Baltz v. Lidestri Foods

SHARON BALTZ PLAINTIFF/COUNTER-DEFENDANT v. LIDESTRI FOODS, INC. DEFENDANT/COUNTERCLAIMANT

CASE NO. 5:19-CV-5193

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF ARKANSAS FAYETTEVILLE DIVISION

March 2, 2021

MEMORANDUM OPINION AND ORDER

Currently before the Court are a Motion for Partial Summary Judgment (Doc. 30), Brief in Support (Doc. 32), and Statement of Facts (Doc. 31) filed by Plaintiff/Counter-Defendant Sharon Baltz. Defendant/Counterclaimant LiDestri Foods, Inc. ("LiDestri") has submitted a Response in Opposition (Doc. 42) and Response to Statement of Facts (Doc. 43). The Court has also received a Reply (Doc. 44) by Ms. Baltz. The Motion for Partial Summary Judgment is now ripe for decision and, for the reasons stated herein, is DENIED.

I. BACKGROUND

On May 30, 2016, Ms. Baltz signed an Employee Confidentiality Agreement (the "Confidentiality Agreement") with her employer, LiDestri. On June 6, 2016, she signed a Confidentiality and Non-Use Agreement (the "Non-Use Agreement"). Ms. Baltz agrees that she had access to confidential information proprietary to LiDestri during her employment. She was also issued a company laptop, which gave her access to company documents, company systems, and her work email account.

Both the Confidentiality Agreement and the Non-Use Agreement that Ms. Baltz signed contained provisions requiring her to return all documents containing confidential information to LiDestri upon her termination. See Doc. 24-1 ("Upon separation from employment, or at any time upon request by [LiDestri], you shall promptly return to [LiDestri] all Confidential Information in your possession or control."); see also Doc. 24-2 ("Upon termination of employment you continue to be under obligation not to disclose any confidential information that you have regarding LiDestri Foods and/or LiDestri Spirits or any customers of the Company, and you must relinquish access to any sources of confidential information."). She was terminated on Friday, October 26, 2018.

Ms. Baltz filed an employment discrimination suit against LiDestri on October 15, 2019. During discovery, Ms. Baltz produced 676 pages of documents to LiDestri. LiDestri contends that "many, if not all," of the documents produced by Ms. Baltz are confidential, subject to her "contractual and fiduciary obligations to LiDestri." (Doc. 43, ¶ 11). Ms. Baltz does not dispute that she kept these documents after she was terminated but asserts that the only other party she has shared these documents with is her attorney. In addition, Ms. Baltz did not return her company laptop until months after her termination when she was requested to do so by LiDestri's attorneys. LiDestri alleges, and Ms. Baltz does not seem to contest, that Ms. Baltz was told to return the laptop via UPS or FedEx at the time she was terminated, and she agreed to do so.¹ LiDestri further alleges, and Ms. Baltz does not dispute, that Ms. Baltz backed up the information on the laptop to a thumb drive, which she also returned to LiDestri months after her termination.

On May 18, 2020, LiDestri filed a four-count Counterclaim (Doc. 24) against Ms. Baltz alleging breach of the Confidentiality Agreement, breach of the Non-Use Agreement, conversion, and breach of the duty of loyalty. In response, Ms. Baltz filed this Motion for Partial Summary Judgment on December 28, 2020.

The "gist" of Ms. Baltz's Motion is that LiDestri's Counterclaim must fail because LiDestri cannot prove damages to support any of its counterclaims. LiDestri agrees it cannot show actual damages for breach of contract or intentional tort, but instead relies on the Arkansas Law of Damages treatise to argue that it is nonetheless entitled nominal damages. See Doc. 42, p. 4-5 (citing Howard W. Brill & Christian H. Brill, 1 Ark. Law of Damages § 3:1). LiDestri further asserts that it is entitled to injunctive relief because Ms. Baltz still "possesses many confidential LiDestri documents and is intending to use them to her advantage in discovery, without any regard for their confidential nature." (Doc. 42, p. 5).

II. CHOICE OF LAW

Neither the parties nor the contracts at issue specify whether Arkansas or New York law applies. Thus, the Court must conduct a choice of law analysis as to LiDestri's breach of contract counterclaims, as well as the tort counterclaims of conversion and breach of the duty of loyalty.

a. Legal Standard

A federal court sitting in diversity applies the choice-of-law principles of the state in which it sits. See Platte Valley Bank v. Tetra Fin. Grp., LLC, 682 F.3d 1078, 1082 (8th Cir. 2012); Prudential Ins. Co. of Am. v. Kamrath, 475 F.3d 920, 924 (8th Cir. 2007). In contract cases, Arkansas courts apply "the law of the state with the most significant relationship to the issue at hand." Crisler v. Unum Ins. Co. of Am., 233 S.W.3d 658, 660 (2006). Where, as here, the subject contract does not include a choice-of-law provision, the following factors are relevant in determining which state has the most significant relationship: "1) the place of contracting; 2) the place of negotiation of the contract; 3) the place of performance; 4) the location of the subject matter of the contract; [and] 5) the domicile, residence, nationality, place of incorporation and place of business of parties." Id. (citing Restatement (Second) Conflict of Laws § 188 (1971)). In tort cases, Arkansas courts look to the doctrine of lex loci delicti as well as to Professor Leflar's five choice-influencing considerations. See Gomez v. ITT Educ. Servs., Inc., 71 S.W.3d 542, 546 (2002) (describing the Leflar factors as "softening" the "rigid formulaic application" of the lex loci delicti doctrine). "These five factors are as-follows: 1) predictability of results; 2) maintenance of interstate and international order; 3) simplification of the judicial task; 4) advancement of the forum's governmental interests; and 5) application of the better rule of law." Id.

b. Discussion

The Court will first analyze LiDestri's counterclaim for breach of contract under the Crisler test, and will then analyze the tort counterclaims of conversion and breach of the duty of loyalty under the Gomez test. For the reasons explained below, the Court concludes Arkansas law controls on all counterclaims.

1. Breach of Contract

Regarding the breach-of-contract counterclaims, the facts do not indicate where the contracts at issue were signed or negotiated. Thus, the first and second factors of the Crisler test are neutral to the Court's analysis. Similarly, the fifth factor does not favor one state or the other because while Ms. Baltz is a resident of Arkansas, LiDestri is incorporated and headquartered in New York. However, the remaining factors are instructive. The third factor—the place of performance—weighs in favor of Arkansas because the contracts at issue required Ms. Baltz to keep certain information confidential during her employment with LiDestri. Ms. Baltz was hired to service the Walmart and Sam's Club accounts in Arkansas where those companies are headquartered. Although her job duties expanded beyond Arkansas, she remained based out of Arkansas, and Walmart and Sam's Club continued to be her main accounts. Likewise, the fourth factor—the subject matter of the contracts at issue—favors Arkansas for the same reason. Therefore, because the third and fourth factors favor Arkansas and the remaining factors are neutral, Arkansas law controls with respect to the breach-of-contract counterclaims.

2. Conversion

Regarding the counterclaim for tort of conversion, the first Gomez factor—the predictability of results—involves consideration of "the . . . ideal that the decision in litigation on a given set of facts should be the same regardless of where the litigation occurs, so that forum-shopping will benefit neither party." Gomez, 71 S.W.3d at 547. Litigation on the issue of conversion will likely be the same whether in Arkansas or New York because both states apply the same standard. See Schmidt v. Stearman, 253 S.W.3d 35, 41 (Ark. Ct. App. 2007) ("[C]onversion is committed when a party wrongfully commits a distinct act of dominion over the property of another that is inconsistent with the owner's rights."); Coiavito v. New York Organ Donor Network, Inc., 860 N.E.2d 713, 717 (N.Y. 2006) ("Two key elements of conversion are (1) plaintiff's possessory right or interest in the property[;] . . . and (2) defendant's dominion over the property or interference with it, in derogation of plaintiff's rights."). As a result, forum-shopping does not seem to be an issue here. Thus, the first factor does not seem to favor one state or the other.

The second factor—maintenance of interstate and international order—warrants "[d]eference to sister state law in situations in which the sister state's substantial concern with a problem gives it a real interest in having its law applied, even though the forum state also has an identifiable interest . . ." Gomez, 71 S.W.3d at 547. However, the opposite is true here. The forum state, Arkansas, has more of a substantial concern because the plaintiff resided and worked here. The only interest New York has in this case is the fact that LiDestri is a resident there. This interest does not override the substantial concern Arkansas has in this case. Given this fact and the fact that "residents of [Arkansas] are not likely to venture to [New York] to engage in tortious conduct," and vice-versa, the second factor weighs in favor of Arkansas law. Id.

The third factor—simplification of the judicial task—is not usually a "paramount consideration." Id. However, under this factor, where the out-of-state rule is outcome-determinative and easy to apply, "there is no good reason why the possibility of importing it as part of the out-of-state law governing the case should not be seriously considered." Id. New York law mirrors Arkansas law on the issue of conversion, so although it may be easier to apply, it is not outcome determinative. The third factor...