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IN THE SUPERIOR cehJtl+'o~ GUAM 2 : 56 3 JWS REFRIGERATION & AIR ) CIVIL CASE NO. CV1506-07 4 CONDITIONING, LTD., ) 5 Plaintiff, ) ) 6 vs. ) ) 7 MALCOLM CAIN, SIMPSON AIR ) FINDINGS OF FACTS AND CONDITIONING, AAON, INC., AAON) CONCLUSIONS OF LAW 8 INTERNATIONAL, ANDREW BILLOK) 9 personally and in his capacity as a) representative of AAON, INC., THERMAL) 10 SUPPLY, INC., and RANDY ASA) 11 personally and in his capacity as a) representative of THERMAL SUPPLY, INC., ) 12 ) ) 13 Defendants,) 14
15 This matter came on for bench trial on January 19, 20 and 25, 2012, before the 16 HONORABLE JUDGE ELIZABETH BARRETT-ANDERSON l . Plaintiff was present through 17 its President John Scragg, (hereinafter referred to as "JWS") and was represented by Attorney 18 G. Patrick Civille, and Attorney Joyce Tang. Defendants Andrew Billok, and AAON 19 International ("AJB") were not present2 and not represented at trial. Defendant Malcolm Cain 20 ("Cain") and Simpson Air Conditioning ("SAC") were present and represented by Attorney 21 Seaton M. Woodley, III. Defendants Thermal Supply, Inc. ("Thermal Supply") and Randy Asa 22 (collectively referred to as "TSI") were represented by Attorney Mitchell F. Thompson. 23 The Court having considered the evidence, including the testimony of all witnesses and 24 exhibits; and further having considered the oral arguments, post trial briefs, hereby enters the 25 following Findings of Fact and Conclusions of Law. To the extent that Findings of Facts
28 I After Trial Judge Barrett-Anderson retired, and was appointed Senior Judge Pro Tempore. 2 In a letter filed with the Court on January 9,2012, Billok wrote the Court and indicated that he may not appear at trial.
Page 1 of 1 stated may be considered Conclusions of Law, they shall be deemed Conclusions of Law.
2 Similarly, to the extent that matters expressed as Conclusions of Law may be considered
3 Findings of Fact, they shall also be deemed Findings of Fact. 4
5 PART I 6 PROCEDURAL BACKGROUND 7 This case was initiated on December 14, 2007. A First Amended Complaint ("FAC") 8 was filed by JWS on December 10, 2008, for Breach of Contract; Breach of Fiduciary Duty; 9 International Interference with Prospective Economic Advantage ("IIPEA"); Negligent 10 Interference with Prospective Economic Advantage ("NIPEA"); Unfair Competition; 11 Misappropriation of Trade Secrets, and Breach of the Duty of Good Faith and Fair Dealing. 12 The trial involved a dispute between JWS and Defendants related to bids for the Guam I3 Schools Project involving public works on various schools: (1) University of Guam Lecture 14 Hall; (2) Liguan and Adacao Elementary Schools; (3) Astumbo Middle School, and (4) Okudu 15 High School. 16 On February 24, 2010, the Court granted TSI's Motion for Summary Judgment and 17 dismissed the XII Cause of Action for Breach, and the XIV Cause of Action for NIPEA. 18 On August 19, 2010, the Court granted AJB's Motion for Summary Judgment and 19 dismissed the XI Cause of Action for NIPEA. Further, the Court granted Summary Judgment 20 in favor of Defendant Billok and dismissed the X Cause of Action for IIPEA, but denied 21 summary judgment for AJB in the same Cause of Action. 22 On December 2, 2010, Judgment was entered III favor of Defendant AAON 23 International's Counterclaim for Breach of Contract III the amount of $20,644.72. The 24 Judgment was appealed on December 20,2010. 25 The Court dismissed the III Cause of Action for NIPEA against Cain in the Amended 26 Complaint. 27
Page 2 of25 FINDINGS OF FACT 2 A. Significant Parties To The Dispute 3 1. JWS is a corporation duly formed, organized and doing business III
4 Guam. Its principal place of business is in Guam. 5 2. Cain is a New Zealand citizen living in Australia. Cain was the former 6 general manager of JWS between December 13, 1999 until September 6, or 27, 2006. First
7 Am. Compi., ~~ 19,28 (Dec. 10,2008). 8 3. Simpson Air ("SAC") is a foreign corporation organized and existing 9 under the laws of Australia, formed on or about September of 2006, and is not licensed to do 10 business on Guam. 11 4. Cain was a part owner of SAC at times relevant to the actions alleged in
12 the Complaint. SAC was sold sometime in 2008 or 2009. Cain now works for Superior Air 13 Solutions, which is principally owned by his wife. Cain conducts business from Australia.
14 5. AAON International, Inc. is a corporation organized and existing under 15 the laws of Florida.
16 6. Billok is a United States Citizen, and the President of AAON 17 International, Inc., which is doing business as AJB Associates, Inc. (collectively Billok and 18 AAON International, Inc. are hereinafter referenced as "AJB"). 19 7. Randy Asa ("Asa") is a United States Citizen, and at all times relevant is 20 a resident of Washington. Asa is an employee of Thermal Supply Inc. 21 8. Thermal Supply Inc. ("TSI") is a corporation duly formed and organized 22 under the laws of Washington.
23 9. TSI did business on Guam exclusively through its on-island 24 representative, Asa.
26 B. The Guam Schools Project and Bidding Process
27 1. The Guam Schools Project (hereinafter "Schools Project") was a design- 28 build project owned by the Guam Educational Financing Foundation ("GEFF") for the construction of five (5) public schools on Guam The project developer was a group by the
Page 3 of25 name of Facility Group. The controversy between the JWS and the Defendants relates to the 2 award through a private competitive bid solicitation for the following public works projects: 3 (1) University of Guam Lecture Hall, (2) Liguan and Adacao Elementary Schools, and (3) 4 Astumbo Middle School (hereinafter collectively referred to as "Schools Project"), involving 5 design build specifications for HV AC AAON and Goodman products. 6 2. JWS was the exclusive sales representative on Guam for AAON 7 products from July 2004 to November 2007. PL's Tr. Ex. "5." Depo. Andrew Billok at pg. 48. 8 Ex"F,E,H" 9 3. Cain began working for JWS sometime in 1999. Cain signed the receipt 10 of the JWS Policy Handbook on July 2, 2004. PLTr. Ex. "A." Paragraph 18 of the 'Policy 11 Handbook stated: " ... all JWS matters are proprietary in nature and to be held in the strictest of 12 confidence ... while in our employ or after without the expressed con(s)ent of the President of 13 JWS ... " Cain signed and acknowledged this policy. Cain was the General Manager of JWS 14 during the design build phase involved in the present controversy. 15 3. JWS was the only heating-ventilation-and cooling ("HV AC") contractor
16 on the Facility Group design team. For over two (2) years JWS, through Cain, worked to
17 incorporate AAON and Goodman HV AC equipment and products into the design build
18 specifications for the Schools Project.
19 4. Instillation and material prices for the design build specifications was
20 not public information or available to everyone working at JWS, nor was it available to other
21 members of the design team. JWS' pricing practices were confidential and couldn't be
22 disclosed without the express consent of the President of JWS. PLTr.Ex. "D."
23 5. After completing his work on the design build, Cain resigned from
24 JWS's on September 8, 2006. [PLTr. Ex. "DD"] He formed a company called Simpson Air
25 Conditioning ("SAC"), a New Zealand company not license to do business on Guam.
26 6. GEFF decided not to enter into a construction contract with the Facility
27 Group as the prime contractor, and instead awarded the contract Core Tech International
28 ("Core Tech") to build several public schools in the summer of2006. Def. Tr. Ex. "23".
Page 4 of25 4. As the General Contractor for the Schools Project, Core Tech, using the
2 Facility group HVAC design build specifications approved by the GEFF, solicited bids for
3 HV AC products from several on island companies, including JWS, SAC, Carrier and Trane. 4 5. Cain met with the General Manager of Core Tech sometime around the
5 period he left JWS to inform Core tech he was leaving Guam, and was going to open his own
6 his own air conditioning company. Based on this information that Core Tech solicited a bid
7 from Cain. 8 6. JWS submitted its HV AC bid on October 3, 2006, for only two
9 elementary schools, Adacao and Liguan, in the total sum of $1,076,000. PI. Tr. Ex. "FF". JWS
10 did not bid on any other school. 11 7. On October 31,2006, having left JWS's employment in early September
12 2006, Cain's new company, SAC, submitted a bid for the same two (2) schools (Adacao and
13 Liguan). Cain also informed Core Tech that his bid included a special price factor that was also
14 given to JWS of .385%, as opposed to the normal price factor of .420%. PI. Tr. Ex. "II"
15 8. Core Tech awarded a Purchase Order to SAC for its bid on Adacao and
16 Liguan Schools on November 16, 2006, for the total sum of$359,593.60 3 . PI. Tr. Ex. "KK."
17 9. There was evidence that after receipt of both JWS and SAC's bids Core
18 Tech, upon instructions from GEFF to reduce overall construction costs, was considering
19 substituting AAON products with a less expensive foreign made product. JWS succeeded in
20 convincing Core Tech to stick to the original design build specifications for AAON products 21 thus putting both JWS and AJB in a good position for the award. 4 PI. Tr. Ex. "LL."
22 10. Between November 16-20, 2006, JWS and Billok exchanged
23 correspondences. JWS informed Billok that Core Tech intended to purchase AAON products
24 from SAC. JWS expressed its concern to Billok that if SAC succeeded in buying and bringing
25 AAON equipment to Guam it would not bode well for their business relationship under the
28 3 Revised on May 2, 2007, to $354,030.00 to reflect elimination of smoke detectors. PI. Tr. Ex. "CCC" th 4 JWS's effort to keep AAON products in the design occurred just prior to Core Tech's Nov. 16 award to SAC.
Page 5 of25 exclusive distributorship agreement. Exs. "LL", "MM", "NN." By this time SAC had already
secured the award for Liguan and Adacao from Core Tech . (see ~14) 5 2
3 11. SAC also bid on Astumbo Middle School for AAON and Goodman 4 products, and Core Tech issued a Purchase Order award to SAC on April 18, 2007, for the total
5 sum of$251,021.006 . PI. Tr. Ex. "AAA." 6 12. According to the testimony of Mr. Ho Eun, General Manager of Core 7 Tech, JWS was not awarded the bid for Adacao and Liguan because JWS's bid was the 8 highest, although it did meet bid specifications including the five (5) year warranty. Mr. Ho 9 Eun, testified that had he known that JWS was the exclusive distributor for AAON products on 10 Guam it was "possible" to negotiate with JWS, although Mr. Eun stated it would have been 11 very difficult because JWS's price margin was very high. Core Tech also stated that only the 12 GEFF could have changed the HV AC specifications, which it did not, therefore AAON and
13 Goodman were still required under the bid.
14 13. Mr. Ho Eun, and Mr. Jung Won, both of Core Tech, testified they did 15 not know JWS was the exclusive distributor for AAON products on Guam.
16 14. AJB is a manufacturer's representative of AAON Inc, distributing 17 HV AC products. AJB appointed JWS as its "authorized" exclusive distributor of AAON 18 products for the Guam on July 14, 2004. Trial Exs. "E." Deposition of Andrew Billok, at pg. 19 48. Throughout the course of its business relationship with JWS, AJB would refer any inquiry 20 or request for AAON products on Guam to JWS under its exclusive distributorship agreement. 21 During the course of the design build for the Schools Project, Cain developed a personal and 22 professional relationship with Billok of AJB, which extended to SAC during its bid for Adacao 23 and Liguan. PI. Tr. Exs. "Y" and "Z."
24 15. On April 30, 2007, shortly after SAC had been awarded the contract for 25 Astumbo Middle School (see ~11) Billok wrote to Cain requesting that their business dealing 26 "not be publicized." In response Cain informed Billok he would be placing an "order" for
28 5 There is no direct evidence that AJB was aware of the award in early November 2006. 6 Revised on May 2,2007, to $245,060.00 to reflect elimination of smoke detectors. Pl.Tr.Ex. "CCC"
Page 60f25 AAON products based on soon to be revised purchase orders from Core Tech (see footnote 2 #3{ PI. Tr. Ex. "BBB." PI. Tr. Ex. "UU." 3 16. AJB paid SAC $83,390.00, and Cain requested that this payment be 4 deposited in a joint personal account with his wife to cover advances they made to SAC for 5 shipment of Goodman products. PI. Tr. Ex. "000." 6 17. The relationship between Billok and JWS soured through the course of 7 2007, and on November 19, 2007 Billok terminated its exclusive distributorship with JWS. PI. 8 Tr. Ex. "NNN." 9 18. AJB made Cain a representative III Australia for AAON products 10 sometime in the summer of2006. 11 19. Regarding Goodman products, JWS was an associate distributor for 12 Goodman products through TSI and its representative agent, Asa. 13 20. TSI did not have an exclusive distributorship with JWS for Goodman 14 products, and there was no exclusive on-going relationship between the parties. See Decision & 15 Order, dated Feb 24, 2010, ~~ 27-28. TSI did business on Guam through its on-island 16 representative, Asa, was not, and is not now, a license corporation on Guam at the times 17 relevant herein. TSI has never had an office on Guam. TSI publishes its pricing sheets, and 18 does not have any exclusivity with contractors.
19 21. Cain solicited the assistance of Asa for pnce quotes on Goodman 20 products for its bids to Core Tech. Def. Tri. Ex. "38"
21 22. TSI sold Cain and SAC Goodman products on its bid to Core Tech. The
22 total TSI received from Core Tech was $140,164.00; $79472.96 due TSI, and $60,691.04 was
23 SAC's portions. Core Tech paid the entire amount to TSI to assure no liens would arise against
24 the general contractor, and in tum TSI paid SAC.
27 7 This Exhibit strongly suggests that BilloklAJB were in "business dealings," with SAC/Cain for the sale of AAON products in the time period immediate preceding the weeks and months before April 30, 2007, in breach 28 of its exclusive distributorship agreement with JWS. Dan More, Co-President of TSI, testified that the $60,691.04 would have been booked as an overpayment, and forwarded to Cain as his share of the profit.
Page 70f25 23. Cain could not purchase the products from TSI directly because he had 2 no established credit with TSI. Asa assisted Cain to get TSI to accept Core Tech's line of credit 3 to consummate the sale. See Exhibit EEE. 4 24. Asa gave Cain a pricing rebate for Goodman products, which was the 5 same pricing rebate available only to JWS and no other company on Guam. Cain used this 6 advantage to prepare his bid on the Schools Project in addition to JWS's confidential 7 information. 8 25. Asa did not mention to JWS that Cain was negotiating pnces for 9 Goodman products to bid on the Schools Project from TSI. JWS found out independently about 10 the negotiations. See Exhibit LL. 11
12 PART III
13 CONCLUSIONS OF LAW
14 This Court has jurisdiction to hear and determine the claims of this lawsuit pursuant to 15 7 GCA §3105 (2010). 16 1. Breach of Contract Confidentiality Agreement Against Cain (Count I). 17 This is an equitable remedy. JWS alleges Cain breached "the confidentiality duties in 18 JWS' Personnel Handbook [that] were part and parcel of Cain's employment contract with 19 JWS ... " First Am. CompI. at ~ 45. JWS alleges that Cain used proprietary and confidential 20 information in SAC's bid for the Schools Project. 21 The JWS Policy Handbook required all employees to keep all confidential information: 22
23 Employees should be aware that all JWS matters are proprietary in nature and to be held in the strictest confidence. 24 Engineering practices, pricing practice and procedures for use by 25 JWS are totally proprietary and any use by employees while in our employ or after without the expressed content of the President of 26 JWS for another other purpose will be prosecuted to the fullest extent of the law. This will include knowledge or possession of 27 any documents or records owned or created by JWS in its 28 operations. See Exhibit A.
Page 8 of25 Guam courts have upheld contract prOVlSlons intended to protect trade secrets or 2 confidential information. See, e.g. Lubasan v. Document Handling Ltd., Inc., Superior Court of 3 Guam Civil Case No. CV0912-88 (Decision and Order, December 5, 1990). This view is 4
consistent with that in other jurisdictions since the mid-1800s. 9 Non-disclosure or 5
6 confidentiality agreements have been upheld even where, as here, they do not limit the duration
7 of the agreement. Sigma Chemical Co. v. Harris, 586 F.Supp. 704, 710 (D.C.Mo.,1984) (citing 8 Nucor Corp. v. Tennessee Forging Steel Service, Inc., 476 F.2d 386 (8th Cir.1973) 9 ("[D]efendant points to the covenant not to reveal trade secrets and argues that, in fact, there is 10
II no time limit. This argument lacks merit because an employee has an absolute, temporally
12 unlimited duty not to disclose hislher employer's trade secrets and thus the absence of a time 13 limit is not a defect). Confidential information that may not technically constitute trade 14 secrets is nonetheless protected. See, Nucor Corp. v. Tennessee Forging Steel Service, Inc .. 15 476 F.2d 386, 392 (C.A.1973) (citing Restatement 2d Torts §§395 10) ("[E]mployees have a 16
18 See e.g. Empire Steam Laundry v. Lozier, 165 Cal. 95, 99, 130 P. 1180, 1182 (Ca1.l913) ("[T]he court finds that the [confidentiality] contract between these parties was freely and voluntarily entered into and that it was not in 19 restraint of trade, but into this question it is wholly unnecessary to enter. For the judgment of the court does not rest alone upon its findings as to the validity of the contract, but declares a violation of plaintiffs rights under circumstances cognizable in 20 equity, without any express contract whatsoever upon the subject"); O. & W Thurn Co. v. Tloczynski, 114 Mich. 149,72 N.W. 140 (Mich. 1897) (holding that a condition of a contract of employment that an agent wiIInever make use of or divulge trade secrets necessarily confided to him by the principle in the conduct of the business is not invalid as being in restraint of trade); 21 Peabody v. Norfolk, 98 Mass. 452,458,1868 WL 5299,5 (Mass.) (Mass. 1868) ("If he invents or discovers, and keeps secret, a process of manufacture ... he has a property in it, which a court of chancery will protect against one who in violation of 22 contract and breach of confidence undertakes to apply it to his own use, or to disclose it to third persons"); Zep Mfg. Co. v Harthcock, 824 S.W.2d 654, 663 (Tex.App.-Dallas,1992) ("Nondisclosure covenants ... do not necessarily restrict a former 23 employee's ability to compete with the former employer ... The nondisclosure covenant prevents only the disclosure of trade secrets and confidential information acquired by the former employee"). 24 10 The Restatement (Second) of Ageney provides in relevant part: 25 § 395 . Using or Disclosing Confidential Information Unless otherwise agreed, an agent is subject to a duty to the principal not to use or to communicate information 26 confidentially given him by the principal or acquired by him during the course of or on account of his agency or in violation of his duties as agent, in competition with or to the injury of the principal, on his own account or on 27 behalf of another, although such infomlation does not relate to the transaction in which he is then employed, unless the information is a matter of general knowledge. 28
Page 9 of25 high duty not to disclose confidential information received by them as employees to 2 competitors regardless of the fact that the information disclosed might not technically be 3 considered a trade secret"). 4 Cain signed the Handbook attesting to his receipt, understanding and acceptance of the 5
6 conditions. As the General Manager of JWS, Cain's position gave him unfettered access to a
7 wide range of confidential information, such as distributorship pricing, and specific 8 information that was used for bids and proposals, to which only a handful of managerial-level 9 employees within JWS had access. Cain's position required that he be involved in developing 10
11 bids, attending design and construction meetings, and supervising and finalizing bids and
12 proposals. Cain was privy to distributor pricing, including the unique .385 multiplier JWS 13 successfully negotiated for the Schools Project. Cain knew exactly what JWS' markup was 14 going to be if it bid on the Schools Project having participated in developing the design build 15 specifications. Knowing the amount and structure of the JWS bid, Cain was equipped to 16
17 secure the winning bid from Core Tech.
18 Cain's bid was based on pricing factors he had previously negotiated with JWS 19 suppliers on behalf of JWS. Specifically, Cain had negotiated a special .385 multiplier for 20 pricing on AAON products with AJB, as opposed to the .42 multiplier AJB ordinarily provided 21
22 to sales representatives. Cain would not have been aware of the special multiplier had he not
23 negotiated it himself while at JWS. Cain's bid expressly included a contractor's rebate from
24 TSI on Goodman products, a rebate successfully negotiated by JWS on the Schools Project. 25 Without accessing these discounts, it is unlikely that Cain could have purchased the products 26 for the same distributor pricing JWS used in preparing its bids. 27
Page 10 of25 The Court finds Cain breached his duty of confidentiality, and finds Cain liable under 2 Count I. 3 2. Intentional Interference with Prospective Economic Advantage (IIPEA) Against 4 Cain (Count II); Against SAC (Count VII), Relating to the Schools Project. 5 JWS causes of action for IIPEA against Cain and SAC I ! allege wrongful conduct which 6 disrupted its economic advantage with Core Tech in the bid solicitation for the Schools Project. 7
8 The tort of intentional interference with prospective economic advantage requires proof
9 of the following: 1) an economic relationship between the plaintiff and some third party, with 10 the probability of future economic benefit to the plaintiff; 2) the defendant's knowledge of the 11 relationship; 3) intentional wrongful acts on the part of the defendant designed to disrupt the 12 relationship; 4) actual disruption of the relationship; and 5) economic harm to the plaintiff 13
14 caused by the wrongful acts of the defendant. Della Penna v. Toyota Motor Sales, U.S.A., Inc.,
15 11 Ca1.4th 376 (Ca1.l995); Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937 16 (Ca1.2003). The Supreme Court of California in Della Penna (1995) while formulating the 17 elements of this common law tort cautioned, "Ours is a competitive economy in which 18 business entities vie for economic advantage ... We have been cautious in defining the 19
20 interference torts, to avoid promoting speculative claims. Given the criticism of these causes of
21 action and the dangers inherent in imposing tort liability for competitive business practices." 22 !d. The elements of IIPEA have their roots in the Restatement 2d Torts for intentional 23 interference with contractual relationship.!2 The Supreme Court of California in Della Penna, 24
26 II Cain is the President of SAC, therefore, any knowledge that Cain had can be imputed to SAC. 12 Restatement 2d Torts §766B, p. 20: 27 One who intentionally and improperly interfered with another's prospective contractual relationship (except a contract to marry) is subject to liability to the other for pecuniary harm resulting from loss 28 of the benefits of the relationship, whether the interference consists of (a) inducing or otherwise causing a third person not to enter into or continue the prospective relation, or (b) preventing the other from acquiring or continuing the prospective relation.
Page 11 of25 and again eight years later in Korea Supply, recognized the faint distinction in legal analysis 2 between the two types of torts, and the commonality of their elements, but nonetheless found 3 them distinct causes of action in the context of an open competitive economy. 4 "We reiterate our statement in Della Penna that 'our courts should firmly 5 distinguish the two kinds of business contexts, bringing a greater solicitude 6 to those relationship that have ripened into agreements, while recognizing that relationships short of that subsist in a zone where the rewards 7 and risks of competition are dominant" !d. p.12 8 This Court recognizes the competitive backdrop in the instant case. 9 The distinction between the two common law torts is that IIPEA requires proof of an 10
11 intentional wrongful act on the part of the defendant designed to disrupt the known relationship
12 between the plaintiff and the third party. The Supreme Court of California first announced its 13 ruling on this common law tort in Buckaloo v. Johnson (1975) 14 Ca1.3d 815, which promptly 14 became the leading authority. Two decades later the elements of a prima facie case of IlPEA is 15 no less incoherent and vague. 13 At odds with the doctrine is support for freedom of trade, 16
17 freedom of speech, and freedom of competition. Justice Mosk quoting Prosser in Della Penna,
18 stated, 19 " 'The policy ofthe common law has always been in favor of free competition 20 which proverbially is the life of trade. So long as the plaintiff s contractual relations are merely contemplated or potential, it is considered to be in the 21 interest of the public that any competitor should be free to divert them to himself by all fair and reasonable means ... In short, it is no tort to beat a business 22 rival to prospective customers. Thus, in the absence of prohibition by 23 statute, illegitimate means, or some other unlawful elements, a defendant seeking to increase his own business may cut rates or prices, allow discounts or 24 rebates,enter into secret negotiations behind the plaintiffs back, refuse to deal 25 with him or threatens to discharge employees who do, or even refuse to deal with third parties unless they cease dealing with the plaintiff, all without incurring liability'" 26
13 Concurring opinion Justice Mosk, Della Penna, supra at p. 14.
Page 12 of25 There is generally consensus that one who commits an interfering act under wrongful 2 motives should not be allowed to interfere with impunity at all times and under all 3 circumstances. An unlawful act can satisfy the element of wrongfulness. It is the independently 4 wrongful act requirement which makes the interference tortuous and, therefore, actionable. An 5
6 employee of Defendant in Korea Supply engaged in bribery and offered sexual favors to key
7 Korean officials in order to obtain the contract. An act is independently wrongful if 8 accomplished through unlawful means. CRST Van Expedited, Inc. vs. Werner Enterprises, Inc. 9 479 F.3d. 1099, 9 th CA (2007) (Defendant's violation of California's Unfair Competition Law 10
11 provided the basis for wrongful conduct.) It is not required that the disruptive act be committed
12 by unlawful means. San Jose Construction vs. S.B.C.C., 155 Cal.App 1528 (2007) (Former 13 employee of plaintiff, hired by defendant, had accumulated non-secret knowledge about the 14 projects and could reasonably expect subcontractors to give defendant with same prices they 15 had provided to plaintiff.) 16
17 Specific intent is also not required to prove IIPEA. A plaintiff need not plead that the
18 defendant acted with the specific intent or purpose to interfere with the plaintiffs business 19 expectancy in order to state a claim for this tort, it can be established by showing, inter alia, a 20 disruption with a contract which is certain to be consummated. Korea Supply Co. v. Lockheed 21
22 Martin Corp., 63 P.3d 937 (Ca1.2003).
23 In the instant case JWS submitted a bid to build the Schools Project creating the
24 probability of future economic benefit. A bid relationship existed between JWS and Core Tech 25 on the schools which JWS actually submitted bids for. Cain worked for JWS for seven (7) 26 years in a management capacity, and was fully aware of JWS' pricing and distributorship 27
28 relationship with AJB. The evidence also shows that Cain had intimate knowledge of the
Page 13 of25 details of the design build, and knew that JWS would bid for AAON products after years of 2 effort. Although Cain knew that JWS was the exclusive distributor of AAON products on 3 Guam. 4 After Cain left JWS he opened SAC in Australia, and used his new company to bid on 5
6 the Schools Project. He met with Core Tech before leaving Guam to inform them he was
7 opening his new company dealing in air conditioning. He never obtained a foreign corporation 8 license to do business here on Guam, in violation of Guam law. 14 Cain did not pay local taxes. 9 This put JWS in an unfair competitive position. 10
11 No other local company was authorized to sale AAON products on Guam. JWS had the
12 exclusive distributorship for AAON products on Guam. JWS invested enormous amounts of 13 time and money for over two years to secure inclusion of AAON products into the design build 14 for the Schools Project, even to the point of encouraging Core Tech to stick with AAON rather 15 than substitute for a less expensive product. Since Core Tech did not opt to substitute with 16
17 cheaper products, there was a reasonable probability that Core Tech could have contracted with
18 JWS, Cain never told Core Tech of JWS' exclusive distributorship agreement with AJB. Mr. 19 Eun testified that had he known of JWS' distributorship agreement he would have checked 20 with Cain, and as a good businessman he would have honored the distributorship. See ~ B(12). 21
The evidence shows that Cain was in continuous communication with Billok after SAC 22
23 submitted its bid and up through award. Cain induced AJB to deal with SAC directly on the
24 fear that AJB would completely lose out on the Schools Project if it didn't deal with SAC 25 because Core Tech was not going to award to JWS based on its high bid. Cain interfered by 26
28 14 Title 18 G.C.A. §7102(a) "A foreign corporation shall not transact business in Guam until it obtains both a business license and a certificate of authority to do so from the Director of Revenue & Taxation."
Page 14 of25 submitting a bid in the first instance, and by inducing AJB to breach its excusive agreement 2 with JWS. 3 The Court finds that Cain acted wrongfully by: 1) not obtaining a foreign corporation 4 license to do business on Guam; 2) not informing Core Tech in the first instance that SAC was 5
6 not business licensed to do business on Guam; 3) failing to advise Core Tech of the exclusive
7 distributorship agreement between AJB and JWS; 4) SUbmitting a bid with undercut prices for 8 AAON products based on prior confidential information attained while in the employment of 9 JWS, and 5) inducing AJB to ignore its exclusive distributorship agreement with JWS on the 10
11 belief that if AJB did not do business with SAC it would lose out completely on the Schools
12 Project contract with Core Tech. 13 The analysis does not end with the Court's determination of Cain and SAC's wrongful 14 conduct. The Court must further determine whether the wrongful conduct was the cause of 15 JWS's harm. Guam Paradise Company v. Mitsubishi Corp., LTD 1992 WL 245660 (D.Guam) 16
17 [The undisputed cause in fact for the Port Authority of Guam ("the Port") not awarding the
18 contract to plaintiff was its high bid and substantial non-conformance, causing the Port to reject 19 all bids.] Did JWS simply out-price itself in this competitive bid? This has been one of the 20 most difficult issues in the instant case. 21
22 The Supreme Court of California, post Della Penna and Korea Supply, talks little about
23 causation, so much so that it almost appears that causation is no longer a critical element as
24 long as there is a finding of "wrongfulness." It would seem unjust to permit a tortious 25 wrongdoer to escape liability in situations where, knowing how to undercut his competitor, he 26 submits the lowest bid. A wrongdoer, armed with competitive information, will always be able 27
28 to undercut his competitor, leaving causation an easy target. On the other hand, as in Guam
Page 15 of25 Paradise, where the solicitor rejects all bids or cancels the solicitation altogether, the wrongful 2 act becomes less of a casual factor, and therefore the plaintiffs own actions should be 3 reviewed with a closer eye towards causation. Unfortunately, the whole issue of causation has 4 been overshadowed by discussion of the unprivileged defendant's wrongful conduct, and to the 5
6 extent that the Superior Court of Guam trial judge in Guam Paradise relied on Buckaloo, it is
7 questionable after Della Penna whether Buckaloo is still good law for any discussion of 8 IIPEA 15 9 It is this Court's opinion, based on the testimony of Core Tech, there was a possibility 10
11 that Core Tech would not have summarily rejected JWS' bid, and based on the exclusive
12 distributorship would have communicated with JWS for possible award. JWS' bid was not the 13 cause of its losses. The Court finds Cain and SAC liable for JWS damages for tortuous 14 interference with the prospective economic advantage with Core Tech as to JWS' s bid for 15 Adacao and Liguan Elementary Schools under the theory ofIIPEA 16 . 16
17 3. VOG Project. IIPEA Against Cain (Count II); Against SAC (Count VII)
18 The Complaint alleges that JWS had a prospective economic relationship with DOG and 19 Core Tech for the UOG Project and the Guam Schools Project. First Am. CompI. at ~ 83. 20 Further, that Simpson Air, through Cain, used JWS' information and trade secrets to obtain the 21
23 15 Della Penn, supra, Footnote FN5 "To the extent that language in Bucka/oo , supra, 14 Ca1.3d. 815, and 24 Seaman's, supra, 36 Ca1.3d 752, addressing the pleadings and proof requirements in the economic relations tort is inconsistent with the formulations we adopt in this case, it is disapproved." 25 16 JWS did not bid on Astumbo Middle School, or Okudu High School. The Court finds that JWS' failure to bid on these projects was the cause in fact of its losses with respect to Core Tech under IIPEA. Thus, in order to have 26 created the economic relationship with Core Tech, JWS needed to enter a bid.
Page 16 of25 contract for the Guam Schools Project "and intentionally assisted [a competitor] in obtaining 2 the DOG contract." 3 The Court finds no evidence that Cain, or SAC through Cain, intentionally assisted 4 lWS' competitor in obtaining the DOG Contract. Therefore, the Court finds that Cain and SAC 5
6 did not interfere with any prospective economic advantage relating to the DOG Project.
7 The Court dismisses these Counts against Cain and SAC as they pertain to the DOG 8 project. 9 4. IIPEA Against AJB (Count X). 10
11 The F AC alleges AlB wrongfully interfered with the prospective economic advantage
12 between lWS and Core Tech. PI. 1st Am. Complt. (Dec. 10, 2008) ~ 89. lWS alleges that AlB 13 "participated in negotiating a bid price for supply of AAON products on the school project 14 with SAC, and in fact offered SAC the same special pricing extended to lWS, in derogation of 15 its exclusive distributorship agreement with lWS" PI. Tr. Brief (Nov. 29, 2011) ~ A, p.16. In 16
17 order to find AlB and Asa liable under IIPEA, lWS must prove the same elements, and meet
18 the same legal standards as discussed in detail under ~ Part II. 19 AlB breached its exclusive distributorship with agreement with lWS. Its actions, 20 however, were not tortuous as discussed under the historical development ofIIPEA. AlB knew 21
22 from Cain that there was a risk Core Tech would alter its specification for AAON products in
23 order to reduce costs, and it set about to assure the deal. The only way to do this was to breach 24 its contract with lWS. Breach of an agreement does not become tortuous by the breach itself. 25 There must be some independent wrongful act. While AlB's breach was wrong, it was not 26 wrongful under IIPEA. AlB sought the benefit of the deal through the one company that 27
28 showed certainty of winning the Schools Project bid. AlB showed no malicious intent. As
Page 17 of25 stated in Della Penna, supra, "Perhaps the most significant privilege or justification for 2 interference with a prospective business advantage is free competition ... Ours is a competitive 3 economy in which business entities vie for economic advantage. In a sense, all vendees are 4 potential buyers of the products and services of all sellers in a given line, and success goes to 5
6 him who is able to induce potential customers not to deal with a competitor." Buckaloo, supra,
7 14 Ca1.3d. 815, at pg. 828, (1975), cited with approval, Della Penna. Id. 8 The Court finds that AJB is not liable for damages under IIPEA. 9 5. IIPEA Against TSI and Randy Asa (Count XIII). 10
11 The Court previously denied TSI summary judgment on this Count stating "there are 12 material facts in dispute regarding the acts that constituted the alleged disruption of the 13 relationship between Plaintiff and Core Tech, as well as the alleged economic harm caused by 14
15 Defendant(s) TS!." See Dec. & Or. Mtn. for Sum. Jud. Causes of Action #12-14. (Feb. 24.
16 2010).
17 Asa provided price quotations to Cain in the course of the design build with the Facility 18 Group for Goodman product based on TSI pricing, and continued to negotiate with Cain after 19 SAC secured the bid. TSI's act of quoting and selling Goodman products to a competitor of 20
21 JWS does no constitute an improper or wrongful act under IIPEA. TSI's prices were readily
22 available to its sales representatives, including Asa for the Guam region. There was no 23 exclusivity for Goodman products on Guam. It is not a tort to maximize one's economic 24 interests provided there is no improper or wrongful conduct. There was no wrongful act 25 committed by TSI in providing price information and ultimately selling Goodman product in 26
27 question to SAC. TSI was free to sell Goodman products to a competitor of JWS. JWS had no
Page 18 of25 reasonable expectation that it would have received the sole economic benefit of Goodman 2 products on Guam. JWS has failed to prove TSI or Asa acted wrongfully. 3 The Court finds TSI and Asa not liable for damages under IIPEA, and dismisses Count 4 XIII accordingly. 5
6 6. Breach of Fiduciary Duties to JWS Against Cain. (Count IV).
7 JWS alleges Cain is liable for common law breach because an agent of JWS he was 8 "obligated to act in the interest of the principal," and that he "wrongfully, oppressively, and 9 maliciously breached his fiduciary duties to JWS" when he submitted bids on the Schools 10
11 Project. This is an equitable remedy.
12 The Restatement (3 fd ) of Agency, Section 8.01 provides that "an agent has a fiduciary 13 duty to act loyally for the principle's benefit in all matters connected with the agency 14 relationship." Restatement 3d Agency §8.01. The duty of loyalty includes the duty to preserve 15 the principal's confidential information, which extends in duration past the termination of the 16
17 agency relationship.
18 An agent's duties concerning confidential information do not end when the agency relationship terminates. An agent is not 19 free to use or disclose a principal's trade secrets or other 20 confidential information whether the agent retains a physical record of them or retains them in the agent's memory. If information is 21 otherwise a trade secret or confidential, the means by which an agent appropriates it for later use or disclosure should be irrelevant. 22 Feats of human memory, however commendable and intriguing in 23 many respects, should not be privileged as instruments of disloyal conduct. Restatement 3d Agency § 8.05, cmt. C. 24
25 This duty of loyalty arises out of the agency relationship, and exists even in the
26 absence of an express confidentiality agreement. See, Empire Steam Laundry, 27 supra at 1182. As General Manager of JWS, Cain owed JWS a common law duty 28
Page 19 of25 of loyalty that extended past the tennination of his agency relationship with JWS. 2 This fiduciary duty existed even in the absence of a contractual duty. 3 For the reasons described above, Cain breached his common law fiduciary duty of 4 loyalty to JWS by improperly disclosing and utilizing the confidential infonnation in a manner 5
6 that injured JWS. Because Cain used confidential infonnation he obtained during his agency
7 relationship with JWS in fonnulating his competing bid in the Schools Project, he breached 8 both his contractual obligation and his common law fiduciary duty to abstain from disclosing 9 confidential infonnation or misappropriating the same for his own or a competitor's purposes. 10
11 The Court finds Cain liable for damages under Count IV.
12 7. Unfair Competition and Misappropriation of Trade Secrets: Against Cain (Counts V&VI) 13
14 JWS alleges the common law tort of unfair competition and misappropriation of trade
15 secrets against Cain in that he wrongfully used JWS' confidential infonnation and trade secrets 16 for his benefit. 17 As discussed above, JWS held certain classes of infonnation confidential and limited 18 access to that infonnation to JWS managers and engineers. Cain was aware that confidential 19
20 infonnation included pricing, personal infonnation of employees, custom design infonnation,
21 and sealed bids, which included design build equipment, drawing for ducts, installation issues, 22 maintenance issues, warranty issues, and price. Cain also understood that confidential 23 infonnation includes knowledge or possession of any documents or records owned or created by 24
25 JWS in its operations. Cain and SAC's misappropriation of confidential infonnation belonging
26 to JWS in fonnulating SAC's bid for the School Project amounted to unfair competition. 27 Because specifications called for AAON products, for which JWS was the exclusive distributor, 28 other potential bidders could not expect to meet the requirements for the Schools Project, which
Page 20 of25 limited Core Tech's exposure as a potential customer. Core Tech never revised the 2 specifications; the project proceeded with AAON specifications. Although a former employee 3 who joins or establishes a competing enterprise may properly solicit business from those he 4 served in this previous employment, "an employee . . . should not be allowed to exploit 5
6 information which his employer compiled at great expense and which represents a valuable
7 business asset." (Callman (3d ed.) Unfair Competition Trademarks & Monopolies, § 52.2(c)(2); 8 Witkin, Equity (8th ed. 1974) s 86.). SAC's use of Cain's improperly gained knowledge 9 regarding special pricing, rebate and warranty information, as well as Cain's direct solicitation 10
11 of AJB to AAON products in disregard of the distributorship agreement caused JWS to lose
12 profits, both directly and indirectly, on the sale of AAON products on Guam. 13 Cain and SAC's actions in connection with the sale of the AAON products to Core 14 Tech constitute tortious conduct and a breach of Cain's common law obligations to JWS. This 15 remedy is similar to other equitable remedies heretofore discussed above. 16
17 The Court finds Cain liable for damages under Counts V and VI.
18 8. Intentional Breach of Contract: Against AJB (Count VIII); Breach of Implied Covenant of Good Faith and Fair Dealing: Against AJB (Count IX). 19
20 The covenant of good faith and fair dealing requires the existence of a contractual
21 obligation between the parties. See e.g. Quijano v. Atkins-Kroll, Inc., 2008 Guam 14; 2008 22 WL 4862508, 1 (Sup. Ct. Guam 2008) at FN2. That agreement is reflected in the exclusive 23 distributorship, and AJB admits that from 2004 to 2007 it "appointed JWS as a sole sales 24
25 representative for AAON heating, ventilation and air-conditioning ("HV AC") equipment for
26 the territories of Guam and Micronesia." Def. AAON International dba AJB Ans. & 27 Countercl., 1 ~ 7 (Feb. 17, 2009). The evidence shows AJB (Billok) intended to sell, and in 28 fact directly sold AAON products to SAC between November 16,2006, and April 30, 2007, in
Page 21 of25 breach of the exclusive distributorship agreement with JWS. AlB should have done what it had 2 done in prior instances of AAON products to be sold on Guam; refer the vendor its exclusive 3 distributor, JWS. AlB wanted the Schools Project at all costs. After years of working to secure 4
AAON products into the design build it was not going to lose the project based on JWS out 5
6 pricing itself, or because of Cain's actions in bidding against JWS. AJB knew that Core Tech
7 wanted to substitute the more expensive HV AC specification with cheaper products from Asia, 8 but was convinced by JWS not to do so. Knowing JWS's bid was much higher than SAC's, it 9 was a possibility that Core Tech would have requested GEFF to rebid with cheaper products. 10
11 Mr. Eun admitted he would not have accepted JWS's bid because it was too high. AJB took a
12 risky move to assure it got the Schools Project contract even if it meant breaching its 13 agreement with JWS. 14 The Court finds AJB liable for damages for intentional breach of contract under Count 15 VIII, and further finds AJB liable for breach of the covenant of good faith and fair dealing 16
17 implied in its exclusive distributorship agreement with JWS under Count IX.
18 9. No Attorney Fees to Any Party. 19 The American Rule, meaning each party must bear the expense of their own attorney's fees, 20 applies in Guam. Fleming v. Quigley, 2003 Guam 4 ~ 35. All parties prevailed on significant 21 issues in this case, thus attorney's fees should not be awarded. See Fargo Pacific, Inc., v. 22 Koranda Corp., 2006 Guam 22 ~ 53. 23
24 10. Damages.
25 Finally, the Court finds that JWS is not entitled to damages related to schools it did not 26 submit bids for. The failure of JWS to submit certain bids is the direct cause of JWS' s losses. 27
Page 22 of25 PART IV CONCLUSION 2
3 Based on the foregoing Findings of Fact and Conclusions of Law the Court
4 concludes as follows for each of the causes of action in the FAC: 5 a) Count I for breach of contract against Cain is GRANTED. 6 b) Count II for IIPEA against Cain is Dismissed as it pertains to the 7 UOG contract, and is GRANTED as it pertains to the Schools Project 8
9 involving Adacao and Liguan.
10 c) Count III for NIPEA against Cain heretofore Dismissed. 11 d) Count N for common law breach of fiduciary duties against Cain is 12 GRANTED. 13
14 e) Count V for common law breach of misappropriate of trade secrets
15 against Cain is GRANTED. 16 f) Count VI for common law breach of unfair competition against Cain 17 is GRANTED. 18 g) Count VII for IIPEA against SAC is Dismissed as it pertains to the 19
20 UOG contract, and is GRANTED as it pertains to the Schools Project
21 involving Adacao and Liguan. 22 h) Count VIII for breach of contract against AJB is GRANTED. 23 i) Count IX for breach of contract against AJB is GRANTED. 24
25 j) Count X for IIPEA against AJB is Dismissed as to all schools.
26 k) Count XI for NIPEA against AJB and Billok heretofore Dismissed.
27 1) Count XII for breach against TSI heretofore Dismissed. 28 m) Count XIII for IIPEA against TSI and Asa is Dismissed.
Page 23 of25 n) Count XIV for NIPEA against TSI heretofore Dismissed. 2 PART V 3 DAMAGES
4 The FAC prays for damages to be awarded for: (a) the I through VI Causes of Action 5 against Cain, (b) the VII Cause of Against SAC, (c) the VIII though X Causes of Action 6 against AJB; (d) the VIII through the IX Causes of Action against Billok; and (e) XIII Cause of 7 Action against TSI in an amount to be proven at trial. JWS' s post trial brief prays for an award 8
9 totaling THREE HUNDRED TWENTY-NINE THOUSAND SIX HUNDRED AND
10 SEVENTY ONE ($329,671.00) DOLLARS. PI. FoF & Concl. of Law (Feb 27, 2012) ~~ 44,45. 11 The FAC prays for Punitive Damages in the amount of$I,OOO,OOO.OO against: (a) Cain 12 for the Second, Fourth, and Fifth Causes of Action; (b) Simpson Air for the Seventh Cause of 13
14 Action; (c) AJB for the Tenth Cause of Action; and (d) TSI for the Thirteenth Cause of Action.
15 PART VI 16 AWARD 17 1. The Court awards damages against Cain, SAC, and AJB jointly and severally 18 for breach of contract claims, and all common law claims, limited to AAON products for 19
20 Liguan and Adacao Elementary Schools in the total sum of TWO HUNDRED FIFTY
21 THOUSAND ONE HUNDRED AND NINETY-NINE ($250,199.00) DOLLARS. 22
23 / / / 24
25 / / /
26 / / /
27 / / / 28
Page 24 of25 2. The Court further awards punitive damages against Cain and SAC jointly and 2 severally for their tortious conduct on IIPEA claims in the sum of ONE HUNDRED 3 THOUSAND ($100,000.00) DOLLARS. 20 GCA §2120. 4 3. JWS is entitled to post judgment interest at 6%. 5
6 No further relief is granted.
8 ,mt ? 4 7012 SO ORDERED: _ _ _ _ _ __ 9
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