LARRY J. McKINNEY, District Judge.
Pending before the Court is Defendant's, Joseph A. Pence ("Pence"), Motion for Summary Judgment (Dkt. No. 425). Pence asks this Court to grant summary judgment in his favor as to the allegations raised by Plaintiff's, Meridian Financial Advisors, Ltd. d/b/a the Meridian Group ("Meridian"), Third Amended Complaint (Dkt. No. 117). The Court has reviewed the parties' submissions, and, for the following reasons, Pence's Motion for Summary Judgment (Dkt. No. 425) is
This case is one of a number of related cases
The other remaining individual defendant in this case, Martin Scott Hall ("Hall"), is a former OCMC employee. Dkt. No. 447-2 at 7-8. In 1999, Hall left OCMC and, following some time with another telecommunications company, went into business for himself. Id. Hall is the principal of a number of limited liability companies at issue in this case, including Navicomm, LLC and Navicomm, Ltd. (collectively "Navicomm"); ICOE, Ltd. ("ICOE"); RFE, LLC; T3A LLC; and the Perisos Group, LLC (collectively, the "Hall Entities"). Id. at 8. Following the collapse of OCMC, the Employee Defendants went to work for Hall at ICOE. See Dkt. No. 424-12 at 100; Dkt. No. 447-3 at 1.
In late 2003, OCMC personnel entered negotiations with Hall to have one of his companies purchase OCMC's Adult Chat Business. See generally Dkt. No. 447-4 at 1-3. As a result of these negotiations, Hall set up Navicomm. Dkt. No. 447-3 at 10. It was agreed that Navicomm would purchase the billing rights to the Adult Chat Business from OCMC, but OCMC would continue to provide accounting, information technology, and other support services. See Dkt. No. 144 ¶ 48. When the Adult Chat Business appeared on an end customer's telephone bill, Navicomm would be listed as the billing party. See id. at ¶ 46; Dkt. No. 447-4 at 5. According to Pence and other witnesses in this action, the Board had expressed concern with having OCMC's name associated with the Adult Chat Business. See, e.g., Dkt. No.
In late 2005, OCMC approached Hall about the possibility of purchasing the billing rights to some of OCMC's Fat Finger Business. Dkt. No. 447-7 at 6-7. Following Pence's advice, Hall engaged Thermo Credit, LLC to factor the Fat Finger Business and determine the value of the transfer. See Dkt. No. 144 ¶ 56. Hall then agreed that ICOE would purchase the billing rights to the Fat Finger Business for approximately $425,000. Dkt. No. 447-7 at 5, 7. There was no formal Board resolution authorizing the transfer of the Fat Finger Business. Dkt. No. 447-1 ¶ 5. At some point prior to being transferred to the Hall Entities, both the Adult Chat and Fat Finger Businesses had been listed as accounts receivable in documents submitted to PNC Bank. See Dkt. No. 424-3 at 189-90, 290-92.
In October 2005, Pence, Benge, and Bernard (the "Officers") formed BT & M Investments, LLC ("BT & M"),
In early 2006, PNC Bank became concerned about the financial status of OCMC. OCMC's Chief Financial Officer, Lester Li ("Li"), along with other members of OCMC's accounting department, had raised concerns about the propriety of the Adult Chat and Fat Finger Transfers. Dkt. No. 424-2 at 209-11. In particular, Li expressed concerns that the Officers and the Employee Defendants may have had some sort of ownership or management relationship with the Hall Entities. Id. at 198-200; see also Dkt. No. 424-3 at 234-42. Soon after bringing his concerns to the Board, Li was terminated and replaced as CFO by Jeff Good of Milestone Advisors. See Dkt. No. 424-1 at 24; Dkt. No. 424-11 at 5-6.
OCMC's financial situation continued to deteriorate. On May 11, 2006, PNC Bank filed suit in this Court seeking the appointment of a Receiver for OCMC. See Dkt. No. 9, PNC Bank, Nat'l Assoc. v. OCMC, Inc., No. 06-CV-755 (S.D.Ind. May 11, 2006). Following a hearing, the Court granted PNC Bank's request and appointed Meridian as Receiver for OCMC. See Dkt. No. 15, PNC Bank, Nat'l Assoc. v. OCMC, Inc., No. 06-CV-755 (S.D.Ind. May 12, 2006). As the court-appointed
PNC Bank sent Margaret Good ("Ms. Good")
On July 31, 2007, pursuant to its powers as Receiver, Meridian filed suit in this Court against numerous parties for their conduct in connection with the collapse of OCMC. Dkt. Nos. 1, 117. This suit was consolidated for discovery only with PNC Bank's case
The Court adds additional facts below as necessary.
As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. See Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). See also United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir.1990). Motions for summary judgment are governed by Federal Rule of Civil Procedure 56(c), which provides in relevant part:
In evaluating a motion for summary judgment, the Court should draw all reasonable inferences from undisputed facts in favor of the nonmoving party and should view the disputed evidence in the light most favorable to the nonmoving party. See Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir.1996). The mere existence of a factual dispute, by itself, is not sufficient to bar summary judgment. Only factual disputes that might affect the outcome of the suit in light of the substantive law will preclude summary judgment. See Anderson, 477 U.S. at 248, 106 S.Ct. 2505; JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 273 (7th Cir.1996). Irrelevant or unnecessary facts do not deter summary judgment, even when in dispute. See Clifton v. Schafer, 969 F.2d 278, 281 (7th Cir.1992). If the moving party does not have the ultimate burden of proof on a claim, it is sufficient for the moving party to direct the court to the lack of evidence as to an element of that claim. See Green v. Whiteco Indus., Inc., 17 F.3d 199, 201 & n. 3 (7th Cir.1994). "If the nonmoving party fails to establish the existence of an element essential to [her] case, one on which [she] would bear the burden of proof at trial, summary judgment must be granted to the moving party." Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996).
At the outset, the Court notes the plethora of filings by all parties in this litigation. Over 4,000 pages of discovery has been filed in connection with this Motion for Summary Judgment. See Dkt. Nos. 424, 426, 447, 458. The focus of the discussion in the briefs of the parties failed to make relevant the bulk of the filed materials. The Court is entitled to rely upon the parties to present clearly their cases for summary judgment and will not "scour the record" on behalf of either parties' position. See Bombard, 92 F.3d at 562; see also United States v. Dunkel, 927 F.2d 955, 956 (7th Cir.1991) (per curiam) ("Judges are not like pigs, hunting for truffles buried in briefs."). The court is also entitled to specific citations to the materials which support the assertions of the brief. See S.D. IND. L.R. 56.1. While this did occur on many occasions, general citations abounded. The Court will take note of the assertions in the parties' briefs to the extent that they actually correspond to designated evidence, but the Court declines the parties' implied invitation to distill the factual issues absent specific, rather than general, designations. Accord. id.
Additionally, Pence contends that Meridian's designations include inadmissible
Meridian contends that Pence violated his fiduciary duties both as an officer and as a director of OCMC. Dkt. No. 117 ¶¶ 83-91. In particular, Meridian alleges that Pence breached his duties of care, loyalty, honesty, and fidelity. Id. at ¶¶ 83-84. Additionally, Meridian contends that Pence improperly usurped corporate opportunities. Id. at ¶ 85. Both officers and directors owe a fiduciary duty to the corporation, and their actions must be for the benefit of the corporation. Marwil v. Grubbs, No. 03-CV-1165, 2004 WL 2278751, *7 (S.D.Ind. Sept. 30, 2004) (Hamilton, J.). "The fiduciary must deal fairly, honestly, and openly with his corporation. . . [and] must not be distracted from the performance of his official duties by personal interests." G & N Aircraft, Inc. v. Boehm, 743 N.E.2d 227, 240 (Ind. 2001). The personal liability of corporate officers is determined by common law rules of agency. Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228, 1231 (Ind. 1994). The duties of a corporate director are determined by statute. Id. Standards for director conduct are set forth in the Indiana Business Corporation Law ("IBCL"). IND.CODE § 23-1-35-1 (2010).
The IBCL requires that a director act in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, in a manner reasonably believed to be in the best interests of the corporation. IND. CODE § 23-1-35-1(a) (2010). Directors may be held liable for breaches of their fiduciary duties when "the breach or failure to perform constitutes willful misconduct or recklessness." IND.CODE § 23-1-35-1(e) (2010). The IBCL is strongly pro-management, and the Court starts with a presumption that directors satisfied their duty. See Shepard v. Meridian Ins. Grp., Inc., 137 F.Supp.2d 1096, 1103 (S.D.Ind. 2001) (Hamilton, J.); see also In re ITT Derivative Litigation, 932 N.E.2d 664, 670 (Ind.2010).
"It has been suggested that the director's judgment should be given the widest leeway when the subject matter is the
Officer duties are determined by common law. Winkler, 638 N.E.2d at 1231. A corporate officer "must refrain from actively and directly competing with [the corporation] for customers and employees and must continue to exert his best efforts on" the corporation's behalf. Kopka, Landau & Pinkus v. Hansen, 874 N.E.2d 1065, 1070 (Ind.Ct.App.2007). Additionally, as the corporation's agent, corporate officers may not "actively exploit their positions within the corporation for their own personal benefits" or "hinder the ability of the corporation to conduct the business for which it was developed." Am. Commercial Lines, LLC v. Ne. Mar. Inst., Inc., 588 F.Supp.2d 935, 948 n. 6 (S.D.Ind. 2008) (Barker, J.) (citing Foodcomm Int'l v. Barry, 328 F.3d 300, 303 (7th Cir.2003)). The parties dispute the effect Pence's activities, both with BT & M and with regards to the transfer of the Adult Chat Business, had on OCMC, as well as what, if any, personal benefit Pence gained from participating in these transactions. Compare Dkt. No. 423-13, 423-14, with Dkt. No. 426-2. Meridian has presented evidence sufficient to create a genuine issue of material fact as to whether Pence's activities were in breach of his fiduciary duties as an officer of OCMC.
As an alternative ground for finding a breach of fiduciary duties, Meridian asserts that Pence usurped OCMC's corporate opportunities through his activities with BT & M. Dkt. No. 117 ¶ 85. "The general rule is that the fiduciary cannot lure away corporate business or clients which in equity and fairness belongs to his corporation." Hartung v. Architects Hartung/Odle/Burke, Inc., 157 Ind.App. 546, 301 N.E.2d 240, 244 (Ind.Ct.App.1973). In describing usurpation of corporate opportunities, the Indiana Court of Appeals has stated:
Kirtley v. McClelland, 562 N.E.2d 27, 33 (Ind.Ct.App.1990) (citing Guth v. Loft, Inc., 5 A.2d 503, 510-11 (Del.1939)). Pence contends that, although BT & M was engaged in activities related to the telecommunications industry generally, the consulting work done by BT & M was not in the line of OCMC's business and, in any event, actually benefitted OCMC. See Dkt. No. 426 at 6. However, since the Hall Entities were OCMC's clients and Pence gained business from them at least in part as a result of his position at OCMC, the Court concludes that there is a genuine issue of material fact as to whether Pence's activities with BT & M constitute usurpation of corporate opportunities. Therefore, Pence's Motion for Summary Judgment as to breach of fiduciary duties as an officer is
Meridian alleges that Pence and others converted OCMC's property. Dkt. No. 117 ¶¶ 93-96. In particular, Meridian contends that Pence converted three categories of property: a laptop and BlackBerry belonging to OCMC ("physical property"), emails containing proprietary information, and a life insurance policy. Dkt. No. 467 at 7-8. The elements necessary to establish a civil cause of action for conversion are similar to those in the criminal conversion statute and, like all civil claims, must be proven by a preponderance of the evidence. McKeighen v. Daviess Cnty. Fair Bd., 918 N.E.2d 717, 723 (Ind.Ct.App.2009). To prove conversion, a plaintiff must demonstrate that the defendant "exert[ed] unauthorized control over property of another[.]" IND.CODE § 35-43-4-3 (2010). Unlike with criminal conversion, mens rea is not an element of tortious conversion. Nat'l Assoc. of Sys. Adm'rs, Inc. v. Avionics Solutions, Inc., No. 06-CV-159, 2008 WL 140773, *14 (S.D.Ind. Jan. 20, 2008) (Barker, J.).
The Court turns first to Meridian's allegations of conversion of the physical property. Pence contends that his possession of the physical property was not conversion because he was in lawful possession of the physical property previously and returned it to Meridian as soon as it was requested. Dkt. No. 469 at 14-15. When the initial possession of property is lawful, conversion occurs only after an unqualified demand for return of the property. Coffel v. Perry, 452 N.E.2d 1066, 1069 (Ind.Ct.App.1983); see also N. Elec. Co., Inc. v. Torma, 819 N.E.2d 417, 429 (Ind. Ct.App.2004) (applying similar rule with employee's retention of property at the end of his employment). However, when "a party clearly converts property to his own use, no demand is necessary." O.K. Sand & Gravel, Inc. v. Martin Marietta Corp., 786 F.Supp. 1442, 1451-52 (S.D.Ind. 1992) (quoting French v. Hickman Moving & Storage, 400 N.E.2d 1384, 1389 (Ind.Ct. App.1980)). There is no dispute that, while employed with OCMC, Pence's possession of the physical property was lawful. Additionally, Meridian has designated no evidence contradicting Pence's assertion that he returned the physical property as soon as Bernard told him that Meridian was looking for it. Dkt. No. 458-2 at 10-11. Meridian has designated no evidence that it requested the property directly from Pence. However, the parties disagree whether Pence should have known that his possession of the physical property was no longer authorized based on the termination of his employment. Viewing the evidence in the light most favorable to Meridian as the non-moving party, the Court concludes that a genuine issue of material fact exists as to conversion of the physical property. Pence's Motion for
Meridian further alleges that Pence deleted emails from the OCMC server, thus "converting" the proprietary information in them. Under certain circumstances, intangible electronic records can be converted through deletion. See, e.g., Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283, 832 N.Y.S.2d 873, 864 N.E.2d 1272, 1278 (2007) (In response to certified question from the Second Circuit, New York Court of Appeals concluded there was a cause of action for conversion based on deletion of "electronic computer records and data," including emails.); see also generally FMC Corp. v. Capital Cities/ABC Inc., 915 F.2d 300, 304-05 (7th Cir.1990) (recognizing conversion based on the information contained in intangible property). In this case, the parties vehemently dispute whether Pence in fact deleted emails and, if so, whether OCMC has any possessory interest in those emails. Compare Dkt. No. 447-10 at 4, with Dkt. Nos. 458-3, 458-4. These are factual disputes that are inappropriate for the Court to decide on summary judgment. Therefore, the Court concludes that there is a genuine issue of material fact as to Meridian's conversion claim based on the emails. Pence's Motion for Summary Judgment as to conversion of the emails also is
Turning to Pence's alleged conversion of the life insurance policy, Meridian submits deposition testimony from Ms. Good stating her belief that Pence instructed Bernard to cash in his life insurance policy without informing the Board. Dkt. No. 424-1 at 14, 106. However, Ms. Good's deposition does not include the basis for her belief, and Meridian fails to designate any other evidence regarding Pence cashing in the life insurance. "Although a nonmoving party's own deposition may constitute affirmative evidence to defeat summary judgment, conclusory statements in the deposition do not create an issue of fact." Williams v. Seniff, 342 F.3d 774, 785 (7th Cir.2003). The Court concludes that Meridian has failed to designate evidence demonstrating a genuine issue of material fact as to Pence's conversion of the proceeds of the life insurance policy, and Pence's Motion for Summary Judgment as to conversion of the life insurance policy is, therefore,
In its Complaint, Meridian alleges five bases for liability under the Indiana Crime Victim's Relief Act ("ICVRA")—criminal conversion, theft, criminal mischief, deception, and computer tampering. See Dkt. No. 117 ¶¶ 97-117. In its response to the Motion for Summary Judgment, Meridian subsequently withdrew its claim of criminal mischief.
ICVRA provides relief to persons who suffer a pecuniary loss based on violation of the provisions of Indiana Code § 35-43. IND.CODE § 34-24-3-1 (2010). See also IND.CODE §§ 35-43-4-3 (criminal conversion), -4-2 (theft), -5-3 (deception), -1-4 (computer tampering). A criminal conviction for the underlying misconduct is not necessary to maintain an action for associated ICVRA civil penalties. Decatur Ventures, LLC v. Stapleton Ventures, Inc., 373 F.Supp.2d 829, 851
Count III seeks to impose ICVRA liability based on criminal conversion. Dkt. No. 117 ¶¶ 98-101. To prove criminal conversion, the plaintiff must show all the elements of tortious conversion are present. IND.CODE § 35-43-4-3 (2010). However, the plaintiff need not show that it made an unqualified demand for the return of the property. See Lambert Enters., Inc. v. Yellowbird, Inc., 496 N.E.2d 406, 409-10 (Ind.Ct.App.1986). In addition, the plaintiff must show that the defendant's conduct was knowing or intentional. Id. As discussed above, there remains a genuine issue of material fact as to civil conversion of the physical property and the emails. As a general rule, "where the defendant's motive or state of mind is an essential element of a plaintiff's case, a court must be circumspect in granting summary judgment based solely on the defendant's categorical denial that the requisite mental state existed." Corrugated Paper Prods., Inc. v. Longview Fibre Co., 868 F.2d 908, 914 (7th Cir.1989). Meridian has brought forth evidence from which a reasonable jury could infer that Pence knowingly or intentionally exerted control over the property at issue. See, e.g., Dkt. No. 458-2 at 10-11. Therefore, the Court concludes that summary judgment on Meridian's conversion-based ICVRA claim is inappropriate at this time and therefore
In Count IV, Meridian seeks ICVRA liability based on theft. Dkt. No. 117 ¶¶ 103-06. To prove theft, a plaintiff must show that the defendant engaged in criminal conversion with the intent to deprive another person of the value of the property at issue. IND.CODE § 35-43-4-2 (2010). As discussed above, the Court concludes that a genuine issue of material fact exists as to criminal conversion. Intent to deprive may be proven by unauthorized possession combined with "the totality of circumstances surrounding the events" of a case. Collins v. State, 169 Ind.App. 375, 348 N.E.2d 413, 415 (Ind.Ct. App.1976) (citing Robinson v. State, 257 Ind. 38, 271 N.E.2d 727 (1971) and Tuggle v. State, 253 Ind. 279, 252 N.E.2d 796 (1969)). Viewing the evidence in the light most favorable to Meridian, the Court concludes that a genuine issue of material fact exists as to whether Pence (1) converted the property at issue and (2) intended to deprive OCMC of the property's value. Therefore, summary judgment on Meridian's theft-based ICVRA claim is
Count VI seeks deception-based ICVRA liability. Dkt. No. 117 ¶¶ 114-17. ICVRA liability for deception may be imposed when the defendant knowingly or intentionally makes a false or misleading written statement with the intent to obtain property. IND.CODE § 35-43-5-3 (2010). Therefore, the key issue on summary judgment is whether Pence made a false or misleading written statement to obtain OCMC property. Meridian contends that Pence made a false or misleading written statement when he communicated to Hall that OCMC did not want the Adult Chat Business anymore, as well as allowing others to communicate the same information. Dkt. No. 447 at 36-37. However, Meridian's designated evidence indicates that this information was communicated to Hall during phone conversations. See Dkt. No. 447-4 at 2-3. Deception specifically requires a written statement. See IND.CODE § 35-43-5-3 (2010); see also Dkt. No. 485 at 16. Because Meridian has not shown a
Finally, Count VII seeks to impose ICVRA liability based on computer tampering. Dkt. No. 117 ¶¶ 119-21. It appears that this allegation also is based on Pence's alleged deletion of emails. See Dkt. No. 447 at 38. To prove computer tampering, a plaintiff must show that the defendant "knowingly or intentionally alter[ed] or damage[d] a computer program or data, which comprises a part of a computer system or computer network without the consent of the owner of the computer system or computer network[.]" IND.CODE § 35-43-1-4(b) (2010). The statutory definitions of "data" and "computer system" are conceivably broad enough to encompass the activity alleged in this case. See IND.CODE §§ 35-43-1-4, -2-3 (2010). However, it is questionable whether Indiana courts would interpret the computer tampering statute so broadly.
Meridian alleges that Pence and others committed violations of the Computer Fraud and Abuse Act ("CFAA"), 18 United States Code Section 1030, by damaging OCMC's protected computers. Dkt. No. 117 ¶¶ 123-28. In particular, Meridian's complaint seeks to invoke the civil penalties under CFAA, which allow for recovery of compensatory damages (limited to economic damages) for violations of CFAA criminal prohibitions when the resulting damage is valued at $5000 or more. 18 U.S.C. § 1030(g) (2010); see also id. at (c)(4)(A)(i)(I) (establishing $5000 minimum damage requirement). A person violates CFAA by "knowingly caus[ing] the transmission of a program, information, code, or command, and as a result of such conduct, intentionally caus[ing] damage without authorization, to a protected computer." 18 U.S.C. § 1030(a)(5)(A)(i) (2010). For CFAA purposes, transmission can be accomplished either over the Internet or through a physical medium such as a compact disc. Int'l
Pence challenges Meridian's CFAA claim in two ways. First, he asserts that there is no evidence that he deleted any data from an OCMC computer. Dkt. No. 426 at 6. Second, Pence contends that even if deletion of data occurred, there was no damage to OCMC's computers. Id.; see also Dkt. No. 424 at 21-22. Because the statute defines "damage" to include "any impairment to the integrity or availability of data, a program, a system, or information," 18 U.S.C. § 1030(e)(8) (2010), the Court concludes that Pence's second argument must fail, as deletion of files impairs the availability of data and, as such, is covered under the statute. See, e.g., Monson v. Whitby Sch., Inc., No 3:09-CV-1096, 2010 WL 3023873, at *3 (D.Conn. Aug. 2, 2010) (under some circumstances, deletion of an employee's own email can give rise to a CFAA claim); see also Condux Int'l, Inc. v. Haugum, No. 08-4824, 2008 WL 5244818, at *8 (D.Minn. Dec. 15, 2008) (same with deletion of evidence of computer use).
Because the deletion of an employee's emails can serve as the basis for a CFAA claim in certain circumstances, the issue becomes whether Meridian has brought forth evidence that Pence in fact deleted emails without authorization. The Seventh Circuit recognizes that previously authorized use of a computer system may become unauthorized when an employee breaches his duty of loyalty to his employer. Citrin, 440 F.3d at 420-21. To substantiate its CFAA claim, Meridian has presented a report from Tribridge ("Tribridge Report") suggesting that between May 10 and May 11, 2006, Pence's email box on the server was reduced in size by ninety-eight percent. See Dkt. No. 447-10 at 4. Viewing this evidence in the light most favorable to Meridian, the non-moving party, a reasonable jury could conclude that Pence deleted the email in question. Pence has presented evidence questioning the methodology and conclusions of the Tribridge Report. See Dkt. Nos. 458-3, 458-4. However, this evidence merely confirms that there exists a genuine issue of material fact as to whether Pence in fact deleted email without authorization in violation of CFAA. Therefore, summary judgment is
Meridian contends that Pence tortiously interfered with OCMC's existing contracts with its customers and vendors to further his own business opportunities. Dkt. No. 117 ¶¶ 130-34. Indiana courts recognize a cause of action for tortious interference with contract when a defendant "induces a party to a contract to break it, intending to injure another person or to get benefit for himself ... [without] sufficient justification for the interference." Bragg v. City of Muncie, 930 N.E.2d 1144, 1147 (Ind.Ct.App.2010). To prove tortious interference with contract, the plaintiff must show that a valid contract was in place, the defendant knew about the contract, defendant's intentional inducement, and lack of justification. Allison v. Union Hosp., Inc., 883 N.E.2d 113, 118 (Ind.Ct.App.2008). Establishing a lack of justification requires a showing that "the interferer acted intentionally, without a legitimate business purpose, and the breach is malicious and exclusively directed to the injury and damage of another." Bilimoria Computer Sys., LLC v. Am. Online, Inc., 829 N.E.2d 150, 156-57 (Ind.Ct. App.2005). In evaluating the justification, the court seeks to determine whether the defendant's conduct was "fair and reasonable under the circumstances." Id. at 156.
In addition to tortious interference with contract, Meridian contends that Pence's activities amount to tortious interference with business relationships. Dkt. No. 117 ¶¶ 136-41. The elements of tortious interference with a business relationship are similar to the elements of tortious interference with contract: the existence of a business relationship, defendant's knowledge of that relationship, intentional interference with the relationship through unlawful acts, absence of justification, and damages. Bridgestone/Firestone, Inc. v. Lockhart, 5 F.Supp.2d 667, 686 (S.D.Ind. 1998) (Hamilton, J.). The illegality of the acts causing the interference is important, as "this tort requires some independent illegal action." Brazauskas v. Ft. Wayne-S. Bend Diocese, Inc., 796 N.E.2d 286, 291 (Ind.2003); see also Great Escape, Inc. v. Union City Body Co., Inc., 791 F.2d 532, 542 (7th Cir. 1986). Sufficiently "wrongful" conduct, such as a breach of fiduciary duty, can satisfy the requirement of independent illegal action. See Economation, Inc. v. Automated Conveyor Sys., Inc., 694 F.Supp. 553, 557 (S.D.Ind.1988) (Tinder, J.).
As discussed above, Meridian has created a genuine issue of material fact as to whether Pence breached his fiduciary duties to OCMC. Additionally, it is undisputed that OCMC had business relationships with the customers whose accounts were transferred to the Hall Entities and Pence knew of the existence of those relationships. Pence claims that his actions were justified. Dkt. No. 426 at 6. While "the existence of a legitimate reason for the defendants' actions will provide the necessary justification to preclude judgment for the plaintiff in the tort action," Economation, 694 F.Supp. at 562 (citing Flintridge Station Assoc. v. Am. Fletcher Mtg. Co., 761 F.2d 434, 441 (7th Cir.1985)), there is clearly a genuine dispute regarding whether the transfer of the Adult Chat and Fat Finger Businesses to the Hall Entities actually benefitted OCMC such that the transfers were justified. Compare Dkt. No. 423-13, 423-14, with Dkt. No. 426-2. Therefore, Pence's Motion for Summary Judgment on Meridian's tortious interference with business relationships claim must be
Meridian initially brought a claim under the Indiana Uniform Trade Secrets Act. Dkt. No. 117 ¶¶ 142-47. However, Meridian subsequently has withdrawn this claim. Dkt. No. 447 at 40. Therefore, Pence's Motion for Summary Judgment on this claim is
Meridian further alleges that Pence's activities amount to unfair competition against OCMC. Dkt. No. 117 ¶¶ 149-51. Based on Meridian's briefing, it appears
Under Woodward Insurance, a claim for unfair competition may be brought when the employee uses "trade secrets or other confidential information acquired in the course of his employment for his benefit or that of a competitor in a manner which is detrimental to his former employer." Woodward Ins., 437 N.E.2d at 67. Under this formulation, the focus is largely on whether there were efforts by the employer to keep the information at issue confidential. Id. at 67-69 (unfair competition tort "contemplates the use of trade secrets or confidential information that is not available to anyone except a trusted employee."). In this case, the purported "confidential information" is the identities of OCMC's customers. However, there is no evidence that OCMC took steps to keep this information confidential. Therefore, the Court concludes Meridian has not brought forth evidence sufficient to create a genuine issue of material fact under the Woodward Insurance formulation of unfair competition. Accord. Ortiz, 94 F.3d at 1124 (requiring summary judgment when non-moving party fails to bring forth evidence on element for which it has the ultimate burden of proof).
In the alternative, a cause of action for unfair competition arises when there is "any conduct, the natural and probable tendency and effect of which is to deceive the public so as to pass off goods or business of one person as and for that of another." Felsher, 755 N.E.2d at 598 (citing Hartzler v. Goshen Churn & Ladder Co., 55 Ind.App. 455, 104 N.E. 34, 37 (1914)).
Meridian seeks quantum meruit recovery based on the alleged unjust enrichment of the Hall Entities at OCMC's expense. Dkt. No. 117 ¶¶ 153-59. In particular, Meridian alleges that Pence and others improperly transferred the Adult Chat Business to Navicomm and received significant payments from Navicomm that should have gone to OCMC instead of Pence. Id. at ¶¶ 153-55. To recover under a theory of unjust enrichment, "a party must show that a measurable benefit has been conferred on a party under such circumstances that retention of the benefit without payment would be unjust." Stoneware, Inc. v. TecServ, Inc., No. 07-CV-1188, 2009 WL 5175193, at *8 (S.D.Ind. Dec. 21, 2009) (Barker, J.). In other words, unjust enrichment recovery is possible only where disgorgement of the benefit received by the defendant is possible. See Lady Di's, Inc. v. Enhanced Servs. Billing, Inc., No. 09-CV-340, 2010 WL 4751659, at *8-*9 (S.D.Ind. Nov. 16, 2010) (Barker, J.). In addition, Indiana law only permits recovery under the equitable principle of unjust enrichment when no adequate remedy at law exists. King v. Terry, 805 N.E.2d 397, 400 (Ind.Ct.App.2004); see also Indiana ex rel. Zoeller v. Pastrick, 696 F.Supp.2d 970, 981 n. 7 (N.D.Ind.2010) (same).
To prevail on its unjust enrichment claim, Meridian must show that Pence has retained a benefit rightly belonging to OCMC. Accord. Lady Di's, 2010 WL 4751659, at *9. However, no evidence has been introduced that Pence has retained any benefit gained as a result of the transfer of business to the Hall Entities. The only conceivable "benefit" conferred on Pence as a result of the transfer of business to the Hall Entities is the loan from the Hall Entities to BT & M to allow Pence, Benge, and Bernard to meet the capital call, and the evidence shows that the proceeds of this loan were given to OCMC. See Dkt. No. 442-19 at 237-40. Despite repeated accusations to the contrary, Meridian has not brought forth any evidence suggesting that funds given to BT & M by the Hall Entities should have, in fact, gone to OCMC. Pence's Motion for
Lastly, Meridian alleges that Pence and others engaged in a civil conspiracy and seeks to hold Pence personally liable for the actions taken by all of the other defendants. Dkt. No. 117 ¶¶ 161-65. Under Indiana law, there is no separate cause of action for civil conspiracy, only for "damages resulting from civil conspiracy" based on concerted tortious action. K.M.K. v. A.K., 908 N.E.2d 658, 663 (Ind. Ct.App.2009). As such, civil conspiracy cannot form the basis for a separate count of liability. Pence is, therefore,
For the foregoing reasons, Pence's Motion for Summary Judgment (Dkt. No. 425) is
IT IS SO ORDERED.
Pending before the Court are two of defendant's, Joseph Pence ("Pence"), motions. Pence's Motion for Partial Reconsideration of the 1/14/11 Order ("Motion to Reconsider") [Dkt. No. 507] asks this Court to reconsider its decision denying partial summary judgment to Pence on claims "based on Pence's alleged deletion of emails from the OCMC server." Pence's Motion in Limine on ESI ("Motion in Limine") [Dkt. No. 508] seeks to prevent plaintiff, Meridian Financial Advisors, Ltd. d/b/a the Meridian Group ("Meridian"), from using certain electronically stored information ("ESI") and evidence based upon said ESI at trial in this matter. The Court has considered the parties' arguments and, for the reasons set forth below,
On July 12, 2010, following briefing and a hearing, the Court sanctioned Meridian both for discovery violations and abuse of the judicial process connected to Meridian's relationship with Ann Bernard and Erin Ray, two potential witnesses in this case. Dkt. No. 470 at 24. The Court concluded that Meridian intentionally failed "to identify ESI from the OCMC hard drives that Meridian had in its possession and found substantively relevant by the deadline for Initial Disclosures" in violation of Federal Rule of Civil Procedure 26(a). Id. As a sanction for Meridian's discovery rule violations, "Meridian is precluded from using this ESI in this case." Id.
On January 14, 2011, the Court issued an Order on Pence's request for summary judgment on all Meridian's claims against him. See Dkt. No. 499. Among other determinations, the Court concluded that genuine issues of material fact still existed as to whether Pence in fact deleted emails
In the present Motion to Reconsider and Motion in Limine, Pence argues that the Tribridge Report should be excluded and, consequently, summary judgment granted in his favor on counts relying upon it because it is based on ESI excluded by the Court in its July 12, 2010 Order ("Sanctions Order"). Meridian contends that the Sanctions Order did not exclude the ESI underlying the Tribridge Report and, alternatively, that Pence waived any challenge to the admissibility of Tribridge Report by failing to raise objections at the summary judgment stage.
The Court includes additional facts below as necessary.
The Federal Rules of Evidence as a whole include a presumption of admissibility for relevant evidence. United States v. Seals, 419 F.3d 600, 612 (7th Cir.2005); see also FED.R.EVID. 403. The sanctions excluding certain ESI in this case were issued pursuant to the Court's discretion under Federal Rule of Civil Procedure 37, and Rule 37 sanctions "must be proportionate to the circumstances surrounding the failure to comply with discovery." Langley ex rel. Langley v. Union Elec. Co., 107 F.3d 510, 514 (7th Cir.2003) (quoting Crown Life Ins. v. Craig, 995 F.2d 1376, 1382 (7th Cir.1993); Newman v. Metro. Pier & Expo. Auth., 962 F.2d 589, 591 (7th Cir.1992)). With these guiding principles in mind, the Court examines the scope of ESI exclusion in the Sanctions Order.
Reviewing the Sanctions Order, the Court is not convinced that all ESI underlying the Tribridge Report is excluded. Clearly, the Sanctions Order excludes the so-called "secret emails" disclosed to the Magistrate Judge at the May 16, 2008, settlement conference. Dkt. No. 470 at 17. However, it is not clear that all the information underlying the Tribridge Report comes from the secret emails as opposed to other categories of ESI possessed by Meridian. At this point in the litigation, the Court will err on the side of admission of relevant evidence, including the Tribridge Report. If Pence can show that the Tribridge Report is based the secret emails—either their existence or their contents —the Court will reevaluate its admissibility.
For the reasons set forth herein, defendant Joseph Pence's Motion for Partial Reconsideration of the 1/14/11 Order [Dkt. No. 507] is
IT IS SO ORDERED.
755 N.E.2d at 598 (citing W. Page Keeton, Prosser and Keeton on the Law of Torts 1015 (5th ed.1984)). Specific types of unfair competition recognized under the Felsher formulation include "passing off," trade name infringement, trademark infringement, and price fixing. See generally Keaton & Keaton v. Keaton, 842 N.E.2d 816, 819-21 (Ind.2006). However, the Court has not found any cases expanding the tort of unfair competition to encompass all claims of tortious interference with business relationships, and the Court declines to create an additional basis for liability that has not been previously recognized under Indiana law. Accord. Ind. Grocery Co., Inc. v. Super Valu Stores, Inc., 684 F.Supp. 561, 580-81 (S.D.Ind.1988) (McKinney, J.) (limiting unfair competition to "claims of passing off and other similar situations involving consumer deceit."). Based on the facts of this case, the Court concludes that the "passing off" analysis is the only applicable basis in this for unfair competition liability under the Felsher formulation.
