Opinion
Civil No. 99-805 (DWF/AJB)
July 19, 2001
James H. Kaster, Esq. and Nicholas G. B. May, Esq., Nichols, Kaster Anderson, Minneapolis, Minnesota appeared on behalf of Plaintiff.
Lewis A. Remele, Jr., Esq., Bassford, Lockhart, Truesdell Briggs, Minneapolis, Minnesota, appeared on behalf of Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on May 23, 2001, pursuant to the parties' cross-motions for summary judgment and Defendant's Motion to Stay. In his Amended Complaint, Plaintiff, a former division manager for the Defendant health insurance company, seeks relief including punitive damages, for Defendant's alleged breach of contract and violation of the Minnesota "whistle blower" statute, Minn. Stat. § 181.932. Defendant asserts three counterclaims: (1) misappropriation of trade secrets under Minn. Stat. § 325C.01, et seq., (2) tortious interference with contractual relations; and (3) unfair competition. For the reasons set forth below, Defendant's Motion to Stay is denied, Defendant's Motion for Summary Judgment is granted in part and denied in part, and Plaintiff's Motion for Summary Judgment is denied.
In footnote 1 of his Memorandum of Law in Response to Defendant's Motion for Summary Judgment, Plaintiff states that he is no longer pursuing his breach of contract claim given certain developments that have occurred through the discovery process. Therefore, the Court will include in its Order a dismissal with prejudice of Count 1 of Plaintiff's Amended Complaint.
Background
Plaintiff John F. Stockberger ("Stockberger") worked for Defendant Physicians Mutual Insurance Company ("Physicians Mutual"), a national health insurance provider, from December 1991 through January 1999. Mr. Stockberger was hired as an at-will employee to manage Defendant's office located in Edina, Minnesota.
Policy of Physicians Mutual for Medigap Insurance
In 1997, the U.S. Congress passed the Balanced Budget Act of 1997 ("the Act") which, in part, required private health insurance companies to provide supplemental health insurance to individuals ("disenrollees") whose Medicare or employer welfare benefit plan had been terminated or discontinued, regardless of the underwriting standards of individual insurers. The disenrollees intended to benefit from such "medigap" coverage were primarily senior citizens.
Plaintiff maintains that, during the summer of 1998, he had a discussion with Rod Pigg, an officer of Physicians Mutual, in which Mr. Stockberger stated that he interpreted the Act to require Physicians Mutual to accept applications from affected individuals beginning July 1, 1998. Plaintiff maintains that Mr. Pigg agreed with his interpretation at that time.
In October 1998, Mr. Stockberger was asked to speak at a clinic on issues of insurance, and he determined that the ramifications of the Act would be one relevant issue to cover. In preparation for the presentation, Mr. Stockberger contacted John Gross, Director of Health Care Policy for the Minnesota Commerce Department. Gross confirmed Stockberger's understanding of the Act stating that the Department's position was that applications for medigap coverage were to be accepted by private insurers as of July 1, 1998. As a result, Stockberger's agents began submitting applications to Physicians Mutual for guaranteed coverage of disenrollees in accordance with the July 1, 1998 date. Physicians Mutual, however, continued to apply its underwriting standards and denied coverage.
On November 13, 1998, Stockberger received a memorandum from Jeanine Jennings, an Agency Compliance Manager for Physicians Mutual, which set forth the company's interpretation of the Act as it had been determined by Phil Powell, the company's Director of Compliance. Jennings' memorandum stated that, until further notice, the issuance of medigap protection was to be evaluated according to the company's underwriting standards. The memorandum further acknowledged that the company's position was contrary to that of the Health Care Financing Agency ("HCFA"), a federal entity. Division managers were directed to address any questions to the Home Office, and they were further informed that any contact with the State Insurance Departments should be directed through the Home Office as well.
After receiving the memorandum, Stockberger again contacted John Gross at the Minnesota Department of Commerce. Stockberger informed Gross of Physicians Mutual's position and requested further clarification of the state's position. During this conversation, Stockberger indicated that he thought his company was making a mistake and that he was concerned about potential liability. Gross reiterated the State's position that private insurers were required to guarantee coverage as of July 1, 1998, and he sent to Stockberger a copy of the relevant code provisions.
Subsequent to his conversation with Gross, Stockberger then contacted Ms. Jennings to relay the information he had collected. Jennings then informed both Powell and Robert Omundson, the Senior Vice President of the Agency Group for Physicians Mutual, of her conversation with Stockberger. As a result, on December 1, 1998, Omundson sent an e-mail to Stockberger inquiring whether he "deliberately violated [the] specific directive" to "route all communication with the State Insurance Department regarding HMO disenrollees through the Home Office." Stockberger responded via e-mail on December 3, 1998, and explained that his October phone call was made in preparation for his presentation and that his recent contact was to request information relating to what he and Gross had previously discussed so that he could pass the information along to Jeanine Jennings. Omundson responded on December 3, 1998, stating in part:
. . . I understand you were somewhat harsh in your conversation with Jeanine which is unprofessional and uncalled for. One of the statements you supposedly made was that we could not legally prevent you from contacting the state dept of insurance. As a private individual and a lis'd agt, that is correct. However, in your status as an employee of this company, we have every right to require that you — in your management capacity — direct all communication (questions, clarifications, etc.) through the Home Office. If you have a major problem accepting that position while we try to work through these current issues, then we have a serious problem!! If you feel that you cannot support and execute the policies of this company as directed by the corporate leadership, I suggest we arrange a time for you fly [sic] in here next week and we will come to a resolution.
To reiterate, our current policy and position in regards to HMO disenrollees remains as stated in the memo you have in your possession. This posture may change tomorrow, next week or later this month. We will, as we promised, keep you posted. You will be notified immediately upon our decision to modify or change this policy/position.
In the meantime, we welcome all business your agents can obtain under the defined guidelines.
On December 9, 1998, Jennings issued another memorandum to all Division Managers which reiterated the company's policy on accepting medigap applications and its directive that all contact with state insurance agencies be directed through the Home Office. Both statements were written in bold type, and the first was underlined and the second was capitalized. At the same time, John Gross contacted Phil Powell by telephone and by letter dated December 15, 1998, to inform him of the state's position.
On December 24, 1998, Jennings issued a memorandum outlining the company's new policy on medigap insurance stating that all policies dated between January 1 and January 8, 1999, would be retroactively effective as of January 1, 1999. On the same day, Powell distributed a memorandum that outlined the general and state-specific policies for medicare supplemental insurance.
Stockberger's Termination
On January 13, 1999, Stockberger was terminated by Physicians Mutual. Physicians Mutual contends that Stockberger was terminated because he had engaged in the business of brokering the sale of viaticals, a business in which the company claims it prohibits its employees to engage. Upon his termination, Stockberger was requested to turn over all company books and records. When Stockberger began working with Physicians Mutual, he signed a Manager's Agreement dated December 5, 1991. It stated, in relevant part, that:
In brief, the viatical business essentially involves the sale of life insurance policies owned by individuals who are terminally ill. For example, a person who is terminally ill may need or value having a large amount of cash in the present and would therefore agree to selling the beneficiary status of their life insurance policy to an investor. If a policy is worth $500,000, the investor might pay the insured $250,000 to be named the beneficiary with the expectation that he would gain a 100% profit upon the impending death of the insured.
* * * 10. The Manager assumes full responsibility for the security and processing of all leads and other contact data now in his possession, care, or custody, or hereinafter placed in his possession, recognizing that the same are Company property held by him in a fiduciary capacity; and covenants that said data shall not be divulged to or shared with any other company or agency whatsoever, except that leads and other contact data may be furnished to duly authorized active agents of this Company. * * * 18. The Manager agrees that all books and records of every kind pertaining to the business of the Company and its said Field Office belong to and are at all times the sole property of the Company, . . . and will turn over the same intact to an accredited representative of the Company on demand or at termination of the employment created by this contract. * * *
During the course of his employment with Physicians Mutual, Stockberger's office had generated a database of policyholder information due in part to the corporate system that generated an information card each time a policy was issued. The cards were filed at the Edina Office and left accessible to Stockberger and his agents to facilitate service to their clients. In addition to this system, however, the information from the cards was transferred to a database kept on Stockberger's computer. Plaintiff maintains that Physicians Mutual was aware of this arrangement due to an audit that occurred during Stockberger's employment.
Upon Stockberger's termination, representatives from Physicians Mutual arrived at the Edina Office to facilitate the return of Stockberger's personal equipment and belongings, including his personal computer. Before the computer was returned, the Physicians Mutual representatives accessed the hard drive finding that it contained the policyholder database. The representatives made a copy of the database and returned the computer to Stockberger. Stockberger made no independent effort to give a copy of the database to Physicians Mutual.
In February 1999, Stockberger contacted Mutual of Omaha, another national insurance company, and by April 1999, he was managing agents for Mutual of Omaha. Stockberger then successfully recruited six agents with whom he had worked at Physicians Mutual to join him at Mutual of Omaha. He told the agents that Mutual of Omaha was in a stronger market position, particularly because Physicians Mutual policy prices were significantly higher. In order to facilitate the solicitation of customers, Stockberger provided the agents with policyholder information from his database of Physicians Mutual customers.
Agents for Physicians Mutual were at-will employees.
On April 2, 1999, Omundson of Physicians Mutual sent a letter to Stockberger demanding that he: (1) surrender any and all Physicians Mutual records, including policyholder information, regardless of their form; and (2) "cease and desist in [his] campaign to cause Physicians Mutual agents to terminate or breach their agreement with Physicians Mutual." The letter further informed Stockberger that the policyholder information was considered "confidential, trade secret, and proprietary" and that further use of such information would be considered unlawful competition and give rise to a claim for damages.
In April 1999, Mr. Stockberger brought the current lawsuit against Physicians Mutual in state court, alleging a violation of Minnesota's "whistle blower" act, Minn. Stat. § 181.932, and breach of contract. In May 1999, Physicians Mutual removed the action to federal court based on diversity jurisdiction and brought counterclaims alleging misappropriation of trade secrets under Minn. Stat. § 325C.01, et seq., tortious interference with contractual relations, and unfair competition.
In June 1999, the Physicians Mutual agents still working at the Edina office brought a separate action in state court against Mr. and Mrs. Stockberger, Mutual of Omaha, and Stockberger's agents for alleged violations of the Uniform Trade Secrets Act, tortious interference with prospective business relations and contractual relations, unjust enrichment, and unfair competition. Plaintiff Stockberger contends, based in part on the agents' supporting allegations set forth in the state court Second Amended Complaint, that the agents' state court action was encouraged by Physicians Mutual. In late January 2001, the agent plaintiffs amended their complaint to name Physicians Mutual as a defendant in the state court action. Physicians Mutual answered and asserted cross-claims against Stockberger, including misappropriation of trade secrets, intentional interference with contractual relations, unfair competition, fraud, conversion, and unjust enrichment. In addition, Physicians Mutual seeks declaratory relief from the state court to the effect that Stockberger's termination was valid and not in violation of Minnesota law.
Physicians Mutual was allowed to amend its counterclaim by adding a claim of fraud.
Discussion
1. Defendant's Motion to Stay
In general, the fact that duplicative litigation has been filed in both state and federal court does not preclude the exercise of jurisdiction. See Stanton v. Embrey, 93 U.S. 548, 554 (1876). Certainly, there is a risk that duplicative litigation could produce conflicting results and a significant expense of time and resources which could be avoided if the federal court were to dismiss or stay its proceedings as the state court action went forward. Yet, in Colorado River Water Conservation District v. United States, the Supreme Court held that such abstention is only appropriate in very limited, exceptional circumstances. 424 U.S. 800 (1976); see also Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26 (1983) ("the task is to ascertain whether there exist 'exceptional' circumstances, the clearest of justifications, that can suffice under Colorado River to justify the surrender of that jurisdiction"). Under Colorado River and Moses H. Cone, when deciding whether to abstain, a federal court must consider: (1) whether there is a res over which one court has established jurisdiction; (2) the inconvenience of the federal forum; (3) whether maintaining separate actions may result in piecemeal litigation, unless the relevant law would require piecemeal litigation and the federal court issue is easily severed; (4) which case has priority-not necessarily which case was filed first but a greater emphasis on the relative progress made in the cases; (5) whether state or federal law controls, especially favoring the exercise of jurisdiction where federal law controls; and (6) the adequacy of the state forum to protect the federal plaintiff's rights. U.S. Fidelity and Guar. Co. v. Murphy Oil USA, Inc., 21 F.3d 259, 263 (8th Cir. 1994) (citations omitted).
The Court finds no exceptional circumstances that require it to abstain from the current action. Given the nature of the dispute and the geographical location of both courts, the first two factors are irrelevant to the instant case. While both cases primarily revolve around issues of state law, there is no indication that either case involves a particularly unique state interest or that Congress or the state legislature has indicated that such claims are more properly litigated in a state forum. It is clear that the state claims are equally cognizable in a federal forum.
With respect to the priority of the two cases, the parties dispute if either is further along in the litigation process. It is of note that the federal case has been in discovery for two years and the Court is now considering dispositive motions. In addition, a trial ready date has been set for December 2001. While this factor is not determinative of the Court's decision, the significant investiture of time, effort and resources cannot be ignored, especially when it has been devoted toward claims that either are not part of the state action or have only recently been asserted.
While the state and federal actions may appear to clearly overlap, upon closer examination, however, it is clear that the parties and claims do not fully align. The most notable differences are that Stockberger's claims against Physicians Mutual, including his whistle blower claim, have not been asserted in state court, and the agents are not parties to the federal action. While Defendant argues that the whistleblower claim is only missing from the state court action because the Plaintiff is awaiting the outcome of this motion, the converse is just as possible that Defendant's duplicative claims will be adjusted upon the outcome as well. It is especially notable that indeed no overlap would exist had Physicians Mutual not asserted its state court cross-claims identical to those it had filed as counter-claims upon its removal of the earlier action to federal court.
Even to the extent that the two actions are duplicative, however, the Supreme Court has been clear that such repetition by itself is an insufficient basis for abstention. The somewhat "exceptional" use of procedure that has caused the actions to occur in their respective courts does not distract the Court from its conclusion that the two actions are merely duplicative without indication that piecemeal litigation is likely to result. Here the Court is confronted with disputes amongst a small nucleus of parties who have made informed choices of which claims to bring and where. There is no risk that parties will be unfairly bound by determinations of one court in their actions before another. Indeed, the parties have available to them numerous litigation tools, whether by stipulation of the parties or by court order, which could result in the two actions being heard by one court, whether state or federal. In fact, consolidation of the two cases may prove to be the most efficient manner of resolving the parties' disputes. This Court finds, however, that to abstain from the action before it would be an abuse of its discretion and a failure to meet its mandate to exercise jurisdiction over those cases properly before it. For these reasons, Defendant's motion to stay the current proceedings is denied, and the Court leaves to the parties the decision whether to pursue other procedural avenues to consolidate the two pending cases.
To the extent that Physicians Mutual argues for the application of the Younger abstention doctrine, the Court's decision not to abstain still stands. In Younger, the Supreme Court held that a federal court should generally refrain from interfering with an ongoing state criminal proceeding. Younger v. Harris, 401 U.S. 37 (1971). The application of Younger has been extended to apply to both criminal or civil proceedings; however, the prohibited interference relates primarily to requests for injunctive and declaratory relief. See Huffman v. Pursue, Ltd., 420 U.S. 592, 603-07 (1975). Given the nature of claims brought and the relief sought from the federal forum in this case, the Court finds that the more appropriate abstention doctrine to apply is Colorado River. Nonetheless, in order for a court to abstain under Younger, the following three factors must be true: (1) the action complained of constitutes the basis for an ongoing state judicial proceeding; (2) the proceedings implicate important state interest(s); and (3) an adequate opportunity exists in the state court proceedings to raise federal questions. Harmon v. City of Kansas City, Mo., 197 F.3d 321, 325 (8th Cir. 1999). In light of the explanation set forth above and in consideration of the Younger factors as they apply to this case, the Court finds no basis for abstention. There is no question that the state court action is an ongoing judicial proceeding. There is also no evidence before the Court that any party's claims could not be properly adjudicated before either court, although no constitutional or federal issues have been raised. More importantly, however, as the Court has already stated, it finds no important interest unique to the state. To abstain in this case would be to shirk its responsibility to hear a case properly before it, and the Court declines to do so. For these reasons, Defendant's motion to stay the current proceedings is denied, and the Court leaves to the parties the decision whether to pursue other procedural avenues to consolidate the two pending cases.
2. Cross-Motions for Summary Judgment
a. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and the inferences which may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enterprise Bank v. Magna Bank of Missouri, 92 F.3d 743, 747 (8th Cir. 1996). However, as the Supreme Court has stated, "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed to 'secure the just, speedy, and inexpensive determination of every action.'" Fed.R.Civ.P. 1. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986).
The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enterprise Bank, 92 F.3d at 747. The nonmoving party must demonstrate the existence of specific facts in the record which create a genuine issue for trial. Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials, but must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik, 47 F.3d at 957.
b. Issues
The Court now turns to the parties' motions for summary judgment. As it stated in its first footnote, the Court will dismiss Plaintiff's breach of contract claim with prejudice pursuant to his release of the claim as indicated in footnote 1 of his Memorandum of Law in Response to Defendant's Motion for Summary Judgment. The Court will address each of the other claims in turn.
i. Whistleblower Claim
Minnesota's "whistleblower" statute ("the Act") states in relevant part that: An employer shall not discharge . . . an employee . . . because:
(a) the employee, or a person acting on behalf of an employee, in good faith, reports a violation or a suspected violation of any federal or state law or rule adopted pursuant to law to an employer or to any governmental body or law enforcement official;
(b) the employee is requested by a public body or office to participate in an investigation, hearing, inquiry; or the employee refuses an employer's order to perform an action that the employee has an objective basis in fact to believe violates any state or federal law or rule or regulation adopted pursuant to law, and the employee informs the employer that the order is being refused for that reason.
Minn. Stat. § 181.932, subd. 1. In order to establish a prima facie case of retaliation under the Act, a plaintiff must establish: (1) that he engaged in conduct protected under the Act; (2) that he suffered from adverse employment action by the employer; and (3) that there is a causal connect between the two. Hubbard v. United Press Int'l, Inc., 330 N.W.2d 428, 444 (Minn. 1983). If the employer can provide a legitimate business reason for the adverse employment action, then the burden shifts to the employee to show that the employer's proffered business reason is pretextual and that the adverse action was in retaliation of the statutorily protected conduct. Id. at 445-46.
Physicians Mutual challenges Plaintiff's whistleblower claim by arguing that Stockberger's communications with the Minnesota Department of Commerce and with Physicians Mutual did not constitute reports and therefore no protected conduct occurred. While the Act does not provide a definition of "report," Minnesota courts have defined a report as a communication which relates or presents concerns in "an essentially official manner." Janklow v. Minnesota Bd. of Examiners for Nursing Home Administrators, 536 N.W.2d 20, 23 (Minn.Ct.App. 1995). A Court may determine, as a matter of law, that a communication does not qualify as a report. Rothmeier v. Investment Advisers, Inc., 556 N.W.2d 590, 593 (Minn.Ct.App. 1996), review denied (Minn. Feb. 26, 1997); see also Janklow, 536 N.W.2d at 23. In light of the evidence that has been presented by both parties, the Court cannot find that Stockberger's second phone call to John Gross of the Minnesota Department of Commerce and Stockberger's subsequent communication with Jeanine Jennings of Physicians Mutual did not constitute reports under the whistleblower statute and thus finds that significant questions of fact remain as to whether the alleged retaliation occurred.
While it appears that Stockberger may have begun to question the conflicting interpretations of the Balanced Budget Act of 1997, Stockberger's first phone call to Gross was admittedly in pursuit of information for his presentation and thus, the Court finds that this first phone call did not constitute a report. The Court cannot find, however, that Stockberger's second phone call to Gross did not qualify as a report. Stockberger initiated a telephone call to a state official he knew to be directly involved in the interpretation of and compliance with health insurance regulations. Stockberger clearly indicated to Gross the law that he thought was being violated, how it was being violated, and allegedly by whom. Even if he characterized in his e-mail to Omundson his second conversation with Gross as another inquiry, the effect of his phone call was to report the possibly illegal conduct. It is conceivable that Stockberger may have used the more benign characterization of an inquiry to limit the reaction from the company, possibly to protect himself or to assuage company concerns so that the inconsistent interpretations could be addressed in a calmer more cooperative atmosphere. Whatever the reason, it is clear to the Court that Stockberger's second phone call to Gross could be determined to be a report. Indeed, Jennings' and Omundson's reactions to their learning of the conversation could be interpreted to indicate that they perceived it to be a report.
The Court also cannot find that Stockberger's communications with Physicians Mutual, namely with Jennings, did not qualify as a report. Physicians Mutual maintains that such communications could not be deemed a report because the company was already aware of the conflicting interpretations. Rothmeier v. Investment Advisers, Inc., 556 N.W.2d at 592 (informing employer of potential violation when employer is already aware does not constitute "report"). However, Physicians Mutual has provided no evidence to support the assertion. While the company's behavior could certainly be characterized as defensive and possibly as an indication of their knowledge, the company still fails to point to any evidence to support its claim that it knew its interpretation was different from that of the state. Indeed, Physicians Mutual has stated that its employee, Powell, was already engaged in an ongoing dialogue with Gross before Stockberger made his report, however, such statements stand without any evidence before the Court to support them. Physicians Mutual does try to point to its statement in Jennings' November 13, 1998, memorandum where it acknowledges that its position differs from that of HCFA. However, HCFA is a federal agency, and the agency to which Stockberger made the report, collected the information, and to which the company ultimately responded is the Minnesota Department of Commerce.
With respect to the remaining elements of Stockberger's prima facie case of retaliation, factual disputes remain and currently preclude the Court's issuance of summary judgment on this claim. Both parties have failed to address the issue of whether Stockberger's practice of accepting applications for medigap insurance despite the company's directive, as alleged in his Amended Complaint, falls under the scope of Minn. Stat. § 181.932, subd. 1(c), which prohibits the retaliation against an employee who has refused to perform an action because he believed it would violate the law. Further, the Court cannot find, based on the evidence before it, that Defendant's explanation of Stockberger's termination is either valid or pretextual. Given the timing of the investigation of Stockberger's alleged involvement in the viatical business, the conduct of both parties surrounding the communications with the state, and the change in Physicians Mutual's policy, disputes of fact remain with respect to whether there is a causal connection between Stockberger's conduct and his termination. For these reasons the Court declines to issue summary judgment on Stockberger's whistleblower claim of retaliation.
ii. Misappropriation of Trade Secrets
a. Trade Secret"
Under the Minnesota Uniform Trade Secrets Act, a trade secret is defined as:
. . . information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Minn. Stat. § 325C.01, subd. 5. In determining whether an item is a trade secret, courts in this District require that a party establish the following three factors: (1) the information must not be generally known or readily ascertainable; (2) the information must derive independent economic value from secrecy; and (3) the party asserting the misappropriation must have made reasonable efforts to maintain secrecy of the item. Lasermaster Corp. v. Sentinel Imaging, a Div. of Sentinel Business Systems, Inc., 931 F. Supp. 628, 635 (D.Minn. 1996) (citations omitted). Although absolute secrecy is not required, the confidential measures must be "reasonable under the circumstances." Id. (citations omitted). If, under all the circumstances, the employee knows or has reason to know that the owner intends or expects the information to be secret, confidentiality measures are sufficient. Id. The issue of whether an employer has taken reasonable steps under the circumstances to maintain the secrecy of information is an issue of fact. Gronholz v. Sears, Roebuck Co., 869 F.2d 390, 393 (8th Cir. 1989) (citing Surgidev Corp. v. Eye Technology Inc., 828 F.2d 452, 455 (8th Cir. 1987)).
Stockberger challenges Defendant's claim of misappropriation, maintaining that the customer list is not a trade secret because Physicians Mutual took no steps to protect it. The Court disagrees and determines that factual disputes remain as to whether reasonable steps were taken to maintain the secrecy of the customer list. First, Stockberger signed the Manager's Agreement which stated that "all leads and other contact data" were "Company property" toward which he had a fiduciary duty and that such information was not to be shared with any other company or agency. The Agreement further stated that all books and records were also Company property and were to be returned upon demand or termination from employment. Second, in her deposition, Melissa Crawford of Physicians Mutual testified to the use of firewalls, passwords, and limited in-house authorization to access the Company's database of policyholders. While Stockberger points to the use of an index card system that was kept in an open file box in the Field Office, questions remain as to whether such a practice complied with company policy and to what extent access to such cards was limited. Defendant directs the Court to Gordon Employment, Inc. v. Jewell, in which the court found no trade secret because a file was left unlocked in a reception area and no policy of confidentiality or secrecy was ever discussed. 356 N.W.2d 738 (Minn.Ct.App. 1984). The Court finds the current facts to be distinct, however, given the existence of the above-mentioned confidentiality policies and procedures. Nonetheless, further questions arise such as the significance of the existence of Stockberger's personal computerized list of policyholders, the degree to which Physicians Mutual was aware of the list, and whether it was or should have been addressed in light of company policy and procedure.
b. Misappropriation"
Misappropriation is defined by statute as:
(i) [the] acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(ii) disclosure or use of a trade secret of another without express or implied consent by a person who
(A) used improper means to acquire knowledge of the trade secret; or
(B) at the time of disclosure or use, knew or had reason to know that the discloser's or user's knowledge of the trade secret was
(I) derived from or through a person who had utilized improper means to acquire it;
(II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use;
* * *
Minn. Stat. § 325C.01, subd. 3. "Improper means" is defined as "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic means." Minn. Stat. § 325C.01, subd. 2.
Stockberger contends that Physicians Mutual cannot establish misappropriation because: (1) the list of policyholders was not a trade secret; (2) Physicians Mutual knew that he was maintaining a list on his computer; and (3) Physicians Mutual returned the list to him after his termination. The Court finds Stockberger's argument to be wholly insufficient because it disregards the time period after Stockberger's termination when he allegedly made the choice to use the purported trade secrets in competition with Physicians Mutual. The fact that Physicians Mutual knew of and then returned Stockberger's list of policyholders are facts to be considered when determining whether the list was actually a trade secret. However, such facts will be considered in the totality of the circumstances, and as the Court has explained above, significant disputes remain. Moreover, even if it is determined that it was legitimate or not prohibited for Stockberger to maintain such a list during his employment, it does not necessarily follow that Physicians Mutual agreed to its use after Stockberger's termination. In light of the definition of misappropriation set forth in Minn. Stat. § 325C.01, subd. 3(ii)(B)(II), a trier of fact will likely have to consider such evidence as the Manager's agreement, company policies and procedures, and the nature of his conduct to determine whether Stockberger's use of the information constituted misappropriation and whether Physicians Mutual offered its implied consent.
For all the reasons explained above, the Court finds that significant questions remain as to whether the policyholder list was a trade secret and whether Stockberger's use of the list subsequent to his termination constituted misappropriation. Accordingly, the Court declines to grant summary judgment on Defendant's claim of misappropriation.
c. Tortious Interference With Contractual Relations
Physicians Mutual maintains that Stockberger tortiously interfered with its contractual relations with its agents and policyholders. In order to establish a claim of tortious interference a claimant must prove: (1) the existence of a contract; (2) the alleged tortfeasor's knowledge of the contract; (3) the intentional interference with the contract; (4) interference without justification; and (5) damages resulting from the interference. Kjesbo v. Ricks, 517 N.W.2d 585, 588 (Minn. 1994).
At issue in the instant case is whether Stockberger intentionally interfered without justification with the contracts between Physicians Mutual and its agents and policyholders. Essentially, Physicians Mutual rests its claims on the purported misappropriation and misuse of the policyholder list as improper leverage to recruit the agents and to retain the clients. Alternatively, Stockberger asserts that the "competitor's privilege" is a pure defense to these claims. See United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633 (Minn. 1982) (adopting Restatement (Second) of Torts § 768 which provides for special privilege for competitors against claims of tortious interference barring involvement of "wrongful means). Such an assertion assumes, however, that no misappropriation and misuse occurred.
While Stockberger does not contest Physicians Mutual's contentions that he used the policyholder list in contacting either the agents or the customers, the Court has yet to be presented with any evidence supporting these assertions. Because the Court has found that material factual disputes remain with respect to whether misappropriation and subsequent misuse occurred, the Court cannot find summary judgment appropriate for either of Physicians Mutual's claims of tortious interference. For these reasons, the Court declines to issue summary judgment on either of Physicians Mutual's claims of tortious interference.
d. Unfair Competition
As both parties have recognized, unfair competition is a tort without specific elements but that instead refers to "a general category of torts which courts recognize for protection of commercial interests." Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301, 305 (Minn.Ct.App. 1987). Stockberger argues that because the claims of misappropriation and tortious interference with contracts are forms of unfair competition, then Physicians Mutual should be precluded from asserting the additional and purportedly redundant claim of unfair competition. Minnesota courts, however, have held to the contrary. See, e.g., Dalco v. Dixon, 338 N.W.2d 437, 441 (Minn. 1983) (holding claim for unfair competition and unlawful use of confidential information as properly brought against both former employee and his current employer). Because material questions of fact remain with respect to whether: (1) a trade secret existed; (2) misappropriation occurred; and (3) Stockberger intentionally intervened in the relevant contracts without justification, the Court cannot issue summary judgment on the claim of unfair competition.
3. Conclusion
After close scrutiny of the procedural history of this case and the respective parties and claims involved in both the relevant state and federal court actions, the Court finds insufficient basis to abstain and thus declines to stay the current federal proceedings. After considering the relative merits of both parties' motions for summary judgment, the Court denies both motions finding that material disputes of fact remain for all claims with the exception of Stockberger's claim for breach of contract. Accordingly, Stockberger's claim for breach of contract is dismissed with prejudice. For the reasons stated, IT IS HEREBY ORDERED THAT:
Defendant's Motion to Stay (Doc. No. 66) is DENIED;
Defendant's Motion for Summary Judgment (Doc. No. 54) is GRANTED IN PART and DENIED IN PART such that:
a. Count I: Breach of Contract of the Amended Complaint (Doc. No. 33) is DISMISSED WITH PREJUDICE; and
3. Plaintiff's Motion for Summary Judgment (Doc. No. 34) is DENIED.