RPM Performance Coatings Group, Inc. et al v. Fredrick

Filing 27

ORDER denying 23 defendant's motion for reconsideration and granting 24 plaintiffs' motion for default. A Permanent Injunction shall enter in this matter, pursuant to Defendant's Terms and Conditions of Employment. This Injunction shall begin on the date of this Order and remain in effect for a period of one year. Although Plaintiffs request a hearing on monetary damages (including attorneys fees), the Court believes the better way to proceed is for Plaintiffs to file a brief specifying exactly what amounts of monetary damages they believe they are entitled to. Plaintiffs brief on monetary damages shall be filed on or before April 5, 2013. Defendant may file a response to plaintiffs' brief on monetary damages on or b efore April 23, 2013. Thereafter, the Court will issue its order specifying the amount of monetary damagesawardable in this case. Clerk directed to mail a copy of this Order via regular and certified mail to defendant. Signed on 3/18/13 by Chief Dist rict Judge Fernando J. Gaitan, Jr. (Enss, Rhonda) A copy of this order was sent via regular and certified mail (article no. 7001 0360 0003 3498 2802) to William Fredrick, 1003 NE Clear Creek Dr., Grain Valley, MO 64029-9182 on 3/18/2013. (Melvin, Greg)

IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
RPM Performance Coatings Group, Inc.
and Stonhard, a division of StonCorp
Group, Inc.,
Plaintiffs,
vs.
William G. Fredrick,
Defendant.

)
)
)
)
) Case No. 12-1392-CV-W-FJG
)
)
)

ORDER
Pending before the Court are (1) Defendant’s Motion for Reconsideration of order
granting entry of default (Doc. No. 23) and (2) Plaintiffs’ Motion for Default Judgment (Doc.
No. 24).
I.

Background
Plaintiffs filed a complaint on November 26, 2012, asserting that defendant violated

the terms of his non-compete agreement with plaintiffs by accepting employment at a
competitor and bidding for competing jobs. Plaintiffs filed motions for temporary restraining
order and for preliminary injunction. On December 13, 2012, the Court denied the motion
for temporary restraining order following a teleconference in which defendant did not
participate, and ordered a preliminary injunction hearing be held Friday, January 11, 2012.
In the meantime, on December 27, 2012, plaintiffs filed a motion for entry of default,
noting that defendant had not timely answered the complaint. On December 28, 2012, the
Court issued an order for defendant to show cause on or before January 9, 2013, why an
entry of default should not be made. Defendant did not respond to the order to show

cause, and so on January 10, 2013, the Court entered an order granting the motion for
entry of default and cancelling the preliminary injunction hearing. The Court further ordered
plaintiffs to file a motion for default judgment, specifying the relief requested, on or before
February 1, 2013.

II.

Motion for Reconsideration (Doc. No. 23)
Almost two weeks after default was entered, on January 23, 2013, pro se defendant

filed a motion for reconsideration (Doc. No. 23). In this document, defendant states he
intended to dispute the complaint, and “With the changes, motions and a court date I did
not send a response to the first documents.”
Defendant then goes on to argue that (1) he abided by the terms of the non-compete
the first time he left plaintiffs’ employment (in 2003) because all the knowledge he had
obtained came from plaintiffs; (2) he maintained a database of customers that was built by
him and that is not proprietary to plaintiffs; (3) he returned to plaintiffs in 2010 with
additional knowledge of the market, industry and competitors that plaintiffs did not have; (4)
he lost business while employed by plaintiffs from 2010 to 2012 because of lack of
competitiveness; and (5) plaintiffs placed him on probation with his employment due to lack
of volume, and mentioned that he might have a change in territory. Defendant claims that
he gave two week’s notice when he decided to leave. Defendant also argues that he was
unaware of the non-compete agreement contained in his 2010 employment contract, as it
was “buried” in a code of conduct form. Defendant further argues that the Court should rule
the agreement he signed inapplicable, because plaintiffs “would have needed to prove that
they provided knowledge and customer information that I did not already possess.” Doc.
2

No. 23, p. 2.
III.

Motion for Default Judgment (Doc. No. 24), and Response to Motion for
Reconsideration
Plaintiffs move for default judgment on their six-count complaint.1 Plaintiffs assert

that defendant left their employment in October 2012 to immediately begin competing with
Stonhard by joining DesKo International, Inc. as Vice President of Speciality Flooring.
Plaintiffs allege that defendant took with him to DesKo confidential information, namely a
bid on a project for Water One. Plaintiff alleges that in the Fall of 2012, defendant provided
budgetary pricing to Water One on behalf of Stonhard, and then abruptly ended his
employment with Stonhard. Plaintiff alleges on information and belief that defendant used
his technical knowledge related to Stonhard products, pricing, and customers to place a
competing bid for the same work to Water One on behalf of Desko on October 30, 2012.
Defendant signed an employment contract on October 29, 2010 (Ex. A to Doc. No.
1), which provides for a confidentiality agreement and an agreement not to compete with
RPM.

The period of the contract is for one year after termination of employment

(regardless of reason); there does not appear to be any geographic limitation on the noncompete agreement. The agreement provides that defendant Aacknowledge[s] that RPM
Performance Coatings has the right to both money damages and injunctive relief in the
form of temporary and permanent court order, for irreparable harm which RPM
Performance Coatings may sustain and for monetary losses which RPM Performance
Coatings may suffer through any breach of any of my obligations thereunder. . . .@ Doc. No.
1

The Counts in the Complaint are: (1) injunctive and equitable relief; (2) breach of
contract; (3) indemnity; (4) injunction; (5) tortuous interference with contractual rights
and advantageous relationships; and (6) accounting.
3

1, Ex. A, & 9.1. The agreement also provides for indemnification of plaintiff for costs and
attorneys fees. Id. & 14.2
Plaintiffs note that despite proper service, defendant failed to answer the complaint
and thereafter failed to respond to the Court’s order to show cause why he should not be
held in default. Plaintiffs assert that defendant’s motion for reconsideration (Doc. No. 23)
should be denied, as defendant fails to explain why he failed to answer the complaint and
failed to respond to the Court’s order. Plaintiffs further note that defendant’s motion
demonstrates that he chose not to participate in the conference call with the Court on
December 13, 2012, and made no effort to contact the Court to reschedule the conference
call. Further, with respect to any argument that defendant has attempted to show good
cause for setting aside the default, plaintiffs indicate that defendant has not presented a
meritorious defense for his breach of the non-compete agreement, as he does not deny
signing the agreement, nor does he deny he received a reminder letter with a copy of the
agreement on or about October 23, 2012. Plaintiffs indicate that the fact defendant was
previously trained by plaintiffs and had a knowledge base the second time he entered their
employment does not make the non-compete unenforceable.
Within their motion for default judgment, plaintiffs request injunctive relief;
specifically, plaintiffs request that defendant “be enjoined from the date of this Court’s
Order for a period of one year from, either for his own account or in the service of or on
behalf of any other person or entity, including DesKo, directly or indirectly engaging in the
business of selling, marketing, or bidding for the installation of flooring products similar to
those sold by Stonhard or RPM Performance Coatings Group, Inc.,” in the same territory
that defendant was responsible for while employed by plaintiffs (map of territory attached

4

as Ex. B to Doc. No. 24). Doc. No. 24, p. 5. Plaintiffs further request that defendant be
enjoined from the date of the Court’s order for a period one year from “taking any action to
(i) solicit, call upon, or initiate communication or contact with any customer of Plaintiffs with
a view to providing any service or product that is offered or provided by Plaintiffs, or (ii)
divert or attempt to divert any customer, supplier, or other business relation of Plaintiffs.”
Doc. No. 24, p. 5. Plaintiffs also request a permanent injunction keeping defendant from
disclosing any of plaintiffs’ confidential information to any person or entity.
With respect to plaintiffs’ claims for breach of contract, plaintiffs request a hearing to
establish the amount of the unliquidated damages. With respect to plaintiffs’ claims for
indemnity, plaintiffs request an award of costs and attorneys fees reasonably incurred in
enforcement of defendant’s obligations. With respect to plaintiffs’ claims for tortuous
interference with contractual rights and advantageous relationships, plaintiffs seek a
hearing to determine amount of damages related to defendant presenting a competing
quote to Water One just weeks after entering a quote for plaintiffs.
IV.

Analysis
The Court finds that plaintiffs have demonstrated their entitlement to a default

judgment and that defendant has not demonstrated that the entry of default should be set
aside. Therefore, defendant’s motion for reconsideration (Doc. No. 23) is DENIED, and
plaintiffs’ motion for default judgment (Doc. No. 24) will be GRANTED.
In particular, defendant was properly served with the Summons and Complaint and
failed to answer or otherwise respond within the appropriate time frame.

Further,

defendant failed to respond to the Court’s order to show cause. Only two weeks after
default was entered did defendant attempt to make some showing as to why judgment

5

should not be entered against him; however, he did not give any good cause for his failures
to provide written responses to the complaint or the order to show cause. Furthermore,
defendant has not shown good cause to set aside the entry of default, and has not shown a
meritorious defense to this action. See Fed. R. Civ. P. 55; Hoover v. Valley West D M, 823
F.2d 227, 230 (8th Cir. 1987).
There is no just reason to delay entering judgment against the Defendant. Therefore
the Court finds that RPM Performance Coatings Group,

Inc. and Stonhard, a division

of StonCor Group, Inc., are entitled to both injunctive relief and monetary damages, as
provided below.
The parties agreed that New Jersey law would govern Defendant’s Terms and
Conditions of Employment. A restrictive covenant is enforceable when “it simply protects
the legitimate interests of the employer, imposes no undue hardship on the employee, and
is not injurious to the public.” Maw v. Advanced Clinical Commn’cs, Inc., 846 A.2d 604, 609
(N.J. 2004); Ingersoll-Rand Co. v. Ciavatta, 542 A.2d 879 (N.J. 1988); Solari Industries, Inc.
v. Malady, 264 A.2d 53 (N.J. 1970). Plaintiffs’ restrictive covenant protects two legitimate
interests: their proprietary and confidential information and their customer relationships.
These interests are legitimately protectable through restrictive covenants. See IngersollRand Co. v. Ciavatta, 542 A.2d 879 (N.J. 1988); A.T. Hudson & Co. v. Donovan, 524 A.2d
412 (N.J. Super. Ct. App. Div. 1987). Defendant’s Non-Compete Agreement reasonably
restricts him from competing for a period of one year and reasonably from performing work
similar to the work he performed while employed with Plaintiffs. Similar language has been
interpreted to include the geographic area in which the employee had responsibility. See
Trico Equip., Inc. v. Manor, No. 08-5561, 2009 U.S. Dist. LEXIS 50524 (D. N.J. July 13,

6

2009). See also Pathfinder, LLC v. Luck, No. 04-1475, 2005 U.S. Dist. LEXIS
44782 (D.N.J. May 20, 2005). Further, taking the allegations of the Complaint as true, the
Court finds the balance of hardships favors the Plaintiffs, and that Plaintiffs have shown
that they are in eminent danger of being irreparably injured if Defendant is not enjoined.
J.H. Renarde, Inc. v. Sims, 711 A.2d 410, 415 (N.J. Super. Ct. Ch. Div. 1998).
Defendant’s inside knowledge of Plaintiffs’ Confidential Information and the relationships he
cultivated on behalf of the Plaintiffs gives him an unfair advantage on behalf of a
competitor. He is in a position to transfer the goodwill generated on behalf of the Plaintiffs
to his new employer. Monetary damages are not an adequate remedy. It is difficult to
quantify the monetary harm to Plaintiffs because of the difficulties of evaluating lost
business.

Additionally, the damage to the relationship with customers cannot be

adequately repaired with monetary damages. Furthermore, defendant used his knowledge
of confidential pricing and customer preferences to submit a bid for a competitor on the
same Scope of Work previously quoted for Plaintiffs.
THEREFORE, IT IS HEREBY ORDERED as follows:
1.

A Permanent Injunction shall enter in this matter, pursuant to Defendant’s

Terms and Conditions of Employment. This Injunction shall begin on the date of this Order
and remain in effect for a period of one year. The following persons are enjoined:
a.

Defendant;

b.

his agents, servants, and employees;

c.

any person who directly or indirectly, through one or more
intermediaries, is controlled by, or is under the common control of the
Defendant;

7

d.

and all those in active concert or participation with the Defendant, who
receive actual notice of this Order by personal service or otherwise.

All of the above are immediately restrained and enjoined from engaging, directly or
indirectly in any of the following acts:
a.

Directly or indirectly engaging in the business of selling, marketing, or
bidding for the installation of flooring products similar to those sold by
Plaintiffs in the Defendant’s formed Territory, as described in Exhibit B
to Doc. No. 25;

b.

Solicit, call upon, or initiate communication or contact with any
customer of Plaintiffs with a view to providing any service or product
that is offered or provided by Plaintiffs, or divert or attempt to divert
any customer, supplier, or other business relation of Plaintiffs;

c.

Disclosing any of Plaintiffs’ Confidential Information to any person or
entity, including DesKo, for any reason or purpose whatsoever, or
making use of any of Plaintiffs’ Confidential Information for his own
purpose or those of another, including DesKo.

2.

Although Plaintiffs request a hearing on monetary damages (including

attorneys fees), the Court believes the better way to proceed is for Plaintiffs to file a brief
specifying exactly what amounts of monetary damages they believe they are entitled to.
Plaintiffs brief on monetary damages shall be filed on or before April 5, 2013. Defendant
may file a response to plaintiffs’ brief on monetary damages on or before April 23, 2013.
Thereafter, the Court will issue its order specifying the amount of monetary damages
awardable in this case.

8

3.

It is FURTHER ORDERED that the clerk of the court mail a copy of this Order

via regular and certified mail to defendant at the following address: William Fredrick, 1003
NE Clear Creek Dr., Grain Valley, MO 64029-9182.
IT IS SO ORDERED.

Dated: March 18, 2013
Kansas City, Missouri

/s/Fernando J. Gaitan, Jr.
Fernando J. Gaitan, Jr.
Chief United States District Judge

9