Fimco, Inc. v. Funk

• Decision Date: 24 October 2017
• Docket Number: No. C16-4109-LTS,C16-4109-LTS
• Parties: FIMCO, INC., Plaintiff, v. CHAD FUNK, Defendant.
• Court: U.S. District Court — Northern District of Iowa

FIMCO, INC., Plaintiff, v. CHAD FUNK, Defendant.

No. C16-4109-LTS

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF IOWA WESTERN DIVISION

October 24, 2017

ORDER ON MOTIONS FOR SUMMARY JUDGMENT

I. INTRODUCTION

This case is before me on a motion (Doc. No. 42) for summary judgment filed by defendant Chad Funk and a motion (Doc. No. 44) for partial summary judgment filed by plaintiff FIMCO, Inc. (FIMCO). Both motions are resisted and have been fully-briefed. I find no need for oral argument.

II. PROCEDURAL HISTORY

FIMCO filed this action in the Iowa District Court for Woodbury County on July 14, 2016. FIMCO alleges that Funk, a former employee, breached a non-compete agreement (Count I), misappropriated trade secrets (Count II) and breached certain fiduciary duties owed to FIMCO (Count III). Doc. No. 3 at 3-4. FIMCO seeks monetary damages and injunctive relief. Id.

Funk filed a notice (Doc. No. 2) of removal to this court on August 17, 2016, and filed an answer (Doc. No. 5) on August 24, 2016. In his answer, Funk admits that he signed the non-compete agreement, asserts that the court must apply Nebraska law and contends that the agreement is unenforceable under Nebraska law.

The parties filed their motions for summary judgment on June 30, 2017. Doc. Nos. 42, 44. On July 21, 2017, both parties resisted each other's motions. Doc. Nos. 48, 51. On August 4, 2017, Funk filed a revised brief (Doc. No. 53) in support of his motion. Each party then filed reply materials. Doc. Nos. 55, 57.

III. RELEVANT FACTS

Unless otherwise noted, the parties do not dispute the following facts:

A. The Parties' Relationship

Funk is a resident of Nebraska and has lived and worked in Nebraska at all times relevant to this dispute. FIMCO is an Iowa corporation with its principal place of business in South Dakota. Doc. No. 3 at ¶ 4. FIMCO recruited Funk through its employees based in South Dakota and Kansas, and negotiations for Funk's employment took place electronically between persons in Nebraska, Kansas and South Dakota. Doc. No. 54 at 18; Doc. No. 51-3 at 48. At the outset of his employment as a sales representative for FIMCO, and as a condition of that employment, Funk signed a non-competition and confidentiality agreement (agreement) in Columbus, Nebraska, on September 16, 2013. Doc. No. 51-3 at 47. FIMCO's President and COO, Dave Wipson, later signed the agreement at FIMCO's headquarters in South Dakota. Id. Among other things, the agreement provided as follows:

1. Non-Competition.

1.1 Employee acknowledges and recognizes the highly competitive nature of the businesses of Company and its affiliates and accordingly agrees as follows:

1.1.1 During employment and, for a period of one year following the date Employee ceases to be employed by Company (the "Restricted Period"), Employee will not, whether on Employee's ownbehalf or on behalf of or in conjunction with any person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise whatsoever ("Person"), directly or indirectly solicit or assist in soliciting in competition with Company, the business of any client or prospective client:

A. with whom Employee had personal contact or dealings on behalf of Company;

B. with whom employees reporting to Employee have had personal contact or dealings on behalf of Company; or

C. for whom Employee had direct responsibility.

1.1.2 During the Restricted Period, Employee will not directly or indirectly:

A. engage in any business that competes with the business of Company or its affiliates (including, without limitation, businesses which Company or its affiliates have specific plans to conduct in the future and as to which Employee is aware of such planning) in any geographical area that is within 100 miles of any geographical area where Company or its affiliates manufactures, produces, sells, leases, rents, licenses or otherwise provides its products or services (a "Competitive Business");

B. enter the employ of, or render any services to, any Person (or any division or controlled or controlling affiliate of any Person) who or which engages in a Competitive Business;

C. acquire a financial interest in, or otherwise become actively involved with, any Competitive Business, directly or indirectly, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; or

D. interfere with, or attempt to interfere with, business relationships (whether formed before, on or after the date of this Agreement) between Company or any of its affiliates and customers,clients, suppliers partners, members or investors of Company or its affiliates.

1.1.3 Notwithstanding anything to the contrary in this Agreement, Employee may, directly or indirectly own, solely as an investment, securities of any Person engaged in the business of Company or its affiliates which are publicly traded on a national or regional stock exchange or on the over-the-counter market if Employee (i) is not a controlling person of, or a member of a group which controls, such person and (ii) does not, directly or indirectly, own 5% or more of any class of securities of such Person.

Doc. No. 44-3 at 3. The restricted geographic region described in paragraph 1.1.2(A) includes South Dakota. Doc. No. 51-3 at 3.

Funk sold FIMCO's products in Iowa, Missouri and Nebraska. Id. at 20. Funk testified that during his time at FIMCO, he travelled to South Dakota "once a month, maybe once every two months" and that his employment never required travel or contact with employees in South Dakota beyond those limited trips. Doc. No. 54 at 19. However, Funk sold products to two South Dakota customers (Doc. No. 51-3 at 48, 53), used a company cell phone that was taxed in South Dakota (Id. at 48, 54-78) and communicated with employees working in South Dakota (Id. at 48, 50; Doc. No. 54 at 19). Funk resigned from FIMCO on February 15, 2016, and began working as a sales representative for Heartland Agriculture, LLC (Heartland), on February 29, 2016. Id. at 16.

B. FIMCO and Heartland

FIMCO is a national retailer and wholesaler of agricultural equipment and parts used to hold and apply liquid fertilizer, herbicide and pesticides to farmland. Doc. No. 44-3 at 83. The equipment sold by FIMCO includes large tanks (for the storage ofchemicals), trailers (to transport the tanks) and sprayers (to apply chemicals to farmland). Id. FIMCO also sells pumps and nozzles for applying chemicals. Id.

Heartland is based in Nebraska. Id. Heartland sells some product lines that overlap with FIMCO's and sells in the same geographic region as FIMCO. Doc. No. 43-4 at 57-58, 66-68; Doc. No. 54 at 19. Specifically, Heartland sells tanks, trailers, sprayers and parts that are similar either in design or purpose to those sold by FIMCO. Doc. No. 43-4 at 85. Heartland also sells self-propelled sprayers that FIMCO does not sell; however, Heartland and FIMCO compete for some of the same customers when it comes to sprayers. Id. at 74, 79, 85. Additionally, Heartland sells flotation equipment designed for self-propelled products which, according to Funk, are not in competition with the flotation equipment sold by FIMCO, as Heartland's flotation equipment cannot be substituted for FIMCO's flotation equipment. Doc. No. 42-6 at 15.

Funk states that Heartland initially hired him as a sales representative, but after Funk received a cease-and-desist letter from FIMCO, Heartland designated Funk as a "self-propelled sales rep" for what Funk and Heartland considered to be the remainder of the noncompete period agreement. Doc. No. 44-3 at 13-14. Funk sold Heartland products to a customer in March 2016, after the customer had unsuccessfully tried to purchase similar products from Funk just before he left FIMCO's employment. Doc. No. 44-3 at 34-35. However, Funk did not receive a commission for this sale. Id. at 43.

Other relevant facts are discussed below.

IV. SUMMARY JUDGMENT STANDARDS

Any party may move for summary judgment regarding all or any part of the claims asserted in a case. Fed. R. Civ. P. 56(a). Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and thatthe moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

A material fact is one "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Thus, "the substantive law will identify which facts are material." Id. Facts that are "critical" under the substantive law are material, while facts that are "irrelevant or unnecessary" are not. Id. "An issue of material fact is genuine if it has a real basis in the record," Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)), or "when 'a reasonable jury could return a verdict for the nonmoving party' on the question," Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir. 2005) (quoting Anderson, 477 U.S. at 248). Evidence that only provides "some metaphysical doubt as to the material facts," Matsushita, 475 U.S. at 586, or evidence that is "merely colorable" or "not significantly probative," Anderson, 477 U.S. at 249-50, does not make an issue of material fact genuine. Put another way, "'[e]vidence, not contentions, avoids summary judgment.'" Reasonover v. St. Louis Cnty., 447 F.3d 569, 578 (8th Cir. 2006) (quoting Mayer v. Nextel West Corp., 318 F.3d 803, 809 (8th Cir. 2003)). The parties "may not merely point to unsupported self-serving allegations." Anda v. Wickes Furniture Co., 517 F.3d 526, 531 (8th Cir. 2008).

As such, a genuine issue of material fact requires "sufficient evidence supporting the claimed factual dispute" so as to "require a jury or judge to resolve the parties' differing versions of...