JOSEPH N. LAPLANTE, District Judge.
If this battle between brothers over their failed business does not quite reach Biblical proportions, cf. Genesis 4:1-16 (Cain and Abel), mythical proportions, cf. Plutarch, Plutarch Lives, I, Theseus and Romulus, Lycurgus and Nurma, Solon and Pulicola (1914) (Romulus and Remus), or even modern pulp literary proportions, cf. Mario Puzo, The Godfather (1969) (Michael and Fredo Corleone, also popularized on film), it easily equals the great "brother versus brother" storylines of professional wrestling,
This particular action was commenced by Glenn, but, as explained infra, Alan has since consented to the entry of judgment on one of Glenn's claims — seeking a declaration that Glenn's membership in Mii ceased as of February 4, 2004 — and the rest (with one minor exception) have been dismissed, either by Glenn or the court. See Order of March 22, 2010 (document no. 70). Alan, however, responded to Glenn's complaint in this action with a counterclaim in 14 counts, which has since grown to 21 counts as the result of several separate amendments. Alan has also joined Mii as a party to the counterclaim, as ordered by the court. See id.
The gist of the counterclaim is that Glenn caused Mii to fail through a variety of wrongful conduct, viz., mismanaging, its relationship with a key customer, Lovejoy, Inc., and then, after withdrawing from Mii, misappropriating that relationship as well as Mii's intellectual property. This court has supplemental jurisdiction over the counterclaim, see 28 U.S.C. § 1367(a), by virtue of its federal-question jurisdiction over Glenn's ERISA claim, see id. § 1331, and has elected to exercise that jurisdiction even after the federal claim was dismissed, based on the parties' expressed
Glenn argues, among other things, that (1) he did not agree to assign his intellectual property rights to either Alan or Mii, (2) there is no evidence Mii owned any protectible trade secrets, (3) Glenn had no duties to Mii (or Alan), at least after withdrawing from Mii in February 2004, (4) though Glenn did business with Lovejoy after his withdrawal from Mii, that did not amount to tortious interference with its relationship with Lovejoy, and (5) even if his withdrawal from Mii breached the limited liability company agreement, it did not cause any harm.
As fully explained infra, the court agrees with Glenn that he is entitled to summary judgment. Although this case had been pending for nearly three years before Alan filed his opposition to Glenn's motion for summary judgment (not counting the time the case was stayed), Alan has not developed any evidence to support several propositions that are essential to his counterclaim. First, there is no evidence of any agreement by Glenn to assign his interest in any intellectual property to Mii or Alan, only to another entity that is not a party to this case. Second, Alan has not properly identified, let alone come forward with evidence tending to show, any trade secret allegedly misappropriated by Glenn. Third, Glenn's duties to Mii (or Alan) by virtue of his management of or membership in Mii were limited to refraining from gross negligence or willful misconduct, and Alan has not come forward with evidence from which a rational factfinder could conclude that Glenn's actions amounted to either. Fourth, Alan has not provided anything to dispute Glenn's submissions establishing that, after he withdrew from Mii, he had no contact with Lovejoy until after Mii had abandoned their relationship, with the result that Glenn's contacts with Lovejoy are not actionable. Fifth, Alan has no evidence that Glenn's withdrawal from Mii, as such, caused any damages to the company or Alan.
As explained more fully below, the court grants Glenn's motion for summary judgment on the counterclaim, abstains from exercising jurisdiction over Glenn's remaining claim against Alan, and ends this episode of the parties' family feud.
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A dispute is "genuine" if it could reasonably be resolved in either party's favor at trial. See Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir.2010). A fact is "material" if it could sway the outcome under applicable law. Id.
Where, as here, "the moving party avers an absence of evidence to support the non-moving party's case, the non-moving party must offer definite, competent evidence to rebut the motion." Meuser v. Fed. Express Corp., 564 F.3d 507, 515 (1st Cir. 2009). In other words, the non-moving party "must proffer admissible evidence that could be accepted by a rational trier of fact as sufficient to establish the necessary proposition." Gomez-Gonzalez v. Rural Opportunities, Inc., 626 F.3d 654, 662 n. 3 (1st Cir.2010). This means that "conclusory allegations, improbable inferences, or unsupported speculation" will not suffice to defeat a properly supported summary judgment motion. Meuser, 564 F.3d at 515 (quotation omitted). In analyzing a summary judgment motion, the court must "view[] all facts and draw[] all reasonable
Alan and Glenn formed Mii, a limited liability company, in 1995. They had "equal membership interests," at least until February 2004. The most recent version of the limited liability company agreement, dated September 1997, reposited the right to manage the business of the company in the members, but allowed them to turn that right over to managers elected by the members. The parties agree that, at some point, Alan and Glenn became Mii's managers, that Alan has continued to serve in that capacity ever since, and that Glenn continued to serve in that capacity until his resignation in February 2004.
The membership agreement does not restrict a manager's ability to resign from that role (and specifically provides a procedure for replacing a manager who "ceases to be a Manager before his term expires for any reason"). The agreement does provide, however, that "[n]o member has power to withdraw by voluntary act from the Limited Liability Company."
As stated in the agreement, Mii's purpose was "to engage in the business of marketing and/or manufacturing of sensor materials, metallic powders and related parts." Alan recalls that he and Glenn wanted, specifically, to finish the work on "composite materials and net shape pressing technologies" they had begun at another company they had started, Materials Innovation, Inc., formed in 1989. By 2002, however, Materials "owed significant amounts of money to a number of creditors," so, Alan says, "it was decided that Materials would cease to operate as a going concern and that all of the resources of [Alan and Glenn] would be focused on" Mii.
Alan recalls that Glenn contributed "his creative talents and interests" to the Materials and Mii ventures, while Alan contributed some $23 million in capital. Thus, Alan explains, Glenn received "co-equal" interests with Alan in those businesses "without the necessity of having to come up with any cash equity." Neither Glenn nor Alan, though, ever served as an employee of Mii; Glenn recalls that this arrangement was "by design." Glenn never entered into any employment contract with Mii, including the "Invention, Non-Disclosure, and Confidentiality Agreement" that Mii made its employees sign.
In August 1996, Glenn and Alan entered into an agreement assigning certain intellectual property to Materials. In relevant part, this agreement provided that "the Inventors" — a term defined as Alan and Glenn "collectively" — "hereby assign, grant and convey to [Materials] their entire right, title and interest in and to U.S. Patent No. 5,453,293, together with ... any patent applications or patents claiming improvement in or modification of the subject matter set forth in the Patent developed by either or both of the Inventors." Alan and Glenn were listed as the inventors of the '293 patent, which issued in September 1995.
The assignment agreement further provided that "[e]ach modification and improvement related to Composite and Engineered Materials" — a defined term — "covered by the patent now or hereafter conceived, made or developed by Inventors, or which shall become the property of Inventors in any manner whatsoever,
In April 2001, Alan loaned Mii $1.5 million, receiving in return a promissory note with a one-year term. He loaned $600,000 to Materials at the same time. To provide collateral for these loans, Mii (and Materials) subsequently provided Alan (and his wife, Sara Beane) with a commercial security agreement, dated January 18, 2002, granting them a security interest in, among other things, "letters of patent, patent applications, and other rights to intellectual property in which [Mii and Materials] have ownership interests." The agreement entitled the lender to take possession of the collateral upon Mii's default. Within two weeks of the execution of the security agreement, Mii had defaulted on the note it had given Alan.
In July 2002, Mii entered into a contract to sell a 1,000-ton metal press to Lovejoy, an Illinois-based manufacturer of metal parts. In negotiating the contract, Lovejoy dealt with both Glenn and Alan, who acknowledges that he participated "in the portion of the negotiations related to the overall design of the press." Lovejoy was the last customer to commit to buying a press from Mii before it eventually ceased operations.
Alan recounts that in fall 2003, one of Lovejoy's customers demanded more precise tolerances on its parts, so that "Mii felt the original approach of the system configuration," which already featured a "modified volumetric feed shoe," was not "adequate to the task." According to Alan, "Mii realized" that it had another "higher technology" which "might be" modified "to meet the specification[s]," but that approach was not without its challenges. Alan alleges that "Mii's email files show many conversations between Glenn" and Lovejoy about "the perceived necessity to upgrade the capabilities of the system," though Glenn did not make Alan or anyone else at Mii aware of these "negotiations" until 2004. While Alan says that "Lovejoy claims they walked away from these discussions believing that Glenn had committed Mii to accomplish an upgrade capable of meeting the [new] specifications," Alan also insists that "[t]here is no paperwork or documentation available to Mii that would substantiate such a contractual commitment."
Alan also accuses Glenn of mismanaging the Lovejoy project in other ways during his time at Mii. First, Alan recalls that, given the technological demands of building the press even to Lovejoy's original specifications, Glenn agreed "to institute a detail design engineering relationship with a major Massachusetts mechanical engineering firm." Nevertheless, Alan says, Glenn ultimately "circumvented" this arrangement "by essentially engaging [the firm's] assistance in mechanical drafting as opposed to engineering oversight."
Second, Alan accuses Glenn of a design error in "the clearances between the outer walls of the inner cylinder components and the inner walls of the outer cylinder components," so that "thermal expansion" caused them to touch, resulting in "catastrophic press failure." Alan says that "cylinder design errors" necessitated a lengthy re-design and re-machining process that contributed to a "10-12 week" delay in delivering the press to Lovejoy. Alan acknowledges, however, that another cause of the delay was an error by a third party who "improperly specified/designed
By November 2003, Mii had delivered the press to Lovejoy, but the press was missing a "required fluidization component" that was still being manufactured. It appears, though the record is unclear, that this component was the one Glenn allegedly caused Lovejoy to believe that Mii would deliver (even though, Alan says, this component was not included in the original specifications). Lovejoy's principals, Michael Hennessy and Woody Haddix, attest that, through January 2004, Alan, Glenn, and others from Mii were working on the component, but without success, so that during that time the press did not "perform at the contractually-agreed upon levels and tolerances."
Beginning around January 2004, Alan and Glenn (together with their brother, David, who had worked for Mii as a consultant, and Sara, Alan's wife) engaged in a series of negotiations, Alan says, "to restructure Alan['s] and Sara's respective rights in the Mii companies and to get [Alan's] personal guaranty and [Mii's] approval" of a $500,000 loan to Mii from an outside lender, Fleet Bank. Around the same time, Alan and Sara were working to resolve "property division issues relating to [her] suit for divorce."
At one point, Alan offered (among other things) to guarantee the loan personally in exchange for (among other things) Glenn's "assurance that all intellectual assets that have been or will be created by Glenn ... and relate to [Mii's] business have been or will be assigned to Mii [] without additional consideration as has been consistent with prior practice." Alan suggests that this assurance was necessary for him to provide certain representations (presumably as to Mii's right to the intellectual property it was using) that Fleet required to make the loan.
Alan recalls that "[b]ottom line, Glenn absolutely refused" to provide the assurance, so that Alan "decided he could not sign the Fleet [loan] documents" making the representations. Alan, "[w]ith the benefit of hindsight," has come to see this as an effort by Glenn to induce Alan to "violat[e] Federal Banking Law and be subject to both criminal and civil sanctions." In any event, Mii did not get the loan from Fleet — nor did Alan and Glenn reach agreement as to restructuring or refinancing Mii.
On February 3, 2004, Alan notified Glenn via letter that Alan and Sara were "exercising [their] rights under [the] Commercial
On February 4, 2004 — the day after Alan's letter announcing his exercise of dominion over Mii's assets — Glenn gave Alan letters announcing that, effective immediately, Glenn was "resign[ing] from his position(s) and duties as an Officer[] and as a member of the Board of Directors of Materials ... and Mii." After dropping a company vehicle and customer files at Mii's facility within the next few days, Glenn had no further contact with the company until the onset of the various legal proceedings enumerated supra.
One of Lovejoy's principals, Haddix, says that, after repeated attempts to call Glenn at Mii's facility in early February 2004, he was told by a Mii employee that Glenn was no longer with the company. Another of Lovejoy's principals, Hennessy, says that he eventually reached Alan, "who advised [Hennessy] that Glenn had left the company in all capacities and that Alan was going to continue operating Mii with its existing workforce and without Glenn."
Haddix and Hennessy recall that, over the next several weeks, they repeatedly expressed "concern that Glenn's departure would make it very difficult, if not impossible, for Mii to complete installation of the fluidization function" of the press, but Alan responded that "Mii had the experience and wherewithal to continue its business." Haddix recalls a similar conversation at a subsequent meeting at Mii's facility, where "Alan insisted that Mii would be fine without Glenn and that the employees on board at the time were well versed in the capability and installation of the fluidization portion" of the press.
Alan does not dispute Lovejoy's account of this meeting, but he does suggest, as already mentioned, that Mii never agreed to provide a functioning fluidization system in the first place. Alan recalls that it was not until he spoke with Hennessy on or around February 10, 2004, that Alan "found out, to [his] complete surprise, that Mii had a very angry primary customer." In fact, Alan says, aside from a "concept sketch" of the fluidization system, "no work was undertaken on Mii's part presumably because Mii believed the project was a time and materials addition to the contract and such had not been authorized by Lovejoy." Nevertheless, Alan says, Mii "intended for Lovejoy to be a satisfied customer," and agreed to work on the fluidization component of the press.
Alan alleges that, by November 2004, Glenn "was pursuing active negotiations with Lovejoy for the immediate fabrication of two additional 1000-ton systems identical to that delivered to Lovejoy by Mii, and for a new 300-ton system." Alan also alleges that, in March 2004, Glenn — acting on behalf of a new limited liability company he had formed, Glenn Beane LLC — contacted several other of Mii's customers, or potential customers.
Glenn, for his part, says that he did not form Glenn Beane, LLC, or "even explore or consider the process of forming it," until after he had resigned from Mii (documents on file with the New Hampshire Secretary of State give the company's "entity creation date" as February 10, 2004, i.e., a week or so after Glenn's resignation). Alan has not come forward with any evidence tending to show that — at any time before Glenn resigned from Mii — Glenn formed, or made plans to form, Glenn Beane LLC, or that he had any contact with any of Mii's customers or potential customers on behalf of himself or Glenn Beane LLC.
On December 15, 2004, acting as attorney-in-fact for Materials, Glenn executed a document assigning a number of patents, including the '293 patent, from Materials to Alan and Glenn, then recorded that document with the United States Patent and Trademark Office. This "re-assignment" invoked a provision of the assignment agreement that, "[u]pon [its] termination for any cause, [Materials] agrees to immediately reassign to the Inventors all patent rights assigned" thereunder, together with "any and all right to any improvements or modifications which [Materials]
In November 2003, Materials had been administratively dissolved by order of the New Hampshire Secretary of State, and nothing was (or has been) done to lift that order. See N.H.Rev.Stat. Ann. §§ 293-A:14.20 — 14.22. Mii has likewise been administratively dissolved, see id. § 304-C:52, by an order of the Secretary of State issued in August 2007, but, Alan says, "is engaged in the process of winding up its affairs," see id. §§ 304-C:52, II, 304-C:56.
In October 2006, Alan filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida. In re Beane, No. 06-5723 (M.D.Fla. Oct. 19, 2006). Alan soon sought, and received, permission from the Bankruptcy Court to employ counsel to conduct litigation against Glenn. In November 2006, Alan and Mii commenced an action against Glenn and Glenn Beane LLC in this court, bringing many of the same claims that Alan later brought as a counterclaimant in this action. Beane v. Beane, No. 06-446 (D.N.H. Nov. 30, 2006). Glenn counterclaimed, bringing essentially the same claims he later brought as a plaintiff in this action.
After furious motion practice — which included Glenn's filing five separate motions to dismiss, and the Magistrate Judge's imposing monetary sanctions against both Alan and Glenn at different points — the court (McAuliffe, C.J.) ordered Alan and Mii to show cause why it should not dismiss their sole claim under federal law and decline to exercise supplemental jurisdiction over the rest of the case. In response, Alan argued, among other things, that diversity jurisdiction existed, because Mii was a nominal party whose citizenship should not be counted. But Judge McAuliffe disagreed, ruling that "[t]he rights upon which plaintiffs base their claims are Mii's rights, and the remedies sought would directly benefit Mii" and, furthermore, that Mii was an indispensible party under Rule 19(b). Beane v. Beane, 2008 DNH 082, 15-20, 2008 WL 1787105. The court also ruled that the amended complaint failed to state any claim under federal law. Id. at 8-12. So the court dismissed the action for lack of subject-matter jurisdiction, id. at 21, entering judgment to that effect on April 30, 2008.
On June 11, 2008, Glenn brought this action against Alan. Around the same time, Glenn also commenced an action, consisting of many of the same claims, against Mii and other parties in Grafton County Superior Court. Beane v. Mii Techs., LLC, No. 2008-C-079 (N.H.Super. Ct.
Alan originally moved to dismiss this action, based on the pendency of similar litigation in other courts, but withdrew the motion around the same time that he filed an answer and a counterclaim against Glenn.
Alan subsequently amended his counterclaim three times, the first as of right and the next two times with leave of court. The counterclaim, as amended, is in 21 separate counts:
While Glenn objected to Alan's second proposed amendment (and was overruled), he did not object to the third proposed amendment, which added counts 17-21. So this court ruled that, "although some of [those] claims ... appear to be legally improper or baseless," the amendment would be allowed because "Glenn has not bothered to object." Order of Aug. 3, 2009 (document no. 59).
In that same order, the court also denied the parties' pending cross-motions for partial summary judgment, and stayed the case, in light of the litigation Glenn had filed against Mii in the Superior Court, which had already conducted a bench trial on his claims (essentially the same claims as here). See id. Eventually, the Superior Court found in favor of Mii on all of Glenn's claims in that action. See Beane v. Mii Techs., LLC, No. 2008-079 (N.H.Super.Ct. July 9, 2009).
In response, this court ordered a status conference at which the parties were to address, among other issues, whether this court had diversity jurisdiction over Glenn's remaining claims. Order of Mar. 5, 2010, 2010 WL 882892 (document no. 69). The court observed that, if Mii were an indispensible party-defendant to Glenn's claim for a declaration that his membership in it had ceased as of February 2004, that might destroy diversity, given Alan's position that Glenn — a New
At the ensuing conference, however, Alan, through counsel, offered to admit that Glenn's membership in Mii did indeed cease as of February 4, 2004, as Glenn alleged in support of count 2 of his amended complaint. This court proceeded to issue an order entering judgment, by agreement, for Glenn on count 2 insofar as it sought a declaration that his membership in Mii had ceased as of that date.
Finally, the court ruled that while Mii was not an indispensible party to count 2 of Glenn's complaint, "most if not all of the counterclaims asserted by Alan actually belong to Mii, as this court has previously ruled." Id. at 2-3 (citing Beane, 2008 DNH 082, 14-16). So the court ordered that Mii be joined as a plaintiff-in-counterclaim (which would not affect this court's subject-matter jurisdiction, since it could exercise supplemental jurisdiction over the counterclaims without regard to Mii's citizenship). Id. Finally, the court lifted the stay, noting that the Superior Court's decision ended up having "limited, if any" preclusive effect on the claims in this action. Id. at 1. Eventually, Glenn filed his instant motion for summary judgment.
As summarized at the outset, Glenn makes a number of arguments in support of his motion for summary judgment, including that: (A) the '293 patent was never assigned to Mii, only to Materials, which is not a party here, and there is no evidence of any agreement between Glenn and either Mii or Alan for the ownership of any intellectual property; (B) there is no evidence of any protectible trade secrets belonging to Alan or Mii; (C) there is no evidence that Glenn breached any of his duties to Mii (or to Alan) before he resigned, and, insofar as any such duty continued after he resigned, he did not violate it in his dealings with Lovejoy, which did not start up again until after Mii had abandoned the relationship; (D) even if Glenn's withdrawal from Mii breached the limited liability company agreement, it did not cause any harm, and (E) Alan has no claim arising out of Glenn's seeking ERISA relief.
One of Alan's principal complaints against Glenn is that he has refused to transfer certain "Intellectual Property" — defined in the amended counterclaim as "intellectual property pertaining to the manufacture of presses employing high pressure, net shape forming technology" — which rightfully belonged to Mii and, after leaving Mii, used that intellectual property for his own benefit. This charge is essential to Alan's claims for breach of contract (count 1) and breach of the implied covenant of good faith and fair dealing (count 2), and, as explained infra, also important to his claims for "ownership of intellectual property rights" (count 10), unjust enrichment (count 11), conspiracy (count 14), "constructive trust and specific performance" (count 16), one of his claims for violation of § 358-A (count 12), and one of his claims for tortious interference with prospective contractual relations (count 13). A problem with all of these claims, as Glenn points out, is that there is no evidence that he agreed to assign intellectual property to Mii or to Alan — only to Materials, which is not a party here.
A further problem with these claims is that Alan was a co-inventor of the '293 patent, which, according to him, was the source of "[a]ll subsequent intellectual property" at issue here. See Part II.A.2, supra. By virtue of his co-inventorship, Alan became a co-owner of the patent, see, e.g., Ethicon, Inc. v. U.S. Surgical Corp., 135 F.3d 1456, 1465 (Fed.Cir.1998), and was entitled to use that patent without Glenn's consent or, indeed, without even accounting to him for any resulting profits. See 35 U.S.C. § 262. In light of this, it is difficult to understand Alan's repeated complaint that Glenn's refusal to transfer the '293 patent and resulting technology to Mii was somehow unreasonable or unfair in light of the substantial capital investment that Alan says he made in developing that intellectual property (some $23 million, by his count). Despite his assertions to the contrary, Alan was never deprived of the benefit of that investment: he was always free to do what he wished with the '293 patent, such as selling it or licensing it to Mii so that it could use it in its dealings with Lovejoy, as collateral for the loan from Fleet, or for any other reason.
The very premise of Alan's numerous claims against Glenn arising out of the ownership of the '293 patent and related intellectual property, then, is mistaken. Indeed, Alan admits in a footnote to his memorandum opposing summary judgment that "he was obviously unaware that he was an [i]nventor of the intellectual property," presumably until Glenn brought it to his attention in his summary judgment submissions here. It would ordinarily border on shocking for a person to engage in knockdown, drag-out litigation claiming deprivation of a right that he possessed all along — and would have realized he possessed all along, if only he had bothered to check. It is less shocking here, however, because this is not so much a lawsuit to resolve an honest dispute over rights as it is a grudge match. See note 1 and accompanying text, supra. In any event, as explained fully infra, Glenn is entitled to summary judgment on all of
As an initial matter, there is no evidence of any contract through which Glenn agreed to assign any intellectual property to Mii. In arguing to the contrary, Alan relies heavily on his and Glenn's agreement assigning the '293 patent and defined "modifications and improvements" to Materials. See Part II. A.2, supra. But that was an agreement to assign intellectual property rights to Materials, not to Mii. Materials has never been a party here, and Alan does not explain how the agreement conveyed any rights in the '293 patent, or any other intellectual property, to Mii (which did not even have a license from Materials for the '293 patent, see id.).
Instead, Alan argues that he personally acceded to Materials's rights under the assignment agreement by virtue of his security agreement with Materials, which defaulted on the underlying loan. See id. A security interest in the intellectual property conveyed by the assignment, though, is not tantamount to ownership of the intellectual property conveyed by the assignment. To the contrary, to obtain ownership of the rights of Materials under the assignment, Alan would have needed to purchase those rights through a "commercially reasonable disposition." N.H.Rev. Stat. Ann. §§ 382-A:9-610(a)-(c) (New Hampshire's version of Article 9 of the Uniform Commercial Code, governing secured transactions); cf. Sky Techs. LLC v. SAP AG, 576 F.3d 1374, 1380-81 (Fed.Cir. 2009) (ruling that ownership of patents serving as collateral under a security agreement passed to the creditor, but only after it disposed of the patents at a public auction at which it purchased them). Alan does not claim to have done so, and there is no record evidence to that effect. His security agreement with Materials, then, does not allow him to enforce its assignment agreement with Glenn.
Alan also suggests that Glenn breached the assignment agreement by "reassigning" the '293 patent to himself and Alan in December 2004. See Part II.A.7, supra. But the agreement expressly provides for Materials to "immediately reassign to the Inventors all patent rights assigned to [it] by the Inventors under this Agreement" upon "termination of this Agreement for any cause" — and one of the causes for termination expressly set forth in the agreement is the dissolution of Materials, which occurred in 2003. See id.
Nevertheless, Alan argues, the agreement was never terminated, because termination can occur only upon written notice to Materials, which Glenn never provided. Even if this is correct, though, the court cannot see how it supports
Alan also points to statements in his amended counterclaim and declarations filed in opposition to the summary judgment motion, as well as a letter from Mii's former attorney, that "create a genuine issue of fact regarding the intentions of Alan and Glenn with respect to the ownership of the intellectual property and technology" in question. If Alan means that the statements and the letter create a genuine issue as to the existence of an agreement for the ownership of the intellectual property (which, as distinguished from the parties' "intentions," is the material issue here), the court disagrees.
Most of Alan's statements simply outline his chief complaint, noted supra, that he contributed the money that Materials and Mii used to fund their operations, while Glenn "made no personal financial contribution to either" and, in fact, "was paid for his services primarily from funds loaned and invested" by Alan. But Alan does not say, or point to any other evidence suggesting, that Glenn agreed that the result of this arrangement would be Mii's (or Alan's) ownership of any intellectual property conceived or developed by Glenn.
As for the letter from the attorney, it states merely that he had been retained by Alan "for the purpose of inventorying, evaluating, and continuing the prosecution and maintenance of the intellectual property developed by" Mii and asks for Glenn, on behalf of Mii, to consent to this representation since the attorney "had prepared a patent application for Mii in 2001." The court is at a loss to see how this even tends to show what Alan says it "proves," i.e., "that [the attorney] believed that the intellectual property and technology ... belonged to Mii." Regardless, an attorney's "belief" as to his client's rights is not evidence that the client actually has those rights (though attorneys no doubt wish
Seizing on his recently discovered co-inventorship of the '293 patent, Alan argues in his summary judgment filings that he and Glenn agreed that they would be "tenants in common" as to the patent, and all of the resulting intellectual property, obligating them to share in any profits realized from using that intellectual property. Alan asserts that this — a "tenancy in common," rather than a "joint tenancy" — is the "agreement to the contrary" contemplated by 35 U.S.C. § 262, which provides that, in the absence of such an agreement, "each of the joint owners of a patent may make, use, offer to sell, or sell the patented invention ... without the consent of and without accounting to the other owners." Needless to say, this theory marks a dramatic shift from the position Alan took in his amended counterclaim (and, so far as the court can tell, throughout the entirety of both this litigation and the parties' prior lawsuit here). And that is not the only problem with it.
But it is a problem, and a fatal one at that. The "tenancy in common" theory is not even hinted at in Alan's counterclaim (which has been amended three times) and, indeed, is inconsistent with the claims to ownership of intellectual property set forth there — all of which rest on the premise that Glenn agreed to assign his intellectual property to Mii, without mentioning any agreement on that subject with Alan, or even acknowledging that Glenn had any rights in the intellectual property at all. Even Alan's opening memorandum in opposition to summary judgment does not claim an agreement for a "tenancy in common" but suggests that such a tenancy arose by operation of law due to the joint inventorship of the '293 patent by Glenn and Alan. It was not until Glenn pointed out in his reply that this arrangement would not have prevented Glenn from using the patent or required him to share in the profits of doing so, per 35 U.S.C. § 262, that Alan argued, in his sur-reply, that he and Glenn had agreed otherwise.
A plaintiff ordinarily may not raise a theory of relief for the first time in his opposition to the defendant's motion for summary judgment, see, e.g., Kunelius v. Town of Stow, 588 F.3d 1, 19 (1st Cir. 2009), let alone his sur-reply. While the court could nevertheless treat the objection as a motion to amend, see id., Alan is plainly not deserving of that relief here. He has already amended his counterclaim three times since it was first filed, more than three years ago. More to the point, Alan has completely changed his characterization of the claimed agreements for ownership of the intellectual property in the time between his last amended counterclaim (where he said Glenn had agreed to assign it to Mii) and his summary judgment sur-reply (where he now says Glenn agreed that he would hold it as a tenant-in-common with Alan). For this reason alone, Alan cannot avoid summary judgment based on his theory that he and Glenn agreed to hold the '293 patent or other intellectual property as tenants-in-common. Indeed, given its substantial deviation from the account of the parties' agreement set forth in his prior declarations, Alan's declaration supporting the claimed tenancy in common agreement (submitted with his sur-reply) appears to be a "sham affidavit" interposed solely to avoid summary judgment. See, e.g.,
Those problems aside, the statements in the declaration do not create a genuine issue of fact as to the existence of such an agreement, or its breach. These statements either attest solely to the parties' expectations or intentions of a joint tenancy for the intellectual property (i.e., without explicating how they reached agreement on that point) or assert in a conclusory fashion that such an agreement existed.
Furthermore, even if they did, there is no evidence tending to show that Glenn breached any such agreement. Alan has not pointed to any evidence suggesting that, in Glenn's dealings with Lovejoy or otherwise, he made use of the intellectual property covered by the alleged "tenancy-in-common" arrangement. Instead, Alan argues that "[s]ince Glenn did not testify in his affidavit [accompanying his summary judgment motion] that he derived no profit or benefit from the patent and related intellectual property, this court must infer that he did."
While that sort of logic has some historical pedigree (the Star Chamber's practice of finding defendants guilty because they refused to deny the charges against them comes to mind, see, e.g., VII John Henry Wigmore, Evidence § 2250, at 281-83 (John T. McNaughton, ed., rev. ed.1961)), it has not taken hold in federal court. Rather, "[a]s to issues on which the summary judgment target bears the ultimate burden of proof, she cannot rely on an absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute." McCarthy v. Nw. Airlines, Inc., 56 F.3d 313, 315 (1st Cir.1995); accord II Wigmore, supra, § 290, at 219-20. So Alan, who bears the burden of proof on his claim for breach of contract — including his new theory that Glenn, without accounting to Alan, used the technology covered by the alleged joint tenancy agreement to do work for Lovejoy — cannot avoid summary judgment on that theory by arguing that Glenn has failed to disprove it.
In short, Alan has failed to raise (i) a genuine issue of fact as to the existence of an agreement for Glenn to assign the '293 patent or any other intellectual property to Mii, (ii) any legitimate theory that would enable Alan (or Mii) to enforce Glenn's assignment agreement with Materials, or (iii) a genuine issue of fact as to the existence or breach of an agreement for joint tenancy of the '293 patent, even if that claim were properly presented. Accordingly, Glenn is entitled to summary judgment on Alan's claim for breach of contract (count 1), as well as his claim for breach of the covenant of good faith and fair dealing (count 2), because — contrary to what Alan
As noted at the outset, Alan also makes a number of other claims based on his (or Mii's) claimed ownership of intellectual property, including claims for relief based on "ownership of intellectual property rights" (count 10), unjust enrichment (count 11), conspiracy (count 14), violation of § 358-A (count 12), tortious interference with prospective contractual relations (count 13), and "constructive trust and specific performance" (count 16). For the most part, these claims depend on an agreement by Glenn to assign intellectual property to Mii or to Alan and, as just discussed at length, Alan has failed to show a genuine issue as to the existence of such an agreement. Insofar as Alan could prevail on any of these claims without proving such an agreement, they nonetheless have other deficiencies that entitle Glenn to summary judgment.
As set forth in the amended counterclaim, Alan's claim for "ownership of intellectual property" (count 10) asserts Glenn's "contractual and equitable obligations to assign rights to inventions invented during the course of his performance of work for Mii to Mii." Again, Alan has not pointed to any evidence of a contract to that effect between Glenn and Mii, and neither Alan nor Mii can enforce Glenn's contract to that effect with Materials. See Part III.A.1.a, supra. While Alan, in his memorandum opposing summary judgment, also refers to license agreements between Mii and Materials, Glenn was not a party to those agreements, so they likewise did not obligate him to transfer any intellectual property to Mii or to Alan.
Alan's claim that Glenn had "equitable obligations" to that effect seems to refer again to Alan's complaint that he made all of the capital investment in Mii, while Glenn made none. As already discussed, though, Alan has not pointed to anything beyond his subjective expectation to suggest an agreement or understanding that, as a result, he would personally own any intellectual property developed by Glenn during Mii's existence (and, in line with that expectation, Alan has always been a co-owner of the '293 patent — which he identifies as the source of "[a]ll subsequent intellectual property"). See Part III.A.1, supra. Nor has Alan identified any agreement between Glenn and Mii that the company would own the intellectual property he developed during his work on its behalf.
As Glenn also points out, Alan has likewise not identified the particular intellectual property that he (or Mii) claims to own, let alone come forward with any evidence that Glenn in fact even created any particular intellectual property in that capacity. Thus, even if Mii (or Alan) had some equitable claim to intellectual property Glenn created while working for Mii — a point this court need not and does not decide — Alan has not provided the necessary evidentiary support for that claim, i.e., that Glenn actually created particular intellectual property while working for Mii.
This is fatal to Alan's claim to "ownership of intellectual property" insofar as it is based on Glenn's alleged "equitable obligations to assign rights to inventions invented during the course of his performance of work for Mii to Mii." Because, again, Alan has also failed to come forward with evidence that Glenn had any contractual obligation to that effect, Glenn is entitled to summary judgment on this claim (count 10).
For essentially the same reasons, Glenn is also entitled to summary judgment on Alan's claims for unjust enrichment (count 11) and constructive trust and specific performance (count 16), insofar as that relief is directed at intellectual property. "Unjust enrichment is an equitable remedy, found where an individual receives a benefit that it would be unconscionable for him to retain." Clapp v. Goffstown Sch. Dist., 159 N.H. 206, 210, 977 A.2d 1021 (2009). Alan's unjust enrichment claim sounds the familiar refrain that he "invested substantial time, labor and money in the creation and production of the press technology," but was deprived of the benefit of that investment when Glenn "misappropriated the press technology."
As just discussed, though, Alan has not identified — let alone provided any evidence of — any intellectual property that Glenn developed during his time at Mii so that his retention of it would be "unconscionable" in light of Alan's investment in the company. Furthermore, as also already discussed, Alan has not come forward with evidence that Glenn has used any of the intellectual property developed through his ventures with Alan, whether in Glenn's dealings with Lovejoy or otherwise. See Part III.A.1.b, supra. These shortcomings are fatal to Alan's unjust enrichment theory, which requires a genuine issue as to whether Glenn received some benefit at Alan's expense. See, e.g., Cohen v. Frank Developers, Inc., 118 N.H. 512, 518, 389 A.2d 933 (1978); Restatement (Third) of Restitution and Unjust Enrichment § 2 cmt. b (2011).
It is also worth repeating that, at least as to the '293 patent, Alan received the same benefit for his financial contributions that Glenn did for his inventive ones, i.e., a co-ownership interest in the patent that allowed him to sell, license, or use it without his brother's participation. See Part III.A.1, supra. Though the court need not decide this issue, co-ownership of a patent between the person who accomplished the invention and the person who funded the work seems sufficiently "just" (especially to the funding partner) such that no rational factfinder could deem it "unconscionable." In any event, Glenn is entitled to summary judgment on Alan's unjust enrichment claim (count 10) due solely to the lack of evidence that Glenn received any benefit at Alan's expense. Glenn is
For much the same reasons, Glenn is also entitled to summary judgment on one of Alan's claims for violations of the Consumer Protection Act, N.H.Rev. Stat. Ann. § 358-A (count 12), one of Alan's claims for interference with prospective contractual relations (count 13), and his claim for conspiracy.
The § 358-A claim set forth as count 12 of the counterclaim alleges that Glenn's "representation that he is the source of the press technology and that he owns the intellectual property relating thereto constitutes a false designation of origin." Assuming, without deciding, that misrepresentations as to ownership of intellectual property are actionable under § 358-A,
Alan's memorandum in opposition to summary judgment asserts that Glenn violated the Consumer Protection Act through other conduct, including "block[ing] the Fleet loan, caus[ing] Mii to breach or be unable to perform the Lovejoy contract and then tak[ing] Mii's customers and property paid for by [Alan]." This assertion is safely ignored, since it is not further developed. See, e.g., Higgins v. New Balance Athletic Shoe, 194 F.3d 252, 261 (1st Cir.1999). As best the court can understand it, though, it does not state any supportable § 358-A claim anyway.
First, the only evidence of any "property" that Glenn "took" is his re-assignment of the '293 patent, and that did not violate the rights of either Alan or Mii, as already discussed. See Part III.A.1, supra. (Even as to Materials, the re-assignment was at worst a breach of the assignment agreement on the theory that Glenn failed to provide the required notice of termination, see id., a transgression that cannot support a § 358-A claim regardless, see, e.g., Barrows v. Boles, 141 N.H. 382, 390, 687 A.2d 979 (1996)). Second, no rational factfinder could conclude that Glenn's handling
Lastly, Glenn is entitled to summary judgment on Alan's claim for a conspiracy between Glenn and Glenn Beane LLC "to take the Intellectual Property developed, commercialized, and patented by Mii with Alan Beane's money" (count 14). There is neither any evidence of intellectual property developed or patented during Glenn's time at Mii so that Mii could potentially have some right to it, see Part III.A.2.a, supra, nor that Glenn or Glenn Beane LLC "took" or even used any such intellectual property, see Part III.A.2.a, supra. (The sole exception is the '293 patent, but, again, nothing Glenn did ever deprived Alan of his co-ownership of that.) Glenn is entitled to summary judgment on counts 12 (violation of § 358-A), 13 (tortious interference with prospective contractual relations), and 14 (conspiracy).
Alan's claims for misappropriation of confidential information (count 6) and trade secrets (count 7) are, to put it charitably, poorly conceived. The "confidential information" claim alleges that Glenn "acquired information relating to the business of Mii during the course of his employment by Mii," including "knowledge of powder metals and powder metal compaction presses," then "used the confidential information of Mii to misappropriate the business of Mii."
As Glenn points out, however, the New Hampshire version of the Uniform Trade Secrets Act "displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret." N.H.Rev. Stat. Ann. § 350-B:7, I. As Glenn further points out, this "essentially creates a system in which information is classified only as either a protected trade secret or unprotected general knowledge," and that, as a result, New Hampshire law "no longer protects confidential information from mere misuse unless it is a statutory trade secret." Mortg. Specialists, Inc. v. Davey, 153 N.H. 764, 789, 904 A.2d 652 (2006). Alan has no claim for misappropriation of confidential information, then, unless that information qualifies as a "trade secret" under New Hampshire's version of the Uniform Trade Secrets Act.
N.H.Rev.Stat. Ann. § 350-B:1, IV. Alan has failed to create a genuine issue as to whether any of the claimed trade secrets satisfy either part of this definition.
Alan's amended counterclaim asserts simply that "Mii maintains certain trade secrets in connection with its business," without describing them any further. Alan's summary judgment memorandum does not go much beyond that, asserting that Mii had trade secrets in its "commercializable technology" as listed in one of Alan's interrogatory responses.
Essentially, this amounts to an assertion that every piece of information ever created by Mii amounts to a trade secret.
Needless to say, the protections of the Uniform Trade Secrets Act are considerably narrower than that. Indeed, a company cannot sustain a claim under the Act by "effectively asserting that all information in or about its [product] is a trade secret. That's not plausible — and, more to the point, such a broad assertion does not match up to the statutory definition." IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583 (7th Cir.2002); see also Sutra, Inc. v. Iceland Express, ehf, No. 04-11360, 2008 WL 2705580, at *4 (D.Mass. July 10, 2008).
Alan makes no effort to explain how any of the extraordinarily broad categories of information set forth in his interrogatory answer have any of the attributes of trade secrets under the Act, i.e., they have independent economic value derived from their secrecy, they are not readily ascertainable by others by proper means, and they are subject to reasonable efforts to maintain their secrecy.
In addition to his charge that Glenn misappropriated Mii's intellectual property, Alan's other principal complaint is that Glenn mismanaged the company's relationship with Lovejoy during his time there and then, after leaving Mii, took the relationship
As Alan appears to acknowledge, however, Glenn has no liability to either Mii or Alan for actions taken while he was still a member or manager of the limited liability company unless they amounted to "gross negligence or willful misconduct." N.H.Rev.Stat. Ann. §§ 304-C:31, IV-V. As fully explained infra at Part III.C.1, Alan has not demonstrated a genuine issue as to whether Glenn's handling of the Lovejoy relationship on behalf of Mii amounted to gross negligence or willful misconduct. Furthermore, as fully set forth infra at Part III.C.2, Alan has not explained how Glenn retained any duties to Mii (or Alan) following Glenn's resignation from Mii in March 2004. That shortcoming aside, moreover, Glenn's subsequent dealings with Lovejoy neither breached any such duties, nor are otherwise actionable, because there is no dispute that Lovejoy initiated its dealings with Glenn only after Mii had admitted it would be unable to make Lovejoy's press function properly and abandoned the relationship.
Two of Alan's claims for breach of fiduciary duty arise out of Glenn's alleged mismanagement of Mii's relationship with Lovejoy (counts 3 and 5). Both allege, in essence, that Glenn "took actions that resulted in disputes between Mii and Lovejoy that caused the loss of payments by Lovejoy under the contract to Mii and the loss of Mii's future business opportunities with Lovejoy." Alan acknowledges that Glenn's duties as a manager and member of Mii are established by the relevant provisions of New Hampshire's Limited Liability Company Act. Those provisions state, in relevant part:
N.H.Rev.Stat. Ann. § 304-C:31. In so many words, then, the manager or member of a limited liability company is not liable to it or to its members for his actions or inaction on its behalf, unless they amount to gross negligence or willful misconduct.
Neither party attempts to define the phrase "gross negligence or willful
Alan asserts that, during Glenn's time at Mii, his handling of the company's relationship with Lovejoy amounted to gross negligence or willful misconduct in that he (a) "negotiat[ed] or enter[ed] into the contract knowing that it could not be fulfilled," (b) "fail[ed] to design and manufacture the Lovejoy presses as required by the contract," and (c) "exhaust[ed] the resources of Mii by causing more than $500,000 in easily avoidable engineering errors."
First, there is simply no evidence that Glenn caused Mii to enter into the contract with Lovejoy "knowing that it could not be fulfilled" or failed to see that Mii honored the contract. As an initial matter, there is no evidence as to what Glenn even committed Mii to do in the contract, because Alan has failed to provide a copy of it. Without the contract, of course, no rational factfinder could conclude that Mii failed to honor it, let alone that such a failure resulted from Glenn's gross negligence or willful misconduct. (It is also worth noting Alan's claim that, even before Glenn left Mii, Lovejoy's system "fully met the contract specifications," see note 3, supra, which — to put it mildly — seems inconsistent with Alan's argument that Glenn caused Mii to breach the contract.) Nor is there any evidence that, whatever that commitment was, Glenn "knew" that Mii would not be able to deliver on it (and it is worth noting that Alan himself participated in negotiating the contract with Lovejoy, see Part II.A.3, supra, and therefore would seem to be at least as responsible as Glenn for any problems in the resulting agreement).
Instead, taken in the light most favorable to Alan, the record shows only that, after the contract was signed, Glenn had discussions with Mii that eventually led to a misunderstanding with Lovejoy about
Furthermore, even if Glenn had committed Mii to delivering on new specifications, there is no evidence that he knew (or even should have known) Mii would be unable to do so. To the contrary, Alan himself states that "Mii realized" that it had technology that, with modifications, "might" suffice to meet those specifications. Alan does not explain how committing the company to execute on a difficult — but not impossible — project amounts to "gross negligence or willful misconduct." (It should be noted here that, in a further inconsistency between Alan's gross negligence claim and his own account of Mii's dealings with Lovejoy, Alan claims that Mii was ultimately able to deliver on the new specifications anyway, see note 5, supra.) Based on the evidence provided by Alan, as augmented by all reasonable inferences in his favor, no rational factfinder could conclude that Glenn acted with "the want of even scant care," let alone recklessly, in negotiating the Lovejoy contract or causing Mii to breach it.
Second, there is also no evidence from which a rational factfinder could conclude that Glenn was grossly negligent or worse "by causing more than $500,000 in easily avoidable engineering errors" in designing the press for Lovejoy. The only support for this claim comes from the statements in Alan's declarations that Glenn "circumvented" Mii's "detail design engineering relationship" with an outside engineering firm "by essentially engaging [its] assistance in mechanical drafting as opposed to engineering oversight" and that Glenn misdesigned "the clearances between the outer walls of the inner cylinder components and the inner walls of the outer cylinder components," so that "thermal expansion" caused them to touch, resulting in "catastrophic press failure." See Part II.A.3, supra.
But Alan points to no evidence even remotely suggesting a standard of care that would demand "engineering oversight" by an outside firm, nor that would exclude the kind of design error made by Glenn. Indeed, the standard of care for designing what Alan himself calls "a very sophisticated 8 level, 1000 ton pressing system" is "so distinctly related to some science, profession, business or occupation
Alan also suggests another theory of "willful misconduct" by Glenn. In one of his declarations, Alan states that, "[i]n my opinion, based on my knowledge of Lovejoy, [its principal] Hennessy, Glenn Beane and the events, I believe that Glenn and Lovejoy contrived a pattern of conduct that ended up with their joint co-opting of Mii's business opportunity." So far as the court can tell, Alan's theory is essentially that Glenn, while still at Mii, agreed that it would provide the fluidization system "as a no charge deliverable to the original purchase order" from Lovejoy, without telling Alan or anyone else at Mii, then "deliberately engineered" Mii's failure to provide that component even though it could have. This enabled Glenn, after resigning from Mii, to hold off on "step[ping] into the Lovejoy situation until he was certain that Mii had essentially solved the problems [so] that his effort, if any, would be minor, but his ability to claim credit major."
Most importantly, Alan says, this scheme allowed Glenn to "appropriate all or some of [Mii's] value to himself without ever having to provide a return on account of [Alan's] investment." Alan ventures that Glenn hatched the scheme after he and their brother David, as part of their efforts to find a potential new investor or buyer for Mii, arrived at a valuation in excess of $60 million (this was all done, Alan says, without his knowing). Alan "believe[s] that 5 seconds after Glenn saw" this valuation, "he undertook to engineer the failure of the company."
This theory gets high marks for creativity and, if proven, would almost certainly amount to the sort of "willful misconduct" actionable under § 304-C:31, IV. But, as reflected in Alan's own characterization of the theory as his "opinion" and "belief," there is absolutely no proof of any such nefarious agreement between Glenn and Lovejoy. The theory is also inherently implausible because, among other reasons, it fails to explain why Lovejoy would willingly suffer a lengthy delay in the delivery of a sophisticated piece of machinery it needed for its business at no apparent benefit to itself, but merely to help Glenn and harm Alan. (This would include the several weeks after Lovejoy learned of Glenn's departure that it continued working on the press with Alan and Mii — a period of cooperation that ended only when Alan announced that Mii was quitting and then stopped returning Lovejoy's calls and e-mails, see Part II.A.6, supra). Alan's willingness to sign a declaration "swearing" to this theory, then, does not create a genuine issue of material fact. Glenn is entitled to summary judgment on Alan's claims for breach of fiduciary duty (counts 3 and 5) insofar as they arise out of Glenn's mishandling of Mii's relationship with Lovejoy.
As already noted, one of Glenn's claims in this case was that his membership in Mii terminated as of February 4, 2004, the day he provided a letter announcing his resignation from that position, among others. See Part II.A.5, supra. Alan eventually agreed to this fact, during a conference with the court, and this court entered judgment for Glenn on that claim accordingly. See Part II.B.2, supra. Glenn argues that, when his membership in Mii ceased, so did any of his duties to either Mii or Alan, so they have no claim against him for his dealings with Lovejoy after his resignation, whether styled as a claim for breach of fiduciary duty, tortious interference, or otherwise.
Alan's summary judgment memorandum does not directly address this point, arguing instead that Glenn's resignation from his role as Mii's manager did not terminate his duties to the company, because, as just discussed, the provisions of the Limited Liability Act impose duties on members as well. By their terms, however, those provisions apply only to a "member," not to a former member. See N.H.Rev.Stat. Ann. §§ 304-C:31, IV-V. This includes the provision on which Alan most heavily relies, § 304-C:31, V(b)(2). That provision states that "[e]very member ... must account to the limited liability company and hold as trustee for it any unfair or unreasonable profit derived by that person" from "use by the member ... of the company's property, including, but not limited to, confidential or proprietary information of the limited liability company or other matters entrusted to the ... member as the result of such status." Id. § 304-C:31, V(b)(2) (emphases added).
Thus, by its terms at least, § 304-C:31, V(b)(2) does not apply to Glenn's dealings with Lovejoy after he left Mii, because he was no longer a "member" at that point. (Of course, further problems with this claim, as already discussed, are the absence of evidence that Glenn used Mii's "confidential or proprietary information" in his post-resignation dealings with Lovejoy, see Part III.B, supra, and that such a claim appears to be pre-empted by the Trade Secrets Act, see note 20, supra.) Nor, for that matter, does § 304-C:31, IV, which, as just discussed, imposes liability on a "member or manager" — not a former member or former manager — for gross negligence or willful misconduct.
Alan does not provide any other authority for the proposition that, after Glenn resigned from Mii, he continued to owe Mii, or Alan, any duty preventing Glenn from doing business with Lovejoy or any of Mii's other customers. The amended counterclaim asserts several other bases of a "confidential relationship" between Alan and Glenn, i.e., (i) their kinship, (ii) the Mii limited liability company agreement, (iii) unspecified "New Hampshire law," and (iv) Alan's "justifiable belie[f] that [Glenn] would act in their best interests." But the Mii limited liability company agreement, like the Act itself, does not impose any duties on former members.
Alan's remaining assertions seem to suggest "[t]he basic confidential relationship [that] arises out of the family relationship, where one party is justified in believing that the other party will act in [his] interest." Clooney v. Clooney, 118 N.H. 754, 757, 394 A.2d 313 (1978). But that "relationship generally is marked by a disparity in position," id. (citing 4 George G. Bogert, Trusts and Trustees § 482 (rev.2d ed.1978)), which was not the case here, where Alan and Glenn had equal ownership interests and roles in the management of Mii. Indeed, as the current version of the treatise cited in Clooney explains, "kinship alone ... does not itself establish a
Furthermore, in his surreply, Alan appears to retreat from his theory that Glenn continued to owe him a duty after leaving Mii, emphasizing that "[t]he vast majority of the misconduct complained of by Mii and Alan occurred while Glenn was a ... member of ... Mii ..., not after his resignation."
Furthermore, even if, after withdrawing from Mii, Glenn retained some duty to keep away from its ongoing customer relationships, he did not breach that duty. It is undisputed that, after Glenn had withdrawn — but before he had any further dealings with Lovejoy — Mii abandoned its relationship with Lovejoy when Alan announced that Mii "could not make the press work, was not going to continue trying, and lacked funding to do so" and, for that matter, stopped returning Lovejoy's e-mails and calls. See Part II.A.6, supra. Of course, "[w]hen a corporation is unable to avail itself of an opportunity, its employee, officer or director is free to exploit it." Energy Resources Corp. v. Porter, 14 Mass.App.Ct. 296, 438 N.E.2d 391, 394 (1982); see also, e.g., 3 William Meade Fletcher, Fletcher Cyclopedia of the Law of Corporations § 862.10, at 225 (rev. ed.2010).
There is no reason to believe that this limitation on the duties of former corporate officers or directors would not also apply to the duties (if any) of the former manager or member of a limited liability company. Cf. Sherman v. FSC Realty LLC (In re Brentwood Lexford Partners, LLC), 292 B.R. 255, 273 (Bkrtcy.N.D.Tex. 2003) (finding that managers of LLC did not breach their fiduciary duty to it by resigning and transferring some of its business to a new entity after LLC's lender had accelerated its loan and filed suit to collect it, essentially leaving the LLC unable to do business). Mii's renunciation of its contract with Lovejoy, then, relieved Glenn of any duty he had to refrain from dealing with Lovejoy for his own benefit as a consequence of his former role as Mii's manager or member — and, again, it is undisputed that, following his resignation, Glenn had no further dealings with Lovejoy until after Mii "had failed to meet [its] obligations," at least in Lovejoy's eyes, see Part II.A.6, supra.
So, even if Glenn had post-resignation duties to Mii, he did not breach them. This entitles him to summary judgment not only on counts 4 (the remaining claim for breach of fiduciary duty) and 16 (the claim seeking a constructive trust over the Lovejoy relationship) but also counts 8 and 9 (the claims for intentional interference with the Lovejoy contract and intentional interference with Mii's prospective relationships with other customers). To prevail on the intentional interference claims,
Alan has not come forward with any evidence disputing this chronology, which is fatal to his claim for intentional interference with the Lovejoy contract. Nor has Alan come forward with any evidence that Glenn had any contact whatsoever with the other potential customers of Mii identified in the amended counterclaim (here, again, Alan's summary judgment memorandum asks the court to "infer from the fact that Glenn does not state under oath that he did not engage in discussions with them that [he] caused them to decide not to do business with Mii," which is not a recognized method of proof in modern judicial practice, see Part III.A.1.b, supra). Glenn is entitled to summary judgment on Alan's claims for intentional interference with actual and prospective contractual relations (counts 8-9).
Alan claims that Glenn's withdrawal from Mii in February 2004 amounted to "wrongful dissociation" under the Limited Liability Company Act because it was prohibited by the Mii limited liability company agreement (count 15). As Alan points out, the Limited Liability Company Act provides that if a member's "withdrawal is a breach of the limited liability company agreement ... the company may recover from the withdrawing member damages for breach of the limited liability company agreement ..., including the costs of any services the withdrawn member was obligated to perform." N.H.Rev. Stat. Ann. § 304-C:27, III. The Mii limited liability company agreement expressly provides that "[n]o member has power to withdraw by voluntary act from the Limited Liability Company."
Despite this provision, Glenn moves for summary judgment on the wrongful dissociation claim, arguing that (1) his withdrawal was not "voluntary," but compelled by Alan's actions, particularly his exercise of dominion over Mii's assets pursuant to the security agreement, see Part III.A.5, supra, and (2) in any event, Alan did not suffer any damages as a result of Glenn's withdrawal from membership in Mii. The court need not reach the first argument because the second one is correct.
Squarely presented with Glenn's argument that his "wrongful dissociation" did not cause Mii any damages, Alan has not identified any. Importantly, while § 304-C:27, III, allows a limited liability company to recover, as damages for a member's withdrawal in breach of the limited liability company agreement, "the costs of any services the withdrawn member was obligated to perform," Alan does not point to any provision of the Mii agreement that required Glenn to render any services to the company by virtue of his membership in it.
Thus, Alan's otherwise unexplained statement in his surreply that Glenn resigned "without fulfilling his contribution obligations" does not make out a claim, for wrongful withdrawal or otherwise, because the Mii limited liability company agreement did not impose any such obligations. See Federalpha Steel LLC Creditors' Trust v. Fed. Pipe & Steel Co., 368 B.R. 679, 688 (N.D.Ill.2006) (dismissing LLC's claim against member for failing "to contribute
Alan's real complaint over Glenn's withdrawal seems to be that he "abandon[ed] the company in the middle of its problems with Lovejoy." See note 25, supra. But there was nothing in the limited liability company agreement — or, for that matter, any other agreement — that obligated Glenn to continue serving as Mii's employee, as opposed to its member (a role that, as just discussed, did not come with any obligations to render services to the company). Nor did the limited liability company agreement obligate Glenn to continue serving as Mii's manager. See Part II. A.1, supra. Thus, the only provision of the limited liability agreement that Glenn violated by withdrawing was the prohibition on voluntary withdrawal itself, and Alan has not identified any damages that followed from that withdrawal. Cf. Federalpha Steel, 368 B.R. at 690 (recognizing claim for wrongful dissociation based on member's "ceasing participation in [the LLC's] management [and] ceasing honoring its duties and obligations under the LLC agreement"). Glenn is therefore entitled to summary judgment on Alan's wrongful dissociation claim (count 15).
Finally, Alan's amended counterclaim includes three separate counts seeking relief for having to respond to the claim for equitable relief under ERISA that Glenn brought at the commencement of this lawsuit, but has since voluntarily dismissed. See Part II.B.2, supra. Alan asserts that this claim, which alleged that Glenn faced potential liability because Alan had refused to make certain filings necessary to terminate the ERISA plans benefitting the employees of Materials and Mii, "had no basis in law [or] fact," because the plans' third-party administrator had agreed to make the necessary filings. Thus, Alan argues, he is entitled to recover his resulting "attorneys' fees, costs, and expenses" under New Hampshire law, including the Consumer Protection Act, N.H.Rev.Stat. Ann. § 358-A:10, I (count 18), another statute providing for attorneys' fees in "contract or tort" actions, id. § 507:15 (count 19), and the common-law, specifically, the decision in Harkeem v. Adams, 117 N.H. 687, 377 A.2d 617 (1977) (count 20).
These state laws have no application here. ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan," 29 U.S.C. § 1144(a), and "[t]he term `State law' includes all laws, decisions, rules, regulations or other State action having the effect of law, of any State," id. § 1144(c)(1). "A state law can be considered `related to' a benefit plan — and thus preempted — `even if the law is not specifically designed to affect such plans, or the effect is only indirect.'" Zipperer v. Raytheon Co., 493 F.3d 50, 53 (1st Cir.2007) (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (further quotation marks omitted)). ERISA's preemptive force extends to, among other state laws, those establishing "causes of action that provide alternative mechanisms to ERISA's own enforcement scheme." Id. (citing N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 658-59, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995)).
The state statutes and decisional law that Alan invokes to recover against Glenn for bringing the ERISA claim fit comfortably within this category. ERISA contains its own provision for attorneys' fees and costs, which states that "[i]n any action
Because ERISA provides its own way for a party to collect the fees and costs incurred in actions to enforce § 1132 of the statute, Alan cannot invoke the "alternative mechanisms" of New Hampshire law to that effect. Indeed, as this court has previously observed, courts have "consistently held that ERISA pre-empts requests under state law for attorney's fees incurred in litigating an ERISA action." Geaghan v. Prudential Ins. Co. of Am., 2009 DNH 178, 8, 2009 WL 4547750 (citing Moffett v. Halliburton Energy Svcs., Inc., 291 F.3d 1227, 1237 n.6 (10th Cir.2002) and S.F. Culinary, Bartenders & Svc. Employees Welfare Fund v. Lucin, 76 F.3d 295, 297-99 (9th Cir.1996)). Accordingly, Alan's claims under New Hampshire law to recover the "attorneys' fees, costs, and expenses" of defending Glenn's ERISA claim — including § 358-A (count 18), § 507:15 (count 19) and the common-law doctrine recognized in Harkeem v. Adams, supra (count 20) — are preempted. Glenn is therefore entitled to summary judgment on those claims.
For the reasons explained supra, Glenn's motion for summary judgment
This court has already disposed of counts 1-4 of Glenn's amended complaint. See Order of March 22, 2010 (document no. 70). This court abstains from exercising any jurisdiction it has over Glenn's sole remaining claim, count 5, which alleges that Mii fraudulently transferred $150,000 to Alan by directing that Lovejoy make payment to Alan, rather than to Mii, for the purchase of certain equipment in March 2005. The ownership of those funds — currently held by a third-party law firm — is the subject of an interpleader action pending, and about to go to trial (if it has not already) in the Grafton County Superior Court, Lawson & Persson, P.C. v. Beane, supra. Accordingly, as this court recently ruled in rejecting jurisdiction over Glenn's attempt to execute a foreign judgment against those very same funds, this court either lacks jurisdiction over them under the doctrine of prior exclusive jurisdiction or, if jurisdiction exists, should abstain from exercising it. Beane v. Mii Techs., L.L.C., 2012 DNH 023, 848 F.Supp.2d 138, 2012 WL 256568 (D.N.H. 2012).
That resolves all of the 26 total counts in the amended complaint and amended counterclaim. The clerk shall enter judgment accordingly and close the case.
