United Rentals (North America) v. Keizer

• Decision Date: 07 January 2004
• Docket Number: No. 02-1580.,02-1580.
• Citation: 355 F.3d 399
• Parties: UNITED RENTALS (NORTH AMERICA), INC., Plaintiff-Appellant, v. Jerry KEIZER, Grant Rent-All, Inc. and Mulder's Outdoor Power Equipment, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 399

355 F.3d 399

UNITED RENTALS (NORTH AMERICA), INC., Plaintiff-Appellant, v. Jerry KEIZER, Grant Rent-All, Inc. and Mulder's Outdoor Power Equipment, Inc., Defendants-Appellees.

No. 02-1580.

United States Court of Appeals, Sixth Circuit.

Argued: October 28, 2003.

Decided and Filed: January 7, 2004.

Appeal from the United States District Court for the Western District of Michigan, Douglas W. Hillman.

Robert H. Smeltzer (argued and briefed), Gerald Haberkorn (briefed), Lowis & Gellen, Chicago, IL, Harold E. Nelson (briefed), Borre, Peterson, Fowler & Reens, Grand Rapids, MI, for Appellant.

Steven C. Berry (argued and briefed), Bigler, Berry, Johnston, Sztykiel & Hunt, Zeeland, MI, Robert W. Smith (briefed), Silverman, Smith, Bingen & Rice, Kalamazoo, MI, for Appellees.

Before CLAY and COOK, Circuit Judges; STAFFORD, District Judge.^*

CLAY, J., delivered the opinion of the court, in which COOK, J., joined. STAFFORD, D.J. (pp. 414-415), delivered a separate opinion concurring in part and dissenting in part.

OPINION

CLAY, Circuit Judge.

Plaintiff United Rentals (North America), Inc. appeals from the April 5, 2002, district court order granting summary judgment to Defendants Jerry Keizer, Grant Rent-All, Inc. and Mulder's Outdoor Power Equipment, Inc. on Plaintiff's claims for breach of contract; violation of the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws Ann. § 445.1902; intentional interference with contract; intentional interference with business relations; civil conspiracy; and breach of a fiduciary duty of loyalty. The Court AFFIRMS the district court's order.

I. STATEMENT OF FACTS

A. Procedural History

On November 7, 2000, United Rentals (North America), Inc. ("United") filed a complaint against Defendants Jerry Keizer, Grant Rent-All, Inc. and Mulder's Outdoor Power Equipment, Inc. ("Mulder's"). Since the parties are completely diverse and the amount in controversy exceeds $75,000, the district court had subject matter jurisdiction over the matter.

The complaint alleged that Keizer violated his covenant-not-to-compete set forth in ¶ 7.2 of his employment agreement by selling construction equipment and soliciting United's customers in a proscribed geographic area, the so-called "Target Area." The complaint further alleged that Keizer, Grant Rent-All and Mulder's continue to compete with United in the Target Area and do so with United's proprietary information in violation of ¶ 7.3 of the agreement and the Michigan Uniform Trade Secrets Act. The complaint also alleged a claim for tortious interference with business relations — i.e., Defendants allegedly interfered with the business relationship between United and its customers; a claim that Mulder's tortiously interfered with Keizer's obligations under the employment agreement; and a civil conspiracy by all Defendants to breach the restrictive covenants of the employment agreement, interfere with United's business relations; misappropriate United's confidential information; and to improperly solicit and do business with United's customers.

United sought an injunction against Keizer and Grant Rent-All (and Mulder's, to the extent it is doing business with Keizer or Grant Rent-All) from competing with United in the Target Area for a specified period of time, disclosing United's confidential information and soliciting United's customers in the Target Area for a specified period of time. United also sought to affirmatively compel Defendants to locate and return any and all of United's confidential information. The complaint also sought an accounting from Defendants for Keizer's alleged breach of the employment agreement and an award of actual and punitive damages. On August 24, 2001, United filed an amended complaint adding a claim against Keizer for breach of a fiduciary duty of loyalty.

Defendants Keizer and Grant Rent-All answered the complaint, and Keizer filed a counter-claim against United on February 21, 2001, alleging that United breached the employment agreement by terminating him without prior notice and without cause on March 6, 2000; Keizer sought his unpaid salary under the agreement from March 6, 2000 through May 31, 2003. Defendant Mulder's answered the complaint on August 13, 2001. United filed an answer to the counterclaim on March 31, 2001. Keizer and Grant Rent-All filed an answer and counterclaim to the amended complaint on September 13, 2001.

On November 1, 2001, Keizer and Grant Rent-All moved for summary judgment on United's complaint. On November 2, 2001, United moved for summary judgment on Count I of its complaint for breach of the non-competition and non-solicitation provision of the employment agreement and on Keizer's counterclaim.

On April 5, 2002, the district court granted Keizer and Grant Rent-All's summary judgment motion, denied United's motion for summary judgment on Count I, and granted United's summary judgment motion on Keizer's counterclaim. The district court also entered judgment in favor of Mulder's on all counts in United's complaint, even though Mulder's had not moved for summary judgment.

For the district court, the crux of the dispute boiled down to the interpretation of the prohibition in ¶ 7.2 of Keizer's employment agreement which, inter alia, prohibits Keizer from "directly or indirectly... engag[ing] in the operation of any equipment sale, rental or leasing business" in the Target Area, excluding Newaygo County. The district court held that this language prohibited Keizer from operating such a business only if it is physically located within the Target Area. Accordingly, Keizer did not breach the agreement by operating Grant Rent-All, which is physically located in Newaygo County, but nevertheless does one-third of its business with customers inside the Target Area. Assuming arguendo that the above-quoted language from ¶ 7.2 is ambiguous, the district court further held that there was no parol evidence in the record to support United's contrary interpretation of the agreement.

The district court dismissed United's claim for breach of the confidentiality clause (¶ 7.3 of the agreement) because United had failed to submit any evidence showing that Keizer had taken or used any confidential information, as defined by the agreement. The district court also dismissed United's claim under the Michigan Uniform Trade Secrets Act. The district court dismissed the tortious interference with business relations, tortious interference with contract and civil conspiracy claims because there was no evidence that Defendants had wrongfully interfered with United's business. Last, the district court dismissed the breach of fiduciary duty of loyalty claim because there is no evidence that Keizer did not devote his full efforts to United's business.

United filed its notice of appeal on May 3, 2002. Keizer did not appeal the district court's dismissal of his counterclaim against United.

B. Substantive Facts

United is a Delaware corporation with its principal place of business in Greenwich, Connecticut. United is in the business of renting and selling construction and industrial equipment throughout the United States. United purchased all of the stock of Kubota of Grand Rapids, Inc. ("KGR") on June 9, 1998. KGR was then merged into United. United is in the business of renting and selling construction and industrial equipment in the Western Michigan area.

Jerry Keizer is a Michigan resident, a former owner of KGR and former general sales manager of United/KGR. Grant Rent-All is a Michigan corporation, with its principal place of business in Grant, Michigan, which is within Newaygo County. Keizer has been the owner and president of Grant Rent-All since December 1994. Keizer never worked at Grant Rent-All until May 2000. Grant Rent-All is managed by Keizer's step-son and step-son-in-law.

Mulder's Outdoor Power Equipment, Inc. ("Mulder's") is a Michigan corporation, with its principal place of business in Byron Center, Michigan; it is in the business of renting and selling construction and industrial equipment. Jerry Keizer's brother, Ron Keizer, is employed by Mulder's.

Prior to June 1, 1998, Jerry Keizer owned one-third of KGR's stock. The other two-thirds were owned by Grand Valley Investments, LLC ("GVI"), a limited liability company consisting of the four Grasman brothers (Larry, Jack, Russ and Rick.) GVI also fully owned and operated an equipment business in Hudsonville known as Grand Valley Equipment Company, Inc. ("GVEC"); Keizer had no interest in GVEC. KGR is located in Grand Rapids, Michigan and is in the business of selling construction, farm and landscaping equipment such as tractors and commercial mowers.

In April 1998, United approached GVI with a letter of intent to purchase the stock of both KGR and GVEC for $22,750,000. United's letter did not acknowledge the fact that Keizer owned a significant amount of KGR stock; among other things, the letter proposed that at closing, United would enter into employment agreements with the four Grasman brothers and that the Grasman brothers would enter into a five-year non-compete agreement, but there was no reference to Keizer.

GVI, by contrast, clearly was aware that it did not own all of the KGR stock and that in order for the proposed sale with United to proceed, GVI needed to control all KGR stock. Accordingly, GVI forwarded a copy of United's letter of intent to Keizer, along with a proposed stock option agreement through which GVI would buy Keizer's stock in KGR. The stock option agreement recited that Keizer owned 7,250 KGR shares compared to GVI's 14,500. It further acknowledged that United had approached GVI about purchasing all of GVEC's stock and that the KGR shares would be included in the proposed transaction.

For $5,000, Keizer granted GVI an option to purchase his KGR shares for $1,475,000. Keizer agreed that if GVI exercised the option, Keizer would "enter into an agreement not to compete with KGR or GVEC for five years ...