Mcgowan & Co. v. Bogan, CIVIL ACTION NO. H-12-1716

CourtUnited States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Southern District of Texas
Writing for the CourtNancy F. Atlas United States District Judge
PartiesMcGOWAN & COMPANY, INC., Plaintiff, v. ROGER F. BOGAN, et al., Defendants.
Decision Date17 March 2015
Docket NumberCIVIL ACTION NO. H-12-1716

McGOWAN & COMPANY, INC., Plaintiff,
v.
ROGER F. BOGAN, et al., Defendants.

CIVIL ACTION NO. H-12-1716

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

March 17, 2015


MEMORANDUM AND ORDER

This breach of contract and business torts case is before the Court on cross-motions for summary judgment. Plaintiff/Counter-Defendant McGowan & Company, Inc. ("McGowan" or "Plaintiff") filed a Motion for Partial Summary Judgment ("Plaintiff's Motion") [Doc. # 111], to which Defendants/Counter-Claimants Roger F. Bogan ("Bogan"), Swain & Baldwin Insurance ("SBI"), Universal Managers, Inc. ("UMI"), and Ray B. Baldwin ("Baldwin") (collectively, "Defendants") filed a Response ("Defendants' Response") [Doc. # 118], and Plaintiff filed a Reply ("Plaintiff's Reply") [Doc. # 121]. Defendants filed a Motion for Summary Judgment ("Defendants' Motion") [Doc. # 96], to which Plaintiff filed a Response ("Plaintiff's Response") [Doc. # 119], and Defendants filed a Reply ("Defendants' Reply") [Doc. # 123]. Both motions are ripe for review.

Having carefully reviewed the parties' briefing, all matters of record, and the applicable legal authorities, the Court grants in part and denies in part both motions for summary judgment. The Court concludes that Ohio law applies to Plaintiff's breach of contract claim because there are no grounds for setting aside the parties' contractual choice of law. Texas law, however, governs Plaintiff's tort claims, pursuant to Ohio choice-of-law rules and § 145 of the Restatement (Second) of

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Conflict of Laws.

Applying Ohio law to Plaintiff's contract claim against Bogan, the Court concludes that the Trade Secrets & Special Terms Agreement (the "Agreement") is not unconscionable and is generally enforceable as explained herein. Because Ohio law applies to Plaintiff's breach of contract claim, Plaintiff's claim for attorneys' fees pursuant to § 38.001 of the Texas Civil Practices and Remedies Code is dismissed. Under recent Ohio law, Plaintiff may recover fair, just, and reasonable attorneys' fees pursuant to Paragraph 27 of the Agreement, if Plaintiff prevails on its breach of contract claim against Bogan. The Court, however, declines to grant summary judgment for either party on Plaintiff's breach of contract claim on this record. There are numerous genuine disputes of material fact on the issue of breach. The Court requires Plaintiff to file a more definite statement clarifying its theory of damages and the evidentiary basis for recovering damages.

Applying Texas law to Plaintiff's tort claims, the Court concludes Plaintiff's claims for misappropriation of trade secrets and unjust enrichment should be dismissed. The Court construes Plaintiff's claim for breach of the duty of loyalty under Ohio law as a claim for breach of fiduciary duty under Texas law. Neither Bogan nor Plaintiff is entitled to summary judgment on this claim because there are genuine disputes of material fact on the element of breach, and, on the record presented, the Court declines to award summary judgment to either party on the issue of damages. Summary judgment is also denied without prejudice on Plaintiff's claims against all Defendants for tortious interference with business relationships and tortious interference with prospective business relationships. The parties have not meaningfully briefed the elements of Plaintiff's tortious interference claims under Texas law. Plaintiff is required to submit a more definite statement, and the parties

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may then file motions for summary judgment on these two torts in accordance with the Court's amended Scheduling Order.

Finally, Plaintiff is awarded summary judgment on Defendants' counterclaim.

I. BACKGROUND

A. Facts

Plaintiff McGowan is an Ohio corporation with its principal place of business in Ohio. McGowan, Excess & Casualty ("McGowan Excess") is a registered trade name of McGowan.1 McGowan "designs, administers, and markets highly-specialized programs of insurance" and has offices in several states, including Texas.2 Defendant SBI is an insurance retail agent located in Texas.3 Defendant Baldwin is the president and sole owner of SBI.4 Defendant UMI is a small wholesale insurance broker, incorporated in Texas and owned by Defendant Baldwin's son, Sam Baldwin.5

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The undisputed facts are as follows. In February 2006, Bogan began working for McGowan as the Regional Vice-President and Branch Manager of the office in Dallas, Texas.6 Bogan worked in this capacity for McGowan for over five years.7 On March 13, 2006, shortly after Bogan started working for McGowan, Chris Longo, the current CEO of McGowan Excess, emailed Bogan a copy of McGowan's "Trade Secrets & Special Terms Agreement" (the "Agreement") [Doc. # 111-2].8 That same day, Bogan received and signed the Agreement in Texas.9 A McGowan representative signed the Agreement on March 30, 2006.10 On July 15, 2011, Bogan informed Longo he was resigning from McGowan.11 Bogan continued to work for McGowan for several weeks, and his last day of employment was August 5, 2011.12 In July or

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August 2011, Bogan began working for UMI.13

The disputed facts center around Bogan's search for new employment and his conduct directly before and after his resignation. The parties contest the circumstances under which Bogan resigned and the facts surrounding the beginning of his employment with UMI. Plaintiff alleges that Bogan engaged in a series of activities that breached the Agreement and his fiduciary duties, such as sending emails to McGowan's customers soliciting business and redirecting potential business from McGowan to UMI or SBI.

B. Procedural History

On or about October 28, 2011, Plaintiff sued Defendants in the Court of Common Pleas of Cuyahoga County, Ohio. See Complaint [Doc. # 1-1]; Notice of Removal [Doc. # 1], ¶ 1. Defendants timely removed this case to federal district court in the Northern District of Ohio on the basis of complete diversity of citizenship between the parties. See Notice of Removal, ¶ 13. On June 6, 2012, the Honorable James Gwin of the Northern District of Ohio transferred this case under 28 U.S.C. § 1404(a) to the Southern District of Texas. See Opinion & Order dated June 6, 2012 ("Transfer Order") [Doc. # 37]. On November 2, 2012, the Court granted Plaintiff's unopposed motion for leave to file an amended complaint. See Order on McGowan & Company, Inc.'s Unopposed Motion for Leave to File First Amended Complaint [Doc. # 54].

Plaintiff's Amended Complaint asserts causes of action against all four Defendants (Bogan, Baldwin, SBI, and UMI) for misappropriation of trade secrets, tortious interference with business relationships, and tortious interference with

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prospective business relationships. Amended Complaint, ¶¶ 30-38, 53-73. Plaintiff further sues Bogan for breach of the Agreement, unjust enrichment, and breach of the duty of loyalty. Id., ¶¶ 39-52, 74-79. Finally, Plaintiff requests attorneys' fees pursuant to § 38.001 of the Texas Civil Practices and Remedies Code. Id., ¶¶ 80-81. Defendants subsequently filed a counterclaim "pursuant to Rule 11 of the Federal Rules of Civil Procedure" for "the recovery of their reasonable and necessary attorney's fees which they have been caused to incur as a result of the groundless and bad faith litigation which has been prosecuted against them by Plaintiff." Defendants' First Amended Answer and Counterclaim ("Amended Answer") [Doc. # 53], ¶ 12.

On December 11, 2014, the parties filed the instant cross-motions for summary judgment. These motions are ripe for review. Defendants seek summary judgment on their counterclaim and all of Plaintiff's claims. Plaintiff seeks summary judgment on all claims against Bogan and Defendants' counterclaim. The Court first addresses each of Plaintiff's claims, then turns to Defendants' counterclaim.

II. SUMMARY JUDGMENT STANDARD

Rule 56 of the Federal Rules of Civil Procedure provides for the entry of summary judgment against a plaintiff who fails to make a sufficient showing of the existence of an element essential to her case and on which she will bear the burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Curtis v. Anthony, 710 F.3d 587, 594 (5th Cir. 2013); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a); Celotex, 477 U.S. at 322-23; Curtis, 710 F.3d at 594.

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For summary judgment, the initial burden falls on the movant to identify areas essential to the non-movant's claim in which there is an "absence of a genuine issue of material fact." ACE Am. Ins. Co. v. Freeport Welding & Fabricating, Inc., 699 F.3d 832, 839 (5th Cir. 2012). The moving party, however, need not negate the elements of the nonmovant's case. Coastal Agric. Supply, Inc. v. JP Morgan Chase Bank, N.A., 759 F.3d 498, 505 (5th Cir. 2014); Boudreaux v. Swift Transp. Co., 402 F.3d 536, 540 (5th Cir. 2005). The moving party may meet its burden by pointing out "the absence of evidence supporting the nonmoving party's case." Malacara v. Garber, 353 F.3d 393, 404 (5th Cir. 2003) (citing Celotex, 477 U.S. at 323; Stults v. Conoco, Inc., 76 F.3d 651, 656 (5th Cir. 1996)).

If the moving party meets its initial burden, the non-movant must go beyond the pleadings and designate specific facts showing that there is a genuine issue of material fact for trial. Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131, 141 (5th Cir. 2004); Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001) (internal citation omitted). "An issue is material if its resolution could affect the outcome of the action." Spring Street Partners-IV, L.P. v. Lam, 730 F.3d 427, 435 (5th Cir. 2013). "A dispute as to a material fact is genuine if...

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