Fryetech, Inc. v. Harris

Page 1144

46 F.Supp.2d 1144

FRYETECH, INC., Plaintiff, v. Greg L. HARRIS, Independent Specialty Coatings, L.L.C., Tom Tongier, Francis Edward Hastings, and Dale E. Wise, Defendants.

No. 98-1092-JTM.

United States District Court, D. Kansas.

March 23, 1999.

Roger M. Theis, John T. Moore, Hinkle, Eberhart & Elkouri, L.L.C., Wichita, KS, for Plaintiff.

Douglas G. Ott, Hall, Levy, Devore, Bell, Ott & Kritz, Coffeyville, KS, for defendants Greg L. Harris, Independent Specialty Coatings, Francis Edward Hatings, Dale E. Wise.

Jeffry L. Jack, Dearth, Markham & Jack, Chartered, Parsons, KS, for Defendant Tom Toniger.

MEMORANDUM AND ORDER

MARTEN, District Judge.

The present case involves claims by plaintiff FryeTech, Inc. ("FryeTech"), a manufacturer of carbon paper, against former FryeTech employees and their company, Independent Specialty Coatings, L.L.C. ("ISC"). FryeTech alleges the defendants breached various duties while still FryeTech employees and wrongfully acquired FryeTech property. FryeTech has moved for summary judgment on its replevin claim. The defendants have also moved for summary judgment. For the reasons stated herein, the former motion is granted and the latter motion is denied.

I. Summary Judgment Standard.

Summary judgment is proper where the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In considering a motion for summary judgment, the court must examine all evidence in a light most favorable to the opposing party. McKenzie v. Mercy Hospital, 854 F.2d 365, 367 (10th Cir.1988). The party moving for summary judgment must demonstrate its entitlement to summary judgment beyond a reasonable doubt. Ellis v. El Paso Natural Gas Co., 754 F.2d 884, 885 (10th Cir.1985). The moving party need not disprove the nonmoving party's claim or defense; it need only establish that the factual allegations have no legal significance. Dayton Hudson Corp. v. Macerich Real Estate Co., 812 F.2d 1319, 1323 (10th Cir.1987).

Once the moving party has carried its burden under Rule 56(c), the party opposing summary judgment must do more than simply show there is some metaphysical doubt as to the material facts. "In the language of the Rule, the nonmoving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)) (emphasis in Matsushita). The opposing party may not rely upon mere allegations or denials contained in its pleadings or briefs. Rather, the opposing party must come forward with significant admissible probative evidence supporting that party's allegations. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses, and the rule should be interpreted in a way that allows it to accomplish this purpose. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

II. The Facts.¹

A. The Defendants.

Defendant Greg L. Harris began working in the carbon paper manufacturing industry after graduating from high school. He initially was an employee of Southwest Carbon Paper Manufacturing Company ("Southwest"), later becoming a 49% owner in that business. Southwest moved its operations to Parsons, Kansas in approximately November of 1972. In 1983, Southwest was purchased by Technicarbon, which merged with Frye Copy Systems on December 31, 1996, becoming FryeTech. At the time of the merger, Harris was General Manager of Technicarbon.

There is evidence Harris remained in this position until he resigned from FryeTech on April 30, 1997. Harris claims he did not know his job title during the four months he worked for FryeTech, and that he was stripped of his general manager responsibilities at some unspecified point during that 120-day period. It is uncontroverted that, as General Manager of both Technicarbon and FryeTech, Harris was familiar with all aspects of the carbon paper manufacturing business, including the ink formulations used in making products for plaintiff's customers, the contact people for plaintiff's customers, plaintiff's customer list and all of plaintiff's pricing information for these customers. Harris and his wife, Sue Ann Harris, formed the defendant ISC.

Defendant Edward Francis (Ed) Hastings worked during high school at IMI Business Forms, one of plaintiff's former large customers. After graduation from high school in 1979, he went to work for Southwest, and thereafter worked for Technicarbon and FryeTech. Defendant Hastings resigned his employment with FryeTech on May 30, 1997, without notice, and commenced working for the defendant ISC on June 2, 1997. He is presently employed as ISC's plant manager.

Defendant Dale Wise has an electronics degree from Pittsburg State College. He commenced working for Southwest in Parsons in 1975. In 1976 or 1977, he began working in a maintenance position which continued after Technicarbon purchased Southwest. He continued working as the head of the maintenance department for Technicarbon and for FryeTech until his resignation on May 30, 1997, again without notice, the same day that defendant Hastings resigned.

Defendant Tom Tongier has a Bachelor's Degree in chemistry from the University of Kansas. Tongier has known Harris since 1980, when he began working for Southwest. He continued working for Southwest, Technicarbon, and, finally, FryeTech until March 13, 1997, when FryeTech terminated his employment.

Most of the events pertinent to this action took place in a period commencing in March of 1997 and ending four months later. These events also divide into two distinct but interrelated trails, the first being FryeTech's ongoing business, the other ISC's formation and development.

B. The Inception of ISC.

The December 1996 Technicarbon/Frye Copy Systems merger is an appropriate starting point. Defendant Harris opposed the merger. He had competed with FryeTech for 25 years, and FryeTech treated and managed its employees in a fashion different from what he was accustomed to with Technicarbon. FryeTech had a reputation as being a centralized corporation with its decision-making and financial functions taking place at its home office in Des Moines, Iowa.

On March 15, 1997, two days after Tongier's termination from FryeTech, and approximately six weeks before Harris' own resignation, Harris and Tongier went to Topeka, Kansas and met with Craig Snyder of Adams Business Forms ("Adams"). Harris, Tongier and Snyder discussed Adams leasing some carbon paper manufacturing equipment to a new carbon paper manufacturing company Harris and Tongier were planning to form to compete with FryeTech. Although Harris states he had not actually formed an intent to compete with FryeTech at the time of the Topeka trip, it is uncontroverted that this was discussed with Adams. These discussions commencing on March 15, 1997 resulted in a business relationship with Adams which is discussed in more detail below.

In this same time period, but prior to April 30, 1997, Harris, his wife, Hastings, Wise and Tongier met at Harris's home, where they talked about leaving FryeTech and joining Harris in a new carbon paper manufacturing business. They also discussed how they could acquire FryeTech's excess machinery and equipment for reuse in this new business. Tongier has stated that, although he was at the meeting, he did not hear conversations about obtaining equipment from FryeTech.

In another pre-April 30, 1997 development, Harris approached Charles W. Brown, the part-time Economic Development Director for the City of Parsons, and applied for financial incentives to start up a new carbon paper manufacturing facility which would compete directly with plaintiff. In addition, at some point — the actual time is not clear — Brown was provided with a copy of a business plan ("Business Plan") prepared by Greg Harris.² Brown was aware that Harris was still employed at FryeTech's Parsons plant at the time Harris applied for incentives for the new business venture. At that same time, Harris also told Brown there was a good possibility that FryeTech would be closing its local manufacturing facility. No one from the city ever contacted any official FryeTech representative concerning any of these matters. During this time, Harris and the City of Parsons were in continuous communication with respect to the type of financial assistance package Harris's new company needed and what the city could provide.

The Business Plan Harris prepared specifically identifies ISC's "management team" as defendants Harris, Hastings, Tongier and Wise. The Plan also specifically mentions Harris leaving FryeTech and references FryeTech's machinery and equipment: "I have decided to leave the employment of FryeTech, and once again try to start an independent competitive carbon coating operation. There is old equipment available which will require substantial investment to bring it to competitive levels." Harris also wrote the "majority of this money will go towards materials to build ink tanks and to repair and modify equipment to bring it up to competitive standards." (Plf.Dep.Exh. 43, at 1, and 4) (Emphasis added.) The language of the plan clearly indicates it was drafted while Harris and all members of ISC's "management team" other than Tongier were still employed by FryeTech.

At some point in this same March through April 1997 time period, Harris and Brown began looking in Parsons for building or warehouse sites for Harris's new carbon paper manufacturing operation. Ultimately, the ISC manufacturing facility was secured on or before May 19, 1997, from the ...