Source Production & Equipment Co., Inc. et al v. Schehr et al

Filing 248

ORDER AND REASONS - IT IS ORDERED that Counter-Defendants' motion for partial summary judgment on Schehr's defamation claim as it relates to statements allegedly made to Frazier (Rec. Doc. 149 ) is GRANTED and that claim is DISMISSED with prejudice. IT IS FURTHER ORDERED that Counter-Defendants' motion for partial summary judgment on Schehr's breach-of-oral-contract claim is DENIED. Signed by Judge Barry W Ashe on 4/4/2019. (sa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
SOURCE PRODUCTION &
EQUIPMENT CO., INC., ASPECT
TECHNOLOGY LIMITED,
SPECMED, LLC, SPEC MED
INTELLECTUAL PROPERTY, LLC
AND SPEC INTELLECTUAL
PROPERTY, LLC

CIVIL ACTION
NO. 16-17528
SECTION M (1)

VERSUS
KEVEN J. SCHEHR, ISOFLEX USA,
ISOFLEX
RADIOACTIVE
LLC,
RICHARD H. MCKANNAY, JR., AND
JOHN DOES 1-10

ORDER & REASONS
Before the Court is a motion for partial summary judgment filed by defendants-incounterclaim Richard D. Dicharry (“Dicharry”), Sandra Kusy (“Kusy”), and Source Production
& Equipment Co., Inc. (“SPEC”) (collectively “Counter-Defendants”), seeking dismissal of a
defamation claim filed by plaintiff-in-counterclaim Kevin J. Schehr (“Schehr”) concerning
purported statements made to Keith Frazier (“Frazier”) and Schehr’s breach-of-oral-contract
claim.1 Schehr opposes the motion,2 and Counter-Defendants reply in further support of the
motion.3 Having considered the parties’ memoranda and the applicable law, the Court issues this
Order & Reasons.
I. BACKGROUND
This matter concerns the alleged theft of trade secrets and breaches of fiduciary duty and
contract by a business’s former employee. The Court explained the factual background of this
1

R. Doc. 149.
R. Doc. 185.
3
R. Doc. 230.
2

case in an Order & Reasons ruling on Defendants’ motion to dismiss certain claims raised in
Plaintiffs’ first amended complaint:4
Source Production & Equipment Co., Inc. (“SPEC”) and its affiliates bring this
trade-secret misappropriation and unfair competition action against Kevin J.
Schehr, Isoflex USA, Isoflex Radioactive LLC, and Richard McKannay, Jr.
SPEC is a supplier of industrial and medical radiography equipment and
radioactive isotope materials. Schehr is a former executive officer at SPEC.
According to the complaint, Schehr began working for SPEC in 1995 and held
various positions at the company until his termination in July of 2016. Plaintiffs
allege that over the course of his employment, Schehr signed several
confidentiality agreements regarding SPEC’s trade secrets. These trade secrets
include technologies used to manufacture containers for shipping radioactive
material.
According to the complaint, Schehr unsuccessfully attempted to acquire an
ownership interest in SPEC in 2012 and 2014. Plaintiffs further allege that
Schehr’s resentment toward SPEC and its owner, Richard Dicharry, following
these attempts prompted Schehr to engage in conduct intended to undermine
SPEC and benefit Schehr and others affiliated with Schehr. To this end, Schehr
allegedly made several misrepresentations to Dicharry that he knew to be false,
caused SPEC to default on the terms of a sale agreement, negotiated business
contracts against Dicharry’s wishes, filed for and claimed ownership rights to
patents developed using SPEC’s resources, and provided false financial
information in order to inflate his personal bonuses, among several other alleged
transgressions.
SPEC terminated Schehr’s employment on July 10, 2016. Plaintiffs allege that
after his termination, Schehr did not immediately return his company-issued
laptop, despite SPEC’s demand that he do so. Plaintiffs further allege that once
the laptop was returned, a forensic analysis revealed that Schehr emailed a
number of SPEC’s confidential and proprietary files to his personal email
accounts. According to plaintiffs, the analysis also showed that minutes after his
termination, Schehr attached two external hard drives to the laptop and
subsequently deleted 5,086 files from the laptop. Plaintiffs allege that Schehr
continues to possess other storage media belonging to SPEC, including thumb
drives and CDs.
Finally, plaintiffs allege that both before and after his termination, Schehr
conspired with Isoflex USA and McKannay, the managing director of Isoflex
USA, to establish Isoflex Radioactive. Plaintiffs allege that in creating Isoflex
Radioactive, defendants misappropriated plaintiffs’ trade secrets and confidential

4

This matter was initially assigned to a different section of this Court and it was realloted to this section
upon the confirmation of the undersigned.

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information. This misappropriation, according to plaintiffs, will allow Isoflex
Radioactive to compete with plaintiffs in the market for radioactive materials.
In their amended complaint, plaintiffs assert against all defendants claims for
violations of the federal Defend Trade Secrets Act (“DTSA”), the Louisiana
Uniform Trade Secrets Act (“LUTSA”), and the Louisiana Unfair Trade Practices
Act (“LUTPA”), as well as for conversion. Against Schehr individually, plaintiffs
assert claims for violation of the Computer Fraud and Abuse Act (“CFAA”),
breach of legal duty, breach of contract, and fraud.
Source Prod. & Equip. Co. v. Schehr, 2017 WL 3721543, at *1-2 (E.D. La. Aug. 29, 2017)
(footnotes citing record eliminated). The Court granted the motion as to Plaintiffs’ conversion
claim against IUSA, IR, and McKanney, as well as Plaintiffs’ conversion claim against Schehr to
the extent they sought to recover the value of their trade secrets; and otherwise denied the
motion. Id. at *7.
In a subsequent Order & Reasons addressing motion to dismiss Schehr’s counterclaim
that was filed by SPEC, Dicharry and Kusy, the Court noted the following additional factual
allegations:
Schehr’s relationship with Dicharry and SPEC deteriorated during the months
leading up to Schehr’s termination. For example, according to Schehr, Dicharry
had promised to give him a 10% ownership interest in SPEC if Schehr facilitated
the completion of the design of a new radiography system (Radiography
Contract). Schehr alleges that the design was completed, but that two weeks
before Schehr’s termination Dicharry unreasonably refused to sign off on the new
design. SPEC and Dicharry also allegedly agreed to form a new company with
Schehr and Dennis Chedraui (NEWCO Agreement). Although the parties to the
agreement allegedly signed a letter of intent, and Dicharry and SPEC verbally
obligated themselves to the terms of the NEWCO Agreement, Schehr asserts that
Dicharry and SPEC failed to fulfill their obligations under the agreement.
According to Schehr, Kusy caused Dicharry and SPEC to breach these contracts
by providing Dicharry with false information about a conference Schehr attended
and a conspiracy between Schehr and Chedraui.
Schehr alleges that upon his termination, SPEC seized a thumb drive and pictures
belonging to him. SPEC allegedly obtained the password for Schehr’s personal
email account from this thumb drive and accessed the account on November 10,
2016. Schehr further alleges that Dicharry and Kusy both made defamatory
statements about Schehr after his termination.
*

*
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*

On September 12, Schehr answered the amended complaint and filed
counterclaims against SPEC. Schehr then amended his counterclaims to add
Dicharry, Kusy, and unknown insurers of SPEC as counterclaim-defendants.
Schehr asserts counterclaims for defamation, invasion of privacy, and
revendicatory relief against all counterclaim-defendants; breach of contract or
detrimental reliance against SPEC, Dicharry, and the insurers; unpaid wages
against SPEC and the insurers; and intentional interference with a contract against
Kusy. SPEC, Dicharry, and Kusy now move to dismiss certain counterclaims.
Source Prod. & Equip. Co. v. Schehr, 2017 WL 6623994, at *1 (E.D. La. Dec. 28, 2017)
(footnotes citing record eliminated). The Court granted the motion as to Schehr’s claims for
revendicatory relief against Dicharry and Kusy and intentional interference with a contract
against Kusy; and otherwise denied the motion. Id. at *7.
II. ANALYSIS
A. Summary Judgment Standard
Summary judgment is proper “if the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine issue as
to any material fact and that the moving party is entitled to a judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed. R. Civ. P. 56(c)). “Rule 56(c)
mandates the entry of summary judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to establish the existence of an element
essential to that party’s case, and on which the party will bear the burden of proof at trial.” Id. A
party moving for summary judgment bears the initial burden of demonstrating the basis for
summary judgment and identifying those portions of the record, discovery, and any affidavits
supporting the conclusion that there is no genuine issue of material fact. Id. at 323. If the
moving party meets that burden, then the nonmoving party must use evidence cognizable under
Rule 56 to demonstrate the existence of a genuine issue of material fact. Id. at 324.

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A genuine issue of material fact exists if a reasonable jury could return a verdict for the
nonmoving party.

See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1996).

The

substantive law identifies which facts are material. Id. Material facts are not genuinely disputed
when a rational trier of fact could not find for the nonmoving party upon a review of the record
taken as a whole. See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986); Equal Emp’t Opportunity Comm’n v. Simbaki, Ltd., 767 F.3d 475, 481 (5th Cir. 2014).
“[U]nsubstantiated assertions,” “conclusory allegations,” and merely colorable factual bases are
insufficient to defeat a motion for summary judgment. See Anderson, 477 U.S. at 249-50;
Hopper v. Frank, 16 F.3d 92, 97 (5th Cir. 1994). In ruling on a summary judgment motion, a
court may not resolve credibility issues or weigh evidence. See Delta & Pine Land Co. v.
Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). Furthermore, a court
must assess the evidence, review the facts, and draw any appropriate inferences based on the
evidence in the light most favorable to the party opposing summary judgment. See Tolan v.
Cotton, 572 U.S. 650, 656 (2014); Daniels v. City of Arlington, 246 F.3d 500, 502 (5th Cir.
2001). Yet, a court only draws reasonable inferences in favor of the nonmovant “when there is
an actual controversy, that is, when both parties have submitted evidence of contradictory facts.”
Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (citing Lujan v. Nat’l
Wildlife Fed’n, 497 U.S. 871, 888 (1990)).
After the movant demonstrates the absence of a genuine dispute, the nonmovant must
articulate specific facts and point to supporting, competent evidence that may be presented in a
form admissible at trial. See Lynch Props., Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625
(5th Cir. 1998); Fed. R. Civ. P. 56(c)(1)(A) & (c)(2). Such facts must create more than “some
metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586. When the nonmovant
will bear the burden of proof at trial on the dispositive issue, the moving party may simply point
to insufficient admissible evidence to establish an essential element of the nonmovant’s claim in
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order to satisfy its summary judgment burden. See Celotex, 477 U.S. at 322-25; Fed. R. Civ. P.
56(c)(B). Unless there is a genuine issue for trial that could support a judgment in favor of the
nonmovant, summary judgment must be granted. See Little, 37 F.3d at 1075-76.
B. Schehr’s Defamation Claim Related to Statements Made to Frazier
Counterclaim-Defendants move for summary judgment on Schehr’s defamation claim as
it relates to statements allegedly made to Frazier, arguing that the claim fails as a matter of law
because Frazier was employed by SPEC at the time the statements were made.5 Schehr contends
that there are disputed issues of material fact regarding whether Frazier was employed by SPEC
at the relevant time.6
In a previous Order & Reasons ruling on Counter-Defendants’ motion to dismiss
Schehr’s defamation claim, this Court held that communications among employees of the same
corporation are not a publication to a third party, and thus are not actionable as defamation
claims. Source Prod. & Equip., 2017 WL 6623994, at *2-3. The Court refused to dismiss
Schehr’s defamation claim as to statements made to Frazier because Schehr alleged that Frazier
was a former SPEC employee at the time the alleged statements were made, and Schehr was
entitled to the benefit of the doubt at the motion to dismiss stage. Id. at *3.
Counter-Defendants attach to their motion for summary judgment the declaration of
Michael Sanchez (“Sanchez”), SPEC’s director of finance and administration, in which Sanchez
declares that Frazier was a full-time SPEC employee at the relevant time.7 Schehr has not
produced any evidence to prove otherwise.8 Instead, Schehr offers conjecture that there might be
a genuine issue of material fact regarding Frazier’s employment status because Schehr has not

5

R. Doc. 149.
R. Doc. 185 at 6 at n.21. Schehr also argues that he has stated a valid defamation claim as to statements
allegedly made to regulatory agencies. Id. at 6. Counterclaim-Defendants’ motion for summary judgment does not
address that portion of Schehr’s defamation claim.
7
R. Doc. 149-2.
8
R. Doc. 185.
6

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been able to locate Frazier to take his deposition.9 At this summary judgment stage, once
Counter-Defendants presented evidence regarding Frazier’s employment, Schehr had the burden
of producing contrary evidence showing the existence of disputed issues of fact. Ragas v. Tenn.
Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir. 1998). Schehr has failed to do so. Thus, CounterDefendants’ motion for partial summary judgment on Schehr’s defamation claim as it relates to
statements allegedly made to Frazier is GRANTED and that claim is DISMISSED with
prejudice.
C. Schehr’s Breach of Oral Contract Claim
Dicharry and SPEC move to dismiss Schehr’s breach-of-oral-contract claim arguing that
Schehr cannot prove the existence of the alleged oral contract due to lack of corroborating
evidence confirming the existence of the alleged oral agreement.10
“A contract is an agreement by two or more parties whereby obligations are created,
modified, or extinguished.” La. Civ. Code art. 1906. Under Louisiana law, the formation of a
valid contract requires: (1) capacity to contract; (2) mutual consent; (3) a certain object; and (4) a
lawful purpose. Id. arts. 1918, 1927, 1966 and 1971. The party demanding performance of an
obligation has the burden of proving the obligation’s existence. Id. art. 1831.
An oral contract with a value exceeding $500 “must be proved by at least one witness and
other corroborating circumstances.” Id. art. 1846. “The plaintiff himself may serve as the
witness to establish the existence of the oral contract.” Suire v. Lafayette City-Par. Consol.
Gov’t, 907 So. 2d 37, 58 (La. 2005) (citing Gulf Container Repair Servs., Inc. v. FIC Bus. & Fin.
Ctrs., Inc., 735 So. 2d 41, 43 (La. App. 1999)). “The ‘other corroborating circumstances’ need
only be general in nature; independent proof of every detail of the agreement is not required.”
Id. (citing Kilpatrick v. Kilpatrick, 660 So. 2d 185, 185 (La. App. 1995)). However, the plaintiff

9

Id. at 6 n.21.
R. Doc. 149.

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cannot provide “the other corroboration”; it must come from another source. Id. (citing Gulf
Container Repair Servs., Inc., 735 So. 2d at 43). A claim for breach of an oral contract fails as a
matter of law if the plaintiff cannot produce corroborating evidence. Id.
In this case, Schehr alleges that he and Dicharry entered into an oral contract whereby
Dicharry agreed to transfer a 10% ownership interest in SPEC to Schehr if Schehr facilitated the
completion of the design for a new radiography system for SPEC.11 Scheher alleges that he
fulfilled his end of the bargain two weeks before his termination, but Dicharry, without good
reason, refused to sign off on the design prototype.12
Dicharry and SPEC argue that Schehr’s claim fails as a matter of law because Scheher
has not – and cannot – offer any corroborating witness testimony or documents to prove the
existence of the alleged oral agreement.13 SPEC and Dicharry submit a declaration by Dicharry
in which he states that he agreed to transfer a 10% ownership interest in SPEC to Schehr if three
conditions were met to Dicharry’s satisfaction: “(1) SPEC met certain profit goals; (2) Schehr
completed the prototype design, testing, licensing, and manufacture of (i.e., brought to market)
the J-Tube System; and (3) Schehr developed and implemented a new line of business for SPEC
that would be completely unrelated to industrial radiography.”14 Dicharry also declares that none
of the conditions was fulfilled.15 SPEC and Dicharry point out that the declaration reiterates
statements that were contained in Dicharry’s discovery responses which were produced on
October 4, 2018.16
Scheher argues that Plaintiffs’17 complaint provides corroborating evidence that the oral
contract existed.18 In paragraph 47 of the complaint, Plaintiffs allege:
11

R. Doc. 56 at 66 & Doc. 61 at 15.
R. Doc. 56 at 66-67 & Doc. 61 at 15-16.
13
R. Doc. 149-1 at 10.
14
R. Doc. 149-3 at 3.
15
Id. at 4.
16
R. Doc. 230 at 4.
17
Dicharry is not a plaintiff, but SPEC is. See R. Doc. 33.
18
R. Doc. 185 at 2-3.
12

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In 2014, Schehr requested to receive ten percent (10%) of SPEC’s stock.
Notwithstanding the lack of any monetary consideration offered for this
ownership interest, Mr. Dicharry agreed to Schehr’s proposal conditionally only
on Schehr completing the design, licensing and production of a new radiography
system based on Mr. Dicharry’s concept. Schehr failed to meet this condition and
no ownership interest in SPEC was transferred to him by Mr. Dicharry prior to
Schehr’s termination.19
Schehr also argues that he has corroborating testimony from SPEC’s project manager, his brother
Billy Schehr (“B. Schehr”).20 B. Schehr testified at his deposition that he knew Schehr and
Dicharry had a deal at some point whereby Schehr would get a portion of the company and that it
was connected to the design of the “J-Tube.”21 Schehr also argues that the Court should
disregard the additional contractual terms stated in Dicharry’s declaration because it is not
Schehr’s burden to disprove Dicharry and SPEC’s defense to the contract claim.22
The Court agrees with Schehr that he has produced enough corroborating evidence to
overcome Counter-Defendants’ motion for summary judgment. SPEC and Dicharry argue that
B. Shehr’s testimony is insufficient corroboration because he did not know all of the terms of the
alleged contract.23 However, the Court finds that B. Schehr’s testimony about the agreement,
together with the allegations in SPEC’s own complaint concerning the oral contract and
Dicharry’s declaration stating that there was an oral agreement, constitute sufficient
corroborating evidence to make the existence of an oral contract a question of fact for the factfinder. Moreover, there are disputed issues of material fact regarding the exact terms of the
contract that cannot be resolved on a motion for summary judgment. Therefore, SPEC and
Dicharry’s motion for summary judgment on Schehr’s breach-of-oral-contract claim is DENIED.

19

R. Doc. 33 at 17-18.
R. Doc. 185 at 4.
21
Id. at n.13.
22
Id. at 6 &10-11.
23
R. Doc. 230 at 5-8.
20

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III.

CONCLUSION
Accordingly,
IT IS ORDERED that Counter-Defendants’ motion for partial summary judgment on

Schehr’s defamation claim as it relates to statements allegedly made to Frazier (R. Doc. 149) is
GRANTED and that claim is DISMISSED with prejudice.
IT IS FURTHER ORDERED that Counter-Defendants’ motion for partial summary
judgment on Schehr’s breach-of-oral-contract claim (R. Doc. 149) is DENIED.

New Orleans, Louisiana, this 4th day of April, 2019.

________________________________
BARRY W. ASHE
UNITED STATES DISTRICT JUDGE

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