R. L. Mlazgar Associates, Inc. v. Focal Point, L.L.C.

Background

Mlazgar is a Minnesota-based lighting products sales agent. In October 2020, it acquired Elan, which had been the sales agent for Focal Point — a manufacturer of commercial lighting products — in the territory of Eastern Wisconsin and Michigan's Upper Peninsula. As part of that acquisition, Mlazgar inherited Elan's sales representative agreement with Focal Point and brought on former Elan employees.

Soon after, several of those newly acquired employees began secretly coordinating with JTH Lighting Alliance, Inc. (JTH), a competitor, and with a Legrand Holding vice president, to launch a new competing sales agency in Wisconsin. In January 2021, seven former Elan employees who had joined Mlazgar departed and formed JTH Lighting Alliance Wisconsin, LLC (JTH-Wisconsin), which became the sales agent for multiple manufacturers in the territory. Legrand Holding, the corporate parent of Focal Point, provided JTH with a $250,000 market development payment through its affiliate Legrand North America, LLC.

In March 2021, Mlazgar and Focal Point formalized their relationship with a new one-year, renewable Sales Representative Agreement. However, in February 2022, Focal Point gave Mlazgar only 30 days' notice of termination — citing a vague desire to pursue 'a new course of direction' — and then replaced Mlazgar with JTH-Wisconsin. Mlazgar argued the termination was void under the MTSRA, continued soliciting Focal Point orders, and filed suit in April 2022.

Parties and Claims

Mlazgar brought the following claims that remained at summary judgment: - Count I: Minnesota Termination of Sales Representatives Act (MTSRA) - Count III: Minnesota Uniform Trade Secrets Act (MUTSA) - Count IV: Defend Trade Secrets Act (DTSA) - Count VI: Breach of the Sales Representative Agreement (confidentiality provision) - Count VII: Aiding and abetting breaches of fiduciary duty - Count VIII: Civil conspiracy - Counts IX and X: Tortious interference with contract and with prospective economic advantage

Defendants asserted counterclaims for breach of contract (Count I), trademark infringement (Count II), false designation of origin (Count III), Illinois Deceptive Trade Practices Act (Count IV), and Illinois Consumer Fraud (Count V).

Count I: MTSRA Claim

Choice of Law

The Sales Representative Agreement contained an Illinois governing law clause. The court held this clause void and unenforceable as applied to the MTSRA claim, because the statute contains an express anti-waiver provision rendering choice-of-law clauses in sales representative agreements ineffective. Because Mlazgar is a Minnesota-domiciled corporation, the MTSRA applies by its own terms.

MTSRA Violations

The MTSRA requires a manufacturer to provide at least 90 days' written notice specifying good cause for termination, and to give the sales representative 60 days to cure. Focal Point provided only 30 days' notice, offered no opportunity to cure, and stated no statutory good cause — only that it was pursuing 'a new course of direction.' The court found these violations clear.

Whether Mlazgar Is a 'Sales Representative' Under the MTSRA

The MTSRA defines 'sales representative' as a person who contracts with a principal to solicit wholesale orders and is compensated, in whole or in part, by commission. It excludes persons who 'distribute, sell, or offer the goods, other than samples, to end users, at retail.'

General definition: Focal Point argued Mlazgar did not solicit 'wholesale orders' because it did not sell to big-box retailers. The court rejected this, finding that the specification distribution chain — where Mlazgar solicited orders from electrical distributors who then resold products to electrical contractors — falls within the statutory definition of soliciting orders 'for goods by persons in the distribution chain for ultimate sale at retail.'

Retail end-user exclusion: Focal Point argued Mlazgar sold directly to end users at retail because it marketed products to project owners. The court disagreed, analyzing Mlazgar's two roles separately. In its role promoting products to specifiers (architects and engineers), Mlazgar was only marketing — not distributing, selling, or offering goods. In its role facilitating orders through electrical distributors, Mlazgar's counterparties were distributors who resold to electrical contractors; Focal Point did not even charge sales tax on these transactions because they were for resale. The court distinguished the 1993 Robbins & Myers case, where the sales agent sold directly to manufacturers who used the products in their own operations, rather than to middlemen who resold them.

The court held Mlazgar is a 'sales representative' protected by the MTSRA, and granted Mlazgar's motion for summary judgment on Focal Point's liability under Count I. Focal Point's motion for summary judgment on Count I was denied. The amount of damages was reserved for the jury.

Trade Secrets Claims (Counts III and IV)

The court analyzed the MUTSA and DTSA claims together, as their key terms are functionally equivalent. Mlazgar identified its trade secrets as a database of information acquired from Elan, including contact lists, pricing, quote histories, and project information. The court found that of all this material, only three documents were ever in defendants' possession or view: (1) a contact list emailed by a former Mlazgar employee to Focal Point; (2) a photometric report held by Kenall, a different Legrand Holding subsidiary; and (3) a screenshot of a sales meeting sent to a JTH executive.

The court held that none of the three documents, individually or in combination, constituted a trade secret: the contact list contained readily ascertainable customer information; the photometric report was derived from publicly available specifications; and the sales figures screenshot would be readily ascertainable to Legrand Holding because OCL (whose figures appeared) is its wholly-owned subsidiary — and Mlazgar itself had publicly filed the screenshot in state court litigation.

Even assuming trade secrets existed, the court also found no evidence of misappropriation. Focal Point received the contact list without any facial indication it was Mlazgar's confidential material; the photometric report was only exchanged between non-parties JTH and Kenall; and the screenshot was never shown to have been received by Focal Point or Legrand (a key Focal Point employee testified she was unaware of it until the litigation). Defendants were granted summary judgment on Counts III and IV.

Breach of Contract — Confidentiality (Count VI)

The court applied Illinois law to the breach of contract claim (to the extent not based on the MTSRA). Mlazgar alleged Focal Point violated the Sales Representative Agreement's confidentiality provision by forwarding Mlazgar's sales order forms to JTH without permission. Focal Point Vice President of Sales Peter Lena testified in his deposition that Focal Point did forward those forms to JTH. The court found a reasonable jury could conclude the sales order forms constituted 'financial data' protected by the confidentiality provision, that Focal Point breached that provision by disclosing the forms to a competitor, and that Mlazgar suffered damages as a result. Focal Point's motion for summary judgment on Count VI was denied; this claim proceeds to trial on both liability and damages.

Aiding and Abetting Breach of Fiduciary Duty (Count VII)

Mlazgar alleged Defendants aided and abetted breaches of fiduciary duty by the seven former employees under two theories: (1) breach of the duty of loyalty by soliciting away manufacturers while still employed by Mlazgar, and (2) breach of the duty of confidentiality by misappropriating Mlazgar's information.

On the confidentiality theory, the court found no evidence Defendants knew the employees were misappropriating confidential information, which is required for aiding-and-abetting liability under Minnesota law.

On the loyalty theory, the only concrete evidence was that a Legrand Holding vice president authorized one former Mlazgar employee (Hendrickson) to solicit a single Legrand subsidiary (OCL) to change agents — but Mlazgar remains OCL's agent in the territory, so Mlazgar suffered no injury from that conduct. Without injury caused by the primary tortfeasors, the aiding-and-abetting claim fails. The court noted, without deciding, that it doubted the seven employees even owed fiduciary duties to Mlazgar given their roles. Defendants were granted summary judgment on Count VII.

Tortious Interference Claims (Counts IX and X)

The court applied Minnesota law to the tortious interference claims after finding the governmental-interest factor in Minnesota's choice-of-law analysis favored Minnesota over Illinois for claims involving interference with a Minnesota company's business relationships.

As to Legrand Holding's role: the court found Legrand Holding had a qualified privilege to intervene in the contracts between Mlazgar and Legrand Holding's own wholly-owned subsidiaries. Under Minnesota law, a parent company may interfere in a subsidiary's contracts when acting in good faith to protect its economic interests. The court found Legrand Holding had a legitimate business justification — building on its existing JTH relationship in other Midwest territories — and no evidence of bad faith or malice.

As to interference with non-Legrand manufacturers: the court found no evidence that Defendants themselves took any tortious action to induce manufacturers such as Bega, Kelvix, Hubbell, Luminii, and Structura to break their contracts with Mlazgar. Mere awareness of JTH's solicitation plans was insufficient. Defendants were granted summary judgment on Counts IX and X.

Civil Conspiracy (Count VIII)

Because all of Mlazgar's underlying tort claims failed at summary judgment, the civil conspiracy claim — which requires a viable underlying tort — necessarily failed as well. Defendants were granted summary judgment on Count VIII.

Defendants' Counterclaims

Voluntarily Dismissed Counterclaims

Defendants requested voluntary dismissal of Counterclaim Counts I (breach of contract), III (false designation of origin), and V (Illinois Consumer Fraud). The court dismissed these three counterclaims with prejudice under Federal Rule of Civil Procedure 41(a)(2).

Trademark Infringement (Counterclaim Count II)

After termination, Mlazgar continued to list Focal Point's registered trademark on its website line card until September 16, 2022, when it removed the mark after Focal Point filed its counterclaims. Defendants sought both actual damages and injunctive relief.

On actual damages: the court granted Mlazgar summary judgment because Defendants presented no evidence that Mlazgar's use of the mark caused actual confusion in the marketplace. Although Defendants cited two email threads, even their own corporate representative admitted nothing 'directly points to' the mark's inclusion on the website causing the confusion.

On injunctive relief: the court found this request moot — not because of Mlazgar's voluntary removal of the mark, but because under Mlazgar's own legal theory (that the termination was void under the MTSRA and the agreement continued for one additional renewal year), the latest Mlazgar could claim any right to use the Focal Point mark was March 10, 2023. After that date, any ongoing risk of Mlazgar using the mark without authorization had expired.

Illinois Uniform Deceptive Trade Practices Act (Counterclaim Count IV)

The IUDTPA does not have extraterritorial effect and applies only if the disputed conduct occurred 'primarily and substantially in Illinois.' The court applied a nine-factor test and found that only four factors (Focal Point's Illinois domicile, the contract's Illinois choice-of-law clause, and the location of payments and complaints) pointed to Illinois, while other factors pointed to Minnesota (Mlazgar's domicile, location of its website) and Wisconsin/Michigan (the territory and location of the allegedly deceptive statements). Notably, Defendants never responded to Mlazgar's extraterritoriality argument. The court granted Mlazgar summary judgment on Counterclaim Count IV.

Disposition

- Defendants' summary judgment motion: Denied as to Counts I and VI; granted as to Counts III, IV, VII, VIII, IX, and X. - Mlazgar's summary judgment motion: Granted as to Focal Point's liability on Count I; denied as to damages on Count I (reserved for jury); denied as moot as to Defendants' Counterclaim Counts I, III, and V (dismissed with prejudice); granted as to Defendants' damages request on Counterclaim Count II; denied as moot as to Defendants' injunctive relief request on Counterclaim Count II; granted as to Counterclaim Count IV. - Remaining for trial: (1) The amount of damages on Mlazgar's MTSRA claim (Count I); and (2) liability and damages on Mlazgar's breach of confidentiality claim against Focal Point (Count VI).