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Distributor Service v. Stevenson

United States District Court, S.D. Indiana, Indianapolis Division

April 24, 2014

DISTRIBUTOR SERVICE, INCORPORATED, Plaintiff,
v.
RUSTY J. STEVENSON and RUGBY IPD CORP., d/b/a RUGBY ARCHITECTURAL BUILDING PRODUCTS, Defendants

Page 965

For DISTRIBUTOR SERVICE, INCORPORATED, Plaintiff: Christopher N. Wahl, Keith J. Hays, HILL FULWIDER MCDOWELL FUNK & MATTHEWS, Indianapolis, IN; John J. Myers, PRO HAC VICE, ECKERT SEAMANS CHERIN & MELLOTT LLC, Pittsburgh, PA; William S. Myers, ECKERT SEAMANS CHERIN & MELLOTT, LLC, Pittsburgh, PA.

For RUSTY J. STEVENSON, RUGBY IPD CORP., doing business as, RUGBY ARCHITECTURAL BUILDING PRODUCTS, Defendants: Melissa K. Fuller, Michael W. Padgett, JACKSON LEWIS LLP, Indianapolis, IN.

OPINION

Page 966

ORDER

Hon. Jane Magnus-Stinson, United States District Judge.

Presently pending before the Court are: (1) a Motion for Partial Summary Judgment filed by Plaintiff Distributor Service, Incorporated (" DSI" ), [Filing No. 41]; and (2) a Cross-Motion for Partial Summary Judgment filed by Defendant Rusty J. Stevenson, [Filing No. 46].

I.

Standard of Review

A motion for summary judgment asks the Court to find that a trial is unnecessary because there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(a). As the current version of Rule 56 makes clear, whether a party asserts that a fact is undisputed or genuinely disputed, the party must support the asserted fact by citing to particular parts of the record, including depositions, documents, or affidavits. Fed.R.Civ.P. 56(c)(1)(A). A party can also support a fact by showing that the materials cited do not establish the absence or presence of a genuine dispute or that the adverse party cannot produce admissible evidence to support the fact. Fed.R.Civ.P. 56(c)(1)(B). Affidavits or declarations must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant is competent to testify on matters stated. Fed.R.Civ.P. 56(c)(4). Failure to properly support a fact in opposition to a movant's factual assertion can result in the movant's fact being considered undisputed, and potentially in the grant of summary judgment. Fed.R.Civ.P. 56(e).

On summary judgment, a party must show the Court what evidence it has that would convince a trier of fact to accept its version of the events. Johnson v. Cambridge Indus., 325 F.3d 892, 901 (7th Cir. 2003). The moving party is entitled to summary judgment if no reasonable fact-finder could return a verdict for the non-moving party. Nelson v. Miller, 570 F.3d 868, 875 (7th Cir. 2009). The Court views the record in the light most favorable to the non-moving party and draws all reasonable inferences in that party's favor. Darst v. Interstate Brands Corp., 512 F.3d 903, 907 (7th Cir. 2008). It cannot weigh evidence or make credibility determinations on summary judgment because those tasks are left to the fact-finder. O'Leary v. Accretive Health, Inc., 657 F.3d 625, 630 (7th Cir. 2011). The Court need only consider the cited materials, Fed.R.Civ.P. 56(c)(3), and the Seventh Circuit Court of Appeals has " repeatedly assured the district courts that they are not required to scour every inch of the record for evidence that is potentially relevant to the summary judgment motion before them," Johnson, 325 F.3d at 898. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party.

Page 967

Ponsetti v. GE Pension Plan, 614 F.3d 684, 691 (7th Cir. 2010).

The fact that cross-motions for summary judgment have been filed does not automatically mean that all questions of material fact have been resolved. Franklin v. City of Evanston, 384 F.3d 838, 842 (7th Cir. 2004). The Court must evaluate each motion independently, making all reasonable inferences in favor of the non-moving party with respect to each motion. Id. at 843.

II.

Background

The Court finds the following to be the undisputed facts, supported by admissible evidence in the record:

DSI is a seller and distributor of wholesale specialty building products to businesses in the Middle Atlantic and Midwest regions of the country. [Filing No. 41-1 at 1.] DSI has eight locations in Pennsylvania, Ohio, Indiana, Kentucky, and Michigan, and employs over one-hundred employees. [Filing No. 41-1 at 1.] Defendant Rugby IPD Corp., doing business as Rugby Architectural Building Products (" Rugby" ), is also in the business of selling and distributing wholesale specialty building products, does so throughout the United States including in Indiana, and is a direct competitor of DSI. [Filing No. 41-1 at 1.] Mr. Stevenson is a former employee of DSI, and is currently employed by Rugby. [Filing No. 41-1 at 1-2.]

A. DSI's Business

The specialty building products sold and distributed by DSI " are not finished products like those a consumer may buy off the shelf in a retail store, but are specialized materials that go into the products manufactured or built by DSI's customers. Some of the primary product categories DSI distributes in Indiana include plywood, melamine board, raw board core, wood finishes, and laminate." [Filing No. 41-1 at 2.] DSI's customers have " an in-depth knowledge of the products they need and very specialized requirements and specifications for the products they purchase." [Filing No. 41-1 at 2.] DSI maintains Customer Lists, which it claims are confidential and which it considers proprietary. [Filing No. 41-1 at 2.] DSI also has information it calls Customer Product Preferences, which include " unique specifications for the products DSI provides -- specifications that are specially suited to the manufacturing or building process of the particular customer and its ultimate products." [Filing No. 41-1 at 2.] DSI also claims its pricing is " highly customized from customer to customer for the same products and product categories, depending on a number of variables that are specific to each customer, and even variables unique to specific projects for each customer," which it refers to as Competitive Pricing. [ Filing No. 41-1 at 3.] DSI negotiates special vendor costs with the manufacturers it represents that are customized by product and " in many cases are unique to particular customers or even projects for particular customers," which it refers to as Competitive Cost Structure. [Filing No. 41-1 at 3.]

DSI's Customer Lists, Customer Product Preferences, Competitive Pricing, and Competitive Cost Structure " are the cornerstone of DSI's ability to compete effectively in the specialty building products industry in Indiana," and include " information that derives economic value from not being generally known to other persons who can obtain economic value from its disclosure or use." [Filing 41-1 at 4.]

B. Mr. Stevenson's Employment With DSI

DSI hired Mr. Stevenson in October 1999 when it opened an Indianapolis

Page 968

Branch, and " with the intention of training [him] to be a salesman and teaching him the specialty building products industry and business." [Filing No. 41-1 at 5.] When DSI hired Mr. Stevenson, he had no sales experience in the specialty building products industry or any related industry. [Filing No. 41-1 at 5.] During his employment, DSI " invested significant time and resources...in teaching [Mr.] Stevenson about the specialty building products industry, in general and in Indiana, and about DSI's specialty building products, DSI's Indiana customers, and the manufacturers represented by DSI in Indiana." [Filing No. 41-1 at 5.] Also during his employment, Mr. Stevenson had access to all of DSI's Customer Lists, Customer Product Preferences, Competitive Pricing, and Competitive Cost Structure for all customers of the Indianapolis Branch and for all manufacturers represented by DSI in the Indianapolis Branch. [Filing No. 41-1 at 4.]

In April 2005, DSI promoted Mr. Stevenson to Sales Manager for the Indianapolis Branch, where he was " a trusted and critical part of DSI's presence and public profile throughout the Indiana market." [Filing No. 41-1 at 5.] Mr. Stevenson was responsible for hundreds of customers in Indiana, and also managed the sales efforts of DSI's two other salesmen in the Indianapolis Branch. [Filing No. 41-1 at 5.]

In June 2009, Mr. Stevenson signed a Confidentiality and Non-Competition Agreement (the " Agreement" ) with DSI which contained, among other provisions, ones entitled " Non-Competition/Non-Solicitation" (the " Non-Compete Provision" and the " Non-Solicitation Provision" ), and " Non-Disclosure of Confidential Information" (the " Non-Disclosure Provision" ). [Filing No. 41-1 at 5-12.]

On August 2, 2013, Mr. Stevenson resigned from DSI, and advised that he was going to work for Rugby as the general manager in charge of Rugby's Indianapolis Branch. [Filing No. 41-1 at 6.] Following the announcement of his resignation, Mr. Stevenson told Dave Dascenzo, the General Sales Manager for DSI, that " he would be the top manager for Rugby's Indianapolis Branch and would have sales and sales management responsibilities for Rugby throughout Indiana." [Filing No. 41-1 at 6.]

C. The Lawsuit

On September 5, 2013, DSI initiated this lawsuit against Mr. Stevenson and Rugby, [Filing No. 1], and on September 11, 2013 it filed the operative Amended Verified Complaint for Injunctive Relief and Damages, [Filing No. 11]. DSI asserts claims for: (1) breach of the Non-Compete Provision, [Filing No. 11 at 9-10]; (2) breach of the Non-Solicitation Provision, [Filing No. 11 at 10-11]; (3) breach of the Non-Disclosure Provision, [Filing No. 11 at 11-12]; (4) recovery of attorneys' fees and expenses under the Agreement, [Filing No. 11 at 13]; (5) misappropriation of trade secrets, [Filing No. 11 at 13-15]; (6) breach of duty of loyalty, [Filing No. 11 at 15-16]; and (7) tortious interference, [Filing No. 11 at 16-17].[1] DSI seeks an injunction enjoining Mr. Stevenson and Rugby from " further conduct constituting breach of contract, misappropriation of the plaintiff's trade secrets, tortious interference

Page 969

with the plaintiff's contracts and other business relations; ...failing to return to DSI immediately all originals and copies of any materials that contain DSI's trade secrets and other confidential information; and...failing to take certain other actions to protect DSI's interests pending a hearing and litigation of the matter." [Filing No. 11 at 17.]

On November 7, 2013, DSI filed a Motion for Preliminary Injunction. [Filing No. 24.] After consultation with the Magistrate Judge, DSI withdrew the Motion for Preliminary Injunction and the parties agreed to file cross motions for partial summary judgment to " accommodat[e] the parties' agreement to seek a ruling on the enforceability of the restrictive covenants in [the Agreement]." [Filing No. 43 at 1.] Those cross motions for partial summary judgment, [Filing No. 41; Filing No. 46], are the motions currently pending before the Court, and relate only to the narrow issue of whether the Non-Compete ...


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