Nutting v. Ram Southwest, Inc.

• Decision Date: 10 July 2000
• Docket Number: No. CIV. A. 98-B-2360.,CIV. A. 98-B-2360.
• Citation: 106 F.Supp.2d 1121
• Parties: Donald W. NUTTING, an individual doing business as Foothills Distributing Co., Plaintiff, v. RAM SOUTHWEST, INC., a New Mexico corporation doing business as Violets; and Ron Sheppeard, an individual, Defendants.
• Court: U.S. District Court — District of Colorado

106 F.Supp.2d 1121

Donald W. NUTTING, an individual doing business as Foothills Distributing Co., Plaintiff, v. RAM SOUTHWEST, INC., a New Mexico corporation doing business as Violets; and Ron Sheppeard, an individual, Defendants.

No. CIV. A. 98-B-2360.

United States District Court, D. Colorado.

July 10, 2000.

Brian D. Smith, Brian D. Smith, P.C., Denver, CO, for plaintiff.

C. Michael Montgomery, Sharra Lee Ikari, Montgomery,Kolodny, Amatuzio, Dusbabek & Parker, LLP, Denver, CO, Kurt S. Lewis, Webb & Lewis, LLC, Denver, CO, Paul Adams, Jeffrey D. Myers, Rod D. Baker, Peacock, Myers & Adams, P.C., Albuquerque, NM, for Defendants.

MEMORANDUM OPINION AND ORDER

BABCOCK, Chief Judge.

Plaintiff, Donald Nutting ("Nutting"), asserts claims for direct infringement of United States Patent No. 5,547,381 ("'381 patent"), inducing infringement of the '381 patent, deceptive trade practices, and breach of a non-competition contract against Defendants, RAM Southwest, Inc. ("RAM") and Ron Sheppeard ("Sheppeard") (collectively "Defendants"). Defendants assert counterclaims for "interference with business and contractual relations" and deceptive trade practices. Defendants move for summary judgment on Mr. Nutting's claim of breach of the non-competition agreement. Mr. Nutting cross-moves for summary judgment on the Defendants' counterclaims. Oral argument would not aid my resolution of these matters. Having the benefit of the briefs to construe properly the claims in question, and for the following reasons, I grant Defendants' motion for summary judgment as to the non-competition agreement, and grant Mr. Nutting's motion for summary judgement as to Defendants' counterclaims. Jurisdiction is proper in this Court pursuant to 28 U.S.C. § 1338.

I. Background

The following facts are undisputed. Mr. Nutting and Mr. Sheppeard sell and manufacture artificial vampire fangs. In 1994, the two met at a Halloween trade show where Mr. Nutting was demonstrating a new, longer fang product called "Custom Dracula Fangs." The Sheppeards (Mr. Sheppeard and his wife, co-owners and officers of RAM, doing business as Violet's Costumes) have manufactured and sold fangs since 1988. They developed an earlier product called "Original Fangtastics." Mr. Sheppeard and Mr. Nutting entered into a relationship whereby the Sheppeards would distribute Mr. Nutting's Custom Dracula Fangs. They also signed a non-competition agreement. In his complaint, Mr. Nutting alleges that Mr. Sheppeard violated the non-competition agreement and packaged his competing fangs in a coffin-shaped display box similar to that used for the Custom Dracula Fangs.

The distributor relationship deteriorated for these and other reasons. The Sheppeards later developed their own fang product in 1995 named "Professional Fangtastics," a derivation of their "Original Fangtastics" product. On March 22, 1994, Mr. Nutting applied for a patent for his Custom Dracula Fangs. Patent issued on August 20, 1996 as the '381 Patent.

The '381 Patent describes an "artificial and removable tooth cap body and a method of easily attaching the tooth cap body to a real tooth." ('381 Patent, Abstract). It explains that,

[i]n the course of parties, particularly Halloween parties, it is common to have people masquerade as vampires and other wild beasts. In doing so, these people are faced with the problem of using tooth cap bodies that simulate fangs.... [T]here is always the problem of the tooth cap body falling out, causing the masquerader the embarrassment of losing virility as to the character he or she is performing.

('381 Patent, Col. 1 lines 10-18). The '381 Patent purports to address these insufficiencies by providing a superior method of securely anchoring the tooth cap to a real tooth so "the tooth cap body does not fall out prematurely." ('381 Patent, Col. 1 lines 22-25). A fang user places the thermoplastic (malleable/hardenable) material into the cavity of the tooth cap. Before the material hardens the user stretches the material across his or her surrounding teeth, pressing and shaping the material with his or her fingers to anchor it to adjacent teeth. ('381 Patent, Col. 2 lines 23-31). After the thermoplastic material hardens, the user can remove the fang and re-use it "many times over." ('381 Patent, Col. 2 lines 40-45).

II. Summary Judgment Standards

The purpose of a summary judgment motion is to assess whether trial is necessary. See White v. York Int'l Corp., 45 F.3d 357, 360 (10th Cir.1995). Rule 56(c) provides that summary judgment shall be granted if the pleadings, depositions, answers to interrogatories, admissions, or affidavits show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The non-moving party has the burden of showing that issues of undetermined material fact exist. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A party seeking summary judgment bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, interrogatories, and admissions on file together with affidavits, if any, that it believes demonstrate the absence of genuine issues for trial. See Celotex, 477 U.S. at 323, 106 S.Ct. 2548; Mares v. ConAgra Poultry Co., Inc., 971 F.2d 492, 494 (10th Cir.1992). Once a properly supported summary judgment motion is made, the opposing party may not rest on the allegations contained in the complaint, but must respond with specific facts showing the existence of a genuine factual issue to be tried. Rule 56(e); see also Otteson v. United States, 622 F.2d 516, 519 (10th Cir.1980). These facts may be shown "by any of the kinds of evidentiary materials listed in Rule 56(c), except the mere pleadings themselves." Celotex, 477 U.S. at 324, 106 S.Ct. 2548.

Summary judgment is also appropriate when the court concludes that no reasonable juror could find for the non-moving party based on the evidence presented in the motion and response. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The operative inquiry is whether, based on all documents submitted, reasonable jurors could find by a preponderance of the evidence that the plaintiff is entitled to a verdict. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment should not enter if, viewing the evidence in a light most favorable to the non-moving party and drawing all reasonable inferences in that party's favor, a reasonable jury could return a verdict for that party. See Anderson, 477 U.S. at 252, 106 S.Ct. 2505; Mares, 971 F.2d at 494. Unsupported allegations without "any significant probative evidence tending to support the complaint" are insufficient, White, 45 F.3d at 360 (citations omitted), as are conclusory assertions that factual disputes exist. See Anderson, 477 U.S. at 247-48, 106 S.Ct. 2505. Evidence presented must be based on more than "mere speculation, conjecture, or surmise" to defeat a motion for summary judgment. Rice v. United States, 166 F.3d 1088, 1092 (10th Cir.1999); U.S. ex rel. Hafter D.O. v. Spectrum Emergency Care, Inc., 190 F.3d 1156, 1163 (10th Cir.1999). Nevertheless, summary judgment is inappropriate if disputes remain as to material facts. See James Barlow Family Ltd. Partnership v. David M. Munson, Inc., 124 F.3d 1321, 1323 (10th Cir.1997).

III. Breach of the Non-Compete Agreement

In support of their motion for summary judgment on Mr. Nutting's claim for breach of the non-competition agreement Defendants argue that: (1) the agreement is invalid as a naked restraint on competition that fails to protect a legally cognizable interest and, as such, is void against public policy; (2) the scope of the restraint embodied in the agreement goes beyond any protectable interest; (3) the agreement lacked consideration; and (4) Mr. Nutting is barred from bringing this claim under the doctrine of "estoppel by laches." I hold that the non-competition agreement is void as a matter of law upon propositions one and two. Consequently, I need not address Defendants' third and fourth arguments.

A. Legally Protectable Interests

Defendants argue that the non-competition agreement is invalid as a naked restraint on competition not ancillary to any other agreement or relationship between the Mr. Nutting and the Defendants. They assert that the agreement protects no legally cognizable interest and is therefore a violation of Colorado public policy. They ask me to apply Colo.Rev.Stat. § 8-2-113 to determine the acceptable boundaries of the non-competition agreement. Mr. Nutting responds that: (1) Colo.Rev.Stat. § 8-2-113 applies to employment contracts only and the instant agreement does not fall within its scope; and (2) the case of Universal Gym should control.

Colorado law embodies a strong public policy which disfavors covenants not to compete, protecting employees "from non-competition clauses except in carefully defined circumstances." Colorado Accounting Machines, Inc. v. Mergenthaler, 44 Colo.App. 155, 609 P.2d 1125, 1126 (1980). This public policy is embodied in Colo. Rev. Stat. § 8-2-113, which limits non-competition agreements to narrowly defined circumstances. Although the statute is included in Title 8, the Labor and Industry section, it has been held to apply outside of a strict employment context. See Smith v. Sellers, 747 P.2d 15 (Colo.Ct.App. 1987) (independent contractors); Gold Messenger, Inc. v. McGuay, 937 P.2d 907 (Colo.Ct.App.1997) (franchiser/ franchisee relationships).

Mr. Nutting recognizes that Colorado has extended this statute beyond employment agreements. He argues though that the Colorado courts only apply this statute to what are, at their core, still employment relationships. Thus, he says Smith is distinguishable. I disagree.

The defendant in Smith was a dentist who...