Phagan later worked as a sales
representative for GWACS, and he subsequently worked for KEA while it was marketing a lower
receiver known at the KE-15. In June 2015, KEA and GWACS entered a non-disclosure agreement
(NDA) for the purpose of evaluating a potential business relationship, but KEA denies that it
received any proprietary information from GWACS pursuant to the NDA. In particular, KEA denies
that it received an investor packet with information about GWACS’ financial condition. Dkt. # 207,
at 2.
GWACS claims that KEA used confidential or proprietary information disclosed pursuant
to the NDA to develop a competing product, and GWACS accuses KEA of violating the NDA. On
April 7, 2020, GWACS sent a cease and desist letter to KEA, alleging that KEA was attempting to
develop a competing product that infringed on GWACS’s intellectual property rights. Dkt. # 122,
at 15. GWACS claimed that it shared information with KEA pursuant to an NDA, and GWACS
demanded that KEA cease from manufacturing or distributing a lower receiver that bore a likeness
to GWACS’ products. Id. The parties were unable to resolve their dispute and GWACS filed this
case alleging claims against KEA, Phagan, Nealon, SST, and Brownells, Inc. KEA filed its own
lawsuit against GWACS in the United States District Court for the District of Arizona, but that case
was transferred to this Court and consolidated with the case filed by GWACS.
The parties filed numerous pretrial motions, including motions to dismiss, discovery motions,
and motions for summary judgment. On February 23, 2023, the Court entered an opinion and order
(Dkt. # 191) granting the motions for summary judgment filed by Brownells, SST, and Phagan, and
GWACS agreed to dismiss its claims against Nealon with prejudice. The Court granted in part and
denied in part KEA’s and GWACS motions for summary judgment, but the number of claims and
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counterclaims proceeding to trial was substantially limited. GWACS’ claims of breach of contract
and misappropriation of trade secrets remain pending for trial, but only as to models of its lower
receiver that were not generally available to the public. Dkt. # 191, at 25. The Court also found that
information about GWACS’ financial status could qualify as a trade secret because this evidence
may not have been known to the public, and the evidence tended to show that GWACS was not in
a position to distribute or manufacture any of its products. Id. at 23. KEA’s only remaining
counterclaim is one for declaratory relief, and KEA seeks a declaratory judgment that it did not
violate the terms of the parties’ NDA. Id. at 40.
II.
GWACS asks the Court to reconsider the summary judgment ruling to the extent that the
Court found that design of the MKI and MKII receivers were not trade secrets, and GWACS
suggests that the Court “may need clarification regarding certain CAV-15 design features that were
not publicly disclosed . . . .” Dkt. # 198, at 2. GWACS argues that it had a production model of the
MKII that was sold to the general public, but the design of the MKII disclosed to KEA was based
on a design that differed from the production model. Id. at 3. KEA responds that GWACS has not
identified any new evidence or an intervening change in the law, and there is no reason for the Court
to reconsider its summary judgment ruling. Dkt. # 201, at 10.
In the Court’s prior opinion and order (Dkt. # 191), the Court reviewed the evidence to
determine what information disclosed to KEA by GWACS could qualify as a trade secret under state
and federal law. The Court considered the various contracts by which information was sold, and the
measures taken by GWACS to maintain secrecy of the information it acquired from SST. Dkt. #
191, at 17-24. The Court noted that the asset purchase agreement between SST and GWACS stated
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that GWACS was purchasing “intellectual property,” but SST did not claim to have any patents,
copyrights, or other legally protected rights to the items being sold. Id. at 19. GWACS claimed that
it provided information to KEA pursuant to an NDA, and GWACS argued that much of the
information provided to KEA pursuant to the NDA qualified as a “trade secret” under state and
federal law. Id. at 22. GWACS took the position that it was “undisputed” that KEA used
information provided under the NDA to develop a new product, even though this is one of the key
issues in dispute in this litigation. Dkt. # 121, at 11; Dkt. # 143, at 5; Dkt. # 144, at 10-11. KEA
responded to this argument by producing evidence that GWACS provided photographs, information,
and design specifications to customers seeking to modify MKI and MKII receivers, and KEA argued
that GWACS generally failed to maintain secrecy of information related to all of its lower polymer
receivers. Dkt. # 191, at 23. The Court agreed that the MKI and MKII receivers could not be
considered “trade secrets” due to GWACS’ failure to maintain secrecy of the design, composition,
and features of these products. Id. These products were available to the general public and were not
protected by a patent, and anyone was free to obtain the MKI and MKII receivers and reverse
engineer the product. Id. However, the MKIII and MKIV receivers were not available to the general
public, information about these products may have been disclosed to KEA pursuant to an NDA, and
there was a genuine dispute as to whether the MKIII and MKIV were trade secrets.
Under Federal Rule of Civil Procedure 59(e), a party may ask a district court to reconsider
a final ruling or judgment when the district court has “misapprehended the facts, a party’s position,
or the controlling law.” Barber ex rel. Barber v. Colo. Dep’t of Revenue, 562 F.3d 1222, 1228 (10th
Cir. 2009). “Grounds warranting a motion to reconsider include (1) an intervening change in the
controlling law, (2) new evidence previously unavailable, and (3) the need to correct clear error or
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prevent manifest injustice.” Servants of Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).
Reconsideration is “not available to allow a party to reargue an issue previously addressed by the
court when the reargument merely advances new arguments or supporting facts which were available
for presentation at the time of the original argument.” FDIC v. United Pac. Ins. Co., 152 F.3d 1266,
1272 (10th Cir. 1998) (quoting Cashner v. Freedom Stores, Inc., 98 F.3d 572, 577 (10th Cir. 1996)).
“A Rule 59(e) motion to reconsider is designed to permit relief in extraordinary circumstances and
not to offer a second bite at the proverbial apple.” Syntroleum Corp. v. Fletcher Int’l, Ltd., 2009 WL
761322 (N.D. Okla. Mar. 19, 2009).
The Court has reviewed GWACS’ motion and finds no basis to reconsider its prior ruling.
GWACS argues that the Court failed to consider that there were differences between the production
models of the MKI and MKII receivers and the designs that were disclosed to KEA pursuant to the
NDA. However, GWACS did not clearly raise this argument in its motion for summary judgment
or any other filing and, instead, GWACS chose to argue that it was “undisputed” that KEA
misappropriated the designs disclosed pursuant to the NDA. GWACS did not clearly distinguish
in its summary judgment filings between the production model of the MKII and the design disclosed
to KEA, even though KEA argued that GWACS failed to maintain secrecy of the design of the MKI
and MKII receivers. The Court relied on the parties to frame the arguments for consideration when
it reviewed the voluminous summary judgment record, and the Court issued a 41 page opinion and
order (Dkt. # 191) considering the arguments raised by the parties. GWACS chose to assert an
argument that it was undisputed that KEA used GWACS’ proprietary information to develop a
competing product, and KEA responded by producing evidence showing that GWACS failed to
maintain secrecy of the designs of the MKI and MKII receivers. The Court rejected GWACS’
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argument and found that GWACS freely shared information and design specifications of the MKI
and MKII receivers with customers. Dkt. # 191, at 22-23. The Court considered the arguments
actually asserted by GWACS and rejected those arguments, and GWACS may not assert new
arguments in the guise of “clarification” after it has had an opportunity to review the Court’s
summary judgment ruling. GWACS’ motion (Dkt. # 198) for partial reconsideration of the summary
judgment ruling is denied.
III.
KEA has filed three motions in limine (Dkt. ## 207, 208, 209) seeking to exclude evidence
at trial. KEA asks the Court to exclude the expert testimony of Brian Haygood, an expert retained
by GWACS to testify about similarities between CAV-15 MKI and MKII receivers and the KP-15
receiver later sold by KEA. Dkt. # 209. KEA argues that evidence concerning the MKI and MKII
receivers is wholly irrelevant in light of the Court’s summary judgment ruling. Dkt. # 208. KEA
also argues that it did not receive an investor packet under the proper channels required by the
parties’ NDA, and KEA asks the Court to exclude all evidence relating to the investor packets.
Dkt. # 207. GWACS asks the Court to exclude testimony of one of its investors, Reed
Oppenheimer, concerning his opinion about AR-15 rifles and GWACS’ use of Oppenheimer’s
investment to fund this lawsuit. Dkt. # 205, at 6-9. GWACS also argues that it is irrelevant that it
permitted one of its federal firearms licenses (FFL) to lapse and, in a similar argument, GWACS also
asserts that it is not relevant that it failed to file necessary documents to remain in good standing with
the Oklahoma Secretary of State in 2014 and 2019. Id. at 10-12.
“The purpose of a motion in limine is to aid the trial process by enabling the Court ‘to rule
in advance of trial on the relevance of certain forecasted evidence, as to issues that are definitively
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set for trial, without lengthy argument at, or interruption of, the trial.’” Mendelsohn v. Sprint/United
Management Co., 587 F. Supp. 2d 1210, 1208 (D. Kan. 2008). However, a court is almost always
better situated to make evidentiary rulings during trial, and a court may defer an in limine ruling
unless the party seeking to exclude evidence shows that the evidence is inadmissible on all potential
grounds. Wright v. BNSF Railway Co., 2016 WL 1611595, *1 (N.D. Okla. Apr. 22, 2016).
Defendant removed this case to federal court based on diversity jurisdiction, and the admissibility
of evidence is generally governed by federal law. Blanke v. Alexander, 152 F.3d 1224, 1231 (10th
Cir. 1998). State law concerning the admissibility of evidence will be considered only if the issue
involves a “substantive” state rule of evidence, such as the collateral source rule or the parol
evidence rule. Id. The parties are advised that all ruling on the motions in limine are preliminary,
but the Court will refrain from offering an in limine ruling if the issue raised by the parties’ requires
the Court to resolve disputed factual issues.
Exclusion of MK I and MK II Designs and Opinions of Brian Haygood (Dkt. ## 208, 209)
KEA argues that evidence concerning the design of the MKI and MKII receivers is irrelevant
in light of the Court’s summary judgment ruling, and KEA asks the Court to exclude evidence
relating only to the design of the MKI and MKII receivers. Dkt. # 208, at 2-3. KEA argues that
evidence related solely to the design of the MKI and MKII receivers would be unfairly prejudicial
to KEA and would be offered merely to confuse the jury. Id. at 4. KEA also seeks to exclude the
expert testimony of Brian Haygood, a firearms expert retained by GWACS, who intends to opine that
the KP-15 produced by KEA was “based heavily” on the design files for the MKII, and he further
intends to testify that KEA misused “intellectual property” owned by GWACS. Dkt. # 209-1, at 11.
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The Court previously granted summary judgment in favor of KEA on GWACS’
misappropriation of trade secrets and breach of contract claims as to the MKI and MKII models of
GWACS’ lower receiver. Dkt. # 191, at 22-23, 28. However, the Court determined that there was
a genuine dispute as to whether KEA learned of the design and features of the MKIII and MKIV
models through information that was disclosed pursuant to an NDA. GWACS retained Haywood
to offer expert testimony supporting its assertion that KEA essentially copied the MKII for the design
of its KP-15 receiver. Dkt. # 209-1, at 2-11. GWACS maintains that evidence concerning the design
of the MKI and MKII receivers was obtained improperly by KEA, because KEA could have obtained
the designs only be means of Phagan’s knowledge of the designs or through materials disclosed
pursuant to an NDA. Dkt. # 211, at 3. GWACS claims that it is relevant to its remaining claims that
KEA allegedly copied the design of the MKII for its own KP-15 receiver, because this makes it more
likely that KEA was attempting to replicate the MKIII and it rebuts KEA’s assertion that it developed
the KP-15 “from scratch.” Id. GWACS also claims that it goes to the “honesty and credibility” of
KEA if GWACS can prove that KEA is lying about whether it relied on the design of the MKII to
develop its own product. Id. For the same reasons, GWACS argues that Haywood’s expert
testimony should be admissible to show that KEA copied the design of the MKII for its own product.
Id. at 9.
The Court finds that KEA’s motion in limine (Dkt. # 208) to wholly exclude evidence
concerning the MKI and MKII receivers should be denied to the extent it is overly broad, but the
Court rejects the arguments raised by GWACS for the admissibility of the design, manufacture, and
features of the MKI and MKII receivers. Information concerning the design and manufacture of the
MKI and MKII receivers may be relevant as background information, particularly to distinguish
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those products from the MKIII and MKIV models and to highlight features that tend to show that
designs of the MKIII and MKIV are trade secrets. However, it is clear that GWACS does not intend
to offer this evidence merely as background information, and GWACS seeks to use the evidence to
cast KEA as a bad actor that illegally obtained the designs of the MKII receiver and copied the
design for its own product. Those arguments are foreclosed by the summary judgment ruling, and
GWACS appears to be searching for a way to work around the Court’s finding that the designs of
the MKI and MKII receivers are not trade secrets. It is not relevant to any issue in this case whether
the design of the KP-15 was in whole or in part based on the design of the MKII, because GWACS
previously failed to meet its burden to show that it maintained secrecy of this information. Dkt. #
191, at 22-23. KEA has not established that evidence concerning the MKI and MKII receivers will
be wholly irrelevant to any issue that could arise at trial, but GWACS is cautioned that it will not be
permitted to imply that KEA engaged in illegal or improper conduct if it relied on the design of the
MKI or MKII for its KP-15 receiver. The motion (Dkt. # 208) is granted in part and denied in part.
Based on this limitation, the Court finds that Haygood’s expert testimony will likely be
irrelevant at trial, and KEA’s motion to exclude Haygood’s testimony is preliminarily granted in part.
The primary purpose of Haygood’s testimony is to show that KEA illegally copied the design of the
MKII to develop its own KP-15 receiver and, for the reasons stated above, this evidence is not likely
to be relevant to any issue that may arise at trial. However, the Court finds that it would be
premature to wholly exclude Haygood’s testimony, because his expert report (Dkt. # 209-1) contains
a discussion concerning general features of lower receivers that be relevant as background
information. Therefore, KEA’s motion (Dkt. # 209) to exclude Haygood’s testimony is granted in
part and denied in part.
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Exclusion of GWACS’ Investor Packets (Dkt. # 207)
KEA argues that GWACS never disclosed an investor packet containing proprietary
information or trade secrets to KEA pursuant to an NDA, and the investor packets are irrelevant to
GWACS’ claims. Dkt. # 207, at 6-7. KEA asserts that the NDA required that any proprietary
information be disclosed to KEA’s authorized representative, Mike Kenney, but Kenney denies that
he received an investor packet from GWACS. Id. at 7. KEA also disputes that the investor packets
contained “proprietary information,” because the allegedly proprietary information was already
known to KEA. GWACS disputes KEA’s contention that GWACS failed to provide investor
packets to Kenney, and GWACS cites evidence suggesting that Kenney recalls reviewing the 2015
investor packet. Dkt. # 210, at 3-4. GWACS also claims that KEA was not properly in possession
of the same information contained in the investor packets, and the information was considered
proprietary under the NDA. Id. at 5-6.
The parties have presented conflicting evidence as to whether Kenney received the investor
packets pursuant to an NDA, and the Court will not resolve disputed factual issues when ruling on
a motion in limine. The parties have also offered conflicting evidence concerning whether the
information in the investor packets was already known to KEA before it allegedly received an
investor packet, and GWACS argues that there is evidence suggesting that KEA improperly received
information contained in the investment packets from Phagan. Dkt. # 210, at 5. KEA’s request to
exclude the investor packets is not appropriate for an in limine ruling, because the motion is based
on contested factual issues that must be resolved by the jury. The motion is denied.
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Oppenheimer’s Statements Concerning AR-15 (Dkt. # 205)
GWACS asks the Court to exclude the opinions of Oppenheimer, a GWACS investor, that
he does not like the AR-15 rifle and that he loaned money to GWACS to fund this lawsuit. Dkt. #
205, at 6. The parties are advised that the opinions of Oppenheimer or any other witness as to their
personal opinions about the AR-15 rifle are not relevant, and the parties should not elicit such
testimony from any witness. It is also not relevant that Oppenheimer loaned money to GWACS to
fund this lawsuit. However, GWACS’ ability to produce and manufacture the lower receivers at
issue in this case is highly relevant, and KEA has come forward with evidence that GWACS lacks
the necessary funding for production of its CAV-15 receivers. The parties have provided portions
of Oppenheimer’s deposition testimony, and he clearly states that he will not invest in GWACS for
further development of products related to the AR-15. GWACS contends that the lack of funding
to manufacture its product does not detract from the value of its trade secrets, but KEA has a
legitimate argument that GWACS should not be able to recover damages for lost profits if it could
not actually produce and market its products. The Court finds that Oppenheimer’s or any other
witness’ opinions about the AR-15 rifle should be excluded at trial, but KEA may offer testimony
that Oppenheimer declined further investment in GWACS’s business. The motion is granted in part
and denied in part as to this issue.
Status of GWACS’s Federal Firearms License and
Oklahoma Business Registration (Dkt. # 205)
GWACS argues that KEA should not be permitted to offer evidence that GWACS’ federal
firearms license lapsed or that GWACS failed to maintain current registration with the Oklahoma
Secretary of State. Dkt. # 205, at 10-12. GWACS does not dispute that one of its federal firearms
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licenses lapsed in June 2020, and KEA has also produced evidence showing that GWACS allowed
one of its three federal firearms licenses to lapse in 2017. Dkt. # 205, at 10; Dkt. # 212-2, at 9.
GWACS also does not dispute that it failed to file annual certificates and pay fees to the Oklahoma
Secretary of State for operating a business in the state of Oklahoma, and GWACS’ status was listed
as “terminated” for approximately three years due to two separate failures to remain in good standing
with the Oklahoma Secretary of State. Dkt. # 205, at 11. GWACS argues that its federal firearm
license lapsed in 2020 due to a clerical error on its part, and its claims that status as a terminated
business with the Oklahoma Secretary of State did not impair the validity of its contractual
agreements with any person or entity. Id. at 10-12. GWACS may explain to the jury how its federal
firearms licenses lapsed or why it chose not to comply with the requirements of the Oklahoma
Secretary of State to legally operate a business in Oklahoma, but KEA has a valid argument that
these facts are relevant to GWACS’ demand for damages. GWACS has not shown that this evidence
will be inadmissible and, even if the evidence is prejudicial to GWACS, it is not unfairly prejudicial.
The motion is denied as to this issue.
IT IS THEREFORE ORDERED that Plaintiff’s Motion for Reconsider[ation of] Partial
Granting of Summary Judgment (Dkt. # 198) and Defendant KE Arms, LLC’s Motion to Exclude
Evidence Regarding Investor Packets (Dkt. # 207) are denied.
IT IS FURTHER ORDERED that Plaintiff GWACS Armory, LLC’s Motion in Limine
(Dkt. # 205) is granted in part and denied in part: the motion is granted as to witness opinions
about the AR-15 rifle and Oppenheimer’s funding of this lawsuit, but the motion is denied in all
other respects.
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IT IS FURTHER ORDERED that Defendant KE Arms, LLC’s Motion to Exclude
Evidence Regarding the CAV-15 MKI and MKII Designs (Dkt. # 208) and Defendant KE Arms,
LLC’s Motion to Exclude Expert Testimony of Brian Haygood (Dkt. # 209) are granted in part and
denied in part: evidence testimony concerning the MKI and MKII designs may be admissible as
factual background, but this evidence is not admissible for the purpose of showing that KEA engaged
in unlawful or improper conduct.
IT IS FURTHER ORDERED that the parties shall file a joint status report concerning trial
deadlines and the scheduling of a settlement conference no later than November 7, 2023.
DATED this 24th day of October, 2023.
Cerin ¥ bafpl—
CLAIRE V.EAGAN \—
UNITED STATES DISTRICT JUDGE
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