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CH Bus Sales, Inc. v. Geiger

United States District Court, D. Minnesota

March 20, 2019

CH Bus Sales, Inc., f/k/a/ CH Trading Company, and its subsidiaries CH Bus Sales Holdings, LLC and CH Bus Sales, LLC, Plaintiff,
v.
Duane Geiger, individually, and REV Group, Inc., a Delaware corporation, Defendants, and Duane Geiger, individually and as a shareholder of CH Bus Sales, Inc., Third-Party Plaintiff,
v.
Michael Haggerty, individually, Third-Party Defendant, and CH Bus Sales, Inc., Nominal Defendant.

          Richard M. Dahl and Brandt F. Erwin, Madigan Dahl & Harlan, P.A., for Plaintiff and Nominal Defendant.

          Edward B. Magarian and Brianna Al Taqatqa, Dorsey & Whitney LLP, for Defendant REV Group.

          Shannon M. McDonough, Bradley R. Hutter, and Tyler P. Brimmer, Fafinski Mark & Johnson, P.A., for Defendant and Third-Party Plaintiff Duane Geiger.

          Garth G. Gavenda, Lindsay W. Cremona, and T. Christopher Stewart, Anastasi Jellum, P.A., for Third-Party Defendant.

          MEMORANDUM OPINION AND ORDER

          SUSAN RICHARD NELSON UNITED STATES DISTRICT JUDGE

         In December 2017, Defendant Duane Geiger resigned from his position as President and CEO of Plaintiff CH Bus Sales (“CHB”), where he had worked for several years. A few months later, he began working at Defendant REV Group (“REV”), a competitor of CHB's in the luxury motor coach market. CHB has now sued both REV and Geiger for a number of alleged legal violations, largely arising out of the non-compete, non-solicitation, and confidentiality provisions Geiger signed with CHB while he was employed there. Geiger and REV have moved for judgment on the pleadings as to all of the claims CHB asserts against them, both individually and collectively.

         After carefully reviewing the record and applicable case law, the Court grants Defendants' motion in part and denies it in part.

         I. BACKGROUND

         In describing the background of this case, the Court assumes as true the factual allegations in CHB's complaint and construes all reasonable inferences from those facts in the light most favorable to CHB. See Great Lakes Gas Transmission Ltd. P'ship v. Essar Steel Minn., LLC, 871 F.Supp.2d 843, 851 (D. Minn. 2012) (noting that the same standard applies to motions to dismiss under Rule 12(b)(6) and motions for judgment on the pleadings under Rule 12(c)). Further, while the Court considers “materials that are necessarily embraced by the pleadings” in this background section, it “ignore[s] materials outside the pleadings.” Id. For instance, though the Court does consider the exhibits attached to the complaint, like the at-issue Employment Agreement, it does not consider the allegations made against CHB in Defendants' counterclaims and third-party complaints (see Doc. Nos. 14, 18, 20), or the assertions made by CHB in a separate litigation it is engaged in in Delaware. See Gorog v. Best Buy Co., Inc., 760 F.3d 787, 791 (8th Cir. 2014); but cf. Defs.' Br. in Support of J. on the Pleadings (“Defs.' Br.”) [Doc. No. 38] at 5 (requesting that the Court take judicial notice of allegedly “contradictory assertions” made by CHB in that legal proceeding).[1]

         A. The Parties

         Plaintiff CHB is a Delaware corporation with its principal place of business in Minnesota, and it is involved in the distribution of “luxury motor coaches.” (Compl. [Doc. No. 1-2] ¶¶ 1, 9.) According to the Complaint, CHB “has steadily grown . . . from a startup company to a full-service distributor, offering sales, service, finance, and after-sales support throughout the United States and Canada, ” to the point where it now employs approximately 35 employees across four offices. (Id. ¶ 10.) Moreover, since January 2010, CHB has been the “exclusive distributor of TEMSA motor coaches in the United States and Europe.” (Id.)[2]

         Defendant REV is a Delaware corporation with its principal place of business in Wisconsin, and it is involved in the “design[], manufacture[], and distribut[ion] [of] specialty vehicles and related aftermarket parts and services, including commercial busses.” (Id. ¶ 4; REV Am. Answer [Doc. No. 14] ¶ 4.) REV and CHB are competitors. (Compl. ¶ 4.)

         Defendant Duane Geiger is a Minnesota resident with extensive experience in the motor coach industry. (Id. ¶¶ 5, 23; Geiger Am. Answer [Doc. No. 18] ¶¶ 5, 23.) From August 2011 through December 20, 2017, Geiger held various senior positions at CHB, including a several-month term as President and CEO. (Id. ¶¶ 5, 23; Geiger Am. Answer [Doc. No. 18] ¶¶ 5, 23.) Sometime in 2018, following his resignation from CHB, Geiger began working as “the general manager of the bus division for REV.” (Compl. ¶ 41; Geiger Am. Answer ¶ 41.) However, because of stock he received during his tenure at CHB, Geiger retains a minority ownership interest in CHB. (See Compl. ¶ 24; Geiger Am. Answer ¶ 24.)[3]

         B. Factual History

         1. Duane Geiger Joins CHB in August 2011 and Signs Employment and Shareholder Agreements

          As part of a “strategic business plan” to “develop the customer base and market for TEMSA's luxury motor coaches, ” in the summer of 2011, CHB recruited Geiger, a “seasoned bus professional, ” to become CHB's Executive Vice President of Sales/Service. (Compl. ¶¶ 22-24.) “In recognition of the anticipated important role Geiger was intended to play within CHB, the company offered Geiger a lucrative base salary starting at $200, 000 per year, plus bonuses, stock options, and executive benefits.” (Id. ¶ 24.) Most importantly for present purposes, though, on or about August 31, 2011, Geiger signed an Employment Agreement with CHB. (Id. ¶ 26; see Compl. Ex. 1 (“Employment Agreement”).) Although the Agreement defined Geiger's job as “Executive Vice President, ” the Agreement was subject to automatic one-year renewals, unless terminated by written notice, and stated that it could “be modified only in writing, signed by both parties.” (Id. §§ 1, 2, 17.)

         This Agreement contained three important provisions. First, the Agreement barred Geiger from disseminating confidential information received “during the course of [his] employment, ” including after his employment, unless it was necessary to perform his duties or “the information cease[d] to be confidential through legitimate means.” (Id. § 8 (“Confidentiality Provision”).) Second, the Agreement barred Geiger from soliciting “any current or prospective [CHB] customers, clients, employees, vendors, or suppliers, ” or from recruiting “any employee of [CHB] for any other work or employment, ” during his employment, “and for a period of two years following the termination of [his] employment.” (Id. § 12.b-12.c (“Non-Solicitation Provision”).) Third, the Agreement barred Geiger from “compet[ing], directly or indirectly, with [CHB], or enag[ing], assist[ing], or participat[ing] . . . in any business or businesses substantially similar to or competitive to the business now or hereafter conducted by [CHB], ” during his employment, “and for a period of two years following the termination of [his] employment.” (Id. § 12.a (“Non-Compete Provision”).)

         In addition, in the fall of 2011, Geiger was elected to CHB's board of directors and then provided with “125 shares of the company's stock.” (Compl. ¶¶ 33-34.) In consideration for this stock, Geiger signed a separate Shareholder Agreement with CHB. (Id. ¶ 34.) This Agreement required Geiger, like all shareholders, “to forever maintain the confidentiality of all of [CHB's] proprietary information.” (Id.)[4]

         According to CHB, these confidentiality agreements were important because “CHB has succeeded as a business in large part because of its valuable confidential and proprietary information and the strategic relationships it has developed in the niche luxury motor coach market.” (Id. ¶ 11.) CHB generically lists its “confidential information” and “trade secrets” as “customers, customer lists, customer needs and preferences, customer buying habits, customer contracts, sales, employee lists, financial information, policies and procedures, projects, business practices, methodologies, strategic plans, financial affairs, pricing, [and] vendor relationships.” (Id. ¶¶ 13-14.) Moreover, in addition to having its employees, shareholders, and directors sign confidentiality agreements, like the ones Geiger signed here, CHB protects its confidential information, “to the extent it exists in physical forms, ” by keeping it in “secured file cabinets.” (Id. ¶¶ 18-19.) CHB alleges that Geiger had access to these kinds of “confidential information” and “trade secrets” during his time at CHB. (Id. ¶ 29.)

         The Complaint also alleges that REV expressed a desire to “potentially acquir[e] CHB” in 2016. (Id. ¶ 36.) To that end, CHB signed a Non-Disclosure Agreement with REV and subsequently shared confidential information with REV “in connection with REV's due diligence efforts.” (Id. ¶ 37.) However, in July 2016, REV “abruptly disengaged with CHB.” (Id. ¶ 38.) Over a year later, CHB alleges, “REV entered into a separate agreement with Daimler AG to distribute Setra brand coaches throughout the United States and Canada, ” which “position[ed] REV to directly compete with CHB in the luxury bus market.” (Id.; see also REV Am. Answer ¶ 38 (admitting that “REV entered into an agreement with Daimler AG to distribute Setra coaches, ” but denying “any suggestion that Daimler AG currently distributes TEMSA coaches”).)

         2. CHB Appoints Geiger President and CEO in March 2018; Several Months Later, Geiger Resigns

         On or about March 1, 2017, CHB promoted Geiger to President and CEO, and increased Geiger's base pay to $360, 000. (Compl. ¶ 27.) The Complaint does not allege that the confidentiality, non-compete, and non-solicitation obligations found in Geiger's Employment Agreement ceased to exist once Geiger accepted this promotion.

         On or about December 20, 2017, Geiger “abruptly resigned from his employment with CHB.” (Id. ¶ 39; Geiger Am. Answer ¶ 39 (admitting that Geiger resigned from CHB around this time).)[5]

         3. Geiger Allegedly Violates His Employment Agreement by Joining REV and Then Contacting a CHB Employee

         Following Geiger's resignation, CHB “learned that Geiger [was] considering seeking employment with REV and/or one of [CHB's] other competitors.” (Compl. ¶ 40.) As such, on February 27, 2018, CHB sent Geiger a letter reminding him of the Employment Agreement's confidentiality, non-solicitation, and non-compete provisions, discussed supra. (Id. ¶ 40; see Compl. Ex. 2 (“Feb. 27, 2018 Letter”).) Nonetheless, CHB alleges, Geiger “accepted employment with REV as the general manager of the bus division for REV.” (Compl. ¶ 41; Geiger Am. Answer ¶ 41.)[6] CHB further alleges that, after Geiger began working at REV, he offered a long-time CHB employee named Marvin Borntrager a job, which caused Mr. Borntrager to resign from CHB. (Compl. ¶ 42; but see Geiger Am. Answer ¶ 42 (denying this allegation).) CHB also alleges that, “although [it] does not yet know the full extent of Geiger's unlawful competition and violation of his contractual, statutory, and common-law obligations, ” it believes that Geiger has misappropriated CHB confidential information and trade secrets, and is using this information for the benefit of REV. (See generally Compl. ¶¶ 43, 50-51, 85, 92, 97.) CHB similarly alleges that REV intentionally assisted Geiger in taking these actions, with full knowledge of Geiger's Employment Agreement, and is reaping the rewards of Geiger's alleged misconduct. (See, e.g., id. ¶¶ 85-90.)

         C. Procedural History

         On July 20, 2018, CHB filed the present complaint in Hennepin County District Court. In its complaint, CHB asserted (at least) eight claims against REV and Geiger: (1) breach of contract against Geiger; (2) tortious interference with contractual relations against REV; (3) breach of “contractual, statutory, and common law” fiduciary duties against Geiger; (4) state law misappropriation of trade secrets against REV and Geiger; (5) federal law misappropriation of trade secrets against REV and Geiger; (6) unjust enrichment against REV and Geiger; (7) unfair competition against REV and Geiger; and (8) tortious interference with actual and prospective business relations against REV and Geiger.

         On August 21, 2018, Defendants jointly removed this case to federal court, asserting federal question jurisdiction for the federal law trade secrets claim, and supplemental jurisdiction with respect to the other, state law claims. (See Notice of Removal [Doc. No. 1].)[7]Defendants subsequently filed answers, and amended answers, followed by the present motion for judgment on the pleadings. The parties submitted full briefing on the motion, and the Court entertained oral argument on December 14, 2018. (See Defs.' Br. in Support of J. on the Pleadings (“Defs.' Br.”) [Doc. No. 38]; Pl.'s Br. in Opp. to J. on the Pleadings (“Pl.'s Br.”) [Doc. No. 42]; Defs.' Reply Br. [Doc. No. 43].)

         II. ...


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