AMERICAN GLASS MACHINERY, LLC v. OTT

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

AMERICAN GLASS MACHINERY, )

Plaintiff, )

) C.A. No. 23-275 Erie

Vv. )

)

RAY OTT and JOHN PAVALONIS ) District Judge Susan Paradise Baxter

d/b/a ARKAUM INDUSTRIES LLC, )

Defendants. )

MEMORANDUM OPINION

L INTRODUCTION .

A. Relevant Procedural History

Plaintiff American Glass Machinery (“AGM”) initiated this action by filing a complaint

against Defendants Ray Ott (“Ott”) and John Pavalonis (“Pavalonis”) d/b/a Arkaum Industries

LLC (“Arkaum”), pursuant to the Defend Trade Secrets Act, 18 U.S.C. §§ 1832, 1836 et seq.

(“DTSA”), and the Pennsylvania Uniform Trade Secrets Act, 12 P.S. § 5301, et seq.

(“Pa.UTSA”). The complaint contains three counts: Count I is a claim of misappropriation of

trade secrets under the FTSA; Count II is a claim of misappropriation of trade secrets under the

Pa.UTSA; and Count III is a claim of inevitable disclosure of confidential information and trade

secrets against Defendant Pavalonis only. As relief for its claims, Plaintiff seeks injunctive relief

and monetary damages.

On June 11, 2024, Defendant Pavalonis filed a pro se “Motion to Be Removed from the

Case” [ECF No. 24], which the Court liberally construes as a motion to dismiss under Rule

12(b)(6). Pavalonis contends that his role in the alleged misappropriation was minimal and

insufficient to support the claims against him. Defendant Ott filed his own motion to dismiss

under 12(b)(6) on July 22, 2024, arguing that Plaintiff's complaint is barred by the three-year

statute of limitations. [ECF No. 30]. Both motions been fully briefed by the parties. This matter

is now ripe for consideration.

B. Relevant Factual History

As pleaded, the factual timeline of events underlying this action have been presented

separately for each Defendant. For clarity and organizational efficiency—given the importance

of the sequence of events—this Court recapitulates the factual background in a linear manner.

AGM manufactures, sells, and services new and reconditioned glass processing

equipment. Its core business involves the proprietary design, production, and maintenance of

open- and closed-top flat glass washers. (ECF No. | at □□□ 10-11). In May 2019, Defendant Ott’s

son, Riley Ott (‘Riley’), began working for AGM. His primary role was converting hand-drawn

assembly diagrams into computer-aided design (“CAD”) files, which constituted AGM’s

proprietary information. Riley was aware of their confidential nature. (/d. at {J 22, 24).

In mid-June 2019, AGM assigned Riley to digitize its original hand-drawn assembly

drawings for an 84-inch vertical flat glass washer into CAD files. (Id. at § 31). He was also

responsible for drafting an operations manual for the washer, which incorporated AGM’s

proprietary wiring diagrams and other confidential technical specifications. Through these tasks,

Riley gained access to AGM’s trade secrets—including machine drawings, electrical schematics,

and parts lists—all clearly marked as confidential. (Id. at 4 31-32). Riley stored the CAD files

on both his personal laptop and AGM’s email system. (Id. at § 35). He further assisted AGM’s

shop foreman, Defendant Pavalonis, in assembling the physical washer using the digitized plans

he had created. (/d.). .

In May 2020, Riley recommended that AGM hire his associate, Jarrett Mosco (“Mosco”).

AGM's CEO, Vincent Sadlek (‘Sadlek'), accepted this recommendation and brought Mosco on

board. (Id. at § 29). Mosco's primary responsibility was assisting Riley with preparing CAD

drawings. (Id.). Two months later, in July 2020, Defendant Ott assumed the position of

“Manager of Marketing and Product Development” for Automated Glass Washing Machines at

Arkaum, a subsequently established business. (/d. at § 44),

On August 6, 2020, Mosco improperly emailed proprietary Tesla-related drawings to his

personal email. (/d. at § 40). Two days later, on August 8, 2020, Riley similarly transmitted

confidential AGM CAD files to his personal email. (/d. at { 36).

On August 11, 2020, Pennsylvania issued a Certificate of Organization for Arkaum,

listing Defendant Ott's residential address as its principal place of business. (/d. at 41).

According to the pleadings, Arkaum was formed to manufacture and sell glass panel washers

identical to AGM's proprietary design. (ECF No. 37 at p. 8). The company's initial members

were Riley and Mosco. (ECF No. | at § 42).

On August 16, 2020, a meeting occurred involving Riley, Mosco, Pavalonis, and Ott,

during which they detailed plans to develop Arkaum while working for AGM, without signaling

their intentions to AGM. Subsequently, on August 28, 2020, Riley and Mosco voluntary resigne

from AGM. (ECF No. | at { 48).

On September 9, 2020, the IRS issued Arkaum an Employer Identification Number (EIN

85-2928556). (Id. at ] 43). That same day, Riley notified Sadlek that neither he nor Mosco

wished to remain employed by AGM. (/d. at § 48). While Riley promised to return AGM’s

physical property, he asserted that he and Mosco retained ownership of certain original

OT

Arkaum was ultimately incorporated on August 11, 2020. ,

intellectual property. (Id.). It is believed that shortly after September 9, 2020, Riley prepared a

memorandum outlining his power to “halt [Sadlek]’s business” and distributed it to, at least,

Mosco and Ott. (ECF No. 1-2 at p. 26).”

On September 18, 2020, AGM terminated Pavalonis after learning he was performing

identical work for Arkaum. (Id. at § 69). Three days later, on September 21, Sadlek demanded in

writing that Riley and Mosco (1) return all AGM equipment and proprietary materials, and (2)

cease using such information for personal or third-party gain. (Id. at { 49), AGM subsequently

discovered that Riley and Mosco had emailed proprietary files to themselves on August 6 and

August 8, 2020, respectively. (Id. at { 50). It was also “after September 21, 2020” that Sadlek

uncovered meeting minutes reflecting the August 16, 2020 meeting among Riley, Ott, Pavalonis,

and Mosco. (/d. at § 77).

IL. DISCUSSION

A. Defendant Pavalonis

Pavalonis argues, in essence, that he is being brought into this matter for passively

attending a meeting. Specifically, he contends that he only ever attended one meeting, was never

hired or paid by Arkaum, and that the single meeting he attended spelled both the inception and

dissolution of Arkaum. Plaintiff contends that Pavalonis is liable under both the DISA and

PUTSA. (ECF No. 28 at p. 14).

To prevail on a claim for misappropriation of trade secrets under both the DTSA and the

PUTSA at the motion to dismiss stage, a plaintiff must plausibly plead “(1) the existence ofa

trade secret, (2) that the trade secret was protectible, and (3) that it was misappropriated by the

It appears that Riley and Mosco submitted their voluntary resignations on August 28, 2020 but continued to work fo

AGM thereafter. A “two-week notice” period would explain why Riley and Mosco continued to work with AGM

until approximately September 9, 2020. It is unclear whether this is definitively the case based on the pleadings.

defendant.” Elmagin Cap., LLC v. Chen, 2024 WL 2845535, at *2 (3d Cir. Mar. 21, 2024); See

also, Paragon Eng'g Servs., Inc. v. Providence Eng'g Corp., 2024 WL 5046719, at *7 (M.D. Pa.

Dec. 9, 2024) (claims under the DTSA and the PUTSA require the same elements).

1. Existence and Protectability of a Trade Secret

To plead the existence of a trade secret in a misappropriation claim brought under the

either the DTSA or PUTSA, a Plaintiff must sufficiently identify the information it claims as a

trade secret and allege facts supporting the assertion that the information is indeed protectable as

such. See, 18 U.S.C. §§ 1836(b), 1839(3). A trade secret is, by definition, “information that: (a)

the owner has taken reasonable means to keep secret; (b) derives independent economic value,

actual or potential, from being kept secret; (c) is not readily ascertainable by proper means; and

(d) others who cannot readily access it would obtain economic value from its disclosure or use.”

Teva Pharm. USA, Inc. v. Sandhu, 291 F. Supp. 3d 659, 675 (E.D. Pa. 2018). Courts have

analyzed whether information is a trade secret by evaluating the following six factors:

(1) existence of knowledge of the information outside of the business, (2) extent of knowledge o

the information within the business, (3) measures taken to protect the alleged secret, (4) the

information's value, (5) the amount of resources used in creating the information, and (6) the

difficulty of legitimately acquiring or duplicating the information. Garcia v. Vertical Screen,

Inc., 2020 WL 2615624, at *4 (E.D. Pa. May 20, 2020) (citing Bimbo Bakeries USA, Inc. v.

Botticella, 613 F.3d 102, 109 (3d Cir. 2010)). This Court will address each factor in turn, noting

that some overlap exists in evaluating each factor.

First, the proprietary information at issue—including electrical wiring diagrams, machine

drawing and schematics, original and CAD drawings, machine assembly drawings, operating

manuals, and customer lists—was maintained by AGM in password-protected systems and

disclosed only to employees on a “need to know” basis. (ECF No 1. at 18). Furthermore,

AGM engaged third parties using non-disclosure agreements (“NDA”) to protect its information,

and no facts or pleadings indicate that this information was ever made public or known outside

AGM’s operations. (See, Id. at { 19),

Second and third, AGM took active steps to protect its proprietary information, including

storing it in secure, password-protected systems and restricting access to a “need to know” basis.

(Id.), Additionally, AGM employed the use of NDAs, lock and key protection, and provided

notice to its employees with access to trade secret information by clearly marking information

and property as “confidential.” (See, e.g., Id. at § 38). These measures demonstrate affirmative

efforts to maintain secrecy beyond mere routine business practices, and demonstrate that the

information was likely unavailable outside of the business.

Fourth and fifth, the facts establish that AGM’s proprietary information provided a

competitive advantage, as evidenced by the alleged harm suffered when former employees used

the data in attempts to undercut AGM’s pricing and or sell the same product in a niche market.

(Id. at §§ 15, 82). Additionally, because AGM invested decades and significant resources into

developing its proprietary information, it is foreseeable that the information developed by AGM,

which cost substantial investment, may be costly and difficult to duplicate. (/d. at § 13).

Sixth, the information was not readily obtainable by competitors through public channels

or independent research. Duplicating AGM’s processes would require reverse-engineering or

improper access, given the security measures in place. AGM has alleged that, to facilitate the

trade misappropriation, not only did Arkaum attempt to hire Pavalonis and eventually planned to

hire Sadlek to create AGM’s own proprietary products, it also alleges that Ott—without

authorization—entered into AGM’s premises for the purpose of inspecting an unfinished washer

presumably to learn details of its functionality. (Id. at §§ 27, 59, 74).

Accordingly, each factor weighs in favor of trade secret protection. AGM’s information

was closely held, actively protected, economically valuable, costly to develop, difficult to

duplicate, and disclosed solely under confidentiality agreement or “need to know” basis. No facts

suggest the information was public or unprotected. Accordingly, the proprietary information

qualifies as trade secrets that were protectible at this stage.

2. Occurrence of Misappropriation

Misappropriation encompasses “disclosure or use of a trade secret” without consent,

including “relying on the trade secret to assist or accelerate research or development|.]” 18

U.S.C. § 1839(5)(B); 12 Pa. C.S. § 5302; Oakwood Lab'ys LLC v. Thanoo, 999 F.3d 892, 909

(3d Cir. 2021). In other words, to successfully bring a claim for trade secret misappropriation the

plaintiff must establish the disclosure of that secret in a confidential relationship. See, Moore v.

Kulicke & Soffa Indus., Inc., 318 F.3d 561, 565 n.2 (3d Cir. 2003). Assuming the veracity of

AGM's well-pleaded factual allegations, and construing all reasonable inferences that may be

drawn from them in favor of AGM, misappropriation has been adequately pled at this stage for

purposes of evaluating Pavalonis’ 12(b)(6) motion.

Here, the Plaintiff alleges that members of Arkaum conspired with Pavalonis to use

stolen trade secrets - specifically, AGM’s proprietary drawings for a vertical flat glass - to

unfairly compete against AGM in the glass washing machine market. (ECF No. 1 at § 82).

Plaintiff further claims that Pavalonis participated in a confidential meeting on August 16, 2020,

with Riley, Ott, and Mosco, where they discussed strategies for Arkaum, as a startup, to compete

with AGM in manufacturing and selling such machines. (/d. at { 81).

While these allegations lack precise detail about Pavalonis’ specific role in the alleged

scheme, or what the extent of his disclosure and communication might have been, they are

sufficient at the pleading stage to support a facially plausible claim that Pavalonis communicated

trade secrets, either as a conspirator or through discussion, in furtherance of Arkaum’s

development. Furthermore, it has also been plausibly alleged that by communicating the trade

secrets, which were confidential in nature and only provided to Pavalonis because of his

employment with AGM, Pavalonis also disclosed those trade secrets in violation of the

confidential relationship manifest between him and AGM. Thus, Defendant Pavalonis’s motion

will be denied and the claims against him will be allowed to proceed beyond the pleading stage.

B. Defendant Ott

1. Statute of Limitations — Standard of Review

A district court may dismiss a complaint on a Rule 12(b)(6) motion based on the time bar

of the statute of limitations only if it can determine (before the factual record is fully developed)

when the claim accrued and whether any tolling periods apply. See, Oshiver v. Leven, ishbein,

Sedran & Berman, 38 F.3d 1380, 1381 n. 1 (3d Cir.1994) (“While the language of Fed.R.Civ.P.

8(c) indicates that a statute of limitations defense cannot be used in the context of a 12(b)(6)

motion, an exception is made where the complaint facially shows noncompliance with the

limitations period and the affirmative defense clearly appears on the face of the pleading.”’)

A plaintiff must bring a claim under either the DTSA or the PUTSA no later than 3 years

after the date on which the misappropriation with respect to which the action would relate is

discovered or by the exercise of reasonable diligence should have been discovered. See, 18

US.C. § 1836; 12 Pa. C.S. § 5307. Both the DTSA and PUTSA explicitly incorporate the

discovery rule. Heraeus Med. GmbH y. Esschem, Inc., 927 F.3d 727, 734 (3d Cir. 2019) (“The

PUTSA explicitly incorporates the discovery rule”); Nasdaq Inc. v. Miami Int'l Holdings, Inc.,

2023 WL 4740753, at *8 (D.N.J. July 25, 2023) (“the DTSA...explicitly incorporates [the]

discovery rule”). Thus, until such time as Plaintiff discovered, or reasonably should have

discovered, the cause of action, the running of the statute is tolled. See, Beauty Time, Inc. v. VU

Skin Sys., Inc., 118 F.3d 140, 144 d Cir. 1997).

2. Statute of Limitations - Analysis

Here, Plaintiff's complaint was filed on September 25, 2023. Thus, in order to comply

with the applicable statute of limitations, Plaintiff's actual or constructive discovery of

Defendant Ott’s alleged misappropriation of trade secrets must have occurred on or after □

September 25, 2020. In this regard, Plaintiff alleges that Ott engaged in a conspiracy with Riley

and Mosco to misappropriate AGM’s trade secrets—including proprietary CAD files and

technical specifications—for the benefit of Arkaum in the weeks leading up to his August 2020

resignation. (ECF No. 1| at § 47). However, according to the complaint, AGM discovered this

scheme “only after September 21, 2020,” when it discovered meeting minutes from an August

16, 2020 discussion involving Ott, Riley, Mosco, and Pavalonis, as well as a memorandum on

Riley’s work computer describing the power to “halt [Sadlek]’s business.” (Id. at §§ 77, 79; ECF

No. 1-2 at p. 26). Thus, the precise date on which Plaintiff knew or should have known of the

alleged misappropriation is not clear from the face of the complaint, because the discovery of the

relevant meeting minutes and memorandum could have occurred on or after September 25,

2020.7

Defendant Ott’s argument that AGM should have been aware of the alleged misappropriation no later than

September 18, 2020, when AGM terminated Pavalonis for working for Arkaum in the same role he held at AGM, is

not at all clear from the face of the complaint. Instead, such a conclusion can only be arrived at by extrapolation,

which is not appropriate at the pleading stage. ;

Accordingly, Defendant Ott’s motion to dismiss Plaintiff's claims against him as

untimely will be denied, without prejudice to his right to raise the statute of limitations defense,

if appropriate, after further development of the factual record through a period of limited

discovery.

An appropriate Order follows.

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