Matson Logistics, LLC v. Smiens
| Decision Date | 05 June 2012 |
| Docket Number | Civil No. 12-400 ADM/JJK |
| Parties | Matson Logistics, LLC, f/k/a Matson America Transportation Services, LLC Plaintiff, v. Jeffrey D. Smiens; Patrick E. Lynch; Global Logistics, LLC; Granite Logistics Services, LLC; and Trinity Logistics, Inc., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Eric Habig, Esq., and Braden K. Core, Esq., Scopelitis, Garvin, Light, Hanson & Feary, Indianapolis, IN, and Mark J. Ayotte, Esq., and Kevin M. Decker, Briggs & Morgan, PA, Minneapolis, MN, on behalf of Plaintiff.
Joseph W. Hammell, Esq., Sarabeth A. Ackerman, Esq., and Jennifer L. Cornell, Esq., Dorsey & Whitney LLP, Minneapolis, MN, on behalf of Defendants Jeffrey D. Smiens, Patrick E. Lynch, and Granite Logistics Services, LLC.
Jonathan K. Reppe, Esq., Reppe Law, PLLC, Northfield, MN, on behalf of Defendant Global Logistics, LLC.
David R. Crosby, Esq., Leonard, Street and Deinard, PA, Minneapolis, MN, on behalf of Defendant Trinity Logistics, Inc.
On April 30, 2012, the undersigned United States District Judge heard oral argument on Plaintiff Matson Logistics, LLC's ("Matson") Motion for Preliminary Injunction [Docket No. 6] ("PI Motion"). The Court also heard oral argument on Defendant Trinity Logistics, Inc.'s ("Trinity") Motion to Dismiss [Docket No. 16] and Defendants Jeffrey D. Smiens ("Smiens"), Patrick E. Lynch ("Lynch"), and Granite Logistics Services, LLC's ("Granite") Motion toDismiss [Docket No. 18]. For the reasons discussed below, Plaintiff's PI Motion is denied, Defendant Trinity's Motion to Dismiss is granted, and the remaining Defendants' Motion to Dismiss is granted in part and denied in part.
Plaintiff Matson is a transportation broker with headquarters in Ohio. Compl. [Docket No. 1] ¶¶ 1, 9. Defendant Global Logistics, LLC ("Global"), is a limited liability company organized in Minnesota, and its one member is Defendant Smiens, a citizen of Minnesota. Compl. ¶ 4. Defendant Granite is also a limited liability company organized in Minnesota with two members, Smiens and Defendant Lynch, both citizens of Minnesota. Id. ¶ 5. Defendant Trinity is a corporation organized in Delaware and with its principal place of business in Delaware. Id. ¶ 6.
On March 24, 2011, Matson entered into an agency agreement with Global for exclusive agency services. Id. ¶ 10. Matson and Global signed a revised Agent Agreement in the beginning of June 2011. Id.; Compl. Ex. 1 ("Agent Agreement"). Smiens and Ricco Guzman, both listed as owners of Global, signed the Agent Agreement with Matson. See Agent Agreement at 5. Under the Agent Agreement, Global was expressly prohibited from acting "as an agent for any other transportation broker or service provider" or "for Agent's own account." Id. § 1. Global was authorized to "perform Services exclusively for and on behalf of [Matson]." Id. The term of the Agent Agreement was to be five years with automatic additional one-year extensions unless terminated by either party with written notice to the other party at least 120 days prior to the termination. Id. § 13. The Agent Agreement included a confidentiality requirement which prohibited Global from disclosing confidential information to anyone duringor after the term of the Agent Agreement. Id. § 16. Confidential information was defined to include "[c]ost and pricing information, Matson America customer lists, vendor lists, and reports or other documents . . . ." Id.
The Agent Agreement also included a non-solicitation provision precluding Global from "directly or indirectly, either individually or as a principal . . . solicit[ing] business, or attempt[ing] to solicit business, in products or services competitive with products or services sold by [Matson]." Id. Ex. A § 1. The non-solicitation provision was to be effective for the entire duration of the Agent Agreement and for a period of 180 days following the termination of the agreement for any reason. Id. The non-solicitation clause also allowed Global to exclude existing customers to which the non-solicitation requirements would not apply, but Global listed none. See generally Compl. Ex. A.
At the request of Smiens, Matson and Global entered into contract re-negotiations on August 29, 2011, but the parties failed to reach a new agreement. Compl. ¶ 19. At this meeting, Smiens was accompanied by Lynch. Id. On September 7, 2011, Smiens and Lynch filed Articles of Organization for Granite in Minnesota. Id. ¶ 20. Matson alleges that through early December 2011, Smiens and Lynch continued using the Matson email addresses for their business dealings as Granite, as well as the same phone numbers and group of employees. Id. ¶ 21. When Matson's Vice President, Mark Christos, called Smiens' office on December 12, 2011, the individual who answered the phone identified the answering entity as Trinity. Id. ¶ 23. Smiens soon joined the call, and he informed Christos that he and Lynch were serving as agents for Trinity. Id. Trinity is a direct competitor of Matson. Id. Smiens stated that Global had "ceased operations" and that "neither Global nor Smiens was bound by the terms of the AgentAgreement." Id. ¶ 24. Smiens stated that he was serving as an agent for Trinity because of the failed re-negotiation on August 29, 2011. Id. ¶ 23.
Global is not dissolved, nor has the Agent Agreement been terminated. Id. ¶ 24. Matson alleges that it lost a substantial number of customers when Smiens began serving as an agent for Trinity through Granite. Id. ¶¶ 25-28. On December 15, 2011, Matson sent a cease-and-desist letter to Global, Granite, and Trinity, but received no response. Id. ¶ 30. On February 15, 2012, Matson filed this lawsuit.
In deciding conflict of law questions, a federal district court sitting in Minnesota applies Minnesota's conflict of law rules. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In diversity cases, federal courts apply state substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). "[P]arties may agree that the law of another state shall govern their agreement and [Minnesota courts] will interpret and apply the law of another state where such agreement is made." Milliken & Co. v. Eagle Packaging Co., Inc., 295 N.W.2d 377, 380 n.1 (Minn. 1980). However, "matters of procedures and remedies [are] governed by the law of the forum state." Davis v. Furlong, 328 N.W.2d 150, 153 (Minn. 1983). "[G]eneral choice of law provisions, as expressed in contracts, incorporate only substantive law, and do not displace the procedural law of the forum state." Fredin v. Sharp, 176 F.R.D. 304, 308 (D. Minn. 1997). Minnesota courts apply Minnesota law concerning procedure. Schwan's Sales Enter., Inc. v. SIG Pack, Inc., 476 F.3d 594, 595-96 (8th Cir. 2007); see also Davis, 328 N.W.2d at 153 (). For a choice of law provision to require another state's law to govern procedural matters, the parties must expressly state that the choice of law provision extends to procedural matters; otherwise, the forum state's procedural laws apply. Schwan's Sales Enter., Inc., 476 F.3d at 596 (citing U.S. Leasing v. Biba Info. Processing Servs., 436 N.W.2d 823, 825-26 (Minn. Ct. App. 1989)).
Here, the Agent Agreement specifies that the "interpretation, construction and enforcement of this Agreement will be governed by the laws of the State of Ohio exclusively, without reference to the laws of any other state or country . . . ." Agent Agreement § 20(d). Because the presumption is that a forum state's procedural laws apply, and because the Agent Agreement does not expressly state that Ohio procedural law applies, Minnesota law governs procedural law in this dispute.
Under Minnesota's choice of law analysis for substantive law, courts first look to whether there is an actual conflict between the law of two states. Myers v. Gov't Emp. Ins. Co., 225 N.W.2d 238, 241 (Minn. 1974). Both Matson and Defendants agree that Ohio and Minnesota law are in actual conflict as to claims regarding successor liability and misappropriation of trade secrets. Because a conflict exists between the substantive laws of Ohio and Minnesota, the choice of law analysis must determine which law applies.
The next step in Minnesota's choice of law analysis is the application of the following five factors: (1) predictability of result; (2) maintenance of interstate order; (3) simplification of the judicial task; (4) advancement of the forum's governmental interests; and (5) the better rule of law. Milkovich v. Saari, 203 N.W.2d 408 (Minn. 1973). Predictability of result weighsstrongly in favor of applying Ohio law here because the parties expressly agreed to be governed by Ohio law in the Agent Agreement. This Milkovich factor aims for the ideal that "litigation on the same facts, regardless of where the litigation occurs, should be decided the same to avoid forum shopping." Nodak Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 604 N.W.2d 91, 94 (Minn. 2000). Predictability is enhanced where the parties get the "benefit of their bargain" regarding choice of law. Medtronic, Inc. v. Advanced Bionics Corp., 630 N.W.2d 438, 454 (Minn. Ct. App. 2001). The intent of this factor is to safeguard the "justified expectations of the parties to the transaction." Id. (citation omitted). As such, predictability of results favors the enforcing the choice of law provision of the Agent Agreement and applying Ohio law to substantive issues.
Maintenance of interstate order does not weigh in favor of either Minnesota or Ohio law. The primary consideration under this factor is whether the application of Minnesota law would "manifest disrespect" for Ohio's sovereignty or stymie interstate commerce. Jepson v. Gen. Cas. Co. of Wis., 513 N.W.2d 467, 471 (Minn. 1994). Since both states have an interest in applying...
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