Isco Industries, Inc. v. Thomas W. O'Neill

CourtCourt of Appeals of Kentucky
DecidedAugust 8, 2025
Docket2024-CA-1122
StatusPublished

This text of Isco Industries, Inc. v. Thomas W. O'Neill (Isco Industries, Inc. v. Thomas W. O'Neill) is published on Counsel Stack Legal Research, covering Court of Appeals of Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Isco Industries, Inc. v. Thomas W. O'Neill, (Ky. Ct. App. 2025).

Opinion

RENDERED: AUGUST 8, 2025; 10:00 A.M. TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals NO. 2024-CA-1122-MR

ISCO INDUSTRIES, INC. APPELLANT

APPEAL FROM JEFFERSON CIRCUIT COURT v. HONORABLE ERIC JOSEPH HANER, JUDGE ACTION NO. 20-CI-003079

THOMAS W. O’NEILL APPELLEE

OPINION REVERSING AND REMANDING

** ** ** ** **

BEFORE: ACREE, CETRULO, AND TAYLOR, JUDGES.

CETRULO, JUDGE: ISCO Industries, Inc. (“ISCO”) appeals from several orders

and the judgment and jury verdict of the Jefferson Circuit Court. All of the rulings

denied ISCO relief in its breach of contract and other related claims brought

against its former employee, Thomas O’Neill (“O’Neill”). After careful review of

the record and law, we reverse and remand, finding that further proceedings are

warranted on all claims. BACKGROUND

Many of the facts in this case are undisputed. O’Neill worked for

ISCO for nearly 22 years, where he eventually rose to the position of Chief Sales

Officer. On March 1, 2013, O’Neill signed a Stock Appreciation Rights (“SAR”)

Certificate and a Restrictive Covenant Agreement (“RCA”) with ISCO. The SAR

Certificate provided O’Neill with compensation in the form of stock appreciation

rights in exchange for confidentiality. The RCA prohibited O’Neill from

disclosing or disseminating proprietary and confidential information to third parties

and required O’Neill to return ISCO documents and property in the event that his

employment ended.

In 2018, O’Neill signed a SAR Exercise Election and Release

Agreement, and he received $783,674.05 as compensation for his vested stock

appreciation rights acquired through the SAR Certificate. As part of the SAR

Election and Release Agreement, O’Neill agreed that if he “materially violate[d]

any terms of [the] Agreement, ISCO [could] terminate any unpaid compensation

and [could] recoup the consideration already provided and seek damages and costs,

including reasonable attorney’s fees.”

On the evening of March 1, 2020, O’Neill accessed ISCO’s servers

and downloaded over 900 documents to his Dropbox account. The next day,

O’Neill resigned from his position with ISCO. That day, he returned his ISCO

-2- laptop and phone but nothing else ISCO-related. ISCO’s Vice President of IT

instructed O’Neill to return business-related materials, and O’Neill agreed, but no

definite timetable was set for the return. ISCO agreed to pay O’Neill through the

end of March, and O’Neill agreed to remain available, if needed, to assist during

the transitionary period related to his departure.

O’Neill retained counsel, and, on April 24, he joined other former

ISCO employees in objecting to a proposed settlement of pending litigation in

Delaware (the “Swain” case).1 Two internal ISCO emails were attached to the

Swain objections, which O’Neill later admitted to providing to his attorneys. Also

on that same date, O’Neill’s attorneys filed another ESOP class action case against

ISCO in the Western District of Kentucky (the “Best” case). O’Neill was not a

party in the Best case; however, certain information appeared in the Best complaint

that ISCO believes O’Neill provided.

Within days of those filings, ISCO contacted O’Neill and demanded

that he return all ISCO-related notes and documents. O’Neill complied and

returned ISCO notes/documents in early May.2 ISCO then filed the instant action

on May 21, 2020.

1 ISCO was not a party in the Swain case, but it involved alleged improprieties of ISCO’s Employee Stock Ownership Program (“ESOP”) trustee. 2 There is continuing debate about whether all documents were returned, but that debate is not relevant to our discussion in light of our rulings.

-3- PROCEDURAL HISTORY

In its complaint, ISCO alleged that O’Neill breached the RCA by: (i)

taking and disclosing confidential ISCO information to third parties; (ii) allowing

that information (or portions of it) to be used in public pleadings; and (iii) retaining

confidential materials and refusing to return them to ISCO. Additionally, ISCO

claimed the breach of the RCA resulted in a material breach of the SAR Certificate

and SAR Election (collectively the “SAR”). In conjunction with the breach of

contract claims, ISCO made claims for breach of fiduciary duty, unjust enrichment,

conversion, and breach of implied covenant of good faith and fair dealing.

O’Neill filed a motion to dismiss the complaint on October 1, 2020.

O’Neill argued that ISCO’s claims should be dismissed because they were seeking

to hold him liable for his participation in Swain and Best, and that this was barred

by the judicial statements privilege. In January 2021, the trial court entered an

order granting that motion, in part, ruling that the judicial statements privilege did

apply to the breach of contract claim made in connection with the Swain case. The

court did not initially extend the privilege to the breach of contract claim related to

the Best litigation. Later, however, on summary judgment, the court held O’Neill’s

alleged disclosures in the Best case were also protected by the judicial statements

privilege. Additionally, the court granted O’Neill’s motion in part as to ISCO’s

conversion claim. It held that ISCO’s conversion claim survived as applied to

-4- O’Neill’s retention of ISCO-related iPad notes but not as to any other ISCO-related

documents and/or materials.

The trial court noted “that the judicial statements privilege [did] not

apply to claims relating to O’Neill’s post-employment retention of documents,

finding that retention is conduct rather than a mere ‘statement’ to which the

privilege might apply.” The trial court also held that it was a jury question “as to

whether O’Neill’s alleged breach” of the RCA by retaining documents amounted

to a material breach of the SAR “such that ISCO might be entitled to recover SAR

compensation already paid to O’Neill.”

A four-day trial took place from March 19 to March 22, 2024, on

these now limited issues of whether O’Neill: (1) breached the RCA by retaining

ISCO documents/materials and failing to return them promptly, and whether such a

breach amounted to a material breach of the SAR; (2) breached his fiduciary duties

to ISCO; and (3) converted ISCO property (as to his ISCO-related iPad notes

only). While discussing final jury instructions before closing arguments, ISCO

objected to the jury not being instructed on compensatory damages and the absence

of a “missing evidence” instruction. The jury returned a verdict in O’Neill’s favor.

The trial court denied ISCO’s post-judgment motions. Now ISCO appeals those

orders and the jury verdict.

-5- ANALYSIS

First and foremost, ISCO argues the trial court erred by granting

O’Neill’s motion to dismiss and motion for summary judgment on its breach of

contract claims for O’Neill’s disclosure of ISCO’s confidential information. ISCO

argues that the judicial statements privilege does not apply because its claim is

based on O’Neill’s conduct and not statements, and because the privilege does not

protect against claims for intentional breaches of contract.3 Conversely, O’Neill

asserts that his conduct was communicative in nature, and the information

disclosed was material and relevant to those other judicial proceedings and thus

protected.

We review a motion to dismiss de novo and construe the facts “in

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