Loftness Specialized Farm Equip., Inc. v. Twiestmeyer

• Citation: 818 F.3d 356
• Decision Date: 15 March 2016
• Docket Number: No. 15–1420.,15–1420.
• Parties: LOFTNESS SPECIALIZED FARM EQUIPMENT, INC., Plaintiff–Appellee v. Terry TWIESTMEYER; Steven Hood ; Twiestmeyer & Associates, Inc., Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

818 F.3d 356

LOFTNESS SPECIALIZED FARM EQUIPMENT, INC., Plaintiff–Appellee

v.Terry TWIESTMEYER; Steven Hood ; Twiestmeyer & Associates, Inc., Defendants–Appellants.

No. 15–1420.

United States Court of Appeals, Eighth Circuit.

Submitted: Oct. 19, 2015.

Filed: March 15, 2016.

Thomas Harlan Dahlk, argued, Victoria H. Buter, on the brief, Omaha, NE, for Defendants–Appellants.

Karna A. Berg, argued, Minneapolis, MN, for Plaintiff–Appellee.

Before WOLLMAN, BEAM, and GRUENDER, Circuit Judges.

GRUENDER

, Circuit Judge.

Loftness Specialized Farm Equipment, Inc. ("Loftness") brought a declaratory judgment action against Terry Twiestmeyer, Steven Hood, and Twiestmeyer & Associates, Inc. ("TAI") involving contracts associated with the development, manufacture, and sale of grain-bagging equipment. Twiestmeyer, Hood, and TAI then asserted counterclaims against Loftness for, among other things, breach of two contracts: an agreement providing for two-percent override payments ("Override Agreement") on grain-bagging-equipment sales and a non-disclosure agreement ("NDA"). The district court granted Loftness's motion for summary judgment on the breach-of-contract counterclaims and entered judgment for Loftness on its claim for declaratory judgment. Twiestmeyer, Hood, and TAI appealed. This court affirmed the district court's grant of summary judgment to Loftness on the counterclaim for breach of the Override Agreement and affirmed the dismissal of the unjust enrichment counterclaim, but we vacated and remanded the grant of summary judgment on the counterclaim for breach of the NDA. Loftness Specialized Farm Equipment, Inc. v. Twiestmeyer, 742 F.3d 845, 851 (8th Cir.2014)

("Loftness I "). On remand, the district court again granted Loftness's motion for summary judgment on the claim for breach of the NDA. Twiestmeyer, Hood, and TAI again appeal. We vacate the grant of summary judgment and remand for further proceedings.

I.

Loftness is a corporation that manufactures and sells farm-machine attachments. Terry Twiestmeyer owned TAI, an independent sales representative that sold farming equipment on behalf of Loftness and other manufacturers. Hood's company, Hood & Company, Inc., also served as a sales representative for Loftness.

Twiestmeyer and Hood sold grain-bagging equipment manufactured in Argentina. This experience provided them with knowledge about the market for grain-bagging equipment and insight into possible improvements to the Argentinian-made equipment. In 2007, Twiestmeyer and Hood approached Loftness with an idea for a new line of grain-bag loaders and unloaders for Loftness to manufacture and sell. Loftness did not manufacture grain-bagging equipment prior to this time.

At the May 2007 initial meeting to discuss the potential new product line, Loftness and TAI executed the NDA. The NDA's "Protection of Confidential Information" provision states:

[Loftness] acknowledges that [TAI] claims its Confidential Information as a valuable and unique asset ... [Loftness] agrees that it will keep in confidence all Confidential Information, and that it will not directly or indirectly disclose to any third party or use for its own benefit, or use for any purpose other than the Project, any Confidential Information it receives from [TAI]. [Loftness] agrees to protect the Confidential Information, and agrees that in no event will it use less than the same degree of care to protect the Confidential Information as it would employ with respect to its own information of like importance that it does not desire to have published or disseminated.

The NDA defines "Confidential Information" as "[s]uch information that [TAI] considers to be proprietary and/or confidential." The "Competitive Business" provision establishes that "[Loftness] agrees not to use [TAI]'s confidential information in any way that could be construed as being competitive of [TAI]'s business for a period of twenty (20) years after the effective date of this Agreement."

Twiestmeyer and Hood shared confidential information with Loftness at this May 2007 meeting. Specifically, Twiestmeyer and Hood informed Loftness about the market for grain-bagging equipment, the need for such equipment in the United States, their suggested design improvements to the Argentinian-made equipment, and the timing for bringing such a product line to the market. After the meeting, Loftness representatives traveled to Arkansas and Nebraska to examine the Argentinian-made equipment, then reverse-engineered a prototype of a grain-bag unloader, which, according to Twiestmeyer and Hood, incorporated several of their ideas, including the addition of two clutches. Loftness also developed a grain-bag loader. Loftness began manufacturing and selling this equipment in 2008.

In May 2008, the parties entered the Override Agreement to establish Twiestmeyer and Hood's compensation for their role in developing the new product line. In this agreement, Loftness agreed to pay Twiestmeyer and Hood "a two percent (2%) override of the dealer net price on all grain bagging equipment and related products, except grain bags, sold by LOFTNESS during the term of the Agreement."¹ The Override Agreement specified a duration of two years.

In May 2010—just before the Override Agreement was set to expire—Loftness informed all of its independent sales representatives, including Twiestmeyer and Hood, that Loftness had reached a deal with Brandt Industries. Under this new agreement, Brandt Industries would sell Loftness-manufactured grain-bagging equipment, which allegedly incorporated TAI's design improvements and other confidential information.

Loftness continued paying the two-percent override to Twiestmeyer and Hood through the end of 2010, even though the Override Agreement had expired. In January 2011, Twiestmeyer and Hood approached Loftness with a new two-percent agreement. This proposed agreement included Grain Bag Storage Systems, Twiestmeyer and Hood's new business entity, as an additional party and provided for a ten-year term. Loftness declined, advising Twiestmeyer and Hood that it would stop using TAI's trademark and cease making the two-percent override payments after February 2011.

Loftness brought suit, seeking a declaratory judgment that it had no duty to pay Twiestmeyer, Hood, or TAI under any existing contract. Twiestmeyer, Hood, and TAI filed an answer and asserted five counterclaims: (1) breach of the Override Agreement, (2) breach of the NDA, (3) violation of the Uniform Trade Secrets Act, (4) violation of the Uniform Deceptive Trade Practices Act, and (5) unjust enrichment. The district court granted Loftness's motion to dismiss with respect to counts three, four, and five. The parties then completed discovery, and Loftness moved for summary judgment on the two remaining breach-of-contract claims. The district court granted Loftness's motion for summary judgment on both claims. Twiestmeyer, Hood, and TAI appealed. On appeal, we affirmed the district court on the counterclaims for breach of the Override Agreement and unjust enrichment, but we vacated and remanded the grant of summary judgment on the counterclaim for breach of the NDA. Loftness I, 742 F.3d at 845, 851

. The district court again granted Loftness's motion for summary judgment as to breach of the NDA. Twiestmeyer, Hood, and TAI again appeal.

II.

We review a district court's grant of summary judgment de novo, viewing the record in the light most favorable to the non-moving party. Montin v. Johnson, 636 F.3d 409, 412 (8th Cir.2011)

. Summary judgment is appropriate if there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Specht v. City of Sioux Falls, 639 F.3d 814, 819 (8th Cir.2011). Our subject matter jurisdiction in this case is based upon diversity of citizenship, and the parties agree that Minnesota law applies. See S. Wine & Spirits of Nev. v. Mountain Valley Spring Co., LLC, 646 F.3d 526, 531 (8th Cir.2011).

The sole issue before the district court in considering Loftness's motion for summary judgment on remand was whether there was any issue of material fact regarding TAI's claim that Loftness had breached the NDA by disclosing and using confidential information when it agreed to have Brandt Industries sell Loftness-manufactured grain-bagging equipment.

Critically, the district court determined that TAI's argument that Loftness breached the NDA by using TAI's confidential information for Loftness's own benefit was not properly before the court because that argument was not asserted in TAI's counterclaims. We disagree. Those counterclaims posited three theories of breach, namely, that Loftness breached the NDA by (1) "disclosing Confidential Information to Brandt for purposes other than the Grain Bag Storage System developed by Loftness and [TAI]," (2) "[u]sing Confidential Information in competition [with] the business developed as part of the Project," and (3) "[f]ailing to protect the Confidential information from being published or disclosed as to third parties." The second theory of breach raised in the counterclaims appears fairly to encompass TAI's use-for-its-own-benefit argument.

Having disposed of the argument based on Loftness's use of confidential information for Loftness's own benefit, the district court instead focused on whether Loftness had disclosed TAI's confidential information in violation of the NDA. The language of the NDA, the district court found, protected the use or disclosure of "Confidential Information" related to the "Project," but the NDA did not prohibit the use or disclosure of project-related information that was no longer confidential. The district court then determined that the "Project" covered by the NDA was the development and marketing of the new grain-bagging product line with the intention of selling that product to the public, a definition supplied by TAI during the litigation and reinforced by testimony from both parties. According to the district court, this...