Metso Minerals Indus., Inc. v. FLSmidth-Excel LLC

Decision Date07 May 2010
Docket NumberCase No. 07-CV-926
Citation733 F.Supp.2d 980
CourtU.S. District Court — Eastern District of Wisconsin
PartiesMETSO MINERALS INDUSTRIES, INC., Plaintiff, v. FLSMIDTH-EXCEL LLC, Excel Foundry & Machine, Inc., Joseph P. Martinez, Cheryl A. Sullivan, Richard A. Parsons, Douglas M. Parsons, Kenneth L. Olson, and Christopher P. Wade, Defendants.

David R. Cross, Johanna M. Wilbert, Michael J. Gonring, Raymond D. Jamieson, Raymond D. Jamieson, Jeffrey Morris, Josephine K. Benkers, Patrick J. Murphy, Quarles & Brady LLP, Milwaukee, WI, Josephine K. Benkers, Quarles & Brady LLP, Madison, WI, for Plaintiff.

Amy L. Lindner, Jennifer E. Pawlowski, Reinhart Boerner Van Deuren SC, Jedidiah L. Dooley, Jennifer S. Coleman, John V. Picone, III, Hopkins & Carley, San Jose, CA, Leslie S. Miller, David G. Hanson, Thomas M. Phillips, Reinhart Boerner Van Deuren SC, Milwaukee, WI, for Defendants.

ORDER

J.P. STADTMUELLER, District Judge.

On October 17, 2007, plaintiff Metso Minerals Industries, Inc. ("Metso") filed suit against FLSmidth-Excel LLC ("Excel"). In the ensuing years, Metso filed several amended complaints, adding numerous new defendants. In Metso's fifth, and final, amended complaint, it alleged that three of its former employees-Martinez, Sullivan, and Olson ("the former employees")-committed breach of contract by violating nondisclosure agreements. Metso additionally alleged that the remainder of the defendants (excluding Christopher Wade) committed tortious interference with contract by encouraging the former employees to acquire and disclose information in violation of the nondisclosure agreements. Defendants 1 have moved for summary judgment as to Metso's breach of contract claims and tortious interference with contract claims. Separately, but related, Metso has moved for summary judgment against Martinez for breach of contract.

BACKGROUND

Metso is engaged in the manufacture and sale of high performance conical rock crushers. As part of its hiring process, Metso 2 required any applicant accepted for employment to agree not disclose confidential information to anyone other than Metso's authorized representatives. Thus, in April 1995 and November 1997, respectively, prior to beginning employment with Metso, Olson and Martinez signed employment applications ("Martinez/Olson Applications") which stated:

I further agree, if employed, to disclose promptly, and upon request, to execute a written assignment of any such Invention, Design or Improvement to the Company and not to disclose, except to authorized representatives of the Company, confidential information derived in the course of my employment.
(Defs. Br. Supp. Mot. S.J. [Dkt. 284] at 3). Likewise, Sullivan, in October 1978, signed an employment application ("Sullivan Application") that stated:
Compensation paid an employee of [Metso] for services covers inventions and ideas and the undersigned hereby agrees in consideration for such compensation that every invention and idea conceived or developed by him/her during the term of employment, and at least in part arising from or related to any special skills for which he/she is employed, to his/her work assignments, or to [Metso] information obtained in the course of employment, is the property of and shall be promptly disclosed to [Metso], its successors or assigns, and he/she agrees on request to execute all documents to evidence its title to such inventions and improvements and to enable it to patent same in any country; and he/she further agrees not to disclose or use at any time information which is designated by [Metso] as confidential except as required by duties as [a] [Metso] employee.

( Id. at 4).

Similarly, Metso asks departing employees to sign a termination agreement which states:

In accordance with my continuing obligations as a former employee of Metso, I hereby certify and agree that I have disclosed or promptly will disclose to Metso all proprietary, secret or confidential information to which I have been exposed during the course of my employment with Metso. I also certify that in the future I will not disclose or use any proprietary, secret or confidential information of Metso without Metso's express written consent. Proprietary, secret or confidential information means information that is not generally known outside of Metso, which derives independent economic value, actual or potential, from not being generally known to or ascertainable by persons outside of Metso, and information that Metso has a reasonable expectation will not be disclosed to persons outside Metso without its permission. I certify and agree that I have delivered or promptly will deliver to Metso all reports, customer lists and all other business or technical materials of a proprietary, secret or confidential nature owned by or originated at Metso which have been or are in my possession or under my control.

( Id. at 3-4). Martinez, Sullivan and Olson each signed a termination agreement containing the above quoted language. ( Id. at 3-5).

ANALYSIS

According to Metso's Fifth Amended Complaint, Martinez, Sullivan and Olson violated their contractual duties respecting their employment applications and, separately, their respective termination agreements by each disclosing information to their subsequent employers, Excel Foundry & Machine, Inc. ("Foundry") and Excel. Metso also alleges that Foundry and Excel, as well as Douglas Parsons and Richard Parsons-both high ranking officers in both Foundry and Excel-committed tortious interference with contract by encouraging the former employees to acquire and disclose information in violation of the nondisclosure provisions of the employment applications and termination agreements. Defendants have moved for summary judgment on these claims on two grounds. Defendants argue that the restrictive covenants in the employment applications and the termination agreements are, per se, invalid pursuant to Wis. Stat. 103.465 because they do not contain geographic or temporal limitations. Defendants also argue that the restrictive covenants in the termination agreements were not supported by consideration, and thus are unenforceable.

I. Summary Judgment Standard

Summary judgment is appropriate where the movant establishes that there isno genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "Material facts" are those facts which "might affect the outcome of the suit," and a material fact is "genuine" if a reasonable finder of fact could find in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is appropriate where a party has failed to make "a showing sufficient to establish the existence of an element essential to that party's case and on which the party will bear the burden of proof at trial." Celotex, 477 U.S. at 317, 106 S.Ct. 2548. A party opposing summary judgment may not rest upon the mere allegations or denials of the adverse party's pleading, but must set forth specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e). Any doubt as to the existence of a material fact is to be resolved against the moving party. Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

II. Validity of Restrictive Covenants

Wisconsin Statutes § 103.465 states:

A covenant by an assistant, servant or agent not to compete with his or her employer or principal during the term of the employment or agency, or after the termination of that employment or agency, within a specified territory and during a specified time is lawful and enforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal. Any covenant, described in this subsection, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint.

Wis. Stat. § 103.465. It is undisputed that the restrictive covenants in the employment applications and the termination agreements do not contain geographic or temporal limitations. It is also clear that a restrictive covenant covered by § 103.465 that does not contain any geographic or temporal limitations is void and unenforceable. The question before the court is whether the restrictive covenants at issue are covered by § 103.465. If they are, then the next question is whether the unenforceable provisions can be severed so as to allow the enforcement of the remaining provisions.

A. Applicability of § 103.465

Wis. Stat. § 103.465, by its plain language, expressly applies to "[a] covenant ... not to compete with [an] employer ... after the termination of that employment." The statute does not address non-disclosure provisions. However, the Wisconsin Supreme Court has held that a non-disclosure provision is subject to § 103.465 if it "seeks to restrain competition." Tatge v. Chambers & Owen, Inc., 219 Wis.2d 99, 579 N.W.2d 217, 223 (1998).

Metso argues, convincingly, that its non-disclosure agreements do not seek to restrain legitimate competition, because they are only aimed at preventing employees from utilizing and disclosing Metso's confidential information. Metso goes on to explain that it would be bad public policy to require temporal and geographic limits on provisions protecting confidential information, because such information belongs to the employer and should not ever be utilized or disclosed. Metso's argument is not without merit. However, as defendants point out, it is an argument better addressed to the legislature, for it is clearly refuted by present Wisconsin case law.

In Tatge, the Wisconsin Supreme Court addressed the validity of a nondisclosure provision that stated:

Employee recognizes and acknowledges that the customer data, programs, andbusiness practices used or employed by Employer embody and involve the use of information of a
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