Ellerton et al v. Sefton Resources Inc., et al

Filing 109

RECOMMENDATION AND ORDER OF UNITED STATES MAGISTRATE JUDGE by Magistrate Judge Nina Y. Wang on 12/29/16. The Court recommends that 84 MOTION to Dismiss filed by John J. Ellerton be DENIED; that 93 MOTION for Summary Judgment filed by S efton Resources Inc. be GRANTED; 75 MOTION for Sanctions filed by Sefton Resources Inc. be DENIED AS MOOT, and that the court DISMISS Mr. Ellerton's three remaining claims WITH PREJUDICE. Additionally, the Court ORDERS that 89 MOTION for Sanctions Under FRCP 37(d) filed by Sefton Resources Inc. is GRANTED IN PART AND DENIED IN PART. The Clerk of the Court is directed to mail Mr. Ellerton a copy of this Recommendation and Order at his address of record: John J. Ellerton, 2724 Puuhoolai Street, Kihei Maui, Hawaii 96753. (Attachments: # 1 Attachment 1, # 2 Attachment 2, # 3 Attachment 3, # 4 Attachment 4, # 5 Attachment 5) (nmarb, )

Webco Industries, Inc. v. Diamond, Not Reported in F.Supp.2d (2012)
2012 WL 5995740

2012 WL 5995740
Only the Westlaw citation is currently available.
United States District Court,
N.D. Oklahoma.
WEBCO INDUSTRIES, INC., Plaintiff,
v.
Richards Kelly DIAMOND, and Accurate
NDT Services, Inc., Defendants.
No. 11–CV–774–JHP–FHM.
|
Nov. 30, 2012.
Attorneys and Law Firms
Brian Matthew Kester, Frederick Jay Hegenbart, Staci
Lynette Roberds, Rosenstein Fist & Ringold, Tulsa, OK,
for Plaintiff.
Mia Vahlberg, Scott Randall Rowland, Cesar Tavares,
Mia Vahlberg, Gable & Gotwals, Tulsa, OK, for
Defendants.

OPINION AND ORDER
JAMES H. PAYNE, District Judge.
*1 Before the Court are Plaintiff Webco, Inc.'s
(“Webco”) Opposed Motion to Voluntarily Dismiss
Counts VII and VIII [Doc. No. 44]; Webco's Opposed
Motion to Voluntarily Dismiss Counts II and III [Doc.
No. 86]; Webco's Motion for Partial Summary Judgment
[Doc. No. 57]; and Defendants' Motion for Summary
Judgment [Doc. No. 56]; Defendants' First Motion in
Limine [Doc. No. 68]; Defendants' Second Motion in
Limine [Doc. No. 69]; Defendants' Third Motion in
Limine [Doc. No. 70]; Defendants' Fourth Motion in
Limine [Doc. No. 71]; Webco's Motion in Limine [Doc.
No. 74]; Defendants' Motion to Compel [Doc. No. 112];
Defendants' Objection to Deposition Designations of
the Deposition of David Culbertson [Doc. No. 119];
Defendants' Objection to Deposition Designations of
the Deposition of George Holliday [Doc. No. 120];
Defendants' Objection to Deposition Designations of
the Deposition of Richards Kelly Diamond [Doc. No.
121]; Defendants' Objection to Deposition Designations
of the Deposition of Robert Bonin [Doc. No. 122];

Defendants' Objection to Deposition Designations of
the Deposition of Thomas Pitts [Doc. No. 123]; and
Defendants' Objection to Deposition Designations of the
Deposition of Rick Taylor [Doc. No. 124].
After consideration of the briefs and for the reasons
detailed below, Defendants' Motion for Summary
Judgment [Doc. No. 56] is GRANTED and Webco's
Motion for Partial Summary Judgment [Doc. No. 57]
is DENIED. In addition, Webco's Opposed Motion to
Voluntarily Dismiss Counts VII and VIII [Doc. No. 44]
is GRANTED without prejudice, and Webco's Opposed
Motion to Voluntarily Dismiss Counts II and III [Doc.
No. 86] is conditionally GRANTED with prejudice.
All remaining motions will be DENIED as MOOT
if Webco does not withdraw its Opposed Motion to
Voluntarily Dismiss Counts II and III [Doc. No. 86].

BACKGROUND
A. Undisputed Factual Background
Plaintiff Richards Kelly Diamond (“Diamond”) is an
expert in non-destructive testing (“NDT”) of stainless
steel tubing. Diamond began developing his expertise
through training he received as a member of the United
States Navy. Both during and after his tenure with the
United States Navy, Diamond received a number of
certifications concerning or related to NDT, and has
completed around 2800 hours of training on to further his
expertise. Since leaving the United States Navy, Diamond
has used his NTD skills in various capacities to assist in
NDT. In 2002, Diamond went to work for RathGibson,
Inc., a specialty tube manufacturer, where he assisted in
developing processes for the manufacture and NDT of
stainless steel tubing. In 2009, Diamond left RathGibson,
Inc. to start Accurate NDT Services, Inc. (“Accurate”),
a corporation organized by Diamond in 2009 through
which he provides NTD consulting services.
In 2009, Webco, a specialty tube manufacturer
headquartered in Sand Springs, Oklahoma, sought
Diamond's consulting services in order to develop a
new line of stainless steel tubing made from a super
duplex material. Webco was referred to Diamond by
one of its customers based on his experience in NDT,
who believed Diamonds expertise would be necessary to
develop Webco's new line of stainless steel tubing. On

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October 10, 2009, Webco and Diamond, who was acting
on behalf of Accurate, entered into the “Webco Industries
and Accurate NDT Services Agreement” (“Services
Agreement”). The Services Agreement was for a one-year
term commencing on October 15, 2009, with the option
to extend for an additional year. Pursuant to the Services
Agreement, Webco paid Accurate a $25,000 fee at the
time the Services Agreement commenced, and an agreed
upon hourly rate for services performed pursuant to the
contract thereafter.
*2 The Services Agreement included the following
relevant provisions:
2. During Agreement Term, [Accurate] will assist
Webco in the development of welded seam super
duplex umbilical tubing. The scope of this involvement
is mainly in the area of nondestructive testing—
ultrasonic, eddy current and radiographical inspection,
however it may cover other areas of the manufacturing
process and/or equipments as directed or needed
(‘Technical Development Services' or ‘Services').
4. During Agreement Term, [Accurate] will not provide
Technical Development Services to other seam welded
umbilical tube makers, including 19D umbilical tube
products.
[Doc. No. 57, Ex. 1 at 2]. The Services
Agreement also included a “Nondisclosure & Non–Use
Agreement” (“NDNU”). [Id. at 4]. The NDNU provided
that Accurate would not disclose or use confidential
information for any purpose not necessary to the
performance of the Services Agreement. [Id. at 5]. The
NDNU defined confidential information as follows:
‘Confidential Information’ means ...
any oral or written information, ...
equipment and manufacturing
processes, technical data or knowhow, patentable and unpatentable,
registered
and
unregistered,
including,
but
not
limited
to,
trademarks,
tradenames,
licenses, research, product plans,
products,
services,
customer
lists, ... developments, inventions,
processes, designs, drawings, ...
or other trade secrets of the
Disclosing Party, or similar items

relating to the Disclosing Party's
business activities.... ‘Confidential
Information’ does not include
information, technical data or
know-how which (i) is in the
possession of the Receiving Party
at the time of disclosure as shown
by the files and records of the
Receiving Party immediately prior
to the time of disclosure; or (ii) prior
to or after the time of disclosure
was or becomes party of the public
knowledge or literature (other than
as a result of any inaction or action
of the Receiving Party in violation of
this Agreement)....
[Id.] Accurate's obligations under the NDNU survived
the termination of the Services Agreement. [Id. at 5].
The NDNU also provided that Webco “shall be entitled
to equitable relief, including injunction, in the event of
[an actual or threatened breach by Accurate]....” [Id.]
Further, Section Eight of the services agreement required
Accurate to “comply with Webco's policies concerning
[its] conduct while at the Webco facilities or the facilities
of its customers.” [Id. at 3]. Webco's “Non-solicitation
and Distribution of Literature Policy” (“Non–Solicitation
Policy”) provided the following:
Solicitation,
distribution
or
literature or other non-work related
items of any kind by employees
during working time of the employee
doing the soliciting or distribution,
or distribution of literature of any
kind or solicitation during the
working time of the employee being
solicited or receiving the literature is
prohibited.
*3 [Doc. No. 79, Ex. 3].
After the Services Agreement was executed, Accurate
began assisting Webco in developing its new line of
stainless steel tubing. Webco and Accurate renewed the
Services Agreement for an additional year concluding
on October 15, 2011. From the start of the Services
agreement until May of 2011, Accurate presented Webco
with periodic invoices, and Webco tendered payment
to Accurate for the services it received. After May of

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Webco Industries, Inc. v. Diamond, Not Reported in F.Supp.2d (2012)
2012 WL 5995740

2011, however, Webco received and approved Accurate's
invoices, but never tendered payment to Accurate.
Accurate continued to provide services to Webco upon
request until August of 2011. On September 11, 2011,
Accurate notified Webco that invoices totally $24, 831.20
were overdue and demanded payment of the outstanding
balance to no avail.
While the Services Agreement was still in effect, Diamond
and a business acquaintance, Ralph Gordon, made
plans to start a tube manufacturing company and
incorporated Coastal Specialty Tubes, Inc. (“Coastal”)
in Florida. Diamond was named as Coastal's President,
and participated in developing Coastal's business plan,
including evaluating potential sites for a manufacturing
facility and e-mailing a potential customer, which was
also one of Webco's customers, regarding Coastal's plans.
Webco learned of Coastal's existence sometime in July of
2011, and, subsequently, began an investigation into the
matter. As a part of this investigation, Webco interviewed
Kranthi Pallegar. Pallegar told Webco's management
that he had discussed Coastal with Diamond and spoke
with other employees about Coastal. Another Webco
employee, Robert Epperly, the director of maintenance
and engineering, told Pallegar that he wanted to speak
with Diamond about Webco. After Pallegar relayed
Epperly's request to Diamond, Diamond contacted
Epperly at his residence and discussed the details of
Coastal at length. Epperly provided Webco with notes he
took during this conversation. Webco subsequently fired
Pallegar and two other employees because Webco believed
these employees had a conflict of interest arising from their
relationships with Diamond and Coastal.
On August 29, 2011, Webco commenced the instant action
against Defendants. Subsequently, in October of 2011,
Coastal was dissolved without ever having the ability to
manufacture any products.

DISCUSSION
A. Voluntary Dismissal Pursuant to Rule 41
On September 28, 2012, Webco filed an Opposed Motion
for Order of Voluntary Dismissal for Counts VII and
VIII. [Doc. No. 44]. On November 6, 2012, Webco filed a
second Opposed Motion for Order of Voluntary Dismissal
for Counts II and III. [Doc. No. 86]. In both motions,
Webco explains that it “admits no invalidity or infirmity

as to the causes of action alleged and seeks only to
streamline the litigation and reduce costs and expenses as
the remainder of the case moves forward.” [Id.]
A plaintiff who wishes to voluntarily dismiss its action
but who cannot do so via notice or stipulation under
Rule 41(a)(1) must seek an order of dismissal from the
court. FED.R.CIV.P. 41(a)(2). Rule 41(a)(2) authorizes
the voluntary dismissal of a cause of action, but only
“upon order of the court and upon such terms and
conditions as the court deems proper.” Fed.R.Civ.P.
41(a)(2). Generally, a dismissal under Rule 41(a)(2) is
addressed to the sound discretion of the court and the
motion is granted unless the opposing party will suffer
legal prejudice. See Ohlander v. Larson, 114 F.3d 1531,
1537 (10th Cir.1997); see also Clark v. Tansy, 13 F.3d
1407, 1411 (10th Cir.1993). However, Rule 41 “is designed
primarily to prevent voluntary dismissals which unfairly
affect the other side, and to permit the imposition of
curative conditions.” Phillips USA, Inc. v. Allflex USA,
Inc., 77 F.3d 354, 357 (10th Cir.1996). The Tenth Circuit
has identified four non-exclusive factors that should
be considered when reviewing a request for voluntary
dismissal: “the opposing party's effort and expense in
preparing for trial; excessive delay and lack of diligence
on the part of the movant; insufficient explanation of the
need for dismissal; and the present stage of the litigation.”
County of Santa Fe, New Mexico v. Public Service Co. of
New Mexico, 311 F.3d 1031, 1048 (10th Cir.2002).
*4 The Court first considers Webco's Motion for Order
of Voluntary Dismissal for Counts II and III. Webco
filed this motion on November 6, 2012, after the close
of discovery and the deadline for dispositive motions. In
its motion, Webco explains that it seeks dismissal “to
streamline the litigation and reduce costs and expenses as
the remainder of the case moves forward.” [Doc. No. 86,
¶ 3]. The Court finds Webco's explanation for its need to
dismiss at this late stage in the litigation is insufficient to
justify the excessive delay in seeking dismissal. Moreover,
Webco's delay in filing its motion caused Defendants to
expend substantial effort and expense in preparation for
trial. The Court recognizes that Defendants' discovery,
motion practice, and pretrial preparation have been
significant. The circumstances of this case make it clear
that Defendants would be prejudiced if Webco's motion
was granted without prejudice.

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The Court is also wary of allowing Webco to dismiss
its claims in light of Defendants' June 15, 2012 Offer of
Judgment pursuant to Federal Rule of Civil Procedure
68. Rule 68 is designed to encourage settlement as it
allows a defendant to make a firm offer of judgment
and shifts the costs of litigation onto plaintiff if plaintiff
rejects the offer and is then awarded less than the Rule
68 offer. Marek v. Estate of Chesny, 473 U.S. 1, 5 (1985).
If Webco were allowed to dismiss its claims without
prejudice, then Defendants would be unfairly deprived
of the benefits conferred upon them by Rule 68. To
be sure, the Court finds that Webco has no reasonable
explanation for the delay in filing its motion to dismiss,
and the timing of events suggests that Webco is seeking to
dismiss its claims to avoid a ruling on Defendants' motion
for summary judgment. Therefore, the Court will impose
curative conditions on Webco's motion to dismiss.
In order to prevent this voluntary dismissal from unfairly
affecting Defendants, the Court has broad discretion to
impose curative conditions, including, but not limited
to, dismissal with prejudice and requiring plaintiff to
compensate the defendants for costs and attorney's fees.
Phillips USA, 77 F.3d at 357; See Gravatt v. Columbia
University, 845 F.2d 54, 55 (2d Cir.1988); Andes v. Versant
Corp., 788 F.2d 1033, 1037 (4th Cir.1986); Bridgeport
Music, Inc. v. Universal–MCA Music Pub., Inc., 583 F.3d
948, 950 (6th Cir.2009); United States v. One Tract of
Real Property, 95 F.3d 422, 425 (6th Cir.1996); Marlow
v. Winston & Strawn, 19 F.3d 300, 304 (7th Cir.1994);
Jaramillo v. Burkhart, 59 F.3d 78, 79 (8th Cir.1995). 1
Accordingly, the Court grants Webco's Motion for Order
of Voluntary Dismissal [Doc. No. 86] upon the following
conditions: (1) that the claims be dismissed with prejudice;
and (2) that Webco is ordered to pay Defendants'
reasonable attorneys' fees incurred in defense of Count II
and Count III from June 15, 2012, forward. The Court,
however, recognizes that Plaintiff is not bound to accept
this condition, but may withdraw its Motion and proceed
to a decision on the merits. See Michigan Surgery Inv.,
LLC v. Arman, 627 F.3d 572, 576 (6th Cir.2010); Gravatt v.
Columbia University, 845 F.2d 54, 56 (2d Cir.1988). Thus,
Webco is granted five days from the date of this Opinion
to withdraw its Motion.
*5 With regard to Webco's Motion for Order of
Voluntary Dismissal for Counts VII and VIII, the Court
notes that the motion was filed before the deadline for
dispositive motions and prior to the close of discovery.

Although the Court believes Webco's explanation is
lacking in persuasiveness, the other factors weigh in
favor of granting Webco's motion without prejudice.
Accordingly, Webco's Opposed Motion for Order of
Voluntary Dismissal for Counts VII and VIII [Doc. No.
44] is granted without prejudice.

B. Motion for Summary Judgment
Summary judgment is proper where the pleadings,
depositions, answers to interrogatories, and admissions
on file, together with affidavits, if any, show there
is no genuine issue as to any material fact, and the
moving party is entitled to judgment as a matter of law.
Fed.R.Civ.P. 56(c). In making the summary judgment
determination, the Court examines the factual record and
draws reasonable inferences therefrom in the light most
favorable to the nonmoving party. Simms v. Oklahoma,
165 F.3d 1321, 1326 (10th Cir.1999). The presence of
a genuine issue of material fact defeats the motion. An
issue is “genuine” if the evidence is significantly probative
or more than merely colorable such that a jury could
reasonably return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
A fact is “material” if proof thereof might affect the
outcome of the lawsuit as assessed from the controlling
substantive law. Id. at 249.

1. Webco's Breach of Contract Claim
The parties filed cross-motions for summary judgment on
the breach of contract claims asserted by Webco against
Defendants. “To establish a breach of contract claim
under Oklahoma law, a plaintiff must show: (1) formation
of a contract; (2) breach of the contract; and (3) damages
as a direct result of the breach.” Tabernacle v. Church Mut.
Ins. Co., Inc., 2012 WL 4128291 (W.D.Okla. Sept. 18,
2012) (citing Digital Design Group, Inc. v. Info. Builders,
Inc., 24 P.3d 834, 843 (Okla.2001)).

a. Breach of the Contract
Webco's primary contention is that Defendants
breached the Services Agreement by providing technical
development services to Coastal in violation of Section
Four and soliciting Webco employees in violation
of Section Eight. If the terms of the contract are
“unambiguous, clear and consistent, they are to be
accepted in their ordinary sense and enforced to carry
out the expressed intention of the parties.” Roads West,

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Webco Industries, Inc. v. Diamond, Not Reported in F.Supp.2d (2012)
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Inc. v. Austin, 91 P.3d 81, 88 (Okla.Civ.App.2004). The
interpretation of an unambiguous contract is a question of
law for the courts. Ferrell Const. Co., Inc. v. Russell Creek
Coal Co., 645 P.2d 1005, 1007 (Okla.1982). After carefully
reviewing the relevant provisions of the Agreement,
the Court is convinced that the parties' intentions are
clearly and unambiguously expressed in the contractual
language.
Section Four of the Services Agreement states: “During
Agreement Term, Accurate NDT will not provide
Technical Development Services to other seam welded
umbilical tube makers, including 19D umbilical tube
products.” (emphasis added). Technical Development
Services is defined in Section Two of the Services
Agreement as follows:
*6 During Agreement Term,
Accurate NDT will assist Webco
in the development of welded seam
super duplex umbilical tubing. The
scope of this involvement is mainly
in the area of nondestructive testing
—ultrasonic, eddy current and
radiographical inspection, however
it may cover other areas of
the manufacturing process and/or
equipments as directed or needed
(‘Technical Development Services'
or ‘Services').
The plain language of these two provisions make it clear
that Defendants' actions did not constitute a breach of
contract.
While it is possible to interpret Technical Development
Services to encompass a wide range of highly technical
activities, the Court finds Defendants' actions were not
technical in nature. There is no genuine dispute that
Coastal was simply a newly organized corporate entity
in the early stages of seeking investors and developing
a business plan. Coastal had not progressed past the
planning stages and did not have an established umbilical
tube manufacturing process necessitating any technical
development services. Accordingly, the Court finds that
Defendants did not breach Section Four of the Services
Agreement.
Webco also asserts that Defendants breached Section
Eight of the Services Agreement by soliciting Webco

employees. Webco's Non–Solicitation Policy prohibits
solicitation by or of employees during working hours
except during break periods, meal times, or other periods
during the work day when employees are properly
not engaged in performing their work tasks. It also
prohibits non-employees from certain solicitations on
Webco property. The Court has doubts as to whether the
parties intended to be bound by this provision at the time
the Services Agreement was formed; nevertheless, even
if it was the parties' intent that Diamonds' conduct be
governed by the Non–Solicitation Policy, the Court does
not believe Diamonds' conduct violated this provision.
In support of its contention that the Non–Solicitation
Policy was breached, Webco points to conversations
Diamond had with two Webco employees, Pallagar
and Epperly, regarding Coastal. However, Webco can
produce no facts indicating that Diamond discussed
Coastal with Pallager under the prohibited conditions.
In addition, with regard to Epperly, it is undisputed
that Diamond contacted Epperly at his home to discuss
the details of Coastal. Webco fails to demonstrate
that Defendants breached Section Eight of the Services
Agreement. Accordingly, the Court finds that Defendants
did not breach the Services Agreement.

b. Damages
Even if Webco could demonstrate that a breach of
contract occurred, Webco's claim also fails because it
cannot demonstrate that it was damaged by an alleged
breach of contract. “Damages claimed for a breach of
contract cannot be recovered unless they are clearly
ascertainable, both in their nature and origin, and it
must be made to appear that they are the natural and
proximate consequence of the breach of the contract and
not speculative and contingent.” Fowler v. Lincoln County
Conservation District, 15 P.3d 502, 507 (Okla.2000)
(citation omitted). To determine if damage is the natural
and proximate consequence of a breach of contract,
Oklahoma courts follow the general rule of foreseeability
first announced in Hadley v. Baxendale, 9 Exch. 341, 156
Eng. Reprint 145 (1854). See Coker v. Southwestern Bell
Tel. Co., 580 P.2d 151, 153 (Okla.1978); Missouri P.R.R.
v. Ridley, 383 P.2d 227, 229 (Okla.1963) (following Hadley
). This rule is summarized in Restatement (Second) of
Contracts § 351 Comment A (1970) as follows:
*7 A contracting party is generally
expected to take account of those

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Webco Industries, Inc. v. Diamond, Not Reported in F.Supp.2d (2012)
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risks that are foreseeable at the
time he makes the contract. He is
not, however, liable in the event
of breach for loss that he did not
at the time of contracting have
reason to foresee as a probable
result of such a breach. The mere
circumstance that some loss was
foreseeable, or even that some loss
of the same general kind was
foreseeable, will not suffice if the
loss that actually occurred was not
foreseeable. It is enough, however,
that the loss was foreseeable as a
probable, as distinguished from a
necessary, result of his breach.
“Moreover, under Oklahoma law, the amount awarded
for breach of contract ‘must be ascertainable in some
manner other than by mere speculation, conjecture or
surmise, and by reference to some definite standard.’
“ Old West Annuity and Life Ins. Co. v. Progressive
Closing & Escrows, Inc., 74 F. App'x 4, 8 (10th Cir.2003)
(unpublished opinion) (quoting John A. Henry & Co.,
Ltd. v. T.G. & Y. Stores Co., 941 F.2d 1068, 1071 (10th
Cir.1991)).
Webco argues that it suffered damages as a result
of Defendants' breach of contract. Specifically, Webco
asserts that it was forced to replace Pallegar and two
other employees because those employees had a conflict
of interest arising from their association with Diamond
and Coastal. During his deposition, Webco's Chief
Operating Officer, David Boyer, testified that as a result
of terminating these employees, Webco was forced to
transfer an employee from its Pennsylvania division to
another facility and pay $8000 in relocation expenses.
Consequently, this transfer left a vacancy in Pennsylvania
that had to be filled by hiring two additional employees.
Boyer estimated that the cost of hiring and training these
new employees was $112,500, because, in his opinion,
these employees were unable to make a contribution as
employees for the first six months of their employment.
There is no doubt that Accurate's actions set in motion
a sequence of events which ultimately led to Webco's
damages. The relevant inquire, however, is whether the
damages were foreseeable at the time of contracting,
and were proximately caused by the breach of contract.
Although the principles of legal causation sometimes

receive labels in contract analysis different from the
“proximate causation” label most frequently employed in
tort analysis, these principles nevertheless exist to restrict
liability in contract as well. Indeed, the requirement
of foreseeability may be more stringent in the context
of contract liability than it is in the context of tort
liability. Restatement (Second) of Contracts § 351 and
Comment a, pp. 135–136 (1979); 11 W. Jaeger, Williston
on Contracts § 1344, pp. 227–228 (3d ed.1968); 5 A.
Corbin, Corbin on Contracts § 1008, pp. 75–76 (1964);
id., § 1019, at 113–116; 3 E. Farnsworth, Contracts §
12.14, pp. 241–243 (1990) (“Hadley ‘impose[s] a more
severe limitation on the recovery of damages for breach
of contract than that applicable to actions in tort or for
breach of warranty, in which substantial or proximate
cause is the test.’ “ (internal citations omitted)). Oklahoma
recognizes that proximate cause may be defeated by an
intervening cause that breaks the causal chain between the
party at fault and the plaintiff's harm. Brigance v. Velvet
Dove Restaurant, 756 P.2d 1232 (Okla.1988); Thompson v.
Presbyterian Hosp., Inc., 652 P.2d 260, 264 (Okla.1982);
see also Graham v. Keuchel, 847 P.2d 342 (Okla.1993);
Oklahoma Uniform Jury Instructions—Civil § 9.8 (2005).
*8 After examining the sequence of events, the Court
finds that an intervening cause interrupted or severed
the connection between Accurate's alleged breach and
Webco's injury. Both the terminated employees' decision
to interact with Diamond and Coastal in a manner giving
rise to a conflict of interest along with Webco's decision
to fire the employees were superseding intervening causes
of Webco's damages. Further, it is not reasonable to
think that either party could foresee that a breach of
the Services Contract would result in the type of damage
Webco is alleging. In addition, the Court finds damages
based on the decreased productivity of the newly hired
employees is highly speculative. For example, it would be
difficult to ascertain whether the newly hired employees
have experience which makes them more valuable
to the company than their predecessors. Accordingly,
Defendants are entitled to summary judgment on Webco's
breach of contract claim.

2. Intentional Interference with
Contractual Relations Claim
In order to establish a claim of tortious interference with
a contract, Webco must show that: “(1) [it] had a business
or contractual right that was interfered with; (2) the
interference was malicious and wrongful, and that such

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interference was neither justified, privileged nor excusable;
and (3) damage was proximately sustained as a result
of the complained-of interference.” Sw. Stainless, LP v.
Sappington, 582 F.3d 1176, 1188 (10th Cir.2009) (quoting
Mac Adjustment, Inc. v. Prop. Loss Research Bureau, 595
P.2d 427, 428 (Okla.1979)) (internal quotations omitted).
For the same reasons discussed above, the Court finds
that Webco has failed to meet its burden on the damages
element of this cause of action. Accordingly, Accurate is
entitled to judgment on this claim.

3. Injunctive Relief
Webco seeks injunctive relief against Accurate pursuant
to the NDNU between the parties. Accurate argues that
Webco is not entitled to injunctive relief because the
NDNU is void as a violation of public policy. Under
Oklahoma law, “[e]very contract by which any one is
restrained from exercising a lawful profession, trade or
business of any kind, otherwise than as provided by
Sections 218 and 219 of this title, or otherwise than
as provided by Section 2 of this act, is to that extent
void.” Okla. Stat. Ann. tit. 15, § 217 (West). Section 217
has been construed by Oklahoma courts to invalidate
only unreasonable restraints on trade. Bd. of Regents
of Univ. of Oklahoma v. Nat'l Collegiate Athletic Ass'n,
561 P.2d 499, 506 (1977); see also Cooper v. Tanaka,
591 P.2d 1181 (Okla.App.1978). “The fundamental test
of the reasonableness of a restraint is its effect on
the public.” Vanguard Envtl., Inc. v. Curler, 190 P.3d
1158, 1165 (Okla.App.2008) (quoting Board of Regents,
561 P.2d at 506). Determining the reasonableness of a
restraint requires courts to balance “the public's and the
individual's need and entitlement to free commerce and
the right to earn a livelihood by employment and ... the
necessity of the restraint to protect and effectuate the basic
transaction.” Cooper, 591 P.2d at 1184. Oklahoma courts
have explained that a “restrictive covenant is reasonable if
it (1) is no greater than necessary to protect the employer
from unfair competition, (2) does not impose an undue
hardship on the employee, and (3) is not injurious to the
public.” Inergy Propane, LLC v. Lundy, 219 P.3d 547, 558
(Okla.App.2009).
*9 The Court finds the NDNU to be an unenforceable
restraint on trade. Of particular concern is the NDNU's
restriction on the use of technical skills, described in
the NDNU as “know-how,” for an unlimited duration
of time. Our free economy functions in part by
encouraging individuals to develop valuable skill-sets,

through education, training, and work experience, and
market those skill-sets to others. There is no doubt that
“one who has worked in a particular field cannot be
compelled to erase from his mind all of the general
skills, knowledge, acquaintances and overall expertise
acquired during his tenure with [a] former employer.”
Disher v. Fulgoni, 464 N.E.2d 639, 642 (Ill.App.1984).
These important concerns necessitate a close examination
of the effect of the NDNU on Diamond's ability to utilize
the skills he has developed over the course of his life.
Webco asserts that it only seeks to prevent Diamond
from utilizing the know-how he obtained directly through
his performance of the Services Agreement. Indeed, the
NDNU does distinguish between know-how obtained
directly from Webco and know-how already known to
Diamond. Under the terms of the NDNU, however,
Diamond's previously developed know-how only avoids
restriction by the NDNU if he can produce files and
records in his possession prior to receipt of the knowhow in question indicating it was known to Diamond
before Webco disclosed the information to him. To
be sure, it would be incredibly difficult for Diamond,
or any other person who developed expertise over an
extended period of time, to produce tangible evidence
documenting his or her progressively increasing skillset. The practical result of enforcing the NDNU would
be to preclude Diamond from using skills he developed
through experiences prior to the Services Agreement
or developing a competing enterprise. The Court finds
the NDNU's practical effect and unlimited duration
to be an unreasonable and unenforceable restraint on
trade. Additionally, the Court will not engage in judicial
modification of the unenforceable provision because the
fundamentally flawed nature of the agreement would
require “material judicial alteration and the provision of
essential terms in order to come within the rule of reason.”
See Loewen Group Acquisition Corp. v. Matthews, 12 P.3d
977, 982 (Okla.App.2000). Accordingly, Defendants are
entitled to summary judgment on the issue of injunctive
relief.

4. Accurate's Breach of Contract Claim
Accurate asserted a counter-claim against Webco for
breach of contract. Accurate seeks payment for inspection
services performed pursuant to the Services Agreement.
Webco argues that it is relieved from its obligation to
perform under the contract because Accurate breached
a material term the Services Agreement thereby relieving

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Webco from its contractual obligation to pay Accurate.
As discussed above, the Court finds Accurate did not
breach the unambiguous terms of the contract. Even if
Webco could demonstrate that a breach occurred, the
Court finds that when the facts are viewed in a light most
favorable to Webco, Diamonds alleged actions still do not
constitute material breach of the Services Agreement.
*10 Under Oklahoma law, “it is the general rule that
a contract must be performed according to the terms
of the agreement before a party can have any right of
action.” Stoltz, Wagner & Brown v. Cimarron Exploration
Co., 564 F.Supp. 840, 850 (W.D.Okla.1981); Houser v.
Sheehan, 389 P.2d 94, 97 (Okla.1964). Accurate, as the
party seeking recovery “has the burden of showing that
the contract was performed according to its terms.” Id.
(citing Camp v. Black Gold Petroleum Co., 154 P.2d 769
(Okla.1944)). Under well-established common law rules,
however, a party is not automatically excused from the
future performance of contract obligations simply because
the other party commits a breach. Dollar Rent A Car Sys.,
Inc. v. P.R.P. Enterprises, Inc., 01 CV 698 JHP FHM,
2006 WL 1266515 (N.D.Okla. May 8, 2006) aff'd, 242 F.
App'x 584 (10th Cir.2007) (citing Owens v. Automotive
Engineers, Inc., 255 P.2d 240, 247 (Okla.1953); Camp,
154 P.2d at 771; Messick v. Johnson, 30 P.2d 176, 178
(Okla.1934); Robberson Steel Co. v. Harrell, 177 F.2d 12,
17 (10th Cir.1949); 17B C.J.S. Contracts § 503 (1999); and
Restatement (Second) of Contracts § 237 (1981.)). Thus,
if a breach is relatively minor and not of the essence,
the plaintiff is still bound by the contract and may not
abandon performance. Id.
In Bonner v. Oklahoma Rock Corporation, the Oklahoma
Supreme Court explained that the following factors are
helpful to determining whether a failure to render or to
offer performance is material:
(a) the extent to which the injured party will be deprived
of the benefit which he reasonably expected;
(b) the extent to which the injured party can be
adequately compensated for the part of that benefit of
which he will be deprived;
(c) the extent to which the party failing to perform or to
offer to perform will suffer forfeiture;

of all the circumstances including any reasonable
assurances; [and]
(e) the extent to which the behavior of the party
failing to perform or to offer to perform comports with
standards of good faith and fair dealing.
863 P.2d 1176, 1186 n. 61 (Okla.1993) (quoting
Restatement (Second) of Contracts § 240)). The factors
outlined above reflect the reality that “[t]he standard
for determining materiality must necessarily be both
imprecise and flexible to further the purpose of securing
for each party his or her expectation of an exchange of
performances.” 23 Williston on Contracts § 63:3 (4th ed.).
While courts should consider the factors outlined above,
“the test is whether the failure of performance defeats
the object of the contract. ” Bonner, 863 P.2d at 1186
(quoting G.A. Nichols, Inc. v. Hainey, 122 P.2d 809, 811
(Okla.1942)) (emphasis original).
Applying the principles outlined above, the Court
finds these allegedly violated provisions of the Services
Agreement to be independent, incidental covenants.
The primary purpose of the contract was to secure
the provision of technical development services by
Defendants. Defendants provided the bargained-for
services to Webco's satisfaction; therefore, even if
Defendants' actions constituted a violation of certain
provisions contained in the Services Agreement, Webco is
still obligated to fulfill its obligations under the contract.
*11 Accordingly, Accurate is entitled to summary
judgment on its breach of contract claim.

CONCLUSION
For the reasons detailed above, Defendants' Motion for
Summary Judgment [Doc. No. 56] is GRANTED and
Webco's Motion for Partial Summary Judgment [Doc.
No. 57] is DENIED. In addition, Webco's Opposed
Motion to Voluntarily Dismiss Counts VII and VIII
[Doc. No. 44] is GRANTED without prejudice. Webco
is granted until December 5, 2012 to file a motion to
withdraw its Opposed Motion to Voluntarily Dismiss
Counts II and III [Doc. No. 86].

(d) the likelihood that the party failing to perform or
offer to perform will cure his failure, taking account

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2012 WL 5995740

All Citations
Not Reported in F.Supp.2d, 2012 WL 5995740

Footnotes

1

The Tenth Circuit has indicated its agreement with the framework articulated by other circuits regarding a court dismissing
a complaint with prejudice after the plaintiff has moved to dismiss without prejudice. See Rockwell Int'l, 282 F.3d 787,
810 (10th Cir.2002) (“We are impressed by these factors and opinions, with which we do not disagree.”).

End of Document

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