Cemen Tech, Inc., An Iowa Corporation Vs. Three D Industries, L.l.c., An Iowa Limited Liability Company, Dean Longnecker, Daniel E. Jones, Bradley J. Luhrs, James Yelton, Scott Longnecker, Mark Dorman, Daniel Pothast, And David Enos

IN THE SUPREME COURT OF IOWA

No. 96 /03–1869

Filed May 2, 2008

CEMEN TECH, INC., an Iowa Corporation,

Appellant,

vs.

THREE D INDUSTRIES, L.L.C., an Iowa Limited Liability Company,

DEAN LONGNECKER, DANIEL E. JONES, BRADLEY J. LUHRS,

JAMES YELTON, SCOTT LONGNECKER, MARK DORMAN, DANIEL

POTHAST, and DAVID ENOS,

Appellees.

Appeal from the Iowa District Court for Warren County, John D.

Lloyd, Judge.

Plaintiff appeals from summary judgment against it in its suit

against former employees and others engaged in production of machine

competing with plaintiff’s. AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED.

William B. Serangeli and CeCelia Ibson Wagner of Smith,

Schneider, Stiles & Serangeli, P.C., Des Moines, for appellant.

F. Richard Lyford and Joan M. Fletcher of Dickinson, Mackaman,

Tyler & Hagen, P.C., Des Moines, for appellees Three D Industries,

L.L.C., Dean Longnecker, Daniel E. Jones, Scott Longnecker, James

Yelton, Mark Dorman, Daniel Pothast, and David Enos.

John P. Roehrick and Curtis J. Krull, Des Moines, for appellee

Bradley J. Luhrs.

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LARSON, Justice.

When the defendants in this case began to manufacture a cement

mixer similar to one manufactured by Cemen Tech (CTI), CTI sued them,

alleging breach of contract, misappropriation of trade secrets, unfair

competition, and breach of fiduciary duty. The district court granted the

defendants’ motion for summary judgment on virtually all of the

plaintiff’s claims, and the plaintiff appealed. We affirm in part, reverse in

part, and remand for further proceedings.

I. Facts and Prior Proceedings.

CTI is a manufacturer of mobile volumetric concrete mixers—

machines designed to mix concrete components at job sites. Defendants

Dean Longnecker and David Enos, through their business, Three D

Company, L.L.C., were interested in purchasing CTI and, on October 25,

1999, sent a letter of intent to CTI requesting information regarding the

business. After a number of letters of intent and nondisclosure and

confidentiality agreements, CTI provided Longnecker and Enos with

business information, including organizational charts; employee

handbooks; a strategic plan; and information on customer deposits,

assets, accounts payable, accounts receivable, financial statements, and

lists of customers and suppliers.

By the spring of 2001, it became clear that Longnecker and Enos

were not going to purchase CTI. On June 5, 2001, CTI terminated

Three D Company, L.L.C.’s latest letter of intent. Discussions continued,

however, between the parties regarding the possible purchase of a

portion of CTI’s business—its “sludge” division. On September 6, 2001,

Longnecker and Enos, through an entity they called “Clarke Industries,

L.L.C.,” submitted a letter of intent to CTI to purchase the sludge

division. CTI apparently ignored it.

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In July 2001 Brad Luhrs, an employee of CTI, contacted

Longnecker about the possibility of leaving CTI and going to work with

Longnecker and Enos to start their own mobile mixer business. By the

end of 2001, Dan Jones, Brad Luhrs, Mark Dorman, Dan Pothast, and

Scott Longnecker resigned from CTI and began working for Three D

Industries developing mobile volumetric concrete mixers in direct

competition with CTI.

In January 2002 the defendants exhibited a prototype cement

mixer at the World of Concrete show closely resembling CTI’s mixer. CTI

sued Three D Industries, L.L.C. and eight individual defendants for

breach of contract, misappropriation of trade secrets, unfair competition,

breach of fiduciary duty, and tortious interference with contract.

Defendants Dean Longnecker and Scott Longnecker filed defamation

counterclaims against CTI. All defendants moved for summary judgment

on CTI’s claims. The district court granted the defendants’ motion for

summary judgment in part and denied it in part, and CTI appealed.

Dean Longnecker and Scott Longnecker dismissed their defamation

counterclaim without prejudice. CTI dismissed, without prejudice, all of

its claims remaining after the district court’s ruling on the defendants’

summary judgment motion. The issues remaining before this court are

those raised by CTI in its appeal from the district court’s summary

judgment ruling.

II. Standard of Review.

Review of a ruling on a motion for summary judgment is for

correction of errors at law. Iowa R. App. P. 6.4; Clinkscales v. Nelson

Sec., Inc., 697 N.W.2d 836, 840–41 (Iowa 2005). Summary judgment is

proper only if “the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show that there is

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no genuine issue as to any material fact and that the moving party is

entitled to a judgment as a matter of law.” Iowa R. Civ. P. 1.981(3). A

question of fact exists “if reasonable minds can differ on how the issue

should be resolved.” Walker v. Gribble, 689 N.W.2d 104, 108 (Iowa

2004). In reviewing the district court’s ruling, the evidence presented

must be viewed in the “light most favorable to the party opposing the

motion for summary judgment.” Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d

637, 641 (Iowa 2000); Gen. Car & Truck Leasing Sys., Inc. v. Lane &

Waterman, 557 N.W.2d 274, 276 (Iowa 1996). However, the opposing

party “may not rest upon the mere allegations of his pleading but must

set forth specific facts showing the existence of a genuine issue for trial.”

Hlubek v. Pelecky, 701 N.W.2d 93, 95 (Iowa 2005); see also Iowa R. Civ.

P. 1.981(5). Speculation is insufficient to create a genuine issue of

material fact. Hlubek, 701 N.W.2d at 96.

III. The Contract Claims.

In count I of CTI’s petition, it alleged that Dean Longnecker and

Enos breached a contractual nondisclosure agreement dated October 25,

1999, which provided that any information disclosed in the course of the

negotiation process would be used solely to evaluate the possible

purchase of CTI and would remain confidential. The district court

concluded as a matter of law that the October 25, 1999 nondisclosure

agreement had been superseded by a January 6, 2000 confidentiality

agreement, and we agree. The January 6, 2000 agreement stated: “This

Agreement comprises the entire agreement and supersedes all prior

understandings and representations (oral or written) between the parties

concerning the subject matter of this Agreement.” In fact, Gary Ruble,

president of CTI, stated it was his understanding that the January 6,

2000 confidentiality agreement had superseded the October 25, 1999

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nondisclosure agreement. The district court properly entered summary

judgment on this count.

In count II, CTI contends that Dean Longnecker, Enos, and

Three D Industries breached a letter of intent dated January 15, 2001.

The district court concluded that Enos had not signed the agreement and

that Longnecker signed only in a representative capacity (on behalf of

Three D Company, L.L.C.). Further, Three D Industries, L.L.C., the entity

sued by CTI, was not a party to the agreement.

We agree with the district court that Enos cannot be held liable for

breach of the January 15, 2001 letter of intent because he did not sign it.

While Longnecker signed this letter of intent, he did so as a

representative of Three D Company, L.L.C. and not in his individual

capacity. Of course, “[c]entral to corporate law is the concept a

corporation is an entity separate from its owners.” Briggs Transp. Co. v.

Starr Sales Co., 262 N.W.2d 805, 809 (Iowa 1978). Because Longnecker

entered into the letter of intent only as a representative of Three D

Company, L.L.C., he cannot be held personally liable for any breach

committed by the corporation.

Finally, the January 15, 2001 letter of intent was signed by

Longnecker as a representative of Three D Company, L.L.C. However,

CTI did not bring this breach-of-contract claim against Three D

Company, L.L.C.; rather, it brought it against Three D Industries, L.L.C.

It is true, as CTI points out, that Longnecker and Enos created a number

of corporations at different times, referring to them as Three D Holding

Company, Three D Industries, L.L.C., Three D Company, and Three D

Industries. While that complicates the facts of this case, it does not

change our analysis of this issue. Three D Company, L.L.C. and Three D

Industries, L.L.C. were created as separate and distinct entities and must

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be treated as such. Just as individuals cannot be held liable on a

contract to which they were not parties, neither can a corporation. The

district court appropriately granted Three D Industries’ motion for

summary judgment on count II of the petition.

Alternatively, CTI argues we can “pierce the corporal veil” to hold

Longnecker and Enos individually liable on the letter of intent because

any corporations named were merely their alter egos. The requirements

for doing so, however, are substantial:

The burden is on the party seeking to pierce the

corporate veil to show the exceptional circumstances

required. Factors that would support such a finding include

(1) the corporation is undercapitalized; (2) it lacks separate

books; (3) its finances are not kept separate from individual

finances, or individual obligations are paid by the

corporation; (4) the corporation is used to promote fraud or

illegality; (5) corporate formalities are not followed; and (6)

the corporation is a mere sham.

In re Marriage of Ballstaedt, 606 N.W.2d 345, 349 (Iowa 2000) (citations

omitted). CTI showed no evidence to generate a genuine issue of fact to

support its piercing-the-veil argument. We affirm the district court’s

grant of summary judgment on the plaintiff’s breach-of-contract claims.

IV. The Claim of Misappropriation of Trade Secrets.

The principal issue in this case is whether CTI generated a genuine

issue of material fact on its claim that the defendants misappropriated

CTI’s trade secrets, including information regarding the construction of

its machines and general information about their manufacture and sale.

CTI contends that Three D, Dean Longnecker, Enos, five former CTI

employees, and James Yelton (a former CTI customer) wrongfully

obtained CTI’s trade secrets and used them to form a competing

business.

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A. Legal Principles. Iowa Code chapter 550 (2001) is Iowa’s

version of the Uniform Trade Secrets Act. This chapter provides that the

owner of a trade secret may enjoin an actual or threatened

misappropriation of a trade secret or may request monetary damages for

such misappropriation. Iowa Code §§ 550.3(1), 550.4(1). A trade secret

is defined as

information, including but not limited to a formula, pattern,

compilation, program, device, method, technique, or process

that is both of the following:

a. Derives independent economic value, actual or

potential, from not being generally known to, and not being

readily ascertainable by proper means by a person able to

obtain economic value from its disclosure or use.

b. Is the subject of efforts that are reasonable under

the circumstances to maintain its secrecy.

Iowa Code § 550.2(4).

The Restatement (Third) of Unfair Competition (1995) [hereinafter

Restatement] is intended to be consistent with the Uniform Trade Secrets

Act, such as our Code chapter 550, and we rely on it here. See

Restatement § 39 cmt. d. The Restatement provides what we consider to

be the appropriate scope of Iowa Code section 550.2(4):

A trade secret can consist of a formula, pattern, compilation

of data, computer program, device, method, technique,

process, or other form or embodiment of economically

valuable information. A trade secret can relate to technical

matters such as the composition or design of a product, a

method of manufacture, or the know-how necessary to

perform a particular operation or service. A trade secret can

also relate to other aspects of business operations such as

pricing and marketing techniques or the identity and

requirements of customers.

Id.

Factors to consider when determining if information is a trade

secret include:

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“(1) the extent to which the information is known outside of

[the] business; (2) the extent to which it is known by

employees and others involved in [the] business; (3) the

extent of measures taken . . . to guard the secrecy of the

information; (4) the value of the information [to the business

and its competitors]; (5) the amount of effort or money

expended . . . in developing the information; (6) the ease or

difficulty with which the information could be properly

acquired or duplicated by others.”

Kendall/Hunt Pub’g Co. v. Rowe, 424 N.W.2d 235, 246 (Iowa 1988)

(quoting Basic Chems., Inc. v. Benson, 251 N.W.2d 220, 226 (Iowa 1977)

(a common-law case predating Iowa Code chapter 550)).

The value of the information for which protection is sought must

be substantial.

A trade secret must be of sufficient value in the operation of

a business or other enterprise to provide an actual or

potential economic advantage over others who do not

possess the information. The advantage, however, need not

be great. It is sufficient if the secret provides an advantage

that is more than trivial. Although a trade secret can consist

of a patentable invention, there is no requirement that the

trade secret meet the standard of inventiveness applicable

under federal patent law.

Restatement § 39 cmt. e.

A trade secret need not be in writing; any secret acquired through

an employee’s job may be the subject of trade-secret protection. Sperry

Rand Corp. v. Rothlein, 241 F. Supp. 549, 563 (D.C. Conn. 1964) (“[I]t

does not matter whether a copy of a Sperry drawing came out in a

defendant’s hand or in his head. His duty of fidelity to his employer

remains the same.”); accord Ed Nowogroski Ins., Inc. v. Rucker, 971 P.2d

936, 940 (Wash. 1999). During employment, an employee may acquire

two classes of information. First, an employee may obtain information of

a general nature simply by being on the job. An employer would have no

reasonable expectation that such information would be treated as a trade

secret. An employee is free to use or disclose this type of general

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information. The second class of information is that which the employer

intends to keep secret by, for example, physically hiding it from view or,

as CTI claims here, by requiring confidentiality. While the first class of

information is not entitled to trade-secret protection, the second class

may be entitled to it. Compare Restatement § 42 cmt. b (trade secrets),

with id. § 42 cmt. d (general information).

Whether an employee is subject to a covenant not to compete is

not determinative of whether the information gathered through

employment constitutes a trade secret.

As a general rule, an employee who has not signed an

agreement not to compete is free, upon leaving employment,

to engage in competitive employment. In so doing, the

former employee may freely use general knowledge, skills,

and experience acquired under his or her former employer.

However, the former employee, even in the absence of an

enforceable covenant not to compete, remains under a duty

not to use or disclose, to the detriment of the former

employer, trade secrets acquired in the course of previous

employment. Where the former employee seeks to use the

trade secrets of the former employer in order to obtain a

competitive advantage, then competitive activity can be

enjoined or result in an award of damages.

Ed Nowogroski Ins. Co., 971 P.2d at 941–42 (footnote omitted); see

Restatement § 42 cmts. b, c.

Additionally, nondisclosure and confidentiality agreements are

relevant to determine whether information constitutes a trade secret.

An agreement between the parties that characterizes

specific information as a “trade secret” can be an important

although not necessarily conclusive factor in determining

whether the information qualifies for protection as a trade

secret under this Section. As a precaution against

disclosure, such an agreement is evidence of the value and

secrecy of the information, and can also supply or contribute

to the definiteness required in delineating the trade secret.

The agreement can also be important in establishing a duty

of confidence. However, because of the public interest in

preserving access to information that is in the public

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domain, such an agreement will not ordinarily estop a

defendant from contesting the existence of a trade secret.

Restatement § 39 cmt. d (citations omitted).

It is not only the nature of the information itself that is significant;

the manner of its acquisition is also significant in determining whether

information constitutes a trade secret.

“The subject matter of a trade secret must be secret.

Matters of public knowledge or of general knowledge in an

industry cannot be appropriated by one as his secret.”

However, the interest protected by this branch of the law is

not secrecy as such. “The protection is merely against breach

of faith and reprehensible means of learning another’s secret.”

Accordingly, “a substantial element of secrecy must exist, so

that, except by the use of improper means, there would be

difficulty in acquiring the information.”

Clark v. Bunker, 453 F.2d 1006, 1009–10 (9th Cir. 1972) (quoting

Restatement of Torts § 757 cmt. b (1939)) (emphasis added). In the case

of an employee leaving a business with trade secrets, the employer might

“find[] itself in the position of a coach, one of whose players has left,

playbook in hand, to join the opposing team before the big game.”

PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1270 (7th Cir. 1995).

B. Evidence Presented in Resistance to the Motion for

Summary Judgment. In this case, CTI contends that its cement

volumetric mixer, component parts, manufacturing processes, and

supplier and customer information constitute trade secrets. A CTI officer

identified numerous processes and design features developed by CTI that

were unique, features that CTI had sought to protect by its

confidentiality agreements and which it claimed as trade secrets. This

evidence is sufficient to generate a fact question regarding the economic

value of the information CTI argues is trade-secret protected.

Evidence in the record shows that CTI took steps to keep such

information confidential. CTI required its employees to acknowledge

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receipt of an employee handbook. Included in the handbook were

nondisclosure agreements providing:

The protection of confidential business information and

trade secrets is vital to the interests and the success of CTI.

Such confidential information includes, but is not limited to,

the following examples:

*compensation data

*customer lists

*financial information

*marketing strategy

*new materials research

*pending projects and proposals

*proprietary production processes

*research and development strategies

*technological data

Employees who improperly use or disclose trade secrets or

confidential business information will be subject to

disciplinary action, up to and including termination of

employment and legal action, even if they do not actually

benefit from the disclosed information.

In addition, employees were required to sign a “patent” agreement

providing, in part:

All inventions, whether patentable or not, developed by

employee in the course of or arising out of the performance

of his or her duties as an employee, shall be owned by

Employer. Employer shall also own any inventions

developed by Employee during the period of his or her

employment which relate to the products, services, or other

business activities of Employer regardless of whether or not

such inventions were developed on or off of company time

and on or off of company premises.

Confidentiality agreements such as these may constitute reasonable

steps to insure secrecy of information, as required by the Uniform Act.

MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 521 (9th Cir. 1993).

Further, though the district court found the fact that the employees were

not required to sign a noncompete agreement persuasive, we do not. As

noted above, the absence of a noncompete agreement is not

determinative of the existence of a trade secret.

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The defendants argue that information regarding CTI’s volumetric

mixer is not a trade secret because it is “readily ascertainable.” This

argument is based, in large part, on the concept of reverse engineering.

(“ ‘Reverse engineering is the process by which a completed process is

systematically broken down into its component parts to discover the

properties of the product with the goal of gaining the expertise to

reproduce the product.’ ” Revere Transducers, Inc. v. Deere & Co., 595

N.W.2d 751, 775 n.8 (Iowa 1999) (quoting Christianson v. Colt Indus.

Operating Corp., 870 F.2d 1292, 1295 n.4 (7th Cir. 1989))). However, the

fact that information may be obtained by lawful means, including reverse

engineering, is not necessarily dispositive of the trade-secret issue.

The theoretical ability of others to ascertain the

information through proper means does not necessarily

preclude protection as a trade secret. Trade secret

protection remains available unless the information is

readily ascertainable by such means. Thus, if acquisition of

the information through an examination of a competitor’s

product would be difficult, costly, or time-consuming, the trade

secret owner retains protection against an improper

acquisition, disclosure, or use . . . .

Restatement § 39 cmt. f (emphasis added).

In CTI’s resistance to the defendants’ motion for summary

judgment, it provided a report by Dr. Bruce Johnson, who holds a Ph.D.

in mechanical engineering and who has considerable experience in

design and development engineering. Dr. Johnson evaluated the

defendants’ reverse engineering claim—he inspected the defendants’

prototype machine; he inspected CTI’s, as well as the defendants’,

manufacturing facilities; he inspected the drawings of both CTI and the

defendants; and he reviewed witness depositions.

Dr. Johnson stated that a representative of the defendant company

told him they did not start construction on their machine until November

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2001, and the defendants exhibited their fully functioning machine at a

trade show in March 2002. Dr. Johnson concluded:

It would be impossible for anyone, even a trained and

experienced engineer, to complete the design process of a

complex piece of machinery such as involved in this

instance, to the point of having a perfectly functioning

prototype, in less than six months without having at his

disposal a vast amount of information. In the context of this

case, it is my opinion that it would have been impossible for

the Defendants collectively to complete the process without

access to the proprietary information of Cemen Tech,

regardless of whether that information was in written or

other form.

Dr. Johnson’s report is strong evidence that, though CTI’s machine and

component parts could be reverse engineered, the difficulty in doing so

may not defeat CTI’s trade-secret claim.

Even though CTI conceded that the defendants, if given sufficient

time, could produce a machine similar to CTI’s based on reverse

engineering, a fact finder could reasonably conclude that the delay in

production of the machine would give CTI a temporal advantage. Even if

the period of that advantage would be short, this would not deny trade-

secret protection to CTI because neither Iowa Code section 550.2(4) nor

section 1(4) of the Uniform Trade Secrets Act “include[s] any requirement

relating to the duration of the information’s economic value.”

Restatement § 39 cmt. d. Presumably, the extent of this temporal

advantage would be reflected in any damage award.

Finally, the defendants’ means of obtaining the information at

issue lends credence to CTI’s claim that the information was intended to

be confidential. Generally,

[i]nformation that is readily ascertainable by proper means is

not protectable as a trade secret, and the acquisition of such

information even by improper means is therefore not

actionable . . . . However, the accessibility of information,

and hence its status as a trade secret, is evaluated in light of

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the difficulty and cost of acquiring the information by proper

means. In some circumstances the actor’s decision to

employ improper means of acquisition is itself evidence that

the information is not readily ascertainable through proper

means and is thus protectable as a trade secret. Because of

the public interest in deterring the acquisition of information

by improper means, doubts regarding the status of

information as a trade secret are likely to be resolved in favor

of protection when the means of acquisition are clearly

improper.

Restatement § 43 cmt. d (citations omitted).

A jury could reasonably find that the employee-defendants took

advantage of their positions at CTI to obtain proprietary information that

was then used for Three D’s benefit. All employee-defendants signed

confidentiality and patent agreements in the course of their employment

with CTI, indicating their understanding that CTI meant for information

gathered during the course of employment to remain confidential. Yet, a

jury could find that defendants Mark Dorman and Daniel Pothast used

the knowledge and skill obtained through their employment with CTI to

develop products for Three D Industries that were similar to those they

produced for CTI. CTI’s employment of Scott Longnecker (Dean

Longnecker’s son), at the apparent request of Dean Longnecker, could

also suggest an intent to obtain information “from the inside.”

Additionally, a jury could find that Dan Jones and Brad Luhrs gave

Three D Industries information they gathered from CTI in the course of

strategy and production meetings, including new product ideas, CTI’s

engineering data, computations, calculations, and certain innovations.

In fact, evidence in the record suggests that Luhrs and Jones copied files

from a CTI computer onto CDs that were not returned to CTI upon their

resignations. The actions of these defendants could reasonably be

considered to be improper and, therefore, “evidence that the information

is not readily ascertainable through proper means and . . . thus

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protectable as a trade secret.” Restatement § 43 cmt. d. Viewing the

evidence in the light most favorable to CTI, we believe there was

sufficient evidence to generate a fact question on the trade-secret issue

with respect to the employee-defendants.

We also believe CTI presented sufficient evidence to generate a fact

question on the trade-secret issue with respect to Three D, Longnecker,

and Enos. A jury could find that these defendants improperly used their

positions as potential buyers to obtain CTI’s proprietary information for

their own benefit. There is evidence in the record that the information

disclosed during the due-diligence process was not returned to CTI, and

there is evidence that these defendants encouraged the employee-

defendants to jump ship to join Three D. A fact finder could infer from

the evidence that these defendants induced or knowingly accepted trade

secrets from CTI. Under the Restatement,

a person who obtains a trade secret by inducing or

knowingly accepting a disclosure from a third person who

has acquired the secret by improper means, or who induces

or knowingly accepts a disclosure from a third person that is

in breach of a duty of confidence owed by the third person to

the trade secret owner, also acquires the secret by improper

means.

Id. § 43 cmt. c.

Finally, we believe CTI has failed to generate a fact question on the

trade-secret issue with respect to defendant James Yelton. Yelton was a

former CTI customer, but was never an employee, so he was never bound

by a handbook or confidentiality agreement. While there is some

evidence Yelton became “a part of” Three D, there is no evidence he

encouraged CTI employees to obtain trade secrets. In fact, the evidence

presented shows the extent of Yelton’s involvement in the development of

Three D’s machine was apparently to furnish photos of CTI’s product

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obtained by him when he was a customer of CTI. This evidence is simply

not sufficient to generate a fact question as to Yelton on the plaintiff’s

trade-secret claim, and the court’s grant of summary judgment as to him

was proper.

In summary, we conclude it was error to enter summary judgment

on CTI’s trade-secret claim, except as to James Yelton. We remand for

further proceedings on this issue.

V. The Unfair Competition Claim.

In count V of its petition, CTI alleged the defendants engaged in

unfair competition by “palm[ing] off the products and services sold by

them to the public as derivatives of Cemen Tech, which . . . caused a

likelihood or probability of confusion as to the source of Defendants’

products and services.” The district court concluded that a genuine

issue of material fact existed as to whether Three D, Longnecker, Enos,

and the employee defendants engaged in unfair competition by palming

off CTI’s products and services as their own. However, the district court

ruled that CTI could not pursue a claim of reverse palming off because it

had not pled that theory in its petition.

“Palming off” occurs when a defendant sells its product under the

plaintiff’s name. Walker Mfg., Inc. v. Hoffmann, Inc., 261 F. Supp. 2d

1054, 1069 (N.D. Iowa 2003). On the other hand, “reverse palming off”

occurs when a defendant sells the plaintiff’s product under the

defendant’s name. Id. Both are legal theories a plaintiff may assert to

prove unfair competition. Basic Chems., Inc., 251 N.W.2d at 231–32.

The court granted Yelton’s motion for summary judgment on the

palming-off claim, concluding that CTI failed to present any evidence that

Yelton was an owner or employee of Three D or that he participated in

the engineering, design, or manufacture of the Three D machine.

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However, any shortcomings in the evidence regarding Yelton’s status as

an owner or employee do not preclude his liability for improper actions in

the representations of the machine to potential buyers. Viewing the

evidence in the light most favorable to CTI, we believe a jury could find

that Yelton was involved in the marketing of Three D’s machine and

made representations about the relative qualities of the competing

machines. We believe it was error for the trial court to sustain Yelton’s

summary-judgment motion on this issue.

On appeal, CTI contends the district court erred in refusing to

allow it to argue reverse palming off as a basis for its unfair-competition

claim. Under our rules of civil procedure, a party need not conform to

technical forms of pleading. Rather, “[e]ach averment of a pleading shall

be simple, concise, and direct.” Iowa R. Civ. P. 1.402(2)(a). In Iowa,

“notice pleading” is all that is required. Under notice pleading, a petition

need only give notice of the incident giving rise to the claim and the

general nature of the claim. Roush v. Mahaska State Bank, 605 N.W.2d

6, 10 (Iowa 2000). A plaintiff is not required to set forth specific legal

theories for recovery. Id. at 9.

We conclude the district court erred in refusing to allow CTI to

pursue its claim of reverse palming off. CTI’s claim in general was that

the defendants wrongfully marketed their machine in unfair competition

with CTI by fraudulently representing the pedigree of the machines. CTI

was not required to identify a particular variety of fraud—palming off or

reverse palming off. If CTI’s evidence at trial supports both theories,

presumably it would be allowed to amend its pleadings to conform to the

proof.

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We reverse the district court’s ruling on this issue insofar as it

sustained Yelton’s motion for summary judgment and the court’s refusal

to allow a claim of reverse palming off.

VI. The Claim of Breach of Fiduciary Duty.

In count VI of its petition, CTI contends the defendants breached

their fiduciary duty to CTI. The district court concluded that Three D

Industries, Longnecker, and Enos were not in a fiduciary relationship

with CTI because their relationship was based on the potential purchase

of CTI, and they were acting solely for their own benefit, not that of CTI.

The district court further concluded that Yelton was not in a fiduciary

relationship with CTI because there was no evidence that Yelton was

anything more than a customer and a salesman for CTI’s equipment. We

agree with the trial court’s conclusions as to any fiduciary relationship

between CTI and Three D Industries, Longnecker, Enos, or Yelton.

The district court also concluded that the employee-defendants did

not have a fiduciary relationship with CTI because CTI failed to present

any evidence suggesting that the employee-defendants were anything

more than traditional employees. On appeal, CTI contends a jury could

reasonably find that the employee-defendants owed a duty of loyalty and

a fiduciary duty to CTI arising out of the employee-defendants’

representation of CTI to potential customers and suppliers, as well as the

trust CTI placed in these employee-defendants to maintain the

confidentiality of its proprietary information.

It is true, as the district court noted, that the question of whether a

fiduciary relationship exists in a given case may, in some cases, be

decided by the court in a summary-judgment proceeding. See, e.g.,

Weltzin v. Cobank, ACB, 633 N.W.2d 290, 292 (Iowa 2001). We do not

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believe, however, that this is such a case. In Kurth v. Van Horn, 380

N.W.2d 693 (Iowa 1986), we recognized that “fiduciary duty” is

“[a] very broad term embracing both technical fiduciary

relations and those informal relations which exist wherever

one man trusts in or relies upon another. One founded on

trust or confidence reposed by one person in the integrity

and fidelity of another. A ‘fiduciary relation’ arises whenever

confidence is reposed on one side, and domination and

influence result on the other; the relation can be legal,

social, domestic, or merely personal. Such relationship

exists when there is a reposing of faith, confidence and trust,

and the placing of reliance by one upon the judgment and

advice of the other.”

Kurth, 380 N.W.2d at 695–96 (quoting Black’s Law Dictionary 564 (5th

ed. 1979) (citations omitted)).

The present case is distinguishable from both Kurth and Weltzin

because here the employees executed confidentiality and nondisclosure

agreements. A jury could find that the relationship between CTI and the

employee-defendants is, therefore, one based “on trust or confidence

reposed by one person in the integrity and fidelity of another.” Kurth,

380 N.W.2d at 695.

We believe the question of whether a fiduciary relationship has

been established turns on the facts of the case and does not lend itself to

disposition by summary judgment. We therefore reverse the judgment of

the district court regarding the claim of breach of fiduciary duty on the

part of the employee-defendants and remand on that issue.

VII. Summary.

We affirm the district court’s grant of summary judgment as to the

plaintiff’s contract claims under counts I, II, and III. We also affirm the

district court’s grant of summary judgment in favor of defendant Yelton

on the trade-secret issue raised in count IV. We reverse the summary

judgment under count IV as to all other defendants. We affirm the

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district court’s denial of summary judgment on count V, the unfair-

competition claim, as to defendants Three D, Longnecker, and Enos, as

well as the employee-defendants. We reverse the summary judgment

entered on behalf of defendant Yelton under count V and reverse the

court’s ruling that CTI could not pursue a claim of reverse palming off.

We affirm the summary judgment under count VI, breach of fiduciary

duty, as to Three D, Longnecker, Enos, and Yelton, but reverse it as to all

other defendants.

We remand for further proceedings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

All justices concur except Appel, J., who takes no part.