Reisdorf v. I3, LLC

• Decision Date: 11 September 2015
• Docket Number: Civil No. 14–780 (DWF/HB).
• Citation: 129 F.Supp.3d 751
• Parties: Dwight REISDORF and DevGroup, Inc., Plaintiffs and Counter–Defendants, v. I3, LLC, and Logistics International, LLC, Defendants and Counter–Claimants, and Chad Ogle, individually and in his capacity as CEO of i3, LLC, and President of Logistics International, LLC, Defendant.
• Court: U.S. District Court — District of Minnesota

129 F.Supp.3d 751

Dwight REISDORF and DevGroup, Inc., Plaintiffs and Counter–Defendants,

v.I3, LLC, and Logistics International, LLC, Defendants and Counter–Claimants,andChad Ogle, individually and in his capacity as CEO of i3, LLC, and President of Logistics International, LLC, Defendant.

Civil No. 14–780 (DWF/HB).

United States District Court, D. Minnesota.

Signed Sept. 11, 2015.

Michael Milo, Esq., Milo Law Firm PLLC & Neff Law Firm, P.A., counsel for Plaintiffs and Counter–Defendants Dwight Reisdorf and DevGroup, Inc.

John N. Bisanz, Jr., Esq., and Bruce C. Recher, Esq., Henson & Efron, P.A., counsel for Defendants and Counter–Claimants i3, LLC, and Logistics International, LLC.

Mark P. Hodkinson, Esq., Christopher J. Haugen, Esq., and Jonathan P. Norrie, Esq., Bassford Remele, P.A., counsel for Defendant Chad Ogle.

MEMORANDUM OPINION AND ORDER

DONOVAN W. FRANK

, District Judge.

INTRODUCTION

This matter is before the Court on the following motions: (1) Motion for Summary Judgment brought by Defendant Chad Ogle ("Ogle") (Doc. No. 51); (2) Motion for Summary Judgment brought by Defendants and Counter–Claimants i3, LLC ("i3") and Logistics International, LLC ("LI") (Doc. No. 59); (3) Motion for Partial Summary Judgment brought by i3 and LI (Doc. No. 62); and (4) Motion for Partial Summary Judgment brought by Plaintiffs and Counter–Defendants Dwight Reisdorf ("Reisdorf") and DevGroup, Inc. ("DevGroup") (Doc. No. 85). For the reasons set forth below, the Court grants Ogle's motion, grants in part and denies in part i3 and LI's motion for summary judgment, denies i3 and LI's motion for partial summary judgment, and grants in part and denies in part Reisdorf and DevGroup's motion for partial summary judgment.

BACKGROUND

Defendant LI is a Minnesota limited liability corporation that provides transportation and logistics solutions services. (Doc. No. 74 ("Bisanz Aff. II.") ¶ 2, Ex. A ("Reisdorf Dep.") at 42; Doc. No. 19 ("Am. Compl.") ¶ 26.) Defendant i3 is a wholly-owned subsidiary of LI, and provides construction, integration, and installation services for retail and office spaces. (Doc. No. 71 ("Hasse Aff.") ¶ 1; Doc. No. 72 ("Opdahl Aff.") ¶ 2; Reisdorf Dep. at 42.) Tim and Glenn Hasse (together, the "Hasses") are the sole owners of i3 and LI. (Doc. No. 54 ("Haugen Aff.") ¶ 11, Ex. I ("Hasse Dep.") at 33–34.)

Plaintiff Dwight Reisdorf ("Reisdorf") began working at i3 as an Executive Vice President on November 24, 2010. (Doc. No. 96 ("Reisdorf Aff.") ¶ 2; Reisdorf Dep. at 9.) Although Reisdorf received a first draft of an employment agreement in November 2010, Reisdorf and i3 did not enter into an employment agreement at that time. (Bisanz Aff. II, Attach. 2 ("Draft Employment Agreement"); (Doc. No. 70 ("Kocopi Aff.") ¶ 6); Reisdorf Dep. at 23–24.) Reisdorf asserts that Chad Ogle ("Ogle"), President of LI and Chief Executive Officer of i3, promised Reisdorf an annual salary of $175,000. (Reisdorf Dep. at 34–36; Reisdorf Aff. ¶ 11.) i3 and LI dispute this assertion. (Kocopi Aff. ¶ 5.)

On February 2, 2011, Ogle sent an e-mail to the Hasses, with a copy to Reisdorf, in which he asked for permission to start a minority-owned business with Reisdorf. (Doc. No. 98 ("Milo Decl.") ¶ 8, Ex. 8 ("February 2, 2011 E–Mail"); Reisdorf Dep. at 44–45.) In February 2011, Ogle and Tim Hasse discussed the possibility of Reisdorf and Ogle creating a minority-owned business. (Hasse Aff. ¶ 4.) During that conversation, Tim Hasse agreed that Ogle and Reisdorf could create such a business. (Id. )

On February 16, 2011, Reisdorf and Ogle co-formed Plaintiff DevGroup, a Minnesota corporation. (Reisdorf Aff. ¶ 3; Haugen Aff. ¶ 12, Ex. J ("Ogle Dep.") at 45; Milo Decl. ¶ 11, Ex. H ("Secretary of State Filing").) At the time of DevGroup's formation, Reisdorf was the President, Treasurer, Director, and a majority shareholder of DevGroup, and Ogle was the Vice President and Secretary of DevGroup. (Reisdorf Dep. at 71; Ogle Dep. at 45, 71.) Reisdorf asserts that he believed the formation and dealings of DevGroup were conducted with the knowledge and consent of i3 and LI's owners. (Reisdorf Aff. ¶¶ 8, 72.)

On March 30, 2011, Reisdorf signed an Employment Agreement with i3. (Haugen Aff. ¶ 4, Ex. B ("Employment Agreement"); Bisanz Aff. II, Attach. 6 ("Employment Agreement"); Milo Decl. ¶ 7, Ex. D ("Employment Agreement").) The Employment Agreement provides, in relevant part, as follows:

1. Employment. Effective as of the date hereof Employee shall assume the position of Executive Vice President of i3. In this capacity, Employee shall perform such duties and responsibilities as are assigned to him, any of which duties and responsibilities may be modified from time to time by the members of the Board of Governors of i3. By accepting this employment, Employee Agrees to devote his full time, attention and energy to the business of i3 and to not pursue any other employment, business or business related activity without the prior written consent of i3.

...

2. Compensation [.]

(a) Salary. Employee shall be paid at a base annual salary rate of $125,000. Said initial base salary shall increase by up to three percent (3%) per year, with any said increase being effective on the one year anniversary of the date of this Agreement.

(b) Bonus. Once the Minimum Net Income (as defined below) is earned, Employee shall be entitled to the bonus set forth in this Section 2(b) (the "Bonus"). i3 shall pay Employee a Bonus equal to ten percent (10%) of quarterly profits earned by i3 during such quarter (calculated in accordance with i3's accounting policies) (the "Bonus Amount") for each calendar quarter Employee is eligible to receive the Bonus. Payment of the Bonus Amount for any calendar quarter shall be made only if (a) the Minimum Net Income was earned in a prior calendar quarter, (b) i3 is profitable (calculated in accordance with i3's accounting policies) during such calendar quarter and (c) any contributions made by the Members of i3 to fund the start-up or operations of i3 have been repaid to such Members in full. Such quarterly bonuses shall be made within 30 days after the end of the calendar quarter in which the Bonus Amount was earned. "Measured Net Income" shall mean cumulative net income i3 (as determined in i3's sole discretion in accordance with i3's financial accounting policies and after taking into account any losses from prior periods) of nine hundred thousand dollars ($900,000) measured from the date of i3's formation....

...

4. Term and Termination of Agreement.

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(a) This Agreement shall be immediately terminable by i3 for cause. For purposes of this Agreement, "Cause" shall be defined as follows:

(i) a material breach of any provision of any legal obligation or representation made to i3;

(ii) any act of dishonesty, misappropriation, embezzlement, fraud or similar conduct, or any conflict of interest or self-dealing, involving i3 or any of its affiliates;

...

(v) any intentional act or omission which materially harms i3's business or reputation or subjects i3 and/or its officers, directors, agents or employees to civil or criminal liability;

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8. Noncompetition and Nonsolicitation. In consideration of the compensation and other benefits provided to Employee as detailed in this Agreement, for a period of two (2) years after employment with i3 ends, regardless of the reason, Employee shall not, directly or indirectly, on his own behalf or at the request of any other person, employer or entity, solicit, offer to provide or provide any services to a competitor of i3.

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16. Amendment. This Agreement contains the entire agreement of the parties and may be altered or amended only by an agreement in writing signed by both parties.

(Employment Agreement ¶¶ 1, 2, 4, 8, 16.)

On March 30, 2011, Reisdorf and Chris Kocopi ("Kocopi"), the President of i3, signed a Phantom Membership Interest Agreement with i3. (Bisanz Aff. II, Attach. 7 ("Phantom Membership Interest Agreement"); Kocopi Aff. ¶ 7.) The Phantom Membership Interest Agreement provided for the grant of a twenty percent phantom interest stock ownership in i3 if certain conditions were satisfied, which would be paid on a change of control, but which would be lost upon termination of employment. (Phantom Membership Interest Agreement ¶¶ 2–4.) The Phantom Membership Interest Agreement also included a "Covenant Not To Compete" provision, which provided that:

Participant covenants and agrees that for a period ending two (2) years after the Participant's termination of employment, he shall not, directly or indirectly, as owner, partner, joint venturer, stockholder, broker, agent, shareholder, trustee, licensor, or in any other capacity whatsoever (as applicable) (i) engage in, become financially interested in, be employed by, render any consultation or business advice to, or have any connection with, any person, firm, corporation, business, or other enterprise engaged in a similar business to, or which is engaged in direct competition with, the business of the Company, or its affiliates, in any market in which the Company, or its affiliates, are then conducting business or (ii) knowingly interfere with, disrupt or attempt to disrupt any then existing relationship, contractual or otherwise, of the Company, or its affiliates, with any of its customers, suppliers, employees, agents or other persons with whom the Company deals, provided, however, that the for[e]going covenant shall not apply if the Participant's employment with the Company is terminated by the Company without Cause.

(Id. ¶ 6.A.)

In May 2011, DevGroup became certified as a minority-owned business enterprise ("MBE") by the Midwest Minority Supplier Development Council ("MMSDC"). (Doc. No. 56 ("Bisanz Aff. I") ¶ 2, Ex. 1 ("MMSDC Certification"); Reisdorf Dep. at 53; Reisdorf Aff. ¶ 57.) Reisdorf asserts that i3 and LI knew that in order to maintain DevGroup's MBE status, Reisdorf had to have actual control and majority ownership of DevGroup, based on Reisdorf's Asian/Pacific...