Marlite, Inc. v. Eckenrod et al
Filing
129
ORDER denying 67 Motion for Partial Summary Judgment; granting in part and denying in part 68 Motion for Summary Judgment; granting in part and denying in part 68 Motion for Partial Summary Judgment; granting in part and denying in part 69 Motion for Summary Judgment; granting 101 Motion for Summary Judgment; adopting Report and Recommendations 111 . Signed by Chief Judge Federico A. Moreno on 8/20/2012. (lme)
UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF FLORIDA
Miami Division
Case Number: 10-2364l-CIV-MORENO
MARLITE, INC.,
Plaintiff,
vs.
ALVIN ECKENROD and MODULAR WOOD
SYSTEMS, INC.,
Defendants,
vs.
JERRY DAGEN AND JAMES ROBBINS,
Third Party Defendants.
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ORDER ADOPTING MAGISTRATE'S REPORT AND RECOMMENDATION
THE MATTER was referred to the Honorable Edwin G. Torres, United States Magistrate
Judge for a Report and Recommendation on Parties' Motions for Summary Judgment (D.E. Nos. 67,
68,69,101). The Magistrate Judge filed a Report and Recommendation (D.E. No. 111) on July 13,
2012. The Court has reviewed the entire file and record. The Court has made a de novo review of
the issues that the objections/"exceptions" to the Magistrate Judge's Report and Recommendation
present. The Complaint, filed on October 8, 2010, alleges seven counts: two counts of breach of
contract, one for tortious interference, one for fraudulent inducement, one for negligent
misrepresentation, and two for injunctive relief. The Court affirms Magistrate Judge Torres's Report
and Recommendation in its entirety for the reasons that follow.
I. Background
A. Factual Background
In January 2006, Marlite Inc. acquired the assets ofPrecision Wood Products Inc., a slatwall
business located in Miami, Florida. At that time, Precision was owned by Defendant Alvin Eckenrod
and three other individuals including Third Party Defendants James Robbins and Gerald Dagen. At
that time, Eckenrod was also the sole shareholder and the only officer of Modular Wood Systems
Inc. In exchange for $ 3 million dollars, Marlite acquired, among other assets, all of Precision's
customer lists, accounts and trade receivables, intellectual property, all contracts with third parties,
documents and records, tangible and intangible property used in or related to Precision's business,
and Precision's goodwill. In addition, Article V ofthe Asset Purchase Agreement between Precision
and Marlite contained a five-year non-competition provision which provided that neither Precision
nor any of its "affiliates and/or related parties" would engage "in competition with the Business as
it is conducted immediately prior to the Closing within the following territories: Georgia and
Florida." (Exhibit A to Complaint, D.E. 1-3). In Section 3.29 ofthe APA, the Sellers represented and
warrantied to MarHte that no entity "owned in whole or in part by any shareholder" was selling
slatwall in competition with Precision in the State of Florida.
Additionally, Eckenrod executed an individual Non-Competition Agreement on January 31,
2006. The Non-Compete stated that Eckenrod would not compete with MarHte in Florida for a
period of three years after the Precision asset purchase closing date. "Notwithstanding" that clause,
Eckenrod was authorized to "continue to own, operate and conduct in competition with [MarHte]"
his businesses Modular Wood Systems, Inc. and Interlam, Inc. (Exhibit B to Complaint, D.E. 1-4),
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B. Procedural Baekground
Marlite filed an initial suit in 2009, alleging misappropriation of trade secrets, tortious
interference and breach of contract against Modular and Eckenrod. See Marlite, Inc. v. Alvin
Eckenrod, et al., No. 09-22607-CIV-TORRES (S.D. Fla. 2009) (Marlite I). Marlite's claims in that
case sounded in breach of contract, tortious interference, misappropriation of trade secrets, and
injunctive relief, and they arose from Eckenrod and Modular's alleged improper hiring of a former
Marlite employee and the solicitation of Marlite's customers by the employee on Modular's behalf.
Following a grant of partial summary judgment in Marlite's favor by Judge Graham, the case then
went to jury trial before Magistrate Judge Torres as a consent trial and was decided in Marlite's favor
on some claims. The judgment was affirmed by the Eleventh Circuit in an unpublished opinion. See
Marlite, Inc. v. Canas, 453 Fed. Appx. 938 (lith Cir. 2012). During sworn testimony in Marlite
I, Defendant Eckenrod admitted to making inaccurate statements in his sworn discovery responses.
Because ofthe newly discovered evidence through Eckenrod's statements, Marlite then filed a new
lawsuit in October of2010, which is the case currently before the court. MarHte's complaint seeks
damages as a result of alleged violations of the AP A and non-compete, fraudulent inducement and
tortious interference as well as injunctive relief against the two defendant parties. Marlite brings the
action regarding sales ofslatwall in Florida by Modular and Eckenrod between January 31,2006 and
May 15, 2009. Eckenrod then filed a third party complaint seeking indemnity from two former
trustees of Precision, Robbins and Dagen.
II. Standard of Review
This Court reviews de novo the determination of any disputed portions of the Magistrate
Judge's Report and Recommendation.
us.
v. Powell, 628 F.3d, 1254, 1256 (lith Cir.2010). "In
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order to challenge the findings and recommendations of the magistrate [judge], a party must ... file
... written objections which shall specifically identify the portions of the proposed findings and
recommendation to which objection is made and the specific basis for objection .... Up~:m receipt of
objections meeting the specificity requirement set out above, a United States DistrictJudge shall
make a de novo determination of those portions ofthe report ... to which objection is made and may
accept, reject, or modify in whole or in part, the findings or recommendations made by the magistrate
[judge]." Heath v. Jones, 863 F.2d 815, 822 (lIth Cir.l989). See also Fed.R.Civ.P. 72(b); 28 U.S.C.
§ 636(b)(l). "[W]henever any party files a timely and specific objection to a finding of fact by a
magistrate, the district court has an obligation to conduct a de novo review ofthe record with respect
to that factual issue." Stokes v. Singletary, 952 F.2d 1567, 1576 (11 th Cir. 1992) (quoting LoConte
v. Dugger, 847 F.2d 745, 750 (lIth Cir.)). "It is improper for an objecting party to ... submit [ ]
papers to a district court which are nothing more than a rehashing of the same arguments and
positions taken in the original papers submitted to the Magistrate Judge. Clearly, parties are not to
be afforded a 'second bite at the apple' when they file objections to a R & R." Camardo v. Gen.
Motors Hourly-Rate Employees Pension Plan, 806 F. Supp. 380,382 (W.D.N.Y.1992)
III. Analysis
Eckemod objects to the Magistrate Judge Torres' Report and Recommendations on eight
grounds. First, Eckemod objects that the Magistrate Judge Torres draws faulty inferences from the
jury verdict in Marlite I and that he misinterprets and misapplies the jury's verdict as to the Non
Compete. Second, Eckemod objects that Magistrate Judge Torres rewrites the contracts before him
for interpretation on the breach ofcontract and breach ofnon-compete. Third, Eckemod objects that
Magistrate Judge Torres has misapplied the doctrine 0 f collateral estoppel. Fourth, Eckemod obj ects
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that Magistrate Judge Torres failed to construe the release between Eckenrod, Robbins, and Dagen
by not reading the two documents in pari materia. Eckenrod's other four objections relate to the
defendant's contract and tort defenses; each of these objections lays out a rehash of arguments
presented in the original summary judgment motions and are not entitled to de novo review.
1. Eckenrod's Marlite I Objections
The Court turns first to Eckenrod's objections regarding factual findings and the jury verdict
in Marlite 1 What Eckenrod calls clearly erroneous is a plausible inference and directly tied to the
instructions given to the jury. The jury specifically replied 'no' to the question whether Modular was
subject to a five year non-compete. While Eckenrod is correct that the length of Modular's non
compete is not part of the jury's determination per the verdict form from Marlite J, the Defendant
disingenuously does not provide the jury instructions given before the deliberation. Those
instructions stated
"If you determine that the parties' intent for these agreements was for Mr. Eckenrod to
refrain from competing with Marlite's Florida businesses onlyfor a three year period, then
your verdict should be for Defendants on the breach of contract claim. If you find by the
greater weight ofthe evidence that Marlite has shown that the parties intended that Modular
be subject to a five year noncompetition period, in addition to the three year non-competition
period that applied to Mr. Eckenrod personally, then your verdict should be for Marlite on
this claim."
Jury Instructions in Marlite J [D .E. 197, emphasis added]. By not including this information in his
briefing, Defendant Eckenrod misleads the Court regarding the Magistrate Judge's factual findings.
The second and fourth specific objections are overruled.
2. Eckenrod's Contract Construction Objection
The Defendant next objects that Magistrate Judge Torres' construction ofcontract language
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operates to rewrite the contracts before him. The Non-Compete at issue reads plainly:
Notwithstanding the above, Selling Shareholder... may after the Closing Date of the
[APA] continue to own, operate and conduct in competition with the Buyer and as
conducted as ofthe Closing Date of the [APA], the following businesses owned by the
Selling Shareholder: Modular Wood Systems, Inc. and Interlam, Inc."
D.E. 1-4 at p. 3. Both Marlite and Eckenrod move for summary judgment on the basis of this
language. Marlite argues in its motion for partial summary judgment that Eckenrod's Non- .
Compete was valid and enforceable, and allowed Modular to compete with Marlite as it had done
prior to the Closing Date of the AP A. Eckenrod, on the other hand, reads the Non-Compete more
expansively as allowing any type of competition in addition to the competition as Modular had
conducted itself prior to the Closing Date of the AP A. Both rely on extrinsic evidence--evidence
not contained solely in the text of the Non-Compete--to interpret the contract. H[C]ontract
language that is unambiguous on its face must be given its plain meaning." Green v. Life &
Health ofAm., 704 So. 2d 1386, 1391 (Fla. 1998). A finding that language is ambiguous or
unclear must precede the use of extrinsic evidence. See Acceleration Nat. Servo Corp. v. Brickell
Fin. Services Motor Club, Inc., 541 So. 2d 738,739 (Fla. 3d DCA 1989). ("Before extrinsic
matters may be considered by a court in interpreting a contract, the words used on the face ofthe
contract must be ambiguous or unclear.") For contract interpretation "the language used ... is the
best evidence of the parties' intent." Hurt v. Leatherby Ins. Co., 380 So. 2d 432, 433 (Fla. 1980).
The Court finds a material issue of disputed fact exists here, one where "the evidence presents a
sufficient disagreement to require submission to ajury. " Allen v. Tyson Foods, Inc., 121 F.3d
642,646 (11th Cir. 1997) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986)).
Indeed, "[i]freasonable minds might differ on the inferences arising from undisputed facts, then
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the court should deny summary judgment." Burton v. City ofBelle Glade, 178 F.3d 1175, 1187
(11 th Cir. 1999). In its objection, Eckenrod introduces wholly new arguments regarding
Marlite's parallel negotiations to purchase Modular. These assertions only add credence to the
gulf in understanding underlying whether a breach of the Non-Compete occurred. As such,
Eckenrod's objection is overruled.
3. Eckenrod's Collateral Estoppel Objection
Eckenrod next objects that neither the jury nor the summary judgment in Marlite I
addressed their 'global exemption' defense. Plaintiff Marlite counters in its response to the
objections that the Eleventh Circuit stated that it had considered all of the briefing and found that
there was no merit to any of Eckenrod's arguments on appeal. Torres notes that this defense was
decided in the first jury trial, Marlite 1 Furthermore, under the theory of collateral estoppel or
issue preclusion, the issue of the global exemption has already been decided against Eckenrod.
For example, when Judge Graham granted partial summary judgment in Marlite's favor for
Eckenrod's violation of Section 3 of the Non-Compete, he implicitly rejected any claim that
Eckenrod would through the "global exemption" be "immune from any claim of breach of
contract."
For collateral estoppel to apply, it must be demonstrated that "(1) the issue at stake is
identical to the one involved in the prior proceeding; (2) the issue was actually litigated in the
prior proceeding; (3) the determination ofthe issue in the prior litigation must have been a
critical and necessary part of the judgment in the first action; and (4) the party against whom
collateral estoppel is asserted must have had a full and fair opportunity to litigate the issue in the
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prior proceeding." Christo v. Padgett, 223 F.3d 1324, 1359 (l1th Cir. 2000) (citations omitted).
On the first prong, whether a global exemption applied was crucial to the claim of breach of
contract. No contract could have been breached if Eckenrod was exempted from compliance by
virtue of such exemption. Second, the issue was raised at the Eleventh Circuit and thus actually
litigated in the prior proceeding. Third, the Eleventh Circuit declared that Eckenrod's arguments
were "without merit;" if the exemption were as important as Eckenrod states in his objections,
then the Eleventh Circuit would have considered it a "critical and necessary" part of the
judgment in the first action. See Marlite, Inc. v. Canas, 453 Fed. Appx. 938 (11th Cir. 2012).
Finally, Eckenrod has had a full and fair opportunity to make the argument before Judge Graham,
Judge Torres, and a three judge panel of the Eleventh Circuit. As such, collateral estoppel bars
this court from considering the global exemption. Eckenrod's objection is overruled.
4. Eckenrod's In Pari Materia Objection
Eckenrod objects to Magistrate Judge Torres' recommendation that this Court enter
judgment in the Third Party Defendants' favor on the grounds that any claims that Eckenrod may
have had against Dagen and Robbins was released by a 2007 settlement agreement. Eckenrod
sued Dagen and Robbins in 2006 following the initial Precision sale. After mediation and
entering into a mediation agreement, Eckenrod received an additional $300,000 and released any
claims that could have been made through June of2007. Eckenrod then voluntarily dismissed his
claims with prejudice. Neither Eckenrod nor Dagen and Robbins dispute that the negotiation and
sale of the Precision assets occurred before June of 2007. Instead, Eckenrod argues that the
mediation agreement he signed must be read in conjunction with the later settlement agreement.
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However, Third Party Defendants point out that there was an eight day gap between the signing
of the two agreements, unlike the one day gap in the case on which Eckenrod relies. See
International Ship Repairs & Marine Servs. Inc. v. General Portland, Inc., 469 So.2d 817 (Fla.
2d DCA 1985). Dagen and Robbins reason that without any incorporation by reference or
integration, that a court is not compelled to read two documents together. This Court agrees. A
liability release bars plaintiffs later claims when there is no dispute that it is valid. Shultz v.
Florida Keys Dive Center, Inc. 224 F.3d 1269, 1273 (11th Cir. 2000). "[C]ontract language that
is unambiguous on its face must be given its plain meaning." Green v. Life & Health ofAm., 704
So. 2d 1386, 1391 (Fla. 1998). The release does not does not include any language integrating
the mediation agreement, and as such, must be construed on its plain terms. Those plain terms
release "of and from, all, and all manner of action, and actions and causes of action ... claims and
demands whatsoever ... for, upon, or by any reason of any matter, cause or thing, whatsoever,
from the beginning of the world to the day of these presents, including without limitation all
claims raised or which could have been raised in that certain case ... " [D.E. 101, Exhibit A].
Eckenrod's objection is overruled.
5. Eckenrod's Contract and Tort Defenses
The remaining four objections that Eckenrod raises all relate to contract and tort defenses
to counts that Magistrate Judge Torres' recommends should be submitted to a jury for
determination at trial. It should be noted that Eckenrod concedes that these arguments are
rehashes of points he raised in his summary judgment and in each objection incorporates his
arguments from his motion for summary judgment. "It is improper for an objecting party to ...
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submit[ ] papers to a district court which are nothing more than a rehashing of the same
arguments and positions taken in the original papers submitted to the Magistrate Judge."
Camardo v. Gen. Motors Hourly-Rate Employees Pension Plan, 806 F. Supp. 380, 382
(W.D.N.Y.1992) . Nevertheless, none of Eckenrod's contract and tort defenses can prevail in
summary judgment as they do not apply as a matter of law. Florida courts have made clear that
"[t]he law is well established that the economic loss rule does not bar tort actions based on
fraudulent inducement and negligent misrepresentation." Allen v. The Stephan Co., 784 So.2d
456,457 (Fla. 4th DCA 2000); see also Moransais v. Heathman, 744 So.2d 973 (Fla.1999); PK
Ventures, Inc. v. Raymond James & Assocs., Inc., 690 So.2d 1296 (Fla. 1997). The distinction for
purposes of the economic loss rule is whether fraud occurs "in connection with
misrepresentations ... to enter into a transaction" or whether fraud occurs in "the performance of
the contract." Allen, at 457. Both of Marlite's counts alleging tortious interference and negligent
misrepresentations fall in the former category; the economic loss rule cannot apply as a matter of
law. Neither can the parol evidence rule apply where there is an allegation of fraudulent
inducement to a contract. Lou Bachrodt Chevrolet, Inc. v. Savage, 570 So. 2d 306, 308 (Fla. 4th
DCA 1990); Tinker v. De Maria Porsche Audi, Inc., 459 So. 2d 487, 491 (Fla. 3d DCA
1984)("when fraud enters into a transaction to the extent of inducing a written contract, the parol
evidence rule is not applicable.") Finally, issues of disputed fact prevent summary judgment as to
the counts of negligent misrepresentation or fraud. Eckenrod's objections themselves raise
disputed issues of material fact and the disagreements between Marlite's principal and Eckenrod
over assurances given to enter into the AP A. These credibility determinations are classic
examples of disputed facts that should properly be submitted to a jury. The Defendant's
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remaining objections are overruled.
IV. Conclusion
For the above reasons, it is
ADJUDGED that United States Magistrate Judge Edwin G. Torres's Report and
Recommendation (D.E. No. 111) on July 13,2012 is AFFIRMED and ADOPTED and all
objections to the same are OVERRULED. Accordingly, it is
ADJUDGED that:
(1)
Plaintiff Marlite's Motion for Partial Summary Judgment (D.E. No.) is DENIED.
(2)
Defendant Eckenrod's motion for summary judgment is GRANTED IN PART and
Counts 1 and 2 of the Complaint are DISMISSED without prejudice.
(3)
Defendant Eckenrod's motion for summary judgment is DENIED IN PART as to
all other issues.
(4)
Defendant Modular's motion for summary judgment is GRANTED IN PART and
Count 5 of the Complaint is DISMISSED without prejudice.
(5)
Defendant Modular's motion for summary judgment is DENIED IN PART as to all
other issues.
(6)
Third Party Defendants' motion for summary judgment (D.E. No.) is GRANTED.
Judgment is entered on behalf of the Third Party Defendants.
r
DONE AND ORDERED in Chambers at Miami, Florida,
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thi~Dday of August, 2012.
FED
UNIT
Copies provided to:
United States Magistrate Judge Edwin G. Torres
Counsel of Record
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