H.B. Fuller Company v. Hamm
Filing
48
ORDER granting in part and denying in part 37 Motion to Alter/Amend/Supplement Pleadings(Written Opinion) Signed by Magistrate Judge Hildy Bowbeer on 8/24/2018. (JFH)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
H.B. Fuller Co.,
Case No. 17-cv-5562 (DWF/HB)
Plaintiff,
v.
ORDER
Timothy Hamm,
Defendant.
HILDY BOWBEER, United States Magistrate Judge
This matter is before the Court on H.B. Fuller’s Motion to Amend [Doc. No. 37].
H.B. Fuller alleges that Timothy Hamm, a former sales manager for the company,
breached contractual and common law duties he owed to the company and violated state
and federal trade secrets laws when he improperly collected H.B. Fuller’s proprietary
information and used it for the benefit of his new employer, IFS Industries, Inc. (Compl.
[Doc. No. 1].) By this motion, H.B. Fuller seeks to add a number of new factual
allegations and two new claims: a claim for breach of Hamm’s non-competition
agreement and a claim for specific performance of that agreement. For the reasons stated
below, the Court will grant the motion in part, allowing H.B. Fuller to amend its
complaint to add the new factual allegations, but will deny the motion without prejudice
as to the new claims.
I.
FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND
H.B. Fuller is a company that develops, manufactures, markets, and sells
adhesives and specialty chemical products. (Compl. ¶ 6 [Doc. No. 1].) On February 1,
2017, Hamm began working for H.B. Fuller as a Geographic Sales Manager in the
company’s Durable Assembly business in North America. (Id. ¶ 14.) As a condition of
his employment, Hamm executed a Non-Disclosure and Non-Competition Agreement
(“NDA”) in which he agreed to, among other things, maintain the secrecy of H.B.
Fuller’s confidential information, refrain from using the company’s confidential
information after ending his employment with H.B. Fuller, and refrain from competing
against H.B. Fuller for the twelve-month period following the termination of his
employment with the company. (Compl., Ex. 1 at 5 [Doc. No. 1-1].)
Among the confidential and proprietary information H.B. Fuller seeks to protect
through its NDA is its confidential model for pricing its adhesive products, including the
“contribution margin” on particular products for particular customers, and its plans for
future pricing and margins as to particular products or customers. It alleges that access to
this information would, among other things, allow a competitor in the “fiercely
competitive” adhesive market to identify customers or products with higher margins,
allowing them to undercut H.B. Fuller’s pricing for specific customers or across the
board, as well as to target new customers. (Compl. ¶¶ 7-9.)
The operative Complaint goes on to allege that on August 7, 2017, roughly six
months after beginning his position with H.B. Fuller, Hamm notified the company that he
2
was leaving his position to accept a new job with a competitor. (Id. ¶ 24.) Although his
then soon-to-be employer directly competes with H.B. Fuller in the Durable Assembly
business, Hamm represented that he would honor the commitments he made to H.B.
Fuller in his NDA. (Id. ¶ 26.) Hamm’s last day as an employee of H.B. Fuller was on
August 25, 2017. (Id. ¶ 30.) As part of his transition out of his employment with H.B.
Fuller, Hamm completed a termination checklist in which he stated he had turned in all of
the company files, materials, records, and property in his possession. (Id. ¶¶ 27-28.)
After Hamm left his position, H.B. Fuller retained a computer forensics consulting
firm to examine and analyze the data on Hamm’s company laptop as part of its standard
operating procedures. (Id. ¶¶ 32-33.) The forensic examination showed that on August
18, 2017, the same day that Hamm notified the company that he would be leaving to
accept another position, Hamm used a personal email account to send emails from his
company laptop while he had access to H.B. Fuller files. (Id. ¶ 35.) It also showed that
the same day, he inserted a USB flash drive into his company laptop, and also that he
“accessed”1 a number of company files in the “Documents” directory of his laptop,
although the Complaint does not specifically allege that he transferred or copied any of
those files onto the USB device or elsewhere. Among the files he accessed that day was
an Excel spreadsheet named “Hamm Copy of targets 2017” (id.), which listed dozens of
H.B. Fuller customers or potential customers as well as information about many of them,
The Court puts the term “accessed” in quotes because the Complaint provides no other
information regarding what “accessed” means, including whether it was opened, read,
copied, transferred, modified, etc.
3
1
including product orders, product volume, pricing, contribution margins, and revenue
information. (Id. ¶ 36.)
Based on these findings, H.B. Fuller concluded that Hamm had taken confidential
information from the company in violation of his NDA obligations. (Id. ¶ 42.) Shortly
thereafter, on December 26, 2017, H.B. Fuller filed a six-count complaint against Hamm
asserting causes of action for (1) breach of contract, (2) specific performance, (3) trade
secret misappropriation under the Defend Trade Secrets Act, (4) trade secret
misappropriation under the Minnesota Uniform Trade Secrets Act, and (5) breach of duty
of loyalty and confidentiality. (Id. ¶¶ 51-91.) It also sought injunctive relief. (Id.)
H.B. Fuller moved for a temporary restraining order (TRO) to require Hamm to
produce all personal electronic storage devices, storage locations, and personal accounts
for forensic examination by an independent third party. (Mot. TRO [Doc. No. 6].)
Rather than litigating over the TRO, the parties stipulated to an order governing
preliminary forensic analysis, which was entered on January 23, 2018. (Stipulation [Doc.
No. 18]; Order Governing Preliminary Analysis [Doc. No. 25].) Pursuant to the parties’
agreement, Pixley Forensics conducted an initial preliminary forensic review and analysis
of Hamm’s personal electronic storage devices and accounts on February 5, 2018.
(Stipulation at 2.) The results of that review and analysis give rise to the instant motion.
H.B. Fuller’s Proposed Amended Complaint (“PAC”) clarifies that Hamm’s new
employer is IFS Industries (“IFS”) and alleges that Pixley Forensics concluded Hamm
not only retained possession of H.B. Fuller confidential information and property after he
4
terminated his employment with the company, but that he “accessed” some of that
information after he began his employment with IFS.2 (Id. ¶ 50.) Specifically, Pixley
Forensics found that USB drives in Hamm’s possession contained 367 data files that
were also within the “Documents” directory he accessed on his company laptop on
August 18, 2017; that his personal emails contained 33 H.B. Fuller data files that were
also in that directory; and that his iPhone held 95 H.B. Fuller data files that were also in
that directory. (Id. ¶ 51.) Pixley Forensics also found the “Hamm Copy of targets 2017”
Excel file in Hamm’s personal email account. (Id. ¶ 54.)
Pixley Forensics also concluded that Hamm “accessed” at least 31 of the H.B.
Fuller data files on his USB devices over the course of four occasions in September and
December of 2017. (Id. ¶¶ 55-56.) Pixley Forensics reported, however, that Hamm did
not use any of his own devices to access those files, as a result of which H.B. Fuller
alleges it is reasonable to conclude he used his IFS company laptop to access the files on
those occasions. (Id. ¶ 59.) H.B. Fuller alleges that one of those files pertains to an H.B.
Fuller customer identified as “Customer A,” and two of those files pertain to another
H.B. Fuller customer identified as “Customer B.” (Id. ¶¶ 57-58.) The Customer A file
and one of the Customer B files was “accessed” on December 5, 2017, and the other
Customer B file was “accessed” on December 19, 2017. (Id.) As to the file that
pertained to Customer A, the PAC alleges it contained “information relating to pricing
and rebate programs,” but there is no equivalent allegation regarding the two files
Again, the Court puts the term “accessed” in quotes because the PAC provides no
additional information regarding what “accessed” means.
5
2
pertaining to Customer B. (Id.) H.B. Fuller further alleges generally that some of the
files Hamm “accessed” in September and December contain “highly-sensitive,
confidential and proprietary information” regarding significant customers of its Durable
Assembly business, “including information related to Customers A and B and specifically
relating to pricing and rebate programs.” (Id. ¶ 61.) It goes on to assert that the
information Hamm “accessed” after he joined IFS would allow a competitor such as IFS
to know H.B. Fuller’s confidential information for various customers and potential
customers, including product volumes, pricing, plans, “contribution margins,” and
revenues. (Id. ¶ 70.)
The PAC further alleges that IFS “recently”3 approached Customer B to run trials
of an adhesive product in competition with an H.B. Fuller product, and that IFS proposed
a pricing structure that was “just below H.B. Fuller’s pricing structure” for that product.
(Id. ¶ 64.) H.B. Fuller asserts that IFS’s recent strategic bid for Customer B’s business,
taken together with Hamm’s post-termination access of H.B. Fuller files, demonstrate
that Hamm is competing with H.B. Fuller in the Durable Assembly business in violation
of Section B(4) of his NDA by sharing H.B. Fuller’s confidential information with IFS
salesmen and assisting IFS in pursuing Customer B’s business. (Id. ¶¶ 65-66.) The PAC
also alleges that Hamm’s stated position at IFS is “a step down” from his position at H.B.
Fuller, and that H.B. Fuller “is informed and reasonably believes” that Hamm’s position
is only a “means to demonstrate facial compliance with his non-compete obligations”
3
The PAC does not indicate whether the overture to Customer B was made before or
after December 5 or 19, 2017, when it alleges Hamm accessed the Customer B files.
6
when in actuality Hamm is engaged in the sale of Durable Assembly products in direct
competition with H.B. Fuller. (Id. ¶ 61.)
II.
MOTION TO AMEND
By this motion, H.B. Fuller seeks to amend its complaint to include additional
factual allegations and, based on those allegations, to add claims for breach of contract
and specific performance premised on violation of Hamm’s non-compete obligations
under Section B(4) of the NDA. H.B. Fuller contends that it did not include those claims
in its initial complaint because it lacked evidence at the time to support them, even
though the company suspected that Hamm had improperly assisted his new employer to
compete against H.B. Fuller in the Durable Assembly business. Now, after the recent
forensic examination, H.B. Fuller asserts it has sufficient evidence to support its claim
that Hamm improperly competed against the company and accordingly moves to add
claims under Section B(4) of the NDA.
A. Legal Standard
A court should freely grant leave to amend a complaint “when justice so requires.”
Fed. R. Civ. P. 15(a)(2). However, “there is no absolute right to amend,” and a court may
deny leave to amend “based upon a finding of undue delay, bad faith, dilatory motive,
repeated failure to cure deficiencies in previous amendments, undue prejudice to the nonmoving party, or futility.” Baptist Health v. Smith, 477 F.3d 540, 544 (8th Cir. 2007)
(citation omitted).
7
When a party challenges a proposed amendment on futility grounds, the Court
considers whether the amendment could withstand a Rule 12(b)(6) motion to dismiss.
Cornelia I. Crowell GST Trust v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir. 2008).
“An amendment is futile if the amended complaint could not withstand a motion to
dismiss under Federal Rule of Civil Procedure 12(b)(6).” Rickmyer v. Browne, 995 F.
Supp. 2d 989, 1001 (D. Minn. 2014). To survive a Rule 12(b)(6) motion, “a complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court accepts all alleged facts as true
and affords Plaintiff all reasonable inferences arising from the allegations. Butler v. Bank
of Am., N.A., 690 F.3d 959, 961 (8th Cir. 2012). But the factual allegations “must be
enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555.
If “the well-pleaded facts do not permit the court to infer more than the mere possibility
of misconduct, the complaint has alleged—but it has not ‘show[n]’—that the pleader is
entitled to relief.” Iqbal, 556 U.S. at 679 (internal quotation omitted). Put another way,
if the facts pled are “merely consistent with the defendant’s liability, it stops short of the
line between possibility and plausibility.” Id. at 678.
B. Discussion
Hamm does not argue here that H.B. Fuller unreasonably delayed in filing its
motion to amend. Nor does Hamm appear to object to the proposed amendments insofar
as the additional factual allegations based on the forensic examination conducted after the
8
original complaint was filed may be pertinent to the causes of action pled in that
complaint. Rather, Hamm’s opposition to the motion to amend is that the proposed new
causes of action for breach of Hamm’s non-compete obligations and for specific
performance of those contractual obligations (Counts VI and VII, respectively [Doc. No.
37-1 at ¶¶ 113-127]) should be rejected as futile because H.B. Fuller fails to link any of
Hamm’s alleged actions to a breach of his non-compete obligations.
“To establish a breach-of-contract claim, a plaintiff must show that (1) a contract
was formed; (2) the plaintiff performed any conditions precedent; and (3) the defendant
breached the contract.” Taxi Connection v. Dakota, Minnesota & E. R.R. Corp., 513 F.3d
823, 826 (8th Cir. 2008) (quoting Commercial Assocs., Inc. v. Work Connection, Inc.,
712 N.W.2d 772, 782 (Minn.Ct.App.2006)). “When a party breaches a contract, a Court
may, in certain circumstances, order specific performance of a contract duty.” Minnesota
Vikings Football Stadium, LLC v. Wells Fargo Bank, Nat'l Ass'n, 193 F. Supp. 3d 1002,
1014 (D. Minn. 2016).
H.B. Fuller’s proposed new claims specifically point to Sections B(4)(a)(2) and
B(4)(a)(5) of the NDA, in which Hamm covenanted not to solicit or help others solicit
H.B. Fuller’s customers for a one year period after his employment, and not to perform
work that would likely result in him using H.B. Fuller’s confidential information to
compete against the company within one year after his employment. (Proposed Am.
Compl. ¶¶ 113-127.) Those sections provide as follows:
(a) During the term of my employment and for twelve (12) months after
termination [ ] of my employment with H.B. Fuller . . .
9
(2) I will not directly or indirectly identify, contact, make sales calls
on, make introductions to, accept business from, provide services,
assistance or consulting to, any entity or person who at any time
within the two (2) year pe1iod prior to my employment termination
(i) was a customer of H.B. Fuller with whom I had direct or indirect
contact; (ii) was identified as a prospective customer of H.B. Fuller
by me, at my direction or by another H.B. Fuller employee or
contractor; (iii) was a customer or prospective customer to whom I
directly or indirectly rendered assistance of any kind; or (iv) was a
customer whose account I supervised or serviced for H.B. Fuller. . .
* * * * * *
(5) I will not serve in any capacity or have interest in, whether as an
owner, employee, consultant, or otherwise, any entity, organization
or person engaged in the development, use, production or sale of any
Conflicting Product, where I will be in a position where performance
of my job duties or my obligations would likely result in use or
disclosure of Confidential Information or where the entity or
organization has requested or required my use or disclosure of
Confidential Information.
(Compl. Ex. 1 at 5-6 [Doc. No. 1-1].)4
H.B. Fuller argues that the PAC alleges facts to support each element of a
claim for breach of these provisions of the NDA because it pleads the existence of
the contract between Hamm and the company (Proposed Am. Compl. ¶¶ 15-24,
113-21); alleges that H.B. Fuller has performed all of the conditions precedent
under the NDA (Id. ¶ 115); and sets forth detailed factual allegations showing that
Hamm breached his non-compete obligations under Section B(4)(a)(2) and (5) (Id.
¶¶ 25-66, 113-21). In addition, H.B. Fuller asserts it has properly pled its claim
The NDA, which was Exhibit 1 to H.B. Fuller’s original complaint, was not attached to
the PAC. However, that appears to have been an oversight, as the PAC carries forward
the reference to that exhibit. [Doc. No. 37-1 at ¶ 15.]
10
4
for specific performance because that remedy is available to rectify Hamm’s
breach of his non-compete obligations under the NDA.
Hamm argues, however, that H.B. Fuller has failed to state a plausible
claim for breach of Section B(4) of the NDA because the facts pled do not show
that Hamm solicited a customer or aided IFS in competing against H.B. Fuller.
On the contrary, Hamm contends, the most H.B. Fuller alleges is that (1) he
accessed files pertaining to two anonymous customers after he began working for
IFS, and (2) IFS “recently” proposed to one of those customers to run trials of an
adhesive product at a slightly lower price than H.B. Fuller offered. Hamm
emphasizes that H.B. Fuller does not allege that the files were accessed prior to
IFS’s proposal to Customer B, and only vaguely alleges that the files “pertained to
Customer B” or “included information about Customer B,” but never alleges that
those files contained price, margin, or product information. That was not an
oversight, Hamm observes, because the files in fact did not contain information
that would be helpful to IFS in underbidding H.B. Fuller. On the contrary, the
first file pertaining to Customer B was a 2008 letter regarding general warrantyrelated information, and the second file pertaining to Customer B was a 2014
document containing a technical service request. (Def.’s Mem. Opp’n Mot.
Amend at 8 [Doc. No. 42].)5 Hamm also points out that H.B. Fuller does not
5
Hamm did not submit with his memorandum a declaration in support of this or other
representations about the contents of or Hamm’s actions with regard to the various data
files that are the subject of this motion. Even if it had, the Court could not consider facts
11
allege that Customer B could not and did not itself disclose H.B. Fuller’s pricing
structure to IFS for the purpose of soliciting more favorable terms.
Hamm additionally points out that H.B. Fuller does not and cannot allege
that the “Hamm Copy of targets 2017” file, the file that does contain pricing
information, links Hamm to Customer B, because Customer B is not one of the
customers listed in the file, and in any event, H.B. Fuller does not allege in either
its original Complaint or in the PAC that Hamm accessed it after he left Fuller’s
employ, or that it includes any information about Customer A or Customer B.
Indeed, Hamm argues, that file was in his personal email account because his
manager at H.B. Fuller asked Hamm to send him the file before he left the
company and Hamm’s company email account had already been discontinued,
leaving him no choice but to use his personal account for that purpose. (Def.’s
Mem. Opp’n Mot. Amend at 3 [Doc. No. 42].) That the file remains in his
personal email account is also meaningless, Hamm notes, because the stipulated
order forbids Hamm to delete or change any of the ESI on any of his devices or in
any of his accounts. (Id. at 3, n. 1, citing Doc. No. 19 ¶ 2.) Thus, Hamm argues
that his alleged access of H.B. Fuller files does not provide even circumstantial
from outside the pleadings or engage in factfinding on the merits of Plaintiff’s factual
allegations in determining whether the PAC would withstand a motion to dismiss for
failure to state a claim. However, the statements do help to illuminate Hamm’s
argument that the facts H.B. Fuller does allege, particularly when compared with the facts
it does not allege, are equally consistent with an innocent explanation and are therefore
insufficient to raise the claim that Hamm is assisting IFS in competing against H.B.
Fuller for Customer B’s business above the speculative level. The Court considers them
in that light.
12
evidence of him competing against H.B. Fuller. Therefore, because none of the
documents he purportedly accessed after he left H.B. Fuller would have assisted
him or IFS in developing pricing for Customer B, and H.B. Fuller offers no
additional facts to show that Hamm actually assisted IFS in competing for
Customer B’s business, let alone how he did so, Hamm argues that H.B. Fuller has
failed to supply an adequate factual basis for its allegation that he violated Section
B(4) of his NDA by competing against his former employer.
Hamm additionally argues the timeline of H.B. Fuller’s allegations make
them particularly implausible. The instant action was filed more than six months
ago, and a short while after that, Hamm agreed to a forensic analysis of all of his
personal electronic devices and accounts. Therefore, Hamm has been aware since
December 2017 that his actions at IFS are being scrutinized and he has cooperated
with H.B. Fuller’s discovery efforts. Despite that, H.B. Fuller alleges he
nevertheless proceeded to deliberately violate his covenant not to compete with
full knowledge that doing so would likely be discovered and could result in legal
consequences concomitant with the instant action. Harm argues that common
sense would reject any inference that he would so brazenly violate his noncompete obligations while in the midst of litigation with his former employer.
Hamm lastly argues that H.B. Fuller’s claim for breach of contract fails
because he has not pled any facts regarding actual damages to H.B. Fuller caused
by his alleged breach. He cites Gen. Mills Operations, LLC v. Five Star Custom
13
Foods, Ltd., 703 F.3d 1104 (8th Cir. 2013) for the proposition that “[a] successful
breach-of-contract claim under Minnesota law has four elements: (1) formation of
a contract; (2) performance by plaintiff of any conditions precedent; (3) a material
breach of the contract by defendant; and (4) damages. Id. at 1107 (citing Parkhill
v. Minn. Mut. Life Ins. Co., 174 F.Supp.2d 951, 961 (D. Minn. 2000)). See also
Jensen v. Duluth Area YMCA, 688 N.W.2d 574, 578–79 (Minn. Ct. App. 2004)
(“A breach of contract claim fails as a matter of law if the plaintiff cannot
establish that he or she has been damaged by the alleged breach”). Here, Hamm
argues the PAC is devoid of factual allegations of damages resulting from
Hamm’s alleged breach of his non-compete obligations. For instance, Hamm
points out that H.B. Fuller does not state it actually lost business from Customer B
to IFS on account of Hamm’s alleged involvement in the competition. H.B. Fuller
also does not allege it lost profits because it was forced to lower its prices to
compete against IFS. Instead, H.B. Fuller states conclusorily that it “has suffered,
and continues to suffer, significant damages” as a “direct result of Hamm’s
breaches of his non-compete obligations.” (Proposed Am. Compl. ¶ 119.) Hamm
argues this is insufficient to support the essential element of damages, and that the
proposed claim for breach of contract must be rejected for this reason alone.
C. Analysis
To state a claim for breach of a non-compete agreement, a complaint must contain
“well-pleaded facts [that] permit the Court to infer more than the mere possibility of
14
misconduct.” CGB Diversified Servs., Inc. v. Mills, No. 4:15-cv-291, 2015 WL
12880462, at *3 (E.D. Ark. Nov. 9, 2015). Here, H.B. Fuller adequately pleads the first
and second elements of a claim for breach of contract by alleging that a Hamm executed
a non-compete contract with H.B. Fuller, and that H.B. Fuller complied with its own
obligations under that contract. (Proposed Am. Compl. ¶¶ 15-24, 113-21.)
The more difficult question is whether H.B. Fuller adequately pleads facts to
support the third element, that Hamm actually breached his non-compete obligations.
H.B. Fuller alleges that Hamm retained possession of more than 495 confidential H.B.
Fuller files after he left the company, and that many of those files contained confidential
company information that would be valuable to IFS. (Id. ¶¶ 50-52, 61, 70.) That, by
itself, supports the original claim that Hamm retained confidential information, but not
that he used it for the purpose of competing with his former employer. H.B. Fuller
further alleges that Hamm “accessed” a total of 31 of those files over the course of four
separate occasions while employed by IFS using an IFS-issued laptop. (Id. ¶¶ 56, 59.)
But H.B. Fuller never alleges specifically what “accessed” means in this context.
Moreover, while it asserts somewhat ambiguously that some of the files Hamm accessed
on those occasions contained highly sensitive and confidential information “regarding
significant Durable Assembly customers, including information related to Customers A
and B and specifically relating to pricing and rebate programs” (id. ¶ 61), the PAC never
directly describes the two Customer B files directly as confidential or sensitive, and never
states that they contained pricing information. In fact, the paragraph that most directly
15
discusses information regarding Customer B is notably devoid of any allegation that
Hamm actually accessed confidential or sensitive information of any kind regarding
Customer B:
Hamm was well aware of H.B. Fuller's pricing structure for sales of the
product(s) to Customer B, including the contribution margin for the
product(s). Moreover, Hamm had access to and/or retained information
about H.B. Fuller's pricing history and strategy as to this customer after he
left his H.B. Fuller employment. Such information would allow a
competitor such as IFS to structure its pricing for this product so that it was
just below H.B. Fuller's. Finally, the information on the USB drive that
Hamm accessed in September and December 2017 included information
about Customer B.
(Proposed Am. Compl. ¶ 65.)
Thus, while the PAC alleges Hamm “was well aware” of H.B. Fuller’s pricing
structure for Customer B, that he “had access to and/or had retained information about
pricing for Customer B and that such information could be used by a competitor to H.B.
Fuller’s competitive disadvantage, the PAC fails to close the loop with any allegation that
Hamm actually accessed or used any of that sensitive information about Customer B.
Moreover, H.B. Fuller does not and probably could not credibly allege that the only
possible way that IFS could have come up with proposed pricing for Customer B that was
“just below” H.B. Fuller’s pricing was by using confidential pricing information it
obtained from Hamm.
The question, then, is whether it is enough to support a plausible inference that
Hamm has violated the non-compete provisions of his NDA simply to allege that after he
left H.B. Fuller and joined IFS he “accessed” a total of 31 files on a total of four different
16
occasions, some of which contained confidential and sensitive H.B. Fuller information
regarding significant H.B. Fuller Durable Assembly customers, including information
relating to pricing and rebate programs. At its core, H.B. Fuller’s argument is that if
(1) Hamm has several hundred H.B. Fuller files that he should not have
retained after his employment with H.B. Fuller ended,
(2) he “accessed” 31 of those files using an unknown device after his
employment ended (but there is no statement about what “accessed”
means),
(3) H.B. Fuller is not aware of any legitimate reason for Hamm to “access” any
of those files after his employment ended,
(4) some of the files Hamm “accessed” contain confidential and sensitive H.B.
Fuller information, including pricing information,
(5) two of the files he “accessed” relate to Customer B (but there is no
description of the content of those files),
(6) IFS made a “recent” proposal to Customer B with pricing that undercut
H.B. Fuller’s pricing (but there are no allegations of Hamm’s direct
involvement in that approach and no allegations supporting an inference
that assistance from Hamm was the only means by which IFS could have
made that proposal6), and
(7) the information Hamm accessed, and/or the information Hamm knows
independently by reason of his tenure and position at H.B. Fuller, if used,
would enable him to help IFS do significant competitive harm to H.B.
Fuller,
then one can reasonably draw the inference that Hamm has not only breached his
agreement not to retain H.B. Fuller confidential information (the subject of the original
6
As already noted, the PAC leaves open the possibility that pricing information could
have come from Customer B directly. But in addition, the PAC identifies a number of
other former key H.B. Fuller Durable Assembly personnel who have moved to IFS.
(Proposed Am. Compl. ¶ 29.)
17
complaint) but has also breached his non-compete agreement (the new claims alleged in
the PAC).
After careful consideration, the Court concludes that although the new allegations
in the PAC are suggestive, and although they reinforce H.B. Fuller’s existing claims
concerning Hamm’s possession of H.B. Fuller confidential information, they are only
“consistent” with a breach of Hamm’s non-compete obligations; they are not sufficient to
permit the Court “to infer more than the mere possibility of misconduct” with regard to
those non-compete obligations. In other words, as to the proposed new claims, the PAC
“has alleged—but it has not ‘show[n]’—that the pleader is entitled to relief.” Iqbal, 556
U.S. at 679 (internal quotation omitted). Accordingly, the motion to amend the
complaint should be denied insofar as it seeks to add new counts for breach of Hamm’s
non-compete obligations under the NDA and for specific performance of the NDA as to
those obligations.7
7
For the sake of clarity as to the basis of its ruling, the Court does not find that H.B.
Fuller’s failure to allege the specific damages that flowed from Hamm’s alleged breach
of the non-compete agreement would defeat its motion to amend if the other elements
were adequately pleaded. The Minnesota Supreme Court has “recognized that the
plaintiff may not have to allege that the breach caused damages in order to state a claim
for breach of contract,” Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn.
2011). Based on that Minnesota state law precedent, courts in this District have held that
“at the pleading stage, the plaintiff does not need to plead damages for a breach of
contract.” Forest Lake Facilities, LLC v. Wells Fargo Bank, N.A., No. CV 17-1766
(DWF/TNL), 2017 WL 4736716, at *3 (D. Minn. Oct. 19, 2017); see also Arctic Cat,
Inc. v. Polaris Indus. Inc., No. CIV. 13-3579 JRT/FLN, 2014 WL 5325361, at *19 (D.
Minn. Oct. 20, 2014). Here, H.B. Fuller has pled that as a direct and proximate result of
Hamm’s competing against the company, H.B. Fuller has suffered, and continues to
suffer, significant damages. (Proposed Am. Compl. ¶ 119.) Therefore, the Court does
not base its decision to deny H.B. Fuller’s motion on the ground that it failed to plead
18
However, as previously noted, the new factual allegations also bear in large part
on the causes of action in the original Complaint, and Hamm offers no reason why the
Complaint should not be amended to include them. Furthermore, the Court has noted that
the factual allegations are at least consistent with a claim that Hamm breached his noncompete agreement, and it may be that in the course of discovery in this case, additional
information will be brought to light that will establish a plausible basis to amend the
Complaint to add such a claim. Therefore, the Court will grant H.B. Fuller’s motion to
the extent it seeks to amend the Complaint to add those new allegations and will deny the
remainder of the motion without prejudice.
Accordingly, IT IS HEREBY ORDERED that Plaintiff’s Motion for Leave to
Amend Complaint [Doc. No. 40] is GRANTED IN PART AND DENIED WITHOUT
PREJUDICE IN PART as set forth herein.
Dated: August 24, 2018
HILDY BOWBEER
United States Magistrate Judge
specific damages flowing from Hamm’s alleged breach of the non-compete provision of
the NDA.
19
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?