Am. Semiconductor., Inc. v. Sage Silicon Solutions, LLC

• Decision Date: 28 April 2017
• Docket Number: Docket No. 43011-2015
• Citation: 395 P.3d 338,162 Idaho 119
• Court: Idaho Supreme Court
• Parties: AMERICAN SEMICONDUCTOR., INC., an Idaho Corporation, Plaintiff-Appellant, v. SAGE SILICON SOLUTIONS, LLC, an Idaho corporation; Zilog, Inc., a Delaware corporation; David Roberts; Gyle Yearsley; and William Tiffany, Defendants-Respondents.

162 Idaho 119
395 P.3d 338

AMERICAN SEMICONDUCTOR., INC., an Idaho Corporation, Plaintiff-Appellant,
v.
SAGE SILICON SOLUTIONS, LLC, an Idaho corporation; Zilog, Inc., a Delaware corporation; David Roberts; Gyle Yearsley; and William Tiffany, Defendants-Respondents.

Docket No. 43011-2015

Supreme Court of Idaho, Boise, February 2017 Term.

Filed: April 28, 2017
Rehearing Denied June 8, 2017

Steven B. Andersen, Andersen, Schwartzman, Woodard, Brailsford, PLLC, Boise, argued for appellant.

Gary L. Cooper, Cooper & Larson Chartered, Pocatello, argued for respondents Sage Silicon Solutions, LLC, David Roberts; Gyle Yearsley, and William Tiffany.

Andrea Jo Rosholt, Moffatt Thomas, Boise, argued for respondent Zilog, Inc.

EISMANN, Justice.

162 Idaho 122

This is an appeal out of Ada County from a judgment in an action brought by American Semiconductor, Inc., to recover damages arising out of Zilog, Inc., contracting with Sage Silicon Solutions, LLC, to perform engineering services for it, where that entity was formed by, and the services were provided by, employees of American Semiconductor, Inc. American Semiconductor, Inc., obtained a jury verdict awarding damages against the engineers and the entity they had formed, but it did not recover against Zilog, Inc. American Semiconductor, Inc., appeals, challenging the dismissal of one of its claims against Zilog, Inc., and seeking a new trial on damages against the engineers and their entity. We affirm the judgment of the district court.

I.

Factual Background.

David Roberts, Gyle Yearsley, William Tiffany, Russell Lloyd, and Evelyn Perryman were all engineers who worked for Zilog, Inc. ("Zilog"), at its facility in Meridian, Idaho, and they constituted the design team at that facility. They were all laid off in 2009 as part of a reduction in force and were later hired by American Semiconductor, Inc. ("American Semiconductor" or "ASI"). This layoff left only two design engineers employed by Zilog, both of whom were in California.

Mr. Roberts had been the design engineering manager when they were employed by Zilog, and he had been hired by David Staab, one of Zilog's two remaining design engineers. On October 21, 2009, Mr. Roberts e-mailed Mr. Staab to inform him that he and Messrs. Yearsley, Tiffany, and Lloyd had formed Sage Silicon Solutions to perform design work and that they would like to make a quote if Zilog had any design work. On January 28, 2010, Messrs. Roberts, Yearsley, Tiffany, and Lloyd and Ms. Perryman formed Sage Silicon Solutions, LLC ("Sage"), to provide those engineering services.

In 2009, Zilog began looking into the development of a microcontroller. By the end of 2010, the project was defined as developing a low-power microcontroller by enhancing an existing processor core that had been developed by Mr. Yearsley when he had been employed by Zilog. Mr. Staab was lead for that project. He contacted Mr. Roberts, and on February 15, 2011, Zilog entered into a contract with Sage to provide services in designing the microcontroller.

On September 23, 2011, American Semiconductor learned that the engineers were working on the project for Zilog, and it made a demand to Zilog that it cease using the engineers. Zilog ceased doing so around September 25, 2011, and two days later American Semiconductor terminated its relationship with all of the engineers except Mr. Lloyd. Zilog completed the project using its resources and engineering resources from its sister company.

162 Idaho 123

395 P.3d 342

On December 2, 2011, American Semiconductor filed this action against the five engineers, Sage, and Zilog. It alleged two claims for damages against only the engineers, six claims for damages against the engineers and Sage, and claims for declaratory and injunctive relief against all Defendants. Sage and the engineers filed a four-count counterclaim. On July 2, 2013, American Semiconductor filed a second amended complaint dropping Mr. Lloyd and Ms. Perryman as named defendants and adding claims against Zilog for intentional interference with economic expectancy, for intentional interference with contract, for violation of the Idaho Trade Secrets Act, and for unjust enrichment.

By the time of trial, American Semiconductor had two claims against Zilog: intentional interference with a contract and intentional interference with an economic expectancy. The district court dismissed the second claim after the close of the evidence, and the jury found no liability on the first claim.

By the time of trial, American Semiconductor had two claims that were only against Messrs. Roberts, Yearsley, and Tiffany: breach of their contractual duty not to compete with American Semiconductor and breach of their fiduciary duty to American Semiconductor. The jury found them liable on both of those claims, but did not award damages on those claims. American Semiconductor also had a claim of intentional interference with its economic expectancy of contracting with Zilog that was asserted against the three engineers and Sage, and the jury found all four of them liable on that claim and awarded damages in the sum of $195,175. Two of the counterclaims filed by Sage and the engineers were submitted to the jury. The jury found that American Semiconductor intentionally interfered with Sage's contract with Zilog, but awarded no damages, and it found no liability on the remaining counterclaim.

The district court awarded Zilog court costs and attorney fees and as between American Semiconductor and the Sage defendants, it determined that there was no prevailing party in the litigation. American Semiconductor then timely appealed.

II.

Did the District Court Err in Granting a Directed Verdict Dismissing the Claim Against Zilog of Intentional Interference with an Economic Expectancy?

The elements for a claim of intentional interference with an economic expectancy are:

(1) The existence of a valid economic expectancy; (2) knowledge of the expectancy on the part of the interferer; (3) intentional interference inducing termination of the expectancy; (4) the interference was wrongful by some measure beyond the fact of the interference itself (i.e. that the defendant interfered for an improper purpose or improper means) and (5) resulting damage to the plaintiff whose expectancy has been disrupted.

Highland Enterprises, Inc. v. Barker , 133 Idaho 330, 338, 986 P.2d 996, 1004 (1999). The knowledge requirement may be satisfied by proving either actual knowledge or knowledge of facts that would cause a reasonable person to believe that the economic expectancy exists. Wesco Autobody Supply, Inc. v. Ernest , 149 Idaho 881, 894, 243 P.3d 1069, 1082 (2010). The wrongful requirement may be established by proving either: "(1) the defendant had an improper objective or purpose to harm the plaintiff; or (2) the defendant used a wrongful means to cause injury to the prospective business relationship." Idaho First Nat'l Bank v. Bliss Valley Foods, Inc. , 121 Idaho 266, 286, 824 P.2d 841, 861 (1991). However, Zilog could not interfere with American Semiconductor's expectancy of contracting with Zilog. Cantwell v. City of Boise , 146 Idaho 127, 138, 191 P.3d 205, 216 (2008). The interferer would have to be a third party to the expected economic relationship. Id .

In its second amended complaint, American Semiconductor alleged that "by soliciting or accepting services from the Individuals [engineers] and Sage, Zilog tortiously interfered with American Semiconductor's prospective economic advantage, including depriving American Semiconductor of the opportunities to earn income from the Individuals' design services." The word Individuals

162 Idaho 124

395 P.3d 343

was defined to mean Messrs. Roberts, Yearsley, Tiffany, and Lloyd and Ms. Perryman. In its brief opposing Zilog's motion for summary judgment, American Semiconductor explained:

ASI's tortious interference with prospective economic advantage claim concerns the economic expectancy ASI had for Roberts, Yearsley, Tiffany, Lloyd, and Perryman's continued employment and loyalty and, as such, is not based upon ASI's prospective relationship with Zilog . Therefore, Zilog cannot defeat ASI's tortious interference claim by attempting to characterize itself as a party to the subject economic relationship.

(Emphases added.)

Even though American Semiconductor asserted that the alleged interference was "not based upon ASI's prospective relationship with Zilog," that was the only evidence of damages offered by American Semiconductor at trial. Its expert testified that he was asked to determine "what ASI has suffered if the jury determines that they would have otherwise gotten the project that's at issue in this case." He calculated that had Zilog contracted with American Semiconductor, it would have received $1,182,488 in revenues and that the loss of that contract resulted in damages from lost profits totaling $1,025,088. The total lost profits included $547,670 that would have been charged for...