RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 United Rentals v. Keizer, et al. No. 02-1580 ELECTRONIC CITATION: 2004 FED App. 0005P (6th Cir.) File Name: 04a0005p.06 _________________ COUNSEL UNITED STATES COURT OF APPEALS ARGUED: Robert H. Smeltzer, LOWIS & GELLEN, FOR THE SIXTH CIRCUIT Chicago, Illinois, for Appellant. Steven C. Berry, BIGLER, _________________ BERRY, JOHNSTON, SZTYKIEL & HUNT, Zeeland, Michigan, for Appellees. ON BRIEF: Robert H. Smeltzer, UNITED RENTA LS (NORTH X Gerald Haberkorn, LOWIS & GELLEN, Chicago, Illinois, AMERICA ), INC., - Harold E. Nelson, BORRE, PETERSON, FOWLER & - REENS, Grand Rapids, Michigan, for Appellant. Steven C. Plaintiff-Appellant, Berry, BIGLER, BERRY, JOHNSTON, SZTYKIEL & - No. 02-1580 - HUNT, Zeeland, Michigan, Robert W. Smith, SILVERMAN, v. > SMITH, BINGEN & RICE, Kalamazoo, Michigan, for , Appellees. - JERRY KEIZER , GRANT RENT - - CLAY, J., delivered the opinion of the court, in which ALL, INC. and MULDER’S - COOK, J., joined. STAFFORD, D. J. (pp. 27-28), delivered OUTDOO R POWER - a separate opinion concurring in part and dissenting in part. EQUIPMENT , INC., - Defendants-Appellees. - _________________ - N OPINION Appeal from the United States District Court _________________ for the Western District of Michigan at Grand Rapids. No. 00-00831—Douglas W. Hillman, District Judge. CLAY, Circuit Judge. Plaintiff United Rentals (North America), Inc. appeals from the April 5, 2002, district court Argued: October 28, 2003 order granting summary judgment to Defendants Jerry Keizer, Grant Rent-All, Inc. and Mulder’s Outdoor Power Equipment, Decided and Filed: January 7, 2004 Inc. on Plaintiff’s claims for breach of contract; violation of the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws Before: CLAY and COOK, Circuit Judges; STAFFORD, Ann. § 445.1902; intentional interference with contract; District Judge.* intentional interference with business relations; civil conspiracy; and breach of a fiduciary duty of loyalty. The Court AFFIRMS the district court’s order.
* The Honorable William Stafford, United States District Judge for the Northern District of Florida, sitting by designation.
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I. sought to affirmatively compel Defendants to locate and STATEMENT OF FACTS return any and all of United’s confidential information. The complaint also sought an accounting from Defendants for A. Procedural History Keizer’s alleged breach of the employment agreement and an award of actual and punitive damages. On August 24, 2001, On November 7, 2000, United Rentals (North America), United filed an amended complaint adding a claim against Inc. (“United”) filed a complaint against Defendants Jerry Keizer for breach of a fiduciary duty of loyalty. Keizer, Grant Rent-All, Inc. and Mulder’s Outdoor Power Equipment, Inc. (“Mulder’s”). Since the parties are Defendants Keizer and Grant Rent-All answered the completely diverse and the amount in controversy exceeds complaint, and Keizer filed a counter-claim against United on $75,000, the district court had subject matter jurisdiction over February 21, 2001, alleging that United breached the the matter. employment agreement by terminating him without prior notice and without cause on March 6, 2000; Keizer sought his The complaint alleged that Keizer violated his covenant- unpaid salary under the agreement from March 6, 2000 not-to-compete set forth in ¶ 7.2 of his employment through May 31, 2003. Defendant Mulder’s answered the agreement by selling construction equipment and soliciting complaint on August 13, 2001. United filed an answer to the United’s customers in a proscribed geographic area, the so- counterclaim on March 31, 2001. Keizer and Grant Rent-All called “Target Area.” The complaint further alleged that filed an answer and counterclaim to the amended complaint Keizer, Grant Rent-All and Mulder’s continue to compete on September 13, 2001. with United in the Target Area and do so with United’s proprietary information in violation of ¶ 7.3 of the agreement On November 1, 2001, Keizer and Grant Rent-All moved and the Michigan Uniform Trade Secrets Act. The complaint for summary judgment on United’s complaint. On also alleged a claim for tortious interference with business November 2, 2001, United moved for summary judgment on relations – i.e., Defendants allegedly interfered with the Count I of its complaint for breach of the non-competition business relationship between United and its customers; a and non-solicitation provision of the employment agreement claim that Mulder’s tortiously interfered with Keizer’s and on Keizer’s counterclaim. obligations under the employment agreement; and a civil conspiracy by all Defendants to breach the restrictive On April 5, 2002, the district court granted Keizer and covenants of the employment agreement, interfere with Grant Rent-All’s summary judgment motion, denied United’s United’s business relations; misappropriate United’s motion for summary judgment on Count I, and granted confidential information; and to improperly solicit and do United’s summary judgment motion on Keizer’s business with United’s customers. counterclaim. The district court also entered judgment in favor of Mulder’s on all counts in United’s complaint, even United sought an injunction against Keizer and Grant Rent- though Mulder’s had not moved for summary judgment. All (and Mulder’s, to the extent it is doing business with Keizer or Grant Rent-All) from competing with United in the For the district court, the crux of the dispute boiled down to Target Area for a specified period of time, disclosing United’s the interpretation of the prohibition in ¶ 7.2 of Keizer’s confidential information and soliciting United’s customers in employment agreement which, inter alia, prohibits Keizer the Target Area for a specified period of time. United also from “directly or indirectly … engag[ing] in the operation of No. 02-1580 United Rentals v. Keizer, et al. 5 6 United Rentals v. Keizer, et al. No. 02-1580
any equipment sale, rental or leasing business” in the Target business of renting and selling construction and industrial Area, excluding Newaygo County. The district court held equipment in the Western Michigan area. that this language prohibited Keizer from operating such a business only if it is physically located within the Target Jerry Keizer is a Michigan resident, a former owner of Area. Accordingly, Keizer did not breach the agreement by KGR and former general sales manager of United/KGR. operating Grant Rent-All, which is physically located in Grant Rent-All is a Michigan corporation, with its principal Newaygo County, but nevertheless does one-third of its place of business in Grant, Michigan, which is within business with customers inside the Target Area. Assuming Newaygo County. Keizer has been the owner and president arguendo that the above-quoted language from ¶ 7.2 is of Grant Rent-All since December 1994. Keizer never ambiguous, the district court further held that there was no worked at Grant Rent-All until May 2000. Grant Rent-All is parol evidence in the record to support United’s contrary managed by Keizer’s step-son and step-son-in-law. interpretation of the agreement. Mulder’s Outdoor Power Equipment, Inc. (“Mulder’s”) is The district court dismissed United’s claim for breach of a Michigan corporation, with its principal place of business in the confidentiality clause (¶ 7.3 of the agreement) because Byron Center, Michigan; it is in the business of renting and United had failed to submit any evidence showing that Keizer selling construction and industrial equipment. Jerry Keizer’s had taken or used any confidential information, as defined by brother, Ron Keizer, is employed by Mulder’s. the agreement. The district court also dismissed United’s claim under the Michigan Uniform Trade Secrets Act. The Prior to June 1, 1998, Jerry Keizer owned one-third of district court dismissed the tortious interference with business KGR’s stock. The other two-thirds were owned by Grand relations, tortious interference with contract and civil Valley Investments, LLC (“GVI”), a limited liability conspiracy claims because there was no evidence that company consisting of the four Grasman brothers (Larry, Defendants had wrongfully interfered with United’s business. Jack, Russ and Rick.) GVI also fully owned and operated an Last, the district court dismissed the breach of fiduciary duty equipment business in Hudsonville known as Grand Valley of loyalty claim because there is no evidence that Keizer did Equipment Company, Inc. (“GVEC”); Keizer had no interest not devote his full efforts to United’s business. in GVEC. KGR is located in Grand Rapids, Michigan and is in the business of selling construction, farm and landscaping United filed its notice of appeal on May 3, 2002. Keizer equipment such as tractors and commercial mowers. did not appeal the district court’s dismissal of his counterclaim against United. In April 1998, United approached GVI with a letter of intent to purchase the stock of both KGR and GVEC for B. Substantive Facts $22,750,000. United’s letter did not acknowledge the fact that Keizer owned a significant amount of KGR stock; among United is a Delaware corporation with its principal place of other things, the letter proposed that at closing, United would business in Greenwich, Connecticut. United is in the business enter into employment agreements with the four Grasman of renting and selling construction and industrial equipment brothers and that the Grasman brothers would enter into a throughout the United States. United purchased all of the five-year non-compete agreement, but there was no reference stock of Kubota of Grand Rapids, Inc. (“KGR”) on June 9, to Keizer. 1998. KGR was then merged into United. United is in the No. 02-1580 United Rentals v. Keizer, et al. 7 8 United Rentals v. Keizer, et al. No. 02-1580
GVI, by contrast, clearly was aware that it did not own all All.1 Keizer signed the modified stock option agreement later of the KGR stock and that in order for the proposed sale with that day. United to proceed, GVI needed to control all KGR stock. Accordingly, GVI forwarded a copy of United’s letter of On May 20, 1998, Kretschman, the Grasmans’ attorney, intent to Keizer, along with a proposed stock option wrote United’s attorney, John Arndts, about the anticipated agreement through which GVI would buy Keizer’s stock in employment agreement with Keizer. Kretschman’s letter KGR. The stock option agreement recited that Keizer owned stated that he anticipated that Keizer’s employment agreement 7,250 KGR shares compared to GVI’s 14,500. It further would be “along the lines required of the Grasmans, but, in acknowledged that United had approached GVI about the case of the non-compete, excluding Newaygo County, purchasing all of GVEC’s stock and that the KGR shares where his son operates a competing business.” (J.A. 173-74.) would be included in the proposed transaction. On May 26, Arndts wrote back with a form employment agreement for Jerry Keizer to sign. Arndts further stated, For $5,000, Keizer granted GVI an option to purchase his “[W]ith respect to excluding Newaygo County from the non- KGR shares for $1,475,000. Keizer agreed that if GVI competition provisions of Jerry’s agreement with [KGR], we exercised the option, Keizer would “enter into an agreement need more information concerning what competitive activities not to compete with KGR or GVEC for five years (other than are contemplated in Newaygo County by his son and Jerry.” in Newaygo County) and otherwise in form and substance (J.A. 183.) acceptable to [United], for which KGR shall pay Keizer” $25,000. Further, upon exercising the option, KGR would Thereafter, United made little effort to get any additional enter into a five-year employment agreement with Keizer that information regarding the competitive activities of Grant could be terminated only for just cause. Rent-All. United asserts that its inquiries were limited because the Grasmans had informed it that Grant Rent-All At this time, GVI also was aware that Keizer owned or was a business in which Keizer and his son or son-in-law partially owned Grant Rent-All, a competing equipment sale were involved, but that it was a very small business with a and rental business in Newaygo County. GVI also was aware different product line from the Grasmans and that it did that Grant Rent-All had sold equipment to customers in the business only in Newaygo County. United does not claim, Grand Rapids area, outside of Newaygo County. It is however, that Keizer misled it about Grant Rent-All prior to undisputed that over one-third of Grant Rent-All’s customers purchasing KGR’s and GVEC’s stock. In fact, United never were located outside Newaygo County both before and after made any inquiries of Keizer about Grant Rent-All until the sale of KGR stock to United. months after Keizer had signed his employment agreement. According to Keizer, the Stock Option Agreement The final version of Keizer’s employment agreement mentioned that Newaygo County would be excluded from the contained the non-competition provision with the Newaygo non-competition agreement because Keizer had so requested at a meeting with the Grasmans and their attorney, Stephen Kretschman, on April 29, 1998. Keizer wanted an assurance 1 Keizer’s testimony was corroborated by Richard, Russell and Terry incorporated into the non-competition provision that if things Grasman. United cites to the affidavit of Larry Grasman, which states did not work out with United as his new employer that he that his understanding of the non-competition agreement “was to allow could “do business as usual in Newaygo” with Grant Rent- Jerry Keizer to compete with United only in Newaygo County.” (J.A. 181 5.) No. 02-1580 United Rentals v. Keizer, et al. 9 10 United Rentals v. Keizer, et al. No. 02-1580
exclusion. The Grasmans’ attorney, Kretschman, had Company agree that the sum of Twenty Five Thousand incorporated the exclusion into the form employment Dollars ($25,000) Price shall be paid by the Company agreement that had been provided to him by United’s to Employee in consideration of this covenant not to attorney. Kretschman testified that he incorporated the compete upon execution of this Agreement. For Newaygo County exclusion into Keizer’s employment purposes hereof, the term “Target Area” shall mean the agreement with KGR to “reflect the fact that there was a area within the state of Michigan west of I-75 and U.S. business in Newaygo County that would … otherwise fall Route 23, but shall exclude Newaygo County. within the scope of the non-compete that should be excluded from it.” (J.A. 596). On June 1, 1998, Keizer sold his KGR (J.A. 29, ¶ 7.2.) stock to GVI. On the same day, he signed the employment agreement with KGR. Paragraph 7.3 of the employment agreement contains the following confidentiality provision: Paragraph 7.2 of the employment agreement contains the following non-competition and non-solicitation provisions: 7.3 Confidential Information During the Restricted Period and thereafter, the Employee shall keep secret 7.2 Competition and Solicitation For a period and retain in strictest confidence, and shall not use for commencing on the Closing Date and terminating five the benefit of himself or others, all data and (5) years thereafter (the “Restricted Period”), neither information relating to the Business (“Confidential the Employee nor any of his Affiliates shall, anywhere Information”), including, without limitation, know- in the Target Area, (as herein defined), directly or how, trade secrets, customer lists, supplier lists, details indirectly, acting individually or as the owner, of contracts, pricing policies, operational methods, shareholder, partner, or employee of any entity, marketing plans or strategies, bidding information, (i) engage in the operation of any equipment sale, practices, polices or procedures, product development rental or leasing business; (ii) enter the employ of, or techniques or plans, and technical processes; provided, render any personal services to or for the benefit of, or however, that the term “Confidential Information” assist in or facilitate the solicitation of any business shall not include information that (i) is or becomes engaged in such activities; or (iii) receive or purchase generally available to the public other than as a result a financial interest in, make limitation, as a sole of disclosure by the Employee, or (ii) is general proprietor, partner, shareholder, officer, director, knowledge in the equipment rental, sales or leasing principal, agent trustee or lender, provided, however, business and not specifically related to the Business. that the Employee may own, directly or indirectly, solely as an investment, securities of any business (J.A. 29, ¶ 7.3.)2 traded on any national securities exchange or NASDAQ, provided the Employee is not a controlling person of, or a member of a group which controls such 2 The agreement is governed by M ichigan law (¶ 9) and also contains business and further provided that the Employee and an integration clause which reads: his Affiliates do not, in the aggregate, directly or indirectly, own two percent (2%) or more of any class This Agreement contains the entire agreement of the parties and supersedes all prior or contem poraneous nego tiations, of securities of such business. Employee and the correspondence, understandings and agreements between the No. 02-1580 United Rentals v. Keizer, et al. 11 12 United Rentals v. Keizer, et al. No. 02-1580
On June 9, 1998, United purchased from GVI all of the offering equipment for sale to the general public within the stock and assets of KGR and GVEC for $22,750,000. On Target Area both directly and through Mulder’s; selling October 1, 1999, KGR and GVEC merged with United.3 In equipment at auctions within the Target Area; selling March 2002, United replaced Keizer as the general sales equipment and parts directly to United’s competitors within manager, although his salary and benefits continued per the the Target Area; advertising equipment for sale and/or rental employment agreement. Keizer resigned effective April 27, within the Target Area; soliciting United’s customers within 2002, believing that his demotion from general sales manager the Target Area; marketing Grant Rent-All in a way that was a constructive discharge. suggested it was affiliated with other business within the Target Area; and giving Mulder’s a copy of KGR’s customer United’s complaint alleges that during the term of Keizer’s list. employment, Keizer maintained an active interest in the affairs of Grant Rent-All, a competitor of United, and II. affirmatively misrepresented his interest in that business to ANALYSIS United. Specifically, the complaint alleges that Keizer maintained his position as president of Grant Rent-All and A. Standard of Review actively obtained financing for its equipment purchases. When United asked Keizer about his interest in Grant Rent- This Court reviews de novo a district court’s decision to All, Keizer allegedly said that it was his son’s business, with grant summary judgment. Cockrel v. Shelby County Sch. which he had nothing to do. Dist., 270 F.3d 1036, 1048 (6th Cir. 2001). Summary judgment must be granted if the pleadings and evidence United alleges that, after resigning from United, Keizer “show that there is no genuine issue as to any material fact took a customer list and began surreptitiously competing with and that the moving party is entitled to a judgment as a matter United in the Target Area under the aegis of Grant Rent-All. of law.” Fed. R. Civ. P. 56(c). A dispute over a material fact Specifically, United alleges that Keizer began selling is only a “genuine issue” if a reasonable jury could find for equipment to United’s customers within the Target Area; the nonmoving party on that issue. Cockrel, 270 F.3d at 1048 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). In reviewing the district court’s grant of summary parties, regarding the subjec t matter o f this Agreement. This judgment, this Court must view all the facts and the Agreement may not be amended or m odified except in writing inferences drawn therefrom in the light most favorable to the signed by both parties and supported by new consideration. nonmoving party. Id. (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). (J.A. 3 2, ¶ 12 .)
3 A special interpretive framework applies when a court The employment agreement continued in force. The employment entertains a summary judgment motion in a breach of contract agreement provides that it cannot be terminated “by any voluntary or involuntary dissolution, reorganization, merger, consolidation or transfer case: of assets of the Co mpa ny … , if a surviving or resu lting corporation or other entity or person continues … the business of the Company.” (J.A. … [A] contract can be interpreted by the court on 28, ¶ 6.6.) The agreement binds and “inure[s] to the benefit of the summary judgment if (a) the contract’s terms are clear, corporation or other entity” and provides that Keizer would be a general or (b) the evidence supports only one construction of sales manager at that surviving entity. (J.A. 28, ¶ 6.6 . ) No. 02-1580 United Rentals v. Keizer, et al. 13 14 United Rentals v. Keizer, et al. No. 02-1580
the controverted provision, notwithstanding some argues that soliciting business from and selling to customers ambiguity.… If the court finds no ambiguity, it should within the Target Area is tantamount to operating a business proceed to interpret the contract – and it may do so at in the Target Area. Defendants argue that to operate a the summary judgment stage. If, however, the court business in the Target Area the business must be physically discerns an ambiguity, the next step – involving an located in the Target Area. In this Court’s view, Defendants examination of extrinsic evidence – becomes are correct. essential.… Summary judgment may be appropriate even if ambiguity lurks as long as the extrinsic As the district court noted, “When ordinary speakers refer evidence presented to the court supports only one of to where a business is operated, they refer to the location of the conflicting interpretations. the business.… For example, a retail store in Grand Rapids would not be said to operate in Newaygo County simply Gencorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 818 because a customer drives from Newaygo to purchase an item (6th Cir. 1999) (quoting Torres Vargas v. Santiago at the Grand Rapids store, even if the store actively advertised Cummings, 149 F.3d 29, 33 (1st Cir. 1998) (internal citations in Newaygo.” (J.A. 70) (emphasis in original). Indeed, this and quotations omitted by Gencorp)). proposition becomes clearer with a more extreme example. If Keizer were to relocate Grant Rent-All to the North Pole B. The Plain Language of Defendant Keizer’s Non- (e.g., the warehouse, inventory and employees), send direct Competition Agreement mailings and make telephone calls to potential customers in the Target Area and then personally deliver the goods, the As noted above, Keizer entered into an employment common sense understanding of this set-up would be that agreement with United’s predecessor, KGR. Paragraph 7.2 of Keizer operates his business in the North Pole, even though the agreement contains a covenant not to compete; such he sells to customers in the Target Area. Cf. Bianchi v. Auto. covenants are enforceable under Michigan law. See Mich. Club of Mich., 467 N.W.2d 17, 20 (Mich. 1991) (holding that Comp. Laws Ann. § 445.774a (a covenant that restricts an “common sense” is a proper basis for contract interpretation). employee from engaging in employment or a line of business See also Lozada v. Dale Baker Oldsmobile, Inc., 197 F.R.D. after termination of employment is enforceable “if the 321, 339 (W.D. Mich. 2000) (“When the contract terms are agreement or covenant is reasonable as to its duration, plain and unambiguous, a court will construe the contract as geographical area, and the type of employment or line of it is written and presume the parties’ intent is consistent with business”). The covenant reads, in relevant part, as follows: the ordinary meaning of the terms in the contract.”) (citing Pierson Sand & Gravel, Inc. v. Pierson Township, 851 F. [N]either [Keizer] nor any of his Affiliates shall, Supp. 850 (W.D. Mich.1994)); Britton v. John Hancock Mut. anywhere in the Target Area, (as herein defined), directly Life Ins. Co., 186 N.W.2d 781, 782 (Mich. Ct. App. 1971) or indirectly, acting individually or as the owner, (“Contracts which are unambiguous are not open to shareholder, partner, or employee of any entity … engage construction and must be enforced as written.”) (citations in the operation of any equipment sale, rental or leasing omitted). business. United cites to a dictionary that defines “operation” as “a The central question is: What does it mean to engage in the process or series of acts aimed at producing a desired result or operation of a competing business in the Target Area? United effect; a method or process of productive activity.” No. 02-1580 United Rentals v. Keizer, et al. 15 16 United Rentals v. Keizer, et al. No. 02-1580
Appellant’s Reply Br. at 5 (quoting Webster’s II, New College whose office is located outside of that area, but soliciting Dictionary (1995)). United argues that the phrase “engage in personnel placement business in Dallas. Id. at 436. In the operation of” in ¶ 7.2 is equivalent to “engage in a series affirming the lower court’s enforcement of the covenant of acts,” such that Keizer’s acts of selling to customers in the against Collen, the Texas court engaged in little analysis, Target Area amounted to his engagement in a series of instead merely summarizing the facts and holdings of two prohibited acts in the Target Area. This Court has discovered, cases – Foxworth-Galbraith Lumber Co. v. Turner, 46 however, that, with specific regard to a business, dictionaries S.W.2d 663 (Tex. Comm’n App. 1932) and Hartung v. Hilda define operation to mean “a business activity or enterprise.” Miller, Inc., 133 F.2d 401 (D.C. Cir. 1943). See Id. at 436. Oxford English Dictionary Online Edition (from the second print ed. 1989). The word “operate” is defined as “[t]o direct This Court does not find Collen to be persuasive authority the working of; to manage, conduct, work (a railway, for two reasons. First, the Texas court appeared to flout the business, etc.)” Id. See also Webster’s Third New Int’l plain language of the restrictive covenant, which, on its face, Dictionary 1581 (1993) (“to manage and put or keep in limited Collen only from working for a personnel placement operation whether with personal effort or not ”). Taken together, these definitions strongly Collen abided by the plain terms of the covenant, and it is indicate that in the business context an operation requires a inexplicable why the court read the covenant expansively to discrete physical location, such as a railway or a grocery include working for such a business located outside of the store. But even assuming that an operation can transcend a defined area. Second, Collen was decided under Texas law, particular physical location, the definition of “operate” not Michigan law, which commands the courts to narrowly indicates that management or oversight is an essential element construe restrictive covenants. See Kelsey-Hayes Co. v. of a business operation. Here, there is no evidence that Maleki, 765 F. Supp. 402, 406 (noting that the Michigan Keizer has managed a competing enterprise in the Target Uniform Trade Secrets Act “does not remove such covenants Area. Although Keizer allegedly carried out some sales and from disfavored status, and narrowly limits them to deliveries in the Target Area, these transactions did not ‘reasonableness’ in protecting only a competitive interest, involve management or oversight of Grant Rent-All’s duration, geographic area, and type of employment”), vacated business. after settlement, 889 F. Supp. 1583 (E.D. Mich. 1991).
United cites several cases that purportedly support its plain The two decisions relied upon by the Collen court in no meaning interpretation of the covenant-not-to-compete. On way advance United’s argument herein. In Foxworth- the surface, the strongest case United cites is Collen v. Source Galbraith, the covenant restricted sales (“the business of EDP, Texas, Inc., 576 S.W.2d 435 (Tex. Civ. App. 1978). In selling”) in Littlefield, Texas or within ten miles thereof. that case, William Collen had agreed to a restrictive covenant Foxworth-Galbraith, 46 S.W.2d at 663. Keizer’s covenant, which stated that he would not “directly or indirectly, enter in contrast, restricts the “operation of any … business” in the into or be engaged as a sole proprietor, partner, stockholder, Target Area. Had the drafters of Keizer’s covenant intended or employee in any personnel placement business in the City to restrict sales or deliveries in the Target Area and not just of Dallas, and within a 100-mile radius thereof.” Id. at 435- the presence of a business in that area, they easily could have 36. Collen argued that the covenant restrained him only from specified a sales limitation in the covenant. They did not. In physically establishing a business in the proscribed area, and fact, it was because the covenant in Foxworth-Galbraith therefore, he was not prohibited from working for a company additionally restricted shipments into the defined areas that No. 02-1580 United Rentals v. Keizer, et al. 17 18 United Rentals v. Keizer, et al. No. 02-1580
the Texas court enforced the covenant against the defendants. The second decision cited by the Texas Court of Appeals in The court suggested that without this specific restriction, the Collen also does not support United’s plain language defendants’ conduct would have fallen outside of the more argument. In Hartung, the sellers gave the buyers the general prohibition against engaging in the business of exclusive right to use the name Hilda Miller, Inc. The sellers selling in those areas. See id. at 666 (holding that the specific further agreed not to “engage in the furniture business under restriction on deliveries into Littlefield “was designed to [that name] nor any other name within the District of prohibit sales which might not come strictly within the terms Columbia.” Hartung, 133 F.2d at 401. The sellers opened up of the former provisions, and to prevent an evasion of such a competing furniture business under the Hilda Miller name provisions”). in a nearby Maryland suburb, advertised the business in District of Columbia newspapers and sold to District of United’s reliance on the Alabama court’s decision in Dixon Columbia residents. Id. at 401-02. Although the court v. Royal Cup, Inc., 386 So. 2d 481 (Ala. Civ. App. 1980), is enforced the covenant as to the sellers’ use of the Hilda Miller misplaced for the same reasons. In Dixon, a salesman agreed name, the court refused, on vagueness grounds, to enforce the not to “engage in the business of selling” particular items more general prohibition against engaging in the furniture within a defined geographic area. Id. at 481-82. He business in the District of Columbia. Id. at 402. Since there specifically agreed not to “solicit or take orders for or sell or is no allegation in this case that Keizer co-opted the United deliver any such merchandise” in that area. Id. at 482. Again, name, it is difficult to see how Hartung is relevant. Keizer agreed to no such specific geographic restrictions on Regardless, the language of the Hartung covenant focused on selling construction equipment. Unlike the drafters of the engaging in the furniture business (i.e., sales) within the agreement in Dixon, the drafters of Keizer’s employment District of Columbia, unlike Keizer’s covenant which focuses agreement could have specified a prohibition on soliciting on the situs of the operation from which sales emanate.4 orders from or delivering merchandise to customers in the Target Area, but did not. Even assuming that United’s broad interpretation of operating a business is plausible, any ambiguity in the If anything, the Dixon case undermines United’s argument. language, which was crafted by United’s predecessor in The Alabama court noted that “engaging in business, as used interest, must be construed against United and in favor of in a restrictive covenant in an employment contract, involves Keizer. See Higgins v. Lawrence, 309 N.W.2d 194, 196 not only the servicing or soliciting of customers, but also (Mich. Ct. App. 1981) (“It is well settled in the law of means the setting up of an office or place of business for contracts that language will be construed against the party soliciting or servicing customers.” Id. at 483 (emphasis drafting the instrument.”) (citations omitted); see also De added) (citing R.E. Harrington, Inc. v. Frick, 428 S.W.2d 945 Bruyn Produce Co. v. Romero, 508 N.W.2d 150, 156 n.4 (Mo. Ct. App. 1968)). Assuming arguendo that the phrase (Mich. Ct. App. 1993) (“an ambiguous document must be “engage in business” is linguistically equivalent to “engage in construed against the drafter of the document”). It is the operation of … any business,” on the facts of this case, it is undisputed that Keizer did not set up an office in the Target Area. Accordingly, under Dixon, Keizer did not run afoul of 4 the restrictive covenant because he did not engage in business One other case United cites is inapposite because the covenant in the Target Area. language was far broader than the language in Keizer’s con tract. In Sobers v. Shann on O ptical Co., 473 A.2d 1035, 1038 (P a. Sup er. Ct. 198 4), the d efendants had agreed to “not compe te” with the plaintiff. No. 02-1580 United Rentals v. Keizer, et al. 19 20 United Rentals v. Keizer, et al. No. 02-1580
undisputed that United drafted the form employment Grant Rent-All before entering into the employment agreement; ¶ 7.2 was then modified by its predecessor-in- agreement. During negotiations, United’s attorney was interest to the contract (GVI). Under ¶ 6.6 of the employment explicitly advised that ¶ 7.2 would have to exclude Newaygo agreement, United succeeded to GVI’s rights and obligations County from the non-compete because Keizer’s “son operates under the agreement. Accordingly, United stands in the same a competing business” in that county. (J.A. 74.) United had position as GVI relative to Keizer with regard to how the the opportunity to conduct due diligence on the extent to agreement must be interpreted. Just as ¶ 7.2 would have to be which Grant Rent-All competes with United, but chose to rely construed against GVI, as the drafter, so too must it now be on the verbal assurance of a GVI representative that Grant construed against United, as GVI’s successor. For this reason Rent-All was not a competitor. United never corroborated as well, the district court was correct in holding that Keizer this assurance by requesting written substantiation or by did not breach ¶ 7.2 of the employment agreement by speaking with Keizer. Had United requested documentation, operating a business located outside of the Target Area, but it would have discovered that one-third of Grant Rent-All’s that conducts business inside the Target Area. customers were located in the Target Area and that Grant Rent-All sells similar products. Thus, on this factual record, C. The Extrinsic Evidence there is no evidence that the parties meant to curtail Grant Rent All’s business in any fashion. Indeed, the negotiation Assuming arguendo that the operative language from ¶ 7.2 history shows that the Newaygo County exclusion was meant is ambiguous, the Court can look to parol evidence to to protect Keizer’s interest in that business. Thus, the construe it as long as that evidence is not inconsistent with the extrinsic evidence shows that the parties intended to restrict written words. See Ditzik v. Schaffer Lumber Co., 360 Keizer’s ability to compete by limiting the location of the N.W.2d 876, 880 (Mich. Ct. App. 1984) (“The ‘parol business which he might operate. evidence rule’ operates to exclude evidence of prior contemporaneous agreements, whether oral or written, which United counters that the most important piece of extrinsic contradict, vary or modify an unambiguous writing intended evidence is Keizer’s stock option agreement with GVI. as a final and complete expression of the agreement.”); There, Keizer agreed that he would “enter into an agreement Detroit Bank & Trust Co. v. Coopes, 287 N.W.2d 266, 269 not to compete with KGR or GVEC for five years (other than (Mich. Ct. App. 1979) (noting that the test for the in Newaygo County) and otherwise in form and substance admissibility of parol evidence “is whether the proffered parol acceptable to [United], for which KGR shall pay Keizer” evidence is inconsistent with the written language”) (internal $25,000. (J.A. 171.) (emphasis added). United argues that the quotation marks and citations omitted). When interpreting an stock option agreement shows that the parties intended to ambiguous contract with extrinsic evidence, summary preclude Keizer from competing with United anywhere except judgment is proper so long as the “extrinsic evidence within Newaygo County. Appellant’s Br. at 34. presented to the court supports only one of the conflicting interpretations.” Gencorp, 178 F.3d at 818. As discussed United’s argument is not persuasive. This language merely below, the extrinsic evidence supports only one interpretation labels the type of agreement to which Keizer would later of the agreement, that of Keizer’s. agree – an agreement not to compete; it does not even begin to define the scope of that agreement. As the instant dispute It is undisputed that United (via GVI) was aware of shows, a non-competition provision can be narrow or broad, Keizer’s ownership interest and personal involvement in No. 02-1580 United Rentals v. Keizer, et al. 21 22 United Rentals v. Keizer, et al. No. 02-1580
depending on the specific language of the agreement.5 Thus, with a “for sale” sign, attended a trade show, advertised his the stock option agreement does not create a disputed issue of business, solicited customers through mass mailings and fact about the meaning of ¶ 7.2. Moreover, even assuming placed a few pieces of equipment for sale or rental at that the stock option agreement somehow obligated Keizer Mulder’s. Id. at 13-14. This evidence, however, shows only not to compete with United in the Target Area, as discussed that Keizer has done some business (i.e., selling or renting above, the other evidence shows that ¶ 7.2 of the employment equipment) in the Target Area, not that he has operated a agreement creates no such obligation. Accordingly, the business located in the Target Area. employment agreement dictates Keizer’s non-competition obligations, not the earlier-signed stock option agreement. In addition, United has not articulated a basis for holding See CMI Int’l, Inc. v. Intermet Int’l Corp., 649 N.W.2d 808, Grant Rent-All liable for breaching a contract to which it was 812 (Mich. Ct. App. 2002) (“When two agreements cover the not a signatory, namely, Keizer’s employment agreement. same subject matter and include inconsistent terms, the later Since Grant Rent-All was not a party to the agreement, agreement supersedes the earlier agreement.”) (citation summary judgment on the breach of contract claim was omitted). proper for Grant Rent-All on this independent ground.
D. Defendant Keizer’s and Grant-All’s Alleged Breach E. Defendant Mulder’s Alleged Violation of the of Keizer’s Employment Agreement Michigan Uniform Trade Secrets Act.
United argues that Keizer has violated the non-competition United has not pressed its contract- and statutorily-based provision, even accepting the district court’s interpretation of breach of confidentiality claims against Keizer and Grant-All. ¶ 7.2. United cites to evidence that Keizer has been doing Accordingly, United has waived any challenge to the district business with Mulder’s and Grand Equipment Company, court’s dismissal of Count II (Michigan Uniform Trade competitors located in the Target Area. Appellant’s Br. at 13. Secrets Act) with respect to Keizer and Grant Rent-All and In the Target Area, Keizer has sold equipment at auctions, the portion of Count I which claims Keizer and Grant Rent- placed two or three pieces of used equipment on a vacant lot All breached the confidentiality provisions of the employment agreement. Instead, United takes issue with the district court’s sua sponte entry of summary judgment in favor of 5 Mulder’s on United’s claim under the Michigan Uniform United also cites as parol evidence the affidavit of Larry Grasman, Trade Secrets Act. (“MUTSA”). Although we agree with our a principal of GVI, who stated that his understanding of the non- competition agreement “was to allow Jerry Keizer to compete with United dissenting colleague that the district court should have only in Newaygo County.” (J.A. 1815.) In contrast, the other three afforded United ten days’ advance notice and an opportunity principals of GVI, Richard, Russell and Terry Grasman, corroborated to respond, Yashon v. Gregory, 737 F.2d 547, 552 (6th Cir. Keizer’s interpretation of ¶ 7.2 – namely, that the provision was intended 1984), we believe that the court’s violation of Rule 56 was to permit Grant Rent-All to operate as it always had been. Larry non-prejudicial. Kistner v. Califano, 579 F.2d 1004, 1006 Gra sman’s testimony does not create a genuine issue of material fact on the meaning of ¶ 7.2, in light of the overwhelming parol evidence which (6th Cir. 1978) (holding that noncompliance with Rule 56's supp orts Keizer’s interpretation. Specifically, both GVI and United were ten-day notice requirement does not deprive the court of the aware of Keizer’s involvement with Grant-All, and United was on notice authority to grant summary judgment when “there has been that Grant-All was a com petitor. Despite this knowledge, United and GVI no prejudice to the opposing party by the court’s failure to did not draft ¶ 7.2 with language that explicitly precludes Keizer from comply with this provision of the rule”). On appeal, United selling in the Target Area. No. 02-1580 United Rentals v. Keizer, et al. 23 24 United Rentals v. Keizer, et al. No. 02-1580
has proffered whatever evidence and related argument it can (ii) Disclosure or use of a trade secret of another without muster in opposition to summary judgment on the MUTSA express or implied consent by a person who did 1 or claim against Mulder’s. United has not argued that it was more of the following: denied critical discovery, thereby hampering its ability to (A) Used improper means to acquire knowledge of the oppose summary judgment. Thus, the propriety of summary trade secret. judgment for Mulder’s is now ripe for a full and fair review. (B) At the time of the disclosure or use, knew or had Since we apply the same de novo standard of review that a reason to know that his or her knowledge of the trade district court applies in the summary judgment context, it is secret was derived from or through a person who had a better use of judicial resources for this Court to settle the utilized improper means to acquire it, acquired under issue now rather than remanding and having to entertain circumstances giving rise to a duty to maintain its another appeal in the future. secrecy or limit its use, or derived from or through a person who owed a duty to the person to maintain its In support of its MUTSA claim against Mulder’s, United secrecy or limit it use. cites to the testimony of former employee Chad Alverson, (C) Before a material change of his or her position, who went to work for Mulder’s. Appellant’s Br. at 15. knew or had reason to know that it was a trade secret According to Alverson’s testimony, he brought a copy of a and that knowledge of it had been acquired by accident customer list to Mulder’s, and Mulder’s owner, Art Mulder, or mistake. saw the list but told Alverson that Mulder’s “didn’t need it.” (J.A. 447-48.) Alverson stated that he brought the list back Id. § 445.1902(b). home and “it probably got thrown out.” (J.A. 448.) Mulder testified that for “[a]bout three minutes” he perused a list that There is no evidence that Mulder’s has misappropriated or he “assum[ed]” had been dropped at his store by Keizer. (J.A. is likely to misappropriate United’s customer list. First, 524-25.) He then “set it back down” and “then it was gone.” Alverson’s acquisition of the list and delivery to Mulder’s (J.A. 526-28.) Mulder testified that it would have been cannot be imputed to Mulder’s. There is no evidence that wrong to use the list and that the list is not in the possession Mulder’s solicited this conduct or condoned it once the list of anyone from Mulder’s. appeared at the store. Alverson brought the list to Mulder’s completely on his own accord without the knowledge of The MUTSA gives a court the power to enjoin an actual or anyone else at Mulder’s. The record shows that Alverson was threatened misappropriation of a trade secret, such as an merely a salesman at Mulder’s, not an officer, director or unauthorized disclosure or use of a trade secret. Mich. Comp. high-level manager whose conduct potentially could bind the Laws Ann. §§ 445.1902, 445.1903. A “misappropriation” company. Cf. CMI Int’l, 649 N.W.2d at 813 (“to make a means either: claim of threatened misappropriation, … the party must establish more than the existence of generalized trade secrets (i) Acquisition of a trade secret of another by a person and a competitor’s employment of the party’s former who knows or has reason to know that the trade secret employee who has knowledge of trade secrets”) (citation was acquired by improper means. omitted). Thus, Mulder’s never “acqui[red]” the list because no one with any meaningful authority at Mulder’s either knew or should have known that the list had been acquired through No. 02-1580 United Rentals v. Keizer, et al. 25 26 United Rentals v. Keizer, et al. No. 02-1580
improper means. In fact, Arthur Mulder testified that he was confidentiality provisions of his employment agreement, nor not sure how the list ended up at his store.6 is there a genuine issue of material fact that Mulder’s violated the Michigan Uniform Trade Secrets Act. Accordingly, there Second, there is no genuine issue of material fact that is no underlying contractual violation or violation of Mulder’s disclosed or used the customer list. Mulder testified Michigan common law or statutory law on which to premise that he glanced at the list for three minutes, determined that these torts. Summary judgment was therefore proper. it would be wrong to use the list, set it down and never saw the list again. As far as anyone knows, the list that appeared G. Defendant Keizer’s Alleged Breach of a Fiduciary at Mulder’s existed for a day and then disappeared. Because Duty of Loyalty there is no evidence of a past disclosure or use of the list or any likelihood of a future use or disclosure, summary United argues that because the district court’s grant of judgment for Mulder’s on the MUTSA claim was proper. summary judgment on the breach of contract claim was improper, it follows that dismissal of its claim for breach of F. Claims for Intentional Interference with Business the fiduciary duty of loyalty also was improper. Appellant’s Relations, Intentional Interference with Keizer’s Br. at 46-47. United has proffered no other argument on the Employment Agreement and Civil Conspiracy merits of this claim. As discussed above, the district court properly granted summary judgment on the breach of contract An essential element of a claim for tortious interference claim. Accordingly, the breach of fiduciary duty claim also with contract, tortious interference with business relations and was properly dismissed. civil conspiracy is that the alleged tortious conduct be wrongful. See Trepel v. Pontiac Osteopathic Hosp., 354 III. N.W.2d 341, 347 (Mich. Ct. App. 1984) (tort of intentional CONCLUSION interference with contract or with business relations requires a showing of “illegal, unethical or fraudulent conduct in For all the foregoing reasons, the district court’s order addition to intentional interference”); Feaheny v. Caldwell, granting summary judgment to Defendants is AFFIRMED. 437 N.W.2d 358, 365 (Mich. Ct. App. 1989) (tort of civil conspiracy requires concerted action “to accomplish a criminal or unlawful purpose, or to accomplish a lawful purpose by criminal or unlawful means”). As discussed above, there is no genuine issue of material fact that Keizer and Grant Rent-All breached the non-compete or
6 Even if Mulder was aware that the list had come from Alverson or Keizer, he would have had no reason to think that they had acquired the list through improper means. To the contrary, Alverson and Keizer acquired the list through proper means presumably because United gave them the list when they were employed at United. The fact that Alverson and/or Keizer perhaps should have returned the list after they left United does not alter the fact that their acquisition of the list was proper. No. 02-1580 United Rentals v. Keizer, et al. 27 28 United Rentals v. Keizer, et al. No. 02-1580
_____________________________________________ Mulder’s.” Final Br. of Appellant at 47. United makes no other argument with regard to Counts IV and V. Because CONCURRING IN PART, DISSENTING IN PART United appears to concede that Counts IV and Count V _____________________________________________ against Mulder’s cannot survive the grant of summary judgment to Keizer in Count I, I agree that we can affirm the WILLIAM STAFFORD, District Judge, concurring in part district court as to those two counts. Given our decision to and dissenting in part. While I agree that summary judgment affirm the district court’s decision as to Count I, it would be was properly entered in favor of Keizer and Grant Rent-All, futile to remand Counts IV and V for further proceedings as I write separately to address the district court’s entry of to Mulder’s. summary judgment in favor of Mulder’s. Mulder’s did not file a motion for summary judgment, nor was notice ever The same is not true of Count II, however. In Count II, given to United that it should introduce evidence to support United alleges that the defendants, including Mulder’s, its claims against Mulder’s. violated the Michigan Trade Secrets Act by misappropriating United’s trade secrets. United argues that the district court’s “The clearly established rule in this circuit is that a district sua sponte entry of summary judgment in favor of Mulder’s court must afford the party against whom sua sponte on Count II should be vacated regardless of the decision as to summary judgment is to be entered ten days notice and an the other counts. I agree. Unlike Counts IV and V, this claim adequate opportunity to respond.” Yashon v. Gregory, 737 against Mulder’s stands on its own and does not fail simply F.2d 547, 552 (6th Cir. 1984). “We have underscored this because the claims against Keizer and/or Grant Rent-All fail. requirement of ‘unequivocal notice’ on numerous occasions. The majority claims that “United has proffered whatever Helwig v. Vencor, Inc., 251 F.3d 540, 552 (6th Cir.2001) (en evidence and related argument it can muster in opposition to banc) (citing Salehpour v. Univ. of Tenn., 159 F.3d 199, 204 summary judgment on the MUTSA claim against Mulder’s.” (6th Cir.1998); Briggs v. Ohio Elections Comm'n, 61 F.3d Infra p. 22. United, however, cannot offer evidence on appeal 487, 493 (6th Cir.1995); Yashon v. Gregory, 737 F.2d 547, that was not part of the record before the trial court; and while 552 (6th Cir.1984)). “Noncompliance with the [ten days I recognize that United has not argued that it was denied notice] provision...deprives the court of authority to grant critical discovery, I cannot assume that United would not summary judgment, unless the opposing party has waived this have introduced additional evidence before the trial court had requirement, or there has been no prejudice to the opposing it been given appropriate notice. Because United should have party by the court’s failure to comply with this provision of been given notice of, and an opportunity to respond to, the the rule.” Kistner v. Califano, 579 F.2d 1004, 1006 (6th Cir. district court’s sua sponte consideration of summary 1978) (citations omitted). judgment on the trade secrets claim against Mulder’s, and because I cannot conclude from this record that the district On appeal, United states: “[I]f this Court reverses the court’s failure to provide appropriate notice was non- District Court’s ruling on summary judgment as to Count I prejudicial, I would vacate the district court’s entry of [breach of contract against Keizer], it follows that this Court summary judgment in favor of Mulder’s as to Count II and should also reverse the District Court’s rulings as to Counts would remand for further proceedings as to that claim. IV [tortious interference with Keizer’s employment/non- compete covenant] and V [conspiracy to breach the restrictive covenants contained in Keizer’s employment contract] as to