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finding that, under LA. REV. STAT. 23:921A, "Louisiana law applies despite the choice of Texas law in the [Non-Disclosure and Non-Compete] Agreement" where the plaintiff had "not ratified that choice of Texas law after his resignation"
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CIVIL ACTION NO. 00-0481 SECTION "T" (3)
June 22, 2000
This cause came for hearing on this date upon the Motion of the Plaintiffs, Allen E. Frederic Jr., Wade Hladky, Patty D. Boudreaux, Kyle Saucier, and Norman W. Winters ("the Plaintiffs"), for Partial Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure ("FRCP"), upon the Motion of the Plaintiffs to Dismiss the Defendant's counterclaims pursuant to Rule 12(b)(6) of the FRCP, and upon the Motion for Partial Review of Magistrate Judge Affrick's Minute Entry pursuant to Local Rule 74.1. The Court, having heard the arguments of the parties, and having studied the legal memoranda and exhibits submitted by the parties, the record, and the applicable law, is fully advised on the premises and ready to rule.
ORDER AND REASONS
I. Background
This case arose as an action for Declaratory Judgment filed by the Plaintiffs, Louisiana citizens, on February 1, 2000, in the Civil District Court for the Parish of Orleans. The Defendant, KBK Financial, Inc. ("KBK"), a Delaware corporation with its principal place of business in Texas, timely filed a Notice of Removal claiming subject matter jurisdiction of this Court pursuant to 28 U.S.C. § 1332. The Plaintiffs seek a judgment declaring that they have breached no contractual or fiduciary duty to KBK, that their actions do not constitute unfair trade practices or tortious conduct, and that a Non-Disclosure and Non-Compete Agreement ("the Agreement") between KBK and one of the Plaintiffs, Norman W. Winters, is null and void. KBK has filed an answer and counterclaim asserting that the Plaintiffs violated a fiduciary duty to KBK and employed unfair trade practices, that the Agreement is valid, and that Winters violated the Agreement.
The act precipitating this litigation is the simultaneous resignation of all five of the Plaintiffs, the entire New Orleans department of KBK, in order to accept offers of employment from Gulf Coast Bank Trust Company ("Gulf Coast"). In a telephone conversation on January 31, 2000, that Frederic recorded, Frederic notified his KBK supervisor that all five Plaintiffs were resigning immediately, with one day's notice, so that the four Plaintiffs without employment agreements could begin employment for Gulf Coast the next day. The fifth Plaintiff, Winters, had the Agreement with KBK requiring, inter alia, that he not work for a competitor of KBK for ninety days. He did not begin employment with Gulf Coast until May 1, 2000, apparently complying with that ninety day requirement. However, Winters was to receive, in addition to his $110,000 base salary, a bonus of $29,000 with 9.75% interest for ninety days upon his reporting to work for Gulf Coast. Continuing, as part of their employment contracts with Gulf Coast, each Plaintiff was indemnified by Gulf Coast for any legal action taken by KBK, and each Plaintiff's attorney fees for contract negotiation as well as for any litigation are to be paid by Gulf Coast. The Plaintiffs' counsel filed this action for declaratory judgment on February 1, 2000, the day after the Plaintiffs notified KBK of their mass resignation.
In its answer and counterclaim, KBK asserts that all of the Plaintiffs have violated their fiduciary duties as KBK's employees and may have employed unfair trade practices, that the Agreement with Winters is valid and binding, and that he has violated the Agreement. All of this conduct, KBK claims, has forced KBK to shut down its local department and has caused damages consisting of two years of rent due under KBK's local lease, and of increased business and legal expenses. KBK, seeking to uncover evidence to prove its counterclaims, has attempted to depose the Plaintiffs and others and has requested disclosure of relevant information and documents. Finding its discovery attempts somewhat unsuccessful due to refusals and objections by the Plaintiffs to answer or produce certain information and documents, KBK sought and was partially granted a Motion to Compel by Magistrate Judge Affrick on June 2, 2000.
Subsequently, the Plaintiffs request that this Court review the Magistrate Judge's Order because they claim that the information sought by KBK and ordered to be disclosed or produced is irrelevant, of an overly broad time frame, protected by Louisiana's Financial Records Privacy Act, protected as proprietary and confidential information of Gulf Coast, and/or is merely intended to harass Gulf Coast and its customers. Additionally, the Plaintiffs request that this Court grant Partial Summary Judgment by holding that the Agreement between Winters and KBK is null and void as an overly broad non-competition contract which is prohibited under Louisiana law. Finally, the Plaintiffs request that this Court dismiss all of KBK's counterclaims for failure to state a claim upon which relief can be granted.
II. Legal Analysis
A. Motion for Partial Summary Judgment
1) The Non-Competition Provision
The Federal Rules of Civil Procedure provide that summary judgment should be granted only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. Civ. P. 56(c). The party moving for summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Stults v. Conoco, Inc., 76 F.3d 651, 655-56 (5th Cir. 1996) (citing Skotak v. Tenneco Resins, Inc., 953 F.2d 909, 912-13 (5th Cir.) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), cert. denied, 506 U.S. 832 (1992)). When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts. The nonmoving party must come forward with "specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis supplied); Tubacex, Inc. v. M/V RISAN, 45 F.3d 951, 954 (5th Cir. 1995).
Thus, where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no "genuine issue for trial." Matsushita Elec. Indus. Co., 475 U.S. at 588. Finally, the Court notes that substantive law determines the materiality of facts and only "facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In this case there is a written contractual agreement between Winters and KBK. Neither the fact of voluntary entry into the Agreement nor its terms are in dispute. The only dispute is whether the Agreement as written is valid under Louisiana law. Consequently, as there is no genuine issue of material fact which could affect the determination of the Agreement's validity and thus nothing for the finder of fact to decide, there are only issues of substantive Louisiana law which will determine the Agreement's validity, and thereby the issue is appropriate for summary judgment.
Louisiana law applies despite the choice of Texas law in the Agreement. LA. REV. STAT § 23:921A(2) declares that such a forum selection "shall be null and void except where the choice of forum clause or choice of law clause is expressly, knowingly, and voluntarily agreed to and ratified by the employee after the occurrence of the incident which is the subject of the civil or administrative action." Winters has not ratified that choice of Texas law after his resignation.
"Louisiana has consistently had a strong public policy against noncompetition contracts which prohibit former employees from competing with a former employer." Cellular One, Inc. v. Boyd, 653 So.2d 30, 32 (La.App. 1st Cir. 1995) (citing Orkin Exterminating Company v. Foti, 302 So.2d 593, 596 (La. 1974)). The governing statute requires:
A. (1) Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void.
* * *
C. Any person, including a corporation and the individual shareholders of such corporation, who is employed as an agent, servant, or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment.
LA. REV. STAT. § 23:921 (emphasis added). Therefore, failure to specify the geographical limitations of a non-competition agreement will render that agreement null and void. See AMCOM of Louisiana, Inc. v. Battson, 670 So.2d 1223 (La. 1996); Petroleum Helicopters, Inc. v. Untereker, 731 So.2d 965 (La.App. 3d Cir. 1999).
Moreover, where agreements fail to specify the geographical restriction or where that restriction is overly broad, "[p]ublic policy requires that the provisions of non-competition agreements be strictly construed in favor of the employee." Cellular One 653 So.2d at 33 (citing Pelican Publishing Co. v. Wilson, 626 So.2d 721 (La.App. 5th Cir. 1993)). Although the jurisprudence is mixed as to whether a court may reform an unclear geographical restriction in a non-competition agreement, this Court recognizes a divergence of two lines of cases: one where no stated geographical restriction or an unascertainable restriction will render the agreement null, and another where a geographical restriction is not clearly stated but can be objectively ascertained and thus may be reformed to save the agreement. See, e.g., Team Environmental Services, Inc. v. Addison, 2 F.3d 124 (5th Cir. 1993); Pelican Publishing, 626 So.2d at 724 (refusing to reform the geographical restriction where it was excluded from the contract); but see Amcom, 670 So.2d at 1223;Cellular One, 653 So.2d at 33 (allowing reformation where the intended geographical restrictions were more evident in the contract). Thus, a non-competition agreement that fails to specify any geographical restriction is null and void and will not be reformed.
This Agreement between Winters and KBK has no geographic restriction specified for the ninety day non-competition requirement. (Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, Exhibit A, ¶ 2). The exception which allows restriction of competition, LA. REV. STAT § 23:921(C), only applies where competition is limited in specified parishes or municipalities, whereas LA. REV. STAT. § 23:921(A), the general rule, declares all other non-competition agreements to be null and void. Therefore, this Agreement to restrict competition for ninety days is null and void.
Moreover, despite KBK's claim that Plaintiff Winters should know the geographical area subject to the restriction, the law requires that the Court strictly construe the Agreement in the employee's favor. Continuing, this is not an instance where the Court could ascertain what areas were intended to be limited. KBK is a national company doing business throughout the country, and KBK's offices can service accounts anywhere. (Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, Exhibit E, p. 2). Any reformation by this Court would be speculation because there is no objective guide in the Agreement from which the Court can ascertain the geographical restrictions. Therefore, the ninety day non-competition requirement in the Agreement can not be reformed and must be declared null and void.
Plaintiff Winters also claims that the scope of activities restricted by the Agreement is too broad and thus must render that part of the contract null. The Court need not address that claim because the failure to define the geographical restriction renders that provision null.
2) The Non-Disclosure Provision
KBK correctly points out that Paragraph 15 of the Agreement contains a severability provision which is valid under Louisiana law, and that allows this Court to determine the validity of each disputed provision of the Agreement independently.
Likewise, the parties dispute the validity of the following non-disclosure provision in the Agreement: "For a period of two (2) years immediately following any termination . . . [e]mployee shall not . . . [u]tilize any information (Confidential Information or otherwise) relating to the business of the Company, either directly or indirectly, with or for the benefit of any competitor of the Company." (Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, Exhibit B, ¶ 3(b)). Winters claims that this would prevent him from working in the banking business because it would prohibit him from participating in the "financing of middle-market businesses through secured loans." (Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, p. 12).
However, KBK claims that "[t]his provision merely prohibits Winters from utilizing any information specific to KBK. There is no indication that this statement prohibits Winters from utilizing any of the experience he has gained during his tenure with KBK. Rather, this section seeks to protect KBK's confidential or propriety [sic] information." (KBK's Memorandum in Opposition to Motion for Partial Summary Judgment, Doc. 52, p. 13).
In fact, if KBK's claim is accurate and that section seeks to protect only confidential and proprietary information, then it would be repetitive since the previous clause in the Non-Disclosure section expressly prohibits that type of disclosure:
Employee shall not . . . [d]ivulge any information (Confidential information or otherwise) relating to the business of the Company, including, but not limited to, the identity of the Customers and/or contractors, data relating to the Company's business, products, and/or services, and the Company's manner and/or methods of operation.
(Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, Exhibit B, ¶ 3(a)). Therefore, this Court believes that the disputed provision, Paragraph 3(b), was not intended to protect solely proprietary or confidential information because the previous clause accomplishes that goal. Consequently, the type of disclosure KBK claims to have intended to prohibit in Section (b), the requirement of non-disclosure of any information "relating to the business" of KBK, is overly broad. The provision would restrain Winters from exercising his lawful profession; therefore, it is prohibited by LA. REV. STAT. § 23:921, and must be declared null and void.
3) The Non-Solicitation of Employees Provision
An agreement not to solicit employees of the former employer is not governed by the noncompetition statute, LA. REV. STAT. § 23:921. See Smith, Barney, Harris Upham Co. v. Robinson, 12 F.3d 515 (5th Cir. 1994). Moreover, an agreement not to solicit employees of a former employer does not interfere with the exercise of a lawful trade or business unless that recruiting is an indispensable ingredient of the former employee's new profession. See id. at 518; John Jay Esthetic Salon, Inc. v. Woods, 377 So.2d 1363 (La.App. 4th Cir. 1979). Thus an agreement prohibiting solicitation of employees of a former employer is not prohibited by the non-competition statute and is subject only to general contract requirements. See id.
The Agreement states: "Employee shall not . . . [s]olicit the employment of or employ any person while such person is employed by the Company." (Plaintiff's Memorandum in Support of Motion for Partial Summary Judgment, Doc. 51, Exhibit B, ¶ 3(f)). Winters' new position at Gulf Coast is that of Marketing Officer of the credit division, and as such he is "responsible for marketing and underwriting business and industry lending services." (KBK's Memorandum in Opposition of Motion for Partial Summary Judgment, Doc. 52, Exhibit 1, ¶ 1). Winters' job is to make business loans; therefore, the Agreement's prohibition of his solicitation of KBK employees does not interfere with his exercise of a lawful trade, is not prohibited by Louisiana law, and is enforceable against Winters. Accordingly, the Plaintiffs' Motion for Partial Summary Judgment must be GRANTED IN PART, and DENIED IN PART.
B. Motion to Dismiss Counterclaim
A motion to dismiss under Rule 12(b)(6) of the FRCP "is viewed with disfavor and is rarely granted." Lowrey v. Texas AM University System, 117 F.3d 242, 247 (5th Cir. 1997); Kaiser Aluminum Chem. Sales v. Avondale Shipyards, 677 F.2d 1045, 1050 (5th Cir. 1982). The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the original complaint must be taken as true. See Campbell v. Wells Fargo Bank, 781 F.2d 440, 442 (5th Cir. 1980). A district court may not dismiss a complaint under Rule 12(b)(6) "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Blackburn v. Marshall, 42 F.3d 925, 931 (5th Cir. 1995). The Fifth Circuit defines this strict standard as, "whether in the light most favorable to the plaintiff and with every doubt resolved in his behalf, the complaint states any valid claim for relief." Lowrey, 117 F.3d at 247 (citing 5 Charles A. Wright Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1357, at 601 (1969)).
"The issue is not whether a Plaintiff will ultimately prevail but whether he is entitled to offer evidence to support his claims." Doe v. Hillsboro Independent School Dist., 81 F.3d 1395, 1401 (5th Cir. 1996). Therefore, no matter how improbable the facts alleged are, they must be accepted as true for the purposes of a motion to dismiss pursuant to Rule 12(b)(6) of the FRCP. See Neitzke v. Williams, 490 U.S. 319 (1993).
In the instant case, KBK claims that all of the Plaintiffs violated their fiduciary duties by their mass resignation and that they may have employed unfair trade practices by using proprietary information to solicit KBK's clients. (KBK's Answer and Counterclaim, Doc. 11, ¶¶ 3-5, 8-10). KBK also claims that Winters may have violated his contractual obligations under the Agreement by soliciting KBK employees, etc. (KBK's Answer and Counterclaim, Doc. 11, ¶¶ 6, 7). These are all claims for which Louisiana law may grant relief. See, e.g., Cenla Physical Therapy and Rehabilitation Agency, Inc. v. Lavergne, 657 So.2d 175 (La.App. 3rd Cir. 1995) (allowing a court to determine whether an employee owes a fiduciary duty); and LA. REV. STAT. § 51:1405 (declaring unfair methods of competition or deceptive practices to be unlawful). Moreover, it is not beyond doubt that KBK can prove these claims.
KBK also claimed that Winters violated the Non-Competition Provision of the Agreement, but, as stated above, that provision of the Agreement is null and void.
Regardless of whether KBK can ultimately prove that the Plaintiffs did owe a fiduciary duty to it, that the Plaintiffs diverted KBK customers to Gulf Coast, that Winters violated the valid portions of the Agreement, or that the Plaintiffs competed unfairly, this Court must assume that all facts alleged by KBK are true. KBK could prove some set of facts which will entitle it to relief. Consequently, as these are claims upon which relief may be granted, the Plaintiffs' Motion to Dismiss KBK's counterclaims must be DENIED.
C. Motion for Partial Review of Magistrate Judge's Minute Entry
The standard by which a district court reviews discovery rulings by a magistrate judge is established by 28 U.S.C. § 636, which states that "[a] judge of the court may reconsider any pretrial matter . . . where it has been shown that the magistrate's order is clearly erroneous or contrary to law." 28 U.S.C. § 636 (b)(1)(A). The Fifth Circuit has stated that the statute specifically requires the district court to apply a "clearly erroneous" standard when reviewing a magistrate judge's ruling on a non-dispositive, pretrial motion such as a discovery motion. See Castillo v. Frank, 70 F.3d 382, 385-86 (5th Cir. 1995). Therefore, Magistrate Judge Affrick's order should be upheld unless it is "clearly erroneous or contrary to law."
On June 1, 2000, Magistrate Judge Affrick issued an order containing the following language with regard to the Motion of KBK to Compel Discovery Responses from the Plaintiffs:
The motion to compel is GRANTED with respect to deposition questions regarding which KBK customers or potential customers were contacted by the plaintiff post-resignation from KBK. To the extent plaintiff contacted KBK's customers or potential customers prior to his resignation from KBK, plaintiff must answer questions relative to the names of same as well as any conversations with or correspondence to or from such customers or potential customers pre and post-resignation. To the extent plaintiff's counsel genuinely believes certain documents to be covered by La. Rev. Stat. § 6:333, he need not produce same. However, he should, with respect to each customer or potential customer whose documents are withheld pursuant to La. Rev. Stat. § 6:333, state that documentation is being withheld for that named individual or entity.
The motion to compel is GRANTED with respect to deposition questions regarding J. Dugan Smith. To the extent plaintiff contacted J. Dugan Smith prior to his resignation, plaintiff must answer deposition questions relative to any conversations with or correspondence to or from Smith pre and post-resignation. To the extent plaintiff's counsel genuinely believes certain documents to be covered by La. Rev. Stat. § 6:333, he need not produce same. However, he should state that documentation is being withheld relative to Smith pursuant to La. Rev. Stat. § 6:333.
The motion to compel is GRANTED with respect to deposition questions regarding a loan package prepared by Hladky for Blacks Railroad prior to his resignation, plaintiff must answer deposition questions relative to any conversations with or correspondence to or from Blacks Railroad pre and post-resignation. To the extent plaintiff's counsel genuinely believes certain documents to be covered by La. Rev. Stat. § 6:333, he need not produce same. However, he should state that documentation is being withheld relative to Blacks Railroad pursuant to La. Rev. Stat. § 6:333.
The motion to compel is GRANTED in part with respect to Interrogatory No. 2. Plaintiff will supply defendant with a written list identifying KBK customers or potential customers who plaintiff contacted prior to and following his resignation.
The motion to compel is GRANTED with respect to Request for Production Nos. 3, 8, and 9. To the extent plaintiff has responsive documents or records, he should produce same for the time period after February 1, 1999.
This order relates only to conversations held and/or documents created after February 1, 1999.
(Doc. 49).
The Plaintiffs' objections to each of the orders of Magistrate Affrick generally fall into the categories of relevancy, proprietary and confidential information, and Louisiana Financial Records Privacy Act, LA. REV. STAT. § 6:333. Additionally, the Plaintiffs claim that portions of the order are overly broad with regard to the scope of documents to be produced as well as to the time frame from which the documents are to be produced.
1) The Relevancy Objection
The Plaintiffs claim that their post-resignation contacts with former KBK customers or potential customers are not in violation of any law. They argue that since competition with a former employer is legal, all post-resignation contact information is irrelevant, and KBK is simply on a "fishing expedition." (Plaintiff's Memorandum in Support of Motion for Partial Review of Magistrate's Minute Entry, Doc. 50, pp. 6-7). The Plaintiffs request that this Court narrow Magistrate Judge Affrick's order to eliminate discovery of the Plaintiffs' post-resignation business activities.
KBK claims that while they were still KBK employees, the Plaintiffs acted in opposition to KBK, and that they may have diverted customers from KBK to Gulf Coast. For KBK to have the opportunity to prove these claims, it must be allowed to discover the identities of customers that may have been diverted. The best way to accomplish this would be to identify customers and potential customers of KBK who signed with or were contacted by the Plaintiffs following their, mass resignation. Thus Magistrate Judge Affrick made no clear error in ordering this production of discovery.
2) The Confidential and Proprietary Information Objection
The Plaintiffs also claim that because the two banks are competitors, they should not be compelled to divulge confidential and competitive business information. (Plaintiff's Memorandum in Support of Motion for Partial Review of Magistrate's Minute Entry, Doc. 50, pp. 7-9) (citingMicrowave Research Corp. v. Sanders Associates, Inc., 110 F.R.D. 669 (D.Mass. 1986), and Duracell, Inc. v. S.W. Consultants, Inc., 126 F.R.D. 576 (N.D.Ga. 1989) for the proposition that a more narrow definition of relevant is appropriate where proprietary and confidential information may be revealed to a competitor). The Plaintiffs request that the Magistrate Judge's order should be narrowed so as not to require Hladky and the other Plaintiffs to divulge their post-resignation activities with customers and especially with those customers who had already closed deals with KBK before the Plaintiffs left.
As with the Plaintiffs' relevancy objection, KBK must be allowed to discover whether any of its customers or potential customers were diverted before or after the resignation. Such discovery could allow KBK to prove that customers who may have engaged in single or multiple deals or who may have renegotiated deals after the Plaintiffs' simultaneous resignation were, in fact, diverted. Moreover, as counsel for KBK points out, KBK seeks only the names of contacts who were previously customers or potential customers of KBK, and, therefore, KBK would only have access to names of customers it already has, not Gulf Coast's whole customer list. (KBK's Memorandum in Opposition to Plaintiff's Motion for Partial Review, Doc. 53, pp. 11-12) (citing Russ Stonier, Inc. v. Droz Wood Company, 52 F.R.D. 232 (E.D.Pa. 1971) for the proposition that a competitor's discovery of names of its own customers in a suit for unfair competition was appropriate). Thus the orders by Magistrate Judge Affrick are not clearly erroneous.
3) The Financial Records Privacy Act Objection
Next, the Plaintiffs object to Magistrate Judge Affrick's order to produce all answers and documents relating to its current customers and contacts because the Plaintiffs contend that release of this type of "financial document" is prohibited by LA. REV. STAT. § 6:333. The Plaintiffs claim that even release of the identity of a customer is a violation of that statute because it defines a financial document broadly as "any document or record held by a bank `which pertains in any way to a past or current customer or to such customer's past or current relationship with the bank and all information contained therein or derived therefrom.'" (Plaintiffs' Memorandum in Support of Motion for Partial Review of Magistrate's Minute Entry, Doc. 50, pp. 10-12) (quoting LA. REV. STAT § 6:333(A)(6)). The Plaintiffs submit that production of any documents or information relating to Gulf Coast customers, even their names, but especially information regarding J. Dugan Smith and Blacks Railroad, would be contrary to law. Further, the Plaintiffs claim that to the extent that KBK requests information on its own customers and potential customers, KBK only seeks to shift its own burden of identifying its customers and providing the appropriate statutory notice to those customers onto the Plaintiffs and perhaps upset Gulf Coast's relationship with its clients.
On the other hand, KBK contends that the statute requires identification of the customers in order for KBK to conform to the notice requirements of LA. REV. STAT § 6:333(C). Continuing, KBK claims that of course it is already aware of the identities of its former customers and contacts, but KBK needs only the identities of those customers that the Plaintiffs contacted since resignation, and then it will either contact those customers directly or follow the notice requirements for disclosure demands required by the statute.
The statute requires that 1) The disclosure demand must be served on the bank; 2) the person demanding the disclosure must provide the bank with an affidavit attesting to adequate notice to the customer; 3) the bank must not have received notice that the customer has taken action to restrain the release of the financial records.
This Court agrees that under a very literal application of LA. REV. STAT. § 6:333, revealing even the identities of present customers would be an illegal violation of the financial privacy statute and would therefore be contrary to law. However, the statute is intended to protect the customers, not the banks. Moreover, Magistrate Judge Affrick's stipulation that information which the Plaintiffs' counsel genuinely believes to be covered by LA. REV. STAT. § 6:333 need not be produced, taken in conjunction with the fact that KBK already has this information and only seeks to reasonably "narrow the field" of customers that it should contact under the requirements of the statute, does, in fact, comply with the statute's purpose. However, in an abundance of caution and to ensure the intended statutory protection for financial customers, this Court will modify that discovery order to allow the Plaintiffs' counsel to submit all documents or responses which Plaintiffs' counsel genuinely believes to be covered by LA. REV. STAT. § 6:333 to Magistrate Judge Affrick for in camera review before release of those documents or responses to KBK.
LA. REV. STAT § 6:333 defines "Customer" as "any person who has transacted, or is transacting, any business with a bank or who has used, or is using, any service of a bank, including but not limited to the following: any person who was or is indebted or otherwise obligated to the bank, whether directly or indirectly; any person who has provided, or is providing, any collateral security for any indebtedness or other obligation to the bank; any person who has had, or currently has, any funds on deposit at the bank; or any person for whom the bank is acting or has acted as a fiduciary."
4) The Overly Broad Scope and Time Frame Objection
The Plaintiffs also argue that Request for Production Nos. 3, 8, and 9 and the Magistrate Judge's order to produce all documents containing clients or customers or prospective clients or customers communications as well as all diaries, calendars, logs, appointment books, and telephone records of the Plaintiffs from February 1, 1999, to the present is overly broad in scope and time. The Plaintiffs assert the same arguments of relevancy, confidential and proprietary information, and Financial Privacy Act as well as objecting to this invasion of their own privacy for such an extensive amount of time. The Plaintiffs request that this Court narrow that order and its time frame to production of relevant information.
While this order is somewhat invasive of the Plaintiffs' privacy and covers quite an extensive time frame, KBK does deserve the opportunity to develop evidence to prove its claims of fiduciary breach, contract breach, and unfair competition. Calendars, logs, phone records, etc., could reveal some evidence of diversion of clients, employee collusion in opposition to KBK, employee solicitation by contractually bound Plaintiff Winters, etc. Consequently, Magistrate Affrick's order to produce these documents, although very broad, is not clearly erroneous. Therefore, the Magistrate Judge's order will be modified with regard to information covered by the Financial Records Privacy Act but is otherwise neither clearly erroneous nor contrary to law, and the Plaintiffs' Motion for Partial Review of the Magistrate Judge's Minute Entry must be GRANTED IN PART, and DENIED IN PART, and all documents and answers not already produced pursuant to said order must be produced immediately.
III. Conclusion
The Court has determined that KBK has not failed to state claims in its Answer and Counterclaim upon which relief may be granted. Also, Summary Judgment is appropriate for the Agreement as there is no genuine issue of material fact in dispute, and, thus, the Non-Competition Provision and one of the Non-Disclosure Provisions must be declared null and void. Finally, the orders of Magistrate Judge Affrick in his Minute Entry will be modified by this Court, solely in an abundance of caution, to ensure that they are not clearly erroneous or contrary to law.
Accordingly,
IT IS ORDERED that the Plaintiffs' Motion to dismiss KBK's counterclaims (Doc. 27) is DENIED. IT IS FURTHER ORDERED that the Plaintiffs' Motion for Partial Summary Judgment (Doc. 51) be, and the same hereby is GRANTED IN PART, and DENIED IN PART, and that the Non-Competition Provision, Paragraph 2, and the Non-Disclosure Provision, Paragraph 3(b), of the Non-Disclosure and Non-Compete Agreement be, and the same hereby are DECLARED null and void. IT IS FURTHER ORDERED that the Plaintiff's Motion for Partial Review of the Minute Entry (Doc. 50) be, and the same hereby is GRANTED IN PART, and DENIED IN PART, and all documents and answers not already produced pursuant to said order must be produced immediately, and that Magistrate Judge Affrick's order (Doc. 49) be modified to allow Plaintiffs' counsel to submit any document or response which he genuinely believes to be covered by LA. REV. STAT § 6:333 to Magistrate Judge Affrick for in camera review,