OPINION AND ORDER
JELDERKS, United States Magistrate Judge.
Plaintiff Ikon Office Solutions, Inc. (Ikon) brings this action against defendants American Office Products, Inc. dba Associated Business Systems, Inc. (ABS), and three former employees of Ikon who now work for ABS: Larry Bradley, Lesa Bergey, and Craig Knouf. Plaintiff Ikon alleges that defendants Bradley and Bergey breached non-competition and confidentiality agreements with Ikon, that all defendants breached one or more fiduciary duties to Ikon, misappropriated Ikon's trade secrets, converted Ikon's documents and databases, and tortiously interfered with Ikon's contracts and economic relations. Ikon has moved for partial summary judgment, and defendants have filed a cross-motion for summary judgment against Ikon on all claims. For the reasons that follow, I deny plaintiff's motion, and grant defendants' cross-motion for summary judgment on all claims.
Ikon had hired Knouf away from a competitor in 1985. In December 1989, Knouf — then sales manager of Ikon's Eugene branch — hired defendants Bradley and Bergey away from their respective employers to work for Ikon. Bergey's former
By 1999, Bradley was a very highly regarded sales representative in Ikon's Eugene branch, and Bergey was the sales manager for the Eugene branch. Bradley resigned from Ikon on July 29, 1999, and Bergey left on September 7, 1999. After a brief interval, each was hired by ABS, though both deny any pre-arranged agreement to come to work for ABS. Ikon contends that, after joining ABS, Bradley and Bergey induced many of Ikon's best customers and employees to defect to ABS. Ikon asserts that Bradley and Bergey accomplished that result by improperly using the relationships they cultivated with customers while employed at Ikon, in violation of non-competition agreements, and by using stolen trade secrets in violation of confidentiality agreements. Ikon also alleges that Bergey, while still employed at Ikon, failed to take appropriate steps to prevent the loss of these customer accounts to ABS. Ikon seeks over twenty million dollars in compensatory and punitive damages from defendants, plus injunctive relief and attorney fees.
The court should grant summary judgment if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Fed R Civ P 56(c). If the moving party shows that there are no genuine issues of material fact, the nonmoving party must go beyond the pleadings and designate facts showing an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A scintilla of evidence, or evidence that is merely colorable or not significantly probative, does not present a genuine issue of material fact. United Steelworkers of Am. v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir.), cert denied, 493 U.S. 809, 110 S.Ct. 51, 107 L.Ed.2d 20 (1989).
The substantive law governing a claim determines whether a fact is material. T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). The court should resolve reasonable doubts about the existence of a material factual issue against the moving party. Id. at 631. The court should view inferences drawn from the facts in the light most favorable to the nonmoving party. Id. at 630-31.
Validity of Bergey and Bradley's Non-Competition Agreements
For purposes of defendants' motion for summary judgment, I must assume that Bergey and Bradley did sign the non-competition agreements as Ikon alleges, and that those documents were signed on the dates that appear on the face of the respective agreements.
Defendant Bergey argues that her non-competition agreement is void because she began working for IKON on December 1, 1989, but did not sign a non-competition agreement until December 18, 1989. I agree. The term "initial employment" in ORS 653.295 "means when the employee starts work." Olsten Corp. v. Sommers, 534 F.Supp. 395, 398 (D.Or. 1982). Cf. Perthou v. Stewart, 243 F.Supp. 655, 659 (D.Or.1965) (agreement void where employment commenced on June 1 but the non-competition agreement was not signed until June 7);
The parties have cited no published Oregon case enforcing a non-competition agreement signed more than three days after the employee commenced work or was promoted. See Bouska v. Wright, 49 Or.App. 763, 621 P.2d 69 (1980). If 17 days after is timely, as Ikon contends, then why not 20 or 30 or even 60 days? I decline Ikon's invitation to embark on that path, particularly when the Oregon Legislature has declared that a noncompetition agreement is void unless it complies with the statutory requirements. Under Oregon law, the right not to be subjected to a non-competition agreement, except as authorized by ORS 653.295, is an "important employment-related statutory right." Dymock v. Norwest Safety Protective Equip. for Oregon Industry, Inc., 172 Or.App. 399, 405-06, 19 P.3d 934 (2001).
Ikon attempts to create a material factual dispute by speculating that Bergey may not have commenced working for Ikon until December 18, but Ikon offers no evidence to support that theory, and Ikon's designated corporate representative, Ronald McGee, recently conceded at deposition that Ikon has no such evidence.
Whether Ikon can Enforce these Non-Competition Agreements
Defendants argue that Ikon is estopped from enforcing the non-competition agreements against Bergey and Bradley, or has waived those rights. I agree.
Less than a year before he decided to leave Ikon, Bradley requested and was given a copy of his personnel file.
The day after Bradley left Ikon, he met with Knouf to discuss possible employment with ABS. Knouf states that his company's policy is to honor any valid non-competition agreements, and he rejects applicants whose employment would violate an enforceable non-competition agreement. ABS retains an attorney to assist in evaluating such applications. Although Bradley told Knouf he had checked with Ikon's human resources department and confirmed that he was not subject to a non-competition agreement, Knouf says he was concerned that Ikon was looking for an excuse to sue ABS, and knew that Ikon would not look favorably on his hiring one of Ikon's top sales persons. In addition, it would cost ABS hundreds of thousands of dollars to open a Eugene branch office. Knouf was willing to make that expenditure only if Bradley was available to oversee that new office. Knouf therefore telephoned Ikon's Eugene sales manager, Bergey, who confirmed that Bradley was not subject to a non-competition agreement.
On or about August 2, 1999, Ikon's senior counsel, Andrew Topping, sent Bradley a letter reminding him of his obligation to preserve certain confidences, but the letter did not mention a non-competition agreement. On August 9, 1999, ABS formally extended a job offer to Bradley, who accepted. On August 11, 1999, counsel for ABS, Jeff Edelson, sent a letter to Topping advising him that Bradley was now employed by ABS and asserting that, in the absence of a valid non-competition agreement, an employee may properly compete with a former employer. Edelson's letter all but invites Ikon to assert a non-competition agreement, if one exists, but Ikon never responded.
After hiring Bradley, ABS signed a five-year lease on an office in Eugene, purchased a truck and equipment for the new Eugene branch, commenced an advertising campaign featuring Bradley, hired administrative staff for that office, and made other commitments (financial and otherwise) in reliance on Bradley being immediately available to work for ABS in Eugene. ABS estimates it expended nearly $700,000 to create a Eugene branch in the weeks immediately after hiring Bradley.
On September 7, 1999, Bergey resigned from Ikon. Before leaving, she asked Gina Salt whether she was subject to a non-compete agreement, and Salt responded that there was no such agreement on file. Ernie White (Ikon's Oregon marketplace president) and perhaps also Beverly
In October 1999, an Ikon employee discovered two folders while cleaning out a filing cabinet in a vacated office in the Eugene branch. Inside the folders were what appear to be copies of non-competition agreements for Bradley and Bergey. Deposition testimony disclosed that the office had been occupied by a succession of Ikon administrative employees, each of whom denied knowledge of the contents of the filing cabinet. The files most likely had been created by David Yordy when he occupied that office in 1989, and had been undisturbed ever since.
By now, Ikon was starting to lose big accounts to Bradley and ABS, so the discovery of these documents provoked great excitement within Ikon. On or about October 14, 1999, Ikon's senior counsel, Andrew Topping, sent a letter to Bradley asserting that he was in violation of the non-competition agreement, and demanding that Bradley comply within three days. Jeff Edelson, counsel for ABS responded that this was a "textbook example" of waiver and estoppel, and that Bradley and ABS had detrimentally relied upon Ikon's assurances that there was no non-competition agreement. Edelson's letter also questioned whether the document was genuine, and told Topping, "We will want to examine the original [document] if you intend to continue to press this issue." Ikon did not respond to Edelson's letter.
Given these undisputed facts, I have little difficulty concluding that Ikon is estopped to enforce the noncompetition agreements against Bradley and Bergey, and/or has waived its rights under those agreements. The non-competition agreements were for Ikon's benefit. It was incumbent upon Ikon to timely assert its rights, especially given the brief duration (one year) of those agreements. Instead, Ikon told Knouf and Bradley that the latter was not subject to a non-competition agreement, and told Bergey that she was not subject to a non-competition agreement. In reliance upon those representations, ABS hired Bradley and Bergey, expended over half a million dollars to open a Eugene branch, and is now facing a lawsuit by Ikon seeking millions of dollars in damages.
Ikon did not attempt to correct its misrepresentations until after defendants had materially changed their position, to their detriment, in reliance upon Ikon's representations. Even then, Ikon's efforts were half-hearted as to Bradley and non-existent as to Bergey. Even after Ikon located a copy of Bergey's non-competition agreement, Ikon never contacted Bergey or ABS to correct Ikon's prior statement that Bergey was not covered by a non-competition agreement, or to advise Bergey
Having induced defendants to believe that Bradley and Bergey were not bound by non-competition agreements, Ikon cannot now deny its own representations in order to recover damages for a largely self-inflicted wound.
The doctrine of equitable estoppel is employed to prevent a person from proving an important fact to be something other than what by act or omission he has led another party justifiably to believe. Wiggins v. Barrett & Associates, Inc., 295 Or. 679, 689, 669 P.2d 1132 (1983). The undisputed facts establish that defendants detrimentally and reasonably relied upon Ikon's representations. The noncompetition agreement covered only the Eugene sales territory, with a one-year duration. Knouf has stated, and Ikon has not controverted, that Bradley is such a super salesman that Knouf would have deferred opening a Eugene branch and instead assigned Bradley to a territory in Salem or Portland until the noncompetition agreement expired. However, after Ikon repeatedly represented that there was no such agreement, ABS incurred the considerable expense (and potential liability) to open a Eugene branch office for Bradley. Cf. Simons v. City of Portland, 132 Or.App. 74, 84, 887 P.2d 824 (1994) (exposure to liability can be a sufficient "detriment" for purposes of equitable estoppel). Bradley and ABS also placed their reputations on the line by promising to service customers in Eugene.
Ikon argues that, to prove an estoppel, defendants must show that Ikon deliberately made representations it knew to be false, with the intent that ABS act upon those representations, i.e., by hiring Bradley and Bergey and competing with Ikon in the Eugene market. Ikon's definition of estoppel would require defendants to prove all the elements of common law fraud. "Although the elements set out [in some published decisions] would seem to require proof of actual intent, and perhaps even a fraudulent representation, the cases do not require so much." Hess v. Seeger, 55 Or.App. 746, 761, 641 P.2d 23 (1982). "It is not necessary to the existence of an equitable estoppel that there should exist a design to deceive or defraud, but it is sufficient if the person against whom estoppel is asserted by his silence or representation has created a belief of the existence of a state of facts which it would be unconscionable to deny." Id. at 762, 641 P.2d 23, quoting Schmeck v. Bogatay, 259 Or. 188, 197, 485 P.2d 1095 (1971) (acknowledging that estoppel by conduct may not require proof of intent to mislead). See also Belleville v. Davis, 262 Or. 387, 397, n. 6, 498 P.2d 744 (misrepresentation may be negligent or even entirely innocent), quoting Prosser, Torts § 105 (4th ed). The doctrine of equitable estoppel prevents a person "from taking an inequitable advantage of a predicament in which his own conduct has placed his adversary." Prosser & Keeton on Torts, § 105 (5th ed). "To constitute an equitable estoppel ... there must have been some omission, misconduct, misrepresentation, or fraud by the party against whom the estoppel is asserted ... which caused another to be misled, and, because of being misled, to have been induced to have altered his position [in some material respect.]" Security Savings & Trust Co. v. Portland Flour Mills Co., 124 Or. 276, 292, 261 P. 432 (1927).
Ikon clearly understood the significance of the representations it made to Bergey, Bradley, and Knouf, and the reasons why these questions were being posed. Ikon knew that ABS was aggressively recruiting Ikon employees, and surely anticipated that Bradley, Bergey, and ABS might act,
Ikon also argues that, as a matter of law, there can be no estoppel because Bergey and Bradley both had knowledge of the non-competition agreements, having signed them ten years earlier. However, it would be an unusual employee who could remember the exact contents of every document pressed in front of them around the time they were hired ten years before. Even assuming that Bradley and Bergey recalled signing some type of non-competition agreement — which they deny — it is unlikely that they would recall the precise terms. Upon departing Ikon, Bergey and Bradley sought to clarify their obligations to Ikon by specifically asking whether they were subject to a non-competition agreement. Ikon responded that they were not. ABS made similar inquiries, with similar results. It is difficult to see how these defendants could have complied with an agreement whose existence was denied by Ikon and the terms of which were unknown to them. As between the parties, Ikon was in the best position to prevent this misunderstanding.
Ikon's argument also proves too much, because Ikon itself is charged with knowledge of the non-competition agreements. Thus, if there was not an equitable estoppel (because defendants had knowledge of the true facts), then Ikon intentionally relinquished a known right when it told Bradley, Bergey, and ABS that there was no non-competition agreement. Ikon argues that it did not intend to waive its rights, but what matters is the objective manifestations evidenced by Ikon's words and deeds, not some hidden subjective reservations or intent. Ikon gave Bradley and Bergey the green light to compete, and gave ABS the green light to hire them. There was nothing "equivocal" about Ikon's conduct, at least not until after defendants had detrimentally relied upon Ikon's representations such that the waiver had become irrevocable. See Wallstreet Properties, Inc. v. Gassner, 53 Or.App. 650, 632 P.2d 1310 (1981) (waiver was revocable up until the other party had materially changed his position in reliance thereupon).
Ikon also argues that Gina Salt did not actually tell Bergey and Bradley that there was no non-competition agreement, but merely that there was no agreement in those particular file folders. Ikon additionally argues that Bradley and Bergey never asked Salt whether there was a non-competition agreement in some other location. Ikon is splitting hairs. By all accounts, if Bradley or Bergey had signed a non-competition agreement, it should have been in the personnel files kept by Gina Salt. Ikon itself was unaware, until months later, that additional documents had been gathering dust for the past ten years in a file cabinet in a different office. Ikon cannot fault Bergey and Bradley for not asking Ikon to look in that particular filing cabinet, when there is no evidence that Bradley or Bergey (or anyone else at Ikon, for that matter) knew the contents of that filing cabinet. A reasonable person would have interpreted Salt's response to mean that Ikon was not claiming that Bradley and Bergey were bound by a non-competition agreement. That is also the
There is no dispute concerning the material facts of this claim, but only the legal significance of those facts. I conclude that Ikon is estopped from enforcing the non-competition agreements against Bergey and Bradley, and/or has waived those rights.
Ikon alleges that defendant Bergey, in her capacity as Eugene branch sales manager, committed a conversion by giving an Ikon employee, David Maeda, the original of his non-competition agreement with Ikon. Bradley, Knouf, and ABS are accused of conspiring with Bergey to commit this deed with the aim of facilitating Maeda's defection to ABS. However, Ikon now concedes that Bergey was merely following orders from Ikon's Oregon marketplace president, Ernie White, who told Bergey to give that document to Maeda.
Ikon also alleges that defendant Bergey converted printouts from an Ikon marketing database, again as part of a conspiracy to help Bradley, Knouf, and ABS. However, Ikon has produced no evidence that defendants have these printouts (or any other Ikon documents), nor has Ikon produced sufficient evidence for a jury to conclude that any documents are missing or that Bergey took them. Deposition testimony from Ikon's own witnesses also makes clear that Bradley already had this information in his head, having provided much of the data in the first place, and ABS had little need for such documents.
Ultimately, Ikon's conversion claim boils down to little more than a suspicion, which is not enough to survive summary judgment. I therefore do not address defendants' alternative argument that Bergey's conduct, even as alleged by Ikon, would not constitute a "conversion."
Breach of Fiduciary Duty
This claim essentially alleges that, after Bradley departed, Bergey stayed behind at Ikon as an ABS mole, stealing trade secrets, converting documents, and undermining Ikon's efforts to compete with ABS. Portions of this claim are intertwined with the conversion and trade secrets claims, and the disposition of those claims applies here as well. As for the remaining allegations, Ikon has produced no evidence that Bergey was an ABS mole who intentionally failed to perform her duties as part of a conspiracy to aid ABS. Acknowledging that failure, Ikon now urges the court to adopt a strict liability theory. As Ikon sees it, Bergey was the Eugene branch sales manager. Ikon ordered her to "shore up" Ikon's key accounts to prevent ABS from winning those customers, Bergey squandered this opportunity, and failed to implement that directive.
Ikon concedes that it never told Bergey just how she was supposed to accomplish that objective. Ikon also has not produced evidence that Bergey would likely have succeeded in that endeavor, or that Bergey had the time and resources to accomplish that task.
The annals of American business are littered with missed opportunities: businesses that failed to recognize or exploit advantages, or to protect their market share against inroads by competitors.
Misappropriation of Trade Secrets
Ikon next contends that defendants stole Ikon's trade secrets. Ikon has not produced evidence from which a reasonable jury could find that defendants misappropriated any documents or otherwise wrongly acquired any trade secrets.
Ikon, as the plaintiff, has the burden of proving both the existence of a trade secret and its misappropriation. Western Medical Consultants, Inc. v. Johnson, 835 F.Supp. 554, 557 (D.Or.1993), aff'd, 80 F.3d 1331 (9th Cir.1996). For purposes of the Oregon Trade Secrets Act:
ORS 646.461. "`Improper means' includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means." ORC 646.461(1).
Ikon first contends that Bradley's knowledge of the identity of Ikon's customers is a trade secret. A customer list can sometimes be a trade secret, e.g., when the employer has expended considerable time and money to pinpoint a narrow segment of the population that is interested in this product or service. See, e.g., Morlife, Inc. v. Perry, 56 Cal.App.4th 1514, 66 Cal.Rptr.2d 731, 735-36 (1997) ("great effort" and expense to identify customer base).
If the identity of Ikon's major customers in the Eugene area were a protected trade secret, a former Ikon sales representative would find it difficult, if not impossible, to ever work for Ikon's competitors in that region. This amounts to a long-term non-competition requirement, but without any of the restrictions that the Oregon Legislature has imposed upon non-competition agreements. See ORS 653.295. Cf. Carolina Chemical Equip. Co. v. Muckenfuss, 322 S.C. 289, 471 S.E.2d 721, 723 (1996) (far-ranging covenant against disclosure of trade secrets was equivalent to a covenant not to compete with unlimited duration and scope); Vigoro, 82 F.3d at 790 ("The former employer should not be permitted to achieve this anticompetitive objective indirectly through an overly-expansive definition of customer trade secrets.")
Ikon next contends that the names of the contact persons at these companies is a trade secret. If thousands of names were involved (and thus considerable effort and expense was required to obtain this information), or the names were otherwise difficult to obtain, this argument might be better taken. However, it appears that only a few dozen names are at issue, and a competitor could obtain those names simply by calling the company and inquiring, "Who buys your copier equipment?" Indeed, that appears to be how Bradley obtained those names in the first place. In theory, Bradley could have gone through the fiction of calling each company to request the name anew, but that exercise would yield no tangible benefit for Ikon and it would be confusing for the customers because Bradley had been doing business with these individuals for years.
Ikon next argues that information regarding each account is a trade secret, such as what equipment the company has in each location, the volume of copies used, the customer's needs and preferences, and when leases expire. There is no evidence that Bradley took any confidential information from Ikon. Rather, this is information that Bradley had in his head from years of personally cultivating these accounts. Much of that data can readily be obtained from public sources, such as UCC filings, or by asking the prospective customer (e.g., how many copiers do you presently
A court cannot compel a man who changes employers to wipe clean the slate of his memory. See North Pacific Lumber, 275 Or. at 371, 551 P.2d 431 (lumber trader not precluded from using knowledge of customers gained during prior employment); Vigoro, 82 F.3d at 790 (salesman's knowledge of local customers gained from prior employment was not a trade secret); Scott, 732 F.Supp. at 1044-45 (departing employee is not forbidden to use knowledge of customers' preferences acquired through personal interaction with those individuals); Fleming Sales Co. v. Bailey, 611 F.Supp. 507, 514 (N.D.Ill.1985) (employee is not obliged to perform a prefrontal lobotomy on himself to erase all knowledge of customers' needs garnered during his employment); Robert S. Weiss & Assoc. v. Wiederlight, 208 Conn. 525, 546 A.2d 216, 224-25 (1988) (insurance salesman not precluded from soliciting accounts cultivated during his prior employment); Carolina Chemical, 471 S.E.2d at 725 (employee may use knowledge of industry he acquired during 17 years with prior employer).
Finally, Ikon argues that defendants misappropriated Ikon's confidential pricing information and marketing strategies. There is no evidence that any documents were taken, only what is in defendants' minds. Although pricing information and marketing strategy can be
I also note that, if Bergey and Bradley did have knowledge of such trade secrets, then the practical result might be to permanently bar them from competing with Ikon anywhere in the world — not just in Eugene for a period of one year, as specified in the non-competition agreement. The court is wary of excluding a person from pursuing his or her livelihood (or subjecting a company to liability for hiring that person, which may amount to the same result) unless there is a fairly substantial showing that the item merits such protection. Ikon has not demonstrated that these so-called "secrets" warrant such protection.
Ikon's trade secrets claim also falters on the absence of evidence that defendants improperly used any "trade secrets" to compete with Ikon or that Ikon was injured as a result. Out of at least 43 customers that defected to ABS, Ikon chose to depose only two. Karen Romero testified that she switched to ABS because she had a good working relationship with Bradley and wanted to continue doing business with him. Of particular importance to her was "Larry's passion for excellence and the service that he provided that always either met or exceeded expectations." That is not a trade secret, but simply Bradley's reputation in the relevant business community.
Patricia Wodke testified that her company was dissatisfied with Ikon's service, machines kept breaking down, there were billing problems and each time she called to fix the problem she had to speak with a different person. Her company's CEO finally took matters into his own hands, contacted Bradley at ABS, and "asked him to come see [Wodke] and talk to her about our equipment." Wodke gave Bradley a list of the equipment her company already had, told him what the company's needs were and what problems they were having, and he submitted a proposal to replace the existing equipment and explained why the new equipment would be superior. This customer was so anxious to change vendors that it paid an early termination fee on the lease for its existing equipment. Again, there is no evidence that Bradley somehow misused Ikon trade secrets. Rather, Ikon apparently was not meeting this customer's needs, so the company found a vendor that would.
Tortious Interference Claims
To succeed on its tortious interference claims, Ikon must prove that the result was "accomplished through improper means or for an improper purpose." Straube v. Larson, 287 Or. 357, 360-61, 600 P.2d 371 (1979). As Ikon correctly conceded at oral argument, if I grant defendants' motion for summary judgment on the other claims, the tortious interference claims necessarily fail as well.
G. Other Motions
Defendants' Motion (# 24) to Hold Trial in Eugene is now moot. Defendants' Motion (# 73) to Strike "Evidence" filed by Plaintiff is primarily directed at assertions in Plaintiff's memorandum that are (allegedly) not supported by evidence in the record. This is really more in the nature of argument. The court has read the record and will decide for itself whether the assertions are supported. Defendants also assert that certain statements in Plaintiff's affidavits are not based on personal knowledge or are hearsay. Although some of those objections are well taken, the issue is moot in light of my ruling on the cross-motions for summary judgment.
Defendants' Motion (# 53) for Summary Judgment on all claims is GRANTED. Plaintiff's Motion (# 50) for partial Summary Judgment is DENIED. Defendants' Motion (# 24) to Hold Trial in Eugene, and Motion (# 73) to Strike, are both DENIED as moot. Any remaining motions are DENIED as moot.
Ikon also argues that it was company policy to require non-competition agreements for all employees. However, Knouf has stated that he was not aware of this policy when he hired Bergey in 1989, hence he did not condition her employment with Ikon upon signing such an agreement. Ikon has not refuted that testimony. Ikon also argues that it is unusual to begin work on a Friday, but that was the first day of the month, a traditional beginning date for commercial transactions. Ikon has failed to produce sufficient probative evidence from which a reasonable jury could conclude that Bergey began work on December 18 rather than on December 1.
In Vigoro, 866 F.Supp. at 1161, the former employer unsuccessfully argued that the following were trade secrets: