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Mobile device shop faces $5M lawsuit
Wisconsin-based Diamond Assets suing Tech Defenders for allegedly violating nondisclosure agreement and ‘stealing trade secrets.’
Editor's note: The original version of this article incorrectly named Garry VonMyhr as a defendant in the lawsuit.
A Grand Rapids-based company that specializes in repairing mobile devices for the education sector is being sued for allegedly breaching the confidence of one of its strategic partners.
Note Tech Industries LLC, doing business as Tech Defenders, at 2350 Oak Industrial Drive NE in Grand Rapids, was co-founded by CEO Garry VonMyhr, who also co-founded Genius Phone Repair in 2009 and Mobile Defenders in 2013.
Note Tech Industries and an associated company under the same CEO and DBA, Repair Center LLC, are being sued for at least $5 million in damages by Janesville, Wisconsin-based Diamond Assets, an IT asset disposition company and Apple trade-in partner for the education sector.
Attorneys for Tech Defenders noted the federal court has “twice rejected” Diamond’s request for a temporary restraining order and an injunction against Tech Defenders.
Tech Defenders’ repair services, device insurance, phone cases and phone case protection plans are geared toward education clients.
According to Steven Shapiro — an attorney at Culhane Meadows law firm in Chicago who is on the team representing Diamond Assets — Tech Defenders and Diamond Assets entered into a nondisclosure agreement in 2015 to form a “strategic alliance.”
He said Tech Defenders agreed to provide repair services to Diamond Assets’ devices if the company agreed not to disclose Diamond Assets’ confidential information or use it to compete for the same customers.
Shapiro said Tech Defenders represented itself as a different line of business, but with complementary services to Diamond Assets, and therefore would not compete.
“Diamond Assets was in trade-up and refurbishment. Tech Defenders was in the repair business,” Shapiro said. “By representing they were in a different business than Diamond Assets, they were able to get trade secrets.”
According to the complaint, filed June 20 in the U.S. District Court - Western District of Wisconsin, “Tech Defenders duplicated Diamond’s proprietary methods and processes while undercutting Diamond’s bids for customer contracts and inappropriately diverting business away from (the) plaintiff.”
The complaint goes on to claim Tech Defenders’ alleged actions diverted $1 million in business from Diamond during its busiest season of the year (May to August) during which it makes 75 percent of its annual revenue.
Since then, Shapiro contends Diamond has “continued to find additional instances in which Tech Defenders has taken business away from Diamond Assets,” which is why it is suing for $5 million, and that figure might increase.
The Business Journal spoke to VonMyhr this month, and he denies all allegations. He sent a statement through his primary defense counsel, attorney Michael Huitink of Brookfield, Wisconsin-based Sorrentino Burkert Risch Law Group, calling the accusations “spurious.”
“This lawsuit is baseless,” the statement said. “Tech Defenders’ success is based on its own employees and its own business model, built out of the house of one of its founders in Grand Rapids. Tech Defenders has well served customers in West Michigan and across the country for over six years. It does not want or need any other company’s trade secrets or confidential information.”
“Tech Defenders will continue to aggressively defend against the baseless accusations and looks forward to bringing this spurious lawsuit to a prompt resolution,” Huitink said.
Diamond Assets contends the alleged actions of Tech Defenders will damage not just the company’s business but also the school districts both entities serve in Michigan, Wisconsin and other states.
“School districts are strapped for cash, students in their home life are up on the latest technology and schools are under constant demand to upgrade technology, but it’s so expensive. Diamond Assets provides an avenue for that upgrade to happen,” Shapiro said.
“The problem is that if Tech Defenders is damaged by the settlement, many schools will suffer as a result of their inability to fund the buy-back devices.”
He added schools potentially will lose revenue as a result of the alleged events.
“Since Diamond Assets is funding the purchase of used equipment to schools and then selling it, it’s a source of revenue for the schools, who then buy new computers. Without that revenue, schools are disadvantaged by this,” he said.
According to Diamond Assets, Tech Defenders serves K-12 schools across the country, including Zeeland Public Schools and private schools such as Grand Rapids West Catholic High School.
The company contracts with schools to purchase old computer devices and schools use these funds to buy updated technology. Devices often are turned over by the school to be inventoried and assessed before a check is written to the school.
Shapiro said a $5-million settlement would greatly increase the chances that Tech Defenders could default on these payments.
The case, which is in the discovery phase, will go to trial Sept. 28, 2018.