Taser Int'l Inc v. Ward

• Citation: 224 Ariz. 389,231 P.3d 921
• Decision Date: 13 May 2010
• Docket Number: No. 1 CA-CV 09-0468.,1 CA-CV 09-0468.
• Parties: TASER INTERNATIONAL, INC., a Delaware corporation, Plaintiff/Appellee,v.Steve WARD, an individual, Defendant/Appellant.
• Court: Arizona Court of Appeals

224 Ariz. 389

231 P.3d 921

TASER INTERNATIONAL, INC., a Delaware corporation, Plaintiff/Appellee,v.Steve WARD, an individual, Defendant/Appellant.

No. 1 CA-CV 09-0468.

Court of Appeals of Arizona Division 1, Department A.

May 13, 2010.

COPYRIGHT MATERIAL OMITTED

Bacal Law Group by Glenn S. Bacal, David M. Andersen, Scottsdale, and Stafford Frey Cooper by Theron (Ted) Buck, pro hac vice, Seattle, WA, Attorneys for Defendant/Appellant.

Taser International, Inc. by Holly Gibeaut, Scottsdale, and Barnes & Thornburg LLP by John R. Maley, pro hac vice, Kathleen M. Anderson, pro hac vice, Indianapolis, IN, Attorneys for Plaintiff/Appellee.

OPINION

PORTLEY, Judge.

¶ 1 Defendant Steve Ward appeals from the entry of partial summary judgment in favor of Plaintiff Taser International. He argues that partial summary judgment should be entered in his favor, or, alternatively, that issues of material fact preclude summary judgment in favor of Taser. For the following reasons, we reverse the entry of partial summary judgment, direct entry of summary judgment in part in favor of Ward, and remand for further proceedings.

FACTS AND PROCEDURAL HISTORY

¶ 2 Taser International develops and manufactures electronic control devices, commonly called stun guns, and accessories for electronic control devices, including a personal video and audio recording device called TASER CAM. Taser sells its products to the military, law enforcement, corrections, private security, and the general public.

¶ 3 Ward was employed full-time with Taser from January 1, 2004, to July 24, 2007, and served as Taser's vice-president of marketing during the time relevant to this appeal.¹ He was an at-will employee, and he did not sign any employment contract, non-compete agreement, or non-disclosure agreement.

¶ 4 During his employment, Ward was privy to some of Taser's confidential information, trade secrets, and other intellectual property. As a member of Taser's Vital Factors Team he participated with company executives and other vice-presidents in considering new product ideas and concepts, product failure rates, product strategies, operational issues, and marketing programs.

¶ 5 In December 2006, Ward began exploring whether he could personally develop the concept of an eyeglass-mounted camera. He sought legal advice about whether he could permissibly develop such a camera independent of Taser, and hired patent counsel to conduct a patent search on the idea.

¶ 6 Between April 2007, and his resignation approximately four months later, Ward shifted his exploration to the concept of a clip-on camera device after learning that the eyeglass-mounted concept was already patent protected. He directed patent counsel to conduct a patent search on the modified idea. ² He communicated with JAM-Proactive, a product development company, about the design and development of a clip-on camera device,³ and he received a detailed product development proposal from JAM-Proactive on June 12, 2007. Prior to his resignation, Ward planned to leave Taser to form a new business, and completed substantial work on a business plan to develop, market, and sell a clip-on camera device.⁴

¶ 7 Ward resigned on July 24, 2007. He never disclosed to Taser his future business plans or his intentions to continue working on the clip-on camera device. He formed Vievu LLC on August 23, 2007, and Vievu now markets a clip-on camera device to general consumers and law enforcement. Ten months after Ward resigned, Taser announced the AXON, a product that provides an audio-video record of an incident from the visual perspective of the person involved. ⁵

¶ 8 Taser filed suit against Ward on October 22, 2007, and asserted claims for misappropriation of trade secrets, breach of the duty of loyalty, tortious interference with contract, breach of contract, breach of fiduciary duty, conversion, and unjust enrichment. The breach of the duty of loyalty and fiduciary duty claims were based on allegations that, while employed with Taser, Ward was “working on [a] Personal Video and Audio Recording Product for [his] own account and with a view toward exploiting this work for [his] own personal gain in competition with TASER.” Taser also alleged that Ward “diverted and misdirected certain aspects of new product development of TASER ... with intent to compete with TASER and to obtain an improper competitive advantage against TASER at such time as he left TASER's employment.” ⁶ Ward answered and asserted counterclaims for tortious interference with contractual relations, tortious interference with business expectancy, and abuse of process.

¶ 9 Taser moved for partial summary judgment on the liability aspect of the breach of the duty of loyalty and fiduciary duty claims. Ward responded with a cross-motion on those claims. After oral argument, the trial court concluded that “there [was] no genuine issue of material fact ..., that Defendant Ward owed a duty of loyalty to Taser and had a fiduciary duty to Taser[,] and that he breached and violated [those] duties.” Consequently, the court granted Taser's motion and denied Ward's cross-motion. The court subsequently entered judgment with Arizona Rule of Civil Procedure 54(b) language.

¶ 10 Ward appeals, and we have jurisdiction pursuant to Arizona Revised Statutes (“A.R.S.”) sections 12-120.21 and -2101(G) (2003).

DISCUSSION

¶ 11 Ward argues that the trial court erred by granting Taser summary judgment on the liability aspect of the breach of the duty of loyalty and fiduciary duty claims. He contends that summary judgment should have been entered in his favor.

¶ 12 We review a grant of summary judgment de novo and view the facts in the light most favorable to the non-moving party. Andrews, 205 Ariz. at 240, ¶ 12, 69 P.3d at 11. A court may grant summary judgment “if the pleadings, deposition, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Ariz. R. Civ. P. 56(c)(1). The determination of whether a genuine issue of material fact exists is based on the record made in the trial court.⁷ Phoenix Baptist Hosp. & Med. Ctr., Inc. v. Aiken, 179 Ariz. 289, 292, 877 P.2d 1345, 1348 (App.1994). Summary judgment is not intended to resolve factual disputes and is inappropriate if the court must determine the credibility of witnesses, weigh the quality of evidence, or choose among competing inferences. Orme School v. Reeves, 166 Ariz. 301, 308-09, 802 P.2d 1000, 1007-08 (1990); State Comp. Fund v. Yellow Cab Co., 197 Ariz. 120, 123, ¶ 11, 3 P.3d 1040, 1043 (App.1999).

¶ 13 In its motion, Taser raised the following theories to support its claims: (1) Ward engaged in direct competition with Taser prior to his resignation; (2) he improperly used Taser's materials and confidential information; (3) he usurped Taser's corporate opportunity in a “second generation on-officer audio and video recording device building from the TASER CAM”; and (4) he failed to inform Taser that he planned to form a competing business. Because the trial court simply granted judgment to Taser on its duty of loyalty and fiduciary duty claims, we review each of the legal theories de novo. See CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A., P.C., 198 Ariz. 173, 178, ¶ 19, 7 P.3d 979, 984 (App.2000) (stating that we consider only the arguments, theories, and facts properly presented to the trial court).

¶ 14 To the extent that we reverse the grant of summary judgment on any legal theory, we are authorized to direct judgment for a party filing a cross-motion with identical issues that can be decided as a matter of law.⁸Roosevelt Sav. Bank v. State Farm Fire & Cas. Co., 27 Ariz.App. 522, 526, 556 P.2d 823, 827 (1976); see also Ariz. R. Civ. P. 56(b) (stating that a defending party may be granted summary judgment on a claim “or any part thereof”); Fed.R.Civ.P. 56 (stating that summary judgment can be granted on “all or part of [a] claim”).

A. Duty Not to Compete

¶ 15 “[I]n Arizona, an employee/agent owes his or her employer/principal a fiduciary duty.” McCallister Co. v. Kastella, 170 Ariz. 455, 457, 825 P.2d 980, 982 (App.1992). “[I]t is too plain to need discussion that an agent is under the duty to act with entire good faith and loyalty for the furtherance of the interests of his principal in all matters concerning or affecting the subject of his agency, and if he fails to do so [,] he is responsible to his principal for any loss resulting therefrom.” Thomas v. Newcomb, 26 Ariz. 47, 51, 221 P. 226, 228 (1923).⁹

¶ 16 One aspect of this broad principle is that an employee is precluded from actively competing with his or her employer during the period of employment. Sec. Title Agency, Inc. v. Pope, 219 Ariz. 480, 492, ¶ 53, 200 P.3d 977, 989 (App.2008); see also Restatement (Third) of Agency § 8.04 (2006) (“Throughout the duration of an agency relationship, an agent has a duty to refrain from competing with the principal....”). Following the termination of the employment relationship, however, in the absence of an enforceable non-compete agreement, a former employee is free to compete. McCallister, 170 Ariz. at 457-58, 825 P.2d at 982-83; Restatement (Third) of Agency § 8.04 cmt. b, c.

¶ 17 Although an employee may not compete prior to termination, “[the employee] may take action [during employment], not otherwise wrongful, to prepare for competition following termination of the agency relationship.” ¹⁰ Restatement (Third) of Agency § 8.04. Preparation cannot take the form of “acts in direct competition with the employer's business.” McCallister, 170 Ariz. at 457-58, 825 P.2d at 982-83.

¶ 18 “The line separating mere preparation from active competition may be difficult to discern in some cases,” and we must “focus on the nature of the defendant's preparations to compete.” Sec. Title Agency, 219 Ariz. at 492, ¶ 54, 200 P.3d at 989 (quotation...