Crst Van Expedited, Inc. v. Werner Enterprises

Citation479 F.3d 1099
Decision Date15 March 2007
Docket NumberNo. 04-56809.,No. 04-57129.,04-56809.,04-57129.
PartiesCRST VAN EXPEDITED, INC., Plaintiff-Appellant, v. WERNER ENTERPRISES, INC., doing business in California as C.L. Werner, Inc., Defendant-Appellee. CRST VAN EXPEDITED, INC., Plaintiff-Appellant, v. WERNER ENTERPRISES, INC., doing business in California as C.L. Werner, Inc., Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Schutte and Kathy A. Karcher, Jenner & Block LLP, Chicago, IL, were on the briefs.

Robert M. Waxman, Ervin, Cohen & Jessup LLP, Beverly Hills, CA, for the appellee. Andres Quintana, Ervin, Cohen & Jessup LLP, Beverly Hills, CA, was on the brief.

Appeals from the United States District Court for the Central District of California; Manuel L. Real, District Judge, Presiding. D.C. No. CV-04-04676-R.

Before A. WALLACE TASHIMA, CARLOS T. BEA, and SANDRA S. IKUTA, Circuit Judges.

BEA, Circuit Judge.

This case calls on us to decide whether, under California law, a corporation's allegations that its competitor lured away employees who had signed employment contracts, sufficiently states two common law tort claims and one state statutory claim.

Appellant CRST Van Expedited, Inc. ("CRST") sued Werner Enterprises, Inc. ("Werner"), claiming Werner had intentionally interfered with CRST's employment contracts by soliciting and hiring away truck driver employees whom CRST had trained at its expense. CRST additionally claimed Werner violated California Business and Professions Code § 17200 et seq., also known as the Unfair Competition Law ("UCL") and had interfered with CRST's prospective economic advantage. In a claim later informally withdrawn, CRST alleged Werner misappropriated CRST's trade secrets.

The district court granted Werner's Federal Rule of Civil Procedure 12(b)(6) motion to dismiss the first amended complaint, without reasoned analysis or explanation. The court also granted Werner's motion for attorneys' fees for CRST's bad faith filing of the trade secret claim. We now reverse in full the district court's dismissal of CRST's complaint. We affirm the district court's grant of attorneys' fees to Werner.

I. Factual and Procedural Background
A. Facts

CRST alleged that it makes use of a three-phase driver training program ("DTP") to help individuals become certified to be truck drivers without having to spend their own money on such certification. CRST enters into the Pre-employment Driver Training Agreement ("training agreement") with an individual who seeks certification. The training agreement specifies that CRST will pay for the first two phases of a student's training, which consist of driver training at an educational facility selected by the student and not affiliated with CRST, and attendance at an orientation program at a site selected by CRST. After a student has successfully completed the first two phases, CRST and the student decide whether to enter into the Driver Employment Contract ("employment contract"). If CRST and the student enter the employment contract, CRST pays for the third phase of training, which consists of hands-on driver training with a CRST lead driver. The employment contract provides, in pertinent part:

3. TERM OF EMPLOYMENT: The term of CRST's employment of Employee under this contract shall be for a period of one (1) year commencing as of the Effective Date subject to termination for Due Cause by CRST prior to the end of the term pursuant to Section 4 of this Contract. CRST's employment of Employee after this one (1) year period shall be at will and may be terminated at any time by either CRST or Employee. . . .

4. TERMINATION OF EMPLOYMENT: During the one (1) year term of this Contract, CRST's employment of Employee may only be terminated for the following reasons: (1) by CRST for Due Cause, effective immediately, (2) by mutual agreement of CRST and Employee, and (3) upon the death of Employee. For the purposes of this Contract, "Due Cause" means Employee's breach of this Contract and/or Employee's failure to satisfy or comply with or violation of any of the standards, requirements, obligations and conditions set forth in the Handbook. Additionally, CRST may terminate the Employee's employment without Due Cause during the life of this Contract. If Employee is terminated without Due Cause, under that circumstance, Employee is forgiven for the amount due under paragraph 6.

6. REIMBURSEMENT OF AMOUNT DUE: Employee hereby agrees that if during the one (1) year term of this Contract: (1) Employee breaches this Contract, or (2) Employee's employment is terminated for Due Cause, then the total amount of $3,600.00 will be immediately due and payable by Employee to CRST. . . .

(Emphasis added.) The contract also requires the employee to devote "full time" to his employment with CRST and not to take actions in conflict with CRST's interests.

Drivers Spencer and Chatman signed CRST's pre-employment driver training agreement and, after completing some of CRST's training program, signed CRST's employment contract.1 In February 2004, after Spencer and Chatman had been employed by CRST for a month, CRST received notice the two drivers had applied for employment with Werner after Werner requested information about them. CRST responded with a series of letters: one on February 9, 2004, advising Werner of the employment contract with Spencer; a second on March 1, 2004, advising Werner of CRST's contracts with Chatman and Spencer, and Werner's alleged interference with them; and a third on March 5, 2004, informing Werner that both Spencer and Chatman were employed pursuant to contracts with noncompetition clauses that would last another 300 days. On March 24, 2004, CRST learned that Spencer and Chatman had accepted truck driver positions with Werner.2 CRST alleged that Werner's hiring of Spencer and Chatman were "but two examples of Werner's ongoing course of conduct that involves waiting for CRST to train driver [sic] through the DTP, at CRST's expense, and then soliciting away those trained employees to work for Werner."

B. Procedural History

CRST's original complaint was filed in California Superior Court and alleged Werner was liable for intentional interference with contract, negligent interference with contract, and violation of the UCL. After Werner removed the case to federal court and filed a Rule 12(b)(6) motion to dismiss the complaint, CRST filed the First Amended Complaint ("FAC")3 alleging two new claims. The claims in the FAC were: (I) intentional interference with contract; (II) negligent interference with contract; (III) violation of the UCL; (IV) interference with prospective economic advantage; and (V) misappropriation of trade secrets. CRST sought compensatory damages, punitive damages, attorneys' fees, a permanent injunction against the continuing solicitation of CRST's and other competitors' employees, determination of unjust enrichment, costs of suit, and other relief deemed just. By stipulation, the parties then removed from the court's calendar, without prejudice, Werner's motion to dismiss the original complaint.

Werner's counsel informed CRST's counsel that it considered Count V, the misappropriation of trade secrets claim, to be brought in bad faith and would seek attorneys' fees were it not dismissed. CRST's attorneys replied without further elaboration that they would dismiss the claim if Werner gave CRST a "release." Werner refused and filed a new motion to dismiss the entire FAC under Rule 12(b)(6). CRST then filed a memorandum opposing the motion to dismiss, in which it conceded it was prepared to dismiss the misappropriation of trade secrets claim.

The district court held a hearing at which it orally ruled to dismiss the FAC in its entirety, with prejudice, without providing reasons for its ruling. The court later entered a written order that also failed to state any reason for the dismissal. CRST filed a timely notice of appeal of the order of dismissal.

Werner then filed a motion for attorneys' fees in the amount of $55,655 on the basis that CRST's claim for misappropriation of trade secrets was specious and brought in bad faith. The court granted attorneys' fees, but only in the amount of $8,750. CRST filed a timely notice of appeal of the attorney fee order. CRST's two appeals were consolidated. CRST appeals the district court's dismissal of Counts I(intentional interference with contract), III (violation of the UCL), and IV (interference with prospective economic advantage), and its grant of attorneys' fees.4

II. Standard of Review and Choice of Law

We review the district court's Rule 12(b)(6) dismissal of CRST's claims de novo. McGary v. City of Portland, 386 F.3d 1259, 1261 (9th Cir.2004). We review the district court's grant of attorneys' fees for an abuse of discretion. United States v. Stone Container Corp., 196 F.3d 1066, 1068 (9th Cir.1999).

Werner did not move to transfer the action to an Iowa court, nor did it invoke Iowa law in reliance on the Iowa forum selection clause in Chatman's contract. Rather, both parties relied on California law in contesting the motion to dismiss. Werner is correct that because CRST did not raise the issue of Iowa law in the court below it may not do so on appeal. Sovak v. Chugai Pharm. Co., 280 F.3d 1266, 1270 (9th Cir.2002) (citing Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Ass'n, 218 F.3d 1085, 1089 (9th Cir.2000)).

III. Intentional Interference with Contract (Count I)

In Count I, CRST alleged Werner intentionally interfered with CRST's employment contracts. California provides a cause of action against a defendant who interferes with a contract between the plaintiff and a third party. As the California Supreme Court has stated:

The courts provide a damage remedy against third party conduct intended to disrupt an existing contract precisely because the exchange of...

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