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Flsmidth Spokane, Inc. v. Emerson

United States District Court, D. Idaho

June 16, 2014

FLSMIDTH SPOKANE, INC., Plaintiff,
v.
ANDREW EMERSON, et al., Defendants.

MEMORANDUM DECISION AND ORDER

EDWARD J. LODGE, District Judge.

This matter is before the Court on a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by Defendants Andrew Emerson and Material Handling Solutions, LLC (collectively referred to hereinafter as "Defendants") (Dkt. 6). The parties have filed responsive briefing and the matter is ripe for the Court's consideration. Having fully reviewed the record herein, the Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, in the interest of avoiding further delay, and because the Court conclusively finds that the decisional process would not be significantly aided by oral argument, this motion shall be decided on the record before this Court without oral argument.

BACKGROUND[1]

Plaintiff FLSmidth Spokane Inc., also d/b/a FLSmidth Material Handling-North America ("FLS") is a worldwide project-based engineering company supplying material handling and other equipment, systems and services to the global cement and minerals industries. On or about February 25, 2009, FLS entered into a Stock and Membership Interest Acquisition Agreement ("Acquisition Agreement") with a competitor, Conveyor Engineering, Inc. ("CEI"), Defendant Andrew Emerson ("Emerson"), a shareholder of CEI, and another shareholder of CEI, Roberto Maraboli ("Maraboli"). FLS acquired CEI and all of Emerson and Maraboli's interest in the goodwill of CEI under the Acquisition Agreement. Pursuant to Section 5.03 of the Acquisition Agreement, Emerson agreed to:

[t]reat and hold as confidential (and not disclose or provide access to any Person to) all information relating to Trade Secrets, processes, Patent and Trademark applications, product development, price, customer and supplier lists, pricing and marketing plans, policies and strategies, details of client and consultant contracts, operations methods, product development techniques, business acquisition plans, new personnel acquisition plans and all other confidential information with respect to the Business...and the Acquired Companies[.]

(Dkt. 1, ¶ 4.5.)

In consideration for the purchase of his shares in CEI, Emerson also entered into a separate Confidentiality and Non-Competition Agreement ("Confidentiality Agreement") and a separate three-year written Employment Agreement ("Employment Agreement") with FLS. On or about March 3, 2009, in accordance with the provisions of the Employment Agreement, Emerson became employed as President of CEI, which was then owned by FLS pursuant to the terms of the Acquisition Agreement. CEI ultimately changed its name to FLSmidth Conveyor Engineering, Inc., and later to FLSmidth Boise, Inc. Concurrently with the name change, Emerson became President and CEO of FLSmidth Boise, Inc., which later merged into Plaintiff FLS.

Pursuant to Section 7 of the Employment Agreement, Emerson agreed that during the term of the Employment Agreement, and indefinitely thereafter, he would preserve as confidential and would not use or disclose to any person not employed by FLS or its Affiliates, any trade secret, proprietary or other confidential information.[2] In Section 8 of the Employment Agreement, Emerson also agreed to the following covenants:

(a) During the term of the Employment Agreement and for two years thereafter, Emerson shall not directly or indirectly on his own behalf or on behalf of any other person, engage, employ or solicit or seek to contract with, employ or solicit the services of any sales representative, dealer, distributor or employee of FLS or any affiliate.
(b) During the term of the Employment Agreement and for two years thereafter, Emerson shall not directly or indirectly work for or with or enter into, or remain in the service or employ (whether as principal, employee, director, consultant or in any other capacity) of any person, or engage or have a direct or indirect financial interest in any business or activity which competes with FLS or its affiliates.
( Id., ¶ 4.14.)

Further, under the terms of the Confidentiality Agreement, Emerson agreed "not to use either the name of CEI, FLS or an Affiliate of either or any name similar thereto, in connection with his own or any other name or business in any way calculated to suggest that Emerson is (or has been) connected with FLS or CEI, nor in any way hold himself out in business solicitations as having had any such connection." ( Id., ¶ 4.18.) FLS paid Emerson "millions of dollars" in exchange for his agreement with such provisions. (Dkt. 12, p. 9.)

After Emerson's employment with FLS ended on April 9, 2013, FLS alleges Emerson participated in the formation of, and is employed by and has ownership interest in, Defendant Material Handling Solutions ("MHS"). FLS claims MHS directly competes with FLS in Idaho, Chile, and perhaps in other worldwide locations. FLS also alleges that Emerson has actively and expressly held himself out on a worldwide basis on MHS' website as both former general manager of CEI and former employee of FLS, and as having experience with both companies that allows him to tackle projects around the world and to obtain better terms and prices of supplies in the United States on behalf of MHS clients.

In addition, FLS claims Emerson has directly or indirectly solicited former FLS employee Jeremy Holland to assist in the formation of, and to work for, MHS. Further, FLS alleges that while employed at CEI and FLS, and by virtue of his position as President and CEO, Emerson was exposed to all of FLS' confidential and proprietary information and trade secrets. FLS alleges Emerson is using or will inevitably use FLS' confidential and trade secret information to directly compete with FLS on behalf of MHS.

FLS filed the instant suit against Defendants on November 14, 2013. FLS' complaint alleges claims for breach of contract and breach of the implied covenant of good faith and fair dealing, violation of Idaho's Trade Secret Act, and Tortious Interference. Defendants now move to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons set forth below, the motion will be GRANTED in part and DENIED in part.

STANDARD OF REVIEW

A complaint may be dismissed under Rule 12(b)(6) for failure to state a claim upon which relief may be granted for one of two reasons: (1) lack of a cognizable legal theory; or (2) insufficient facts under a cognizable legal claim . Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). To sufficiently state a claim to relief and survive a 12(b)(6) motion, the pleading "does not need detailed factual allegations, " however, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action will not do." Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Rather, there must be "enough facts to state a claim to relief that is plausible on its face." Id. at 570. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 556. The plausibility standard is not akin to a "probability requirement, " but does require more than a sheer possibility that a defendant acted unlawfully. Id.

In Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), the Supreme Court identified two "working principals" that underlie Twombly. First, although a court must accept as true all factual allegations in a complaint when ruling on a motion to dismiss, the court need not accept legal conclusions as true. Id. "Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Id. at 678-79. Second, only a complaint that states a plausible claim for relief will survive a motion to dismiss. Id. at 679. "Determining whether a ...


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