CDC Restoration & Constr., LC v. Tradesmen Contractors, LLC

2012 UT App 60

274 P.3d 317

CDC RESTORATION & CONSTRUCTION, LC, Plaintiff and Appellant,

v.TRADESMEN CONTRACTORS, LLC; Kenneth Allen; Paul Carsey; Jay Lasater; Michael Lasater; Shauna Lasater; and Lindsey Mounteer, Defendants and Appellees.

No. 20100127–CA.

Court of Appeals of Utah.

Feb. 24, 2012.

Richard F. Ensor and Kari A. Tuft, Salt Lake City, for Appellant.

Romaine C. Marshall, P. Bruce Badger, and Rachel S. Anderson, Salt Lake City, for Appellees.

Before Judges McHUGH, VOROS, and ORME.

OPINION

VOROS, Associate Presiding Judge:

¶ 1 CDC Restoration & Construction, LC (CDC) appeals from summary judgment in favor of Tradesmen Contractors, LLC (Tradesmen), Kenneth Allen, Paul Carsey, Jay Lasater, Michael Lasater, Shauna Lasater, and Lindsey Mounteer (collectively, Defendants).¹ CDC's claims arise out of the Defendants' creation of Tradesmen, competition against CDC for work projects, and alleged misappropriation of confidential information and trade secrets. We affirm in part and reverse in part.

BACKGROUND

¶ 2 CDC is a contractor that primarily repairs concrete and installs protective and decorative coatings in Utah and the surrounding states. From 2003 to 2005, CDC performed concrete repair and restoration work for Kennecott Utah Copper Corporation (Kennecott). Pursuant to Kennecott's policy, CDC entered into a preferred provider agreement (PPA) with Kennecott before performing the work. The PPA listed pricing information to provide Kennecott some assurance of what a given project might cost. Included in CDC's PPA was pricing information for its hourly employees as well as hourly, daily, weekly, and monthly rates for various pieces of industrial equipment. The PPA stated that the information in it was confidential.

¶ 3 Defendant Carsey began working for CDC in the early 1990s and eventually became a CDC foreman. He worked in that capacity from 2004 to 2005, during which time CDC was performing work for Kennecott. Carsey never signed a confidentiality agreement, but was told that CDC's pricing information was confidential. Carsey resigned in January 2006, informing CDC's owner Ralph Midgley that he was “burned out” and was going to “flip houses.” However, CDC alleges that before Carsey resigned from CDC, he had begun speaking with the other defendants about starting Tradesmen (a company that would compete directly with CDC for work at Kennecott), had begun working for Tradesmen, and had been elected Tradesmen's vice president and project developer. Carsey testified that he did not begin working for Tradesmen until after he had resigned from CDC.

¶ 4 Defendant Allen worked for an independent contractor hired by Kennecott to supervise work performed at Kennecott's refinery. Allen was a project manager and, in that capacity, supervised CDC's work and knew CDC's confidential pricing information. Before working at the refinery, Allen worked as a project manager, coordinator, and director for Kennecott for twenty-eight years. By December 2005, Allen had formalized his ownership interest in Tradesmen. CDC alleges that Allen and Carsey frequently exchanged phone calls during the period when both CDC and Tradesmen were formulating bids for a Kennecott job. CDC also alleges that Allen went to great lengths to hide his involvement with Tradesmen during this time, including sending an email to Kennecott management indicating that he was unfamiliar with Tradesmen.

¶ 5 In late 2005, Kennecott put a contract up for bid for a project known as E–Bay (the Project) at its refinery. In January 2006, Kennecott conducted a pre-bid walkthrough of the refinery. Carsey participated in the walkthrough on behalf of CDC. Tradesmen also participated in the walkthrough. Noticing Tradesmen's presence, Midgley asked Carsey if he knew anything about Tradesmen. Carsey said he did not. In the days following the walkthrough, Carsey assisted CDC with every aspect of assembling its bid for the Project. Meanwhile, Tradesmen also put together a bid for the Project. The Tradesmen Defendants concede that they used the labor rates in CDC's PPA as a starting point for Tradesmen's PPA. They claim that Allen, primarily, assembled Tradesmen's bid. CDC alleges that Carsey assisted in assembling Tradesmen's bid even while he was in the employ of CDC. Allen and Carsey deny that allegation. Both testified that Carsey did not assist Allen in preparing Tradesmen's bid. However, defendant Michael Lasater, a Tradesmen manager, testified that Carsey was frequently at the Tradesmen offices during the time that Tradesmen was formulating its bid.

¶ 6 CDC, Tradesmen, and a third company each submitted bids for the Project. CDC's bid was the highest, Tradesmen's the second highest, and the third company's the lowest. On January 24, 2006, Kennecott awarded the Project to Tradesmen. In an email, Dan Larsen, Kennecott's then senior electrical engineer and supervisor of the Project stated, “After reviewing the bids and talking this over ... we felt that Tradesm[e]n/Paul Carsey should do this work. Working in the tank house basement is dangerous and [we] felt his experience and concern for safety were a good fit to have the repairs completed in the [Project].” Dennis Woolley, Kennecott's maintenance superintendent, testified that price was also a factor in awarding the bid.

¶ 7 CDC sued. It alleged (1) misappropriation of trade secrets against Tradesmen, Allen, and Carsey for improper use of its labor and equipment rates and bid information; (2) breach of fiduciary duty against Carsey; (3) intentional interference with prospective economic relations against Tradesmen, Allen, and Carsey; and (4) civil conspiracy against all Defendants.

¶ 8 The trial court entered summary judgment in favor of Defendants on all claims. It ruled that CDC failed to present sufficient evidence to demonstrate a genuine issue of material fact as to whether its labor and equipment rates were trade secrets under the Utah Uniform Trade Secrets Act (the UTSA or Utah UTSA), see Utah Code Ann. §§ 13–24–1 to –9 (2009), whether Tradesmen, Allen, and Carsey used CDC's labor and equipment rates and bid information, and whether Carsey owed CDC a fiduciary duty. The court also ruled that the UTSA preempted all remaining claims.

ISSUES AND STANDARD OF REVIEW

¶ 9 CDC first contends that it presented sufficient evidence to demonstrate a genuine issue of material fact as to whether its labor and equipment rates and other bid information are trade secrets and as to whether Tradesmen, Allen, and Carsey used those trade secrets. CDC next contends that it presented sufficient evidence to demonstrate a genuine issue of material fact as to whether Carsey owed it a fiduciary duty. CDC then contends that its intentional interference with prospective economic relations claim is not preempted by the UTSA. Finally, CDC contends that its civil conspiracy claim is not preempted by the UTSA.

¶ 10 Summary judgment is appropriate when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Utah R. Civ. P. 56(c). We “review[ ] a trial court's legal conclusions and ultimate grant or denial of summary judgment for correctness and view[ ] the facts and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party.” Bingham v. Roosevelt City Corp., 2010 UT 37, ¶ 10, 235 P.3d 730.

ANALYSIS

I. Trade Secrets

A. CDC's Labor and Equipment Pricing

¶ 11 CDC first contends that the trial court erred when it ruled that CDC “failed to present evidence that is sufficient to establish a genuine issue of material fact that its labor and equipment rates derive independent economic value from not being generally known to, and not being readily ascertainable by proper means by,” Tradesmen, Carsey, and Allen.

¶ 12 Specifically, CDC alleges that Tradesmen misappropriated the specific labor and equipment rates set forth in CDC's PPA. CDC claims not only that each item on this list is a trade secret, but also that the list itself is entitled to protection as a unique compilation. CDC points out that “an alchemy of information may constitute a trade secret when its separate parts are each generally known and readily ascertainable, but, when analyzed together such parts derive independent economic value.” See USA Power, LLC v. PacifiCorp, 2010 UT 31, ¶ 42, 235 P.3d 749. CDC also contends that the trial court erred in ruling that CDC failed to establish that Tradesmen used CDC's labor and equipment rates.

¶ 13 “What constitutes a trade secret is a question of fact.” Envirotech Corp. v. Callahan, 872 P.2d 487, 494 (Utah Ct.App.1994) (citing Telex Corp. v. International Bus. Machines Corp., 510 F.2d 894, 928 (10th Cir.1975); Kodekey Elecs., Inc. v. Mechanex Corp., 486 F.2d 449, 455 (10th Cir.1973)). “The burden of demonstrating the existence of a trade secret is on the plaintiff, and there is no presumption in his or her favor.” Id. (citing Microbiological Research Corp. v. Muna, 625 P.2d 690, 696 (Utah 1981)).

¶ 14 Where, as here, the nonmoving party will bear the burden of proof at trial, the movant “may satisfy its burden on summary judgment by showing, by reference to ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,’ that there is no genuine issue of material fact.” Orvis v. Johnson, 2008 UT 2, ¶ 18, 177 P.3d 600 (quoting Utah R. Civ. P. 56(c)). Upon such a showing, “the burden then shifts to the nonmoving party, who ‘may not rest upon the mere allegations or denials of the pleadings,’ but ‘must set forth specific facts showing that there is a genuine issue for trial.’ ” Id. (emphasis omitted) (quoting Utah R. Civ. P. 56(e)).

¶ 15 To establish a claim for misappropriation of a trade secret, the proponent of the trade secret must show “(1) the existence of a trade secret, (2) communication of the trade secret to [the defendant] under an express or implied agreement...