Marlite, Inc. v. Eckenrod
| Decision Date | 13 July 2012 |
| Docket Number | Case No. 10-23641-Civ-MORENO/TORRES |
| Parties | MARLITE, INC., Plaintiff, v. ALVIN ECKENROD, and MODULAR WOOD SYSTEMS, INC., Defendants. ALVIN ECKENROD, Third Party Defendant, v. JAMES ROBBINS, individually and as trustee of a dissolved Florida Corporation, and JERRY DAGAN, individually and as trustee of a dissolved Florida Corporation, Third Party Defendants. |
| Court | U.S. District Court — Southern District of Florida |
This matter is before the Court on the following cross-motions for summary judgment: Plaintiff Marlite, Inc.'s ("Marlite") Motion for Partial Summary Judgment [D.E. 67]; Defendant/Third-Party Plaintiff Alvin Eckenrod's ("Eckenrod") Motion for Partial or Final Summary Judgment [D.E. 68]; Defendant Modular Wood Systems, Inc.'s ("Modular") Motion for Summary Judgment [D.E. 69]; and Third-PartyDefendants Jerry Dagen's ("Dagen") and James Robbins' ("Robbins") (together, "Third-Party Defendants") Motion for Summary Judgment [D.E. 101]. Based on a review of the motions and related filings, and the record in the case and in Marlite, Inc. v. Alvin Eckenrod, et al, No. 09-22607-CIV-TORRES (S.D. Fla.) ("Marlite I"),1 we recommend for the following reasons that Marlite's motion be Denied; Eckenrod's motion be Granted in part and Denied in part; Modular's motion be Granted; and Third-Party Defendants' motions be Granted.
Marlite and Modular are direct competitors in the slatwall business. Both companies design, engineer, and manufacture wall panel systems. Eckenrod is the president and sole shareholder and officer of Modular. This action concerns sales of slatwall in Florida by Modular and Eckenrod between January 31, 2006 and May 15, 2009.
In November 2002, Eckenrod, Dagen, Robbins, and another individual entered into a Shareholders' Agreement ("Agreement") regarding Precision Wood Products, Inc. ("Precision"), a slatwall manufacturing company. [D.E. 1-5]. Eckenrod, Dagen, and Robbins were designated as officers and directors of the company. The Agreement contained a restrictive covenant that precluded Eckenrod and his wholly-owned company, Modular, from competing with Precision, except as to certain specified clientsoutside the State of Florida, during the term of the Agreement and for two (2) years thereafter. [Id. § 7.1].
On January 31, 2006, Precision sold virtually all of its assets for $3 million to Marlite pursuant to an Asset Purchase Agreement ("APA"). [D.E. 1-3 ]. The APA required, among other things, that Precision deliver to Marlite certified resolutions of its (Precision's) shareholders and Board of Directors authorizing the sale; and that, simultaneously with the closing, Eckenrod and the other selling shareholders execute non-competition agreements with Marlite and execute and deliver Guarantees to Marlite. [Id. §§ 7.09, 7.10, and 7.12; see D.E. 43-1 at 143-50; D.E. 43-2 at 68-69]. An integration clause in the APA provided that the APA and certain specified documents constituted the entire agreement and understanding between the parties regarding the subject matter contained therein and superceded all prior agreements and representations, written or oral, by any officer, employee or representative of any party therein. [D.E. 1-3 § 13.19].
Precision represented and warrantied in the APA that no part of its business was being conducted through "any related parties or . . . affiliate of [Precision] or through any entity that is owned in whole or in part" by Eckenrod or any other shareholder of Precision. [Id. § 3.29]. A complete list of Precision's slatwall customers was described elsewhere in the APA. [Id. § 3.25].
As Precision's President, Dagen executed the APA on behalf of the company.
The APA contained a five-year non-competition provision that prohibited Precision and "all of its affiliates and/or related parties" from engaging "in any business in competition with [Marlite] as it is conducted immediately prior to the Closing" in Georgia and Florida. [Id. § 5.01(a)].
The Non-Competition Agreement that Eckenrod executed on January 31, 2006 ("Non-Compete") provided that he would not compete with Marlite within the State of Florida for a period of three years after the closing date of the APA. [D.E. 1-4 § 1]. "Notwithstanding" the afore-mentioned restriction, Eckenrod was expressly permitted to "continue to own, operate and conduct in competition with [Marlite] and as conducted as of the Closing Date of the [APA], the following businesses owned by [Eckenrod]: Modular Wood Systems, Inc. and Interlam, Inc." [Id.]. The Non-Compete expressly stated that Marlite would not effectuate the APA unless Eckenrod agreed to the terms and conditions of the Non-Compete and, moreover, that Eckenrod acknowledged that the restrictive covenant was reasonable and that serious injury and loss would ensue to Marlite if Eckenrod competed with Marlite after the sale had occurred. [Id.].
The Non-Compete also contained restrictive covenants prohibiting Eckenrod from the unauthorized use of Marlite's confidential information and from employing or contracting with certain individuals and entities for a three-year period after the Closing Date of the APA. [Id. §§ 2, 3].
After January 31, 2006, Eckenrod continued to operate Modular as its President and sole shareholder and officer.
Marlite filed suit on October 9, 2009 against Modular and Eckenrod for misappropriation of trade secrets, tortious interference, and breach of contract. The claims stemmed from Defendants' improper hiring of a former Marlite employee and from the solicitation of Marlite's customers by the employee on Modular's behalf. The Honorable Donald L. Graham, then the presiding judge in the case, granted partial summary judgment for Marlite on its claim that Eckenrod breached his Non-Compete by hiring the former Marlite employee. [D.E.145 in Marlite I at 12-13].
A jury trial was held on the remaining claims and, in accordance with the jury's verdict, final judgment was entered in favor of Marlite on some though not all of its claims. [D.E. 248 in Marlite I]. The Court of Appeals affirmed the judgment. See Marlite, Inc. v. Canas, 453 Fed. Appx. 938 (11th Cir. 2012) (unpublished).
Of particular relevance in the present case are the jury's findings that (1) Modular was an "affiliate or related party" of Precision pursuant to Section 5.01(a) of the APA and (2) Modular was subject to the three-year non-competition period specified in Eckenrod's Non-Compete rather than the five-year period set forth in the APA. [D.E. 200 in Marlite I at 1-2 ¶¶ 1, 2].2
During discovery in Marlite I, Eckenrod initially indicated in sworn discovery responses that he had honored the restrictive covenants contained in the APA and in the Non-Compete. However, he later admitted in deposition that his sworn responses were inaccurate and he confirmed that Modular had in fact been selling slatwall in Florida continuously and in direct competition with Marlite from January 31, 2006 to the then-present (March 16, 2010). [D.E. 118-4 in Marlite I at 4-5; see also D.E. 40-2 at 113-14, 188].
Based on these admissions, Marlite sought leave to amend its complaint to assert additional claims against Defendants based on the newly-discovered evidence of violations of the APA and Non-Compete, but that request was denied. On October 8, 2010, Marlite filed the present lawsuit against Eckenrod and Modular raising these claims. [D.E. 1].
Marlite now seeks damages resulting from the sales that Defendants made to Marlite's Florida customers in violation of the APA and the Non-Compete. Counts 1-4 and 6-7 of the Complaint state claims against Eckenrod individually for: breach of the APA (Count 1); interference with contract (Count 2); fraudulent inducement (Count 3); negligent misrepresentation (Count 4); breach of the Non-Compete (Count 6); injunctive relief (Count 7). Count 5 states the sole claim against Modular, for injunctive relief (Count 5).
Eckenrod answered the Complaint, asserted various affirmative defenses, and filed a Third-Party Complaint against Dagen and Robbins, individually and as trustees for a dissolved Florida corporation, for implied indemnity (Count 1) and common law indemnity in the alternative (Count 2). [D.E. 32 at 15-20 ("Third Party Complaint")]. Eckenrod seeks indemnification from Dagen and Robbins in the event he is found liable to Marlite for losses suffered as a result of misrepresentations made during the negotiation of the APA or a breach of the duty to disclose the fact of Modular's competition with Precision and Marlite.
All of the parties in this case have moved for summary judgment. Summary judgment is appropriate where "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 that the moving party is entitled to judgment as a matter of law." Imaging Bus. Mach., LLC. v. BancTec, Inc., 459 F.3d 1186, 1189 (11th Cir. 2006) (citing Fed. R. Civ. P. 56(c)). In deciding a summary judgment motion, the Court must view all the evidence and make all reasonable inferences in the light most favorable to the non-moving party. Id. (citing Cruz v. Public Super Mkts., Inc., 428 F.3d 1379, 1382 (11th Cir. 2005)). A material fact is one that might affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When the non-moving party fails to prove an essential element of its case for which it has the burden of proof at trial, summary judgment is warranted. See Celotex Corp.v. Catrett, 477 U.S. 317, 323 (1986); Hilburn v. Murata Elecs. North Am., Inc., 181 F.3d 1220, 1225 (11th Cir. 1999). Thus, our task is to determine whether, considering the evidence in the light most favorable to the non-moving party,...
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