Stuart C. Irby Co. v. Tipton

• Decision Date: 06 August 2015
• Docket Number: 14–2682.,Nos. 14–1970,s. 14–1970
• Citation: Stuart C. Irby Co. v. Tipton, 796 F.3d 918 (8th Cir. 2015)
• Parties: STUART C. IRBY COMPANY, INC., Plaintiff–Appellant v. Brandon TIPTON; Wholesale Electric Supply Company, Inc.; John Doe, 1–5; Michael Gilbert; Stephen Padgett ; Kurt Blumfelder; Gary Cummings, Defendants–Appellees. Stuart C. Irby Company, Inc., Plaintiff–Appellant v. Brandon Tipton; Wholesale Electric Supply Company, Inc.; John Doe, 1–5; Michael Gilbert; Stephen Padgett ; Kurt Blumfelder; Gary Cummings, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

796 F.3d 918

STUART C. IRBY COMPANY, INC., Plaintiff–Appellant

v.Brandon TIPTON;

Wholesale Electric Supply Company, Inc.;

John Doe, 1–5;

Michael Gilbert;

Stephen Padgett ;

Kurt Blumfelder;

Gary Cummings, Defendants–Appellees.

Stuart C. Irby Company, Inc., Plaintiff–Appellant

v.Brandon Tipton;

Wholesale Electric Supply Company, Inc.;

John Doe, 1–5;

Michael Gilbert;

Stephen Padgett ;

Kurt Blumfelder;

Gary Cummings, Defendants–Appellees.

Nos. 14–1970

14–2682.

United States Court of Appeals, Eighth Circuit.

Submitted: April 16, 2015.

Filed: Aug. 6, 2015.

Kim M. Boyle, argued, New Orleans, LA, (Jeffrey L. Spillyards, Rogers, AR., Mark D. Fijman, Jackson, MS., W. Thomas Siler, Jr., Jackson, MS, on the brief), for Plaintiff–Appellant.

Gary D. Corum, argued Little Rock, AR, (Brent Maurice Langdon, Melissa G. McPherson, Texarkana, TX, on the brief), for Defendants–Appellees.

Before WOLLMAN and GRUENDER, Circuit Judges, and GRITZNER,¹District Judge.

Opinion

GRUENDER, Circuit Judge.

In this appeal, we consider claims brought by an employer after several of its employees left to work for a competitor.The district court granted summary judgment to the defendants on all claims and awarded them attorneys' fees and costs.We conclude that granting summary judgment to the defendants was inappropriate and that the award of attorneys' fees and costs must be vacated.

I.Background

Brandon Tipton, Michael Gilbert, and Steven Padgett worked for Treadway Electric Company, Inc.(“Treadway”), a distributor of electrical products.Tipton initially worked for Treadway in its office in Little Rock, Arkansas and later became the branch manager for its Conway, Arkansas location.Gilbert and Padgett worked as inside salesmen for Treadway in Conway.While working for Treadway, Tipton, Gilbert, and Padgett each signed agreements that contained the following non-compete provision:

[I]f and when you leave Treadway's employ, for whatever reason, you will not compete with Treadway or its subsidiaries by soliciting or accepting business from Treadway's customers within your territory, as defined by Treadway Electric Company, for at least one (1) year after leaving; and ... you will not solicit the employment of any Treadway representatives for at least one (1) year after leaving.

Thereafter, Stuart C. Irby Company, Inc.(“Irby”) became interested in purchasing many of Treadway's assets, and an asset purchase agreement (“APA”) was signed on December 8, 2011.The APA stated that Treadway “will assign and transfer to [Irby] ... all of [Treadway's] rights, title and interests in and to, and [Irby] will take assignment of and assume, all rights and interest in and obligations under the Assigned Contracts.”Irby's chief operating officer has averred that Tipton's, Gilbert's, and Padgett's non-compete agreements were assigned to Irby.Indeed, when Treadway and Irby discussed which contracts would be assigned, they discussed the non-compete agreements, and Treadway's president showed Tipton's agreement to Irby.

The APA took effect on January 1, 2012, at which time Tipton, Gilbert, and Padgett became Irby employees.Irby retained them with essentially the same benefits and seniority.For the employees, the transition from Treadway to Irby appears to have been seamless.Tipton testified that Irby's business was the same as Treadway's had been.As a branch manager for Irby, Tipton directed the office's operations, including sales, delivery of products, and administrative activities.Tipton interacted daily with customers, even taking them out for meals and on annual fishing trips.As inside salesmen for Irby, Gilbert and Padgett also dealt with customers on a regular basis.

After working for Irby for about one year, Tipton began talking with Kurt Blumfelder, the Executive Vice President of Wholesale Electric Supply Company, Inc.(“Wholesale”).Tipton admitted that Wholesale did “pretty much the same thing” as Irby, and Blumfelder likewise acknowledged that the companies were competitors in Arkansas.On March 14, 2013, Tipton announced that he was leaving Irby to work for Wholesale.The next day, Gilbert and Padgett did the same.

What happened in advance of these resignations forms the core of this case.During his deposition approximately eight months after he left Irby, Tipton had very little recollection about any conversations he had with Blumfelder about coming to work for Wholesale.Tipton did not remember whether he had informed Gilbert and Padgett about a meeting he had with Blumfelder.Nor could Tipton recall whether he told Blumfelder that he should hire Gilbert and Padgett.Blumfelder, however, testified that he spoke with Tipton by telephone “a number of times” in early 2013 about him coming to work for Wholesale.Tipton acknowledged that he was “[p]ossibly looking for employment” if he was talking to Blumfelder around this time.On January 5 and 8, the following text-message exchange occurred:

Blumfelder: Interested in meeting tomorrow AM or lunch; Or Thursday ... I can meet anytime 11AM–9PM ... In Conway or Little Rock ... Let me know if you guys r available any of these times please.Thanks.

Tipton: Thursday would be better.

Blumfelder: Ok great.Are you guys able to come to Little Rock to see our place or would you prefer to meet in Conway?

And on January 29, the following text-message exchange occurred:

Tipton: What time does everyone leave the store in Conway[?]

Blumfelder: I'll chase them out at 5 and will be there waiting on you guys.What beer u like[?]

Furthermore, when asked whether he talked with Gilbert and Padgett about leaving Irby and going to Wholesale, Tipton admitted that he met with them and Blumfelder on March 13, the day before Tipton resigned from Irby.Tipton did not remember whether he had spoken to Gilbert and Padgett about leaving Irby before then.

Irby sued Tipton, Gilbert, Padgett, Blumfelder, and Wholesale asserting claims for breach of fiduciary duty, breach of contract, civil conspiracy, and tortious interference with a contract.²On cross-motions for summary judgment, the district court granted summary judgment to the defendants on all claims.The court then awarded the defendants in excess of $200,000 in attorneys' fees and costs.Irby appeals both rulings.

II.Discussion

A.

We review the district court's grant of summary judgment de novo, Loftness Specialized Farm Equip., Inc. v. Twiestmeyer,742 F.3d 845, 849(8th Cir.2014), affirming if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law,”Fed.R.Civ.P. 56(a).“At the summary judgment stage, facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts.”Scott v. Harris,550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686(2007)(quotingFed.R.Civ.P. 56(c) ).To survive a summary-judgment motion, the evidence must be “such that a reasonable jury could return a verdict for the nonmoving party.”Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).The parties agree that Arkansas substantive law applies here.Consequently, we“apply decisions of the Arkansas Supreme Court construing Arkansas law, and we attempt to predict how that court would decide any state law questions that it has not yet resolved.”G & K Servs. Co., Inc. v. Bill's Super Foods, Inc.,766 F.3d 797, 800(8th Cir.2014).

1.Breach of Fiduciary Duty

Irby first argues that the district court erred in granting summary judgment on its fiduciary-duty claim against Tipton.As the branch manager of Irby's Conway office, Tipton owed a fiduciary duty to Irby.SeePennington v. Harvest Foods, Inc.,326 Ark. 704, 934 S.W.2d 485, 495(1996)(“[A] manager owes a fiduciary duty to his business.”);Tandy Corp. v. Bone,283 Ark. 399, 678 S.W.2d 312, 318(1984)(same).The parties disagree about whether a trial is necessary to determine if Tipton abided by that duty.

Irby contends that Tipton breached his fiduciary duty by recruiting Gilbert and Padgett to join Wholesale.“Arkansas law strikes a careful balance between an employer's right to employee loyalty, and an employee's right—absent contrary contractual commitment—to resign and pursue his career with a competing employer.”Vigoro Indus., Inc. v. Crisp,82 F.3d 785, 788(8th Cir.1996).Under Arkansas law, “[e]ven corporate officers and directors, who have fiduciary duties to the corporation beyond those of less essential employees, are free to resign and go into competition, so long as they remain loyal prior to resigning.”Id.And a corporate fiduciary, while still employed, is free to notify his colleagues and his employer's customers of his intent to leave.Id.However, before resigning, a manager has a duty of loyalty that “preclude[s] him from soliciting other employees or customers to leave [the employer] with him.”Id.

We conclude that a trial is necessary to determine whether Tipton, while still employed by Irby, solicited Gilbert and Padgett to leave for Wholesale.Tipton spoke with Blumfelder by telephone “a number of times” in early 2013 about joining Wholesale.In January 2013, Blumfelder and Tipton exchanged text messages to arrange a meeting for “you guys” at which Blumfelder would provide beer and a tour of Wholesale's facility.A reasonable jury could conclude that the “guys” for whom Tipton was arranging a meeting included Gilbert and Padgett, especially because Blumfelder admitted that he was interested in meeting them.Furthermore, a reasonable jury could infer that by arranging a meeting with Blumfelder that involved beer and a tour of Wholesale's facility, Tipton was trying to convince Gilbert and Padgett to join Wholesale with him.SeeAnderson,477 U.S. at 248, 106 S.Ct. 2505.Tipton could not recall whether he asked Blumfelder to hire Gilbert and Padgett, but Tipton admits that, before he left Irby, he met with them to discuss leaving Irby to become Wholesale employees.This meeting, which Blumfelder...