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Badger Daylighting Corp. v. Palmer

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

September 20, 2019

GARY PALMER, Defendant. GARY PALMER, Counter Claimant,



         This cause is before the Court on Plaintiff Badger Daylighting Corporation’s (“Badger”) Motion for Preliminary Injunction [Dkt. 22] filed on June 3, 2019. With that motion, Badger seeks an order enjoining Defendant Gary Palmer from using Badger’s confidential information and trade secrets; soliciting Badger’s customers and employees; continuing his employment with SEC and HydroX; destroying, altering, removing, modifying, deleting, or disposing of any documents; and otherwise unfairly competing with Badger [Dkt. 22, Dkt. 68]. This matter came before the Court for oral argument on September 6, 2019.

         For the reasons detailed in this entry, Plaintiff’s motion is GRANTED in part and DENIED in part.

         Factual Background

         I. The Parties

         Badger is a Canadian corporation with its principal place of business in Alberta, Canada [Dkt. 1-2, at 2; Dkt. 63, at 1]. Badger purports to be the industry leader in nondestructive hydro-excavation (“hydrovac”) services [Dkt 1-2, at 1]. Its workforce numbers approximately 2300 employees and it conducts operations in 42 states and Canada [Dkt 1-2, at 1; Dkt 63, at 1]. Mr. Palmer is a United States citizen residing in Henry County, Georgia [Id.]. Mr. Palmer was employed with Badger for nearly seven years from July 26, 2012 through April 8, 2019 [Dkt. 63, at 1-2; Dkt. 68, at 3-4, 8]. He served as a Regional Manager from December 20, 2013 until his resignation, when he began employment with Southeast Connections, LLC (“SEC”) as President of SEC’s hydrovac services business line [Id.].

         SEC, a subsidiary of PowerTeams Services (“PowerTeams”), is a general contractor that performs utility infrastructure services, including hydrovac services, in many of the same locations as Badger [Dkt. 63, 2-3; at Dkt. 68, at 9]. Shortly after Mr. Palmer began his employment with SEC, SEC spun off its hydrovac business line into a new entity, Hydro Excavators, LLC (“HydroX”), which Mr. Palmer now oversees [Id.]. Neither SEC nor any of its related entities is a party to this litigation.

         II. Mr. Palmer’s Employment with Badger

         Mr. Palmer was first hired by Badger as a Field Supervisor in July 2012 [Dkt. 68, at 3]. Prior to this employment, he had never heard of hydrovacing [Id.]. Mr. Palmer quickly rose up the ranks at Badger, receiving three promotions in less than a year and a half [Id. at 3-4; Dkt. 63, at 1]. On December 20, 2013, Mr. Palmer was promoted to Regional Manager for the Southeast Region, whose duties included: managing and growing significant customer accounts; identifying opportunities for his sales team; maximizing his team’s performance on sales targets; teaching Area Managers how to identify opportunities and grow the business; developing and executing sales strategies; and forecasting, managing, and reporting sales activity [[Dkt. 68, at 4-5]. He also had management and recruitment responsibilities [Id.]. In his roles at Badger, particularly as Regional Manager, Mr. Palmer had extensive access to Badger’s confidential business data and information, which generally was provided to employees only on a need-to-know basis [Id. at 6].

         Upon promotion to the Regional Manager position, Mr. Palmer signed the non-compete, non-solicitation, and confidentiality agreement currently in dispute before the Court (the “Agreement”) [Id. at 5; Dkt. 63, at 4]. The confidentiality provision of the Agreement prohibits the disclosure and use of confidential information and defines “confidential information” as:

Information which has been created, discovered, developed by or otherwise become known to [Badger] . . . which information has commercial value to [Badger], including but not limited to trade secrets, innovations, equipment designs, processes, computer codes, data, know how, improvements, discoveries, development, techniques, marketing plans, strategies, costs, customers, and client lists, or any information the Employee has reason to know [Badger] would like to treat as confidential for any purpose, such as maintaining a competitive advantage or avoiding undesired publicity, whether or not developed by the Employee.

         The confidentiality provision further provides:

Unless previously authorized . . . [u]pon termination of employment, the Employee shall return to [Badger] any and all property and records of [Badger] in his possession, at [Badger], at his personal residence or elsewhere . . .

         The non-compete and non-solicitation provisions of the Agreement prohibit Mr. Palmer from:

(a) Solicit[ing], accept[ing] or divert[ing] business from any customer of [Badger] or attempt[ing] to convert any such customer to acquire services from another person or entity which are similar to the services provided by [Badger] . . . the term “customer” shall mean any person or entity to whom [Badger] has provided services during the preceding twelve months to the start of the Period, or any such persons or entities known by Employee to have been targeted or contacted by [Badger] for sale of such services during such twelve months;
(b) Within . . . Georgia, Florida, Tennessee, North Carolina, South Carolina, Alabama, Virginia, Mississippi, compete in any manner with [Badger], or own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business which competes directly or indirectly with [Badger]; and
(c) Solicit[ing] for employment any employee, consultant, contractor or sub-contractor of [Badger].

[Dkt. 57-1, Exh. 18].

         III. Mr. Palmer’s Departure from Badger and Employment with SEC/HydroX

         In approximately February or March of 2019, Mr. Palmer spoke with a former Badger employee and current SEC employee about opportunities at SEC [Id. at 8]. Mr. Palmer was directed to Billy Campbell, SEC’s co-founder and former president. Mr. Campbell informed Mr. Palmer that SEC was spinning off its hydrovac business into a new entity, HydroX, and that he was looking for someone with experience to run this business line [Id.]. SEC extended an offer to Mr. Palmer on March 1, 2019, which Mr. Palmer accepted on April 1, 2019 [Id.; Dkt. 63, at 2]. The same day he accepted employment with SEC, Mr. Palmer informed his direct supervisor at Badger that he was resigning but would not state where he was going to work [Dkt. 68, at 7]. Mr. Palmer was reminded of his obligations pursuant to the Agreement [Id.].

         IV. Badger’s Asserted Grounds for Relief

         Badger’s request for injunctive relief addresses five legal claims: breach of the Agreement’s confidentiality provision; breach of a fiduciary duty; violation of the Indiana Uniform Trade Secrets Act (“IUTSA”); breach of the agreement’s non-solicitation provision; and breach of the Agreement’s non-compete provision [See generally Dkt. 68]. The parties have provided additional facts specific to each claim.

         A. Breach of the Agreement’s Confidentiality Provision & Violation of the IUTSA

         Both Badger’s breach of contract claim pursuant to the confidentiality provision and its IUTSA claim arise from Mr. Palmer’s alleged absconding with over 5000 Badger documents on the eve of his resignation [Dkt. 68, at 13]. Specifically, the day before announcing his resignation from Badger, March 31, 2019, at approximately 5:00 a.m., Mr. Palmer downloaded more than 5000 documents from his Badger computer onto a Seagate large capacity external hard drive [Id. at 13-14]. The downloaded documents included: budgets; emergency response plans; employee contact information; customer contact information; contract pricing and bid information for specific customers; strategic plans; organizational charts; job descriptions; regional compensation planning information; financial reports and statements; employee training materials; business development planning materials and goals; master servant agreements and compiled lists of master servant agreements; equipment drawings; and employee salary information [Id. at 14; Dkt. 59-3, Exh. 103].

         Mr. Palmer retained possession of the hard drive onto which he had downloaded the Badger documents and did not disclose its existence, despite specific discovery-based interrogatories aimed at eliciting such information [Dkt. 68, at 14]. After conducting its own forensic investigation of Mr. Palmer’s assigned Badger computer, Badger discovered all that Mr. Palmer had taken from its files without permission [Id]. On June 20, 2019 Badger promptly informed opposing counsel of Mr. Palmer’s unauthorized heist and the existence of the hard drive [Id.]. During the Court hearing, counsel for Mr. Palmer attempted to explain Mr. Palmer’s prior failure to reveal the existence of the hard drive as having merely “slipped his mind.” Our assessment of those circumstances is not so benign.

         Mr. Palmer’s own expert confirmed the following detailed information about Mr. Palmer’s use of the hard drive: Mr. Palmer had attached the hard drive to his personal computer and accessed the documents following his departure from Badger. He took these steps as recently as June 20, 2019, the date when his counsel was informed by Badger of the hard drive’s existence [Id.; Dkt. 59-3, Exh. 104] Mr. Palmer’s expert also confirmed that two documents were located on both the hard drive and Mr. Palmer’s SEC/HydroX computer, including a file entitled “2018 Emergency Response File/Emergency response plan” (the “Emergency Response Plan”) [Id.].

         The Emergency Response Plan had been developed by a Badger committee, which had included Mr. Palmer, to help its customers respond to natural disasters. The file was discovered attached to a May 22, 2019 e-mail sent by Mr. Palmer from his HydroX e-mail address to his Hydro-X executive assistant [Id. at 14], whom Mr. Palmer directed to review the document “to ensure the B word isn’t utilized” [Id. at 14]. Mr. Palmer then sent an email to Mr. Campbell with an attachment entitled “Hydro X Emergency Response Plan” [Id. at 14-15]. The HydroX Emergency Response Plan was virtually identical to the Badger Emergency Response Plan, except for the removal of the Badger name [Id. at 15]. Again, during the Court’s hearing on the pending motions, counsel for Mr. Palmer stated that the document has now been completely “pulled back” and is not being used at or by HydroX.

         After these discoveries, Mr. Palmer turned over the hard drive as well as his personal computer to Badger for inspection [Dkt. 64, at 22]. However, per his deposition testimony, Mr. Palmer has represented that he cannot recall what action he took with the hard drive between the time he originally created it and the time Badger notified defense counsel of its existence, nor can he recall whether he ever connected the hard drive to any other device, including any device at SEC/HydroX [Dkt. 59-3, Exh. 105]. He also cannot state with certainty whether he sent the Badger documents to anyone in particular or saved them in another location [Id.].

         B. Breach of the ...

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