AMERICAN SEMICONDUCTOR., INC., an Idaho Corporation, Plaintiff-Appellant,
SAGE SILICON SOLUTIONS, LLC, an Idaho corporation; ZILOG, INC., a Delaware corporation; DAVID ROBERTS; GYLE YEARSLEY; and WILLIAM TIFFANY, Defendants-Respondents.
Opinion No. 40
from the District Court of the Fourth Judicial District of
the State of Idaho, in and for Ada County. Hon. Thomas F.
Neville, District Judge.
judgment of the district court is affirmed.
B. Andersen, Andersen, Schwartzman, Woodard, Brailsford,
PLLC, Boise, argued for appellant.
L. Cooper, Cooper & Larson Chartered, Pocatello, argued
for respondents Sage Silicon Solutions, LLC, David Roberts;
Gyle Yearsley, and William Tiffany.
Jo Rosholt, Moffatt Thomas, Boise, argued for respondent
an appeal out of Ada County from a judgment in an action
brought by American Semiconductor, Inc., to recover damages
arising out of Zilog, Inc., contracting with Sage Silicon
Solutions, LLC, to perform engineering services for it, where
that entity was formed by, and the services were provided by,
employees of American Semiconductor, Inc. American
Semiconductor, Inc., obtained a jury verdict awarding damages
against the engineers and the entity they had formed, but it
did not recover against Zilog, Inc. American Semiconductor,
Inc., appeals, challenging the dismissal of one of its claims
against Zilog, Inc., and seeking a new trial on damages
against the engineers and their entity. We affirm the
judgment of the district court.
Roberts, Gyle Yearsley, William Tiffany, Russell Lloyd, and
Evelyn Perryman were all engineers who worked for Zilog, Inc.
("Zilog"), at its facility in Meridian, Idaho, and
they constituted the design team at that facility. They were
all laid off in 2009 as part of a reduction in force and were
later hired by American Semiconductor, Inc. ("American
Semiconductor" or "ASI"). This layoff left
only two design engineers employed by Zilog, both of whom
were in California.
Roberts had been the design engineering manager when they
were employed by Zilog, and he had been hired by David Staab,
one of Zilog's two remaining design engineers. On October
21, 2009, Mr. Roberts e-mailed Mr. Staab to inform him that
he and Messrs. Yearsley, Tiffany, and Lloyd had formed Sage
Silicon Solutions to perform design work and that they would
like to make a quote if Zilog had any design work. On January
28, 2010, Messrs. Roberts, Yearsley, Tiffany, and Lloyd and
Ms. Perryman formed Sage Silicon Solutions, LLC
("Sage"), to provide those engineering services.
2009, Zilog began looking into the development of a
microcontroller. By the end of 2010, the project was defined
as developing a low-power microcontroller by enhancing an
existing processor core that had been developed by Mr.
Yearsley when he had been employed by Zilog. Mr. Staab was
lead for that project. He contacted Mr. Roberts, and on
February 15, 2011, Zilog entered into a contract with Sage to
provide services in designing the microcontroller.
September 23, 2011, American Semiconductor learned that the
engineers were working on the project for Zilog, and it made
a demand to Zilog that it cease using the engineers. Zilog
ceased doing so around September 25, 2011, and two days later
American Semiconductor terminated its relationship with all
of the engineers except Mr. Lloyd. Zilog completed the
project using its resources and engineering resources from
its sister company.
December 2, 2011, American Semiconductor filed this action
against the five engineers, Sage, and Zilog. It alleged two
claims for damages against only the engineers, six claims for
damages against the engineers and Sage, and claims for
declaratory and injunctive relief against all Defendants.
Sage and the engineers filed a four-count counterclaim. On
July 2, 2013, American Semiconductor filed a second amended
complaint dropping Mr. Lloyd and Ms. Perryman as named
defendants and adding claims against Zilog for intentional
interference with economic expectancy, for intentional
interference with contract, for violation of the Idaho Trade
Secrets Act, and for unjust enrichment.
time of trial, American Semiconductor had two claims against
Zilog: intentional interference with a contract and
intentional interference with an economic expectancy. The
district court dismissed the second claim after the close of
the evidence, and the jury found no liability on the first
time of trial, American Semiconductor had two claims that
were only against Messrs. Roberts, Yearsley, and Tiffany:
breach of their contractual duty not to compete with American
Semiconductor and breach of their fiduciary duty to American
Semiconductor. The jury found them liable on both of those
claims, but did not award damages on those claims. American
Semiconductor also had a claim of intentional interference
with its economic expectancy of contracting with Zilog that
was asserted against the three engineers and Sage, and the
jury found all four of them liable on that claim and awarded
damages in the sum of $195, 175. Two of the counterclaims
filed by Sage and the engineers were submitted to the jury.
The jury found that American Semiconductor intentionally
interfered with Sage's contract with Zilog, but awarded
no damages, and it found no liability on the remaining
district court awarded Zilog court costs and attorney fees
and as between American Semiconductor and the Sage
defendants, it determined that there was no prevailing party
in the litigation. American Semiconductor then timely
the District Court Err in Granting a Directed Verdict
Dismissing the Claim Against Zilog of Intentional
Interference with an Economic Expectancy?
The elements for a claim of intentional interference with an
economic expectancy are:
(1) The existence of a valid economic expectancy; (2)
knowledge of the expectancy on the part of the interferer;
(3) intentional interference inducing termination of the
expectancy; (4) the interference was wrongful by some measure
beyond the fact of the interference itself (i.e. that the
defendant interfered for an improper purpose or improper
means) and (5) resulting damage to the plaintiff whose
expectancy has been disrupted.
Highland Enterprises, Inc. v. Barker, 133 Idaho 330,
338, 986 P.2d 996, 1004 (1999). The knowledge
requirement may be satisfied by proving either actual
knowledge or knowledge of facts that would cause a reasonable
person to believe that the economic expectancy exists.
Wesco Autobody Supply, Inc. v. Ernest, 149 Idaho
881, 894, 243 P.3d 1069, 1082 (2010). The wrongful
requirement may be established by proving either: "(1)
the defendant had an improper objective or purpose to harm
the plaintiff; or (2) the defendant used a wrongful means to
cause injury to the prospective business relationship."
Idaho First Nat'l Bank v. Bliss Valley Foods,
Inc., 121 Idaho 266, 286, 824 P.2d 841, 861 (1991).
However, Zilog could not interfere with American
Semiconductor's expectancy of contracting with Zilog.
Cantwell v. City of Boise, 146 Idaho 127, 138, 191
P.3d 205, 216 (2008). The interferer would have to be a third
party to the expected economic relationship. Id.
second amended complaint, American Semiconductor alleged that
"by soliciting or accepting services from the
Individuals [engineers] and Sage, Zilog tortiously interfered
with American Semiconductor's prospective economic
advantage, including depriving American Semiconductor of the
opportunities to earn income from the Individuals' design
services." The word Individuals was defined to
mean Messrs. Roberts, Yearsley, Tiffany, and Lloyd and Ms.
Perryman. In its brief opposing Zilog's motion for
summary judgment, American Semiconductor explained:
ASI's tortious interference with prospective economic
advantage claim concerns the economic expectancy ASI had for
Roberts, Yearsley, Tiffany, Lloyd, and Perryman's
continued employment and loyalty and, as such,
is not based upon ASI's prospective relationship with
Zilog. Therefore, Zilog cannot defeat ASI's tortious
interference claim by attempting to characterize itself as a
party to the subject economic relationship.
though American Semiconductor asserted that the alleged
interference was "not based upon ASI's prospective
relationship with Zilog, " that was the only evidence of
damages offered by American Semiconductor at trial. Its
expert testified that he was asked to determine "what
ASI has suffered if the jury determines that they would have
otherwise gotten the project that's at issue in this
case." He calculated that had Zilog contracted with
American Semiconductor, it would have received $1, 182, 488
in revenues and that the loss of that contract resulted in
damages from lost profits totaling $1, 025, 088. The total
lost profits included $547, 670 that would have been charged
for computer-aided-design software ("tools") that
American Semiconductor already had the right to use under the
license with its vendor. The expert's calculations were
based upon what American Semiconductor would have charged to
perform all of the work necessary for the project from the
beginning through completion of the design of the chip, using
the tools that American Semiconductor was licensed to use
from its vendor. Much of that work was in addition to the
work that Zilog had contracted with Sage to perform. The
expert testified that the additional work would have produced
$740, 182 in revenues for American Semiconductor and that the
loss of that work caused American Semiconductor $582, 782 in
Semiconductor completed its case in chief during the eighth
day of trial, and Zilog moved for a directed verdict. With
respect to the claim of intentional interference with a
prospective economic advantage, Zilog argued that the
economic expectancy had to be with a third party other than
Zilog and that the only evidence of an economic expectancy
presented during the trial was with Zilog. In response,
American Semiconductor stated that "the expectancy, and
the relationships at issue are ASI's relationships with
its own employees, " and it argued the evidence showed
that Zilog knew that the engineers were employed by American
Semiconductor and that Zilog intentionally interfered with
that relationship. Zilog then argued that the evidence showed
that it would not have contracted with American Semiconductor
because it would have cost too much to do so. American
Semiconductor responded to that argument by stating that
Zilog hired the engineers through Sage rather than through
American Semiconductor. The district court denied the motion,
based upon its understanding that "ASI is alleging that
Zilog interfered with ASI's economic expectancy with-with
parties rested during the ninth day of trial, and the
following day the court held a jury instruction conference.
During that conference, American Semiconductor explained that
it was not contending that the economic expectancy was
contracting with Zilog. It stated that the expectancy was the
future economic benefits that American Semiconductor would
receive based upon its relationships with the engineers.
After that explanation, Zilog responded by pointing out that
American Semiconductor did not present any evidence of
damages other than interference with the expectancy of
contracting with Zilog. The district court then stated that
it would reconsider its denial of the motion for a directed
verdict and grant it because there was no evidence to support
the claim as characterized by American Semiconductor.
time of the trial, American Semiconductor had two remaining
claims against Zilog: intentional interference with a
contract and intentional interference with an economic
expectancy. The district had proposed a special verdict form,
with Question No. 6 dealing with interference with an
economic expectancy and Question No. 8 dealing with
interference with a contract.
discussion of those two proposed questions began with Mr.
Zarian, counsel for American Semiconductor, asking to discuss
Question No. 6, and explaining that the economic expectancy
was not contracting with Zilog. It was the future benefits
that would come to American Semiconductor from it
relationships with the engineers. The dialogue was as
MR. ZARIAN: And may I speak to, then, to Question 6?
THE COURT: Question No. 6 in the Special Verdict?
MR. ZARIAN: Yes, Your Honor.
So, ASI is not-not-not arguing that Zilog interfered with
its-its own relationship that was part of an expectancy.
The-the claim has been, consistently throughout, that
the-the expectancy in the case, with respect to this
claim against Zilog, is with ASI's employees and the
future benefits that would come from-from those
relationships with its own employees, in particular the
individual defendants. But that-that's been the claim
throughout, Your Honor.
. . . .
THE COURT: Okay. Your problem is with Question 6?
MR. ZARIAN: Yes, Your Honor.
THE COURT: And the question is: Did Zilog intentionally
interfere with American Semiconductor's economic
expectancy of contracting with Zilog? You're saying
that's not the question?
MR. ZARIAN: No, Your Honor - that's right, Your Honor.
The-the way we defined that claim is-is expectancy of
future pecuniary gain from its relationships with its
employees, separate and apart, distinct from the
Employee Confidentiality Agreement, which is the subject of
. . . .
MR. ZARIAN: Well, our-our claim, with respect to the
economic expectancy of contracting with Zilog, is against
Sage and the individual defendants, Your Honor.
district court sought further clarification. It apparently
thought that if the economic expectancy with respect to
contracting with Zilog was only against Sage and the
engineers, then American Semiconductor's claim against
Zilog must only be its claim of intentional interference with
contract. Mr. Zarian again explained that it had two claims
against Zilog, but the interference with economic expectancy
claim against Zilog was interfering with "an economic
expectancy in the future benefit of the relationships with
our employees." The dialogue was as follows:
THE COURT: So, you're saying 6-
MR. ZARIAN: So-
THE COURT: -you-you're-you only have one claim against
MR. ZARIAN: We have two at the moment, Your Honor. But-but I
think, perhaps, the question we're discussing together
here is 4, Question 4, which is, indeed, an economic
expectancy of contracting with Zilog, but-but that's a
claim against the Sage defendants.
And so, the claim against Zilog is-is-has always
been, Your Honor-I mean, the way we've articulated
it, is an economic expectancy in the future benefit of
the relationships with our employees.
district court expressed surprise as to this characterization
of the economic expectancy claim against Zilog. The proposed
jury instructions submitted by American Semiconductor
regarding that claim did not identify the economic expectancy
at issue. The court stated that it had received two versions
of the special verdict form, and both of them had asked
whether Zilog had intentionally interfered with American
Semiconductor's economic expectancy of contracting with
Zilog. Mr. Zarian explained that it had sent over a special
verdict form that deleted the reference to Zilog and that the
economic expectancy was, as alleged in its second amended
complaint, "depriving ASI of the opportunities to earn
income from the individuals' design services." The
dialogue was as follows:
THE COURT: Did-did Zilog intentionally interfere with
American Semiconductor's economic expectancy of
contracting with Zilog?
We-we had-I've seen two versions of this proposed Special
Verdict Form, and I haven't had-and this has been in both
of them, and I haven't-I haven't heard this until
MR. ZARIAN: The comments we sent that deleted, Your Honor,
did make that change; the-the ones that Mr. Luvai sent.
But, Your Honor, paragraph 90 of our Second Amended
Complaint, which is the operative complaint, I-I think we do
articulate the theory we've adhered to throughout, you
know, summary judgment briefing and-and other briefing in
And-and it reads, Your Honor, that-that Zilog tortiously
interfered with ASI's prospective economic advantage,
including depriving ASI of the opportunities to earn income
from the individuals' design services.
MS. ROSHOLT: For Zilog.
MR. ZARIAN: No. It doesn't say that; it just says