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Midwest Sign & Screen Printing Supply Co. v. Dalpe

United States District Court, D. Minnesota

May 10, 2019

Midwest Sign & Screen Printing Supply Co., Plaintiff,
v.
Robert Dalpe and Laird Plastics, Inc., Defendants.

          Daniel Oberdorfer and Nicole L. Faulkner, Stinson Leonard Street LLP, Minneapolis, MN, for plaintiff Midwest Sign & Screen Printing Supply Co.

          Cory D. Olson, Anthony Ostlund Baer & Louwagie P.A., Minneapolis, MN, for defendant Robert Dalpe.

          Jennifer A. Nodes and Jennifer Zwilling, Jackson Lewis P.C., for defendant Laird Plastics, Inc.

          OPINION AND ORDER

          ERIC C. TOSTRUD, UNITED STATES DISTRICT JUDGE

         Midwest Sign & Screen Printing Supply seeks a preliminary injunction forbidding its former employee, Robert Dalpe, from “working for or assisting” his new employer, Laird Plastics, “in any capacity that competes with Midwest” in violation of an employment agreement between Midwest and Dalpe. Midwest has introduced evidence showing that Dalpe likely violated his employment agreement by emailing himself Midwest's confidential information before his Midwest employment ended and that, if not modified, Dalpe's new position would enable him to assist Laird in competing with Midwest. Midwest has not, however, shown a likelihood of success on other essential elements of its claims, and Laird and Dalpe have introduced evidence showing that Dalpe no longer possesses or intends to use or disclose Midwest's confidential information and that Dalpe's job duties with Laird have been limited to minimize the probability of violating Dalpe's employment agreement with Midwest. For these reasons, among others, Midwest has not shown a likelihood of success on the merits or irreparable harm to justify ordering the extraordinary remedy of a preliminary injunction.

         I

         A

         Midwest and Laird's business activities overlap but are not identical. Midwest is “a full-service supplier of sign materials, including paints and substrates; screen materials, including inks, adhesives, and frames; digital media, equipment, and software; and other digital services.” First May Aff. ¶ 3 [ECF No. 5]; Mem. in Supp. at 2 [ECF No. 4] (“Midwest prides itself [on] being more than simply a supplier. It offers its customers a full-service experience with expert hands-on consultation from its experienced sales representatives.”). Midwest serves customers in twenty-nine states. Weinberg Aff. ¶ 18, Ex. D [ECF No. 6]. Laird is “the largest plastics distributor in the nation, ” with fifty locations in the continental United States and Canada. Reply Mem. at 2 [ECF No. 36]; First Jenkins Decl. ¶¶ 2-3 [ECF No. 32] (stating Laird has over 25, 000 customers). Laird says that “[a]s a result of its geographic breadth, each Laird location tailors its product offerings to the demands of the individual local market.” First Jenkins Decl. ¶¶ 4, 7. At its location in Portland, Oregon, where Dalpe is supposed to work, Laird offers three categories of plastic products: (1) graphic materials, like rigid sheet stock and semi-rigid plastics, which are primarily used for large, indoor signage; (2) acrylics and polycarbonates, which are hard and often see-through materials used when customers require a more durable or transparent product; and (3) mechanical/engineering materials, which are plastics used industrially, such as conveyor equipment in a manufacturing plant. Id. ¶¶ 11, 13, 17, 20.

         Midwest and Laird dispute the extent to which they compete. Midwest says there is considerable identity between its business and Laird's, calling the two “direct competitors.” Mem. in Supp. at 9; see First May Aff. ¶ 9; Second May Aff. ¶ 4 [ECF No. 38]. Laird says that it and Midwest do not “sell blue widgets to the same local hardware store, ” and that it “sells vastly different plastics products to a largely dissimilar customer base.” Mem. in Opp'n at 1 [ECF No. 31]; First Jenkins Decl. ¶ 40 (“Of Laird's approximate 350 customers in the Portland Market, less than ten are also customers of Midwest.”). Midwest and Laird's submissions identify specific products they both sell, albeit with different volume and regularity. These include “roll stock” (for digital printing and lamination) and “rigid sheet stock” (for signage). See Dalpe Decl. ¶ 16 [ECF No. 33]; Second May Aff. Ex. C [ECF No. 38-1]; First Jenkins Decl. ¶¶ 31-41. The Parties' submissions also identify products sold by one but not the other. Midwest sells screen-printing supplies and digital-printing inks; Laird does not. Id. Laird sells industrial plastics, also known as “rod and tube”; Midwest does not. Id.

         B

         Dalpe began working for Midwest in June 2011. Dalpe Decl. ¶ 1; Froelke Aff. Ex. A [ECF No. 7]. His first job was Operations Manager, which involved managing Midwest's warehouse, inventory, and customer support at a California location. Dalpe Decl. ¶ 1; Mem. in Supp. at 2. In April 2015, Midwest promoted Dalpe to the position of Northwest Sales Manager. Dalpe Decl. ¶ 1; Weinberg Aff. Ex. A. In this new role, Dalpe officed in Portland but oversaw sales for Midwest's “Pacific Northwest” region, which included all of Oregon and Washington, and parts of Idaho, Alaska, Montana, and British Columbia. Weinberg Aff. ¶ 7. According to Midwest's “Job Description” document, Dalpe's duties as Sales Manager included leading a team of five sales representatives, meeting with key customers, approving customer quotes and proposals, and “monitor[ing] Midwest's competition, their products, sales and marketing activities.” Weinberg Aff. Ex. C at 1. He also participated in weekly sales calls with the Vice President of Sales and other Sales Managers nationwide. Weinberg Aff. ¶ 17.[1]

         As part of his promotion to Northwest Sales Manager, Midwest required Dalpe to renew his acceptance of a contract entitled “Confidentiality, Nonsolicitation and Noncompetition Agreement.” Weinberg Aff. Ex. B (2015 Agreement, hereinafter “Agreement”); see also Froelke Aff. Ex. A (2011 Agreement). Principally at issue in this motion are the Agreement's non-disclosure (¶ 2), non-retention (¶ 3), and non-compete (¶¶ 5 and 6) provisions:

2. I will not, during or after the term of my employment, disclose [Midwest's] confidential information to any other person or entity, or use [Midwest's] confidential information for my own benefit or for the benefit of another, unless [Midwest] expressly direct[s] me to do so.
3. If either [Midwest] or I terminate my employment, I will deliver to [Midwest] immediately all of [Midwest's] confidential information, in whatever format, and will not retain any copies. . . .
5. For a period of 12 months after the termination of my employment (whether voluntary or involuntary), I will not own, work for or assist any entity that offers products or services that compete with products or services that [Midwest] offer[s].
6. For a period of 12 months after the termination of my employment (whether voluntary or involuntary), I will not provide products or services that compete with [Midwest's] to any entity who was a customer of [Midwest's] during my employment with [Midwest].

         Agreement ¶¶ 2-3, 5-6. The Agreement also contains choice-of-law and choice-of-forum clauses providing that Minnesota law shall govern “any disputes arising out of or in any [sic] related to this Agreement” and that Dalpe consents to jurisdiction in Minnesota courts. Id. ¶ 11.[2]

         C

         Around December 2018, Dalpe began meeting with individuals from Laird to discuss the possibility of leaving Midwest for Laird. See First Jenkins Decl. ¶¶ 51-55. On February 25, 2019, Laird offered Dalpe a position as the Profit Center Manager to lead Laird's Portland location. Id. ¶ 56. That same day, Dalpe informed Midwest that he intended to terminate his employment to work with Laird. Weinberg Aff. ¶¶ 19-20. Dalpe's last day at Midwest was March 8, 2019, and his first day at Laird was March 19, 2019. Dalpe Decl. ¶¶ 31-32.

         Both before and after meeting with Laird representatives, Dalpe sent several emails from his Midwest work account to his personal account attaching Midwest documents. Dalpe Decl. ¶ 33; First May Aff. ¶¶ 12-13. The information included Midwest's annual profit and loss statements and daily margin reports dating back to 2015, account lists and contact information for over 2, 700 Midwest customers, and copies of an offer letter and employment agreement for a recently-hired Midwest sales representative. See First May Aff. ¶ 13. Dalpe does not dispute that this information is confidential but testifies that he did this “in order to ensure compliance with [his] non-compete obligations and without any intention of sharing the information with Laird or using the information at Laird for competitive advantage, ” and so he could calculate his commission amount. Dalpe Decl. ¶¶ 34-35. Midwest says the “vast majority” of information Dalpe sent himself is not timely or pertinent to “the method by which [his] bonus or other compensation is calculated.” First May Aff. ¶ 14.

         Laird has not provided a job description for Dalpe's new position except to say that Profit Center Managers in general “lead[] each Laird location” and are “responsible for overseeing all aspects of local operations including hiring and terminating personnel, developing and implementing sales strategies, selecting suppliers, and identifying investment opportunities.” First Jenkins Decl. ¶ 6. Dalpe will supervise five Laird sales representatives and report to a Regional Manager. Dalpe Decl. ¶¶ 2-3; First Jenkins Decl. ¶ 7. Laird attempts to distinguish Dalpe's role from what he did at Midwest by saying he will help “grow its Portland Market sales by adding equipment to fabricate and process plastics, ” meaning items like “cosmetic displays, machine guards, starwheels, pullies, rollers, and sprockets”-something Midwest doesn't do. First Jenkins Decl. ¶ 53; Mem. in Opp'n at 13 n.2.

         D

         Three days after Dalpe notified Midwest that he would be resigning and taking a new position with Laird, counsel for Midwest wrote to Laird and Dalpe regarding his obligations under the Agreement. Oberdorfer Aff. ¶¶ 2-3, Exs. A, B [ECF No. 8]. According to Midwest, “[d]espite numerous written requests from Midwest's counsel, neither Laird nor Dalpe” provided adequate assurances “that Dalpe has ceased accessing and has destroyed Midwest confidential information, ” and Dalpe refused to “turn over [his] personal devices for Midwest's review . . . or preservation.” Mem. in Supp. at 13; see Oberdorfer Aff. ¶¶ 4-6, Ex. C. In response to these communications, Laird agreed to restrict Dalpe from directly soliciting Midwest customers but did not agree to Midwest's request that Dalpe not supervise Laird sales representatives who solicit Midwest customers. Oberdorfer Aff. ¶ 6.

         Midwest commenced this action against Dalpe and Laird on April 8, 2019. See Compl. at 29 [ECF No. 1]. Midwest asserts claims for breach of contract, violation of state and federal trade-secret acts, breach of the duty of loyalty, tortious interference with contract, unfair competition, and aiding and abetting. Id. ¶¶ 70-133. Midwest seeks injunctive relief and monetary damages. See, e.g., id. ¶ 80; id. at 28-29. There is diversity jurisdiction over the case under 28 U.S.C. § 1332(a)(1). See Compl. ¶¶ 12-15 (alleging that Midwest is a Minnesota corporation with a principal place of business in Minnesota, Dalpe is an Oregon citizen, Laird is a Delaware corporation with its principal place of business in Texas, and that there is over $75, 000 in controversy).

         On the same day it filed suit, Midwest moved for a temporary restraining order.[3]ECF No. 3. Midwest's proposed order describes the relief it seeks. ECF No. 9. If entered, the proposed order would enjoin Dalpe “from violating the terms of [the Agreement].” Id. at 1. It also would enjoin Dalpe and Laird “from maintaining, using or disclosing any confidential or trade secret information belonging to Midwest.” Id. at 1-2. A hearing on Midwest's motion occurred on May 2, 2019. ECF No. 41.

         According to Laird, since Midwest filed its motion, Laird and Dalpe have “repeatedly represented” that Laird has not requested or received Midwest's confidential information, Laird has directed Dalpe not to use or disclose the confidential information, Dalpe has not forwarded or stored Midwest's confidential information, and Dalpe has deleted the information from all devices and mediums. Mem. in Opp'n at 14-15; Nodes Decl. ¶¶ 3-5 [ECF No. 35]; Dalpe Decl. ¶¶ 36-38. Dalpe also retained a computer-forensics firm “to examine the content of [his] personal devices and provide written assurance that [he] did not disclose Midwest's confidential information at any time and deleted all Midwest content.” Dalpe Decl. ¶ 36.

         At the hearing, Defendants provided new information about self-imposed restrictions to Dalpe's job at Laird. Following the hearing, and in response to an invitation from the Court, Laird filed a supplemental declaration outlining the limitations Laird represents it has imposed on Dalpe's employment:

Dalpe is not to personally contact or attempt to contact any known Midwest customers, or direct another Laird employee to contact any known Midwest customers, during the Restrictive Period, for the purpose of soliciting and/or selling Shared Products [defined as roll stock and rigid sheet stock]. . . .
[W]hile Laird may continue to sell rigid sheet stock to Shared Customers as it had prior to [Dalpe's] hire, during the Restrictive Period, [Dalpe] is not to be personally involved in these sales. . . . [or] any strategy discussions regarding Shared Products to Shared Customers. . . .
[T]o the extent a Midwest customer contacts [Dalpe] during the Restrictive Period to purchase a Shared Product, he is to immediately direct them to [his supervisor] or to one ...

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