Gen. Irrigation, Inc. v. Advanced Drainage Sys., Inc.

Decision Date24 February 2022
Docket NumberCase No. 3:19-cv-00078
Citation601 F.Supp.3d 487
Parties GENERAL IRRIGATION, INC., Plaintiff, v. ADVANCED DRAINAGE SYSTEMS, INC., Defendant.
CourtU.S. District Court — District of North Dakota

Ryan C. McCamy, Conmy Feste, Ltd, Fargo, ND, for Plaintiff.

Brent J. Edison, Caren W. Stanley, Vogel Law Firm, Fargo, ND, Andrew H. King, Pro Hac Vice, Keith Shumate, Pro Hac Vice, Squire Patton Boggs LLP, Columbus, OH, for Defendant.

ORDER GRANTING, IN PART, AND DENYING, IN PART, MOTION FOR PARTIAL SUMMARY JUDGMENT

Daniel M. Traynor, United States District Judge

INTRODUCTION

[¶ 1] THIS MATTER comes before the Court on a Motion for Partial Summary Judgment filed by the Defendant, Advanced Drainage Systems, Inc., ("ADS") on April 9, 2021. Doc. No. 55. The Plaintiff, General Irrigation, Inc., ("General"), filed a Response on April 30, 2021. Doc. No. 56. ADS filed a Reply on May 14, 2021. Doc. No. 57. For the reasons set forth below, ADS's Motion for Partial Summary Judgment is GRANTED, IN PART, AND DENIED, IN PART . Counts I, and IV of the Complaint are DISMISSED .

BACKGROUND

[¶ 2] General is a North Dakota corporation in the business of designing, selling, and servicing agricultural drainage systems. General is headquartered in Oakes, North Dakota. ADS is registered to do business in North Dakota but is a Delaware corporation with its principal place of business in Hilliard, Ohio. ADS manufactures plastic drainage pipe and other water management products.

[¶ 3] In September 2015 Dana and Ryan Rosendahl ("Dana" and "Ryan" or "Rosendahls" collectively) were at the Big Iron farm show in West Fargo, ND. Dana is the President/CEO of General and Ryan is General's owner. Doc. Nos. 56-1 at ¶ 1, 56-2 at ¶ 1. While at the Big Iron, Dana and Ryan approached Gary Nordick ("Nordick"), ADS's regional Sales Representative, and Kris Sayre ("Sayre"), ADS's District Sales Manager, to talk about forming a distributor arrangement. Doc. Nos. 56-1, ¶ 2, 55-2 at ¶ 1, 55-4 at ¶ 1. According to Dana, after comparing General's business with smaller businesses in Minnesota, both Sayer and Nordick told Dana and Ryan they "would have no problem achieving similar sales volumes of or more than $1 million during [their] first year." Doc. No. 56-1 at ¶ 7.

[¶ 4] The Rosendahls claim Nordick, and Sayre told them all ADS sales in the region would go through General, with the exception of independent install contractors who had distribution agreements with ADS already in place. Doc. No. 56-2 at ¶ 2. Ryan states he specifically asked Nordick and Sayer "what happens when Quandt Brothers (as an example) calls Gary and says I want to order a load of drain tile, you're saying that sale will be run through General Irrigation?" Doc. No. 56-2 at ¶ 3. Ryan claims Nordick and Sayre both responded yes, all sales will go through General. Id. According to Dana, both Sayre and Nordick told the Rosendahls they would make 10% profit on ADS products because customers could not purchase ADS products for less than what General was paying. Doc. No. 56-1 at ¶ 8. The record is unclear, but at some point, Ryan claims Nordick told him the "farmer price" would be the lowest anyone could buy ADS products. Doc. No. 56-2 at ¶ 7. Dana claims, without providing specifics, Nordick and Sayre said General could offer the customer the lowest price possible. Doc. No. 56-1 at ¶ 23.

[¶ 5] Both Sayre and Nordick deny making any promise or representation to the Rosendahls regarding General's ability to offer the lowest prices to customers or orders for ADS products would be handled exclusively by General. Doc. Nos. 55-2 at ¶ 5, 55-4 at ¶ 5. Sayre and Nordick also state they had no intent to deceive General nor did they make any statements they knew or believed to be false. Doc. Nos. 55-2 at ¶ 6, 55-4 at ¶ 6.

[¶ 6] On October 12, 2015, General and ADS entered into an agreement to establish a dealership relationship between ADS and General. Doc. No. 55-3. The Agreement provides in relevant part:

Under this agreement ADS will sell General Irrigation drainage products at a standard rate of 10% below farmer list price. Other pricing may be obtained on a job by job basis. Terms of the sale will be stated on each invoice. ADS will assist in the promotion and marketing of drainage products for General Irrigation.
General Irrigation agrees to stock and distribute only ADS drainage products for use in the Agricultural Market.

Doc. No. 55-3, p. 2. In other words, ADS would sell its products to General at a 10% discounted rate in exchange for General agreeing to sell only ADS drainage products. See id. The Agreement did not expressly prevent ADS from selling its products directly to consumers. See id. General claims they entered into this agreement based on the claims made by Sayre and Nordick at the Big Iron show. Doc. No. 56-1 at ¶ 28.

[¶ 7] In order to advertise the new partnership between ADS and General, in early 2016, the Parties worked together on a joint marketing effort. Doc. No. 55-4 at ¶ 7. They worked together to prepare mailers and an invitation to a luncheon. Id. Emails were exchanged in which customer information was sent between ADS and General. Doc. Nos. 55-5, 55-6, 55-7, 55-10. The purpose of these exchanges was to generate a list of individuals ADS and General could invite to the luncheon.

[¶ 8] According to Nordick, the Rosendahls never made any indication the contents of the mailing lists were confidential or otherwise trade secrets or proprietary information. Doc. No. 55-4 at ¶ 11. Nordick also states no one at General asked ADS to keep that information confidential. Id. Furthermore, Nordick claims the information in the list was easily obtainable because ADS has sold products in North Dakota for numerous years and several names on the list were existing ADS customers. Doc. No. 55-4 at ¶ 12. ADS could use its own database to obtain many of the other names and addresses on the mailing list. Id. Both Nordick and Sayre state ADS did not acquire any trade secrets or confidential or proprietary information from General. Doc. Nos. 55-4 at ¶ 13, 55-2 at ¶ 7.

[¶ 9] Ryan states Nordick called to ask him about General's customers in the area Nordick did not know well. Doc. No. 56-2 at ¶ 17. Nordick needed this information before talking to those individuals. Id. According to Ryan, he and Nordick discussed what General's customers had already purchased, items in need of replacing, and areas of inquiry to focus on. Id. Ryan gave Nordick "detailed information" relating to General's business with Brian Vculek farm, German Farms, Thorpe Farms, Quandt, Paul Roney, Hansen Farm, and others. Id. at ¶ 18. Until sharing their customer list with ADS, General had not shared it with anyone. Id. According to Ryan, Nodrick stated ADS would use the information to advertise but co-branded with General to help increase customer contacts for General. Id. The record contains no reference or implication Nordick, Sayre, or anyone at ADS was specifically told or had reason to know General considered their customer list confidential. It is undisputed ADS could have found all of the relevant customer information easily by other means.

[¶ 10] After entering the agreement, sending out the mailings, and having the luncheon reception, Dana claims General learned Nordick sold directly to customers totaling $450,000 worth of sales. Doc. No. 56-1 at ¶ 23. Dana spoke with Nordick and explained he did not expect Nordick to use the customer information for ADS's benefit. Id. at ¶ 26. Dana was "shocked to learn that Nordick was diverting long-time General customers to make purchases directly through ADS." Id. According to Ryan, when pressed on this issue, Nordick told him customers did not want to buy drain tile from General. Doc. No. 56-2 at ¶ 5. But those same customers received quotes from General and continued purchasing irrigation and other products from General. Id. In 2016 and 2017, General's gross sales of ADS products was $175,363 and $103,048 respectively. Doc. No. 56-1 at ¶ 18. General claims its profits have come up short approximately $175,000. Doc. No. 56-1 at ¶ 22.

[¶ 11] General sent ADS a letter dated December 20, 2017, expressing General's dissatisfaction with the results of the Agreement. Doc. No. 56-8. General sought to change the terms of the written agreement, but to continue as an ADS distributor. Id. On March 6, 2018, Sayre responded by email saying ADS cannot change the terms of the Agreement at that time. Doc. No. 56-9. The email further states, "[i]t has never been our policy to force ADS customers to do business with our agricultural distribution partners in any geography." Id. Sayre then reassured General ADS had been trying to push their clients in the Oakes area to work with General but were being met with "firm resistance" from the clients. Id.

[¶ 12] Unsatisfied with the breakdown of the Agreement and relationship with ADS, General filed the Complaint in this case in State District Court on April 8, 2019. Doc. No. 1-2. ADS removed the State action to this Court on May 2, 2019 on diversity grounds. Doc. No. 1. General Irrigation is a citizen of North Dakota, ADS is a citizen of Delaware and Ohio, and the amount in controversy exceeds $75,000. Therefore, this court has jurisdiction pursuant to 28 U.S.C. § 1332. The Complaint brings five claims: (1) Misappropriation of Trade Secrets; (2) Breach of Contract; (3) Fraud/Deceit; (4) Unjust Enrichment/Quantum Meruit; and (5) Declaratory Judgment. ADS seeks summary judgment on Counts One through Four of the Complaint.

DISCUSSION
I. Summary Judgment Standard

[¶ 13] The Court will grant summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a) ; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "An issue is ‘genuine’ if the evidence is sufficient to persuade a reasonable jury to return a verdict for the...

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