Opinion
CIV. NO. 22-00062 JAO-KJM
2024-01-11
HH ASSOCIATES, U.S., INC., as successor to InnerWorkings, Inc., Plaintiff, v. Raymond EVANS, Defendant.
Allison M. Warner, Pro Hac Vice, Carolyn O. Boucek, Pro Hac Vice, Peter A. Steinmeyer, Pro Hac Vice, Ridhi D. Madia, Pro Hac Vice, Epstein Becker & Green, P.C., Chicago, IL, Erik W. Weibust, Pro Hac Vice, Epstein Becker & Green, P.C., Boston, MA, Ronald Tang, Christopher J. Cole, Marr Jones & Wang LLP, Honolulu, HI, for Plaintiff. Daniel Hildebrand, Pro Hac Vice, Lewitas Hyman PC, Chicago, IL, Jennifer W. Corinis, Pro Hac Vice, Greenberg Traurig, Tampa, FL, Kelly Anne Higa Brown, Lanson K. Kupau, Lanson Keola Kupau, II, Margery S. Bronster, Mark G. Valencia, James William Rooney, Michelle J. Chapman, Bronster Fujichaku Robbins, Honolulu, HI, for Defendant.
Allison M. Warner, Pro Hac Vice, Carolyn O. Boucek, Pro Hac Vice, Peter A. Steinmeyer, Pro Hac Vice, Ridhi D. Madia, Pro Hac Vice, Epstein Becker & Green, P.C., Chicago, IL, Erik W. Weibust, Pro Hac Vice, Epstein Becker & Green, P.C., Boston, MA, Ronald Tang, Christopher J. Cole, Marr Jones & Wang LLP, Honolulu, HI, for Plaintiff.
Daniel Hildebrand, Pro Hac Vice, Lewitas Hyman PC, Chicago, IL, Jennifer W. Corinis, Pro Hac Vice, Greenberg Traurig, Tampa, FL, Kelly Anne Higa Brown, Lanson K. Kupau, Lanson Keola Kupau, II, Margery S. Bronster, Mark G. Valencia, James William Rooney, Michelle J. Chapman, Bronster Fujichaku Robbins, Honolulu, HI, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AS TO LIABILITY (ECF NO. 27) AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO STRIKE AND FOR SANCTIONS (ECF NO. 75)
Jill A. Otake, United States District Judge.
This case involves allegations by Plaintiff HH Associates, U.S., Inc., as successor to InnerWorkings, Inc. (hereafter, "IW" or "Plaintiff") against Defendant and former employee Raymond Evans ("Evans" or "Defendant") regarding actions that Evans took leading up to his departure from IW in February 2020. IW brings claims for breach of fiduciary duty, breach of contract, violation of state and federal trade secrets laws, tortious interference with existing and prospective business relationships, and civil conspiracy. See ECF No. 1 at 32-47. IW now moves for summary judgment as to liability on all claims. See ECF No. 27 ("Motion for Summary Judgment").
According to the Complaint, InnerWorkings merged into HH Associates in December 2021, ECF No. 1 ¶ 15, and Evans does not appear to presently dispute this allegation, ECF No. 63 at 2 n. 1. As both parties refer to Plaintiff as "IW" in briefing, the Court also uses "IW" rather than "HH" to refer to Plaintiff.
IW also moved to strike certain declarations from Evans' summary judgment submission, and for sanctions in connection with Evans' submission. See ECF No. 75 ("Motion to Strike and For Sanctions"). For the reasons discussed below, the Court GRANTS IN PART AND DENIES IN PART IW's Motion for Summary Judgment, and GRANTS IN PART AND DENIES IN PART IW's Motion to Strike and For Sanctions.
I. BACKGROUND
A. Factual History
Unless otherwise noted, the below facts are undisputed. These facts originate with allegations and admissions from the Complaint and Answer, see ECF Nos. 1, 20, or from the parties' Statements of Facts submitted in relation to IW's Motion for Summary Judgment, see ECF Nos. 28, 63.
IW characterizes itself as "a marketing execution firm that employs sales representatives who sell marketing execution services to corporate clients." ECF No. 28 ¶ 1. IW's services include the printing of branded merchandise and marketing materials, the provision of product packaging, and creative production services. ECF No. 1 ¶ 19. IW is a Delaware corporation with a principal place of business in Chicago, Illinois. ECF No. 28-2 at 1.
IW hired Evans in 2006 as a sales representative, and he worked for IW until his resignation in February 2020. ECF No. 28 ¶ 2. In his capacity as a sales representative, Evans was responsible for servicing IW's clients in Hawai'i and Guam as well as managing other IW sales representatives in the state. ECF No. 28 ¶ 3. In his management capacity, Evans maintained personal relationships with other sales representatives and was privy to their compensation at IW. ECF No. 1 ¶ 35.
In 2019, IW's business and stock price were on the decline. ECF No. 63 ¶ 40. In the beginning of that year, IW closed its Hawai'i office and instructed its Hawai'i employees to work from home. ECF No. 63 ¶ 42. At the time, IW employed six or seven other Hawai'i-based sales representatives in addition to Evans. ECF No. 28 ¶ 3; ECF No. 63 ¶ 46. By August 2019, Sarah Horn, IW's then-Vice President of Operations, resigned from IW and joined Smart Source, LLC ("Smart Source") as its Chief Operating Officer. ECF No. 28 ¶¶ 7-8; ECF No. 63 ¶ 56. Smart Source is a marketing supply-chain company that provides marketing and promotional materials—and is a direct competitor of IW. ECF No. 1 ¶ 38.
Horn reached out to several IW sales representatives, including Evans, in December 2019 to alert them that she was traveling to Hawai'i and to inquire into "catch[ing] up" with them. ECF No. 28 ¶ 11; ECF No. 63 ¶ 11. Horn met with Evans on December 11, and asked Evans about the level of interest that he and other IW sales representatives had in joining Smart Source. ECF No. 28 ¶ 12. After meeting with Horn, Evans met with four Honolulu-based IW sales representatives in his home the following day. ECF No. 28 ¶¶ 12, 16. Evans then emailed Horn and conveyed "the questions that came up," referencing compensation, a potential buy-out, approved suppliers, and other employment benefits. ECF No. 28 ¶ 17; ECF No. 28-6 at 1, 2; ECF No. 28-25. Later that month, Evans assisted Horn in arranging a dinner in Hawai'i, hosted by Smart Source, for the Hawai'i-based IW sales representatives. ECF No. 28 ¶ 19. Evans also provided their personal contact information to Horn. ECF No. 28 ¶ 20.
Evans continued to provide Horn and others at Smart Source with information related to IW throughout December and
January. For example, in a December 12 to email Horn, Evans attached a spreadsheet detailing IW's inventory in Honolulu. ECF No. 28 ¶ 14; ECF Nos. 28-21, 28-22. On December 15, Evans mentioned in another email to Horn that he was "trusting" her with the inventory report, and stated his belief that IW "will simply fire me if they found out that I sent that to you ... I don't feel sending that to you was the 'right' thing to do and am concerned. Please protect me." ECF No. 28 ¶ 17; ECF No. 28-6. In a December 18 email, Evans sent Horn details about forthcoming compensation changes at IW. ECF No. 28 ¶ 18. On January 15, Evans sent Horn documents conveying "transactional projections" for Evans as well as other IW sales representatives in Hawai'i. ECF No. 28 ¶ 21; ECF Nos. 28-31, 28-32, 28-33.
By late January 2020, Smart Source extended offer letters to all seven of IW's Hawai'i-based sales representatives, including Evans. ECF No. 28 ¶ 23; ECF Nos. 28-34, 28-35, 28-36, 28-37. Evans and at least three other representatives agreed to a February 17, 2020 start date. ECF No. 28-37. Evan notified IW of his departure on February 7 with a departure date of February 14, and Evans does not dispute that he falsely characterized his departure as a "retirement." ECF No. 28 ¶ 24; ECF No. 63 ¶ 24.
Between February 11 and February 13, Evans also notified all of his IW customers—from his new Smart Source email address—that he was leaving IW. ECF No. 28 ¶ 25. The form email noted in part that Evans was leaving IW for Smart Source, and stated "I'm hoping you will continue to allow me to service and take care of you." See, e.g., ECF No. 28-40 at 1. The email also stated "I'm hoping you will do the following," and provided steps to delete Evans' IW email, save his new Smart Source email, and save Smart Source's vendor information. Id. at 2. Evans acknowledged in deposition that this email served to "indirectly" ask customers to "move their business from [IW] to Smart Source" and affirmed that his intent by sending this email was to move the customer's business from IW to Smart Source. See ECF No. 28-3 at 31.
IW's exhibits demonstrate that Evans sent this form email to 20 customers. See ECF No. 28-38. But Evans conceded during his deposition that he sent this same email to all 63 of his then-active IW customers. See ECF No. 28-3 at 31.
In addition to contacting customers, Evans—while still an IW employee—began to enter all of his 63 active accounts, as well as his calendar, contacts, and documents from IW into Smart Source's systems. ECF No. 28 ¶¶ 27, 29; ECF No. 28-43. Evans also forwarded IW information and documents to his personal email address in the last 11 days of his employment with IW, including but not limited to: his 2018 and 2019 sales breakdown by customer; a list of suppliers; and various client proofs. ECF No. 28 ¶ 30; ECF Nos. 28-48 through 28-53. And in one instance, Evans emailed two Smart Source employees on February 11 stating "I have an order to enter for this customer" and asked to "[p]lease set them up." ECF No. 28-45.
On February 14, 2020, Evans and three other IW employees left IW's employ, ECF No. 63 ¶ 59, and became employees of Smart Source on February 17, 2020, ECF No. 28 ¶ 32. Following the departure, upwards of 80% of IW's customers left for Smart Source. ECF No. 28 ¶ 36; ECF No. 63 ¶ 36. After leaving IW, Evans retained all of his hard copy customer "file folders" from IW and used these documents to service IW customers who moved to Smart Source. ECF No. 28 ¶¶ 31, 37. A few weeks after the departure of Evans and other employees, one former IW employee
emailed Evans to thank him for his work at IW and concluded: "And most important of all ... you led us all to a greener pasture." ECF No. 28 ¶ 35. Evans responded, stating in part: "For the green pastures you should actually thank Sara [Horn]. I basically was only the messenger... (I hope the Judge sees it that way...)." Id.; ECF No. 28-57 at 1.
B. Procedural History
IW filed its Complaint in February 2022, and Evans filed an Answer in June. ECF Nos. 1, 20. The Complaint asserts the following claims: breach of fiduciary duty of loyalty (Count I); breach of contract (Count II); violation of the Defend Trade Secrets Act, 18 U.S.C. § 1836 et seq. (Count III); violation of Hawai'i Uniform Trade Secrets Act, Haw. Rev. Stat. § 482B-1 et seq. (Count IV); tortious interference with existing and prospective business relationships (Count V); and civil conspiracy (Count VI). The parties proceeded with discovery, and IW has now moved for summary judgment—as to liability only—on all of its six claims. ECF No. 27. Evans opposes summary judgment. ECF No. 62.
Following summary judgment briefing, IW moved on November 20, 2023 to strike two declarations submitted by Evans in opposition to summary judgment. ECF No. 75. IW also sought sanctions related to the submission of these declarations. Id. Evans opposed both forms of relief. ECF No. 77. The Court conducted a motions hearing on these and several other pending motions on January 5, 2024. ECF No. 82.
In the background of this case is a pending lawsuit in the Middle District of Florida, brought by Plaintiff against Horn and Smart Source, Innerworkings Inc. v. Horn, et al., 8:21-CV-903 (M.D. Fla.) (the "Florida litigation"). At the hearing, both parties represented that the Court should not delay issuance of this Order in deference to any pending orders in the Florida litigation.
II. LEGAL STANDARDS
A. Motion to Strike
Rule 26(e) of the Federal Rules of Civil Procedure states in relevant part:
A party who has made a disclosure under Rule 26(a)—or who has responded to an interrogatory, request for production, or request for admission—must supplement or correct its disclosure or response... in a timely manner if the party learns that in some material respect the disclosure or response is incomplete or incorrect, and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing."
Fed. R. Civ. P. 26(e). Rule 26 disclosure obligations are enforced by Rule 37(c), which "'gives teeth to these requirements by forbidding the use at trial of any information required to be disclosed by Rule 26(a) that is not properly disclosed.'" Hoffman v. Constr. Protective Servs., Inc., 541 F.3d 1175, 1179 (9th Cir. 2008) (quoting Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1106 (9th Cir. 2001)). According to Rule 37(c), "[i]f a party fails to provide information or identify a witness as required by Rule 26(a) ... the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial." Fed. R. Civ. P. 37(c)(1). Rule 37(c)(1) contains two exceptions: if the party's failure to make a Rule 26(a) disclosure is either "substantially justified or harmless," exclusion is not required. Id.
B. Motion for Sanctions
"Courts of justice are universally acknowledged to be vested, by their very
creation, with power to impose silence, respect, and decorum, in their presence, and submission to their lawful mandates." Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) (citation omitted). When a court imposes sanctions pursuant to its inherent power, it must find "bad faith or conduct tantamount to bad faith." Fink v. Gomez, 239 F.3d 989, 994 (9th Cir. 2001). Rule 56(h) also speaks to bad faith, permitting a court to impose sanctions if it concludes "an affidavit or declaration under this rule is submitted in bad faith or solely for delay." Fed. R. Civ. P. 56(h).
The Court is empowered under 28 U.S.C. § 1927 to sanction a person or attorney "who so multiplies the proceedings in any case unreasonably and vexatiously" through ordering the offending party to pay "excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct." 28 U.S.C. § 1927. Section 1927 sanctions require the conduct at issue must be at least reckless. See Lahiri v. Universal Music and Video Distrib. Corp., 606 F.3d 1216, 1219 (9th Cir. 2010) (citing B.K.B. v. Maui Police Dep't. 276 F.3d 1091, 1107-08 (9th Cir. 2002)). Such conduct also must cause the proceedings to be multiplied "in both an 'unreasonable and vexatious manner.'" Lozano v. Cabrera, 2023 WL 2387583, at *2 (9th Cir. Mar. 7, 2023) (quoting In re Girardi, 611 F.3d 1027, 1060-61 (9th Cir. 2010)).
C. Motion for Summary Judgment
Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The moving party must identify "each claim or defense—or the part of each claim or defense—on which summary judgment is sought." Id. And when "the court does not grant all the relief requested by the motion, it may enter an order stating any material fact—including an item of damages or other relief—that is not genuinely in dispute and treating the fact as established in the case." Fed. R. Civ. P. 56(g). "A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)); see T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). In a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party. See State Farm Fire & Cas. Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989) (per curiam).
Once the moving party has met its burden of demonstrating the absence of any genuine issue of material fact, the nonmoving party must set forth specific facts showing that there is a genuine issue for trial. See T.W. Elec., 809 F.2d at 630; Fed. R. Civ. P. 56(c). The opposing party may not defeat a motion for summary judgment in the absence of any significant probative evidence tending to support its legal theory. See Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991). The nonmoving party cannot stand on its pleadings, nor can it simply assert that it will be able to discredit the movant's evidence at trial. See T.W. Elec., 809 F.2d at 630.
If the nonmoving party fails to assert specific facts beyond the mere allegations or denials in its response, summary judgment, if appropriate, shall be entered. See Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 884, 110 S.Ct. 3177, 111 L.Ed.2d 695
(1990); Fed. R. Civ. P. 56(e). There is no genuine issue of fact if the opposing party fails to offer evidence sufficient to establish the existence of an element essential to that party's case. See Celotex, 477 U.S. at 322, 106 S.Ct. 2548; Citadel Holding Corp. v. Roven, 26 F.3d 960, 964 (9th Cir. 1994) (citing id.).
In considering a motion for summary judgment, "the court's ultimate inquiry is to determine whether the 'specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec., 809 F.2d at 631 (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)) (footnote omitted). Inferences must be drawn in favor of the nonmoving party. See id. However, when the opposing party offers no direct evidence of a material fact, inferences may be drawn only if they are reasonable in light of the other undisputed background or contextual facts and if they are permissible under the governing substantive law. See id. at 631-32. If the factual context makes the opposing party's claim implausible, that party must come forward with more persuasive evidence than otherwise necessary to show there is a genuine issue for trial. See Bator v. Hawai'i, 39 F.3d 1021, 1026 (9th Cir. 1994) (citing Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir. 1987)).
III. DISCUSSION
A. Motion to Strike and for Sanctions
1. Whether Evans Violated Rule 26
IW moves to strike two declarations Evans submitted during summary judgment briefing, contending that Evans failed to identify the former IW customers ("Declarants") who penned these declarations ("Declarations") in any initial or supplemental disclosures. ECF No. 75 at 15-27. Evans contends he was not required to supplement because the Declarants were made known to IW during the discovery process—and even if he was, his failure to do so was substantially justified or harmless. ECF No. 77 at 10-19.
The Declarants at issue are former IW customers who submitted Declarations stating in relevant part that: (1) they were "not contacted, solicited, or coerced by anyone from Smart Source ... to stop working with [IW] and begin working with Smart Source"; and (2) their "decision to stop working with [IW] was ... based on [their own] experience with [IW]." ECF Nos. 77-1, 77-2. Evans submitted these Declarations during summary judgment briefing, see ECF Nos. 63-29, 63-30, and relies on them to attack the causation element of IW's tortious interference claims, see ECF No. 62 at 28-29.
Upon review of the parties' briefing and exhibits, the Court finds that Evans was not required to supplement any disclosures with this information under the full text of Rule 26(e). Evans is correct that Rule 26(e)'s latter clause cannot be ignored—which requires supplementation "if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing." See Fed. R. Civ. P. 26(e) (emphasis added). Discovery in this matter began subsequent to the Florida litigation, and IW and Evans agree that the substantive discovery in this Court completely overlaps with that of the Florida litigation. See ECF No. 75 at 1.1; ECF No. 77 at 4 n.2. Evans claims—and IW confirmed during the hearing—that Evans made IW aware of these Declarations no later than May 25, 2023 in the Florida litigation. ECF No. 77 at 3, 5, 11. Regardless of the
propriety or timeliness of this disclosure in that case, IW was aware of the Declarations more than 12 weeks before discovery closed on August 21, 2023 in this case. See ECF No. 22 (Rule 16 scheduling order). Because IW received additional information in writing that the Florida litigation defendants sought to use these Declarations, Evans was not required to serve a supplement in this litigation, and exclusion under Rule 37(c) is therefore not warranted. See Fed. R. Civ. P. 26(e).
2. Whether the Declarations Are Perjurious
In addition to its procedural argument, IW concurrently moves for sanctions against Evans on the substantive ground that the contested Declarations are perjurious, arguing they directly contradict documentary evidence and Evans' deposition admissions. ECF No. 75 at 27-30. Evans insists the Declarations do not contain perjury and do not conflict with his testimony. ECF No. 77 at 19-23.
The Court agrees in part with IW that the Declarations contain a false assertion. The Declarations both state that their respective businesses "w[ere] not contacted, solicited or coerced by anyone from Smart Source ... to stop working with [IW] and begin working with Smart Source." See e.g., Doc. 63-30 at 3 (emphasis added). Evans leans on the latter portion of the statement, arguing that because the Declarants could stop working with IW at any time, their 2023 Declarations can be reconciled with Evans' 2020 email informing them of his new Smart Source employment and expressing his "hope" that they would continue to do business with him. ECF No. 77 at 20-21. Not so. Setting aside Evans' argument about the contours of the term "solicitation," Evans cannot ignore the documentary and deposition evidence confirming that he contacted, via a form email from a Smart Source email address, all of his then-active customers at IW. See ECF No. 28-40 at 1-2; ECF No. 28-3 at 31. In fact, one of the Declarants affirmatively replied to Evans' email. ECF No. 75-6 at 49. It further strains credulity for Evans to argue that this contact was not initiated to stop the customer from working with IW and begin working with Smart Source. ECF No. 77 at 20-21. Evans' email provides explicit steps for recipients to "delete" his IW email address, "add" his Smart Source email address, and "add" Smart Source as a new vendor. See ECF No. 28-40 at 1-2. The Court concludes the Declarations contain a false assertion of fact.
The Court declines to label either Declaration "perjurious." Perjury, subornation of perjury, and false declarations under the United States Code all require knowledge of falsity by the declarant. See 18 U.S.C. §§ 1621, 1622, 1623; see also Ninth Circuit Model Jury Instruction Nos. 24.15, 24.16, 24.17. The Court lacks any information about whether either Declarant here remembered or was shown the form email Evans sent in February 2020, and therefore the Declarations cannot be considered perjurious on the present record.
3. Appropriate Sanctions
Having found that the declarations contain a false statement, the Court turns to remedies. IW requests that Evans be sanctioned pursuant to Rule 56(h), 28 U.S.C. § 1927, and the Court's inherent authority, and seeks an order that (1) states Evans has forfeited any defenses to summary judgment, and (2) awards attorneys' fees incurred in preparing its Motion to Strike. ECF No. 75 at 27. The Court finds these proposed remedies unwarranted.
A finding of bad faith must underlie sanctions issued under the Court's inherent authority or Rule 56(h), Fink, 239 F.3d at 994, and sanctions pursuant to
Section 1927 must be supported by a finding of at least recklessness, Lahiri, 606 F.3d at 1219. IW argues that Evans submitted the Declarations in bad faith in part because this issue has already been briefed in the Florida litigation. See ECF No. 75-1 at 29 (characterizing Florida litigation briefing as Evans being "called out" for egregious behavior). But the Florida court, as of the date of this Order, has not made any findings on the merits of Plaintiff's parallel motion to strike. See generally Docket 8:21-CV-903 (M.D. Fla.) (last visited on January 10, 2024). And while the Court finds Evans' argument that the Declarations are reconcilable with documentary and deposition evidence to be unavailing, the Court does not find Evans' submission to be reckless, in bad faith, or solely for delay.
Furthermore, precluding Evans from raising any summary judgment defenses when the Declarations were only used to defend against one of six claims is both unduly harsh and illogical, and would amount to an inverse "dismissal sanction"—a "harsh penalty" that the Ninth Circuit insists may be "imposed only in extreme circumstances." In re Phenylpropanolamine (PPA) Prod. Liab. Litig., 460 F.3d 1217, 1226 (9th Cir. 2006) (quoting Malone v. U.S. Postal Serv., 833 F.2d 128, 130 (9th Cir. 1987)). Moreover, the Declarations do not necessarily relate to other claims; and they have no bearing on Evans' purported breach of contract with IW. Thus, stripping Evans of his defenses on all claims is not commensurate with any damage wrought by the Declarations' submission.
The Court will not, however, permit the false statements to be used in this litigation. In light of the above findings, the Court STRIKES the following sentences of each of the Declarations to the extent Evans seeks to use them here:
(1) FHB was not contacted, solicited or coerced by anyone from Smart Source, LLC ("Smart Source") to stop working with InnerWorkings and begin working with Smart Source. See ECF 63-29 at 3.
(2) Eggs 'N Things was not contacted, solicited or coerced by anyone from Smart Source, LLC ("Smart Source") to stop working with InnerWorkings and begin working with Smart Source. See ECF No. 63-30 at 3.
The Court elects to strike these sentences in their entirety, rather than only the "contacted" portion. Evans did not cite to or mention these declarations in opposing summary judgment on the breach of fiduciary claim for soliciting customers, see ECF No. 63 ¶ 25; ECF No. 62 at 14-15, and coercion is not applicable to the facts of this case. Furthermore, as more fully explained in Section III.B., the Court finds as a matter of law that Evans' mass email to his customers constituted solicitation. Having resolved the Motion to Strike and For Sanctions, the Court turns to IW's Motion for Summary Judgment.
B. Breach of Fiduciary Duty of Loyalty (Count I)
IW contends that it is entitled to summary judgment on Count I against Evans for breach of fiduciary duty. Neither party provides the elements by which a plaintiff may prevail on a breach of fiduciary claim, and the Hawai'i Supreme Court does not appear to have expounded on the elements necessary for such a claim to succeed. However, the Intermediate Court of Appeals and federal district courts in Hawai'i agree that a claim for breach of fiduciary duty requires (1) the existence of a fiduciary duty, (2) defendant's breach of that duty, and (3) resulting damages. See, e.g. Aquilina v. Certain
Underwriters at Lloyd's Syndicate #2003, 407 F. Supp. 3d 1016, 1048 (D. Haw. 2019) (citations omitted); Molokai Servs. Inc. v. Hodgins, 142 Hawai'i 150, 414 P.3d 202 (Ct. App. 2018) (table). And in reviewing the cases of other states that have adopted or looked to the Restatement (Second) of Agency, the elements are identical. See, e.g., Albert's Organics, Inc. v. Holzman, 445 F. Supp. 3d 463, 479 (N.D. Cal. 2020); Hedgeye Risk Mgmt., LLC v. Heldman, 412 F. Supp. 3d 15, 23 (D.D.C. 2019); FLS Transportation Servs. (USA) Inc. v. Casillas, 2017 WL 4127980, at *4 (D. Nev. Sept. 18, 2017); Agilysys, Inc. v. Vipond, 2006 WL 2620103, at *2 (D. Ariz. Sept. 13, 2006); see also Exotics Hawaii-Kona, Inc. v. E.I. Du Pont De Nemours & Co., 116 Hawai'i 277, 298, 172 P.3d 1021, 1042 (2007) (noting that "fraud, as for other torts, requires proof of duty, breach of duty, causation, and damages") (emphasis added); cf. Beard Rsch., Inc. v. Kates, 8 A.3d 573, 601 (Del. Ch.), aff'd sub nom. ASDI, Inc. v. Beard Rsch., Inc., 11 A.3d 749 (Del. 2010) (requiring only duty and breach).
In Hawai'i, "employees owe their employer a duty of loyalty." Eckard Brandes, Inc. v. Riley, 338 F.3d 1082, 1085 (9th Cir. 2003) (citing Stout v. Laws, 37 Haw. 382, 392 (Haw. Terr. 1946)). And, during his employment, an employee owes a duty "not to compete with the principal concerning the subject matter of his agency." Id. (quoting Restatement (Second) of Agency § 393). "Although an employee 'is entitled to make arrangements to compete' with his employer prior to terminating the employment relationship, the employee is not 'entitled to solicit customers for such rival business before the end of his employment.'" Id. (quoting Restatement (Second) of Agency § 393 cmt. e).
In the context of employee non-solicitation agreements, the Supreme Court of Hawai'i recently held that "'solicitation' requires an active initiation of contact." Prudential Locations, LLC v. Gagnon, 151 Hawai'i 136, 147, 509 P.3d 1099, 1110 (2022), as amended (Apr. 1, 2022). "'Solicit' means to approach with a request or plea." Id. (quoting Atmel Corp. v. Vitesse Semiconductor Corp., 30 P.3d 789, 793 (Colo. App. 2001), abrogated on other grounds by Ingold v. AIMCO/Bluffs, L.L.C. Apartments, 159 P.3d 116 (Colo. 2007)). But mere contact "to inform [a party] that [the employee] was leaving," standing alone, does not constitute solicitation. See id.; see also MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 521 (9th Cir. 1993) (discussing California law) ("Merely informing a former employer's customers of a change of employment, without more, is not solicitation.").
IW argues Evans breached his duty of loyalty because, prior to his resignation, he solicited both customers and coworkers to join Smart Source. See ECF No. 27-1 at 20-22. Evans does not dispute that he owed a duty of loyalty to IW during his time of employment; instead, he counters that his actions regarding IW customers constituted mere preparation to compete, that he simply notified colleagues regarding the potential for employment at Smart Source, and that IW has not adduced any evidence regarding damages. ECF No. 62 at 14-16.
The Court finds there is no genuine dispute of material fact that Evans solicited customers of IW prior to his resignation. During his final week of employment, Evans does not dispute that he contacted all of his customers with a form email from a Smart Source email address that stated in part he was "hoping [customers] will continue to allow [Evans] to service and take care of [them]," to "please delete" his IW email address, to "please add" his Smart Source email address, to
"please add" Smart Source as a new vendor, and to repeat his hope that the customer would continue to work with him. See, e.g., ECF No. 28-40 at 1-2. Evans conceded in deposition that he intended through this email to move the customer's business to Smart Source. See ECF No. 28-3 at 31. Evans' email easily meets the Hawai'i Supreme Court's requirement of "active initiation of contact" needed for solicitation. See Prudential Locations, 151 Hawai'i at 147, 509 P.3d 1099. Furthermore, this email went beyond mere "notification" to a customer of his departure. See id.; MAI Sys. Corp., 991 F.2d at 521. Indeed, Evans' form email constituted an "approach with a request or plea"—the very definition of solicitation. Atmel Corp., 30 P.3d at 793.
But such evidence is in dispute regarding Evans' alleged solicitation of his colleagues. The parties dispute, for example, the content of Evans' communication to IW colleagues when they met at his home in December 2020, and Evans denies he conveyed any offer of employment from Smart Source. See ECF No. 63 ¶ 16. Furthermore, while Evans undisputedly sent Horn the personal contact information for IW's Hawai'i-based sales representatives, this fact does not establish that Evans approached any coworker with a "request or plea" to leave IW. See Atmel Corp., 30 P.3d at 793. Finally, at least one coworker who resigned with Evans on February 14, 2020 testified that Evans did not encourage her to join Smart Source. See ECF No. 63-9 at 4. Finally, drawing all inferences in favor of Evans as the non-movant, the issue of whether to believe Evans' March 2020 tongue-in-cheek email proclaiming to be a mere "messenger" to his IW coworkers is an issue for a jury to decide. See T.W. Elec., 809 F.2d at 631. IW has not established for summary judgment purposes that Evans solicited his colleagues.
Turning to "resulting damages," the Court notes that IW does not address this element, see ECF No 27 at 20-22, or respond to Evans' insistence that IW cannot prove that his breach caused any damage, see ECF No. 62 at 16, ECF No. 71 at 10-11. Whether damages resulted from Evans' solicitation of customers, and the precise amount of those damages, will be for a jury to decide.
IW's motion as to summary judgment on Count I is therefore GRANTED IN PART, as the Court finds there is no genuine dispute of material fact on the issue of whether Evans breached his fiduciary duty by soliciting IW customers. Fed R. Civ. P. 56(a). IW's motion on this claim is DENIED in all other respects.
C. Breach of Contract (Count II)
IW next seeks summary judgment on its claim for breach of contract based on a confidentiality agreement it alleges Evans entered during his tenure with IW. Under Illinois law, "[t]he elements of a claim for breach of contract are (1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) breach of contract by the defendant; and (4) resultant injury to the plaintiff." Neft v. United Cont'l Holdings, Inc., 299 F. Supp. 3d 965, 973 (N.D. Ill.
Plaintiff does not mention, in its opening brief or reply, the controlling law for purposes of the breach of contract claim. See ECF Nos. 27-1 at 18-19; 71 at 15-16. The Court discerns from the exhibits and Defendant's briefing, however, that Illinois substantive law would apply to the breach of contract claim asserted, see ECF Nos. 28-4 at 3 (stating confidentiality agreement would be governed by laws of the United States and Illinois); ECF No. 62 at 10-16 (applying Illinois contract law), and the parties agreed at the hearing.
2018) (quoting Avila v. CitiMortgage, Inc., 801 F.3d 777, 786 (7th Cir. 2015)).
"Whether a contract exists, its terms and the intent of the parties are questions of fact to be determined by the trier of fact." Pepper Const. Co. v. Palmolive Tower Condominiums, LLC, 405 Ill. Dec. 748, 59 N.E.3d 41, 65 (Ill. App. Ct. 2016) (citing Hedlund & Hanley, LLC v. Bd. of Trustees of Cmty. Coll. Dist. No. 508, 376 Ill.App.3d 200, 315 Ill.Dec. 1, 876 N.E.2d 1, 6 (2007)). On the other hand, a contract's validity, interpretation, and enforceability are questions of law. See N. Ill. Const. Co. v. Zale, 136 Ill.App.3d 822, 91 Ill.Dec. 527, 483 N.E.2d 1013, 1015 (1985) (citation omitted); see also 1550 MP Rd. LLC v. Teamsters Loc. Union No. 700, 433 Ill.Dec. 60, 131 N.E.3d 99, 110 (Ill. 2019).
IW moves for summary judgment, claiming Evans admitted that he signed a confidentiality agreement during his deposition, and further that he breached this confidentiality agreement when he provided Horn and Smart Source with IW inventory, transactional projections, IW customer information, and information related to IW's compensation structure. ECF No. 27 at 22-23. Evans counters by pointing to the following: (1) IW's proffered confidentiality agreement is unsigned and unexecuted; (2) IW has not put forth sufficient evidence to establish that the proffered agreement is the one Evans signed or acknowledged while employed at IW; and (3) Evans has submitted a declaration clarifying that he does not know whether the document shown to him in deposition is the same document he would have been required to sign or acknowledge. ECF No. 62 at 16-19.
IW responds that Evans' declaration should be stricken as a sham affidavit because it contradicts his testimony. See ECF No. 71 at 15. Under the sham affidavit rule, "a party cannot create an issue of fact by an affidavit contradicting his prior deposition testimony." Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir. 2012) (citations and quotation marks omitted). To trigger this rule, "the district court must make a factual determination that the contradiction is a sham, and the 'inconsistency between a party's deposition testimony and subsequent affidavit must be clear and unambiguous to justify striking the affidavit.'" Id. (quoting Van Asdale v. Int'l Game Tech., 577 F.3d 989, 998-99 (9th Cir. 2009)). But "the non-moving party is not precluded from elaborating upon, explaining or clarifying prior testimony elicited by opposing counsel on deposition [and] minor inconsistencies that result from an honest discrepancy, a mistake, or newly discovered evidence afford no basis for excluding an opposition affidavit." Van Asdale, 577 F.3d at 999 (quoting Messick v. Horizon Indus., 62 F.3d 1227, 1231 (9th Cir. 1995)).
Having reviewed Evans' deposition testimony against the declaration, the Court concludes it does not constitute a sham declaration. When shown an unsigned IW confidentiality agreement, Evans' testimony was equivocal: he stated he "believed" it was one of many agreements he was required to sign or acknowledge during his employment, and that it "must have" been one that he acknowledged. ECF No. 28-3 at 7. Evans' declaration clarifies that he simply does not know whether the unsigned IW confidentiality agreement shown to him in deposition is the same document he would have been required to acknowledge or sign during his employment. ECF No. 63-1 at 3. In light of the above, Evans has set forth specific facts showing that there is a genuine issue for trial. See T.W. Elec., 809 F.2d at 630. The parties dispute the existence of a contract—a dispute to be resolved by the factfinder. See Pepper Const. Co., 405 Ill.Dec. 748, 59 N.E.3d at 65. Mindful of the inferences to be drawn at the summary judgment stage, and because IW has not established the existence of a contract between itself and Evans, the Court DENIES summary judgment Count II.
The Court further notes that the parties have submitted separate exhibits of reports that display Evans' "completed courses" or various policy acknowledgments during his IW employment. These document purport to show Evans signed or acknowledged some iteration of a Confidentiality Agreement on two separate dates: January 28, 2011, see ECF No. 63-28, and May 14, 2015, see ECF No. 28-5 at 2. It is therefore not clear to the Court that the unsigned Confidentiality Agreement submitted by IW, see ECF No. 28-4, is the 2011 version or the 2015 version (or possibly neither) of what Evans was required to sign.
D. Trade Secrets Claims (Counts III, IV)
IW seeks summary judgment on its claims for trade secret misappropriation against Evans arising under federal and state law.
The Defend Trade Secrets Act ("DTSA") (relevant to Count III) permits the owner of a trade secret to bring a civil action for misappropriation in federal court. 18 U.S.C. § 1836. Similarly, the Hawai'i Uniform Trade Secrets Act ("HUTSA") (relevant to Count IV) allows a plaintiff to recover damages for such misappropriation. Haw. Rev. Stat. § 482B-1 et seq. Courts in this district have analyzed DTSA and HUTSA claims under the same rubric. See, e.g., S&G Labs Hawaii, LLC v. Graves, 2021 WL 621429, at *9 (D. Haw. Feb. 17, 2021) (citing WHIC LLC v. NextGen Lab'ys, Inc., 341 F. Supp. 3d 1147, 1161 (D. Haw. 2018)).
A plaintiff seeking to recover for trade secret misappropriation must ultimately prove "(1) that the plaintiff possessed a trade secret, (2) that the defendant misappropriated the trade secret; and (3) that the misappropriation caused or threatened damage to the plaintiff." InteliClear, LLC v. ETC Glob. Holdings, Inc., 978 F.3d 653, 657-58 (9th Cir. 2020) (citing 18 U.S.C. § 1839(5) (DTSA elements)); see also NextGen Lab'ys, 341 F. Supp. 3d at 1162 (citing BlueEarth Biofuels, LLC v. Hawaiian Elec. Co., 780 F.Supp.2d 1061, 1078 (D. Haw. 2011) (HUTSA plaintiff must prove existence and misappropriation of trade secret)). Trade secrets include:
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
18 U.S.C. § 1839(3); see also Haw. Rev. Stat. § 482B-2 (providing similar definition). To establish a trade secret, then, plaintiffs musts specifically identify the information or item claimed as a trade secret, InteliClear, 978 F.3d at 658, and further demonstrate the measures used to maintain secrecy, and establish its the independent economic value derived from
being unknown, see 18 U.S.C. § 1839(3)(AB). The Ninth Circuit instructs that "a trade secret may consist of a compilation of data, public sources or a combination of proprietary and public sources." United States v. Nosal, 844 F.3d 1024, 1042 (9th Cir. 2016). A plaintiff may demonstrate it has taken reasonable measures to maintain secrecy by, for example "advising employees of the existence of a trade secret, limiting access to a trade secret on [a] 'need to know basis,' and controlling plant access." United States v. Chung, 659 F.3d 815, 825 (9th Cir. 2011). A plaintiff may also employ "document destruction methods" and "confidentiality agreements." Id. at 825 (citing MAI Sys. Corp., 991 F.2d at 521). Independent economic value means that the information must be "valuable because it is unknown to others." Direct Techs., LLC v. Elec. Arts, Inc., 836 F.3d 1059, 1071 (9th Cir. 2016) (citation omitted) (discussing California law).
IW claims that Evans misappropriated its "transactional projections, inventory report, and confidential information about forthcoming changes to IW's compensation plan and compensation information about the Hawaii sales reps," all of which IW claims are trade secrets. ECF No. 27 at 23-27. Evans does not dispute that he sent this information to Horn in December 2019 and January 2020. ECF No. 28 ¶¶ 14, 18, 21; ECF No. 63 ¶¶ 14, 18, 21. Rather, Evans contends IW has not put forth sufficient evidence to show the information he sent constitutes trade secrets. See ECF No. 62 at 22-25.
The Court finds that factual disputes abound on whether the information at issue constitutes trade secrets on grounds of independent economic value. For example, IW contends that its transactional projections, warehouse inventory, and compensation structure are not public information and derive independent economic value. ECF No. 27-1 at 24. Evans responds by proffering the deposition testimony of Smart Source employee Scott Rich, who testified that (1) margin information was not difficult to discern, particularly because "suppliers tend to share that information from time to time"; (2) IW's commission structure was "common knowledge" in the industry; and (3) suppliers could easily provide warehouse inventory information. ECF No. 63-6 at 6, 7-8, 11. Evans also points to the declaration of Bill Thomas, former IW employee, stating it was "common for customers to reveal competitor pricing information" unprompted, ECF No. 63-8 at 3, and deposition testimony from Smart Source representative Scott Huber who stated that Smart Source and IW operate in "a pretty small industry. If there are changes in compensation, trust me, everyone knows." ECF No. 63-7 at 6.
In light of the genuine factual disputes regarding whether IW's proffered trade secrets are protected under state or federal law, the Court DENIES IW's Motion on Counts III and IV.
E. Tortious Interference Claims (Count V)
IW also moves for summary judgment on its claim against Evans for tortious interference with existing and prospective business relationships. In Hawai'i, the elements of this claim are:
(1) the existence of a valid business relationship or a prospective advantage or expectancy sufficiently definite, specific, and capable of acceptance in the sense that there is a reasonable probability of it maturing into a future economic benefit to the plaintiff; (2) knowledge of the relationship, advantage, or expectancy by the defendant; (3) a purposeful intent to interfere with the relationship, advantage, or expectancy; (4) legal causation between the act of interference and the impairment of the relationship, advantage, or expectancy; and (5) actual damages.
Buscher v. Boning, 114 Hawai'i 202, 216 n.7, 159 P.3d 814, 828 n.7 (2007) (quoting Kahala Royal Corp. v. Goodsill Anderson Quinn & Stifel, 113 Hawai'i 251, 267 n.18, 151 P.3d 732, 748 n.18 (2007)).
To establish the first element of this tort, the Hawai'i Supreme Court differentiates between the pleading and the summary judgment procedural postures: although plaintiffs "are not required to specifically identify (i.e., name) the third party with whom they have a business expectancy" at the pleading stage, such plaintiffs "will eventually be required to present more specific details in order to support their claims." Hawaii Med. Ass'n v. Hawaii Med. Serv. Ass'n, Inc., 113 Hawai'i 77, 118, 148 P.3d 1179, 1220 & n.35 (2006). The specific-party identification requirement at the summary judgment stage is sensible because without it, "'liability under a theory of tortious interference with prospective business expectancies would be virtually without limit and impossible to calculate.'" Id. at 1220 n.35 (quoting Celex Grp., Inc. v. Exec. Gallery, Inc., 877 F. Supp. 1114, 1125 n.19 (N.D. Ill. 1995)); see also Eng. v. City & Cnty. of Honolulu, 2006 WL 8436473, at *6 (D. Haw. July 6, 2006) (granting summary judgment for defendant "based on [p]laintiff's failure to identify a third party or specific facts proving the possibility of future association with a third party").
At this posture, IW's proffered evidence fails to specifically identify the third parties with whom it purportedly had existing or prospective business relationships for purposes of summary judgment. See Hawaii Med. Ass'n, 113 Hawai'i at 118 n.35, 148 P.3d at 1220 n.35. In support of its claim, IW cites to Evans' deposition testimony, which indicates that (1) Evan brought his clients from Applied Graphics (a previous position) to IW; (2) "most" of Evans' clients were "repeat customers"; and (3) Kobayashi Travel was a 20-year customer of Evans. See ECF No. 27-1 at 28. Although this testimony identifies a single customer in Kobayashi Travel, IW's claim appears to subsume dozens of IW's Hawai'i customers, without identifying by name who any of those customers were. See ECF No. 1 ¶ 133. Nor is it even clear, at this stage, whether IW seeks to prove that Evans tortiously interfered with all of IW's Hawai'i-based customers, or only those Evans serviced during his tenure. See ECF No. 27-1 at 28 ("IW's Hawaii customers"); ECF No. 71 at 17-18 ("virtually all of IW's Hawaii customers"); but see id. at 17 ("virtually all of his [Evans'] IW customers").
The Hawai'i Supreme Court has cautioned that plaintiffs bringing intentional interference with existing and prospective business relationships are eventually "required to present more specific details in order to support their claims," lest the tort grow limitless and incalculable. See Hawaii Med. Ass'n, 113 Hawai'i at 118 n.35, 148 P.3d at 1220 n.35. IW has failed to do so, and summary judgment is not warranted. The Court therefore DENIES IW's Motion on Count V based on IW's failure to establish the first element and does not reach the subsequent elements of the claim.
F. Civil Conspiracy (Count VI)
Finally, IW moves for summary judgment on its claim for civil conspiracy against Evans. "In Hawai'i, civil conspiracy is the combination of two or more persons or entities by concerted action to accomplish a criminal or unlawful purpose, or to accomplish some purpose not in itself criminal or unlawful by criminal or unlawful means." Jass v. Cherry-Road
Techs. Inc., 572 F. Supp. 3d 906, 937 (D. Haw. 2021) (internal quotation marks and citation omitted). Civil conspiracy is not an independent cause of action, but a "theor[y] of potential liability ... derivative of other wrongs." Molina v. OneWest Bank, FSH, 903 F. Supp. 2d 1008, 1020 (D. Haw. 2012) (citation omitted); see also W. Sunview Properties, LLC v. Federman, 338 F. Supp. 2d 1106, 1123 (D. Haw. 2004) ("gravamen of a claim of civil conspiracy involves the underlying tort").
Federal district courts in Hawai'i require three elements to establish civil conspiracy: "(1) the formation of a conspiracy; (2) wrongful conduct in furtherance of the conspiracy, i.e., an actionable claim based upon deceit; and (3) damage." Pro Flexx LLC v. Yoshida, 2021 WL 297126, at *9 (D. Haw. Jan. 28, 2021). "The existence of the joint assent of the parties need not be proved directly." Kazuo Hashimoto v. Halm, 40 Haw. 354, 362 (Haw. Terr. 1953). But "mere acquiescence or knowledge is insufficient to constitute a conspiracy." Robert's Hawaii Sch. Bus, Inc. v. Laupahoehoe Transp. Co., 91 Hawai'i 224, 260 n.44, 982 P.2d 853, 889 n.44 (1999). In other words, for a defendant to be liable for civil conspiracy, "[t]here must be intentional participation in the transaction with a view to the furtherance of the common design and purpose." Zimmerman v. Grolle, 38 Haw. 217, 226 (Haw. Terr. 1948) (footnote and citation omitted).
Finally, the existence of a civil conspiracy "is generally a factual issue and should be resolved by the jury." Valvanis v. Milgroom, 529 F. Supp. 2d 1190, 1203 (D. Haw. 2007) (quoting Radcliffe v. Rainbow Const. Co., 254 F.3d 772, 790 (9th Cir. 2001)). When analyzing a claim for civil conspiracy, if different inferences might reasonably be drawn from the same evidence, "judicial intrusion into the jury's role in determining whether a civil conspiracy existed" is not justified. Mendocino Env't Ctr. v. Mendocino Cnty., 192 F.3d 1283, 1303 (9th Cir. 1999) (citation omitted).
IW alleges that Evans conspired with Horn and Smart Source to "unlawfully and unfairly solicit [IW] clients and employees." ECF No. 1 ¶ 138. IW argues in the instant Motion that Evans "entered into and agreed to assist" Smart Source in its plan to "take IW's business and thereby immediately acquire a substantial business in Hawai'i without paying for it," and accomplished the conspiracy's objective by soliciting IW employees and customers as well as assisting Smart Source's "efforts to tortiously interfere with IW's customer relationships." ECF No. 27-1 at 29. The problem for IW is that its briefing cites to a single disputed fact—the extent of the loss of its business in Hawai'i—to establish its claim. See id. And none of IW's undisputed facts show the formation of a civil conspiracy. See generally ECF No. 28. IW's counsel posited at the hearing that Horn's February 11, 2020 email to a Smart Source colleague provides such evidence, as it notes "When I spoke to Ray, the plan was for him to ONLY enter accounts that he has active orders for ..." ECF No. 28-43.
In the Court's own independent review of the summary judgment record, it has not located any evidence establishing Evans formed an agreement to loot IW's customer base or roster of sales representatives, or any admission by Evans of his participation in such a plan. See Zimmerman, 38 Haw. at 226. In fact, Evans testified to the opposite, stating that when Horn approached him about moving to Smart Source: "We [(Evans and other IW sales representatives)] didn't know what was going on at that time. We didn't know what Smart Source's plan was with us. We didn't know whether it was going to buy
out the division or what ..." ECF No. 28-3 at 20. As different inferences might reasonably be drawn from the evidence of record, the court will not intrude on "the jury's role in determining whether a civil conspiracy existed" at this juncture. See Mendocino Env't Ctr., 192 F.3d at 1303.
Even if IW could conclusively establish the formation of a conspiracy and wrongful conduct in furtherance thereof, IW has not established resulting damages. See Pro Flexx LLC, 2021 WL 297126, at *9 (reciting elements). The fact that IW lost 80% of its customer base following the departure of Evans and other sales representatives speaks to correlation, but correlation does not necessarily imply causation. See ECF No. 28 ¶ 36. Finally, the Court emphasizes that civil conspiracy is not its own cause of action, but "derivative of other wrongs." Molina, 903 F. Supp. 2d at 1020. Because the Court has found factual disputes regarding IW's breach of fiduciary duty and tortious interference claims, summary judgment on the derivative theory of civil conspiracy is also unwarranted. See W. Sunview Properties, 338 F. Supp. 2d at 1123 (denying summary judgment on civil conspiracy where issues of fact remained on underlying tort of fraud).
When asked about causation during the motions hearing, IW also pointed to Evans' March 2020 email to a former customer that stated "out of the 10 people that worked for [IW] in Hawaii everyone has left and now there is only 1 support staff left ... [IW] basically does not exist anymore in Hawaii..." ECF No. 28-54 at 1. Drawing all inferences in favor of Evans as the non-movant, the Court finds it does not establish causation for purposes of summary judgment. T.W. Elec., 809 F.2d at 631.
For all of the above reasons, IW has not established the formation of a conspiracy for purposes of summary judgment. The Court therefore DENIES IW's Motion on Count VI.
IV. CONCLUSION
For the reasons stated, the Court GRANTS in part and DENIES in part IW's Motion for Summary Judgment, ECF No. 27, and GRANTS in part and DENIES in part IW's Motion to Strike and For Sanctions as follows:
1. The Court GRANTS IW's Motion for Summary Judgment on Count I with respect to the issue of whether Evans breached his fiduciary duty by soliciting IW customers.
2. The Court otherwise DENIES IW's Motion for Summary Judgment on the remainder of Count I and on Counts II through VI.
3. The Court GRANTS IW's Motion to Strike and For Sanctions to the extent IW seeks to preclude Evans from using the sentences at issue in the Declarations, see supra pp. 1207-10.
4. The Court otherwise DENIES IW's Motion to Strike and For Sanctions.
IT IS SO ORDERED.