Staffworks Group-Wisconsin Inc. v. Serv. First Staffing Inc.
| Decision Date | 29 June 2020 |
| Docket Number | Case No. 18-C-392 |
| Parties | STAFFWORKS GROUP-WISCONSIN INC., Plaintiff, v. SERVICE FIRST STAFFING INC., et al., Defendants. |
| Court | U.S. District Court — Eastern District of Wisconsin |
Plaintiff Staffworks Group-Wisconsin Inc., d/b/a Nicolet Staffing (Nicolet), filed this action against its former employees, David Sanders and Kathryn Kienert, and Service First Staffing, Inc. (SFS), after Sanders and Kienert resigned from Nicolet to join SFS, a rival in the temporary staffing industry. Nicolet alleges that Defendants' misconduct illegally benefited its competitor and caused Nicolet to shutter its New London branch office and to suffer significant economic loss. The complaint asserts claims for misappropriation of Nicolet's trade secrets in violation of 18 U.S.C. § 1836, together with various state law claims including breach of contract, tortious interference with contract, breach of fiduciary duty, and misappropriation of confidential information. Nicolet's insurer, Zurich American Insurance Company, joined the action and asserted a subrogation claim against Defendants for money it paid for the alleged loss under its policy of insurance. Dkt. No. 34. The court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1332. Presently before the court is Defendants' motion for summary judgment. Dkt. No. 41. For the reasons that follow, Defendants' motion for summary judgment will be granted.
Nicolet and SFS are staffing companies that provide temporary employees and related staffing services to their customers. Defs.' Statement of Undisputed Material Facts (DSMF), ¶¶ 1, 8, Dkt. No. 45. Staffing agencies, like SFS and Nicolet, evaluate potential employees for their customers—by screening for drug use, running criminal background checks, and evaluating their skills—before placing them with customers in need of temporary employees. Id. at ¶¶ 7-8. The staffing agencies are paid by the customers for whom they place temporary employees; they also handle the payroll of the temporary employees. Id. at ¶ 8.
Nicolet operates its staffing service in small towns throughout Wisconsin and the upper peninsula of Michigan. Pl.'s Additional Facts (PAF), ¶ 98, Dkt. No. 56. It is not a large company, never having exceeded 30 employees. Id. Nicolet was purchased from Wisconsin Staffing Services, Inc. by the Staffworks Group entities in December 2012 and formed a new company, Staffworks Group-Wisconsin, Inc., to house the assets of Nicolet. Id. at ¶ 99.
Before joining SFS, Defendants David Sanders and Kathryn Kienert worked together at Nicolet. When Nicolet was purchased in 2012, Sanders was the branch manager at the office in New London, Wisconsin. DSMF, ¶ 22. In this role, Sanders handled client, recruiting, marketing, and staffing matters for Nicolet. PAF, ¶¶ 125-27. He held this position until Nicolet promoted him to district manager in May 2015, which entailed new company and customer-related responsibilities and supervising additional branch offices (including offices in Medford, Menominee, Wisconsin Rapids, New London, and Eau Claire). DSMF, ¶ 23; PAF, ¶¶ 130-31. Nearly a year and a half later in October 2016, Nicolet's CEO told Sanders that Nicolet's new COO wanted to fire Sanders. DSMF, ¶ 24. However, instead of being fired, Sanders was told to report to another district manager and lost his supervisory role over the Medford and Menomineebranches. Id. at ¶ 25. Subsequently, and effective January 5, 2017, Sanders was again demoted so that he was branch manager of solely the New London branch and his base salary was reduced to $25,000 (he received additional income through commissions). Id. at ¶ 27.
On or about July 16, 2017, Sanders replied to a job posting for SFS about a position for an account manager. Id. at ¶ 40. Sanders accepted the position at SFS on or about July 31, 2017, after meetings with Tami Siekert (SFS's Wisconsin Rapids branch manager) and Pete Weslow (SFS's President). He claims the reasons for his decision to leave Nicolet and join SFS were his declining salary and the fact that warrants for unpaid taxes had been served on Nicolet by the Wisconsin Department of Revenue in May 2016. Id. at ¶¶ 38, 45. He notified Nicolet of his intent to resign from Nicolet on August 10, 2017, and was immediately terminated. He started work at SFS on August 16, 2017. Id. at ¶¶ 41-42, 46.
Sanders deleted all of his Nicolet emails on his work computer before departing Nicolet. Id. at ¶ 47. Nicolet claims that Sanders forwarded company documents to his personal email address over many years, intending to use them at a later time. PAF, ¶¶ 146-47. Sanders disputes this account, asserting that he forwarded emails to accommodate his travel schedule and track commissions, and denies that his deletion of emails prevented Nicolet from conducting business with its customers. DSMF, ¶¶ 47, 80. Sanders claims that he never shared any of this information with SFS. Id. at ¶ 80.
Kienert also worked at the New London branch of Nicolet. Id. at ¶ 35. She did not have official job duties outside of this branch. Id. Kienert directly reported to Sanders during her tenure at Nicolet. Id. at ¶ 36. She was his "right-hand person," who was eventually promoted to assistant branch manager. PAF, ¶128. Kienert, like Sanders, was neither a director nor officer of Nicolet. DSMF, ¶ 37.
Kienert desired to leave Nicolet and join Sanders at SFS once he announced his departure. Id. at ¶ 53. Kienert started working at SFS on September 5, 2017, in Wisconsin Rapids before she and Sanders opened a Waupaca branch for SFS on September 25, 2017. Id. at ¶¶ 55-56. Kienert's initial role was as a recruiter. Id.
At the time they began their employment with Nicolet, Sanders and Kienert each signed a "Non-Competition, Non-Disclosure and Non-Solicitation Agreement." Id. at ¶¶ 57-58. Sanders's Agreement identifies Staffworks Group-Wisconsin, Inc. as a counterparty, in addition to other Staffworks entities. Id. at ¶ 60. Kienert's Agreement did not identify the plaintiff, Staffworks Group-Wisconsin, Inc., as a counterparty; it listed "Brann Enterprises, Inc., Staffworks Group 2, Inc. and Staffworks Group 3, Michigan corporations, also doing business as Staffworks Group," which were collectively described as "Staffworks" in the agreement. Id. at ¶ 59. Nicolet claims this was an inadvertent scrivener's error, and Kienert's contract was intended to cover her employment with Nicolet. PAF, ¶¶ 119-20.
The non-compete clause of the Agreement provides that "[d]uring the term, Employee agrees not to, directly or indirectly, conduct any prohibited services within a fifty (50) mile radius of any branch or office." Id. at ¶ 110. "Services" is defined to "include the scope of employment, specific duties and work performed on behalf of Staffworks as part of its agreement or contract with [its] customers," including "temporary staffing, payroll services, recruitment, and direct hire placement." Id.
The non-disclosure clause provides that an employee "will not: (1) take, retain, or use Information or Staffworks's materials for Employee's own benefit; (2) disclose Information to any other entity except in a manner consistent with Staffworks's policies." Id. at ¶ 111. Information is defined as "information or materials that are considered trade secret, confidential and/orproprietary by Staffworks," including "the development and provision of unique products and services," as well as:
e-mails, e-blasts or communications, technical specifications, know-how, protocols, results of testing, data, scientific and medical information, strategic business plans, methodologies processes, financial information, product information, methods of operation, draft patent applications, customer information, supplier information, compilations of data software (both object code and source code), proposed agreements, weekly reports, monthly profit reports, client lists, business cards received during the solicitation or service of business[.]
Id. The non-disclosure also requires that each employee agree to:
keep Information of Staffworks confidential. During and after Employee's employment Employee will not: . . . (3) delete, encrypt, password protect, or retain electronic files containing Information or Staffworks's materials (including emails and attachments); or (4) take any other action that impairs, restricts, limits, or impedes Staffworks's ability to have full access to and use of its Information, materials, and Workproduct.
Id. After employment at Nicolet is terminated, the employee agrees to return all Information, workproduct, and materials. Id.
The agreement also contains a non-solicitation clause with respect to Nicolet's customers. It provides that the employee:
acknowledges that the relationships between Staffworks, its clients, strategic partners and Customers are valuable assets of Staffworks. During the [Term], Employee agrees that Employee will not contact (directly or through another person or company) any then-current Staffworks Customer and/or strategic partner for the purposes of: (1) inducing them to terminate their relationship with Staffworks, (2) to discourage them from doing business with Staffworks, or (3) to offer to provide products or services that are similar to those of Staffworks. These prohibitions cover solicitations or contact on Employee's behalf, as an employee of a third party, as an independent contractor, consultant, or any other status, and apply whether the contact was initiated by Employee, the Customer, or a third party. The Employee has an affirmative duty to notify and acknowledge to any Customer who contacts the Employee that the Employee has entered into this Agreement.
The non-compete, non-disclosure, and non-solicitation (with respect to customers) covenants define the duration of the applicable term differently than the non-solicitation clause with respect to other company employees (described below). Id. at ¶ 115...
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