Opinion
No. C5-01-459.
Filed November 13, 2001.
Appeal from the District Court, Hennepin County, File No. 99-007023.
Edward J. Pluimer, Craig D. Diviney, Roberto Anguizola, (for appellant)
John J. Steffenhagen, (for respondent)
Considered and decided by Hanson, Presiding Judge, Toussaint, Chief Judge, and Stoneburner, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellant employer sued respondent employee, its former president, for breach of non-compete and confidentiality provisions of respondent's employment contract. The district court granted respondent's motion for summary judgment, determining that respondent's claims were too speculative to create genuine issues of material fact. We affirm.
FACTS
Appellant Manhattan Group, LLC (Manhattan) designs and sells children's toys. Respondent Dean Rizer worked for Manhattan's predecessor company for approximately seven years and then was promoted to president of Manhattan. At the time of his promotion, Rizer executed an employment agreement that contained a provision prohibiting Rizer from engaging in competitive business activity for two years after his termination and a provision prohibiting him from divulging confidential information for five years after his termination.
Approximately eighteen months after promoting him, Manhattan terminated Rizer. For nearly three months thereafter, Manhattan and Rizer considered and discussed the possibility of Rizer remaining with Manhattan as a product design consultant. During the same period, Rizer also considered serving in a similar position with MTC-UK, a British company that held the exclusive license to manufacture and distribute Manhattan-branded toys in Europe.
Manhattan filed suit against Rizer for breach of the non-compete and confidentiality provisions. The suit was based on Rizer's alleged role in assisting MTC-UK's managing director, Thomas Gatacre, in launching a competing company known as JellyCat, Ltd. Manhattan alleged that, after the termination of his employment with Manhattan, Rizer provided advice to Gatacre regarding the business plans of Manhattan; had discussions with Gatacre about Gatacre's intention to compete with Manhattan through JellyCat; provided information about Manhattan's new product line to Gatacre; and performed certain tasks to assist Gatacre or MTC-UK.
After discovery was completed, Rizer filed a motion for summary judgment. In his motion, Rizer argued that (1) the non-compete and confidentiality provisions were unenforceable; (2) Manhattan failed to establish a breach of either provision; and (3) Manhattan suffered no damages as a result of any alleged breach. The district court concluded that while the non-compete and confidentiality provisions were enforceable and the issue of damages was triable, there was insufficient evidence to permit a jury to find Rizer breached the non-compete or confidentiality provisions. The district court granted Rizer's motion, except in a minor respect not material to this appeal.
DECISION
"The determination of whether a genuine issue of material fact exists is * * * subject to de novo review." Brookfield Trade Ctr. v. County of Ramsey, 609 N.W.2d 868, 874 (Minn. 2000). The court reviewing a grant of summary judgment asks (1) whether there are any genuine issues of material fact and (2) whether the district court erred in applying the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).
To defeat a summary judgment motion, the nonmoving party must demonstrate the existence of specific disputed facts that create a genuine issue of material fact. Gorath v. Rockwell Int'l, Inc., 441 N.W.2d 128, 131 (Minn.App. 1989). A material fact is one that affects the outcome of the case depending on its resolution. Zappa v. Fahey, 310 Minn. 555, 556, 245 N.W.2d 258, 259-60 (1976). The nonmoving party "cannot preserve his right to a trial on the merits merely by referring to unverified and conclusionary allegations in his pleading or by postulating evidence which might be developed at trial * * *." Lubbers v. Anderson, 539 N.W2d 398, 401 (Minn. 1995) (citation omitted). In fact, our supreme court has said that "there is no genuine issue of material fact for trial when the nonmoving party presents evidence which merely creates a metaphysical doubt as to a factual issue and which is not sufficiently probative with respect to an essential element of the nonmoving party's case to permit reasonable persons to draw different conclusions." DLH, Inc. v. Russ, 566 N.W.2d 60, 71 (Minn. 1997).
The precise issue here is whether Manhattan presented sufficient evidence to support an inference that Rizer either provided Manhattan's confidential information to Gatacre or participated in the launch of JellyCat as a competitor of Manhattan. Since Rizer denied having done either, and a deposition of Gatacre taken in a separate action did not elicit any admission by Gatacre that Rizer did either, Manhattan is reduced to supporting the inference by circumstantial evidence. While circumstantial evidence may support an inference,
a fact is proved by circumstantial evidence when its existence can reasonably be inferred from other facts proved in the case * * *. "Inferences must * * * be reasonably supported by the available evidence; sheer speculation is not enough."
Cokley v. City of Otsego, 623 N.W.2d 625, 633 (Minn.App. 2001)) (citation and quotation omitted); see also Lubbers, 539 N.W.2d at 401 (stating that some evidence must exist to create the link asserted by the party challenging the grant of summary judgment).
The circumstantial evidence developed by Manhattan supports the inference that Rizer had the motive and opportunity to provide confidential information to Gatacre and to participate with Gatacre in the launch of a competing business. It falls short, however, of supporting the inference that Rizer actually did either.
Manhattan presented evidence that (1) Rizer phoned Gatacre the day after his termination by Manhattan and had a lengthy discussion, at a time when Rizer was privy to the fact that Manhattan's plans included the possible termination of MTC-UK's license; (2) Gatacre incorporated JellyCat eight days after that call; (3) Rizer traveled to London a month later, bringing toy samples he purchased in a retail store, and had an all-day meeting with Gatacre; (4) during the meeting, Rizer discussed Manhattan's Easter holiday line of toys, offered to become a consultant to MTC-UK, and saw the logo Gatacre had developed for JellyCat; (5) Rizer and Gatacre had frequent phone conversations thereafter; (6) Rizer traveled to Indonesia to consult on a rat infestation problem at a toy production facility; and (7) Rizer helped Gatacre arrange payment of $2,700 to secure delivery of promotional sample bags for JellyCat by an Iowa manufacturer. Manhattan also raised issues concerning Rizer's credibility.
The district court denied summary judgment with respect to this arrangement only.
This evidence would likely support the inference that Rizer might have provided confidential information to Gatacre, or might have participated in the launch of JellyCat, but that is speculative.
There is no evidence that Rizer's telephone discussions with Gatacre had anything to do with JellyCat. There is no evidence that Rizer was aware of JellyCat's existence or any intent by Gatacre to become a competitor of Manhattan before he met with Gatacre in London or before he discussed Manhattan's Easter line with Gatacre. There is no evidence that Rizer had any involvement with JellyCat, other than to passively observe its logo when he visited Gatacre in London. There is no evidence that Rizer advised, assisted with or participated in the formation of JellyCat. There is even no evidence that the Indonesian plant that Rizer visited at Gatacre's request was going to be used to produce toys for JellyCat and not MTC-UK.
Manhattan comes closest to a supportable inference of breach with its claim that Rizer provided Manhattan's confidential information to Gatacre during the London visit. In his affidavit, Rizer acknowledges that he "discussed in general terms what Manhattan's Easter line encompassed." Rizer claimed that this was appropriate and not a breach of Manhattan's confidentiality because the conversation took place while MTC-UK was a licensee of Manhattan and before Gatacre had displayed the JellyCat logo (which Rizer claimed was the first indication he received that Gatacre intended to compete with Manhattan). But Manhattan's corporate designee testified that if Gatacre had requested the same information directly from Manhattan, Manhattan would have been able to decide what information it would and would not release to Gatacre, and also would have known what information was provided. Rizer clearly was not authorized to act for Manhattan in providing information to Gatacre and Rizer's decision as to the timing and the extent of the disclosure could have prejudiced Manhattan.
Unfortunately, the evidence stops here. Rizer was not asked on deposition to detail specifically what information he disclosed to Gatacre. Likewise, although Gatacre's deposition was taken in a separate action by Manhattan against MTC-UK and Gatacre, he was not asked what specific information was disclosed to him. There was no other source for these specifics. Without them, a jury would be unable to determine what the disclosure was, whether the disclosure was material, whether it was information that Gatacre had not already obtained from Manhattan or what harm the information might cause. Thus, even as to this claim, the evidence falls short of supporting the inferences necessary for a finding that there was a breach of the confidentiality provision.
Without evidence to support its allegations, Manhattan's claims are based on conjecture, and not premises of fact from which a causal connection can be inferred. See DLH, Inc, 566 N.W.2d at 71 (stating that nonmovant "must do more than rest on mere averments"). Such speculation and general assertions are not sufficient to create a genuine issue of material fact for trial. Id.; see also Bob Useldinger Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 328 (Minn. 1993) (stating that "[m]ere speculation, without some concrete evidence, is not enough to avoid summary judgment"). The circumstantial evidence creates suspicion of the possibility of wrongdoing, but is not sufficient to support an inference that there was actual wrongdoing.
Manhattan also argues that Rizer violated the non-compete provision by failing to notify Manhattan as soon as he learned that Gatacre was considering forming JellyCat or a competing business. The non-compete provision only requires Rizer to refrain from engaging in competing activities, it does not impose an affirmative duty on him to notify Manhattan of the competing activities of others. Rizer's failure to inform Manhattan does not constitute a breach of the non-compete provision.
Finally, Manhattan argues that Rizer breached the non-compete and confidentiality provisions when he provided an affidavit to MTC-UK, for use in defending an action brought against it by Manhattan. As noted by the district court "the provision of sworn testimony in a lawsuit cannot form the basis of a claim for violation of a non-compete agreement." This is because (1) the terms of the non-compete provision do not prohibit involvement in legal proceedings, (2) litigation is not the sort of activity a non-compete provision is designed to protect, and (3) such a prohibition would present significant public policy concerns.
Given our decision to affirm summary judgment on this ground, we need not reach Rizer's alternative arguments concerning the enforceability of the relevant provisions and the issue of damages.