Snap! Mobile, Inc. v. Argyrou

• Docket Number: 83766-4-I
• Decision Date: 26 December 2023
• Parties: SNAP! MOBILE, INC., a Delaware corporation, Appellant, v. MICHAEL ARGYROU, an individual; LEERA KPEA, an individual; BRIAN LEE, an individual; LEIGHTON RUSH, an individual; MARCUS THORNTON, an individual; TRAVIS TINER, an individual; JAY WOODWORTH, an individual, Respondents, ALEX CARDENAS, an individual; CHRIS REINHARDT, an individual; DYLAN REDA, an individual, Defendants.
• Court: Washington Court of Appeals

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SNAP! MOBILE, INC., a Delaware corporation, Appellant,
v.
MICHAEL ARGYROU, an individual; LEERA KPEA, an individual; BRIAN LEE, an individual; LEIGHTON RUSH, an individual; MARCUS THORNTON, an individual; TRAVIS TINER, an individual; JAY WOODWORTH, an individual, Respondents,

ALEX CARDENAS, an individual; CHRIS REINHARDT, an individual; DYLAN REDA, an individual, Defendants.

No. 83766-4-I

Court of Appeals of Washington, Division 1

December 26, 2023

UNPUBLISHED OPINION

Chung, J.

Snap! Mobile, Inc. (Snap) lost many former employees and accounts to upstart rival Vertical Raise, LLC (VR). Snap sued VR and its founder Paul Landers in Idaho for tortious interference with contract, unfair competition, and misappropriation of trade secrets, resulting in a monetary judgment and permanent injunction in Snap's favor. In this lawsuit, Snap sued several of its former employees in King County for breach of restrictive covenants in their employment agreements. Relying on the Idaho judgment, the former employees

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moved for summary judgment and dismissal on their affirmative defenses of claim preclusion (res judicata) and issue preclusion (collateral estoppel). The trial court concluded both doctrines applied and granted summary judgment in the former employees' favor.

Snap appeals the dismissal of its claims. Respondents, the former employees, cross-appeal the denial of their motion to amend and their fee award. We affirm the trial court's denial of Respondents' motion to amend. However, we conclude that Snap's claims are not precluded under the doctrines of claim preclusion or issue preclusion. Therefore, we reverse the summary judgment order and remand for further proceedings.

FACTS

Snap, founded in 2013, is a Delaware corporation with its principal place of business in King County. Snap developed an online platform to help teams and schools raise money through online donation campaigns. Snap employs area sales representatives across the country who serve as the primary contacts for its customers. The sales representatives were independent contractors until Snap began converting them to W-2 employees in June 2017.

The sales representatives who chose to become employees signed a sales representative agreement. The agreement included a forum selection clause agreeing to jurisdiction in King County, Washington and resolution under Washington law for any disputes related to or arising out of the agreement, with the employee consenting to personal jurisdiction in King County Superior Court.

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Additionally, the agreement included several provisions in a section entitled "Restrictive Covenants" aimed at protecting Snap's interest in its "Proprietary and Trade Secret Information." The restrictive covenants consisted of a non-compete clause, a non-acceptance of business clause, and a non-solicitation of business clause for the specific geographic area where the employee performed services for Snap as well as "any geographic area about which Employee learned Confidential, Proprietary, and Trade Secret Information." The agreement also prohibited solicitation of other Snap employees. All restrictions had a duration of 18 months after termination of employment.

VR entered the online fundraising industry in 2018, five years after Snap. VR began hiring Snap sales representatives as independent contractors, and Chief Executive Officer (CEO) Paul Landers encouraged them to use Snap's client lists and other confidential customer information for VR's benefit. In October 2018, Snap sued two former employees and VR to enforce the restrictive covenants in the agreement in King County. See Snap! Mobile v. Clay, et al., Case No. 18-2-26321-2 SEA. VR successfully moved to dismiss for lack of personal jurisdiction, as its place of business was in Idaho, and the lawsuit proceeded against only the former employees.^[1] In December 2019, Snap brought a complaint against VR in Idaho for tortious interference with contract, misappropriation of trade secrets, and unfair competition, and subsequently

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amended to add Landers as a defendant. See Snap! Mobile, Inc. v. Vertical Raise, LLC, Case No. CV28-19-8796 (Kootenai County, Idaho) ("Idaho lawsuit").

Soon after, Snap filed this lawsuit for breach of contract, seeking damages and injunctive relief against ten other former Snap employees-Michael Argyrou, Alex Cardenas, Leera Kpea, Brian Lee, Chris Reinhardt, Leighton Rush, Marcus Thornton, Travis Tiner, Dylan Reda, and Jay Woodworth (collectively, Respondents). The Respondents had all signed the Snap sales representative agreement with its restrictive covenants and had subsequently joined VR as independent contractors. None of these former Snap employees was a resident of Washington State. Snap brought the lawsuit in King County, Washington, pursuant to the forum selection clause in the sales representative agreement.

Snap continued to pursue VR and Landers in the Idaho lawsuit. In December 2020, the Idaho court granted Snap's motion for a preliminary injunction, enjoining VR, Landers, "and anyone acting in concert or on behalf of Vertical Raise and Landers" from engaging in certain activities, including soliciting, accepting, or transacting business with Snap customers and business partners served by former Snap employees, aiding former Snap employees in breaching their sales representative agreements, compensating former Snap employees for transacting business with former Snap clients in the geographic area they had served for Snap, and obtaining or using Snap's confidential, trade secret information.

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Meanwhile, in King County, Respondents answered Snap's complaint, alleging several affirmative defenses, including hostile work environment leading to the Respondents' departure from the company and constructive discharge. In April 2021, Respondents filed a motion for summary judgment alleging the restrictive covenants were void as a matter of law and unenforceable. The same day, Snap filed a motion for summary judgment asking the court to strike the two affirmative defenses based on hostile work environment under CR 12(f), find the restrictive covenants valid and enforceable as a matter of law, and determine that Respondents breached the covenants. The trial court granted Snap's request to strike Respondents' hostile workplace affirmative defenses but denied summary judgment on all other issues. The court also denied the Respondents' motion for summary judgment.

Back in Idaho, Snap moved for partial summary judgment on its claims against VR and Landers for tortious interference with contract and misappropriation of trade secrets. In June 2021, the court determined that Snap had established a prima facie case of tortious interference and VR and Landers failed to provide any evidence of justification. The court concluded that VR and Landers personally were liable for tortious interference as a matter of law. The court also held that VR and Landers misappropriated Snap's trade secrets. The court granted partial summary judgment on the two claims.

The remaining issues went to trial, and a jury awarded Snap $750,000 in economic damages for unjust enrichment, $150,000 in punitive damages from

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VR, and $100,000 in punitive damages from Landers individually. Snap moved for additur, i.e., additional damages, and received an additional $410,021 for VR's unjust enrichment and $900,000 for the cost to Snap for workforce replacement. In September 2021, the Idaho court granted a permanent injunction against VR, Landers, "and their employees, independent contractors, servants, and agents, and anyone acting in concert or on behalf of Vertical Raise, LLC and Paul Landers," enjoining them from the same actions outlined in the preliminary injunction for 18 months.

During trial in the Idaho lawsuit, non-party and former Snap employee Paul Croghan appeared as a witness. While he was in Idaho to testify, Snap served him with a motion for contempt for violating the preliminary injunction.^[2] The Idaho court dismissed the contempt proceedings against Croghan, concluding the preliminary injunction was overbroad and lacking in specificity such that it did not provide Croghan with proper notice of the scope of prohibited conduct. In addition, the trial court determined it lacked personal jurisdiction over Croghan.^[3]

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Back in King County, Respondents filed a motion to amend their answer to add affirmative defenses including res judicata, collateral estoppel, and material breach "based on harassment that the Defendants experienced in the workplace and that the hostile work environment was a material breach of the Defendants' Sales Representative Agreements and employee handbook." The court granted Respondents' motion to amend to add affirmative defenses of collateral estoppel, res judicata, unjust enrichment, offset, and unconscionability, but denied the material breach defense because it was identical to the previously dismissed hostile work environment affirmative defenses. Two months later, Respondents moved for summary judgment on their affirmative defenses that Snap's claims were precluded under the doctrines of res judicata and collateral estoppel based on the entry of the final judgment in the Idaho lawsuit against VR and Landers. The trial court granted Respondents' motion for summary judgment, concluding Snap's claims were precluded by both collateral estoppel and res judicata. Under the terms of the agreement, Respondents requested and received attorney fees and costs.

Snap appeals the court's dismissal of its breach of contract claim. Respondents cross-appeal the denial of the motion to amend and the amount of attorney fees awarded.

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DISCUSSION

I. Summary Judgment Dismissal of Snap's Claims

The trial court dismissed Snap's claims on summary judgment, citing both collateral estoppel and res judicata. We review orders on summary judgment de novo. Kim v. Lakeside Adult Fam....