Shukh v. Seagate Technology, LLC et al
Filing
242
MEMORANDUM OPINION AND ORDER (1) Granting in part and denying in part plaintiff's 150 Motion to Dismiss Counterclaims. Motion is denied as to defendants' counterclaim f or breach of contract. Motion is granted as to defendants' counterclaims for conversion and replevin. (2) Ganting in part and denying in part defendants' 169 Motion for Summary Judgment. Moti on is granted as to defendants' counterclaim for breach of contract. Motion is denied as moot as to defendants' counterclaims for conversion and replevin.(3) Denying as moot defendants' [16 9] Motion for Preliminary Injunction. (4) Denying defendants' 169 motion for the return of documents under the inherent authority of the Court. (5) Denying plaintiff 9;s 214 Motion to Dismiss for Lack of Subject Matter Jurisdiction on the Grounds of Mootnees Based on Changed Circumstances. (6) Based upon the Court's granting Defendants' motion for summary judgment as to its counterclaim for breach of contract, Shukh shall return all documents at issue within twenty-one (21) days from the date of this Order. (Written Opinion). Signed by Judge John R. Tunheim on November 30, 2011. (DML)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
ALEXANDER M. SHUKH,
Civil No. 10-404 (JRT/JJK)
Plaintiff,
v.
SEAGATE TECHNOLOGY, LLC,
SEAGATE TECHNOLOGY, INC.,
SEAGATE TECHNOLOGY, and
UNKNOWN OWNERS AND
ASSIGNEES,
MEMORANDUM OPINION
AND ORDER
Defendant.
Constantine John Gekas and John C. Gekas, GEKAS LAW, LLP, 11
South LaSalle Street, Suite 1700, Chicago, IL 60603; and James H. Kaster,
Katherine M. Vander Pol, and Sarah W. Steenhoek, NICHOLS KASTER,
PLLP, 80 South Eighth Street, Suite 4600, Minneapolis, MN 55402, for
plaintiff.
Chad Drown, Calvin L. Litsey, Elizabeth Cowan Wright, Joseph A.
Herriges, David J. F. Gross, and Jeya Paul, Charles F. Knapp, FAEGRE
& BENSON LLP, 90 South Seventh Street, Suite 2200, Minneapolis, MN
55402, for defendants.
Plaintiff Alexander M. Shukh filed this action against defendants Seagate
Technology, LLC, Seagate Technology, Inc., and Seagate Technology (collectively
“Seagate”), alleging claims arising out of Seagate‟s employment and termination of
Shukh. Seagate counterclaimed against Shukh for breach of the parties‟ employment
agreement, conversion, and replevin. Seagate‟s claims arise out of Shukh‟s duplication
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and retention of over 49,000 documents owned by Seagate. Shukh moves to dismiss the
counterclaims. Seagate moves for summary judgment on all of its counterclaims, or, in
the alternative, for a preliminary injunction on the breach of contract counterclaim or for
the return of documents pursuant to the Court‟s inherent authority. Because there is no
material issue of fact as to Shukh‟s breach of the document return provision of the
employment agreement, the Court will grant Seagate‟s motion for summary judgment as
to the breach of contract claim. The Court will grant Shukh‟s motion to dismiss as to the
conversion and replevin counterclaims because the heart of those claims lies in the breach
of contract claim. The Court will deny the remaining motions made by Shukh and
Seagate.
BACKGROUND
Shukh worked at Seagate from around September 15, 1997 until sometime after he
was notified of his termination on January 14, 2009, to be effective March 16, 2009.
(Am. Compl. ¶¶ 33, 34, April 7, 2010, Docket No. 7.) Shukh signed an agreement
entitled At-Will Employment, Confidential Information and Invention Assignment
Agreement on September 15, 1997.
(Am. Compl., Ex. 1.)
Seagate alleges Shukh
breached the following provision of the agreement:
Returning Company Documents: I agree that, at the time of leaving the
employ of the Company, I will deliver to the Company (and will not keep
in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment,
software, other documents or property, or reproductions of any
aforementioned items developed by me pursuant to my employment with
the Company or otherwise belonging to the Company, its successors or
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assigns. In the event of the termination of my employment, I agree to sign
and deliver the “Termination Certification” attached hereto as Exhibit C.
(Am. Compl., Ex. 1 at 3.) Prior to Shukh‟s termination and immediately following his
notice of termination, Shukh made copies of approximately 49,607 pages of Seagate‟s
documents. 1 (Mots. Hr‟g Tr. at 36:10-16, Sept. 28, 2010, Docket No. 64.) Shukh alleges
that the documents are proof of his inventorship rights at issue in his claims against
Seagate. (Am. Compl. ¶ 330.)
Seagate repeatedly requested the return of the documents, but Shukh has refused.
First, on January 15, 2009, after Shukh received his notice of termination, Shukh‟s
supervisor was informed that Shukh was copying and taking documents from Seagate.
(Allen Decl. ¶ 4, June 13, 2011, Docket No. 166.) When Shukh‟s supervisor requested
the return of the documents, Shukh refused. (Allen Decl. ¶¶ 4-5.) On May 26, 2009,
Seagate sent a letter to Shukh, again requesting the return of the documents, but no
documents were returned. (Mem. in Supp., Ex. H, Docket No. 163-8.) Later that year,
Shukh‟s attorney indicated that he had possession of about twelve documents. (Mem. in
Opp‟n to Mot. for Summ. J., Exs. B-4, B-6, Docket No. 189-2.) Seagate first learned that
Shukh had taken many more documents in February of 2010, when Shukh filed his
complaint, referencing numerous Seagate documents. (Reply Mem. 4, Aug. 2, 2011,
Docket No. 195.)
Seagate sent a letter to Shukh the following month, once more
1
Shukh copied 4,544 documents onto physical pieces of paper using Seagate‟s copier and
paper, and digitally copied 45,063 documents onto electronic media. (Am. Countercl. ¶ 20,
June 3, 2011, Docket No. 155.)
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requesting the return of Seagate‟s documents, citing the terms of the employment
agreement (Mem. in Supp., Ex. J, June 13, 2011, Docket No. 163-10); Shukh refused.
Seagate prepared a motion for the return of documents and initially scheduled a
hearing on the motion for June 2, 2010. (Stipulation 2, May 17, 2010, Docket No. 12.)
As a result of a trial in which Shukh‟s counsel was involved, the parties agreed to delay
the hearing until after August 16, 2010. (Id. at 3.) Seagate moved for return of its
documents in August. (Mot. to Disqualify Counsel and for Return of Documents, Aug.
30, 2010, Docket No. 25.) A hearing was held before the Magistrate Judge on September
28, 2010, and Shukh‟s counsel admitted that Shukh had taken approximately 50,000
documents. (Mots. Hr‟g Tr. at 36:10-14, Sept. 28, 2010.) At that hearing the Magistrate
Judge ordered Shukh to copy all of the documents and provide them to Seagate, so that
Seagate could examine them and determine whether there are any privilege concerns.
(Docket No. 61.) Seagate alleges that this hearing was the first time it learned the extent
of the documents taken, and it subsequently counterclaimed against Shukh on April 15,
2011, seeking the return of all of the documents. (Ans. and Countercl., Apr. 15, 2011,
Docket No. 142.) Shukh made copies of the documents, and gave those additional copies
to Seagate. (Am. Countercl. ¶ 20.) However, to date, none of Shukh‟s own copies of
Seagate‟s documents appear to have been returned to Seagate.
Shukh moved to dismiss Seagate‟s counterclaims for failure to state a claim on
May 13, 2011. (Mot. to Dismiss, May 13, 2011, Docket No. 150.) Seagate moved for
summary judgment on its counterclaims on June 13, 2011. (Mot. for Summ. J., June 13,
2011, Docket No. 169.) In support of its motion, Seagate submitted a DVD containing a
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copy of the documents at issue under protective seal. (Drown Decl., Ex. P, June 13,
2011, Docket No. 163-16.) Additionally, Seagate has produced many of the documents
at issue in discovery, but withheld approximately 392 documents under assertions of
privilege. (Letter to Dist. Judge, Sept. 23, 2011, Docket No. 202.) Those documents are
now the subject of a motion to compel made by Shukh, which will be decided by the
Magistrate Judge. (Am. Mot. to Compel, Oct. 7, 2011, Docket No. 206.) Shukh later
moved to dismiss Seagate‟s counterclaims for lack of jurisdiction. (Mot. to Dismiss, Oct.
14, 2011, Docket. No. 214.)
ANALYSIS
I.
STANDARD OF REVIEW
A.
Motion to Dismiss
Shukh moves to dismiss Seagate‟s counterclaims under Federal Rule of Civil
Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.
Although a complaint need not contain “detailed factual allegations” to survive a motion
to dismiss, “a plaintiff‟s obligation to provide the „grounds‟ of his „entitle[ment] to relief‟
requires more than labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)
(internal citations omitted). “Where a complaint pleads facts that are merely consistent
with a defendant‟s liability, it stops short of the line between possibility and plausibility”
and must be dismissed.
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal
quotation marks omitted). In reviewing a complaint on a motion to dismiss, the Court
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takes as true all allegations in the complaint, and construes it in the light most favorable
to the nonmoving party. Carton v. Gen. Motors Acceptance Corp., 611 F.3d 451, 454
(8th Cir. 2010).
B.
Seagate’s Motion for Summary Judgment
Seagate moves for summary judgment pursuant to Federal Rule of Civil Procedure
56. Summary judgment is appropriate where there are no genuine issues of material fact
and the moving party can demonstrate that it is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(a). A fact is material if it might affect the outcome of the suit, and a
dispute is genuine if the evidence is such that it could lead a reasonable jury to return a
verdict for either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A
court considering a motion for summary judgment must view the facts in the light most
favorable to the non-moving party and give that party the benefit of all reasonable
inferences that can be drawn from those facts. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986). “To defeat a motion for summary judgment, a
party may not rest upon allegations, but must produce probative evidence sufficient to
demonstrate a genuine issue [of material fact] for trial.” Davenport v. Univ. of Ark. Bd.
of Trustees, 553 F.3d 1110, 1113 (8th Cir. 2009) (citing Anderson, 477 U.S. at 247-49).
II.
BREACH OF CONTRACT
A.
Shukh’s Motions to Dismiss the Breach of Contract Claim
Shukh moves to dismiss Seagate‟s breach of contract claim for failure to state a
claim. Specifically, Shukh argues that Seagate has not adequately pleaded the elements
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of damages and satisfaction of conditions precedent. Seagate amended its counterclaim
to address these concerns and the Court finds that Seagate has adequately pleaded these
elements, as discussed in further detail below. For these reasons, the Court will deny
Shukh‟s motion to dismiss for failure to state a claim as to the breach of contract
counterclaim.
Additionally, Shukh moves to dismiss Seagate‟s breach of contract claim under
Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction, arguing
that Seagate‟s production of documents in discovery mooted its claim for breach of
contract. Seagate did not, however, produce all of the documents at issue; it withheld
approximately 392 documents due to privilege claims. At the hearing on this matter,
counsel for Shukh admitted that not all documents were produced in discovery, and
Shukh has a motion to compel pending before the Magistrate Judge. (Mots. Hr‟g Tr. at
6:16-22, Nov. 3, 2011, Docket No. 231.) The Court concludes it has jurisdiction at this
time and will deny the 12(b)(1) motion because it finds at least some documents have not
yet been produced.
B.
Seagate’s Motion for Summary Judgment on Breach of Contract
Seagate moves for summary judgment on its counterclaim for breach of contract.
To establish a breach of contract claim under Minnesota law, the plaintiff must prove that
(1) an agreement was formed, (2) the plaintiff performed any conditions precedent, and
(3) the defendant breached the agreement. Nicollet Cattle Co. v. United Food Group,
LLC, No. 08-5899, 2010 WL 3546784, at *7 (D. Minn. Sept. 7, 2010) (citing Commercial
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Assocs., Inc. v. Work Connection, Inc., 712 N.W.2d 772, 782 (Minn. Ct. App. 2006)). In
addition, some Minnesota cases hold that damages are a required element, see, e.g.,
Parkhill v. Minn. Mut. Life Ins. Co., 174 F. Supp. 2d 951, 961 (D. Minn. 2000), while
others indicate that specific performance may be requested in lieu of damages. See
Loppe v. Steiner, 699 N.W.2d 342, 349 (Minn. Ct. App. 2005).
Seagate argues that there is no genuine issue of fact on any of the elements
required to prove a breach of contract claim. Seagate supports its claim with ample
record evidence that Shukh does not dispute.2 First, an agreement was formed when
Shukh signed the employment agreement. (Am. Compl. ¶ 287 (admitting the existence
of the agreement).) The consideration exchanged included Seagate‟s promises of at-will
employment and compensation and Shukh‟s promise to comply with the terms of the
Employment Agreement. (Am. Compl., Ex. 1 at 1.)
Second, any conditions precedent have been satisfied. A condition precedent
“is one which is to be performed before the agreement of the parties becomes operative.”
Lake Co. v. Molan, 131 N.W.2d 734, 740 (Minn. 1964).
The agreement generally
required Shukh to agree to its terms “[a]s a condition of [his] employment with Seagate.”
(Am. Compl., Ex. 1 at 1.)
2
Additionally, the document return provision was to be
Rule 56(e) provides:
If a party fails . . . to properly address another party‟s assertion of fact as required
by Rule 56(c), the court may . . . (2) consider the fact undisputed for purposes of
the motion; [or] (3) grant summary judgment if the motion and supporting
materials – including the fact considered undisputed – show that the movant is
entitled to it . . . .
Fed. R. Civ. P. 56(e). In reaching its decision, the Court considered the supporting materials
provided by both parties in the light most favorable to Shukh.
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complied with “at the time of leaving the employ of” Seagate. (Am. Compl., Ex. 1 at 3.)
There is no material issue of fact that Seagate employed Shukh nor that Shukh has left the
employ of Seagate. (Am. Compl. ¶¶ 33, 34.)
Finally, there is no issue of fact that Shukh breached the contract. The terms of
the employment agreement are clear: upon Shukh‟s termination he was to return
Seagate‟s “records, data, notes, reports, . . . correspondence, specifications, drawings,
blueprints, sketches, . . . other documents or property, or reproductions of any
aforementioned items . . . .” (Am. Compl., Ex. 1 at 3.) Shukh admitted that he took and
retained Seagate‟s documents. (Stipulation 2; Mots. Hr‟g Tr. 26-27, Sept. 28, 2010; see
also Am. Compl. ¶¶ 241, 250, 252.)
A review of the evidence submitted in this action indicates that there is no genuine
issue of material fact on the elements of breach of contract. However, Shukh has raised a
number of defenses to Seagate‟s breach of contract claim which the Court now addresses.
C.
Shukh’s Defenses to Breach of Contract
Shukh asserts that the counterclaims are moot because Seagate attached a copy of
the documents to its motion, that the counterclaims are preempted by federal patent law
and the Constitution, that he needs additional time for discovery, that Seagate‟s request
for equitable remedies is barred by its unclean hands, and that Seagate has waived its
rights under the contract due to its delay in seeking legal relief. The Court considers each
of these defenses in turn.
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1.
Mootness
Shukh argues that Seagate‟s counterclaims are moot because Seagate later
disclosed all of the documents at issue in support of its summary judgment motion.
Shukh cites to cases that involve parties who initially disclosed materials in discovery
and later attempted to obtain a protective order or assert a privilege.3 The Court finds
that these cases are inapposite. By producing documents as part of the litigation process
in 2011, Seagate did not condone Shukh‟s unauthorized taking of the documents in 2009.
Further, the parties have a legally cognizable interest in the outcome, because lawful
possession of the documents is relevant for this action and for future use of the
documents.4 See City of Erie v. Pap’s A.M., 529 U.S. 277, 287 (2000). The Court finds
that Seagate did not moot its breach of contract claims by submitting a copy of the
documents in support of its motions.
3
See United States ex rel. Schweizer v. Oce, N.V., 577 F. Supp. 2d 169, 176 (D.D.C.
2008) (a party must jealously guard its privilege to retain it); Door Direct, Inc. v. Nationwide
Delivery Sys., Inc., 2005 U.S. Dist. LEXIS 35236 (W.D. Tex. 2005) (a party may use
information obtained through discovery); Cruz v. Coach Stores, Inc., 196 F.R.D. 228, 230
(S.D.N.Y. 2000) (party had disclosed material in related litigation without a protective order and
therefore could not assert a privilege over same material in a different action); McGreevy v. CSS
Indus., 1996 U.S. Dist. LEXIS 10244 (E.D. Pa. 1996) (no privilege where information was
inadvertently disclosed if no reasonable attempt made to safeguard information or prompt steps
taken to correct disclosure).
4
The documents exchanged in this litigation are currently protected under seal. Seagate
is concerned that Shukh will use the documents for a competitive advantage in his new business,
Spingate Technology, LLC, which develops memory technology designed to replace the type of
products made by Seagate. (Mem. in Supp., Ex. Q, June 13, 2011, Docket No. 163-17.)
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2.
Preemption and Constitutionality
Shukh also defends against Seagate‟s counterclaims by arguing that they are
preempted by federal patent law because he needs the documents to prove his
inventorship claims. In addition, he argues that the return of the documents would
conflict with the Patent Clause of the Constitution, U.S. Const. art. I, § 9, cl. 8, and
therefore may not be ordered.5 These arguments rest on the premise that Shukh is unable
to prove his inventorship claims without these documents and that he cannot obtain the
documents in another manner. To the contrary, Seagate has already provided nearly all
of these documents in discovery, and Shukh is currently challenging Seagate‟s assertion
of privilege over the documents not produced. (Letter to Dist. Judge 1-2, Sept. 20, 2011,
Docket No. 201; Am. Mot. to Compel.) It is clear that there are other lawful methods of
obtaining such proof, such as discovery governed by the Federal Rules of Civil
Procedure. This Court will not sanction an employee‟s breach of contract merely because
the employee finds it inconvenient to follow the rules of discovery to obtain evidence
supporting its claims against an employer.
5
The patent clause states that “Congress shall have Power . . . [t]o promote the Progress
of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive
Right to their respective Writings and Discoveries . . . .” U.S. Const. art. I, § 9, cl. 8. Shukh‟s
argument as to this clause is not clear, but it appears that he creates a distinction between
ownership and inventorship, and argues that inventorship cannot be transferred, even though
ownership of a patent may be assigned. Because, pursuant to his reading, the patent clause
primarily protects inventor‟s rights, he argues that any theories that detract from the right of
inventorship run afoul of the Constitution.
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3.
Additional Time for Discovery
Shukh submits a declaration seeking additional time for discovery on its defenses
and claims against Seagate. A “party opposing summary judgment is required to file an
affidavit . . . showing what specific facts further discovery might uncover.” Roark v.
City of Hazen, 189 F.3d 758, 762 (8th Cir. 1999). In Anuforo v. Commissioner, the
district court denied a party‟s request for additional time to take a witness‟s testimony
because the request lacked specific facts and a description of “what information further
discovery might reveal.”6 614 F.3d 799, 808 (8th Cir. 2011) (affirming). Similarly,
Shukh‟s assertions lack specificity. He claims that he must investigate “[t]he true facts
behind Seagate‟s failure to move promptly to seek the return of documents” and take
additional depositions. (Mem. in Opp‟n to Mot. for Summ. J., Ex. D ¶ 4, July 12, 2011,
Docket No. 189-4.) Shukh does not indicate what information might be uncovered or
how the “true facts” of Seagate‟s purported delay might be relevant to the counterclaims.
Accordingly, the Court finds that Shukh has not adequately supported his request for
additional time for discovery.
4.
Unclean Hands
Shukh also raises the equitable defense of unclean hands to bar Seagate‟s request
of specific performance of the contract. “The doctrine of unclean hands will be invoked
6
The Eighth Circuit reached similar holdings in Ray v. Am. Airlines, Inc., 609 F.3d 917,
923 (8th Cir. 2010) (denying request because non-moving party failed to articulate how facts
sought were relevant to rebuttal of motion for summary judgment); and Marksmeier v. Davie,
622 F.3d 896, 903 (8th Cir. 2011) (denying request because non-moving party‟s statement that
depositions were “necessary to test the veracity of and refute the allegations made” was not
specific enough).
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only to deny equitable relief to a party whose conduct has been unconscionable by reason
of a bad motive.” Wind Turbine Indus. Corp. v. Jacobs Wind Elec. Co., Inc., No. 09-36,
2010 WL 4723385, at *12 (D. Minn. Nov. 16, 2010). Shukh argues that his claims
against Seagate of correction of inventorship and fraud support a finding that Seagate has
unclean hands. This Court addressed Shukh‟s argument of unclean hands in its Order
dated March 30, 2011 when it dismissed Shukh‟s request for a declaration that the
document return provisions of the employment agreement are unenforceable.7 (Mem.
Op. and Order at 29-31, Mar. 30, 2011, Docket No. 140.) Shukh has not submitted
additional evidence to persuade the Court to reconsider this decision.
A party may not merely raise the defense of unclean hands to contest a motion for
summary judgment without providing any evidentiary support. 8 Shukh had the burden to
show that there was a factual dispute as to his defense of unclean hands, and has failed to
point to a single fact outside of the allegations contained in his complaint. For this
7
Shukh had argued that Seagate‟s fraudulent omission of his name as inventor and its
filing of false patent applications demonstrated unclean hands. (Id. at 30.) This Court reviewed
his arguments and found “no evidence of unconscionability, or bad faith” that would require this
Court to declare the document return provisions unenforceable, and the Court dismissed the
claim for declaratory judgment. (Id. at 31.)
8
Courts have repeatedly dismissed the defense of unclean hands when it is unsupported.
See, e.g., Minn. Specialty Crops, Inc. v. Minn. Wild Hockey Club, LP, No. 00-2317, 2002 U.S.
Dist. LEXIS 13991, at *36 (D. Minn. July 26, 2002) (dismissing unclean hands defense when
defendants presented no specific evidence showing plaintiff sought trademark registrations in
bad faith); Metro Networks Communs., Ltd. P’ship v. Zavodnick, No. 03-6198, 2003 U.S. Dist.
LEXIS 22685, at *22 (D. Minn. Dec. 12, 2003) (dismissing unclean hands defense when
defendant did not show plaintiff‟s conduct was “unconscionable either as a result of a „bad
motive‟ or in the benefits to [plaintiff] or injury to others”); Pedersen v. Akona, 429 F. Supp. 2d
1130, 1143-44 (D. Minn. 2006) (declining to apply unclean hands doctrine in correction of
inventorship action because plaintiff had not produced evidence showing defendant acted with
bad motive and plaintiff had not established elements of fraud).
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reason, the Court finds that Seagate‟s demand for specific performance is not barred by
Shukh‟s defense of unclean hands.9
5.
Waiver
Shukh asserts that Seagate waived its rights to enforce the document return
provision of the contract, because Seagate first asked Shukh to return the documents on
his last day in January 2009, but waited sixteen months to take any legal action to retrieve
the documents and two and a half years before moving for summary judgment on this
issue. Waiver requires “an intentional relinquishment of a known right, and it must
clearly be made to appear from the facts disclosed.” Citizens Nat’l Bank v. Mankato
Implement, Inc., 441 N.W.2d 483, 487 (Minn. 1989) (internal quotation marks omitted).
Mere unexplained delay is not construed as a voluntary relinquishment of contractual
rights. Har-Mar, Inc. v. Thosen & Thorshov, Inc., 218 N.W.2d. 751, 756 (Minn. 1974).
The waiving party must also have had “full knowledge of the facts.” Freitag v. Wolf, 226
N.W.2d 868, 870 (Minn. 1975).
The Court concludes that Seagate‟s delay in seeking legal enforcement does not
constitute waiver. Seagate showed that it sought enforcement of the document return
provision at regular intervals since Shukh‟s termination in 2009. Seagate has made
numerous requests for the documents and all of them have been refused or ignored by
Shukh. Further, Seagate could not have waived its rights prior to knowing how many
9
Shukh clearly may continue to pursue his original claims of fraud, correction of
inventorship, discrimination, and retaliation. This portion of the opinion concerns only unclean
hands in the context of the breach of contract, which is unsupported.
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documents were involved, and Seagate claims that it did not have full knowledge of the
facts until a hearing held September 28, 2010. After the hearing, Seagate timely filed its
counterclaim for the return of the documents. Additionally, Seagate also notes that the
employment agreement included a clause requiring “any waiver of rights under this
agreement” to be “in writing signed by the party to be charged.” (Am. Compl., Ex. 1 at
4.) Because Seagate showed no intention of relinquishing its rights by repeatedly asking
for the documents, and because Shukh‟s employment agreement clearly required the
return of the documents at issue, the Court finds that the defense of waiver does not bar
Seagate‟s enforcement of the contract.10
In sum, the Court finds none of the defenses that Shukh raised against Seagate‟s
counterclaims are adequate to defeat Seagate‟s motion for summary judgment on the
breach of contract claim. Shukh has not disputed Seagate‟s proof of the elements of the
breach claim, and his defenses are insufficient. The Court will grant summary judgment
in favor of Seagate as to the breach of contract claim and will order specific performance
in the form of Shukh returning the relevant documents.
10
Similar to his argument on mootness, Shukh cites numerous cases in which courts have
held that a party has waived work product and attorney-client privileges because it failed to take
adequate and reasonable steps to protect its privileges. See Bowles v. Nat’l Ass’n of Home
Builders, 224 F.R.D. 246, 253 (D.D.C. 2004); IMC Chems., Inc. v. Niro, Inc., No. 98-2348, 2000
U.S. Dist. LEXIS 22850, at *80-81 (D. Kan. July 19, 2000). The Court finds these cases
inapplicable because Seagate‟s assertion of privilege is not at issue in the present motions before
this Court and will be determined by the Magistrate Judge. (Am. Mot. to Compel.) Seagate is
seeking to enforce an employment agreement that explicitly required the return of any
documents at the termination of Shukh‟s employment.
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C.
Preliminary Injunction
Seagate moved in the alternative for a preliminary injunction on the breach of
contract claim, asking this Court to order the return of the documents pending the
resolution of the action. The Court denies Seagate‟s motion for a preliminary injunction
because it is rendered moot by the Court‟s grant of summary judgment on the breach of
contract claim.11
III.
CONVERSION AND REPLEVIN
Seagate has also asserted counterclaims of conversion and replevin against Shukh
based on his appropriation of its documents. Under Minnesota law, conversion is “an act
of willful interference with personal property, done without lawful justification by which
any person entitled thereto is deprived of use and possession.” DLH, Inc. v. Russ, 566
N.W.2d 60, 71 (Minn. 1997) (internal quotation marks omitted). Punitive damages for
conversion may be awarded under Minn. Stat. § 549.20. Goodwin v. Harmon, No. 971123, 1997 WL 769491, at *2 (Minn. Ct. App. Dec. 16, 1997). “A replevin action seeks
to regain possession of items” and is governed by Minnesota statute. B-Kam, LLP v.
Floding, No. 08-5168, 2011 U.S. Dist. LEXIS 34683, at *26 (D. Minn. Mar. 30, 2011);
see Minn. Stat. §§ 565.21-23. A judgment in replevin may include “damages for the
detention, or the taking and withholding.” Minn. Stat. § 548.04.
11
Although the Court is not resolving this issue, it appears that there is no strong basis for
a finding of irreparable harm at this time. A court may deny a preliminary injunction solely on
the ground that the movant did not show a threat of irreparable harm to the movant. Watkins Inc.
v. Lewis, 346 F.3d 841, 844 (8th Cir. 2003).
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Shukh moves to dismiss Seagate‟s conversion and replevin claims on two theories:
one, that the heart of the action is a breach of contract and there is no distinct tort; and,
two, that he did not take original documents, but only copies.
Seagate moves for
summary judgment on both claims.
A.
Heart of the Action
Shukh moves to dismiss Seagate‟s conversion and replevin claims on grounds that
the heart of the action is a breach of contract. “Minnesota law does not recognize an
independent tort for conduct that merely constitutes a breach of contract.” First Integrity
Bank, N.A. v. Ohio Cas. Ins. Co., Civ. No. 05-2761, 2006 WL 1371674, at *6 (D. Minn.
May 15, 2006). If the “actions at the heart” of a tort claim “are identical to those which
constitute a breach of contract,” there is no separate tort cause of action. Id. “A tort is
independent from a breach of contract if a relationship would exist which would give rise
to the legal duty without enforcement of the contract promise itself.” Best Buy Stores,
L.P. v. Developers Diversified Realty Corp., No. 05-2310, 2007 U.S. Dist. LEXIS 86283
(D. Minn. Nov. 21, 2007) (internal quotations marks omitted). In order for the plaintiff to
recover under a breach of contract and a tort claim, the “plaintiff must prove separate
damages for [the tort] and for breach.” Hanks v. Hubbard Broad., Inc., 493 N.W.2d 302,
308 (Minn. Ct. App. 1992).
In this case, the actions at the heart of the conversion and replevin claim (Shukh‟s
taking and retention of Seagate‟s documents) are the same as those giving rise to the
breach of contract. Minnesota courts have not recognized a separate legal duty to return
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an employer‟s documents. 12 Seagate has not requested a specific amount of damages at
this stage, and it is unlikely that it could prove separate damages for conversion and
breach. Seagate has enumerated no extraordinary circumstances that would allow it to
pursue both a breach of contract action and an action in tort. Because the actions at the
heart of the claims are the same and Seagate has not proven separate damages for the
separate claims, the Court will grant Shukh‟s motion to dismiss the conversion and
replevin counterclaims.13
B.
Conversion of Copies of Documents
Shukh also moves to dismiss the conversion and replevin claims on grounds that
Seagate only alleged that Shukh took copies, and making copies does not amount to
conversion because it does not deprive the owner of the original documents. Seagate
counters that Shukh took Seagate‟s physical property by using its paper, ink, and
photocopier to make the copies at issue.
It is not clear whether Minnesota law
acknowledges an action in conversion or replevin for copies of documents when the
12
Case law from other districts is inconsistent. Although the Eastern District of
Pennsylvania has held several times that an employee has an independent legal duty to return
documents to its employer upon termination, see Brown & Brown, Inc. v. Cola, 745 F. Supp. 2d
588, 623 (E.D. Pa. 2010); Orthovita, Inc. v. Erbe, No. 07-2395, 2008 WL 423446, at *6 (E.D.
Pa. Feb. 14, 2008); Integrated Waste Solutions, Inc. v. Goverdhanam, No. 10-2155, 2010 WL
4910176, at *13 (E.D. Pa. Nov. 30, 2010); other district courts have held that, absent a
contractual provision requiring the return of documents, an employee is under no such duty. See
Bowles v. Nat’l Ass’n of Home Builders, 224 F.R.D. at 260; IMC Chems., Inc. v. Niro, Inc.,
No. 98-2348, 2000 U.S. Dist. LEXIS 22850, at *80-82.
13
Seagate moves for summary judgment on conversion and replevin. Because the Court
will grant Shukh‟s motion to dismiss the conversion and replevin counterclaims, the Court will
deny Seagate‟s motion for summary judgment on these claims.
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claimant retains the originals. The Court finds that it need not reach that determination
because Shukh‟s heart of the action argument effectively disposes of Seagate‟s
counterclaims for conversion and replevin. Because the Court will grant Shukh‟s motion
to dismiss as to conversion and replevin, Seagate‟s motion for summary judgment on
those claims is rendered moot.
IV.
COURT’S INHERENT POWER TO COMPEL RETURN OF DOCUMENTS
Seagate argues that the Court has inherent power to compel the return of its
documents. In support, it cites cases from other districts and state courts wherein a court
ordered a party that obtained documents outside the course of discovery to return the
documents.
Shukh contends the request is improper because Federal Rule of Civil
Procedure 65 governs motions for the return of documents. The Supreme Court has held
that
when there is bad-faith conduct in the course of litigation that could be
adequately sanctioned under the Rules, the court ordinarily should rely on
the Rules rather than the inherent power. But if in the informed discretion
of the court, neither the statute nor the Rules are up to the task, the court
may safely rely on its inherent power.
Chambers v. NASCO, Inc., 501 U.S. 32, 50, (1991).
Because the Court has other
sufficient bases upon which to order the return of documents, the Court will deny
Seagate‟s motion requesting the Court to exercise its inherent powers.
ORDER
Based on the foregoing, and the records, files, and proceedings herein, IT IS
HEREBY ORDERED that:
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1.
Plaintiff‟s Motion to Dismiss Counterclaims for Lack of Subject Matter
Jurisdiction on the Grounds of Mootness Based on Changed Circumstances [Docket No.
214] is DENIED.
2.
Plaintiff‟s Motion to Dismiss Counterclaims [Docket No. 150] is
GRANTED in part and DENIED in part as follows:
a.
The motion is DENIED as to defendants‟ counterclaim for breach of
contract.
b.
The motion is GRANTED as to defendants‟ counterclaims for
conversion and replevin.
3.
Defendants‟ motions for summary judgment, a preliminary injunction, and
the return of documents [Docket No. 169] are GRANTED in part and DENIED in part
as follows:
a.
The motion for summary judgment is GRANTED as to defendants‟
counterclaim for breach of contract.
b.
The motion for summary judgment is DENIED as moot as to
defendants‟ counterclaims for conversion and replevin.
c.
The motion for a preliminary injunction is DENIED as moot;
d.
The motion for the return of documents under the inherent authority
of the Court is DENIED.
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Based upon the Court‟s granting Defendants‟ motion for summary judgment as
to its counterclaim for breach of contract, IT IS HEREBY FURTHER ORDERED that
Shukh return all documents at issue within twenty-one (21) days from the date of this
Order.
DATED: November 30, 2011
at Minneapolis, Minnesota.
____s/
____
JOHN R. TUNHEIM
United States District Judge
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