MARCO A. HERNANDEZ, District Judge.
Defendants Fieldturf USA and Fieldturf Tarkett USA Holdings, Inc. (collectively "FTUSA") move for summary judgment on all eight of plaintiffs' claims. Plaintiffs Field Turf Builders ("FTB") and Mark Ryan, and additional counterclaim-defendants Crystal Ryan, Boeckman Properties, and Gulf Pacific Co., (collectively "FTB et al") cross move for partial summary judgment on two of its claims, all of defendant FTUSA's affirmative defenses, and five of FTUSA's counterclaims. I grant and deny in part FTUSA's motion for summary judgment. I also grant and deny in part FTB et al's motion for partial summary judgment.
Defendant Fieldturf USA (FTUSA) is a subsidiary of FieldTurf Tarkett USA Holdings, Inc. Compl. ¶ 2. FTUSA is a 5% minority member of plaintiff FTB. Answer ¶ 81. FTB is owned and managed by co-plaintiff Mark Ryan. Compl. ¶ 3. Counterclaim-defendant Boeckman Properties is owned by Mark Ryan's wife, Crystal Ryan, also a counterclaim-defendant. Def.'s Concise Statement of Material Facts ("Material Facts") ¶ 14. FTB leased a facility in Wilsonville from Boeckman Properties and used it as its principal place of business. Pl.'s Reply to Def.'s Answer ¶¶ 13-14. Mark Ryan also owns and manages counterclaim-defendant Gulf Pacific Company, which performed financial services for FTB.
FTUSA manufactures and installs synthetic grass turf for landscaping and athletic fields throughout the United States. Material Facts ¶ 1. Over a ten-year period, FTB worked with FTUSA as a contractor or subcontractor to install FTUSA's synthetic turf.
On February 3rd, FTUSA learned that the IRS tax lien was still unresolved. FTUSA MSJ 7. Six days later, FTUSA hired attorneys to work with Mark Ryan's attorney to prepare the documents for the deal.
After FTUSA took over the Boeckman facility, the parties continued to work towards finalizing the deal in writing.
Summary judgment is appropriate if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party bears the initial responsibility of informing the court of the basis of its motion, and identifying those portions of "`the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact."
Once the moving party meets its initial burden of demonstrating the absence of a genuine issue of material fact, the burden then shifts to the nonmoving party to present "specific facts" showing a "genuine issue for trial."
The substantive law governing a claim determines whether a fact is material.
If the factual context makes the nonmoving party's claim as to the existence of a material issue of fact implausible, that party must come forward with more persuasive evidence to support his claim than would otherwise be necessary.
Defendant FTUSA moves for summary judgment on all eight of Plaintiffs' claims, two of which Plaintiffs also cross move for summary judgment. I will discuss these eight claims first, and then continue with FTB et al's cross motion for partial summary judgment on all of FTUSA's affirmative defenses and five of FTUSA's counterclaims.
Plaintiffs claims that FTUSA and its agents entered its Wilsonville facility without permission on March 27, 2009. Oregon defines trespass as occurring when a person intentionally "(a) enters land in the possession of the other, or causes a thing or third person to do so, or (b) remains on the land, or (c) fails to remove from the land a thing which he is under a duty to remove." Restatement (Second) Torts § 158 (1965);
Both Plaintiffs and FTUSA have moved for summary judgment on this claim. There is no dispute that Mark Ryan permitted FTUSA to use the Boeckman facility in Wilsonville. FTUSA MSJ 14; FTB Opp'n 8. The issue is whether FTUSA exceeded the scope of the permission when FTUSA removed assets and equipment from the Boeckman facility on March 27th.
Plaintiffs allege that FTUSA took without permission its property (equipment, computers, proprietary information, client files, and artwork) on March 27th. Compl. ¶ 27. In Oregon, conversion is defined as follows:
Plaintiffs and FTUSA have both moved for summary judgment on this claim. FTUSA argues that it lawfully acquired the equipment because Mark Ryan gave it permission. There is no dispute that Mark Ryan gave FTUSA permission to use the equipment to continue with the installation projects. FTB Opp'n 12; FTUSA MSJ 16. Similar to the trespass claim, FTB claims that although it gave FTUSA permission to use the equipment, the permission would last until the deal between the parties was finalized, but not if the deal was rejected. FTB Opp'n 12; Decl. of Mark Ryan in Opp'n of FTUSA's Mot. for Summ. J. ("Ryan Decl.") ¶¶ 8, 13. FTUSA counters that FTB did not impose any restrictions on the use of the equipment. It also has produced evidence that FTB alerted John Deere Credit that it had "transferred all of its equipment assets to Field Turf USA and no longer has the equipment in its possession." FTUSA MSJ Memo 16. FTUSA has maintained possession of the equipment, but Mark Ryan has not been paid for the equipment.
FTUSA also argues that because it had lawfully acquired the property, FTB needed to demand the property in order to maintain a conversion claim. FTUSA MSJ 16. "When a defendant acquires possession of the chattel lawfully . . ., a conversion may result upon the refusal to redeliver the chattel on demand by the owner."
Plaintiffs claim that FTUSA made false and material misrepresentations related to its intention to purchase FTB. Compl. ¶ 32. In Oregon, the elements of fraud are:
In 2006, the Mark Ryan and FTUSA began to discuss a deal in which the two companies would "vertically integrate". FTUSA MSJ 5. In mid-2008, Mark Ryan and Joe Field, then CEO of FTUSA, advanced discussions of the sale.
Plaintiffs claim that FTUSA interfered with and destroyed existing economic relationships with FTB's customers. Compl. ¶ 36. In Oregon, to state a claim for intentional interference with economic relations, a plaintiff must allege each of the following elements:
With respect to customer relationships, Plaintiffs claim that FTUSA interfered with the "Hoover Park" client by refusing to deliver the carpet for the project. FTUSA MSJ 22. Because the carpet was not delivered on time, the contract went into default and FTB incurred liquidated damages — though these damages were later recalled.
Hoover Park is the only customer relationship mentioned in support of this claim. Plaintiffs would like the court to infer that FTUSA interfered with the Hoover Park relationship by withholding the carpet, so that FTB's financial situation would be exacerbated. FTB Opp'n 16. This inference is unwarranted. Even viewing the facts in a light most favorable to Plaintiffs, they have not presented sufficient evidence to create a genuine issue of material fact. If anything, the March 5th letter from Mark Ryan to the Hoover Park customer shows that the relationship failed because FTB had become insolvent. FTUSA's motion on this claim is granted.
Plaintiffs claim that FTUSA owed them the fiduciary duties of "good faith, fair dealing, reasonable care, undivided loyalty and full, frank disclosure" as a prospective purchaser of FTB. Compl. ¶ 41. Plaintiffs allege that FTUSA breached this duty by removing FTB's assets on March 27th and by taking over FTB's business.
Plaintiffs again make arguments beyond that alleged in their complaint. In the complaint, they claim that the fiduciary duty arises because FTUSA is a prospective purchaser. But in their response to FTUSA's motion, they argue that the duty arises from the long-standing ten-year relationship that the parties had as manufacturer and installer. FTB Opp'n 17. I will analyze this claim as pled.
FTUSA argues that the parties dealt with each other at arm's length by using separate attorneys. FTUSA MSJ 25. Even FTB admits that the negotiations for the sale were at arm's length. FTB Opp'n 18. The relationship between FTUSA and Plaintiffs was not subject to fiduciary duties. There are simply no facts from which one can even infer that as a seller, FTUSA owed a fiduciary duty to Plaintiffs. FTUSA's motion on this claim is granted.
Plaintiffs claim that FTUSA misappropriated its trade secrets, such as customer lists, business contacts, and other proprietary information. Compl. ¶ 45. The Oregon Uniform Trade Secrets Act, ORS 646.461-646.475, defines a trade secret as:
ORS 646.461(4). Misappropriation occurs when a person acquires a trade secret but "knows or has reason to know" that the acquisition was acquired by "improper means." ORS 646.461(2)(a). Misappropriation also occurs when a person discloses or uses a trade secret without express or implied consent. ORS 646.461(2)(b)-(d).
FTUSA argues that there is no misappropriation of trade secrets because (1) FTUSA provided customers to FTB, so it did not have any proprietary customer lists, (2) FTB gave FTUSA permission to use its computers, records, and information once FTUSA took over FTB's business, (3) the skill and knowledge of FTB's former employees do not qualify as trade secrets, and (4) regardless of all of the above, FTB made no effort to ensure the secrecy of any of its alleged trade secrets. FTUSA MSJ 27-29. The dispositive fact is that Plaintiffs admit they never required FTUSA to sign a confidentiality agreement before giving FTUSA full access to FTB's vendor lists, equipment, and other alleged proprietary information. FTB Opp'n 20. The fact that there was no effort to maintain the secrecy of any alleged trade secrets defeats this claim entirely. One cannot claim a trade secret if it was not maintained as a secret. ORS 646.461(4).
Plaintiffs also argue that FTUSA obtained trade secrets from Robert Gloeckner, the former general manager of FTB. Plaintiffs argue that according to the employee handbook, Gloeckner had a duty to maintain the confidentiality of any FTB records, reports, and documents. FTB Opp'n 20. As stated above, FTUSA argues that the vendor lists were made available to FTUSA without any restrictions. As for the installation expertise of Gloeckner, in
FTB claims that FTUSA has willfully maintained a monopoly in the manufacture and installation of field turf in the Western United States. Compl. ¶ 49-51. Under Section 2 of the Sherman Act, "[e]very person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony[.]" 15 U.S.C. § 2. In order to state a claim for monopolization under section 2, a plaintiff must prove that "(1) the defendant possesses monopoly power in the relevant market; (2) the defendant has willfully acquired or maintained that power; and (3) the defendant's conduct has caused antitrust injury."
FTB argues that the relevant market is the manufacture and installation of field turf, while FTUSA argues that it is only the manufacture of field turf because it subcontracts its installation work. FTB Opp'n 23; FTUSA MSJ 32. There are facts to support both positions. Mr. Gloeckner provided testimony that manufacturers and installers work together, not as one unit to compete for bids. FTUSA MSJ 32. On the other hand, FTB points out that the product that FTUSA provides is an installed unit (not field turf alone), even though it may use different installers. FTB Opp'n 23. The parties also dispute the geographical area of the relevant market. Plaintiffs claim that the geographical area is the Western United States, while FTUSA argues that it is a national company.
With respect to monopoly power, "[a] mere showing of substantial or even dominant market share alone cannot establish market power sufficient to carry out a predatory scheme. The plaintiff must show that new rivals are barred from entering the market and show that existing competitors lack the capacity to expand their output to challenge the predator's high price."
As for the third element, anticompetitive conduct that causes injury, Plaintiffs argue that FTUSA wanted to acquire FTB so that it could eliminate Grass Valley Turf, another installer of synthetic turf that FTUSA had employed in the past. FTB Opp'n 25. There is no mention of how many other installers exist in the Western United States (assuming arguendo that this is the relevant market) or that FTUSA actually succeeded in eliminating Grass Valley Turf as a competitor. Plaintiffs also provide a long list of examples of how FTUSA was anticompetitive towards FTB. The problem, however, is that Plaintiffs have only alleged injury to themselves, as opposed to competition as a whole or that prices have been negatively impacted. "The courts have repeatedly observed that `the antitrust laws protect competition, not competitors.'"
Plaintiffs claim in alternative to its third, fourth, fifth, and sixth claims, that FTUSA breached its contract with Plaintiffs for $2,150,000, which included the purchase of FTB's assets and a consulting contract for Mark Ryan. Compl. ¶ 38. "[B]efore there can be a valid contract there must be a meeting of the minds as to all of its terms; that nothing can be left for future negotiation, and that if any portion of the contract is not agreed upon . . . there is no contract."
On January 18, 2009, Mark Ryan and FTUSA had come to an agreement of $2,150,000 for the purchase of FTB's assets and a seven-year consulting for Mark Ryan. Owen Decl. Ex. 4 at 1. This agreement was the culmination of several email exchanges in which the parties had proposed several other purchase prices.
Even though I find that a contract existed, Plaintiffs' claim does not survive summary judgment. In the January 18th email, FTUSA stated unequivocally that board of director approval was still needed because of the large amount of money involved.
FTUSA brought several counterclaims and third-party claims against FTB, Mark Ryan, Crystal Ryan, Boeckman Properties, and Gulf Pacific Company (collectively "FTB et al"). FTB et al has cross moved for summary judgment on all 13 of FTUSA's affirmative defenses. FTB et al has also cross moved for summary judgment on the following counterclaims: fraud/misrepresentation, conspiracy to extort money, breach of fiduciary duty (derivative action), conversion/embezzlement (derivative action), and conspiracy to commit embezzlement/conversion (derivative action).
FTUSA brings this defense with regards to Plaintiffs' 1st, 2nd, 5th and 6th claims of trespass, conversion, breach of fiduciary duties, and misappropriation of trade secrets. The estoppel defense is based on FTUSA's allegation that Mark Ryan consented to FTUSA's use of FTB's equipment and facility while the purchase deal was being negotiated. Answer ¶ 64. As explained earlier in this opinion, there is a genuine dispute of material fact as to the scope the permission granted by Plaintiffs. FTB et al's motion on this affirmative defense is denied.
FTB et al argue that the unclean hands doctrine is inapplicable to FTUSA's claims for trespass and conversion. In its response, FTUSA concedes this argument. However, FTUSA does not concede this affirmative defense against the rest of Plaintiffs' claims. Thus, the unclean hands doctrine is dismissed with respect to claims one (trespass) and two (conversion), but remains a valid defense against claim three (fraud/misrepresentation), the only other claim that survives FTUSA's motion for summary judgment.
FTB et al argue only generally against FTUSA's other 11 affirmative defenses, stating that they are simple denials of torts. FTB MSJ 14. For example, FTUSA's fourth affirmative defense states that "FieldTurf has not trespassed on the premises leased by [FTB] from Boeckman Properties inasmuch as FTUSA was given unrestricted access thereto." Answer ¶ 67. Much of the other affirmative defenses are similarly stated.
Because there remains a genuine dispute of material fact as to the second, fourth, fifth, sixth, seventh, eighth, and ninth affirmative defenses, I deny FTB et al's motion with respect to these defenses.
FTB et al has moved for partial summary judgment on the following counterclaims: fraud/misrepresentation, conspiracy to extort money, breach of fiduciary duty (derivative action), conversion/embezzlement (derivative action), and conspiracy to commit embezzlement/conversion (derivative action).
FTUSA claims that throughout the negotiations for the purchase of FTB's assets, Mark Ryan failed to disclose that FTB was burdened with liens, debts, and other obligations. Answer ¶ 179. FTUSA asserts that had it known about FTB's financial burdens, it would have stopped negotiations.
FTUSA claims that Mark Ryan committed fraud by misrepresenting the health of FTB during negotiations for the sale of the business. For example, FTUSA claims that it did not know about the $994,447 IRS tax lien until after negotiations began. FTUSA Opp'n 15. Through reassurances from Mark Ryan that the lien would be paid, FTUSA continued to negotiate.
There is no dispute that FTUSA discovered the IRS tax lien in October 2008. FTB et al's Memo. in Supp. of Mot. for Partial Summ. J. ("FTB MSJ") 15. As for the other financial troubles, FTB et al implies that FTUSA was aware of them because by January 2009, Mr. Gloeckner, FTB's general manager, had been working with FTUSA in anticipation of the purchase.
FTB et al had moved to dismiss this claim earlier in this case, but Judge Haggerty denied the motion.
FTB et al renew their argument that a civil extortion claim does not exist. Since Judge Haggerty's decision in March 2010, there appear to be no other cases that discuss this issue. FTUSA has not brought forth any new cases in support either. Given that there have not been any new developments in the case law since Judge Coffin's skepticism for this tort, I decline to recognize the civil tort of extortion. FTB et al's motion on this counterclaim is granted.
FTUSA is a 5% owner of FTB. It claims that Mark Ryan owed fiduciary duties to FTB, and that as manager of FTB, he breached the duties of care and loyalty by violating the law when he ignored federal tax obligations, paid his wife Crystal Ryan a yearly salary even though she performed no duties for FTB, failed to pay important obligations such as union wages and employee benefits to the union trust fund, improperly represented FTB pro se in a California lawsuit, and authorized excessive partner distributions even as FTB incurred substantial debt. Answer ¶¶ 196-200.
FTB argues that FTUSA is not the proper party to bring a derivative action under Rule 23.1 of the Federal Rules. For the purposes of Rule 23.1, "[a]n adequate representative must have the capacity to vigorously and conscientiously prosecute a derivative suit and be free from economic interests that are antagonistic to the interests of the class."
Factors considered in determining the adequacy of a representative in a derivative suit include: (1) indications that the party advancing the derivative claims is not the true party in interest, (2) the claimant's unfamiliarity with the litigation and unwillingness to learn about the suit, (3) the degree of control exercised by the attorney over the litigation, (4) the degree of support received by the claimant from the other shareholders, (5) the lack of any personal commitment to the action on the part of the representative claimant, (6) the remedy sought by the claimant in the derivative action, (7) the relative magnitude of the claimant's personal interests as compared to the derivative action itself, and (8) the claimant's vindictiveness toward the opposing party.
In his March 4, 2010 Order, Judge Haggerty denied FTB's motion to dismiss the derivative claims based on the assertion that FTUSA was an inadequate representative.
FTB et al argue that FTUSA is an inadequate representative because it "oversaw and caused the collapse" of FTB, which presumably is in conflict to it representing the interests of FTB. FTB MSJ 19. FTB also asserts that FTUSA has a large personal interest in the direct claims, which conflicts with the derivative claims, and that it is vindictive towards the counterclaim defendants. FTUSA disputes that it caused FTB's collapse. FTB et al has not met its burden to show that FTUSA is an inadequate representative for the derivative claims.
With respect to the merits of the breach of fiduciary duty claim, there is a genuine issue of material fact as to whether Mark Ryan breached the duties of care and loyalty. Mark Ryan claims that the salary paid to his wife was in lieu of his taking a salary and that he used his best effort to resolve FTB's financial problems. FTB MSJ 20. FTUSA describes the large distributions that Mark Ryan authorized for shareholders, despite the mountain of debt that FTB faced. FTUSA Opp'n 21. In 2008, Crystal Ryan received $589,013, Mark Ryan received $184,532, and Marv LaPorte received $765,720.
FTUSA claims that Mark Ryan improperly removed funds from FTB for use in other businesses for the Ryans' personal use. Answer ¶ 208. Mark Ryan ran four different businesses that operated on a seasonal basis. FTB MSJ 21. He argues that all loans between the companies were properly recorded and that he did not take more than what he was entitled.
FTUSA claims that Mark Ryan, his wife Crystal, and Gulf Pacific conspired together to embezzle or convert FTB's funds. Answer ¶ 213. Similar to the other claims in which there are disputes about the propriety of how FTB's funds were used, there is a genuine dispute of material fact. FTB et al's motion on this counterclaim is denied.
FTUSA's motion for summary judgment [#64] is granted and denied in part as follows:
Claim 1 Trespass — denied
Claim 2 Conversion — denied
Claim 3 Fraud/Misrepresentation — denied
Claim 4 Intentional Interference with Business Relationship — granted
Claim 5 Breach of Fiduciary Duty — granted
Claim Six Misappropriation of Trade Secrets — granted
Claim Seven Willful Maintenance of a Monopoly — granted
Claim Eight Breach of Contract — granted
FTB's motion for partial summary judgment [#70] is granted and denied in part as follows:
Claim 1 Trespass — denied
Claim 2 Conversion — denied
1st Affirmative Defense Estoppel — denied
3rd Affirmative Defense Unclean Hands — granted for trespass and conversion claims
2nd, 4th, 5th, 6th, 7th, 8th, 9th Affirmative Defenses — denied
4th Counterclaim Fraud/Misrepresentation — denied
5th Counterclaim Conspiracy to Extort Money — granted
6th Counterclaim Breach of Fiduciary Duty (Derivative Action) — denied
7th Counterclaim Conversion/Embezzlement (Derivative Action) — denied
8th Counterclaim Conspiracy to Commit Embezzlement/Conversion (Derivative Action) — denied
Further, FTUSA's 10th, 11th, 12th, and 13th affirmative defenses are dismissed as moot and FTUSA's 3rd Counterclaim for Breach of Contract (Sale of FTB's Equipment) is dismissed.
IT IS SO ORDERED.
