O'Sullivan Films, Inc. v. Neaves
| Decision Date | 18 October 2018 |
| Docket Number | Case No. 5:17-cv-00031 |
| Parties | O'SULLIVAN FILMS, INC., Plaintiff, v. David NEAVES, Defendant. |
| Court | U.S. District Court — Western District of Virginia |
Charles Michael Sims, Harry Robert Yates, III, Joan C. McKenna, O'HaganMeyer, Richmond, VA, for Plaintiff.
Robert Edwin Dean, II, Rob Dean Law, Roanoke, VA, for Defendant.
When Defendant David Neaves started his employment with Plaintiff O'Sullivan Films, Inc. ("O'Sullivan"), he agreed to a limited noncompete agreement (the "Noncompete") with O'Sullivan. Neaves concedes that he has willfully violated the terms of the Noncompete, but insists that the Noncompete is invalid under Virginia law. O'Sullivan disagrees and asks the court to enforce the Noncompete.
This matter comes before the court several motions. O'Sullivan has filed a Motion for Summary Judgment (the "O'Sullivan Motion"), ECF No. 50. Neaves has filed a Motion for Summary Judgment Regarding the Enforceability of the Non-Compete (the "Neaves Enforceability Motion"), ECF No. 54, and a Motion for Summary Judgment Regarding Damages (the "Neaves Damages Motion"), ECF No. 55. For the reasons described below, the O'Sullivan Motion will be GRANTED in part and DENIED in part , the Neaves Enforceability Motion will be DENIED , and the Neaves Damages Motion will be GRANTED in part and DENIED in part.
Pursuant to Rule 56(a), the court must "grant summary judgment if the movant shows that 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) ; Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Glynn v. EDO Corp., 710 F.3d 209, 213 (4th Cir. 2013). When making this determination, the court should consider "the pleadings, depositions, answers to interrogatories, and admissions on file, together with ... [any] affidavits" filed by the parties. Celotex, 477 U.S. at 322, 106 S.Ct. 2548. Whether a fact is material depends on the relevant substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Id. (citation omitted). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. If that burden has been met, the non-moving party must then come forward and establish the specific material facts in dispute to survive summary judgment. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
In determining whether a genuine issue of material fact exists, the court views the facts and draws all reasonable inferences in the light most favorable to the non-moving party. Glynn, 710 F.3d at 213 (citing Bonds v. Leavitt, 629 F.3d 369, 380 (4th Cir. 2011) ). Indeed, "[i]t is an ‘axiom that in ruling on a motion for summary judgment, the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor.’ " McAirlaids, Inc. v. Kimberly–Clark Corp., 756 F.3d 307, 310 (4th Cir. 2014) (internal alteration omitted) (citing Tolan v. Cotton, 572 U.S. 650, 134 S.Ct. 1861, 1863, 188 L.Ed.2d 895 (2014) (per curiam) ). Moreover, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge." Anderson, 477 U.S. at 255, 106 S.Ct. 2505. The non-moving party must, however, "set forth specific facts that go beyond the ‘mere existence of a scintilla of evidence.’ " Glynn, 710 F.3d at 213 (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505 ). Instead, the non-moving party must show that "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Res. Bankshares Corp. v. St. Paul Mercury Ins. Co., 407 F.3d 631, 635 (4th Cir. 2005) (quoting Anderson, 477 U.S. at 249, 106 S.Ct. 2505 ). "In other words, to grant summary judgment the [c]ourt must determine that no reasonable jury could find for the nonmoving party on the evidence before it." Moss v. Parks Corp., 985 F.2d 736, 738 (4th Cir. 1993) (quoting Perini Corp. v. Perini Constr., Inc., 915 F.2d 121, 124 (4th Cir. 1990) ).
The facts in this case are undisputed. Plaintiff O'Sullivan Films, Inc. is a manufacturer of artificial leather, which it sells to the automotive industry, among other clients. Declaration of Richard J. Till ("Till Decl."), ECF No. 60 Ex. A, ¶ 1. O'Sullivan sells over $17 million in artificial leather products annually, and its financial investment in machinery, equipment, and trade secrets is greater than $20 million. Id. ¶¶ 5–6. O'Sullivan's automobile business is targeted to manufacturers in the United States, Mexico, and Canada. Deposition of Scott Krueger, ECF No. 60 Ex. B., at 10:2–9, 11:20.
Defendant David Neaves was hired by O'Sullivan in June 2013 and worked through December 2016. Neaves first worked as a New Product Development Chemist in Artificial Leather, and then was promoted to Artificial Leather Film R & D Manager. Till Decl. ¶¶ 2–3. As a requirement of his employment with O'Sullivan, on June 17, 2013, Neaves entered into a Confidential Information, Invention, and Non-Solicitation Agreement (the "Agreement"), ECF No. 60 Ex. C, with O'Sullivan. The Agreement, including the Noncompete, is governed by Virginia law. Agreement ¶ 19.
Paragraph 8 of the Agreement contains the Noncompete:
For one year after my employment with O'Sullivan ends, either voluntarily or for cause, I agree that I will not (a) sell, attempt to sell, or assist others in selling or providing products or services in competition with the Business of O'Sullivan at the Restricted Contacts; or (b) help, financially or otherwise, any person or entity to compete with the Business of O'Sullivan by using or contacting the Restricted Contacts.
Id. ¶ 8. "Restricted Contacts" is defined as:
actual and potential customers, agents, distributors, vendors, business partners, and persons or entities that, during the two years before my employment with O'Sullivan ends, I had direct contact with or that I had indirect contact with, including indirect contact by supporting or being responsible for the activities of other O'Sullivan employees who had direct contact with the Restricted Accounts.
Id. Additionally, the "Business of O'Sullivan" is defined as "the development, manufacturing, marketing, and sale of plastic engineered films compounds, services related to this market, and other business that O'Sullivan engages in during my employment." Id. ¶ 2.
Id. ¶ 8. The Agreement defines "Confidential Information" as:
any kind of information that is not known by the general public. It includes all documents or items that reflect what I have done with, or thought about, the Confidential Information .... Confidential Information includes, but is not limited to, technical information (such as formulas, trade secrets, inventions, and designs); financial information (such as projections, forecasts, budgets, and plans); and business and manufacturing information (such as plans, strategies, processes, competitive analyses, and lists and information about customers, potential customers, vendors, and employees).All Confidential Information is protected by this Agreement regardless of how it is learned by me or disclosed to me.
Finally, Paragraph 12 of the Agreement provides for both injunctive relief and fee shifting should Neaves violate any part of the Agreement:
I agree that the remedies available at law for breach of my obligations under this Agreement may be inadequate and that O'Sullivan will need immediate relief to protect its rights under this Agreement. I agree that, in addition to any rights and remedies available to O'Sullivan at law or in equity, temporary and permanent injunctive relief may be granted in any proceeding brought to enforce my obligations under this Agreement, without the need to prove actual damage. I agree that I will be responsible for all attorneys' fees, costs, and expenses incurred by O'Sullivan by reason of any action relating to this Agreement, and that O'Sullivan will be entitled to such additional relief that a court deems appropriate.
In Neaves' various positions, he refined O'Sullivan's artificial leather. Deposition of David Neaves ("Neaves Dep."), ECF No. 60 Ex. D, 50:14–17. Neaves also had management responsibility over more junior artificial leather research and development employees. Id. 68:14–65:7. According to O'Sullivan, and not disputed by Neaves:
Neaves had access to the chemical formulas used by O'Sullivan for its artificial leather, constantly refined O'Sullivan's artificial leather products, and performed his own testing and supervised testing of O'Sullivan's products to improve performance. Neaves Dep. 28:11–14. He made adjustments to formulations for clients, Neaves Dep. 34:20–35:4, and drafted instructions and testing plans for his subordinates. Neaves Dep. 39:8–11.
Neaves admitted that the automotive companies he worked and communicated with while at O'Sullivan included Tesla, General Motors ("GM"), and Chrysler. Neaves Dep. 59:1–5. In particular, Neaves had primary responsibility for O'Sullivan's attempt to win a GM...
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