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Wesco Autobody Supply, Inc. v. Ernest

November 24, 2010

WESCO AUTOBODY SUPPLY, INC., A WASHINGTON CORPORATION, PLAINTIFF-APPELLANT-CROSS RESPONDENT,
v.
HOLLY ERNEST, INDIVIDUALLY; PAINT AND SPRAY SUPPLY, INC., AN IDAHO CORPORATION; AUTOMOTIVE PAINT WAREHOUSE, A UTAH CORPORATION; HUGH BARKDULL, INDIVIDUALLY; BRADY BARKDULL, INDIVIDUALLY; AND MIKE COOK, INDIVIDUALLY, DEFENDANTS-RESPONDENTS-CROSS APPELLANTS.



Appeal from the District Court of the Sixth Judicial District, State of Idaho, Bannock County. Hon. Don L. Harding, District Judge.

The opinion of the court was delivered by: Burdick, Justice

2010 Opinion No. 111

SUBSTITUTE OPINION. THE COURT'S PREVIOUS OPINION FILED JULY 28, 2010 IS HEREBY WITHDRAWN.

District court order granting partial summary judgment, affirmed in part and remanded for further proceedings.

This case arises out of the purchase by Appellant Wesco Autobody Supply, Inc. (Wesco) of three auto body supply stores from Paint & Equipment Supply, Inc. (P&E) on August 1, 2005. The stores were located in Idaho Falls, Pocatello, and Twin Falls, Idaho (Idaho Stores). Respondents Holly Ernest (Ernest) and Tom Davis (Davis) were owners of Automotive Paint Warehouse (APW), a wholesale supplier to the three stores, and Paint & Spray Supply, Inc. (P&S), an Idaho corporation that owned supply stores in the Boise area. Respondents Brady Barkdull (Brady), Hugh Barkdull (Hugh), and Mike Cook (Cook) were employees in the Idaho Stores at the time of Wesco's purchase. (Ernest, Davis, Brady, Hugh, and Cook are collectively referred to as ―Respondents‖). On August 19, 2005, the majority of Wesco employees from the Idaho Stores quit and began working for P&S. Wesco commenced this suit against Ernest, Davis, P&S, APW, and the departing employees (collectively ―Defendants‖).

Wesco raises the following issues on appeal: (1) whether the district court erred in granting summary judgment; (2) whether the district court erred in holding as a matter of law that Ernest, Davis, P&S, and APW are not liable for tortious interference with Wesco's employment and customer contracts and prospective business advantage; (3) whether the district court erred in narrowing the acts as a matter of law for which Brady is potentially liable; and (4) whether the district court erred by finding as a matter of law that Defendants are not liable for civil conspiracy. On cross-appeal, Respondents raise the issue of whether the district court erred in failing to grant Defendants' renewed motion for summary judgment. We affirm, in part, and remand for further proceedings.

I. FACTUAL AND PROCEDURAL BACKGROUND

Wesco is a Washington corporation that owns stores in Washington, Oregon, and Idaho. On August 1, 2005, Wesco purchased the Idaho Stores from P&E for $2.2 million. Of that purchase price, $996,000 was allocated to the purchase of the goodwill associated with the Idaho Stores. Defendants Jeffrey Peck, Travis Dayley, Joel Johnston, Chantil Dobbs, David Cristobal, Ryan Nesmith, Jodee Reid, Curtis Stairs, Tiffany Thomsen, Hugh Barkdull, Brady Barkdull, Michael Cook, Shelby Thompson, Jenny Hancock, and Kelly McClure were all employed by P&E at the time of the purchase.

When Wesco purchased the Idaho Stores, Brady was the regional sales manager for the Idaho Stores; Hugh was the manager of outside sales; Cook was the manager of the Pocatello store; Hancock was the manager of the Idaho Falls store; Dayley was the manager of the Twin Falls store along with handling some outside sales; and Peck was the manager of outside sales at the Twin Falls store.

Ernest and Davis are the owners of APW and P&S. When Wesco purchased the Idaho Stores from P&E, APW was the wholesale paint supplier to P&E. Wesco alleged that, prior to Wesco's purchase of P&E, Ernest and Davis informed Roger Howe, a Wesco owner, that they knew P&E's employees very well, had a better relationship with them than P&E's owner, and if P&E did not work something out with them, they would take the business from P&E's owner. Howe's testimony was as follows:

Q: And what was the nature of that conversation?

A: Just essentially that they were, you know, interested in the three stores down there and if anything ever become of it, you know, they'd like to do something with the stores down there and that sort of thing.

Q: Anything else you recall about that conversation today?

A: Yeah, that they had a better handle of David's [P&E's owner] business. They knew his employees real well, and they had a better relationship with them than David did and that-you know, I mean, if they couldn't work something out with David, they'd just go take it away from him.

Q: Is that a quote, or is that just your recollection today?

A: That's my reco-it's not an exact quote, but it's a pretty-pretty fair statement of what I recall.

After the purchase of P&E, on August 8 and 9, 2005, Brady traveled to Seattle, Washington for an orientation meeting with Wesco. There, he learned that Wesco would no longer purchase APW paint at the Idaho Stores. Instead, Wesco would be supplying the Idaho Stores from Wesco's Washington warehouses. On or about August 10, 2005,*fn1 Brady met with Ernest and Davis. While Brady stated at his deposition that Ernest told Brady he was opening stores in Idaho and asked if he would be interested in accepting a position, Ernest stated in his deposition that he did not offer Brady a job until August 13 and that Brady informed him at the August 10 meeting that APW was going to lose its account with P&E/Wesco. Davis stated that he believed they did offer Brady a job at the August 10 meeting. It is not disputed that Ernest and Davis decided at some time prior to August 19, 2005, to open stores that would compete with Wesco's newly acquired Idaho Stores.

On August 13, 2005, Brady met with Ernest to look at potential store sites in Pocatello. Ernest stated that he took Brady along to try to convince Brady to come work for P&S. Brady told Ernest that if the other employees went he would probably go also, but Ernest said Brady did not offer to solicit any of the employees. Brady did make calls to High Desert Realty on August 17 and 19, 2005, to assist P&S in locating a retail location. Brady also admitted that he placed calls on August 16, 2005, inquiring about obtaining business licenses for P&S. Between August 10 and August 19, 2005, Brady and Ernest exchanged 64 telephone calls.

On August 17, 2005, Ernest met with Cook and Hancock to offer them jobs working for P&S. Brady was present at the meeting with Hancock. On the same date, Howe and Mark Mortensen, a Wesco employee, met in Pocatello with Brady, Hugh, and Cook to discuss rumors that employees were leaving to work for a competitor. All three denied the rumors, according to Howe.

The next day, on August 18, 2005, Ernest met with Dayley, Cristobal, and Johnston to offer them jobs at P&S. Brady stated that he discussed the resignations with Peck and Dayley. Hancock also spoke with Thompson and McClure about their decisions to work for P&S. Hancock stated that Brady told her they would all be quitting on Friday afternoon.

On August 19, 2005, the employees submitted their resignations to Wesco at the end of the day. The resignation letters contained nearly identical language.*fn2 Hancock prepared the letter for the Idaho Falls office. Cook prepared the letter for the Pocatello office and told others they could use it if they wanted to. Cook pointed Dayley to a website that he could use to draft a resignation letter, and Dayley was asked by the other Twin Falls employees to draft letters for them as well.

When Cristobal and Johnston left their employment with Wesco, they took two interior paint books with them (Cristobal returned one of the paint books). Johnston testified that the ―SEM book‖ has color information for matching up interior dyes and that the book he took was one he had requested from the SEM representative for himself. Johnston also stated that he took the business cards that customers and businesses had given him over his years at P&E. Cook admitted that he deleted his work folder, two personal programs he had brought in (Adobe Photo Shop and Microsoft Office), customer phone lists that had been saved in Microsoft Excel, letters to customers that had been saved in Microsoft Word, and his music folder. Wesco hired Wes Goodwin, from a data services company, to search a hard drive for evidence of inappropriate usage by the former employees. Goodwin concluded that there was a significant indication of deleted and damaged files that appeared to be associated with Wesco operations as well as the computer operating system, and that the files were not deleted during the normal course of the computer operation.

At some point letters were sent to customers from some of the former employees regarding P&S's new business and its locations. The letters were undated but stated that ―[e]ffective August 19, 2005.‖ the employees had terminated employment with P&E and would be joining P&S as of August 22, 2005. A letter dated August 16, 2005, was also sent to customers from P&S and included Brady as one of its ―people.‖

Wesco alleged that the employees continued to use their Wesco cell phones and cell numbers and, as late as August 25, 2005, some of the employees' phones still gave an introduction with the P&E name. Wesco also alleged that the employees continued to wear P&E shirts at the new stores. Dayley stated that he told some customers about the lawsuit with Wesco, but did not make any other representations about Wesco outside of that. Peck also stated that on August 20, 2005, he contacted customer ―Marky's Autobody‖ to tell it he would be working for P&S.

Former Wesco employees Curtis Stairs, Tiffany Thomsen, David Cristobal, Chantil Dobbs, Travis Dayley, Jeffrey Peck, Joel Johnston, Kelly McClure, Shelby Thompson, Jenny Hancock, Brady Barkdull, Hugh Barkdull, Michael Cook, and Jodee Reid filed affidavits in March 2006, that were substantially similar to the following:

1. That I have personal knowledge of the facts stated herein.

2. That prior to August 19, 2005 I was an employee of Wesco Autobody Supply, Inc., dba Paint and Equipment Supply in Pocatello[, Twin Falls, Idaho Falls], Idaho. I had become an employee of Wesco when Paint and Equipment Supply, Inc. had been purchased by Wesco on or about August 1, 2005.

3. That as an employee of Wesco I had not entered into any employment contract which limited the time I was to work for them, when or under what circumstances I could leave, who I could go to work for, or what information I could share with a new employer. I was specifically designated by Wesco as an ―at will‖ employee.

4. That I terminated my employment with Wesco on or about August 19, 2005 and went to work for Paint and Spray Supply, Inc. on or about August 22, 2005.

5. When I left my employment with Wesco, I took with me only my personal belongings. I specifically did not take any employee lists, customer lists, customer information (such as custom paint formulas), or any other business information or documents belonging to Wesco. I did not download or forward by computer any such information of any kind. I did not remove any computer or delete or corrupt any computer files of any kind.

6. Since going to work for Paint and Spray Supply, Inc. I have not said anything of a disparaging nature about Wesco to any former or current Wesco customer, I have not told any former or current Wesco customer that they did not have to comply with any contracts they may have with Wesco, and I have not interfered with any relationship Wesco may have or may have had with any current or former customer other than to compete for the business that customer may have for automobile paint and related supplies offered for sale by Paint and Supply.

Dayley's affidavit differed in that it added a declaration ―[t]hat Ryan Nesmith terminated his employment with Wesco prior to August 19, 2005, does not and has never worked for Paint and Spray Supply and had nothing to do with any opening of Paint & Spray Supply stores.‖ McClure's affidavit stated that McClure terminated employment with Wesco on or about August 20, 2005. Thompson's affidavit stated that she terminated her employment with Wesco on or about August 29, 2005, and went to work for P&S on or about August 30, 2005. Cook's affidavit also stated:

I did delete a personal work folder and two computer programs that were my personal programs (Microsoft Office and Adobe) and that I had loaded on one of the Wesco computers to assist me with my personal work and for personal matters. This included the deletion of my personal customer telephone list. All other customer information remained on the computer, including location, telephone number, sales information, etc.

The affidavit of Ernest read as follows:

1. I am one of the owners of Automotive Paint Warehouse (APW), a Utah corporation, and also of Paint and Spray Supply, Inc. (P&S), which is a separate corporation from APW. Individually, and in the capacities mentioned above, I have personal knowledge of the facts stated herein.

2. P&S is an Idaho corporation that has been in good standing since about 1972 and has been selling automotive paint and supply products in Idaho during that time. APW and P&S have an agreement with BASF to sell BASF products in Idaho and APW charges P&S the same price for its products as it charged Wesco and P&E prior to the time P&S opened its stores in August 2005. APW is a wholesaler in Idaho and does not compete with Wesco for retail business.

3. I had telephone and personal contacts with some of the employees of Wesco Autobody Supply, Inc. (Wesco), on or after August 10, 2005, for the purpose of attempting to hire some individuals to go to work in stores that were being opened in Pocatello, Twin Falls, and Idaho Falls, Idaho by P&S. Any such contacts were made on behalf of and in my capacity as an owner of P&S and were not made in a personal capacity or as an owner of APW.

4. On or after August 22, 2005, P&S opened automotive paint and supply stores in Pocatello, Twin Falls, and Idaho Falls, Idaho. Those stores are wholly owned and operated by P&S and have nothing to do with APW, other than as a customer of APW.

5. At no time have I, personally or as an owner of P&S, nor has P&S had any intent or desire to drive Wesco out of business, but the sole desire has been to legitimately compete in the business of selling automotive paint and supplies to potential customers in the markets served by the P&S stores in Idaho, as was the case prior to Wesco's purchase of P&E.

Wesco brought this action against its former employees and Ernest, Davis, P&S, and APW, asserting nine theories of liability and seeking a temporary restraining order:*fn3 (1) interference with prospective economic advantage; (2) breach of contract/breach of duties; (3) interference with contract as to Ernest, Davis, P&S, and APW; (4) interference with contract as to all Defendants; (5) unfair competition; (6) restraint of commerce in contravention of the Idaho Competition Act; (7) computer fraud in contravention of 18 U.S.C. § 1030; (8) misappropriation of trade secrets in contravention of the Idaho Trade Secrets Act; and (9) civil conspiracy. In its First Amended Complaint,*fn4 Wesco added a claim for conversion against all Defendants. The district court's Decision Re: Summary Judgment, entered on September 7, 2006, decided the claims raised by Wesco as follows:

(1) Count One: Interference with Prospective Economic Advantage (All Defendants)

(a) Dismissed except as to employees Dayley, Johnston, Brady, Cook, and Hancock

(2) Count Two: Breach of Contract/Breach of Duties (Employees)

(b) Fiduciary Duty-Dismissed except as to Dayley, Johnston, Brady, Cook, and Hancock

(3) Count Three: Interference with Contract*fn5 (Ernest, Davis, P&S and Automotive)

(a) Dismissed as to all

(4) Count Four: Interference with Contract*fn6 (All Defendants)

(a) Dismissed as to all

(5) Count Five: Unfair Competition (All ...


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