Steve Silveus Ins., Inc. v. Goshert

• Decision Date: 12 September 2007
• Docket Number: No. 34A03-0603-CV-88.,34A03-0603-CV-88.
• Citation: 873 N.E.2d 165
• Parties: STEVE SILVEUS INSURANCE, INC., and Silveus Insurance Group, Inc., Appellants-Plaintiffs, v. Richard L. GOSHERT, Goshert Crop Insurance, Inc., Richard D. Goshert, Goshert Enterprises, Inc., David Goshert, Goshert Farms, Inc., Goshert Insurance, LLC, Richard Leroy Goshert, Inc., Rick Goshert Insurance, Inc., DLG Enterprises, Inc., Riedel ABC Corporation, and XYZ Corporation, Appellees-Defendants.
• Court: Indiana Appellate Court

873 N.E.2d 165

STEVE SILVEUS INSURANCE, INC., and Silveus Insurance Group, Inc., Appellants-Plaintiffs, v.Richard L. GOSHERT, Goshert Crop Insurance, Inc., Richard D. Goshert, Goshert Enterprises, Inc., David Goshert, Goshert Farms, Inc., Goshert Insurance, LLC, Richard Leroy Goshert, Inc., Rick Goshert Insurance, Inc., DLG Enterprises, Inc., Riedel ABC Corporation, and XYZ Corporation, Appellees-Defendants.

No. 34A03-0603-CV-88.

Court of Appeals of Indiana.

September 12, 2007.

Paul D. Refior, Refior Law Office, Warsaw, IN, Attorney for Appellants.

Michael H. Michmerhuizen, Cathleen M. Shrader, Thomas A. Herr, Barrett & McNagny LLP, Fort Wayne, IN, Attorneys for Appellees.

OPINION

VAIDIK, Judge.

Case Summary

The events giving rise to this appeal began in 1994, when Steve Silveus hired former business associate and longtime friend Richard L. Goshert("Richard Goshert") to sell crop insurance on behalf of the Steve Silveus Insurance Agency.The agreement between the parties included a provision requiring thirty days' notice of termination and a covenant by Richard Goshert not to compete with Silveus.Silveus subsequently signed identical agreements with Richard Goshert's sons, David Goshert and Richard D. Goshert("Rick Goshert").When Steve Silveus believed that the Gosherts had begun competing with him and his agency, he terminated the agreements without providing the Gosherts with thirty days' notice.When the Gosherts separated from Silveus, Rick Goshert took back-up tapes containing certain trade secrets belonging to Silveus, and the Gosherts formed Goshert Insurance, LLC to compete with Silveus.

These actions prompted Steve Silveus Insurance, Inc. and Silveus Insurance Group, Inc.(collectively "Silveus") to file a lawsuit against the Gosherts alleging breach of contract, conversion, and misappropriation of trade secrets and asking for injunctive and declaratory relief and monetary damages.¹The Gosherts filed a counterclaim against Silveus, alleging breach of contract, unfair competition, defamation, fraud, and conversion.The trial court concluded that Silveus was the first party to breach the agreements due to its failure to provide the Gosherts with thirty days' notice of termination.As such, the trial court awarded the Gosherts $512,170.91 on their breach of contract claim and rejected Silveus' breach of contract claim based on the covenants not to compete, concluding that the first party to materially breach a contract is precluded from enforcing such covenants.However, the trial court ruled in favor of Silveus on its claim for misappropriation of trade secrets and awarded it equal damages of $512,170.91, thereby offsetting the Gosherts' damage award.

Silveus appeals the trial court's judgment and damages award as to the parties' breach of contract claims.Silveus also appeals the trial court's refusal to award it attorney fees on its conversion claim against the Gosherts, contending that it prevailed on that claim.The Gosherts cross-appeal the trial court's judgment in favor of Silveus on Silveus' claim for misappropriation of trade secrets.We affirm the judgment of the trial court in all respects.

Facts and Procedural History

The Silveus family has been selling crop insurance in northern Indiana since the 1940s.For approximately the last forty years, Steve Silveus has been at the helm of that business.The business comprises several distinct entities, including the named plaintiffs in this case, Steve Silveus Insurance, Inc. and Silveus Insurance Group, Inc.Steve Silveus is a longtime acquaintance of Richard Goshert.The two were business partners in the 1970s and, until this dispute arose, personal friends.

In 1994, Richard Goshert began selling crop insurance for Silveus pursuant to an agreement with Steve Silveus Insurance Agency, Inc.In 1998, Richard Goshert signed an identical agreement with Steve Silveus Insurance Agency, Inc. in his capacity as president of Goshert Crop Insurance, Inc.That same year, David Goshert, one of Richard Goshert's sons, began selling crop insurance for Silveus pursuant to an identical agreement, which David Goshert signed in his capacity as president of Goshert Farms, Inc.Then, in 2000, Rick Goshert, also the son of Richard Goshert began selling crop insurance for Silveus pursuant to an identical agreement, which Rick signed in his capacity as president of Goshert Enterprises, Inc.Each of the agreements was entitled "Independent Contractor Engagement Agreement."Because they are all essentially identical, we will refer to them collectively as "the Agreements."Silveus' attorney drafted the Agreements, each of which contained a confidentiality agreement.

Paragraph 2 of the Agreements provides, "The term of this Agreement shall be from________,[²] and shall continue until the expiration of thirty (30) days after either party shall give thirty (30) days written notice of termination."See, e.g.,Appellants' App.p. 28;see alsoid. at 34, 40, 46.Furthermore, Paragraphs 4, 16, 17, 18, and 19 comprise a covenant not to compete with Silveus in the crop insurance business during the term of the agreement or for three years after the termination of the agreement in numerous counties in Indiana, Michigan, Ohio, and Illinois.

In addition to becoming a salesman for Silveus, Rick Goshert was also hired to act as Silveus' IT manager.In this role, Rick Goshert had a great deal of control over Silveus' computer-related issues.Silveus maintained computer databases that contained certain customer information, including client names, names of prospective clients, property descriptions, farm names, property identifications maintained by the United States Department of Agriculture, past insurance coverages, and histories of losses.Importantly, Rick Goshert had access to Silveus' computer back-up tapes, which contained much of this customer information.As Silveus' IT manager, Rick Goshert also worked with other Silveus salesmen to develop computer programs and software related to the crop insurance business.The software Silveus salesmen used included programs such as GRP, GRIP, MPCI, CropCalc, Swanware, and What If.

In 2001, certain Silveus salesman, including the Gosherts, expressed unhappiness with the prominence of Steve Silveus' name on Silveus sales materials.As such, Steve Silveus changed the name of Steve Silveus Insurance Agency, Inc. to Silveus Insurance Group, Inc.Steve Silveus determined that this change required new independent contractor engagement agreements.Specifically, Steve Silveus concluded that each salesman would be required to execute an agreement in his individual capacity in addition to the agreements executed by the corporate entities that had previously entered agreements with Silveus, i.e.,Goshert Crop Insurance, Inc., Goshert Farms, Inc., and Goshert Enterprises, Inc.The individual Gosherts refused to sign agreements in their personal capacities due to the increased liabilities associated with such a change.

The relationship between the Gosherts and Silveus continued to deteriorate during 2001.In December 2001, Rick Goshert sent Silveus a letter resigning his position as Silveus' IT manager, though he remained as a salesman.Then, on January 7, 2002, the Gosherts met with Silveus to discuss the future of the relationship between the two.The possibility of new agreements signed by the individual Gosherts was raised again, and the Gosherts again refused to sign such agreements.On January 9, 2002, Silveus discovered that Rick Goshert had taken steps to preclude Silveus agents other than the Gosherts from accessing certain programs on their computers.That day, the Silveus family met and determined that it would be best for Steve Silveus to terminate the Gosherts.Silveus terminated the Gosherts two days later, on January 11, 2002, with more than two months remaining in the federally-restricted crop insurance selling season, which did not end until March 15, 2002.

As of January 9, 2002, two days before their termination, the Gosherts had already drafted a letter to be sent to Silveus customers and prospects in an attempt to attract those farmers to a new agency, Goshert Insurance, LLC.The draft provided, in pertinent part:

The agency I have been associated with to service your crop insurance needs in the past, Steve Silveus Insurance Agency, Inc. is being restructured.Because of these changes, I feel your needs will be better served by forming (joining)Goshert Insurance, LLC(?).We will still be located in Warsaw, Indiana and ? ? ? ? ? ? ? ?.

Id. at 66.Furthermore, Rick Goshert monitored Silveus' e-mail communications between January 9 and January 11, 2002.After being terminated by Silveus, the Gosherts formally created Goshert Insurance, LLC and began sending solicitation letters to Silveus customers and prospects within the geographical areas restricted in the covenants not to compete.

Silveus filed a Complaint for Damages and Injunctions ("Complaint") against the Gosherts,³ alleging breach of contract, conversion, and misappropriation of trade secrets under Indiana Code chapter 24-2-3.Silveus requested injunctive and declaratory relief and monetary damages.Silveus claimed, in part, that the Gosherts had violated the covenants not to compete in the Agreements.The Gosherts filed a counterclaim ("Counterclaim"), alleging breach of contract, unfair competition, defamation, fraud, and conversion.The Gosherts claimed, in part, that Silveus had breached the Agreements by failing to provide thirty days' notice of termination in accordance with Paragraph 2.

The trial court conducted a twelve-day bench trial between October 11, 2004, and September 28, 2005.Regarding the consequences of Silveus' failure to provide the Gosherts with thirty days' notice of termination, Richard Goshert testified, "I could have at least serviced all clients that I already had, if not been able to see some new ones."Tr.p. 1021....