CGB Diversified Servs., Inc. v. Baumgart

• Decision Date: 01 December 2020
• Docket Number: Case No. 1:20-cv-00031-SRC
• Citation: 504 F.Supp.3d 1006
• Parties: CGB DIVERSIFIED SERVICES, INC., Plaintiff, v. Jeff BAUMGART, et al., Defendants.
• Court: U.S. District Court — Eastern District of Missouri

504 F.Supp.3d 1006

CGB DIVERSIFIED SERVICES, INC., Plaintiff,

v.Jeff BAUMGART, et al., Defendants.

Case No. 1:20-cv-00031-SRC

United States District Court, E.D. Missouri, Southeastern Division.

Signed December 1, 2020

Charles B. Leuin, Lauren Tortorella, Benesch Friedlander, Chicago, IL, John W. Grimm, Limbaugh Firm, Cape Girardeau, MO, for Plaintiff.

Alice Marie Aten, Sarah E. S. Carlson, Dentons US LLP, St. Louis, MO, Dan Beale, Dentons US LLP, Atlanta, GA, John R. Vales, Dentons US LLP, Short Hills, NJ, for Defendant Jeff Baumgart.

Sarah E. S. Carlson, Dentons US LLP, St. Louis, MO, Dan Beale, Dentons US LLP, Atlanta, GA, John R. Vales, Dentons US LLP, Short Hills, NJ, for Defendants NAU Country Insurance Company, QBE Insurance Corporation.

Memorandum and Order

STEPHEN R. CLARK, UNITED STATES DISTRICT JUDGE

This matter comes before the Court on [42] Defendants' Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6). The Court grants, in part, and denies, in part, the Motion.

I. Background

Diversified alleges that it fell victim to an elaborate scheme launched by its competitors and former employees to steal Diversified's trade secrets and raid its employees. Doc. 38 at ¶ 1. Diversified alleges that Jeff Baumgart and other former Diversified employees departed the company and immediately began working for NAU Country Insurance Company, one of Diversified's competitors in the crop insurance industry, and QBE Insurance Corporation, Country's corporate affiliate. Id. at ¶¶ 1–6; Doc. 43 at pp. 1–2. Baumgart and the other employees purportedly misappropriated Diversified's trade secrets and now use them to solicit business from Diversified's customers. Doc. 38 at ¶¶ 4–6. Diversified further contends the former employees solicited other Diversified employees to join Country and QBE Insurance. Id. at ¶¶ 5–6. Diversified claims that these actions violated the non-compete, non-solicitation, and confidentiality provisions in the former employees' employment agreements. Id. at ¶ 3. Diversified also alleges that Country and QBE Insurance schemed with the former Diversified employees to acquire Diversified's trade secrets and solicit Diversified customers and employees, all while knowing these actions violated the employment agreements Baumgart and the other former employees had with Diversified. Id. at ¶¶ 1–6.

Based on Defendants' conduct, Diversified asserts eleven claims, including: 1) breach of contract (against Baumgart); 2) misappropriation of trade secrets pursuant to the Defend Trade Secrets Act— 18 U.S.C. § 1832 ; 3) misappropriation of trade secrets pursuant to the Missouri Uniform Trade Secrets Act— MO. REV. STAT. 417.450 et seq. ; 4) breach of fiduciary duty (against Baumgart); 5) tortious interference with the Baumgart Agreement (against Country); 6) tortious interference with Diversified's contractual relations (against Country); 7) tortious interference with Diversified's business relationships and/or expectancy with its customers and agents (against Country); 8) tortious interference with the Baumgart Agreement (against QBE Insurance); 9) tortious interference with Diversified's contractual relations (against QBE Insurance); 10) tortious interference with Diversified's business relationships and/or expectancy with its customers and agents (against QBE Insurance); and 11) civil conspiracy (all Defendants). Doc. 38. Defendants move to dismiss all claims for failure to state a claim. Doc. 42.

II. Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a claim for "failure to state a claim upon which relief can be granted." The notice pleading standard of Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a plaintiff to give "a short and plain statement showing that the pleader is entitled to relief[.]" To meet this standard and to survive a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotations and citation omitted). This requirement of facial plausibility means the factual content of the plaintiff's allegations must "allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Park Irmat Drug Corp. v. Express Scripts Holding Co. , 911 F.3d 505, 512 (8th Cir. 2018) (quoting Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ). The Court must grant all reasonable inferences in favor of the nonmoving party. Lustgraaf v. Behrens , 619 F.3d 867, 872-73 (8th Cir. 2010). Ordinarily, only the facts alleged in the complaint are considered for purposes of a motion to dismiss; however, materials attached to the complaint may also be considered in construing its sufficiency. Reynolds v. Dormire , 636 F.3d 976, 979 (8th Cir. 2011).

When ruling on a motion to dismiss, a court "must liberally construe a complaint in favor of the plaintiff[.]" Huggins v. FedEx Ground Package Sys., Inc. , 592 F.3d 853, 862 (8th Cir. 2010). However, if a claim fails to allege one of the elements necessary to recover on a legal theory, the Court must dismiss that claim for failure to state a claim upon which relief can be granted. Crest Constr. II, Inc. v. Doe , 660 F.3d 346, 355 (8th Cir. 2011). Threadbare recitals of a cause of action, supported by mere conclusory statements, do not suffice. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 ; Bell Atlantic v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Although courts must accept all factual allegations as true, they are not bound to take as true a legal conclusion couched as a factual allegation. Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (internal quotations and citation omitted); Iqbal , 556 U.S. at 677–78, 129 S.Ct. 1937.

III. Allegations in complaint

Under Iqbal / Twombly , the Court assumes the veracity of Diversified's well-pleaded factual allegations. Iqbal, likewise, does not require the Court to state here every well-pleaded factual allegation contained in the Complaint. The Court therefore provides the relevant factual allegations for the purposes of this Order.

Diversified alleges that Baumgart began working at Diversified around May 2001 and signed an employment agreement as a condition of employment. Doc. 38 at ¶¶ 28–29. This agreement purportedly included non-competition, customer non-solicitation, and confidentiality provisions. Id. at ¶ 29. In 2019, Baumgart also signed a document acknowledging receipt of the Employee Handbook, which among other things, required Baumgart to acknowledge that he would not disclose confidential information. Id. at ¶¶ 42–47.

Baumgart worked for Diversified for 18 years, eventually becoming National Marketing Manager. Id. at ¶¶ 2, 29. In that role, Baumgart had access to Diversified's strategy for marketing, pricing, sales, agent communication, customer and agent services, and customer information and profiles. Id. at ¶ 30. He also had the responsibility of developing, implementing, and supporting Diversified's policies and practices for protecting its trade secrets and proprietary information. Id. at ¶ 31.

Diversified alleges that three other former employees, Michael Gauer, Rich Morrison, and Kane Adams, worked in concert with Baumgart to carry the alleged "scheme" to steal Diversified's trade secrets and raid its employees. Id. at ¶¶ 2–4. Gauer, Diversified's Upper Midwest Marketing Regional Manager at the time of his departure in January 2020, began working for Diversified in September 2015. Id. at ¶ 48. On September 8, 2015, Gauer signed an employment agreement that purportedly contained non-solicitation, non-compete and confidentiality provisions. Id. at ¶ 49. Morrison, Diversified's Manager of Marketing Services at the time of his departure, began working at Diversified in or about October 2000. Id. at ¶ 57. As a condition of his employment, he signed an employment agreement purportedly containing non-solicitation, non-compete, and confidentiality provisions. Id. at ¶ 58. Adams, Diversified's West District Marketing Director at the time of his departure, began working at Diversified in 2007. Id. at ¶ 66. As part of his continued employment with Diversified, Adams signed an employment agreement on December 15, 2017, purportedly containing non-solicitation, non-compete, and confidentiality provisions. Id. at ¶ 67.

Around December 12, 2019, Baumgart, Adams, Gauer and his brother, Pat Gauer, met with Country personnel to discuss employment at Country and/or QBE Insurance. Id. at ¶ 75. In mid-December 2019, Morrison met with Country personnel to discuss employment with Country and/or QBE Insurance. Id. Jim Korin, the President of Country, asked Baumgart to ask his team for information for Country's "modeling." Id. at ¶¶ 76–77. On December 20, 2019, Korin, through Baumgart, requested information from Gauer, Adams, and Morrison, as well as three other Diversified employees—Larry Copes, Jimmy Armistead, and Brian Long—to facilitate Country's hiring process and "modeling." Id. at ¶ 77. The requested information included "key members base and bonus compensation for last year, "[Copes's] and [Armistead's] agreements," and "ideas regarding [Baumgart's] team." Id.

By December 20, 2019, Country had one or more of Diversified's employment agreements and had reviewed its contents. Id. at ¶ 78. On January 7, 2020, Doug Jakway, Senior Vice President, General Counsel, and Corporate Secretary of Country, requested the home addresses and personal telephone numbers of Baumgart, Gauer, Morrison, Adams, Copes, Armistead, and Long. Id. at ¶¶ 76, 79. Korin later personally made offers of employment to Baumgart, Morrison, Gauer, Adams, Copes, and Armistead. Id. at ¶¶ 81–82.

On January 8, 2020, while still employed by Diversified, Baumgart told Gauer that he predicted their business at Country would be worth $500 million by the third year. Id. at ¶ 98....