Prairie Field Servs., LLC v. Welsh

497 F.Supp.3d 381

PRAIRIE FIELD SERVICES, LLC, Plaintiff,

v.Alan WELSH, Alan Gilbertson, Dustin Drefke, Immense Services, LLC, Darcy Johnson, Scott Keogh, Aladdin Financial, Inc., and DJ Express, Inc., Defendants.

File No. 20-cv-2160 (ECT/KMM)

United States District Court, D. Minnesota.

Signed October 29, 2020

Joseph W. Anthony, Philip J. Kaplan, and Ryan M. Lawrence, Anthony Ostlund Baer & Louwagie P.A., Minneapolis, MN, for Plaintiff Prairie Field Services, LLC.

Heidi J. Bassett, John J. Steffenhagen, and Klay C. Ahrens, Hellmuth & Johnson PLLC, Edina, MN, for Defendants Alan Welsh, Alan Gilbertson, Dustin Drefke, and Immense Services, LLC.

OPINION AND ORDER

Eric C. Tostrud, United States District Judge

Plaintiff Prairie Field Services, LLC claims that three of its former employees—Defendants Alan Welsh, Alan Gilbertson, and Dustin Drefke—stole its confidential business information and used it to start a competing business, Defendant Immense Services, LLC. Compl. ¶¶ 1–2 [ECF No. 1]. Prairie also believes that another set of Defendants—Darcy Johnson, Scott Keogh, Aladdin Financial, Inc., and DJ Express, Inc.—unlawfully assisted in this conduct. Id. ¶ 3. Prairie has moved for a temporary restraining order and preliminary injunction that would, among other things, severely restrict the business activities that Welsh, Gilbertson, Drefke, and Immense may pursue.¹ ECF No. 4.

Prairie's motion will be granted in part and denied in part. Prairie is likely to succeed on the merits of its claim that Welsh, Gilbertson, and Drefke violated their fiduciary duties, and Prairie has shown a sufficient threat of irreparable harm resulting from these Defendants’ possession of its confidential information. Welsh, Gilbertson, and Drefke must return Prairie's information.² Prairie has not shown a threat of imminent irreparable harm traceable to Immense's current business activities. The motion will therefore be denied to the extent it seeks to bar those activities.

I

A

Prairie is a "transportation and logistics company" that hauls "oil and related products" by truck from oil fields to other destinations. Compl. ¶ 17; Dunn Decl. ¶ 2 [ECF No. 8]. It was organized as a limited liability company in North Dakota, but its corporate headquarters is in Minnesota, and the oil fields it serves are in Wyoming, Colorado, New Mexico, and Texas. Compl. ¶¶ 5, 17; Dunn Decl. ¶ 2. Its financial staff and most of its senior leadership, including the Chief Financial Officer, work in the Minnesota headquarters, but other employees work remotely in other states. Dunn Decl. ¶¶ 2, 5, 16.

Understanding this case requires a brief word about the market in which Prairie operates. When an oil company needs trucking services, it generally puts out a call for bids. Trucking companies then compete with one another for the business. Compl. ¶ 19; Dunn. Decl. ¶ 4; Welsh Decl. ¶¶ 7–8 [ECF No. 25]. A company like Prairie may serve the same customers more than once, but it usually does not have "exclusive contracts" with those customers. Welsh Decl. ¶ 9. Rather, the only way to retain customers is to keep offering attractive bids. The bidding process has been especially "price-sensitive" during the COVID-19 pandemic because plummeting demand has resulted in a market "heavy on suppliers." Compl. ¶ 18; Dunn Decl. ¶ 3; Welsh Decl. ¶¶ 6–7. Now more than ever, then, a company that is unable to "remain competitive on price" is unlikely to fare well, Compl. ¶ 18; Dunn. Decl. ¶ 3, so a great deal rides on the numbers that go into bids.

When Prairie prepares its bids, it uses what it calls a "confidential pricing model that breaks down the estimated costs of the" proposed work. Compl. ¶ 19; Dunn. Decl. ¶ 4. Prairie has not submitted any one document that shows a master formula, but it has filed a number of documents under seal that show applications of the model for individual bids and customers. Dunn Decl., Exs. J [ECF No. 9], N [ECF No. 9-1], AA [ECF No. 9-11]. It appears that the model combines basic, publicly available factors (e.g. , fuel costs, the distance between destinations, and speeds) with other, more specific factors that reflect Prairie's "knowledge of its customers’ needs." Compl. ¶ 19; Dunn Decl. ¶ 4. According to Prairie, the model as a whole is much more than "basic arithmetic"; it draws on "years of historical data," and recreating it would require "inside knowledge of Prairie's confidential information." Compl. ¶ 19; Dunn Decl. ¶ 4.

B

Until recently, three of the Defendants worked for Prairie. The first, Welsh, spent a little over four years with the company, first as its Director of Safety and then as its Chief Operating Officer. Compl. ¶ 20; Dunn Decl. ¶ 5; Welsh Decl. ¶ 2. Although Welsh worked out of South Dakota and thus away from the Minnesota headquarters, Compl. ¶ 6; Defs.’ Mem. in Opp'n at 35 [ECF No. 24], he was a significant player in the company. He was "ultimately responsible for every aspect of [its] operations" and either led or participated in "every major initiative at Prairie." Compl. ¶ 21; Dunn Decl. ¶ 6. He was also the company's "primary salesperson and [the] main contact for [its] customers." Compl. ¶ 22; Dunn Decl. ¶ 7. With these responsibilities came "access to most of Prairie's competitive information," including financial statements and projections, "pricing, customer and vendor contacts, well locations, and management plans." Compl. ¶ 23; Dunn Decl. ¶ 8.

Gilbertson, Prairie's former Director of Operations, was Welsh's "righthand man." Compl. ¶¶ 24–25; Dunn Decl. ¶¶ 9–10; Gilbertson Decl. ¶ 2 [ECF No. 26]. He was in charge of "manag[ing] Prairie's relationships with third-party contractors" and also "had access to almost all of Prairie's competitive information." Compl. ¶ 25; Dunn Decl. ¶ 10. He was with the company for about five years. Dunn Decl. ¶ 9.

Drefke was not quite as high up in Prairie's official ranks, but he still played a significant role. He was the company's "Dispatch Manager" and then its "Sales Manager," which required him to "manage[ ] a team of 8-10 people who worked on day-to-day trucking operations." Compl. ¶ 27; Dunn Decl. ¶ 12; Drefke Decl. ¶ 2 [ECF No. 27]. He had access to a great deal of Prairie's business information, including "individual tickets, [its] truck monitoring system, pricing, and forecasts." Compl. ¶ 28; Dunn Decl. ¶ 13.

Near the end of 2019, each of these men signed a written acknowledgement that they had received a copy of Prairie's Employee Handbook. Dunn Decl. ¶ 15, Exs. B [ECF No. 8-2], C [ECF No. 8-3], D [ECF No. 8-4]; see also Drefke Decl. ¶ 3; Gilbertson Decl. ¶ 3. By its own terms, the Handbook is "not a contract." Dunn Decl., Ex. A at 5 [ECF No. 8-1]. Similarly, the acknowledgement that the men signed stated that the Handbook did not "create an employment contract or term," but the employees nevertheless agreed to "comply with [its] policies." E.g. , id. , Ex. B. Among other things, the Handbook prohibited employees from engaging in "[s]imultaneous employment" with a Prairie competitor and from "[u]sing [their] position in the company or knowledge of its affairs for personal gains." Id. at 10. It also warned that employees would be subject to discipline, including "legal action," if they "improperly use[d] or disclose[d] trade secrets or confidential business information." Id. at 11. It defined "[c]onfidential information" as "any and all information disclosed to or known by [the employee] because of employment with the company that is not generally known to people outside the company about its business." Id.

C

The events leading up to this lawsuit began in the early summer of 2020. In June, Welsh, Gilbertson and Drefke began to discuss the prospect of forming their own company and calling it Immense Services, LLC. Drefke Decl. ¶ 5; Gilbertson Decl. ¶ 4; Welsh Decl. ¶ 15. By June 8, they had formed "@immenseservicesllc.com" email addresses. Dunn Decl., Ex. F [ECF No. 8-6]. On June 18, they filed organizational documents with the Wyoming Secretary of State to officially form Immense. Gilbertson Decl. ¶ 4; Dunn Decl., Ex. G [ECF No. 8-7 at 49–52].

According to the current record, not much happened with Immense for the next month or so. On June 24, Gilbertson sent an email from his Immense email address to Welsh at his Prairie email address, attaching rates that Prairie had charged one of its customers for hauling water. Dunn Decl. ¶ 34, Ex. T [ECF No. 9-4]. On August 3, Welsh sent an email to a different Prairie employee, apparently seeking advice on how Immense might take advantage of an opportunity to "haul water equipment" for a company called Element Frac. Pl.’s Mem. in Supp. at 10 [ECF No. 6]; Dunn Decl., Ex. I [ECF No. 8-9]. Welsh ran this idea by Drefke, but Drefke expressed concern about Immense committing to any contracts before it had insurance. Dunn Decl., Ex. I.

Later in August, things began to accelerate. On August 17, Welsh and Drefke began working on obtaining insurance for Immense. Dunn Decl., Exs. CC [ECF No. 8-16], DD [ECF No. 8-17]. During this process, Welsh apparently discovered that Immense could get better insurance rates if it were "associated with an established company." Welsh Decl. ¶ 19. This led him to identify DJ Express, a company owned by his friend, Darcy Johnson, as part of Immense's "management team" in a draft "vision statement" meant for the insurance underwriters. Id. ; Dunn Decl., Ex. H [ECF No. 8-8 at 2–3].³

A few days later, around August 22, Welsh announced his resignation from Prairie, Dunn Decl. ¶ 5, Ex. O [ECF No. 8-13], but at Prairie's request, he agreed to stay on through the end of September to help with the transition, Welsh Decl. ¶ 20. Drefke's employment with Prairie officially ended around the same time, but he also agreed to stay on in an unofficial capacity. Dunn Decl. ¶¶ 11, 56; Drefke Decl. ¶ 7. Welsh told Prairie that he was going to work with a small trucking management company in South Dakota that would not compete with Prairie. Dunn ...