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West Plains, L.L.C. v. Retzlaff Grain Co. Inc.

United States Court of Appeals, Eighth Circuit

August 30, 2017

West Plains, L.L.C., doing business as CT Freight Company Plaintiff-Appellee
v.
Retzlaff Grain Company Incorporated, doing business as RFG Logistics; Bryce Wells; Jeffrey Bradley; Thomas Danner; Rebecca Danner; Jody May; Chad Needham; Todd Payzant; Samantha Rhone; Crystal Konecky; Cindy Scholting; Drew Waggoner Defendants-Appellants

          Submitted: May 10, 2017

         Appeal from United States District Court for the District of Nebraska - Omaha

          Before RILEY, BEAM, and SHEPHERD, Circuit Judges.

          RILEY, CIRCUIT JUDGE.

         On February 5, 2013, ten individuals resigned from CT Freight Services, a division of West Plains, L.L.C. (West Plains), to join a start-up freight brokerage operation founded by Bryce Wells, the former owner of West Plains. West Plains sued. The district court[1] granted a temporary restraining order followed by a preliminary injunction against Retzlaff Grain Company (RFG Logistics), prohibiting RFG Logistics from soliciting CT Freight's customers until April 5, 2013. The case proceeded to trial, and a jury found the defendants liable for tortious interference with business relationships and breach of the duty of loyalty. The jury awarded West Plains $1, 513, 000 and required nine of the ten employees to forfeit portions of compensation received from West Plains. The defendants renewed their motion for judgment as a matter of law and moved for a new trial or amended judgment. The district court denied the motions, and the defendants seek reversal. We affirm. See 28 U.S.C. § 1291 (appellate jurisdiction).

         I. BACKGROUND

         A. Factual Background[2]

         Bryce Wells was president and shareholder of West Plains Company, an agricultural commodity trading business. In February 2012, Wells sold West Plains Company to West Plains, L.L.C. (West Plains), but declined an offer to stay with West Plains as chief financial officer. West Plains continued to operate the same business units as West Plains Company. One of those business units was a small freight brokerage operation called CT Freight. CT Freight's primary source of revenue was shipping dry commodities, referred to by the parties as the "bulk hopper" industry. The bulk hopper business comprised about 90 percent of CT Freight's annual revenue, and CT Freight's top 20 customers generated roughly 70-75 percent of CT Freight's overall revenue.

         At the time of the sale, Thomas Danner and Rebecca Danner (Danners), Jeff Bradley, Chad Needham, Todd Payzant, Samantha Rhone, Crystal Konecky, Cindy Scholting, Drew Waggoner, (the employee defendants) and Jody May[3] were employees of West Plains Company. Needham supervised CT Freight's Omaha office, and Thomas Danner (Danner) supervised another office in Manning, Iowa. The employee defendants all accepted employment with West Plains, and they continued to work in the same positions they held at CT Freight before the sale, with the exception of May. The employee defendants each signed the West Plains Employee Handbook, which prohibited employees from engaging in conflicts of interest and disclosing confidential information to a competitor.

         About eight months later, in October 2012, Wells began forming a competing freight brokerage operation, Retzlaff Grain Company, which did business as RFG Logistics. Wells first recruited Scholting, CT Freight's administrative supervisor, Danner and his wife Rebecca, and Needham. Those four individuals signed confidentiality and consulting agreements with Wells in October or November 2012. In exchange for providing Wells information about CT Freight's operations, Wells paid them each a $5, 000 consulting fee.

         From the time they signed their agreements with Wells to their eventual resignations, Scholting, Needham, and Danner extensively communicated with Wells, closely working with him to organize the details of RFG Logistics. Scholting provided Wells with insight on the dynamics of the CT Freight team and advised him on the best method to recruit the team. Eventually, the supervisors began to recruit the employees. In December, Danner recruited Bradley, a freight broker in the Manning office. In early January 2013, Needham and Wells recruited freight brokers Waggoner and Payzant and brokerage assistant Rhone. Bradley, Waggoner, and Payzant signed confidentiality and consulting agreements with Wells. By the end of January, the employee defendants had all committed to leaving CT Freight for RFG Logistics. Wells secured an office location in Omaha, and the Danners secured a location in Carroll, Iowa. The plan was in place.

         On February 5, 2013, the employee defendants submitted resignations from CT Freight via email. The Danners, Needham, and Payzant announced their resignations were effective immediately. Waggoner, Scholting, and Konecky offered to remain working for CT Freight for approximately one week. Bradley offered to stay until February 8, 2013, and May offered to stay for two weeks. Upon receiving notices of the resignations, West Plains' regional manager summoned Waggoner, May, Rhone, and Konecky to a meeting and directed them to hand over their work cell phones and keys and told them they were free to leave. Scholting was not told to leave. Later that afternoon, Konecky and Waggoner were asked to return to assist customers while West Plains scrambled to find replacements. Scholting, Konecky, and Waggoner remained at CT Freight until February 8, when they declined to sign a two-year non-compete agreement and were told to leave.

         B. Procedural History

         On February 8, 2013, West Plains brought this suit alleging claims of (1) misappropriation of trade secrets against all defendants; (2) tortious interference with business relationships against all defendants; (3) tortious interference with employment relationships against Wells and RFG Logistics; (4) breach of the duty of loyalty against the employee defendants; (5) civil conspiracy against all defendants; and (6) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, against Needham. See 28 U.S.C. § 1332(a) (diversity jurisdiction). Four days later, the district court granted a temporary restraining order against the defendants prohibiting them from contacting and providing freight brokerage services for the customers and carriers of CT Freight until further order and ordering the defendants to return any original documents and records taken from West Plains. On February 26, the district court entered a preliminary injunction extending the terms of the restraining order until April 5, 2013.

         In June 2015, the defendants moved for partial summary judgment. The district court concluded Wells (and RFG Logistics) lawfully solicited the employee defendants to join RFG Logistics and granted summary judgment on the claim for tortious interference with employment relationships. The district court also granted summary judgment on the claim against Needham under the Computer Fraud and Abuse Act, but denied summary judgment on the claims for misappropriation of trade secrets and tortious interference with business relationships. In anticipation of trial, the defendants filed a motion in limine to exclude evidence relating to CT Freight's "'total loss of value'" and lost profits after the injunction expired. The district court denied the motion, reasoning claim-specific issues would have to be resolved at trial.

         Trial took place before a jury over seven days in January 2016. West Plains called Wells and each of the employee defendants. The district court received into evidence several hundred pages of exhibits, including instant messages and emails exchanged among the defendants and photocopies of the employee defendants' contact lists taken from West Plains. To prove its damages, West Plains called an expert witness who, over the defendants' objection, testified as to the value of the CT Freight division before resignations in February 2013. From reviewing financial statements and customer reports, the expert concluded RFG Logistics was a profitable business in its first month and executed "significant sales that were previously CT Freight's." At the close of the plaintiff's case, the defendants moved for judgment as a matter of law, which the district court denied.

         The jury returned a verdict in favor of West Plains on the tortious interference with business relationships claims against all defendants except May, Rhone, and Konecky. The jury also found all employee defendants breached their duty of loyalty and all defendants except May entered into a civil conspiracy. The jury awarded $1, 513, 000 in compensatory damages and required forfeiture of compensation against the employee defendants in varying amounts, totaling $51, 787.50.[4] The defendants renewed their motion for judgment as a matter of law, or alternatively, to amend the judgment, or for a new trial. The district court denied the motions, and the defendants appeal.

         II. DISCUSSION

         A. Judgment as a Matter of Law

         Judgment as a matter of law should be granted where "the court finds that a reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue." Fed.R.Civ.P. 50(a). We review de novo the denial of the defendants' renewed motion for judgment as a matter of law, "viewing the evidence 'in the light most favorable to the party who prevailed before the jury.'" Wilson v. Brinker Int'l, Inc., 382 F.3d 765, 769 (8th Cir. 2004) (quoting City of Omaha Emps. Betterment Ass'n v. City of Omaha, 883 F.2d 650, 651 (8th Cir. 1989)).

         1. Tortious Interference with Business Relationships

         To prove tortious interference with a business relationship under Nebraska law, West Plains must demonstrate:

"(1) the existence of a valid business relationship or expectancy, (2) knowledge by the interferer of the relationship or expectancy, (3) an unjustified intentional act of interference on the part of the interferer, (4) proof that the interference caused the harm sustained, and (5) damage to the party whose relationship or expectancy was disrupted."

Huff v. Swartz, 606 N.W.2d 461, 466 (Neb. 2000) (quoting Koster v. P & P Enters., 539 N.W.2d 274, 278-79 (Neb. 1995)). "In order to be actionable, interference with a business relationship must be both intentional and unjustified." Aon Consulting, Inc. v. Midlands Fin. Benefits, Inc., 748 N.W.2d 626, 645 (Neb. 2008); see also Lamar Co. v. City of Fremont, 771 N.W.2d 894, 906 (Neb. 2009) ("An intentional, but justified, act of interference will not subject the interferer to liability.").

         Nebraska has adopted the factors of § 767 of the Restatement (Second) of Torts to determine whether such interference was proper. See Huff, 606 N.W.2d at 468. In this case, the jury was ...


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