JOHN R. TUNHEIM, District Judge.
Plaintiff Alexander M. Shukh filed this action against defendants Seagate Technology, LLC, Seagate Technology, Inc., and Seagate Technology (collectively "Seagate"), alleging claims arising out of Seagate's employment and termination of Shukh. Seagate counterclaimed against Shukh for breach of the parties' employment agreement, conversion, and replevin. Seagate's claims arise out of Shukh's duplication and retention of over 49,000 documents owned by Seagate. Shukh moves to dismiss the counterclaims. Seagate moves for summary judgment on all of its counterclaims, or, in the alternative, for a preliminary injunction on the breach of contract counterclaim or for the return of documents pursuant to the Court's inherent authority. Because there is no material issue of fact as to Shukh's breach of the document return provision of the employment agreement, the Court will grant Seagate's motion for summary judgment as to the breach of contract claim. The Court will grant Shukh's motion to dismiss as to the conversion and replevin counterclaims because the heart of those claims lies in the breach of contract claim. The Court will deny the remaining motions made by Shukh and Seagate.
Shukh worked at Seagate from around September 15, 1997 until sometime after he was notified of his termination on January 14, 2009, to be effective March 16, 2009. (Am. Compl. ¶¶ 33, 34, April 7, 2010, Docket No. 7.) Shukh signed an agreement entitled At-Will Employment, Confidential Information and Invention Assignment Agreement on September 15, 1997. (Am. Compl., Ex. 1.) Seagate alleges Shukh breached the following provision of the agreement:
(Am. Compl., Ex. 1 at 3.) Prior to Shukh's termination and immediately following his notice of termination, Shukh made copies of approximately 49,607 pages of Seagate's documents.
Seagate repeatedly requested the return of the documents, but Shukh has refused. First, on January 15, 2009, after Shukh received his notice of termination, Shukh's supervisor was informed that Shukh was copying and taking documents from Seagate. (Allen Decl. ¶ 4, June 13, 2011, Docket No. 166.) When Shukh's supervisor requested the return of the documents, Shukh refused. (Allen Decl. ¶¶ 4-5.) On May 26, 2009, Seagate sent a letter to Shukh, again requesting the return of the documents, but no documents were returned. (Mem. in Supp., Ex. H, Docket No. 163-8.) Later that year, Shukh's attorney indicated that he had possession of about twelve documents. (Mem. in Opp'n to Mot. for Summ. J., Exs. B-4, B-6, Docket No. 189-2.) Seagate first learned that Shukh had taken many more documents in February of 2010, when Shukh filed his complaint, referencing numerous Seagate documents. (Reply Mem. 4, Aug. 2, 2011, Docket No. 195.) Seagate sent a letter to Shukh the following month, once more requesting the return of Seagate's documents, citing the terms of the employment agreement (Mem. in Supp., Ex. J, June 13, 2011, Docket No. 163-10); Shukh refused.
Seagate prepared a motion for the return of documents and initially scheduled a hearing on the motion for June 2, 2010. (Stipulation 2, May 17, 2010, Docket No. 12.) As a result of a trial in which Shukh's counsel was involved, the parties agreed to delay the hearing until after August 16, 2010. (Id. at 3.) Seagate moved for return of its documents in August. (Mot. to Disqualify Counsel and for Return of Documents, Aug. 30, 2010, Docket No. 25.) A hearing was held before the Magistrate Judge on September 28, 2010, and Shukh's counsel admitted that Shukh had taken approximately 50,000 documents. (Mots. Hr'g Tr. at 36:10-14, Sept. 28, 2010.) At that hearing the Magistrate Judge ordered Shukh to copy all of the documents and provide them to Seagate, so that Seagate could examine them and determine whether there are any privilege concerns. (Docket No. 61.) Seagate alleges that this hearing was the first time it learned the extent of the documents taken, and it subsequently counterclaimed against Shukh on April 15, 2011, seeking the return of all of the documents. (Ans. and Countercl., Apr. 15, 2011, Docket No. 142.) Shukh made copies of the documents, and gave those additional copies to Seagate. (Am. Countercl. ¶ 20.) However, to date, none of Shukh's own copies of Seagate's documents appear to have been returned to Seagate.
Shukh moved to dismiss Seagate's counterclaims for failure to state a claim on May 13, 2011. (Mot. to Dismiss, May 13, 2011, Docket No. 150.) Seagate moved for summary judgment on its counterclaims on June 13, 2011. (Mot. for Summ. J., June 13, 2011, Docket No. 169.) In support of its motion, Seagate submitted a DVD containing a copy of the documents at issue under protective seal. (Drown Decl., Ex. P, June 13, 2011, Docket No. 163-16.) Additionally, Seagate has produced many of the documents at issue in discovery, but withheld approximately 392 documents under assertions of privilege. (Letter to Dist. Judge, Sept. 23, 2011, Docket No. 202.) Those documents are now the subject of a motion to compel made by Shukh, which will be decided by the Magistrate Judge. (Am. Mot. to Compel, Oct. 7, 2011, Docket No. 206.) Shukh later moved to dismiss Seagate's counterclaims for lack of jurisdiction. (Mot. to Dismiss, Oct. 14, 2011, Docket. No. 214.)
Shukh moves to dismiss Seagate's counterclaims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Although a complaint need not contain "detailed factual allegations" to survive a motion to dismiss, "a plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). "Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility" and must be dismissed. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (internal quotation marks omitted). In reviewing a complaint on a motion to dismiss, the Court takes as true all allegations in the complaint, and construes it in the light most favorable to the nonmoving party. Carton v. Gen. Motors Acceptance Corp., 611 F.3d 451, 454 (8
Seagate moves for summary judgment pursuant to Federal Rule of Civil Procedure 56. Summary judgment is appropriate where there are no genuine issues of material fact and the moving party can demonstrate that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and a dispute is genuine if the evidence is such that it could lead a reasonable jury to return a verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A court considering a motion for summary judgment must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences that can be drawn from those facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). "To defeat a motion for summary judgment, a party may not rest upon allegations, but must produce probative evidence sufficient to demonstrate a genuine issue [of material fact] for trial." Davenport v. Univ. of Ark. Bd. of Trustees, 553 F.3d 1110, 1113 (8
Shukh moves to dismiss Seagate's breach of contract claim for failure to state a claim. Specifically, Shukh argues that Seagate has not adequately pleaded the elements of damages and satisfaction of conditions precedent. Seagate amended its counterclaim to address these concerns and the Court finds that Seagate has adequately pleaded these elements, as discussed in further detail below. For these reasons, the Court will deny Shukh's motion to dismiss for failure to state a claim as to the breach of contract counterclaim.
Additionally, Shukh moves to dismiss Seagate's breach of contract claim under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, arguing that Seagate's production of documents in discovery mooted its claim for breach of contract. Seagate did not, however, produce all of the documents at issue; it withheld approximately 392 documents due to privilege claims. At the hearing on this matter, counsel for Shukh admitted that not all documents were produced in discovery, and Shukh has a motion to compel pending before the Magistrate Judge. (Mots. Hr'g Tr. at 6:16-22, Nov. 3, 2011, Docket No. 231.) The Court concludes it has jurisdiction at this time and will deny the 12(b)(1) motion because it finds at least some documents have not yet been produced.
Seagate moves for summary judgment on its counterclaim for breach of contract. To establish a breach of contract claim under Minnesota law, the plaintiff must prove that (1) an agreement was formed, (2) the plaintiff performed any conditions precedent, and (3) the defendant breached the agreement. Nicollet Cattle Co. v. United Food Group, LLC, No. 08-5899, 2010 WL 3546784, at *7 (D. Minn. Sept. 7, 2010) (citing Commercial Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn. Ct. App. 2006)). In addition, some Minnesota cases hold that damages are a required element, see, e.g., Parkhill v. Minn. Mut. Life Ins. Co., 174 F.Supp.2d 951, 961 (D. Minn. 2000), while others indicate that specific performance may be requested in lieu of damages. See Loppe v. Steiner, 699 N.W.2d 342, 349 (Minn. Ct. App. 2005).
Seagate argues that there is no genuine issue of fact on any of the elements required to prove a breach of contract claim. Seagate supports its claim with ample record evidence that Shukh does not dispute.
Second, any conditions precedent have been satisfied. A condition precedent "is one which is to be performed before the agreement of the parties becomes operative." Lake Co. v. Molan, 131 N.W.2d 734, 740 (Minn. 1964). The agreement generally required Shukh to agree to its terms "[a]s a condition of [his] employment with Seagate." (Am. Compl., Ex. 1 at 1.) Additionally, the document return provision was to be complied with "at the time of leaving the employ of" Seagate. (Am. Compl., Ex. 1 at 3.) There is no material issue of fact that Seagate employed Shukh nor that Shukh has left the employ of Seagate. (Am. Compl. ¶¶ 33, 34.)
Finally, there is no issue of fact that Shukh breached the contract. The terms of the employment agreement are clear: upon Shukh's termination he was to return Seagate's "records, data, notes, reports, ... correspondence, specifications, drawings, blueprints, sketches, ... other documents or property, or reproductions of any aforementioned items. ..." (Am. Compl., Ex. 1 at 3.) Shukh admitted that he took and retained Seagate's documents. (Stipulation 2; Mots. Hr'g Tr. 26-27, Sept. 28, 2010; see also Am. Compl. ¶¶ 241, 250, 252.)
A review of the evidence submitted in this action indicates that there is no genuine issue of material fact on the elements of breach of contract. However, Shukh has raised a number of defenses to Seagate's breach of contract claim which the Court now addresses.
Shukh asserts that the counterclaims are moot because Seagate attached a copy of the documents to its motion, that the counterclaims are preempted by federal patent law and the Constitution, that he needs additional time for discovery, that Seagate's request for equitable remedies is barred by its unclean hands, and that Seagate has waived its rights under the contract due to its delay in seeking legal relief. The Court considers each of these defenses in turn.
Shukh argues that Seagate's counterclaims are moot because Seagate later disclosed all of the documents at issue in support of its summary judgment motion. Shukh cites to cases that involve parties who initially disclosed materials in discovery and later attempted to obtain a protective order or assert a privilege.
Shukh also defends against Seagate's counterclaims by arguing that they are preempted by federal patent law because he needs the documents to prove his inventorship claims. In addition, he argues that the return of the documents would conflict with the Patent Clause of the Constitution, U.S. Const. art. I, § 9, cl. 8, and therefore may not be ordered.
Shukh submits a declaration seeking additional time for discovery on its defenses and claims against Seagate. A "party opposing summary judgment is required to file an affidavit ... showing what specific facts further discovery might uncover." Roark v. City of Hazen, 189 F.3d 758, 762 (8
Shukh also raises the equitable defense of unclean hands to bar Seagate's request of specific performance of the contract. "The doctrine of unclean hands will be invoked only to deny equitable relief to a party whose conduct has been unconscionable by reason of a bad motive." Wind Turbine Indus. Corp. v. Jacobs Wind Elec. Co., Inc., No. 09-36, 2010 WL 4723385, at *12 (D. Minn. Nov. 16, 2010). Shukh argues that his claims against Seagate of correction of inventorship and fraud support a finding that Seagate has unclean hands. This Court addressed Shukh's argument of unclean hands in its Order dated March 30, 2011 when it dismissed Shukh's request for a declaration that the document return provisions of the employment agreement are unenforceable.
A party may not merely raise the defense of unclean hands to contest a motion for summary judgment without providing any evidentiary support.
Shukh asserts that Seagate waived its rights to enforce the document return provision of the contract, because Seagate first asked Shukh to return the documents on his last day in January 2009, but waited sixteen months to take any legal action to retrieve the documents and two and a half years before moving for summary judgment on this issue. Waiver requires "an intentional relinquishment of a known right, and it must clearly be made to appear from the facts disclosed." Citizens Nat'l Bank v. Mankato Implement, Inc., 441 N.W.2d 483, 487 (Minn. 1989) (internal quotation marks omitted). Mere unexplained delay is not construed as a voluntary relinquishment of contractual rights. Har-Mar, Inc. v. Thosen & Thorshov, Inc., 218 N.W.2d. 751, 756 (Minn. 1974). The waiving party must also have had "full knowledge of the facts." Freitag v. Wolf, 226 N.W.2d 868, 870 (Minn. 1975).
The Court concludes that Seagate's delay in seeking legal enforcement does not constitute waiver. Seagate showed that it sought enforcement of the document return provision at regular intervals since Shukh's termination in 2009. Seagate has made numerous requests for the documents and all of them have been refused or ignored by Shukh. Further, Seagate could not have waived its rights prior to knowing how many documents were involved, and Seagate claims that it did not have full knowledge of the facts until a hearing held September 28, 2010. After the hearing, Seagate timely filed its counterclaim for the return of the documents. Additionally, Seagate also notes that the employment agreement included a clause requiring "any waiver of rights under this agreement" to be "in writing signed by the party to be charged." (Am. Compl., Ex. 1 at 4.) Because Seagate showed no intention of relinquishing its rights by repeatedly asking for the documents, and because Shukh's employment agreement clearly required the return of the documents at issue, the Court finds that the defense of waiver does not bar Seagate's enforcement of the contract.
In sum, the Court finds none of the defenses that Shukh raised against Seagate's counterclaims are adequate to defeat Seagate's motion for summary judgment on the breach of contract claim. Shukh has not disputed Seagate's proof of the elements of the breach claim, and his defenses are insufficient. The Court will grant summary judgment in favor of Seagate as to the breach of contract claim and will order specific performance in the form of Shukh returning the relevant documents.
Seagate moved in the alternative for a preliminary injunction on the breach of contract claim, asking this Court to order the return of the documents pending the resolution of the action. The Court denies Seagate's motion for a preliminary injunction because it is rendered moot by the Court's grant of summary judgment on the breach of contract claim.
Seagate has also asserted counterclaims of conversion and replevin against Shukh based on his appropriation of its documents. Under Minnesota law, conversion is "an act of willful interference with personal property, done without lawful justification by which any person entitled thereto is deprived of use and possession." DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997) (internal quotation marks omitted). Punitive damages for conversion may be awarded under Minn. Stat. § 549.20. Goodwin v. Harmon, No. 97-1123, 1997 WL 769491, at *2 (Minn. Ct. App. Dec. 16, 1997). "A replevin action seeks to regain possession of items" and is governed by Minnesota statute. B-Kam, LLP v. Floding, No. 08-5168, 2011 U.S. Dist. LEXIS 34683, at *26 (D. Minn. Mar. 30, 2011); see Minn. Stat. §§ 565.21-23. A judgment in replevin may include "damages for the detention, or the taking and withholding." Minn. Stat. § 548.04.
Shukh moves to dismiss Seagate's conversion and replevin claims on two theories: one, that the heart of the action is a breach of contract and there is no distinct tort; and, two, that he did not take original documents, but only copies. Seagate moves for summary judgment on both claims.
Shukh moves to dismiss Seagate's conversion and replevin claims on grounds that the heart of the action is a breach of contract. "Minnesota law does not recognize an independent tort for conduct that merely constitutes a breach of contract." First Integrity Bank, N.A. v. Ohio Cas. Ins. Co., Civ. No. 05-2761, 2006 WL 1371674, at *6 (D. Minn. May 15, 2006). If the "actions at the heart" of a tort claim "are identical to those which constitute a breach of contract," there is no separate tort cause of action. Id. "A tort is independent from a breach of contract if a relationship would exist which would give rise to the legal duty without enforcement of the contract promise itself." Best Buy Stores, L.P. v. Developers Diversified Realty Corp., No. 05-2310, 2007 U.S. Dist. LEXIS 86283 (D. Minn. Nov. 21, 2007) (internal quotations marks omitted). In order for the plaintiff to recover under a breach of contract
In this case, the actions at the heart of the conversion and replevin claim (Shukh's taking and retention of Seagate's documents) are the same as those giving rise to the breach of contract. Minnesota courts have not recognized a separate legal duty to return an employer's documents.
Shukh also moves to dismiss the conversion and replevin claims on grounds that Seagate only alleged that Shukh took copies, and making copies does not amount to conversion because it does not deprive the owner of the original documents. Seagate counters that Shukh took Seagate's physical property by using its paper, ink, and photocopier to make the copies at issue. It is not clear whether Minnesota law acknowledges an action in conversion or replevin for copies of documents when the claimant retains the originals. The Court finds that it need not reach that determination because Shukh's heart of the action argument effectively disposes of Seagate's counterclaims for conversion and replevin. Because the Court will grant Shukh's motion to dismiss as to conversion and replevin, Seagate's motion for summary judgment on those claims is rendered moot.
Seagate argues that the Court has inherent power to compel the return of its documents. In support, it cites cases from other districts and state courts wherein a court ordered a party that obtained documents outside the course of discovery to return the documents. Shukh contends the request is improper because Federal Rule of Civil Procedure 65 governs motions for the return of documents. The Supreme Court has held that
Chambers v. NASCO, Inc., 501 U.S. 32, 50, (1991). Because the Court has other sufficient bases upon which to order the return of documents, the Court will deny Seagate's motion requesting the Court to exercise its inherent powers.
Based on the foregoing, and the records, files, and proceedings herein,
1. Plaintiff's Motion to Dismiss Counterclaims for Lack of Subject Matter Jurisdiction on the Grounds of Mootness Based on Changed Circumstances [Docket No. 214] is
2. Plaintiff's Motion to Dismiss Counterclaims [Docket No. 150] is
3. Defendants' motions for summary judgment, a preliminary injunction, and the return of documents [Docket No. 169] are
Based upon the Court's granting Defendants' motion for summary judgment as to its counterclaim for breach of contract,
Fed. R. Civ. P. 56(e). In reaching its decision, the Court considered the supporting materials provided by both parties in the light most favorable to Shukh.