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Repat, Inc. v. Indiewhip, LLC

United States District Court, D. Massachusetts

December 14, 2017




         This case is a tale of misplaced confidence, deceit, and betrayal, followed by protracted and bitter litigation, signifying in the end - nothing. In the Amended Complaint, plaintiff Repat, Inc., alleges that defendants IndieWhip, LLC, and its members, Chandler Quintin, Paul Kettelle, and Brian Bruzzi, stole trade secrets developed “over three years and at a cost of hundreds of thousands of dollars” comprising Repat's strategies for marketing and selling customized t-shirt quilts and pillows. Repat asserts that Ketelle, Bruzzi, and Quintin, who had access to the alleged trade secrets in their role as consultants to Repat, surreptitiously exploited these secrets to enable Quintin's brother-in-law, Scott Carlson, to launch a business, defendant American Quilt, LLC that competes directly with Repat.

         Discovery having concluded, defendants now move for summary judgment. They raise familiar defenses: that Repat's e-commerce marketing strategies were too “vaguely described” to merit protection as trade secrets; that the “secrets” are not in fact proprietary, but are generally known in the trade; and that, even if properly viewed as trade secrets, Repat failed to protect their confidentiality as required by law.[1] Additionally, defendants maintain that Repat has failed to produce any evidence that American Quilt copies (makes use) of Repat's marketing strategies. In response, Repat concedes that, while “it has disclosed in blogs, interviews and the like non-confidential aspects of its marketing and advertising efforts, ” there remains portions of its “digital marketing practices and strategies [that] are not generally known or easily ascertainable.” Moreover, Repat asserts that material factual disputes exist as to “whether the IndieWhip defendants disclosed Repat's trade secrets to American Quilt.” Repat's SOF ¶ 9; Pl.'s Opp'n at 1.[2] For the reasons that follow, defendants' motion for summary judgment will be ALLOWED.


         Nathan Rothstein and Ross Lohr co-founded Repat in 2012. The company sells custom quilts and pillows made from customers' t-shirts. Repat customers send used t-shirts to one of Repat's contract manufacturers in Massachusetts or North Carolina. The t-shirts are cut into squares and stitched together to form a quilt, which is then backed with fleece. Between 2012 and 2016, Repat sold some 140, 000 t-shirt quilts; its 2015 sales exceeded $4 million, and by 2016, it was selling as many as 1, 000 quilts a week. As the business grew, Repat tested different key words and ad pitches in its online marketing, determining those that most successfully generated “a profitable CPA” (cost to acquire a customer for each keyword) and an “excellent ROI” (return on investment for each keyword) when used in conjunction with Google Adwords.

         Over its five years of existence, Repat engaged a number of ecommerce marketing companies to assist it in formulating internet and email sales strategies. Since March of 2013, Repat has hired, among others, Klaviyo (ecommerce marketing platform); Mischa Stevens (Adwords and search engine optimization (SEO)); Social Fulcrum (SEO); Green Banana (SEO); JB Media (SEO); Ecommerce Influence (optimizing email marketing sequences and flow); Jivaldi, LLC (conversion tracker); and Jonathan Schwartz (web development services). All of these hires had access to Repat's claimed trade secrets, but only Stevens and JB Media signed nondisclosure agreements.

         IndieWhip is a video production and advertising company based in Providence, Rhode Island. IndieWhip designs digital advertising and email marketing campaigns supported by custom videos. In September of 2014, Repat hired IndieWhip to make a video for its website. In 2015, Repat commissioned IndieWhip to produce two additional videos, including one depicting its quilt manufacturing process. In March and April of 2015, Quintin, Kettelle, and Bruzzi filmed the making of quilts at one of Repat's contract manufacturers, Precision Sportswear, in Fall River, Massachusetts. Repat alleges that prior to the filming, it made clear to the IndieWhip crew that only nonproprietary aspects of the process were to be recorded.[3]IndieWhip billed Repat approximately $20, 000 for the three videos.

         In April of 2015, Repat expanded the IndieWhip contract to include the management of Repat's Google AdWords advertising strategy (Repat began using Google AdWords in October of 2012), Facebook, and YouTube. Repat also asked IndieWhip to oversee its email targeting of customers and prospective customers. To that end, Repat allowed IndieWhip to access its Klavio software.[4] Finally, Repat contracted with IndieWhip to build a “landing page” for potential buyers recruited through Facebook and Google.

         Repat claims that during the course of the contract, IndieWhip had access to the following trade secrets:

[D]igital marketing strategies and practices relating to Google AdWords including the specific keywords it has used; its combinations of keywords and ads; the bids and budgets it allocated to keywords; the amount of website traffic (clicks) that resulted from specific keywords-ad combinations; the number of emails Repat collected resulting from that traffic; the revenue produced as a result of customers clicking on ads that serve the specific keywords; the cost to acquire a customer (CPA) for each keyword; the return on investment (ROI) for each keyword; and the performance of Repat's various ads, including the amount of traffic, revenue, email sign ups, CPA and ROI associated with each ad and the content used for each ad.

See Bauer Decl., Ex. 1 (Answers to Interrog.) at #1, #4. Lohr, a founder, director, and officer of Repat, testified that “[t]he most valuable keywords are those that, when associated with an effective Repat ad, have generated the most ‘clicks' and ‘conversions, ' and have the lowest cost per conversion ratios.” Lohr Decl. ¶ 13. IndieWhip produced multiple reports for Repat containing detailed descriptions of Repat's marketing strategies and practices. Repat alleges that IndieWhip disclosed this information to American Quilt, including the trade secrets involved in its Facebook campaign.

Repat claims that IndieWhip had access to the specific audiences that Repat has used to target potential customers; the budget allocation to each of those audiences; the number of emails collected on Repat's website for each audience; the amount of revenue derived from each audience; the CPA and ROI for specific audiences used for Facebook advertising; and the performance of Repat's various Facebook ads, including the content. Repat's digital marketing strategies and practices also include the timing and segmentation of marketing emails sent to potential customers and the revenue derived from each of those emails; the content and timing of the emails in the “welcome series, ” “abandoned cart” series, and “post purchase” flows; and the click rates, open rates and revenues generated by each flow and each email within the flow.

Id.[5] Indiewhip completed its work for Repat in August of 2015. None of the three written contracts entered into by Repat and IndieWhip over the course of their relationship contained confidentiality provisions or non-competition clauses.

         Scott Carlson and Brian Dumeer formed American Quilt as a limited liability company in August of 2016, approximately one year after IndieWhip's engagement with Repat came to an end. Quintin contends that Carlson first approached him with the idea of creating a business selling “t-shirts sewn together [into a quilt] with a luxurious backing.”[6] (Carlson, it will be remembered, is Quintin's brother-in-law). Repat asserts that with IndieWhip's covert assistance, American Quilt built a marketing campaign based on Repat's secrets. Repat contends that

many of the key words that American Quilt uses in its Google AdWords account are identical to those keywords that IndieWhip learned were Repat's most successful keywords in generating clicks and conversions in its Google AdWords campaigns. Similarly Quintin created an “abandoned cart flow” that mimics the abandoned cart flow Repat paid Ecommerce Influence to design . . . which Quintin learned while providing services to Repat. Quintin also created a “shirt reminder flow” based on the flow used by Repat to remind customers to send in their shirts.

Opp'n Mem. at 15.

         Quintin admits that he built American Quilt's website and created its Facebook advertising account in October of 2016. He also identified and procured a manufacturer for American Quilt in New Hampshire, and helped launch American Quilt's online advertising and marketing campaigns. In hiring the manufacturer and recruiting the online advertisers, Quintin used the pseudonym “Joe McMillan.”[7] See Lohr Decl. ¶ 29; Repat SOF ¶ 29. American Quilt also “hired Klaviyo for email marketing and as a mechanism to collect customer email addresses.” Defs.' SOF ¶ 91.[8] Carlson's deposition testimony makes clear that he knows next to nothing about the day-to-day operations of his business, including the identity of the person or persons who created and maintain American Quilt's website, manage its advertising campaigns, oversee its email marketing accounts and its Twitter, Facebook, and Instagram pages, or even how its finished products are shipped. See Repat SOF ¶ 43.

         By letter dated October 3, 2016, Repat demanded that IndieWhip cease and desist its use of Repat's trade secrets for the benefit of American Quilt. It also demanded that IndieWhip “secure and return all of [Repat's] confidential and trade secret information including return of its mailing lists.” Opp'n Mem. at 5. Emails offered by Repat reveal that one month after IndieWhip received the cease and desist letter, Quintin, again hiding under the pseudonym “Joe McMillan, ” engaged GreenBanana to assume the management of American Quilt's digital marketing efforts. The contract between American Quilt and GreenBanana identified Quentin as the “Client” and the “Principal” for reporting purposes. Bauer Decl. - Ex. 27 at 12. See Id. at Exs. 29, 30, 32, and 33.

         Repat filed this lawsuit on October 24, 2016, asserting four claims - misappropriation of trade secrets under federal law (18 U.S.C. § 1836), and Massachusetts law (Gen. Laws ch. 93, § 42) (Count I); theft of trade secrets under the common law (Count II); theft of trade secrets under Rhode Island law (Gen. Laws § 6-41) (Count III); and unfair competition under the Massachusetts Unfair Business Practices Act ...

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