Welsco, Inc. v. Brace
| Decision Date | 30 September 2014 |
| Docket Number | Case No. 4:12-cv-00394-KGB |
| Parties | WELSCO, INC. PLAINTIFF v. MIKE BRACE DEFENDANT |
| Court | U.S. District Court — Eastern District of Arkansas |
Plaintiff Welsco, Inc. ("Welsco") brings this action against defendant Mike Brace, Welsco's former employee, alleging breach of a covenant not to compete, a violation of the Arkansas Trade Secrets Act ("ATSA"), Ark. Code Ann. §§ 4-75-601 et seq., breach of fiduciary duty and duty of loyalty, and tortious interference. Welsco also seeks a declaratory judgment that the covenant not to compete is binding and fully enforceable under Arkansas law. This Court has jurisdiction pursuant to 28 U.S.C. § 1332.
Before the Court is Welsco's motion for summary judgment (Dkt. No. 56). Mr. Brace has responded (Dkt. No. 83), and Welsco has replied (Dkt. No. 121). Also before the Court is Mr. Brace's motion for summary judgment (Dkt. No. 62). Welsco has responded (Dkt. No. 88), and Mr. Brace has replied (Dkt. No. 120). Along with the pending motions for summary judgment, before the Court is Mr. Brace's motion to strike or, in the alternative, objections to consideration of, Adam Kohler's affidavit (Dkt. No. 86). Welsco has responded (Dkt. No. 124), and Mr. Brace has replied (Dkt. No. 126). For the following reasons, Welsco's motion for summary judgment is granted in part and denied in part (Dkt. No. 56), and Mr. Brace's motion for summary judgment is granted in part and denied in part (Dkt. No. 62). The Court also grants in part and denies in part Mr. Brace's motion to strike, and in the alternative, objections to the consideration of Mr. Kohler's affidavit (Dkt. No. 86).
The Court previously set forth the factual background of this case in its Opinion and Order denying Welsco's motion for preliminary injunction (Dkt. No. 33). The Court's Opinion and Order made several factual determinations based on the evidence and testimony submitted at the preliminary injunction hearing. That evidence received at the preliminary injunction hearing is now part of the trial record. See Fed. R. Civ. P. 65(a)(2).
Welsco is an Arkansas corporation with its principal place of business in Arkansas. Welsco's primary business is distributing welding supplies and industrial gas. Mr. Brace, who currently is a citizen of Oklahoma, was employed by Welsco from March 15, 2005, through April 30, 2012, as the branch manager of Welsco's Tulsa, Oklahoma, store. Mr. Brace resigned on April 30, 2012, and began to work for Gas & Supply, a competitor of Welsco.
Sometime before March 15, 2005, and before Mr. Brace became an Oklahoma resident, he interviewed for employment with Welsco at the company's Arkansas headquarters. Mr. Brace accepted employment with Welsco after the Arkansas interview, relocated to Tulsa, Oklahoma, and, at some point in March 2005, received from Welsco through the mail a noncompete agreement addressed to Mr. Brace in Tulsa. At the preliminary injunction hearing, Chris Layton, a vice president for sales for Welsco who oversaw Welsco's Tulsa store, could not specifically recall having had a conversation with Mr. Brace about the noncompete agreement during Mr. Brace's interview in Arkansas. However, according to Welsco and Mr. Layton, as a standard practice, Welsco always discusses noncompete agreements in interviews prior to hiring employees and requires salespeople to sign noncompete agreements as a condition of employment. Mr. Brace asserts that a noncompete agreement was not discussed during his interview in Arkansas and that he received the noncompete agreement in the mail from Welscowithout any prior discussion. However, Mr. Brace admits that he executed the noncompete agreement in Oklahoma and returned it to Welsco in Arkansas, without questioning or negotiating with Welsco any of its terms (Dkt. No. 85, ¶ 7). In addition, Mr. Brace sought the advice of an attorney in Oklahoma before signing the noncompete agreement (Id., ¶ 6).
Welsco contends that, prior to joining Welsco, Mr. Brace had not worked in a position in which he solicited sales. Mr. Brace disputes this and maintains that he assisted in making sales during his employment at Miller Electric, prior to joining Welsco (Dkt. No. 85, ¶ 9; Dkt. No. 38, at 170). Both parties cite Mr. Brace's testimony at the preliminary injunction hearing. Mr. Brace testified that he was a welding engineer in Miller Electric's industrial products group and worked in "technical sales," helping distributors sell products to the end user (Dkt. No. 38, at 94-95, 168-70). However, Mr. Brace said he did not directly sell products to customers (Id. at 95).
Welsco asserts that, while a Welsco employee, Mr. Brace received training in Arkansas regarding the welding and industrial gas supply business and frequently traveled to Arkansas for management meetings. Mr. Brace denies that he received any "special" training, asserting that the training he received at Welsco was conducted by product manufacturers. Mr. Brace denies that he frequently traveled to Arkansas for management meetings, yet he admits that he traveled to Arkansas for management meetings four to seven times per year (Dkt. No. 85, ¶ 10).
Welsco asserts, and the Court previously found, that, in his role as a Welsco manager, Mr. Brace solicited existing and prospective clients on Welsco's behalf and was involved in marketing, strategic planning, and company operations. Mr. Brace now denies this, although he cites no record evidence in support of this denial (Dkt. No. 85, ¶ 12). Mr. Brace also disputes Welsco's assertion and the Court's previous finding that, because of his position at Welsco, Mr. Brace had access to detailed confidential information regarding Welsco clients, clients' needs,company finances, cost information, product specifrcations, and the like (Id., ¶ 13). Mr. Brace contends that this information was not confidential in nature, primarily relying on the deposition testimony of Russell Walker, Welsco's current branch manager, that some customer information can be discovered through word of mouth and that some pricing can be ascertained by other distributors with passwords to access cost information on manufacturers' websites (Dkt. No. 64, ¶¶ 19-23; Dkt. No. 62-10). Welsco disputes Mr. Brace's characterization of Mr. Walker's testimony (Dkt. No. 89, ¶¶ 19-23).
The Court notes that Mr. Brace testified at the preliminary injunction hearing that Welsco's client lists included pricing and cost information that would be considered confidential and which would be of value to a competitor. He agreed that he did not forget this information as soon as he left Welsco and that, even without a hard copy of Welsco's pricing and cost information, a person could use the information to Welsco's detriment, for example, by undercutting Welsco's price to a particular customer (Dkt. No. 38, at 106-08). On examination by his attorney, Mr. Brace said that knowing the prices Welsco charges customer would not be beneficial to him at Gas & Supply because Gas & Supply's pricing is different (Dkt. No. 38, at 173). On, redirect, however, Mr. Brace agreed that, even if Gas & Supply had better prices than Welsco's prices, knowing Welsco's prices would allow Gas & Supply to increase its own prices to increase profits while still remaining competitive with Welsco (Id. at 191).
Welsco also asserts that Mr. Brace received from Welsco within months of his resignation confidential company information that he should have returned to Welsco after reviewing and commenting on it. At the preliminary injunction hearing, Mr. Layton testified regarding a contract pricing list to which only certain employees have access. Mr. Layton said the pricing list is sent in hard copy to store managers with instructions to return the list afterreviewing and commenting on the list. Mr. Layton said that Mr. Brace failed to return the pricing list and that he was unable to find the list in the Tulsa store after Mr. Brace left Welsco (Dkt. No. 38, at 28-30, 74). At the preliminary injunction hearing, Mr. Brace testified that he was not sure what he did with the contract pricing list, has no recollection what he did with the list, and does not recall being instructed to return the list (Dkt. No. 38, at 80). Mr. Brace now disputes that he retained or failed to return confidential information of Welsco, citing his own declaration to that effect as well as the testimony of two former Welsco employees that they have no knowledge that Mr. Brace took confidential information (Dkt. No. 85, ¶ 35).
The parties agree that Mr. Brace's sales were concentrated largely in Tulsa County, Oklahoma, and the surrounding counties and that a large majority of Mr. Brace's sales came from the 798 union pipefitters and welders union ("the 798 Union"), which is based in Tulsa, Oklahoma (Dkt. No. 85, ¶ 14). Mr. Brace does not dispute Welsco's estimate that 90 percent of Mr. Brace's sales came from selling Welsco's products to the 798 Union's training center and to the 798 Union's individual members (Dkt. No. 85, ¶ 15).
It is undisputed that, even though Welsco, through its then-salesman Mr. Brace, sold products to the individual members of the 798 Union, Welsco essentially considered the customer to be the 798 Union, not the individual members. In fact, during the period of Mr. Brace's employment with Welsco, Welsco did not track individual sales to members of the 798 Union by individual name. Instead, it recorded the sale or sales to "the 798 Union." However, Mr. Brace now contends that the 798 Union as a whole was never the customer of Welsco, regardless of how Welsco tracked sales, or the customer of Gas & Supply (Dkt. No. 64, ¶ 36). He relies largely on Mr. Layton's testimony that sales to the 798 Union can be broken down into two categories, sales to the 798 Union training center as opposed to "direct sales" to the 798Union's individual members, although the fact that Welsco sold and sells products to the...
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