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United States ex rel. Ray v. American Fuel Cell and Coated Fabrics Co.

United States District Court, W.D. Arkansas, El Dorado Division

March 2, 2015

UNITED STATES OF AMERICA ex rel. DANNY MICHAEL RAY, Plaintiff,
v.
AMERICAN FUEL CELL AND COATED FABRICS COMPANY and THE ZODIAC GROUP, Defendants.

MEMORANDUM OPINION AND ORDER

SUSAN O. HICKEY, District Judge.

Before the Court is Defendant American Fuel Cell and Coated Fabrics Company's ("Amfuel") Motion for Summary Judgment. (ECF No. 90). Plaintiff Danny Michael Ray ("Ray") has responded. (ECF No. 94). Amfuel has replied. (ECF No. 99). The matter is ripe for the Court's consideration. Ray alleges causes of action for FCA retaliation and state law breach of employment contract.

BACKGROUND

Amfuel manufactures rubberized containers that hold fuel ("fuel cells") and are used in U.S. Military aircraft and commercial aircraft. (ECF No. 92, ¶ 1). During the time at issue in this case, Amfuel also manufactured towable drums for the transport of fuel or water for the U.S. Military. (ECF No. 92, ¶ 2). Amfuel utilizes unique, proprietary internal processes, which it refers to as "NP 474, " to manufacture fuel cells that meet the performance specifications required by the U.S. Government for fuel cells to be used in military aircraft. (ECF No. 92, ¶ 3).

Amfuel's quality control department conducts extensive inspection of the fuel cells and towable drums at different stages of the manufacturing process. (ECF No. 92, ¶ 5). If a quality control inspector, Amfuel engineer, or other Amfuel employee concludes that the product has defects, then the quality control department and an engineer decide whether the product can be repaired or whether it should be scrapped. (ECF No. 92, ¶ 6). Repairs are a planned part of the manufacturing process. (ECF No. 92, ¶ 7). The products are largely handmade with a significant error rate. (ECF No. 92, ¶ 8). Therefore, the manufacturing process anticipates repairs to items that fail quality inspection. (ECF No. 92, ¶ 9).

After the products are built, Amfuel's quality control department conducts a number of performance tests before submitting the products to the government. (ECF No. 92, ¶ 10). If the product fails a test, it is either repaired or scrapped. (ECF No. 92, ¶ 13). The U.S. Military's Defense Contract Agency ("DCMA") oversees some of the pre-delivery inspections and performance tests.

Amfuel is one of only two manufacturers of a certain type of fuel cell used for some military aircraft, such as the F-18. As a result, Amfuel has a significant business interest in protecting data related to its proprietary manufacturing processes. Furthermore, Amfuel's manufacturing processes are regulated by the International Traffic in Arms Regulations ("ITAR"). ITAR prohibits the export of arms and related technical data outside the U.S. Information required for the design, development, production, and manufacture of defense articles is covered by ITAR.

Amfuel implemented company policies to ensure that there are no outside disclosures of sensitive, proprietary information. At the time at issue, Amfuel's Policy Manual provided a confidentiality policy, which stated:

It is the policy of the Company that internal business affairs of the organization, particularly confidential information and trade secrets, represent Company assets that each employee has a continuing obligation to protect... Employees authorized to have access to confidential information may be required to sign special nondisclosure agreements and must treat the information as proprietary Company property for which they are personally responsible.

(ECF No. 92, Ex. G). Amfuel's Policy Manual also contained a "Use of Communications Systems" policy, which provided:

All Company communications services and equipment, including the messages transmitted or stored by them, are the sole property of the Company... Employees should not use email... or any other insecure communications system to communicate confidential, proprietary or trade secret information... All outgoing messages, whether by mail, facsimile, email, internet transmission, or any other means should be... work-related... Improper use of Company communication services and equipment will result in discipline, up to and including termination.

(ECF No. 92, Ex. G). Amfuel's Integrity Handbook reiterates these policies. (ECF No. 92, Ex. H). During the time relevant to this lawsuit, Amfuel also had an Electronic Communications Policy, which provided that in most instances, confidential information should never be communicated via email. (ECF No. 92, Ex. I at 13). It further indicated that Amfuel only permits employees to work remotely under certain circumstances, such as for medical reasons. (ECF No. 92, Ex. I at 16).

Plaintiff Ray was hired by Amfuel in March 2007 as a process engineer. Amfuel offered to pay Ray additional compensation if it implemented any of his recommendations and they resulted in cost savings for Amfuel. Amfuel maintains that a final employment contract was never entered into with Ray, but Ray contends that he signed and returned a revised version of a draft contract which constitutes his employment contract. Ray asserts that Amfuel CEO Bill Mow signed this contract. Amfuel denies that the contract was ever adopted and claims the contract is not in its possession. During discovery, Ray indicated that he had a copy of the contract but now states he has been unable to locate a final and executed copy of the contract.

The draft contract that Ray asserts he executed and returned to Amfuel provides that the "Employee shall not, during the term of this Contract of employment or thereafter, disclose any information relative to the business affairs of Amfuel." (ECF No. 92, Ex. K). Ray received copies of Amfuel's policies and Integrity Handbook when he was hired. (ECF No. 92, Ex. L & Ex. M).

Amfuel assigned Ray to work on its fuel cell production line. As a process engineer, Ray's primary job duties were evaluating the manufacturing process and making recommendations to improve it. He worked with quality control inspectors during different stages of the manufacturing process to determine if fuel cells needed to be repaired or scrapped ...


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