Criterion 508 Solutions, Inc. v. Lockheed Martin Servs., Inc.

• Decision Date: 29 September 2009
• Docket Number: No. 4:07–cv–00444–JAJ–CFB.,4:07–cv–00444–JAJ–CFB.
• Parties: CRITERION 508 SOLUTIONS, INC., Plaintiff, v. LOCKHEED MARTIN SERVICES, INC., Defendant.
• Court: U.S. District Court — Southern District of Iowa

806 F.Supp.2d 1078

CRITERION 508 SOLUTIONS, INC., Plaintiff,

v.LOCKHEED MARTIN SERVICES, INC., Defendant.

No. 4:07–cv–00444–JAJ–CFB.

United States District Court, S.D. Iowa, Central Division.

Sept. 29, 2009.

Gordon R. Fischer, Bradshaw Fowler Proctor & Fairgrove, Des Moines, IA, for Plaintiff.

David A. Tank, Megan C. Dempsey, William J. Miller, Dorsey & Whitney LLP, Des Moines, IA, for Defendant.

ORDER

JOHN A. JARVEY, District Judge.

This matter comes before the court pursuant to Defendant Lockheed Martin Services, Inc.'s (“Lockheed”) February 16, 2009, Motion for Summary Judgment (Dkt. No. 78). On August 30, 2007, Plaintiff Criterion 508 Solutions, Inc. (“Criterion”) filed a petition in Polk County Iowa District Court, which Lockheed removed to federal court on September 28, 2007 (Dkt. No. 1). Criterion filed a Brief in Resistance to Defendant's Motion for Summary Judgment on April 14, 2009 (Dkt. No. 95–2), as well as a Statement of Undisputed Facts (Dkt. No. 95–3) and a Response to Lockheed's Facts (Dkt. No. 95–4). On May 11, 2009, Lockheed filed a Response to Criterion's Facts (Dkt. No. 106) and a Reply Brief (Dkt. No. 112). Criterion responded with a Sur Reply on June 22, 2009 (Dkt. No. 121) and an Addendum to the Sur Reply on June 25, 2009 (Dkt. No. 123). For the reasons set forth below, the court grants summary judgment on Counts I, III, and VIII, and grants in part and denies in part summary judgment on Counts II and V.

I. STATEMENT OF MATERIAL FACTS ¹

Criterion is an Iowa company specializing in technological “accessibility solutions” in compliance with Section 508 of the Rehabilitation Act. Section 508 requires federal agencies to make all electronic and information technology accessible to persons with disabilities. Specifically, Criterion specializes in “independent third-party validation of Web sites, Web applications, software, PDF documents, and/or fillable forms.” (Pl. Facts, dkt. 95–3 at 1.) Criterion also offers on-site training and e-learning courses. (Pl. Facts, dkt. 95–3 at 2.)

Angy Brooks created an S-corporation called Brooks Web Services (“BWS”) in November 2000. BWS began working for Criterion in 2001 and performed Section 508 compliance work, including but not limited to, technical development, template creation, documentation, and technical training development. (Def. Appx. at 129.) BWS signed a Subcontractor's Services Agreement with Criterion on May 23, 2004. (Def. Appx. at 147–50.) The Agreement included a confidentiality provision, a “right to title” for all work product, and a restrictive covenant preventing direct or indirect competition for two years following termination. (Def. Appx. at 148–49.) Criterion gave BWS 60–days' notice of termination in May 2005. (Def. Appx. at 129.) On June 30, 2006, BWS filed suit against Criterion for allegedly unpaid invoices in Polk County District County. (Pl.'s Br. in Resistance, dkt. 95–2 at 9.) Criterion responded with counterclaims and the court ultimately granted judgment for Criterion. (Pl.'s Br. in Resistance, dkt. 95–2 at 18.) When BWS failed to pay the judgment, Criterion successfully pierced BWS's corporate veil and Brooks was held personally liable for the judgment against BWS on June 27, 2008. (Pl.'s Response to Def.'s Statement of Undisputed Facts, dkt. 95 at 2; Pl.'s Br. in Resistance, dkt. 95–2 at 22.)

During the 60–day notice period of termination and before Brooks' end date of July 2005, Brooks began looking for new employment. In May, almost immediately after Criterion gave her notice of termination, Brooks responded to a job advertisement that Global Commerce & Information (“GCI”) had posted. GCI partners with Lockheed Martin Services ² (“Lockheed”) “to locate and hire people who will provide services to Lockheed Martin.” (Def. Facts, dkt. 78–2 at 2; see also Def. Appx. at 160–207.) GCI sent Brooks' resume to Kathy Plourd, a Lockheed employee, on May 13, 2005. (Pl. Appx. at 9). Plourd interviewed Brooks ³ (Pl.'s St. of Undisputed Facts, dkt. 95–3 at 10) and on May 23, 2005, BWS entered into a Subcontractor Agreement with GCI. (Def. Appx. at 151.)

From that point on, Brooks performed various subcontractor assignments associated with Section 508 compliance for the Social Security Administration (“SSA”). (Pl.'s St. of Undisputed Facts, dkt. 95–3 at 12–14.) The SSA paid Lockheed a total of $345,723 for Brooks' work. (Pl.'s St. of Undisputed Facts, dkt. 95–3 at 14.) During Brooks' employment with Lockheed, Brooks was at all times bound by the terms of a two-year restrictive covenant. (Pl.'s St. of Undisputed Facts, dkt. 95–3 at 14.) Thus, Criterion contends that Brooks' Section 508 work product for SSA/Lockheed was a direct result of the trade secrets and proprietary information Brooks learned while working for Criterion. (Pl.'s St. of Undisputed Facts, dkt. 95–3 at 14.)

A. Material Facts Relating to the Nature of Brooks' Employment with Lockheed

The parties dispute whether Brooks was a full-time employee or an independent contractor for Lockheed. Lockheed argues that Brooks was not a Lockheed employee and therefore it is not vicariously liable for the tortious acts of independent contractors. Criterion disputes Lockheed's characterization of Brooks' employment and maintains that Lockheed is responsible for Brooks' actions because she was an employee.

Lockheed asserts that Brooks was an independent contractor because of the Subcontractor's Services Agreement she signed with GCI on May 23, 2004. The Agreement states that she is not an employee to GCI or to any of its clients, nor will she receive any employee benefits.⁴ Criterion admits that Brooks signed the agreement, but denies that it “implies Brooks was a contractor or subcontractor.” (Pl. Resp. to Def.'s Facts, dkt. 95–4 at 5.) Lockheed also asserts that Brooks received wages from GCI and GCI withheld employment taxes. ( See Def. Appx. at 139.) In her deposition, Brooks confirmed that GCI paid her for Lockheed-related work. (Def. Appx. at 212.) Additionally, Brooks stated that she used the SSA computers and worked at SSA offices, not at Lockheed offices. (Def. Appx. at 214.)

However, Criterion asserts that Brooks was, at all times, a full-time employee of Lockheed. Although GCI referred Brooks to Lockheed (Pl. Appx. at 9), Criterion states that Brooks' job interview was with Kathy Plourd, an employee for Lockheed, and not GCI. (Def. Appx. at 143.) Additionally, Brooks received work assignments from Lockheed and submitted her work for review by Plourd. Lockheed agrees that Plourd “acted as a supervisor and/or administrator to Brooks and ensured that Brooks' project for the SSA was fulfilled.” (Def. Facts, dkt. 78–2 at 4.) However, Lockheed states that while Plourd was a supervisor, she did not “tell [Brooks] how to do the work,” nor did she “dictate to [Brooks] the means or methods [Brooks] [was] to follow to accomplish the goals set forth in the project.” (Def. Appx. at 214A, 215.) Criterion objects and points to emails from Plourd to bolster its argument that Brooks was actually an employee of Lockheed. In an email from Brooks to Plourd, Brooks stated, “[S]ince I will be held responsible for the deliverables of the word order, I want to capture them in writing so that we're all in agreement as to what is expected from me....” (Pl. Mat. Facts, dkt. 95–3 at 10.) In another email from Brooks to Plourd, Brooks stated, “I WELCOME and ENCOURAGE your criticism and comments.” (Pl. Mat. Facts, dkt. 95–3 at 11) (emphasis in original.) Lastly, Brooks also sought Plourd's “input and feedback.” (Pl. Mat. Facts, dkt. 95–3 at 11.) Other factors also indicate Lockheed's involvement in financial matters. For example, Criterion contends that Brooks sought Lockheed's permission to attend a conference and to receive reimbursement from Lockheed for certain expenses. (Pl. Mat. Facts, dkt. 95–3 at 11.) Brooks' email signature line also included Lockheed's name and Brooks recorded her hours using the Lockheed timecard system. (Pl. Mat. Facts, dkt. 95–3 at 11.)

B. Material Facts Relating to Lockheed's Knowledge of Brooks' Criterion Work

Whether or not Lockheed knew about Brooks' restrictive covenant with Criterion remains in dispute. Lockheed claims that it did not intentionally interfere with Brooks' restrictive covenant because it did not know that Brooks had any contractual limitations from previous employment. Criterion asserts that Lockheed intentionally interfered with Brooks' restrictive covenant and that it hired Brooks to gain proprietary Criterion information. Criterion contends that Lockheed had ulterior motives in hiring Brooks because Lockheed knew it could gain the functional equivalent of Criterion's products by hiring Brooks to design new Section 508 products for clients.

Lockheed states that Brooks never “inform[ed] [GCI] that she had a restrictive covenant, noncompete agreement, or confidentiality agreement as part of her prior relationship and/or contract with Criterion.” (Def. Facts, dkt. 78–2 at 3; see also Def. Appx. at 212–13.) Brooks signed an Employee Consent Agreement which stated, “Contractor Employee acknowledges ... that he/she is not restricted by any employment or other agreement from providing services to Client, and understands that any misstatements or lack of candor by Contractor Employee of his/her qualifications or availability may be grounds for immediate termination by the Client.” (Def. Appx. at 157.) Lockheed also states that it never had a copy of Brooks' subcontractor services agreement with Criterion. (Def.'s Resp. to Pl.'s Statement of Disputed Facts, dkt. 106 at 21.)

Criterion denies everything related to Lockheed's claim that it was unaware of Brooks' employment agreement with Criterion. Criterion suggests an email from Brooks to Plourd provides evidence that Lockheed was aware of the restrictive covenant. In this email, Brooks stated, “If you recall, I worked for Criterion Solutions prior to coming to work as a contractor for [L...