WERNER ENTERPRISES, INC. vs CARSON MENDEZ, WILLIAM B. STALLINGS, AND AJC LOGISTICS, LLC

• Court: District Court of Appeal of Florida
• Decided: June 2, 2023
• Docket: 23-0235
• Status: Published

Opinion

IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA FIFTH DISTRICT

NOT FINAL UNTIL TIME EXPIRES TO FILE MOTION FOR REHEARING AND DISPOSITION THEREOF IF FILED

WERNER ENTERPRISES, INC.,

Appellant,

v. Case No. 5D23-235 LT Case No. 16-2020-CA-005745

CARSON MENDEZ, WILLIAM B. STALLINGS, AND AJC LOGISTICS, LLC,

Appellees.

________________________________/

Opinion filed June 2, 2023

Nonfinal Appeal from the Circuit Court for Duval County, Robert M. Dees, Judge.

Gregory A. Hearing, Benjamin W. Bard and Kevin M. Sullivan, of GrayRobinson, P.A., Tampa, for Appellant.

Henry M. Coxe, III, Michael E. Lockamy and John G. Woodlee, of Bedell, Dittmar, DeVault, Pillans & Coxe, P.A., Jacksonville, for Appellees, Carson Mendez and William B. Stallings. Edward B. Carlstedt, of FordHarrison LLP, Tampa for Appellee, AJC Logistics, LLC.

PER CURIAM.

Werner Enterprises, Inc. (“Werner”), sued two of its former employees

for tortious interference, breach of the duty of loyalty, and civil conspiracy. In

the civil conspiracy count, Werner also sued the business where the two

employees went to work after they resigned from Werner.

Werner moved to amend its complaint to seek punitive damages. The

trial court denied the motion, finding that Werner failed to make a reasonable

showing of having a reasonable basis for recovering punitive damages. We

reverse.

I.

Werner is a logistics provider. AJC Logistics, LLC (“AJC”), is one of

Werner’s competitors. Carson Mendez and William Stallings held managerial

roles in Werner’s Jacksonville office.

Werner alleged that in 2019, Mendez and Stallings—while they were

still employed by Werner—conspired with AJC management to solicit several

of Werner’s Jacksonville employees to resign their employment and move to

AJC. Werner alleged that the purpose of this effort was to undermine

Werner’s business by establishing a new AJC office in Jacksonville that

2 would be staffed by experienced Werner employees and serve Werner’s

customers. Werner alleged that Appellees referred to their plan as “Project

Satellite.”

Werner sought the trial court’s permission to amend its complaint to

seek punitive damages. In support of its motion for leave to amend, Werner

proffered numerous e-mail and text message conversations involving

Mendez, Stallings, and senior AJC officers.

For example, on September 3, 2019, Stallings sent an e-mail to AJC’s

controller. He wrote that he looked forward to talking with AJC more as

“‘Project Satellite’ continues to develop.” He attached a “90 Day Roll Out”

plan that called for recruiting seven of Werner’s “core” employees and

included a projection of revenue that the new office would generate for AJC

in the first year.

That same day, AJC’s controller and managing director sent a memo

to AJC’s president. They reported that by hiring a team of experienced

Werner employees, AJC could “potentially double” its surface transportation

division “with minimal risk and up front investment.” The memo conveyed

Stallings’ estimate that the team would produce $10 million in revenue

without requiring AJC to “risk” the “outlay of an acquisition.” The memo

indicated that Appellees began discussing the project on August 4, 2019.

3 On September 16, 2019, Stallings e-mailed AJC’s controller and

managing director to tell them that he and Mendez had an appointment to

look at two properties that could accommodate five to ten employees. That

same day, AJC’s controller e-mailed Stallings to ask about which of Werner’s

clients he and Mendez would be bringing with them to AJC. The message

acknowledged that this disclosure might breach Stallings’ duty to Werner,

but also indicated the information would benefit the project: “While the names

of the initial customers would be extremely helpful, I also understand that

while you are currently employed, this may be a direct breach of your

employment. However, whatever you feel comfortable telling us that you

think will fast track our credit team will be helpful.”

On September 24, 2019, Stallings provided the names of thirteen of

Werner’s clients that he expected to join AJC’s new operation within ninety

days. The list included several large, recognizable corporations. Stallings

identified how much revenue each entity would generate. He also named

thirteen other clients that would be “likely early account targets.” He stated

that getting a “head start on establishing credit for this inventory of accounts

will be a big help.”

The following day, AJC’s controller and managing director sent a

memo to AJC’s board of directors. They reported that they “covet[ed] the

4 Board’s support and insight” about “a unique opportunity to grow the Surface

Transportation division of AJC Logistics by hiring a team of individuals who

have proven the ability to succeed.” The memo proposed hiring a team of

nine employees, who were “the ‘A’ players from the Jacksonville office of

Werner Logistics.” The memo included revenue, margin, and volume figures

from Werner’s Jacksonville operation. As AJC’s controller had previously

suggested, the memo advertised that the project offered “the benefits of an

acquisition, but without the upfront investment.” The memo also gave a grim

assessment of what Werner’s Jacksonville operation would be like after

Project Satellite: “The team believes many customers (primarily dry) will

follow them as they have strong relationships, some for 10+ years, and the

remaining Werner employees will not be able to support good customer

service.”

On October 4, 2019, AJC’s controller informed Mendez, Stallings, and

AJC’s managing director that AJC had “added some contingent legal fees”

to the project’s budget, “just in case Werner decides to make this an issue.”

The message continued, “In consulting our attorneys we don’t believe

[Werner has] a legal ground to stand on but [we] want to be responsible in

our financial planning.” On October 8, 2019, AJC’s controller e-mailed

Mendez and Stallings to discuss the logistics of Werner’s employees joining

5 AJC. In reference to the timing of Mendez and Stallings accepting

employment offers from AJC, she wrote, “We want to protect you while you

are still Werner employees so we either need your acceptance earlier or the

written offers [to the solicited Werner employees] need to come directly from

us.”

Over the course of October 13, 14, and 15, 2019, Mendez and Stallings

conferred by text message with AJC’s managing director about the progress

of their efforts to recruit the targeted Werner employees. These messages

included discussions about what compensation would be required to secure

the employees’ commitments. In one message, Stallings listed the expected

start date for each employee. In another message, Mendez reported that he

had spoken with an employee “a lot” about the opportunity and what the

employee would be paid at AJC. Mendez also conveyed that another

employee was “very excited” and “on board” with joining AJC.

Mendez resigned from Werner on October 18, 2019. His resignation

letter indicated that he was leaving Werner’s Jacksonville office in the “very

capable hands” of Stallings and another employee. He also reported that he

“spoke with the team and tried to inspire as much confidence as possible

that they can carry on without me.” Stallings resigned two weeks later. On

November 12, 2019, Werner announced that it would close the Jacksonville

6 office where Stallings and Mendez had worked.

The trial court held a hearing on Werner’s motion for leave to amend.

Werner argued that Appellees’ actions were “nothing short of corporate

espionage” and an “outright theft of Werner’s business.” Werner alleged that

Appellees launched Project Satellite to reap the benefits of buying Werner’s

Jacksonville office without having to pay any money to Werner. Werner

claimed its proffer showed that Appellees “conspired with each other to assist

Mendez and Stallings in breaching their duty of loyalty to Werner” by

disclosing confidential business information and tortiously interfering with

Werner’s customer and employee relationships. Werner reiterated that

Appellees planned Project Satellite while Mendez and Stallings were still

Werner employees. Werner also emphasized that Project Satellite received

approval from AJC’s board of directors and executive officers.

The trial court found that Werner’s proffer failed to make a reasonable

showing of Appellees’ intentional misconduct or gross negligence. As such,

the court denied Werner’s motion for leave to amend its complaint to seek

punitive damages.

II.

We review the trial court’s ruling de novo. Grove Isle Ass’n, Inc. v.

Lindzon, 350 So. 3d 826, 829 (Fla. 3d DCA 2022).

7 A.

Our analysis begins with what a plaintiff must do at the leave to amend

stage. Florida law requires the plaintiff to seek the trial court’s permission

before adding punitive damages to its complaint. § 768.72(1), Fla. Stat.

(2022); see also Bistline v. Rogers, 215 So. 3d 607, 611 (Fla. 4th DCA 2017)

(noting that the “statute requires the trial court to act as a gatekeeper”). To

obtain this permission, the plaintiff must make “a reasonable showing” of

having “a reasonable basis” for the recovery of punitive damages. §

768.72(1), Fla. Stat. The showing can be based on evidence in the record or

evidence proffered by the plaintiff. Id. “Proffered evidence is merely a

representation” of the evidence that a party proposes to present at trial. See

Grim v. State, 841 So. 2d 455, 462 (Fla. 2003).

When deciding if the plaintiff has made the required “reasonable

showing” of a “reasonable basis” for recovering punitive damages, the trial

court makes a legal determination that is “similar to the standard that is

applied to determine whether a complaint states a cause of action.” Est. of

Despain v. Avante Grp., Inc., 900 So. 2d 637, 644 (Fla. 5th DCA 2005); see

also Holmes v. Bridgestone/Firestone, Inc., 891 So. 2d 1188, 1191 (Fla. 4th

DCA 2005) (“When a trial court is determining if a plaintiff has made a

‘reasonable showing’ under section 768.72 for a recovery of punitive

8 damages, it is similar to determining whether a complaint states a cause of

action, or the record supports a summary judgment . . . .”). Thus, the court

asks “whether a reasonable jury could infer” from the proffer that the

defendant’s conduct satisfies the statutory criteria for punitive damages. See

Varnedore v. Copeland, 210 So. 3d 741, 747 (Fla. 5th DCA 2017). When

completing this task, the court views the proffer in a light most favorable to

the plaintiff. See Est. of Despain, 900 So. 2d at 644.

Substantively, punitive damages are reserved for cases in which a

defendant is “personally guilty of intentional misconduct or gross

negligence.” § 768.72(2), Fla. Stat. “Intentional misconduct” happens when

a defendant has “actual knowledge of the wrongfulness of the conduct and

the high probability” that it will harm the plaintiff, but nevertheless

“intentionally pursued that course of conduct,” resulting in said harm. §

768.72(2)(a), Fla. Stat. “Gross negligence” occurs when a “defendant’s

conduct was so reckless or wanting in care that it constituted a conscious

disregard or indifference to the life, safety, or rights of persons exposed to

such conduct.” § 768.72(2)(b), Fla. Stat. A corporation can incur liability for

punitive damages based on the actions of its managing agents. See Schropp

v. Crown Eurocars, Inc., 654 So. 2d 1158, 1159–61 (Fla. 1995); Wells Fargo

Bank, N.A. v. Elec. Funds Transfer Corp., 326 So. 3d 753, 757 (Fla. 5th DCA

9 2021); Fla. Power & Light Co. v. Dominguez, 295 So. 3d 1202, 1205 (Fla. 2d

DCA 2019).

B.

We now examine how these standards apply in this case. An employee

owes a duty of loyalty to his employer. See Fish v. Adams, 401 So. 2d 843,

845 (Fla. 5th DCA 1981). An employee does not violate that duty “when he

merely organizes a corporation during his employment to carry on a rival

business after the expiration of his employment.” Id. “However, that

employee may not engage in disloyal acts in anticipation of his future

competition, such as using confidential information acquired during the

course of his employment or soliciting customers and other employees prior

to the end of his employment.” Id. A business can be liable for civil conspiracy

when it induces another business’s employees to breach the duty they owe

to their employer. See Sec. Title & Abstract, Inc. v. First Am. Title Ins. Co.,

414 So. 2d 604, 604–05 (Fla. 1st DCA 1982). Moreover, these business torts

can warrant punitive damages. See, e.g., Bailey v. St. Louis, 196 So. 3d 375

(Fla. 2d DCA 2016).

In Bailey, the plaintiffs’ complaint alleged claims for, inter alia, breach

of fiduciary duty, civil conspiracy, and tortious interference. Id. at 376. The

plaintiff business had approached the defendant business about the

10 possibility of securing a loan. Id. at 380. As part of the underwriting process,

the plaintiff business provided confidential financial records. Id. After

conducting due diligence, the defendant business did not offer a loan, but

instead offered to buy a majority stake in the plaintiff business. Id. An agent

of the defendant business told an agent of the plaintiff business that “you’re

going to accept this offer or we’re going to take your doctors and we’re going

to take your company.” Id.

When the plaintiff business refused, the defendant business “made

good on its threat.” Id. It did so by falsely leading some members of the

plaintiff business to believe their colleagues were misappropriating corporate

assets. Id. In turn, those members—while still working for the plaintiff

business—started conspiring with the defendant business against the

plaintiff business. Id. at 381. They used the plaintiff business’s confidential

documents, customer leads, and key personnel to benefit the defendant

business. Id. Ultimately, the defendant business paid members of the plaintiff

business to not work, incited other employees to quit their jobs by falsely

telling them that the plaintiff business was about to fire them, and fraudulently

induced customers of the plaintiff business to unwittingly become customers

of the defendant business. Id. On this record, the Second District Court

reversed the trial court’s finding that the plaintiff business failed to establish

11 a factual basis for punitive damages. Id. at 379, 382.

The facts in Bailey overlap considerably with the proffer in this case.

Both cases involve a subversive takeover of a target business by a

competing business. In each case, the competing business relied on target

business employees providing sensitive customer/financial records and

inducing fellow target business employees to resign their employment. While

defamation is not a feature of this case as it was in Bailey, one could

reasonably argue that Appellees’ conduct in this case was in some ways

worse than the conduct in Bailey. In Bailey, the plaintiff business willingly

provided documents to the defendant business for the purpose of obtaining

a loan. While the defendant business later misused the documents, the initial

disclosure was nevertheless a voluntary one. By contrast here, Werner did

not know that two of its employees were furnishing sensitive customer and

employee information to AJC. Moreover, in Bailey, the defendant business

did at least make an offer to buy the plaintiff business. Here, AJC was

attracted to Project Satellite because it allowed AJC to enjoy all “the benefits

of an acquisition” without having to make an “upfront investment.”

In finding that Werner’s proffer was insufficient to receive leave to

amend, the trial court adopted Appellees’ explanation of several of the key

messages in Werner’s proffer. For example, with respect to the e-mail where

12 AJC’s controller asks Stallings for the names of Werner customers that would

follow him to AJC, the court wrote that the message “suggests an intention

to avoid the sharing of any information that Defendant Stallings believed he

could not provide without breaching his obligations to Plaintiff.” A reasonable

jury might well view the message that way. However, such a jury could

instead find that even though AJC knew the information it requested was

sensitive and would likely violate Stallings’ duty to Werner, it asked for the

information anyway because the business upside was worth the legal risk.

At the leave to amend stage, it is not for us to definitively forecast which view

a jury will take, but only to determine if there is a reasonable view of the

evidence that supports the plaintiff’s position. See Varnedore, 210 So. 3d at

747 (observing that when deciding if a proffer is successful, the court asks

whether a reasonable jury could infer from the proffer that the defendant’s

conduct satisfies the statutory basis for punitive damages).

Similarly, regarding the closure of Werner’s Jacksonville office, the trial

court found that the “evidence proffered is, at best, equally consistent with

Defendants’ position that Plaintiff had already adopted a plan to close the

branch.” However, at the leave to amend stage, a court should view this

conflict in a light most favorable to the plaintiff. See Est. of Despain, 900 So.

2d at 644.

13 III.

Taken in a light most favorable to Werner, its proffer shows that Project

Satellite was a trojan horse operation to transform Werner’s Jacksonville

office into AJC property without payment to Werner. Again, in a light most

favorable to Werner, this transformation occurred because two of Werner’s

employees, secretly working in concert with AJC’s executive officers and

board of directors, provided AJC with sensitive information about Werner’s

customers and induced key Werner employees to resign their employment

and work for AJC. This is not to suggest that a jury will ultimately find for

Werner on these issues. We merely hold that a reasonable jury could credit

the proffered evidence as demonstrating Appellees’ intentional misconduct

and/or gross negligence. See Varnedore, 210 So. 3d at 747.

Because Werner made a “reasonable showing” of having a

“reasonable basis” for the recovery of punitive damages, we reverse the trial

court’s order denying leave to amend and remand with instructions to grant

the motion. See § 768.72(1), Fla. Stat.

REVERSED and REMANDED with instructions.

LAMBERT, C.J., JAY and SOUD, JJ., concur.