United Rentals (North America), Inc. v. Keizer

• Decision Date: 05 April 2002
• Docket Number: Case No. 1:00CV831.
• Citation: 202 F.Supp.2d 727
• Parties: UNITED RENTALS (NORTH AMERICA), INC., a Delaware corporation, Plaintiff, v. Jerry KEIZER, Grant Rent-All, Inc., a Michigan corporation, and Mulder's Outdoor Power Equipment, Inc., d/b/a Mulder's Equipment & Rental, a Michigan corporation, Defendants.
• Court: U.S. District Court — Western District of Michigan

202 F.Supp.2d 727

UNITED RENTALS (NORTH AMERICA), INC., a Delaware corporation, Plaintiff, v. Jerry KEIZER, Grant Rent-All, Inc., a Michigan corporation, and Mulder's Outdoor Power Equipment, Inc., d/b/a Mulder's Equipment & Rental, a Michigan corporation, Defendants.

Case No. 1:00CV831.

United States District Court, W.D. Michigan, Southern Division.

April 5, 2002.

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COPYRIGHT MATERIAL OMITTED

Harold E. Elson, Borre, Peterson, Fowler & Reens, Pc, Grand Rapids, Mi, Robert Hill Smeltzer, Lowis & Gellen, Chicago, IL, for plaintiffs.

Steven C. Berry, Bigler, Berry, Johnston, Sztykiel, et al., Zeeland, MI, Robert Paul Cooper, Grand Rapids, MI, for defendants/Counter Claimants Jerry Keizer and Grant Rent-All, Inc.

Adam E. Parsons, Silverman, Smith & Bingel, PC, Kalamazoo, MI, for Defendant/Counter Defendant Mulder's Outdoor Power Equipment, Inc.

OPINION RE CROSS MOTIONS FOR SUMMARY JUDGMENT

HILLMAN, Senior District Judge.

This is a diversity action alleging six counts: (1) breach of employment agreement; (2) violation of the Michigan Trade Secrets Act, MICH. COMP. LAWS § 445.1901 et seq.; (3) tortious interference with business relations; (4) tortious interference with contract; (5) civil conspiracy; and (6) breach of fiduciary duty of loyalty. The action also includes a counterclaim by defendant Jerry Keizer for breach of employment agreement. The matter presently is before the court on cross motions for summary judgment. Defendant/Counter-plaintiff Jerry Keizer and defendant Grant Rent-All seek summary judgment on all claims against them (dkt # 66).¹ Plaintiff/counter-defendant United Rentals (North America), Inc., moves for summary judgment on Count I of its complaint and summary judgment on the counterclaim against it (dkt#71, 72). For the reasons that follow, defendants' motion for summary judgment is GRANTED and plaintiff's cross-motion for summary judgment on Count 1 is DENIED. Plaintiff's motion for summary judgment on the counterclaim is GRANTED.

I.

Plaintiff United Rentals (North America), Inc., ("United") is in the business of selling and renting construction and industrial equipment. Defendant Jerry Keizer ("Keizer"), together with his wife, was a former one-third owner and General Sales Manager of Kubota of Grand Rapids, Inc. ("GR Kubota"). Grand Valley Investments, LLC ("GVI"), a limited liability company consisting of the five Grasman brothers (Larry, Jack, Terry, Russ and Rick) owned the other two-thirds of GR Kubota. GVI also fully owned and operated an equipment business in Hudsonville known as Grand Valley Equipment Company, Inc. ("GVEC").

Keizer also has been the owner and president of Grant Rent-All since its formation in December 1994. Grant Rent-All is in the business of selling construction and industrial equipment and is located within Newaygo County, Michigan. Although Keizer was president of Grant Rent-All since 1994, he never worked there until May 2000. Grant Rent-All is managed by Keizer's step-son and step-son-in-law.

Mulder's Outdoor Power Equipment is also in the business of renting and selling construction and industrial equipment and is located in Kent County, Michigan. Ron Keizer, brother of defendant Keizer, is employed by Mulder's.

In April 1998, United offered to purchase all of the stock of GR Kubota and GVEC for $22.75 million. In its offer, United required a five-year non-compete agreement from the owners of the companies.

GVI determined that it would buy out Keizer's interest in GR Kubota prior to selling GR Kubota and GVEC to United. It therefore made an offer to Keizer to buy out his stock interest for a purchase price, in conjunction with a five-year employment agreement that included an agreement not to compete anywhere in Michigan west of I-75 and US-23. Keizer refused to sign such an unlimited non-competition agreement because of his then-current involvement with Grant Rent-All. GVI agreed to modify the non-competition agreement to exclude Newaygo County.

The evidence is undisputed that at the time of the agreements, the Grasman brothers were all aware of the existence of Grant Rent-All, that Keizer had an interest in Grant Rent All, and that his son and son-in-law operated the company. The attorney for GVI conveyed to United that Keizer and/or his affiliates (his sons) had such an interest. (Def. Ex. H at 178-81; Def. Ex. D; Def. Ex. Q at 17-20; Def. Ex. P at 17; Def. Ex. R at 26-28.) The evidence also is undisputed that between January 1995 and May 1998, approximately two-thirds of the customers of Grant Rent-All were located in Newaygo County. The remaining one-third were located outside of Newaygo County. (Def. Ex. A, ¶¶ 4-5; Def. Ex. R at 66, 68, 82.)

Keizer ultimately entered into a stock option agreement with GVI, in which he agreed to sell his shares of GR Kubota to GVI for $1,475,000.00. Under the Stock Option Agreement, Keizer agreed that if GVI exercised its option, Keizer would enter into a covenant "not to compete with GR Kubota and GVEC for five years (except in Newaygo County) and otherwise in form and substance agreeable to URI [United Rentals, Inc.]...." The agreement also provided that if GVI exercised the option, GR Kubota would enter into a five-year employment agreement with Keizer at a salary of $75,000.00 per year, plus benefits. According to the option agreement, Keizer's employment agreement would be terminable only for just cause.

Subsequently, GVI exercised its stock option. On June 1, 1998, Keizer signed an employment agreement with GR Kubota. That agreement provided that:

This Agreement contains the entire agreement of the parties and supersedes all prior or contemporaneous negotiations, correspondence, understandings and agreements between the parties, regarding the subject matter of this Agreement. This agreement may not be amended or modified except in writing signed by both parties and supported by new consideration.

(Def.Ex.F, ¶ 12.)

The non-competition, non-solicitation portion of the employment agreement provides in relevant part:

For a period commencing on the Closing Date and terminating five (5) years thereafter (the "Restricted Period"), neither the Employee nor any of his Affiliates shall, anywhere in the Target Area, (as herein defined), directly or indirectly, acting individually or as the owner, shareholder, partner, or employee of any entity, (i) engage in the operation of any equipment sale, rental or leasing business; (ii) enter the employ of, or render any personal services to or for the benefit of, or assist in or facilitate the solicitation of any business engaged in such activities; or (iii) receive or purchase a financial interest in, make a loan to, or make a gift in support of, any such business in any capacity, including, without limitation, as sole proprietor, partner, shareholder, officer, director, principal, agent, trustee or lender .... For purposes hereof, the term "Target Area" shall mean the area within the state of Michigan west of I-75 and U.S. Route 23, but shall exclude Newaygo County.

(Def.Ex.F, ¶ 7.2.) The employment agreement also contained a confidentiality provision, which states:

During the Restricted Period and thereafter, the Employee shall keep secret and retain in strictest confidence, and shall not use for the benefit of himself or others, all data and information relating to the Business ("Confidential Information"), including, without limitation, know-how, trade secrets, customer lists, supplier lists, details of contracts, pricing policies, operational methods, marketing plans or strategies, bidding information, practices, policies or procedures, product development techniques or plans, and technical processes; provided, however, that the term "Confidential Information" shall not include information that (i) is or becomes generally available to the public other than as a result of disclosure by the Employee, or (ii) is general knowledge in the equipment, rental, sales or leasing business and not specifically related to the Business.

(Def.Ex.F., ¶ 7.3.)

In addition, the employment agreement contains a series of provisions regarding termination. First, the agreement permits the employer to terminate Keizer for seven different types of cause. (Def.Ex.F, ¶ 6.1.) If terminated for cause, Keizer is not entitled to any further compensation or benefit. Second, the agreement permits the employer to terminate Keizer without cause, but requires the employer to pay Keizer his salary for the remainder of the term of the agreement. (Def.Ex.F, ¶ 6.2.) Third, Keizer is permitted to terminate the agreement upon fifteen days notice, but Keizer forfeits all further compensation under the agreement by such termination. (Def.Ex.F, ¶ 6.3.) Fourth, in the event of a disability of 60 consecutive days or 120 days in any 12-month period, either party may terminate the agreement with no further compensation. (Def.Ex.F, ¶ 6.4.) Similarly, in the event of death, no further compensation is owed. (Def.Ex.F, ¶ 6.5.) No dispute exists that Keizer was not terminated for cause or for disability or death.

Paragraph 6.6 of the employment agreement addresses the continuation of the employment agreement upon the merger or sale of assets of the company:

This Agreement shall not be terminated by any voluntary or involuntary dissolution, reorganization, merger, consolidation or transfer of assets of the Company, or by any other act or event of or suffered by the Company, if a surviving or resulting corporation or other entity or person continues (or resumes after a period of not more than sixty days) the business of the Company. In any such event, if the business of the Company is so continued or so resumed, this Agreement shall be binding on and shall inure to the benefit of the corporation or other entity or person surviving or resulting or to which such assets shall have been transferred and the Employee shall be a General Sales Manager or other comparable official of...