Northwest Bec-Corp v. Home Living Service

• Decision Date: 18 January 2002
• Docket Number: No. 26558.,26558.
• Parties: NORTHWEST BEC-CORP and Northwest Pharmaceutical, Inc., Plaintiffs-Appellants-Cross Respondents, v. HOME LIVING SERVICE f/k/a Home IV Care, Inc., and Janet Hughes, individually, Defendants-Respondents-Cross Appellants.
• Court: Idaho Supreme Court

41 P.3d 263

136 Idaho 835

NORTHWEST BEC-CORP and Northwest Pharmaceutical, Inc., Plaintiffs-Appellants-Cross Respondents, v. HOME LIVING SERVICE f/k/a Home IV Care, Inc., and Janet Hughes, individually, Defendants-Respondents-Cross Appellants.

No. 26558.

Supreme Court of Idaho, Idaho Falls, September 2001 Term.

January 18, 2002.

Nielson & Reece, P.L.L.C., Pocatello, for appellants-cross respondents. Nick L. Nielson argued.

Racine, Olson, Nye, Budge & Bailey, Pocatello, for respondents-cross appellants. John R. Goodell argued.

KIDWELL, Justice.

Appellants Northwest Bec-Corp and Northwest Pharmaceutical, Inc. appeal the district court's grant of summary judgment for the defendants, Home Living Service and Janet Hughes. Northwest Bec-Corp and Northwest Pharmaceutical, Inc. filed an action alleging breach of a confidential nondisclosure agreement by Hughes as well as misappropriation of trade secrets and tortious interference with contracts against Home Living Service and Hughes. The district court entered a grant of summary judgment finding that the appellants had not established a genuine issue of material fact. On cross appeal, Home Living Service and Hughes appeal the district court's determination of attorney fees. We affirm the district court's grant of summary judgment and award of attorney fees.

I. FACTS AND PROCEDURAL BACKGROUND

Janet Hughes (Hughes) was employed by Long Term Care (LTC) as the Director of Pharmacy from January of 1996 through February of 1999. On September 17, 1996, Hughes entered into a Confidential Nondisclosure Agreement (Agreement) with LTC. Under the terms of the Agreement, she was not to reveal any of LTC's proprietary information including customer lists, video presentations, and other trade secrets and information developed by LTC. The district court found that Hughes was forced to sign the Agreement to remain employed with LTC. In February of 1999, Hughes left LTC and began working as a Pharmacist/Director of Pharmacy Development for Northwest Pharmaceutical, Inc. (NWPI), a wholly owned subsidiary of Northwest Bec-Corp (NWBC). NWBC was aware of the Agreement, and began negotiations to purchase LTC to eliminate any potential liability issues. As part of the purchase of LTC, NWBC acquired the proprietary information mentioned above, and Hughes' Confidential Non Disclosure Agreement was assigned to NWBC. Hughes left NWPI in May of 1999 and accepted the position of staff pharmacist with Super Save Drug (SSD) and Home Living Service (HLS), where she is currently employed. All of the companies involved offer substantially similar services to their customers including pharmaceutical supplies and services, training seminars, and other residential long-term care services.

After Hughes' departure from NWPI, approximately ninety NWPI customers ended their business relationship with NWPI and began doing business with HLS. On July 27, 1999, NWBC and NWPI filed a verified complaint containing three main causes of action against Hughes and HLS. The plaintiffs alleged that Hughes had breached the Confidential Nondisclosure Agreement. They alleged that Hughes and HLS had misappropriated NWBC and NWPI trade secrets in violation of the Idaho Trade Secrets Act. Their final claim was that Hughes and HLS tortiously interfered with NWBC's and NWPI's customer contracts.

The defendants filed motions to dismiss and attached affidavits. The district court treated them as motions for summary judgment because "matters outside the pleadings" were presented to the district court for consideration. The district court granted the motions. The district court found no evidence in the record to support plaintiffs' claim that Hughes or HLS or both had misappropriated the trade secrets. The district court also found no evidence in the record of the existence of any contracts between the plaintiffs and their customers with which the defendants allegedly interfered. The court further found that the Agreement was nonassignable by either party. The district court awarded Hughes costs and approximately one-half of her attorney fees. It awarded HLS costs, but no attorney fees. Each side filed a timely notice of appeal and cross appeal.

II. STANDARD OF REVIEW

Summary judgment is proper "if the pleadings, depositions, 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 a judgment as a matter of law." I.R.C.P. 56(c). When reviewing an appeal from a grant of summary judgment, this Court employs the same standard used by the district court originally ruling on the motion. S. Griffin Constr., Inc. v. City of Lewiston, 135 Idaho 181, 185, 16 P.3d 278, 282 (2000). On appeal, this Court will ascertain whether any genuine issues of material fact exist, and whether the moving party is entitled to summary judgment as a matter of law. Coghlan v. Beta Theta Pi Fraternity, 133 Idaho 388, 400-01, 987 P.2d 300, 312-13 (1999). In a motion for summary judgment, this Court should liberally construe all facts in favor of the nonmoving party and draw all reasonable inferences from the facts in favor of the nonmoving party. S. Griffin Constr., Inc.,135 Idaho at 185,16 P.3d at 282. Summary judgment must be denied if reasonable persons could reach differing conclusions or draw conflicting inferences from the evidence presented. Orthman v. Idaho Power Co., 130 Idaho 597, 600, 944 P.2d 1360, 1363 (1997). At all times, the moving party has the burden of establishing the lack of a genuine issue of material fact. Id. To meet this burden, the moving party must challenge in its motion and establish through evidence that no issue of material facts exists for an element of the nonmoving party's case. Smith v. Meridian Joint Sch. Dist. No. 2, 128 Idaho 714, 719, 918 P.2d 583, 588 (1996). The nonmoving party "may not rest upon the mere allegations or denials of that party's pleadings, but the party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial." I.R.C.P. 56(e). If the moving party challenges an element of the nonmoving party's case on the basis that no genuine issue of material fact exists, the burden then shifts to the nonmoving party to present evidence that is sufficient to establish a genuine issue of material fact. Smith, 128 Idaho at 719,918 P.2d at 588. When presenting affidavits, they "shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein." I.R.C.P. 56(e). The nonmoving party must submit more than just conclusory assertions that an issue of material fact exists to establish a genuine issue. Coghlan, 133 Idaho at 401,987 P.2d at 313. "[A] mere scintilla of evidence or only slight doubt as to the facts" is not sufficient to create a genuine issue of material fact for purposes of summary judgment. Samuel v. Hepworth, Nungester & Lezamiz, Inc., 134 Idaho 84, 87, 996 P.2d 303, 306 (2000).

III. ANALYSIS

A. The Evidence Before This Court Does Not Establish that Janet Hughes and HLS Misappropriated NWBC and NWPI's Trade Secrets.

Appellants assert that the loss of approximately ninety customers following the departure of Hughes was the result of the misappropriation of NWBC and NWPI's trade secrets by Hughes and HLS. Although they agree that the district court properly determined that LTC's customer lists and video presentations were trade secrets, the appellants believe that the court failed to acknowledge numerous deficiencies in the affidavits submitted by the defendants, particularly the affidavit of Hughes. The affidavits do not contain specific denials of particular facts that are crucial for the defendants to meet their burden. The appellants contend that the district court did not properly determine that Hughes and HLS had met their burden under their motion for summary judgment before shifting the burden to NWBC and NWPI.

Neither side disputes the district court's finding that LTC's customer list and video presentations are trade secrets as defined by Idaho Code section 48-801(5). The dispute focuses on whether actual misappropriation occurred. At the center of this claim is whether HLS and Hughes met their burden under the motion for summary judgment by proving that misappropriation as defined in I.C. § 48-801(2) did not occur. As discussed in the standard of review, if HLS and Hughes met their burden through the affidavits submitted, then the burden shifted to NWBC and NWPI to provide evidence that demonstrated there was a genuine issue of material fact. Without such evidence, summary judgment would be proper.

In support of their initial motion for summary judgment, HLS and Hughes submitted Hughes' affidavit. Her affidavit traced her employment history, culminating with her employment with HLS. With respect to the misappropriation claim, the following statements from Hughes' affidavit were most applicable:

I am certain that I do not have any information that would be characterized as confidential information. I do not have nor have I ever disclosed a customer list, programs, software, or "in house" developed procedures of Long Term Care. The bottom line is that I have never disclosed any so-called confidential information to any unauthorized person.

In support of their final motion for summary judgment, HLS and Hughes submitted the affidavits of Traci Berreth, Lori Gebo-Shaver, Loana Lyman, and John Goodell. Berreth and Gebo-Shaver's affidavits both provided details about HLS and SSD's extensive marketing efforts to assisted living facilities from May of 1999 to present. Both affidavits and the attached exhibits described in detail the process used by HLS and SSD to attract new customers, including obtaining a list of facilities classified as a public document from a...