Opinion
C.A. No. N16C-04-168-WCC
07-17-2019
OMNIMAX INTERNATIONAL, INC., Plaintiff, v. NICK DOWD, Defendant.
Seth T. Ford, Esquire (Argued); Troutman Sanders LLP, 600 Peachtree Street N.E., Suite 3000, Atlanta, GA 30308. Attorney for Plaintiff. Jennifer C. Jauffret, Esquire; Lori A. Brewington, Esquire; Richards, Layton & Finger, P.A., 920 N. King Street, Wilmington, DE 19801. Attorneys for Plaintiff. John A. Sensing, Esquire (Argued); Jesse L. Noa, Esquire; Potter Anderson & Corroon LLP, 1313 North Market Street, Wilmington, DE 19801. Attorneys for Defendant.
Defendant's Motion for Summary Judgment - DENIED IN PART, GRANTED IN PART
Defendant's Motion for Sanctions - DENIED
MEMORANDUM OPINION
Seth T. Ford, Esquire (Argued); Troutman Sanders LLP, 600 Peachtree Street N.E., Suite 3000, Atlanta, GA 30308. Attorney for Plaintiff. Jennifer C. Jauffret, Esquire; Lori A. Brewington, Esquire; Richards, Layton & Finger, P.A., 920 N. King Street, Wilmington, DE 19801. Attorneys for Plaintiff. John A. Sensing, Esquire (Argued); Jesse L. Noa, Esquire; Potter Anderson & Corroon LLP, 1313 North Market Street, Wilmington, DE 19801. Attorneys for Defendant. CARPENTER, J.
Before the Court are Defendant Nick Dowd's ("Defendant" or "Dowd") Motion for Summary Judgment and Motion for Sanctions. For the reasons set forth below, the Motion for Summary Judgment is DENIED IN PART AND GRANTED IN PART. Defendant's Motion for Sanctions is DENIED.
I. FACTUAL AND PROCEDURAL BACKGROUND
The crux of this case is whether Dowd breached customer and employee non-solicitation provisions in the Employee Agreement Regarding Restrictive Covenants ("the Agreement") he had with Plaintiff, OmniMax International, Inc. ("Plaintiff" or "OmniMax").
OmniMax is an international building products company that manufactures aluminum, steel, vinyl, and copper products. It is a Delaware corporation with its principal place of business in Georgia. From June 1, 1998 until February 3, 2014, OmniMax employed Defendant, who resides in Texas.
Id. ¶ 4; Answ. ¶ 4.
Compl. ¶ 1.
Compl. ¶ 2.
During Dowd's employment with Plaintiff, he held executive level management positions and acted as the Senior Vice President of Commercial Products. In this role, Defendant led the sales, marketing, and product development teams, which included Scott Bacon ("Mr. Bacon"), Plaintiff's Vice President of Commercial Sales.
Id. ¶¶ 5, 7.
Id. ¶ 7; Pl. Opp'n to Def. Mot. for Summ. J. at 7.
As an OmniMax employee, Dowd participated in its Executive Incentive Plan ("the EIP"). To participate in the EIP, Dowd was required to execute an Agreement containing several restrictive covenants, two of which are directly relevant to this dispute. First, the employee non-solicitation provision provides:
Compl. ¶ 13.
Id. ¶ 17. Dowd executed the Agreement on May 1, 2011.
See Compl., Ex. A (hereinafter "Agreement").
Employee understands and agrees that the relationship between the Company Group and each of its Protected Employees constitutes a valuable asset of the Company Group and may not be converted to Employee's own use. Employee agrees that during his employment and for the two (2) years following the End Date, Employee will not, directly or indirectly, on Employee's own behalf or as a Principal or Representative of any other Person, solicit or induce or attempt to solicit or induce any Protected Employee to terminate his employment with the Company or any member of the Company Group or to enter into employment with any other Person.Second, the customer non-solicitation provision states:
Employee understands and agrees that the relationship between the Company Group and each of its customers constitutes a valuable asset
of the Company Group and may not be converted to Employee's own use. Employee hereby agrees that during his employment and for two (2) years following the End Date, Employee will not, without the prior written consent of Company, directly or indirectly, on Employee's own behalf or as a Principal or Representative of any other Person, solicit, divert, take away or attempt to solicit, divert, or take away any customer for the purpose of providing or selling Company Services; provided, however, that the prohibition of this covenant shall apply only to customers with whom Employee had Material Contact on the Company or any member of the Company Group's behalf during the two (2) years immediately preceding the End Date.
"Protected Employee" is defined as "any employee of the Company or any member of the Company Group who was employed by the Company or any member of the Company Group at any time during Employee's employment and (a) with whom Employee had a supervisory relationship; (b) with whom Employee worked or communicated on a regular basis; or (c) from whom Employee obtained Trade Secrets or Confidential Information as a result of his employment." Agreement § 1(i).
Agreement § 2.5.
"Material Contact" is defined as "contact with any customer (a) with whom Employee had business dealings on the Company's or any member of the Company Group's behalf; or (b) for whom Employee was responsible for supervising, marketing or coordinating, directly or indirectly, the dealings between the Company or any member of the Company Group and the customer." Agreement § 1(f).
Agreement § 2.4.
In August 2013, Dowd left OmniMax. Under the terms of his departure, Defendant was required to be available to Plaintiff until February 3, 2014 ("the Separation Period"). Defendant continued to receive his base compensation during the Separation Period, and the restrictive covenants contained in the Agreement expired on February 3, 2016. On August 5, 2015, Metal Sales, a competitor of Plaintiff, announced that Dowd had been appointed its President.
Def. Mot. for Summ. J. at 5-6.
Id. at 6.
Id.
Several months later, on January 4, 2016, Mr. Bacon resigned from his position as Vice President of Commercial Sales at OmniMax. Mr. Bacon then began working for Metal Sales as Vice President of Sales and Marketing on or around January 28, 2016. Plaintiff allegedly could not find a suitable replacement for Mr. Bacon until May 2016, incurring $79,950 in recruiter fees, and an additional $20,000 in compensation for his replacement.
Compl. ¶ 32.
Id. ¶ 35.
See Sensing Aff., Ex. 8.
Dowd also allegedly engaged in communications regarding possible employment at Metal Sales with Donnie Arndt ("Mr. Arndt"), a salesman for Plaintiff. Mr. Arndt reported these conversations to OmniMax, and Plaintiff subsequently increased his salary to ensure it retained his services.
Id., Ex. 6.
Id., Ex. 8.
On April 19, 2016, Plaintiff filed its Complaint in this Court, claiming that Defendant breached the Agreement by recruiting Plaintiff's employees to work with him at Metal Sales and by soliciting OmniMax customers. Dowd removed the case to the United States District Court for the District of Delaware ("District Court") on June 14, 2016. OmniMax subsequently filed a Motion to Remand, which was granted on August 9, 2016. Defendant filed the instant Motion for Summary Judgment and the Motion for Sanctions in December 2018. This is the Court's decision on the Motions.
See Compl.
Def. Notice of Filing of Removal, Ex. 1.
II. DISCUSSION
Before the Court begins its analysis, it finds that Delaware law should be applied in the decision on Defendant's Motions. Section 3.2 of the Agreement contains a choice of law provision, which states that Delaware law will govern disputes arising from the Agreement "without regard to the principle of conflicts of laws." Accordingly, "Delaware courts will generally honor a contractually-designated choice of law provision so long as the jurisdiction selected bears some material relationship to the transaction." Here, the Court finds that Delaware, as OmniMax's state of incorporation, has a significant interest regarding the Agreement between Plaintiff and Defendant, and no other state has a greater material relationship. The Plaintiff is headquartered in Georgia, the Defendant resides in Texas, and the Plaintiff's work territory encompassed all of North America. Therefore, the Court sees no basis to disturb the parties' choice of law set forth in the Agreement.
Agreement § 3.2.
J.S. Alberici Constr. Co. v. Mid-West Conveyer Co., 750 A.2d 518, 520 (Del. 2000).
A. Motion for Summary Judgment
In reviewing a Motion for Summary Judgment pursuant to Rule 56 of the Superior Court Civil Rules, the Court must determine whether any genuine issues of material fact exist. Specifically, the moving party bears the burden of showing that there are no genuine issues of material fact so that he is entitled to judgment as a matter of law. The Court must view all factual inferences in a light most favorable to the non-moving party. Summary judgment will not be granted if there is a material fact in dispute or further inquiry into the facts would be appropriate.
Super. Ct. Civ. R. 56(c); Wilm. Trust Co. v. Aetna, 690 A.2d 914, 916 (Del. 1996).
Moore v. Sizemore, 405 A.2d 679 (Del. 1979).
Alabi v. DHL Airways, Inc., 583 A.2d 1358, 1361 (Del. 1990).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. Super. 1962), rev'd in part on procedural grounds and aff'd in part, 208 A.2d 495 (Del. 1965).
i. Employee Solicitation Claim
Defendant argues that he is entitled to summary judgment on Plaintiff's claim for breach of the Agreement's employee non-solicitation provision because he did not engage in any prohibited conduct during the Separation Period. More specifically, Dowd contends that he did not solicit or induce Mr. Bacon or Mr. Arndt to join him at Metal Sales because they first approached Defendant about possible employment.
Def. Mot. for Summ. J. at 20.
Id.
In response, Plaintiff argues that the Court should deny Defendant's Motion for Summary Judgment because Dowd did solicit OmniMax's employees. According to OmniMax, Defendant's argument that he took no actions to elicit Mr. Bacon or Mr. Arndt's interest in Metal Sales is "untenable and, at a minimum establishes genuine disputes of material fact." Plaintiff claims that Dowd acknowledged he "chased" Mr. Bacon, and that Defendant even recommended Mr. Bacon to the CEO of Metal Sales. Further, Plaintiff contends that Mr. Arndt told OmniMax he was contacted by Defendant, and the two had an in person meeting about possible employment at Metal Sales.
Pl. Opp'n to Def. Mot. for Summ. J. at 25.
Id. at 26.
Id. at 25.
Id.
It is clear to the Court that there are disputed facts surrounding how the Defendant's alleged interactions with Mr. Bacon and Mr. Arndt actually occurred, and consequently, whether he engaged in prohibited conduct under the terms of the Agreement. These underlying factual issues cannot be resolved at the summary judgment stage. Therefore, Defendant's Motion for Summary Judgment on the employee solicitation claim is denied.
ii. Customer Solicitation Claim
Defendant also claims that he is entitled to summary judgment on Plaintiff's claim for breach of the Agreement's customer non-solicitation provision because OmniMax cannot show that he engaged in any improper contact. Furthermore, Dowd argues that Plaintiff has failed to establish a causal connection between his alleged actions and OmniMax's purported loss in sales.
Def. Mot. for Summ. J. at 21.
Id. at 27.
In response, Plaintiff contends that the evidence demonstrates it suffered an injury because Defendant directed his sales staff to "go attack" OmniMax customers, and this subsequently led to "decreased sales to OmniMax and increased sales to Metal Sales." Plaintiff further argues that it is not required to have written documents showing its sales decreased because of Dowd's actions or to present expert testimony as to the relationship of Defendant's conduct to its losses.
Pl. Opp'n to Def. Mot. for Summ. J. at 30.
Id. at 31.
To succeed on a breach of contract claim, Plaintiff must demonstrate with reasonable certainty that Defendant's breach caused the alleged loss. In spite of allowing additional discovery, the Court finds that Plaintiff has been unable to causally connect Dowd's alleged improper contact with OmniMax customers, either personally or at his direction, that specifically led to a reduction in sales. Furthermore, OmniMax's sales are based on projects instead of year-long contracts, and it has not identified any projects lost due to Defendant's alleged customer solicitation.
Tanner v. Exxon Corp., 1981 WL 191389, at *1 (Del. 1981).
The Court is unwilling to accept OmniMax's argument that Dowd's alleged conduct resulted in its lost sales simply because Defendant worked for a competitor whose sales increased while Plaintiff's sales decreased. The Plaintiff relies on Defendant's employment at Metal Sales as proof that he was "tak[ing] actions designed to divert and take away OmniMax's customers." However, Defendant's position alone is not sufficient evidence to prove improper conduct by Dowd, as defined by the terms of the Agreement.
Pl. Opp'n. to Def. Mot. for Summ. J. at 29.
In essence, the Plaintiff's case is built on three foundational assumptions (a) the Defendant took the position with Metal Sales; (b) it has evidence suggesting he directed his sales staff to solicit OmniMax customers during the non-solicitation time period; and (c) it has suffered reduced sales.
However, even if the Court accepts OmniMax's assumptions, they have no evidence to prove or even to circumstantially suggest that its damages (i.e., loss of sales/profit) has a direct relationship to Dowd's conduct. In fact, Plaintiff has not conducted any investigation or obtained any information from the customers for whom it asserts gave business to Metal Sales to its detriment. Further, Omnimax has no expert who could perhaps correlate its losses to the conduct of Metal Sales personnel. The customers here are in the same small universe of businesses that all in the building products trade would solicit for business. Without such causal connection, the Plaintiff is unable to establish it suffered any damages from Defendant's conduct.
Accordingly, the Court believes that Plaintiff has failed to establish a breach of the Agreement's customer non-solicitation provision and Defendant's Motion for Summary Judgment on the customer solicitation claim is granted.
B. Motion for Sanctions
When reviewing a Motion for Sanctions, this Court must determine whether a party has engaged in specific conduct in violation of Superior Court Civil Rule 11(b). Matters presented to the Court must have factual evidentiary support, or are likely to have evidentiary support after a reasonable opportunity to investigate. If the Court finds that a party is in violation of the requirements of Rule 11(b) after notice and reasonable opportunity to respond, the Court on its own initiative may impose an appropriate sanction on the party.
Super. Ct. Civ. R. 11(b).
Super. Ct. Civ. R. 11(c).
Dowd argues that Plaintiff engaged in willful fraud on the District Court, this Court, and Defendant when it made a false representation that OmniMax's damages were less than $75,000. Defendant also contends that Plaintiff knew its damages actually exceeded $75,000 at the time of its sworn declaration to the District Court. As a result, Dowd is requesting that this case be dismissed and an award of attorneys' fees be granted. In the alternative, Defendant requests that, in addition to an award of attorneys' fees, Plaintiff's maximum recovery be capped at $74,999 based on false representations to the District Court, or $13,500 based on failure to amend discovery responses.
Def. Mot. for Sanctions at 1-2.
Def. Mot. for Sanctions Hr'g Tr. at 6.
Def. Mot. for Sanctions at 6.
Id.
In response, OmniMax admits that it "mistakenly omitted recruiter fees when identifying damages prior to remand..." Plaintiff also argues that discovery later revealed additional damages associated with the customer solicitation claim, which it was unaware of at the time of remand. OmniMax contends that this Court should deny Defendant's Motion for Sanctions and grant it reasonable attorneys' fees for responding.
Pl. Opp'n to Def. Mot. for Sanctions at 1.
Id. at 4. --------
Since the Court has granted Defendants' Motion for Summary Judgment on the customer solicitation claim, the alleged significant damages associated with this claim are no longer relevant. Furthermore, the parties have agreed to stipulate that damages for Defendant's alleged breach of the employee non-solicitation provision would be capped at $74,999. Although the Court has other concerns about how Plaintiff's case has been managed throughout the course of this litigation, it does not believe that OmniMax's conduct in calculating its damages was an intentional act in bad faith that would warrant an imposition of sanctions. Therefore, Defendant's Motion for Sanctions is denied.
III. CONCLUSION
For the reasons set forth in this Opinion, Defendant's Motion for Summary Judgment is DENIED IN PART AND GRANTED IN PART. Defendant's Motion for Sanctions is DENIED.
IT IS SO ORDERED.
/s/_________
Judge William C. Carpenter, Jr.