Baker v. Tremco Inc.

• Decision Date: 16 July 2008
• Docket Number: No. 29A02-0711-CV-1001.,29A02-0711-CV-1001.
• Citation: 890 N.E.2d 73
• Court: Indiana Appellate Court
• Parties: Brennen BAKER, Appellant/Plaintiff/Counterclaim Defendant, and Moisture Management, Appellant/Third-Party Defendant, v. TREMCO INCORPORATED and Rick Gibson, Appellees/Defendants/Counterclaim Plaintiffs/Third-Party Plaintiffs.

890 N.E.2d 73

Brennen BAKER, Appellant/Plaintiff/Counterclaim Defendant, and Moisture Management, Appellant/Third-Party Defendant, v. TREMCO INCORPORATED and Rick Gibson, Appellees/Defendants/Counterclaim Plaintiffs/Third-Party Plaintiffs.

No. 29A02-0711-CV-1001.

Court of Appeals of Indiana.

July 16, 2008.

Andrew W. Hull, Daniel K. Burke, Hoover Hull LLP, Indianapolis, IN, Attorneys for Appellants.

Mark J.R. Merkle, Anthony W. Mommer, Krieg DeVault LLP, Indianapolis, IN, Attorneys for Appellees.

OPINION

BRADFORD, Judge.

Appellant/Plaintiff/Counterclaim Defendant Brennen Baker and Appellant/Third-Party Defendant Moisture Management appeal the trial court's grant of partial summary judgment in favor of Appellees/Defendants/Counterclaim Plaintiffs/Third-Party Plaintiffs Tremco Incorporated and Rick Gibson. Baker and Moisture Management contend that the trial court erroneously granted summary judgment to Tremco and Gibson with respect to their claims that (1) Baker's covenant not to compete with former employer Tremco is unenforceable, (2) Tremco tortiously interfered with Baker's business activities, (3) Tremco wrongfully discharged Baker, (4) Gibson defamed Baker, and (5) Tremco violated Indiana's blacklisting statute. We affirm in part, reverse in part, and remand with instructions.

FACTS AND PROCEDURAL HISTORY

Tremco manufactures and sells various products for the construction and maintenance of roofing systems. Weatherproofing Technologies Incorporated ("WTI") is a wholly-owned subsidiary of Tremco's, engaged in general contracting work, including the installation of roofing systems. On July 19, 1991, Baker and Tremco entered into a "Representative's Agreement" ("the Agreement"), in which Tremco agreed to employ Baker to "sell and promote the sale of such [Tremco] products as may be assigned to him to sell, in such areas or to such accounts as may be assigned by [Tremco]." Appellees' App. p. 32. Tremco was identified in the Agreement as "the Company," which was defined as "Tremco incorporated, its successors, and assigns[.]" Appellees' App. 32.

The Agreement included, inter alia, a noncompete clause, which provides in relevant part as follows:

15. a. [Baker] agrees that in consideration of his employment and the investment by [Tremco] in his training, that during the term of his employment and for a period of 18 months after the termination of his employment under this Agreement for any reason (such period not to include any period of violation or period of time required for litigation to enforce the covenants this paragraph 15), [Baker] will not directly or indirectly, for himself, or as an agent of employee of, or on behalf of or in conjunction with, any Person, or as a partner in any partnership, or as a shareholder, director or officer of any corporation, or otherwise:

i) in any business, for any purpose or in any place, employ or solicit for the purpose of employment any natural person employed by [Tremco]; or

ii) compete with [Tremco] in any aspect of any Applicable business in the areas in which the Applicable business is being conducted by [Baker] on the date of termination of [Baker's] employment or in which it has been conducted by [Baker] during the 24 month period which precedes such termination date; or

iii) solicit or attempt to solicit any Applicable business, or accept any Applicable business, from any Customer.

Appellees' App. p. 35. The Agreement defined "Applicable Business" as "any business being conducted by [Tremco] at the date upon which [Baker's] employment with [Tremco] terminates or which [Tremco] has conducted within the 24 month period preceding such termination date." Appellees' App. p. 32.

During the course of Baker's employment with Tremco, he was trained in the promotion of goods and services through the Association of Educational Purchasing Agencies (which is an association of school systems that cooperatively purchased goods and services), in roof asset management programs, and in thermal imaging that would reveal areas of a roof in need of repair. Baker's duties at Tremco were to sell field inspection services, roof asset management services (including patch and repair services), and roofing supplies and products. Baker received commissions on sales of WTI services and Tremco products.

On January 5, 2004, Baker resigned his position with Tremco, due, according to his resignation letter, to "breaches in verbal agreements, and what [Baker felt had] been unethical behavior of Tremco Sales Management[.]" Appellees' App. p. 37. In late 2004, Baker, who had formed Moisture Management, began contacting some of the same customers, in the same territory, that he had serviced while at Tremco, providing roof consulting, waterproofing consulting, patch and repair services, and roof asset management services.

On November 23, 2004, after Tremco sent Baker a cease-and-desist letter, he filed a complaint against Tremco and Rick Gibson, his former supervisor, for declaratory judgment and money damages. Baker sought to have the noncompete clause declared unenforceable and sought damages for Tremco's alleged tortious interference with his business, alleged violation of Indiana's "blacklisting" statute, and alleged breach of the Agreement by Tremco.¹ Tremco counter-sued Baker and brought in third-party defendant Moisture Management, alleging breach of the Agreement by Baker, tortious interference by Moisture Management, and a trade secrets violation by Baker.

Tremco and Gibson filed a motion for partial summary judgment, contending that no genuine issue of material fact remained with respect to Baker's claim against Tremco that the noncompete clause was unenforceable, Baker's defamation claim against Gibson, and Baker's claims against Tremco of tortious interference, blacklisting, and wrongful discharge. On May 17, 2007, the trial court granted summary judgment in favor of Tremco and Gibson, concluding that "Judgment is hereby entered in favor of [Tremco and Gibson] and against Baker on all claims alleged in Baker's Complaint, and Baker shall have and recover nothing from [Tremco and Gibson]." Appellants' App. p. 695.

DISCUSSION AND DECISION

Standard of Review

When reviewing the grant or denial of a summary judgment motion, we apply the same standard as the trial court. Merchants Nat'l Bank v. Simrell's Sports Bar & Grill, Inc., 741 N.E.2d 383, 386 (Ind.Ct. App.2000). Summary judgment is appropriate only where the evidence shows there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Id.; Ind. Trial Rule 56(C). All facts and reasonable inferences drawn from those facts are construed in favor of the nonmoving party. Id. To prevail on a motion for summary judgment, a party must demonstrate that the undisputed material facts negate at least one element of the other party's claim. Id. Once the moving party has met this burden with a prima facie showing, the burden shifts to the nonmoving party to establish that a genuine issue does in fact exist. Id. The party appealing the summary judgment bears the burden of persuading us that the trial court erred. Id.

I. Covenant Not to Compete

Baker contends, inter alia, that he did not violate the covenant not to compete with Tremco because he completed only with Tremco's subsidiary WTI, not with Tremco itself. As an initial matter, the Agreement provides that it "shall be governed by the internal laws of the State of Ohio." Appellants' App. p. 641. Ohio courts have established that "restrictive covenants not to compete are disfavored by law." Clark v. Mt. Carmel Health, 124 Ohio App.3d 308, 706 N.E.2d 336, 340 (1997). Further, a restrictive covenant will "be enforced only to the extent that the restraints imposed thereby are reasonably necessary to protect the employer's legitimate business interests." Brentlinger Ents. v. Curran, 141 Ohio App.3d 640, 752 N.E.2d 994, 998 (2001) (citing Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 325 N.E.2d 544, 546-48 (1975)).

Baker contends that he could not have violated the noncompete clause because he did not compete against Tremco but only against its subsidiary, WTI, and the two are completely separate entities. Tremco maintains that competing against WTI is equivalent to competing against Tremco. Essentially, Tremco is asking to have its own corporate structure disregarded. Generally, a parent corporation and its subsidiary are considered to be separate legal entities, even if the subsidiary is wholly owned by the parent corporation. LeRoux's Billyle Supper Club v. Ma, 77 Ohio App.3d 417, 602 N.E.2d 685, 687-88 (1991). Although we acknowledge that, in one circumstance recognized by Ohio law, the corporate entity may be disregarded and a parent corporation and its subsidiary may be treated as a single entity, this is not one of those cases. LeRoux's, 602 N.E.2d at 687-88. A corporate structure may be disregarded, and the parent held liable for the actions of a subsidiary, when a party can show that the parent and subsidiary are "fundamentally indistinguishable." Univ. Circle Research Ctr. Corp. v. Galbreath Co., 106 Ohio App.3d 835, 667 N.E.2d 445, 448-49 (1995).

This case, of course, does not fit into that framework, as Tremco, and not an outside party, is asking us to disregard its own corporate structure.² Our research, however, has revealed no Ohio cases in which a corporate structure was disregarded under similar circumstances, and we find no warrant in Ohio law for crafting a completely new exception to Ohio's general rule that corporations and subsidiaries are separate entities. We conclude, therefore, that WTI and Tremco are separate entities as a matter of law. Because all agree that Baker competed directly only with WTI and not Tremco, he did not violate the noncompete clause of the Agreement. See Russell v. Birmingham Oxygen Serv., Inc., 408 So.2d 90, 93 (Ala.1981) (concluding that parent company could not enforce noncompete...