Jim Hawk Truck-Trailers of Sioux Falls, Inc. v. Crossroads Trailer Sales & Serv.

655 F.Supp.3d 825

JIM HAWK TRUCK-TRAILERS OF SIOUX FALLS, INC., Plaintiff, v. CROSSROADS TRAILER SALES & SERVICE, INC., Alvin Scholten, Mark Sneve, Michael Falor, David Jensen, Tracy Thompson, Nick Big Eagle, Chaz Kohorst,¹ Taylor Larson, and Derek Falor, Defendants.

4:20-CV-04058-KES

United States District Court, D. South Dakota, Southern Division

Signed February 8, 2023

Gillian G. O'Hara, Victoria Helen Buter, Pro Hac Vice, Kutak Rock LLP, Omaha, NE, for Plaintiff.

Bradley J. Lindeman, Nicole L. Brand, Erik E. Rootes, Pro Hac Vice, Jacalyn N. Chinander, Pro Hac Vice, Meagher & Geer, PLLP, Minneapolis, MN, Kent R. Cutler, Kimberly R. Wassink, Cutler Law Firm, LLP, Sioux Falls, SD, for Defendant Crossroads Trailer Sales & Service, Inc.

Bradley J. Lindeman, Nicole L. Brand, Erik E. Rootes, Pro Hac Vice, Jacalyn N. Chinander, Pro Hac Vice, Meagher & Geer, PLLP, Minneapolis, MN, for Defendants Alvin Scholten, Mark Sneve, Michael Falor, David Jensen, Nick Big Eagle, Chaz Kohorst, Taylor Larson.

Bradley J. Lindeman, Nicole L. Brand, Erik E. Rootes, Pro Hac Vice, Meagher & Geer, PLLP, Minneapolis, MN, for Defendant Tracy Thompson.

Bradley J. Lindeman, Erik E. Rootes, Pro Hac Vice, Jacalyn N. Chinander, Pro Pac Vice, Meagher & Geer, PLLP, Minneapolis, MN, for Defendant Derek Falor.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

FACTUAL BACKGROUND

Pending before the court is defendants' summary judgment motion. Docket 121. This case arises from a group of former Jim Hawk Trailers of Sioux Falls, Inc. (Jim Hawk) employees moving to Crossroads Trailer Sales and Service Inc. (Crossroads), and what these individual employees as well as Crossroads did throughout the transfer process. See Docket 1. The below table summarizes Jim Hawk's surviving claims against the various defendants up to this point.²

   Claim                  Claim                               Defendant(s)
   Number
                 Misappropriation of            Crossroads, Alvin Scholten, Mike Falor
    1          Trade Secrets Under the            Mark Sneve, Dave Jensen, Tracy
               Defend Trade Secrets Act             Thompson, and Derek Falor
                 (18 U.S.C. § 1836)
     2             Misappropriation of
                 Trade Secrets Under             Crossroads, Alvin Scholten, Mike Falor
                South Dakota's Uniform            Mark Sneve, Dave Jensen, Tracy
                Trade Secrets Act (SDCL            Thompson, and Derek Falor
                      § 37-29-1)
     3        Breach of Duty of Loyalty             Alvin Scholten, Mike Falor, Mark Sneve
                                                    Dave Jensen, Tracy Thompson Derek
                                                   Falor, Nick Big Eagle, Chaz Kohorst
                                                       and Taylor Larson
     4        Tortious Interference               Crossroads, Alvin Scholten, Mike Falor
              With Business Relations                   Mark Sneve, Dave Jensen, Tracy
                                                        Thompson, and Derek Falor
     5           Tortious Interference              Crossroads, Alvin Scholten
                 With Employment                   
                 Relationships
     6           Civil Conspiracy                  Crossroads, Alvin Scholten, Mike Falor,
                                                    Mark Sneve, Dave Jensen, Tracy
                                                    Thompson, and Derek Falor
 
     7          Unjust Enrichment                 Crossroads, Alvin Scholten, Mike Falor,
                                                    Mark Sneve, Dave Jensen, Tracy
                                                     Thompson, and Derek Falor
     8          Unfair Competition                  Crossroads, Alvin Scholten, Mike Falor,
                                                     Mark Sneve, Dave Jensen, Tracy
                                                      Thompson, and Derek Falor
     9               Defamation                        Alvin Scholten

The court recites a broad overview of the facts in the light most favorable to the non-moving party, Jim Hawk.

Jim Hawk is a Sioux Falls trailer dealer and business that sells semi-truck trailers, parts, and service. See Docket 166 at 2. Crossroads is a trailer business in Sioux Falls. See Docket 157-19 at 6-7. Crossroad's president is Mark Habben, and its vice president is Brian Johnson. See id. at 194, 211.

Alvin Scholten began working at Jim Hawk in 2004 as a trailer salesman and eventually took over as the general manager of Jim Hawk in 2015. See Docket 157-16 at 4-5. Jim Hawk fired Scholten in December 2019. See id. at 19. Soon after, Scholten began talking with Crossroads about potential employment, and joined Crossroads in January 2020. See id. at 22, 24. Prior to officially joining Crossroads, Scholten talked to Jim Hawk employees Mike Falor, Tracy Thompson, and Dave Jensen about the potential for them to work at Crossroads. See id. at 24. At some point, Scholten also talked to Jim Hawk employee Derek Falor, Mike Falor's son, about the possibility of Derek Falor joining Crossroads. See id. at 28; Docket 157-13 at 5.

Eventually, Mike Falor, Tracy Thompson, and Dave Jensen all left Jim Hawk and officially started working at Crossroads on March 16, 2020. See Docket 157-13 at 23-24; Docket 157-14 at 49; Docket 157-18 at 39. Crossroads also hired three Jim Hawk mechanics, Nick Big Eagle, Chaz Kohorst, and Taylor Larson, who all started working at Crossroads on March 16, 2020. See Docket 133 ¶ 234; Docket 160 at 46.

Other than Scholten, the individual defendants left Jim Hawk without giving Jim Hawk advance notice of their departure. See Docket 157-38 at 18; Docket 157-13 at 26; Docket 157-12 at 13; See Docket 157-16 at 19 (showing Jim Hawk fired Scholten). All of them were at-will employees. See Docket 157-33 at 47.

Broadly speaking, Jim Hawk alleges the individual defendants took trade secret information and gave it to Crossroads, improperly directed Jim Hawk customers to Crossroads while still working for Jim Hawk, or improperly interfered with Jim Hawk's employees, all to the benefit of Crossroads and the detriment of Jim Hawk. See Docket 159 at 8-11. Jim Hawk further alleges that Crossroads improperly took trade secret information and improperly interfered with Jim Hawk's customers and employees. See id. Jim Hawk additionally alleges Scholten defamed it by telling its employees that its parts department might be sold or closed, and that the employees' jobs might be at risk. See id. at 85.

Defendants move for summary judgment in all claims against them. See Docket 121. The court discusses each claim and supplements the factual accounts for the relevant claims.

LEGAL STANDARD

Summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party can meet its burden by presenting evidence that there is no dispute of material fact or that the nonmoving party has not presented evidence to support an element of its case on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must inform the court of the basis for its motion and also identify the portions of the record that show there is no genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).

To avoid summary judgment, "[t]he non-moving party may not 'rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.'" Mosley v. City of Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cnty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). Summary judgment "must be denied if on the record then before it the court determines that there will be sufficient evidence for a jury to return a verdict in favor of the nonmoving party." Krenik 47 F.3d at 957. It is precluded if there is a genuine dispute of fact that could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When considering a summary judgment motion, the court views the facts and the inferences drawn from such facts "in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)).

DISCUSSION

I. Misappropriation of Trade Secrets

A. Factual Background

Viewing the record in the light most favorable to Jim Hawk, the record shows the following additional facts relevant to the disposition of Jim Hawk's trade secret claims:

After Jim Hawk fired Scholten, Scholten took and gave Crossroads a Jim Hawk General Ledger Balance sheet through October 2019 that contained information on profits, losses to date, net income, loss, the value held in the company, and Jim Hawk's retained earnings, expenses, and inventories. See Docket 157-16 at 35; Docket 153 at 20. Scholten also took Jim Hawk's most recent profit and loss statement, which showed Jim Hawk's net profit for each department every month for the year to date. See Docket 157-16 at 16. Additionally, he took a single-spaced, 14½ page customer list containing customers' names, addresses, contact person, trailer type information, and other information, from Jim Hawk and brought it to his Crossroad's office. See id. at 16, 18, 50-64.

Mark Sneve started working at Jim Hawk in 1984, and eventually became a service manager. See Docket 157-17 at 5-6. Because of his position, Sneve knew Jim Hawk's pricing information, customer...