Agxplore International, LLC v. Shelley

Filing 54

MEMORANDUM AND ORDER.. IT IS HEREBY ORDERED that plaintiff Agxplores Motion to Dismiss Count III of Shelley's Counterclaim is granted in part and denied in part. IT IS FURTHER ORDERED that defendant Shelley shall file an amended answer and counterclaim no later than January 19, 2013. ( Amended/Supplemental Pleadings due by 1/22/2013.) Signed by District Judge Stephen N. Limbaugh, Jr on 1/9/13. (MRS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SOUTHEASTERN DIVISION

AGXPLORE INTERNATIONAL, LLC,
Plaintiff,
vs.
MARK SHELLEY,
Defendant.

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Case No. 1:12-cv-16 SNLJ

MEMORANDUM AND ORDER
Plaintiff Agxplore International, LLC filed this action against defendant Mark Shelley
alleging that Shelley misused Agxplore’s confidential information and trademarks to compete
unfairly with Agxplore. Shelley counterclaimed, and, on August 16, 2012, Shelley amended his
counterclaim to add a breach of contract count. Agxplore moved to dismiss that count on
September 4, 2012 (#28). Shelley filed a memorandum in opposition and requested leave to
amend his counterclaim in the event that the Court finds his original pleading to be inadequate.
I.

Background
For purposes of the motion to dismiss, the Court accepts as true Shelley’s allegations.

From September 2008 to December 2010, Shelley was employed as a salesperson for Agxplore.
Shelley and Agxplore executed a Confidentiality and Non-Compete Agreement on September 19,
2008. Shelley’s territory was the northeast United States, where his only customer was Melvin
R. Weaver & Sons, a subsidiary of D&L Distribution (“Weaver”). Shelley sold a variety of
Agxplore’s agricultural micronutrient products to Weaver, including a product called Synurgize.
Shelley sold over 20,000 gallons of Synurgize to Weaver each year. In 2009, Weaver expressed
concern to Shelley that a competitor, Reichman Sales & Service, would start selling Agxplore in

the northeast, and Shelley passed those concerns on to Agxplore. Then, in October 2010,
Weaver and Shelley discovered that Reichman sold Synurgize in competition with Weaver.
Shelley alleges that he contacted Agxplore’s sales manager, Tim Gutwein, who denied any
knowledge of how Reichman had obtained the Synurgize. Despite Gutwein’s assurances,
Reichman began advertising Synurgize in a farming publication at a price 45% lower than
Weaver’s.
In November 2010, Weaver approached Agxplore through Shelley about making a private
label formulation of Synurgize that was designed to have an anti-foaming agent added and would
be marketed as “Charge” by Weaver. Agxplore provided the “Charge” product to Weaver for
sale, but Gutwein later admitted to Shelley that Agxplore was actually providing the old
Synurgize formula (without the anti-foaming agent added) under the new Charge label.
As a result of the undercutting of price by Reichman and the “Charge” mislabeling,
Weaver immediately ceased doing business with Agxplore. Shelley consequently lost his only
customer and related sales commissions. Shelley alleges (1) that Agxplore’s actions constituted
a breach of its employment contract with Shelley, (2) that Agxplore’s actions created a working
environment in which no reasonable person would have stayed, and (3) that the actions amounted
to a constructive discharge of Shelley. Finally, Shelley alleges that Agxplore’s actions
constituted a fraud on Shelley and Weaver and that, as a result, it would be contrary to public
policy to enforce the covenant not to compete.
II.

Legal Standard
The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the

legal sufficiency of a complaint so as to eliminate those actions which are fatally flawed in their
legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial

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and trial activity. Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (quoting
Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). A complaint must be dismissed for failure to
state a claim if it does not plead enough facts to state a claim to relief that is plausible on its face.
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 560 (2007) (abrogating the traditional “no set of
facts” standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). A petitioner need not
provide specific facts to support his allegations, Erickson v. Pardus, 551 U.S. 89, 93 (2007) (per
curiam), but “must include sufficient factual information to provide the grounds on which the
claim rests, and to raise a right to relief above a speculative level.” Schaaf v. Residential
Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008), cert. denied, 129 S.Ct. 222 (2008) (quoting
Twombly, 550 U.S. at 555-56 & n.3).
In ruling on a motion to dismiss, a court must view the allegations of the complaint in the
light most favorable to the petitioner. Scheuer v. Rhodes, 416 U.S. 232 (1974); Kottschade v.
City of Rochester, 319 F.3d 1038, 1040 (8th Cir. 2003). Although a complaint challenged by a
Rule 12(b)(6) motion does not need detailed factual allegations, a petitioner must still provide the
grounds for relief, and neither “labels and conclusions” nor “a formulaic recitation of the
elements of a cause of action” will suffice. Twombly, 550 U.S. at 555 (internal citations
omitted). “To survive a motion to dismiss, a claim must be facially plausible, meaning that the
factual content . . . allows the court to draw the reasonable inference that the respondent is liable
for the misconduct alleged.” Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010)
(quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). When determining the facial
plausibility of a claim, the Court must “accept the allegations contained in the complaint as true
and draw all reasonable inferences in favor of the nonmoving party.” Id. (quoting Coons v.
Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)). Finally, where a court can infer from those factual

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allegations no more than a “mere possibility of misconduct,” the complaint must be dismissed.
Id. (quoting Iqbal, 129 S.Ct. at 1950).
III.

Discussion
To state a cause of action for breach of contract, plaintiff must allege: (1) a valid and

enforceable contract between the plaintiff and defendant; (2) the rights of plaintiff and the
obligations of defendant thereunder; (3) a violation thereof by defendant; and (4) damages
resulting to plaintiff from the breach. Teets v. American Family Mut. Ins. Co ., 272 S.W.3d 455,
461 (Mo. Ct. App. 2008); Trotter’s Corp. v. Ringleader Restaurants, Inc., 929 S.W.2d 935, 941
(Mo. Ct. App. 1996). A party “fails to state a claim for breach of contract [if] it does not set out
[the claimant’s] rights or [the defendant’s] obligations under the contract.” 929 S.W.2d at 941.
Shelley’s breach of contract claim against Agxplore fails as alleged. Although Shelley
alleges the existence of the September 19, 2008 contract between himself and Agxplore, he does
not set out the “rights of plaintiff and obligations of defendant thereunder,” as required by
Missouri law. See Teets, 272 S.W.3d at 461. Shelley suggests that because Agxplore “knows
full well” its obligations and Shelley’s rights under the contract, he is not required to allege that
information in his complaint. Shelley further states that the title of the contract, “Confidentiality
and Non-Compete Agreement,” provides Agxplore with notice of the general nature of the rights
and obligations arising under the agreement. However, the Eighth Circuit requires that Shelley
allege “sufficient factual information to provide the grounds on which the claim rests,” and he
must “raise a right to relief above a speculative level.” Schaaf, 517 F.3d at 549. Shelley’s
allegations provide plenty of facts about Agxplore’s allegedly shady dealings with Weaver, but
they do not connect the shady dealings to a breach of Agxplore’s contract with Shelley.

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Shelley requests that he be permitted to amend his counterclaim. Federal Rule of Civil
Procedure 15(a)(2) requires that leave to amend a pleading be freely given when justice requires.
“Leave to amend should be denied if the proposed amendment would be futile,” however. Wiles
v. Capitol Indem. Corp., 280 F.3d 868, 871 (8th Cir. 2002).
Shelley’s proposed amendment identifies the contract provision that Agxplore breached,
namely that the contract “required Agxplore to support Shelley in his efforts as an Agxplore
employee by making ‘reasonable efforts to inform [Shelley] of the rules, standards, and
procedures’ that Agxplore purports to follow.” (#32-2, ¶ 40.) The Agreement provision itself
states that Shelley “understand[s] that the Company will make reasonable efforts to inform me of
the rules, standards and procedures which are in effect from time to time and which apply to me.”
Shelley’s amendment further alleges that Agxplore violated its obligations when it
“unfairly and unreasonably undermined Shelley’s efforts to sell Agxplore products to Weaver,”
which Shelley states “amounted to a breach of Agxplore’s duty to reasonably inform Shelley of
changes to the ‘rules, standards, and procedures’ it purported to follow.”
Agxplore contends that Shelley’s amended claim still does not cite to a specific
contractual provision that Agxplore allegedly breached. Agxplore maintains that Shelley’s
allegation that the Agreement “required Agxplore to support Shelley in his efforts as an Agxplore
employee by making ‘reasonable efforts to inform [Shelley] of the rules, standards, and
procedures’ that Agxplore purports to follow” fails to provide Agxplore with any notice of the
specific contractual obligation to Shelley. First, Agxplore says that it is not clear where in the
Agreement Agxplore is required to “support Shelley in his efforts.” Second, Agxplore argues
that Shelley’s language regarding “rules, standards, and procedures” is “not found anywhere in

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the agreement at issue and similarly fails to give Agxplore any notice of its purported
obligation.”
The Court agrees that the Agreement does not appear to state that Agxplore is “required
to support Shelley in his efforts” as salesperson. However, the Agreement does explicitly refer to
the “rules, standards[,] and procedures which are in effect from time to time and which apply to
[Shelley].” (Agreement ¶ 2.)
Shelley’s claim is that (1) Shelley and Agxplore executed a Confidentiality and NonCompete Agreement, (2) Agxplore thereby agreed to inform Shelley of the “rules, standards and
procedures which are in effect from time to time and which apply to [Shelley]”, and (3) Agxplore
violated that provision when it engaged in the practices that resulted in the loss of Weaver’s
business. 1
This Court must determine whether Shelley’s claim is “facially plausible,” which means
that Shelley’s factual allegations must allow the Court “to draw the reasonable inference that the
respondent is liable for the misconduct alleged.” Cole, 599 F.3d at 861 (quoting Iqbal, 129 S.Ct.
at 1949). Much of Shelley’s counterclaim appears to go to whether the contract is enforceable,
not whether Agxplore breached the contract itself, e.g., Shelley alleges that “Agxplore’s actions
constitute a fraud on Shelley and his customer” and “[a]s a result, it would be contrary to public
policy to enforce the covenant not to complete.” Agxplore correctly observes that Shelley
provides no specificity regarding exactly about which “rules, standards, and [/or] procedures” it

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Shelley supplemented his response memoranda by adding information about Agxplore’s
Consent Decree with the Environmental Protection Agency. (#33.) Agxplore agreed to pay a
civil penalty of $237,573 based in part on its violation of a statute that makes it unlawful to sell a
pesticide that is adulterated or misbranded. Shelley states that the Consent Decree “is consistent
with the allegations in Counterclaim Count III.” To the extent that Shelley contends that
Agxplore paid the civil penalty because it allegedly mislabeled the “Charge” product, Shelley
should say so in his counterclaim.
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failed to inform Shelley, and the Court agrees that Shelley has not pleaded his breach of contract
claim adequately.
Although Shelley’s breach of contract claim fails as it is currently pleaded, the Court will
provide Shelley with the opportunity to amend his counterclaim. He must, however, provide
further allegations than what he proposes in his September 14, 2012 amendment. First, as noted
above, he does not identify the rule, procedure, or standard that was not communicated to him by
Agxplore. Second, although Shelley states he was “constructive[ly] discharge[d]” and cites to “a
working environment in which no reasonable person would have stayed,” that allegation is oddly
placed in his breach of contract claim, and he does not indicate whether he believes he has a legal
cause of action for “constructive discharge.” Finally, he does not explain the connection between
Agxplore’s alleged failure to abide by its contract provision and what he calls his “constructive
discharge.”
Accordingly,
IT IS HEREBY ORDERED that plaintiff Agxplore’s Motion to Dismiss Count III of
Shelley’s Counterclaim is granted in part and denied in part.
IT IS FURTHER ORDERED that defendant Shelley shall file an amended answer and
counterclaim no later than January 19, 2013.

Dated this

9th

day of January, 2013.

____________________________________
STEPHEN N. LIMBAUGH, JR.
UNITED STATES DISTRICT JUDGE

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