Wired Fox Techs., Inc. v. Estep, Civil Action No.: 6:15-331-BHH

CourtUnited States District Courts. 4th Circuit. United States District Court of South Carolina
Writing for the CourtBruce Howe Hendricks United States District Judge
PartiesWired Fox Technologies, Inc., Plaintiff, v. Christopher Estep, individually, and as Owner of Steel Lions, Inc.; and Steel Lions, Inc., (Of Whom Christopher Estep is also Defendant-Counterclaimant) Defendants. Christopher L. Estep, Defendant-Counterclaimant, v. Jeffrey Yelton, Dwayne Mosley, and Jon Weatherill, and Asset Enterprises, Inc., Additional Counterclaim Defendants.
Docket NumberCivil Action No.: 6:15-331-BHH
Decision Date27 March 2017

Wired Fox Technologies, Inc., Plaintiff,
v.
Christopher Estep, individually, and as Owner of Steel Lions, Inc.; and Steel Lions, Inc.,
(Of Whom Christopher Estep is also Defendant-Counterclaimant) Defendants.


Christopher L. Estep, Defendant-Counterclaimant,
v.
Jeffrey Yelton, Dwayne Mosley, and Jon Weatherill,
and Asset Enterprises, Inc., Additional Counterclaim Defendants.

Civil Action No.: 6:15-331-BHH

DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF SOUTH CAROLINA GREENVILLE DIVISION

March 27, 2017


OPINION AND ORDER

This matter is before the Court on Defendant-Counterclaimant Christopher Estep ("Estep") and Defendant Steel Lions, Inc.'s ("Steel Lions") (collectively "Defendants") motion for summary judgment on Plaintiff-Counterclaim Defendant Wired Fox Technologies, Inc.'s ("Wired Fox" or "Plaintiff") claims, and Estep's motion for partial summary judgment on his counterclaims for declaratory judgment under the Copyright Act and for violation of the South Carolina Payment of Wages Act ("SCPWA") (ECF No.

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127).1

BACKGROUND AND PROCEDURAL HISTORY

The factual background of this case is set forth thoroughly in the Court's prior orders. (See ECF Nos. 70 & 125.) The Court assumes knowledge of that background and incorporates it by specific reference herein. This case arises out of a falling out between various parties to a business venture in Greenville, South Carolina known as Wired Fox Technologies. Counter Defendant Jeffrey Yelton ("Yelton") formed Wired Fox in September 2013 after purchasing the assets of a company called Goddard Technologies ("Goddard"). Goddard was a software company that had a presence in the security and identification software industry for clients such as schools and airports. Estep worked for Goddard as a computer programmer from January 2001 to December 2003, then left to form his own company called Intellisoft, Inc. ("Intellisoft"), which specializes in the same sector of the software industry.

Yelton and Estep began discussing the potential for Estep and/or Intellisoft to perform computer programming work for Wired Fox in October 2013. (Estep Decl., ECF No. 127-3 ¶ 4-5.) Estep confided in Yelton that he was having difficulties with his business partner, David Peeples ("Peeples"), at Intellisoft; indeed, Estep had already begun to have a falling out with Peeples by that fall. (Id. ¶¶ 6-9.) On December 9, 2013, after meeting in person, Yelton sent via email to Estep an "Independent Contractor Agreement" setting forth the proposed terms of a business relationship between Wired

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Fox and Estep. (Id. ¶ 11.) Yelton's email states:

Attached is a rough agreement that we can operate under. I'm just trying to be very clear about what each of us expects. Please feel free to add anything you want to add. I put the start date at 1-1-2014 but we can start as soon as you are ready.

Give me a call if you want to discuss.

(ECF No. 127-3 at 20 (emphasis in original).) The document was never signed by either party, and Estep contends it was never finalized. Additionally, the document contains certain phrases that seem to indicate it is not a final product and that the particulars of the business relationship will continue to evolve, namely: (1) under one subparagraph of the "payment for services" provision it states, "Let's discuss this"; (2) under the "term/termination" provision it states, "We will start with a 6 month term to see if the relationship is beneficial to both parties"; and (3) under the "expenses covered" provision of the "services to be provided" attachment it states, "How do you think we should handle these?" (See ECF No. 71-1 at 2, 5.) Estep states, however, that he and Yelton reached an agreement in principal about most of the material terms of his business relationship with Wired Fox, namely: (1) Estep would perform the service and maintenance work for Wired Fox customers and would receive 50% of the gross revenue from such work or contracts; (2) Estep would create new software2 for Wired Fox customers which would be owned on a 50/50 basis between himself individually and Wired Fox; and (3) Estep would become an equal 50% owner of Wired Fox at some point prior to the end of 2014. (Id.) There is no signed writing that memorializes this limited set of terms.

Yelton describes the December 2013 meeting with Estep to discuss the terms of

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their emerging business arrangement as follows:

During the meeting, I made clear that any source code created based upon Goddard Code would belong exclusively to [Wired Fox]. Any new source code created that was not based on Goddard Code would be owned jointly between [Wired Fox] and Estep. The new software, which we eventually called the "Blue Fox Code," would be marketed as such on [Wired Fox's] website and in all future marketing materials to [Wired Fox's] customers. These terms were outlined in an Independent Contract Agreement ("Agreement") which was to start on January 1, 2014 and run through December 31, 2014. Under the Agreement, Estep would be a contracted 1099 employee of [Wired Fox]. His agreement to provide services would be for a minimum of six months under the Agreement with both parties being required to perform all requirements no later than December 31, 2014. This Agreement was not signed but we acted in accordance and reliance on the terms beginning January 1, 2014, with Estep being employed as an independent contractor on or about that date.

(Yelton Decl., ECF No. 135-1 ¶ 5 (emphasis added).) Curiously, in the very next sentence of his declaration, when describing the plans for the new Blue Fox Code, Yelton states: "According to the Agreement, the Blue Fox Code was to be owned and used exclusively by [Wired Fox] in order to provide customizable products and services to third parties, including security and identification software, program development enhancement, scanners, identification card supplies, and various other uses." (Id. ¶ 6 (emphasis added).) During the course of this litigation, Plaintiff has represented that the entirety of the terms in the Independent Contractor Agreement were in place and enforceable from January 2014 onward. Paragraph 5 of the Independent Contractor Agreement states:

RELATIONSHIP OF PARTIES. It is understood by the parties that Chris Estep is an independent contractor with respect to Wired Fox Technologies, and not an employee of Wired Fox Technologies. Wired Fox Technologies will not provide fringe benefits, including health insurance benefits, paid vacation, or any other employee benefit, for the benefit of Chris Estep.

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(ECF No. 71-1 at 2-3.) Paragraph 6 of that document states:

WORK PRODUCT OWNERSHIP. Any copyrightable works, ideas, discoveries, inventions, patents, products, or other information (collectively, the "Work Product") developed in whole or in part by Christ Estep in connection with the development of extensions to Val-Id v3.x and v4.x shall be the exclusive property of Wired Fox Technologies. Upon request, Chris Estep shall sign all documents necessary to confirm or perfect the exclusive ownership of Wired Fox Technologies to the Work Product.

Any development done on products other than Val-Id v3.x and v4.x will be owned jointly and equally (50/50%) by Chris Estep and Wired Fox Technologies.3

(Id. at 3.)

Estep began performing programming work for Wired Fox in January 2014 as contemplated, with no signed contract in place. Estep's relationship with Peeples declined rapidly over the next few months, and Peeples and Intellisoft began to threaten legal action against Estep, making a variety of allegations about Estep's conduct with respect to source code he developed while at Intellisoft and Intellisoft client accounts. (ECF No. 127-3 ¶¶ 12-14.) After negotiating a stand-still agreement4 with Intellisoft in order to ensure completion of a software project for the Pentagon, Estep turned back to negotiations with Yelton. (Id. ¶¶ 15-20.)

Estep states that he and Yelton finalized their agreement and understanding of the Wired Fox venture in late June 2014, including the following terms: (1) Estep and Yelton would each be 50% shareholders of Wired Fox; (2) Estep would be provided a draw from Wired Fox in the amount of at least $8,000 per month, plus employment benefits including medical, dental, and life insurance coverage, and retirement benefits

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through a 401(k); (3) the ownership of any software created by Estep, including the Blue Fox Code he had already been developing for 6-8 weeks, would be split between Estep and Wired Fox on a 50/50 basis; (4) Yelton would provide all of the working capital to cover the start-up expenses of the company, including computer hardware, equipment and software, marketing, travel, and related business expenses; and (5) Yelton would reimburse Estep for all legal expenses associated with the on-going dispute with Intellisoft and Peeples, which was anticipated to possibly include the purchase of Peeples' ownership interest in Intellisoft by Wired Fox. (Id. ¶ 20.)

On July 21, 2014, Estep and Peeples participated in a mediation regarding the proposed split-up of Intellisoft, during which Estep pursued various options to purchase Peeple's half of Intellisoft, on the promise of Yelton funding such a purchase if it came about. (Id. ¶¶ 21-23.) Also on July 21, 2014, Yelton entered into an Administrative Shared Services Agreement with two of his business associates, Dwayne Mosley ("Mosley") and Jon Weatherill ("Weatherill"), through their company Asset Enterprises, Inc. ("AEI"), whom Yelton had contacted regarding a possible acquisition of Wired Fox due an inability to sustain mounting operating costs. (ECF No. 135-1 ¶ 13.) Yelton next met with Mosley and Weatherill on July 29, 2014, in order to detail a rough plan for a possible joint venture between AEI and Wired Fox. (Id. ¶ 13 & pg. 26.) Yelton contends that he informed Estep of the specifics of this meeting during several telephone conversations. (Id. ¶ 13.)

On July 31, 2014,...

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