Loftness Specialized Farm Equip., Inc. v. Twiestmeyer

• Decision Date: 11 February 2014
• Docket Number: No. 12–4049.,12–4049.
• Citation: 742 F.3d 845
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: LOFTNESS SPECIALIZED FARM EQUIPMENT, INC., Plaintiff–Appellee v. Terry TWIESTMEYER; Steven Hood; Twiestmeyer & Associates, Inc., Defendants–Appellants.

742 F.3d 845

LOFTNESS SPECIALIZED FARM EQUIPMENT, INC., Plaintiff–Appellee

v.Terry TWIESTMEYER; Steven Hood; Twiestmeyer & Associates, Inc., Defendants–Appellants.

No. 12–4049.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 23, 2013.

Filed: Feb. 11, 2014.

Victoria H. Buter, of Omaha, NE. The following attorney also appeared on the appellant brief; Thomas H. Dahlk, of Omaha, NE, for appellants.

Karna A. Berg, of Minneapolis, MN, for appellee.

Before GRUENDER, BEAM, and SHEPHERD, Circuit Judges.

GRUENDER, Circuit Judge.

Loftness Specialized Farm Equipment, Inc. (“Loftness”) brought this declaratory judgment action against Terry Twiestmeyer, Steven Hood, and Twiestmeyer & Associates, Inc. (“T & A”). Twiestmeyer, Hood, and T & A then asserted counterclaims against Loftness for, as relevant here, unjust enrichment and breach of two contracts. The district court granted Loftness's motion to dismiss the unjust enrichment counterclaim. The district court then granted Loftness's motion for summary judgment on the breach of contract counterclaims and entered judgment for Loftness on its claim for declaratory judgment. We vacate and remand in part and affirm in part.

I. Background

Loftness manufactures and sells farming equipment and has its principal place of business in Minnesota. Twiestmeyer and his wife own T & A, which markets and sells grain bagging equipment on behalf of Loftness. Hood's company, Hood & Company, Inc., serves as a sales representative for Loftness.

In 2007, Twiestmeyer and Hood approached Loftness with an idea for a new line of grain bag loaders and unloaders for Loftness to manufacture and sell. At that time, Twiestmeyer and Hood were selling grain bagging equipment that was manufactured in Argentina. This sales experience provided them with knowledge about the market for grain bagging equipment and insight into possible improvements to the Argentinian-made equipment. Twiestmeyer and Hood met with representatives of Loftness on May 15, 2007 to pitch this new product line. Prior to this meeting, Loftness did not manufacture grain bagging equipment and was not considering doing so. Before discussing Twiestmeyer and Hood's proposal, T & A and Loftness signed a non-disclosure agreement (“NDA”). Neither Twiestmeyer nor Hood are identified as parties to the NDA. Pursuant to the NDA, Loftness agreed it would “keep in confidence all Confidential Information” and would “not directly or indirectly disclose to any third party or use for its own benefit, or use for any purpose other than the Project, any Confidential Information it receives from [T & A].” Loftness further agreed not to use T & A's “confidential information in any way that could be construed as being competitive of [T & A's] business for a period of twenty (20) years after the effective date of this Agreement.” The NDA defined “Confidential Information” as “[s]uch information that [T & A] considers to be proprietary and/or confidential” and provided a non-exhaustive list of types of such information.

At the parties' initial meeting in May 2007, Twiestmeyer and Hood testified that they informed Loftness about the market for grain bagging equipment, the need for such equipment in the United States, their suggested improvements to the Argentinian-made equipment, and the timing for bringing such a product line to market. After this meeting, representatives of Loftness traveled to Arkansas and Nebraska to examine the Argentinian-made equipment. Loftness thereafter concluded that “[i]t appeared that there was [an] opportunity to sell this equipment. There w[ere] already Argentinean made machines being sold in North America, and it was obvious that there were shortfalls in those machines that [Loftness] could fix.” Loftness then developed a prototype of a grain bag unloader, which according to Twiestmeyer and Hood, incorporated several of their ideas, including the addition of two additional clutches to the Argentinian grain bag unloader. Loftness also developed a grain bag loader. Loftness began manufacturing and selling this equipment in 2008.

Following the May 2007 meeting, the parties discussed how Twiestmeyer and Hood would be compensated for their role in developing Loftness's new product line. These discussions culminated with an agreement signed on May 21, 2008 (the “May 2008 Agreement”) in which Loftness agreed to pay Twiestmeyer and Hood “a two percent (2%) override of the dealer net price on all grain bagging equipment and related products, except grain bags, sold by LOFTNESS during the term of the Agreement” (the “two-percent override payments”). The May 2008 Agreement specified a duration of two years.

Less than three weeks before the May 2008 Agreement was to expire, on May 3, 2010, representatives of Loftness called Twiestmeyer and Hood to inform them of a deal that Loftness had reached with Brandt Agricultural Products Limited (the “Brandt deal”). Pursuant to the Brandt deal, Loftness would manufacture grain bag loaders and unloaders for Brandt to sell as Brandt equipment, and Brandt would manufacture grain bag augers for Loftness to sell. Twiestmeyer and Hood testified that Loftness's representatives assured them that the Brandt deal would be a “good deal for all of us” and a “win-win” and that Loftness would continue making the two-percent override payments. Twiestmeyer and Hood testified that their understanding from their telephone conversations with Loftness's representatives was that the duration of the May 2008 Agreement had been extended to coincide with the remaining term of the NDA. At that time, approximately three years had passed since the NDA was signed, leaving a duration of approximately seventeen years. However, Twiestmeyer and Hood admit that they did not discuss explicitly the duration of any extension of the May 2008 Agreement with Loftness's representatives. Twiestmeyer testified that Loftness's representatives did not say “We are extending the May 2008 [A]greement” or anything of that nature.

Loftness continued making the two-percent override payments to Twiestmeyer and Hood until early 2011, even though the May 2008 Agreement's initial two-year term had expired in May 2010. In January 2011, a representative of Loftness advised Twiestmeyer and Hood of Loftness's intention to terminate the two-percent override payments. At approximately the same time, Twiestmeyer and Hood presented Loftness with a revised agreement providing for a continuation of the two-percent override payments. Loftness did not sign this revised agreement.

Loftness then brought this action, seeking a declaratory judgment that it has fulfilled its duties under the NDA and the May 2008 Agreement. Twiestmeyer, Hood, and T & A then asserted counterclaims against Loftness for unjust enrichment, breach of the NDA, and breach of the May 2008 Agreement. Loftness moved to dismiss these counterclaims for failure to state a claim, which the district court granted with respect to the unjust enrichment counterclaim. Loftness subsequently moved for summary judgment on the counterclaims for breach of the NDA and breach of the May 2008 Agreement. The district court granted Loftness's motion for summary judgment and entered judgment for Loftness on its claim for declaratory judgment. Twiestmeyer, Hood, and T & A timely appealed.

II. DiscussionA. Breach of the Non–Disclosure Agreement (NDA)

Twiestmeyer, Hood, and T & A first appeal the district court's grant of Loftness's motion for summary judgment on the counterclaim for breach of the NDA. They argue that Loftness breached the non-compete clause of the NDA by entering into the Brandt deal and by sharing information with Brandt without continuing to make the two-percent override payments. We review de novo a district court's grant of summary judgment, M & I Marshall & Ilsley Bank v. Sunrise Farms Dev., LLC, 737 F.3d 1198, 1199 (8th Cir.2013), affirming if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “The non-moving party receives the benefit of all reasonable inferences supported by the evidence, but has ‘the obligation to come forward with specific facts showing that there is a genuine issue for trial.’ ” Atkinson v. City of Mountain View, 709 F.3d 1201, 1207 (8th Cir.2013) (quoting Dahl v. Rice Cnty., 621 F.3d 740, 743 (8th Cir.2010)).

In granting summary judgment to Loftness, the district court applied a three-part test for the tort of misappropriation of trade secrets and confidential information. The district court derived this test from Cherne Industrial, Inc. v. Grounds & Associates, Inc., 278 N.W.2d 81, 89–90 (Minn.1979), which states the common law standard for the tort of misappropriation of trade secrets and confidential information, and from Strategic Directions Group, Inc. v. Bristol–Myers Squibb Co., 293 F.3d 1062, 1064 (8th Cir.2002), which recites the test for claims brought under the Minnesota Uniform Trade Secrets Act (“MUTSA”).¹ The district court determined that Twiestmeyer, Hood, and T & A's claim failed the third part of this test because they made no effort to keep their ideas and information confidential.

Twiestmeyer, Hood, and T & A's claim, however, is premised upon Loftness's alleged breach of the non-compete provision of the NDA, not the tort of misappropriation of trade secrets and confidential information. Minnesota law distinguishes between a claim based upon the tort of misappropriation of trade secrets and confidential information and one based upon the breach of a non-compete provision in a contract. In Cherne, for example, the plaintiff brought a claim for misappropriation of trade secrets and confidential information and a claim for breach of a covenant not to compete. 278 N.W.2d at 88–91. The Cherne court analyzed the two claims separately and decided the latter claim based upon the language of the relevant contract. Id. Furthermore, in Electro–Craft...