Metzler v. XPO Logistics, Inc. et al
Filing
116
MEMORANDUM OPINION AND ORDER Granted in Part and Denied in Part 76 MOTION for Partial Summary Judgment filed by Richard M. Metzler, Denying 109 MOTION to Strike 103 Reply to Response to Motion, and Brief in Support (Correc ted) filed by Richard M. Metzler, Granting 110 Opposed MOTION for Leave to File Supplemental Summary Judgment Record filed by XPO Logistics, Inc., Granted in Part and Denied in Part 78 SEALED MOTION for Partial Summary Judgment filed by XPO Logistics, Inc.. Signed by Magistrate Judge Amos L. Mazzant on 9/25/14. (cm, )
United States District Court
EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
RICHARD M. METZLER
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V.
XPO LOGISTICS, INC.
CASE NO. 4:13-CV-278
Judge Mazzant
MEMORANDUM OPINION AND ORDER
Pending before the Court are Plaintiff’s Motion for Partial Summary Judgment (Dkt.
#76), Defendant/Counterclaim Plaintiff XPO Logistics, Inc.’s Partial Summary Judgment Motion
(Dkt. #78), Metzler’s Motion to Strike XPO’s Reply in Further Support of Its Summary
Judgment Motion (Dkt. #109), and XPO Logistics, Inc.’s Opposed Motion for Leave to
Supplement Summary Judgment Record (Dkt. #110).
After considering the motions, the
responses, and the relevant pleadings, the Court finds as follows with regard to each motion.
BACKGROUND1
Plaintiff, Richard M. Metzler (“Plaintiff” or “Metzler”), entered into an Employment
Agreement with XPO Logistics, Inc. (“XPO”) on or about October 5, 2011 (the “Employment
Agreement”), to become the Senior Vice President of Acquisitions for XPO. XPO is a North
American company providing transportation logistics services in the non-asset based logistics
sector, meaning that it arranges logistics and transportation services for customers utilizing assets
1
Plaintiff objects to numerous statements made in the declaration of Bradley S. Jacobs (“Mr. Jacobs”), which is
made in support of XPO Logistics, Inc.’s partial summary judgment motion, as well as many of the exhibits attached
thereto (Dkt. #91). In objection number eleven, Plaintiff objects to the following statement of Mr. Jacobs, on the
basis that it is an improper legal conclusion: “As of that date, XPO’s investigation was already well underway,
Metzler had already been placed on paid leave, he had already received XPO’s Notice of Cause for Termination
letter, and numerous breaches of the Employment Agreement constituting further Cause for termination had already
been uncovered before Metzler first suggested, in his Original Petition, that he was being discriminated against
because of age.” The Court agrees that the second portion of that sentence is an improper legal conclusion, and thus,
the following will be stricken from the affidavit of Mr. Jacobs: “…and numerous breaches of the Employment
Agreement constituting further Cause for termination had already been uncovered before Metzler first suggested, in
his Original Petition, that he was being discriminated against because of age.” Plaintiff’s objection number eleven is
sustained. Plaintiff’s remaining objections are overruled.
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such as trucks, railcars, and planes owned by others. Metzler has worked in the transportation
and logistics industry for over thirty-five years, and has held executive-level positions for some
of the largest logistics companies in the world. Metzler was actively recruited for the position
with XPO, and was considered highly qualified. In his position as Senior Vice President of
Acquisitions, Metzler’s primary function was to leverage his experience and network to explore,
identify, and analyze potential acquisition opportunities for XPO. In this role, Metzler contends
that his duties included: (1) identification, research, and analysis of potential acquisitions; (2)
negotiating letters of intent on approved acquisitions; (3) developing and sustaining a network of
deal sources including, but not limited to investment banks, business owners, business brokers,
trade associations, and private equity firms; (4) conducting evaluations of companies; (5)
conducting due diligence; and (6) coordinating with external advisors and participating in the
development of investment strategy.
Under the Employment Agreement, Metzler received a base salary of $300,000 per year,
and had the opportunity to earn an annual bonus. Over the period of his employment, Metzler
received Base Salary and Bonus in the total amount of $538,771. As a senior executive, Metzler
was also given the opportunity to earn a substantial equity stake in XPO; therefore, the
Employment Agreement provides that Metzler would receive 85,000 restricted stock units
(“RSUs”), to vest in equal annual installments of 20% beginning September 2, 2012, subject to
Metzler’s continued employment. Metzler received 85,000 RSUs, 17,000 of which had vested
prior to his termination, with a value on the date of vesting, net of withholding taxes, of at least
$195,000.
Prior to his employment with XPO, Metzler held board and advisory positions with other
companies, including but not limited to 33 Integrated Solutions (“M33”) and Flash Global
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Logistics (“Flash”). Before he was hired, Metzler informed XPO about his roles with these
companies, and offered to resign from these positions in order to maintain his employment with
XPO. However, after discussions with XPO and a substantive review by XPO’s management
and board of directors of the companies and positions held by Metzler, XPO approved Metzler to
remain in his board and advisory positions.
During his employment with XPO, Metzler was successful in identifying and pursuing
three companies, which resulted in XPO acquiring these companies, each with annual revenues
between $22 and $43 million. Metzler had access to XPO confidential information regarding,
among other things, XPO’s competitive and acquisition strategies and investment and acquisition
targets. Metzler reported directly to the CEO of XPO.
On May 2, 2013, Metzler was placed on paid leave pending an investigation into
suspected activities that were adverse to XPO’s interests. On May 6, 2013, XPO sent Metzler a
letter titled “Cause of Termination of Your Employment,” stating that Metzler was:
(1) failing to cooperate in good faith with an internal Company investigation with
which the Company asked you to cooperate; and (2) refusing my lawful directives
as Chief Executive Officer of the Company. As a result, I am writing to notify
you that “Cause” (as defined by your October 5, 2011 Employment Agreement)
exists to terminate your employment with XPO. To the extent these violations are
curable, you have 15 days in which to cure them, as specified in paragraph 4(c) of
your Employment Agreement.
(Dkt. #78, Declaration of Jacobs, Ex. G, p. 1). On May 31, 2014, XPO sent Metzler a letter titled
“Notice of Termination of Your Employment for Cause” (the “Termination Notice”). The
Employment Agreement provides that XPO “may terminate Employee’s employment hereunder
for Cause by written notice at any time” (Dkt. #78, Ex. A § 4(c)). “Cause” is defined as, among
other things:
(i) “material dereliction of duties or his negligence or substantial failure to
perform his duties hereunder;”
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(ii) “willful refusal to follow any lawful directive of the CEO, CAO, the Board,
or any other executive officer to whom Employee reports;”
(iii) “commission of any fraud, embezzlement, theft, or dishonesty, or any
deliberate misappropriation of money or other assets of the Company;”
(iv) “material breach of any term of this [Employment] Agreement…;”
(v) “any willful act, or failure to act, in bad faith to the material detriment of the
Company;” and
(vi) “willful failure to cooperate in good faith with a governmental or internal
investigation of the Company of any of its directors, managers, officers or
employees, if the Company requests his cooperation.”
Id. Upon termination for Cause, “[a]ll unvested RSUs… shall be forfeited”, and XPO has the
right to “cancel the RSUs, including any vested amounts thereof, and require Employee to forfeit
or remit to the Company… the after-tax net amount… received by the Employee, in respect of
any RSUs.” Id. at §§ 3(c), 5(g).
XPO contends that in February of 2013, Metzler was solicited by Expert Network Group
(“ENG”) to refer acquisition deals in the asset-light logistics sector to ENG’s client Moelis
Capital Partners, LLC (“Moelis”). XPO contends that Moelis is a direct competitor of XPO for
acquisitions in the asset-light logistics sector. XPO asserts that Metzler agreed to accept a seat
on the Board of Directors of every target he identified that Moelis acquired as a result of his
work for ENG and Moelis. XPO contends that Metzler disclosed Target A to Moelis as a
potential acquisition target. Target A was then and remains now of interest to XPO as an
acquisition candidate and XPO met with Target A as recently as January 2014 to discuss a
potential acquisition. XPO contends that Metzler also disclosed to Moelis two other potential
targets, one of which was actually acquired by XPO after Metzler disclosed it to Moelis.
Metzler contends that when ENG first contacted him, he believed ENG was referring an
opportunity to XPO, and only later understood that ENG and Moelis wanted Metzler to refer
opportunities to them. Metzler asserts that he believed that maintaining good relations with ENG
and Moelis could lead to future acquisition discussions and negotiations which could benefit
4
XPO, so he agreed to have a discussion with Moelis regarding acquisitions that were entirely
non-competitive and non-conflicting with XPO. Metzler asserts that he informed both Moelis
and ENG that he did not want to be compensated since this was to be simply an informal
networking relationship only. He never executed, nor intended to execute, any agreement with
ENG or Moelis; and he never promised any personal benefit from his limited relationship with
ENG or Moelis. Metzler asserts that Target A was not a legitimate acquisition target during
Metzler’s time with the company, and that XPO and Jacobs showed no interest in acquiring
Target A. Jacobs later told Metzler that the investment community would think XPO was
“crazy” if it did an acquisition of Target A because they were a home delivery company. The
two additional companies referred to by XPO are 3PD and Home Direct, and Metzler contends
that he did not discuss these companies with Moelis, and believes that these discussions did not
occur.
XPO also asserts that Metzler was aware that XPO was seeking to acquire Target B, and
had made a substantial investment of time, resources, and money into that effort. Metzler was on
the acquisition team, and was aware that Target B had critical salespeople who represented an
important part of its value. Metzler recommended to the CEO of another company (“Target C”)
that was itself an XPO acquisition target for which Metzler was responsible, that Target C should
hire one of Target B’s salespeople. XPO asserts that this created the risk that Target B would
lose an important revenue-generating employee at the very time that XPO was working to
acquire the company.
Metzler contends that XPO complains about his recommendation of a salesperson
working at Target B to Target C for a transportation management services position despite the
fact that XPO has never offered transportation management services, and earlier that year,
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Metzler recommended the same salesperson for a position at XPO.
The salesperson was
interviewed and considered, but was not ultimately hired. Metzler asserts that no one at XPO
stated that this salesperson was such a valuable asset of Target B that his leaving the company
would have a detrimental impact on the valuation of the company, and there is no evidence that it
would have had a material impact.
Metzler states that his sole purpose in making the
recommendation was to strengthen the relationship with Target C for the benefit of XPO.
XPO also asserts that Metzler failed to disclose a potential acquisition opportunity in
Home Delivery America, Inc., a company specializing in in-home and business-to-business
delivery and logistics. XPO contends that the target was disclosed to Metzler by Individual C, a
lawyer who represents XPO in certain matters, and the two of them pitched opportunities to each
other without regard for and contrary to XPO’s interests. XPO also contends that Metzler failed
to disclose his dealings with several firms that recruited him for consultation services.
Metzler asserts that Jacobs told him that XPO did not have any interest in making
acquisitions in the segment of the market in which Home Delivery America, Inc. specializes.
Metzler also contends that he made connections with various firms, and attended various
meetings to learn about opportunities that were beneficial to XPO.
XPO also asserts that Metzler disclosed confidential information regarding XPO to other
third-parties and dealt behind XPO’s back on behalf of himself and other parties. XPO also
asserts that Metzler failed to cooperate with the investigation, and failed to follow directives.
Metzler contends that he did not disclose confidential XPO information to anyone, and primarily
engaged in these relationships for the benefit of XPO. Metzler also asserts that he cooperated to
the best of his ability with XPO’s changing and varied demands throughout the investigation.
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PROCEDURAL HISTORY
On February 24, 2014, Metzler filed his motion for partial summary judgment (Dkt.
#76). On March 21, 2014, XPO filed its response (Dkt. #90). On April 10, 2014, Metzler filed
his reply (Dkt. #101).
On February 25, 2014, XPO filed its motion for partial summary judgment (Dkt. #78,
#79, #80). On March 21, 2014, Metzler filed his response (Dkt. #92, #93). On April 10, 2014,
XPO filed its reply (Dkt. #103). On April 21, 2014, Metzler filed his sur-reply (Dkt. #108).
On April 22, 2014, Metzler filed his motion to strike XPO’s reply in further support of its
summary judgment motion (Dkt. #109). On May 1, 2014, XPO filed its response to this motion
(Dkt. #111). On May 19, 2014, Metzler filed his reply (Dkt. #114).
On May 1, 2014, XPO filed its motion for leave to supplement the summary judgment
record (Dkt. #110). On May 19, 2014, Metzler filed his response to this motion (Dkt. #113). On
May 29, 2014, XPO filed its reply (Dkt. #115).
LEGAL STANDARD
The purpose of summary judgment is to isolate and dispose of factually unsupported
claims or defenses. See Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). Summary judgment
is proper if the pleadings, the discovery and disclosure materials on file, and any affidavits
“[show] that there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” FED. R. CIV. P. 56(a). A dispute about a material fact is genuine
“if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The trial court must resolve all
reasonable doubts in favor of the party opposing the motion for summary judgment. Casey
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Enters., Inc. v. Am. Hardware Mut. Ins. Co., 655 F.2d 598, 602 (5th Cir. 1981) (citations
omitted). The substantive law identifies which facts are material. Anderson, 477 U.S. at 248.
The party moving for summary judgment has the burden to show that there is no genuine
issue of material fact and that it is entitled to judgment as a matter of law. Id. at 247. If the
movant bears the burden of proof on a claim or defense on which it is moving for summary
judgment, it must come forward with evidence that establishes “beyond peradventure all of the
essential elements of the claim or defense.” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th
Cir. 1986). But if the nonmovant bears the burden of proof, the movant may discharge its burden
by showing that there is an absence of evidence to support the nonmovant’s case. Celotex, 477
U.S. at 325; Byers v. Dallas Morning News, Inc., 209 F.3d 419, 424 (5th Cir. 2000). Once the
movant has carried its burden, the nonmovant must “respond to the motion for summary
judgment by setting forth particular facts indicating there is a genuine issue for trial.” Byers, 209
F.3d at 424 (citing Anderson, 477 U.S. at 248-49). The nonmovant must adduce affirmative
evidence. Anderson, 477 U.S. at 257. The Court must consider all of the evidence but refrain
from making any credibility determinations or weighing the evidence. See Turner v. Baylor
Richardson Med. Ctr., 476 F.3d 337, 343 (5th Cir. 2007).
ANALYSIS
A. Metzler’s Motion to Strike XPO’s Reply in Further Support of Its Summary Judgment Motion
(Dkt. #109) and XPO Logistics, Inc.’s Opposed Motion for Leave to Supplement Summary
Judgment Record (Dkt. #110)
The Court combines the analysis of these two motions, as they raise exactly the same
issue: whether XPO’s evidence submitted in response to Metzler’s objections to the summary
judgment evidence and as an attachment to its reply brief is properly submitted to the Court for
consideration. At the outset, the Court notes that although both parties accuse the other of severe
8
prejudice resulting from the unnecessary increase in litigation costs arising from the filing of
multiple motions and repeated assertions regarding the facts and legal arguments made in this
case, it is clear that both parties, to quote Plaintiff, have “no reservations about filing a multitude
of motions rehashing the same facts and circumstances repeatedly” (Dkt. #113 at 7). The Court
assumes nothing from this other than a firm resolve on the part of counsel for both parties to
zealously represent their clients’ positions on the facts and law as they see fit under the Federal
Rules of Civil Procedure and the Eastern District of Texas Local Rules.
The parties also actively dispute various factual arguments in the motion to strike and
motion for leave to supplement. The Court will not consider the factual disputes in this section,
but will instead, reserve its analysis on the substantive issues presented in this case for the
analysis addressing the parties’ motions for summary judgment.
Metzler moves to strike the reply brief of XPO filed in support of its motion for partial
summary judgment on the basis that it presents new, improper, and untimely evidence (Dkt.
#109). Metzler’s argument rests on his interpretation of Eastern District of Texas Local Rule
(“Local Rule”) CV-56(d), which provides that “[a]s used within this rule, ‘proper summary
judgment evidence’ means excerpted copies of pleadings, depositions… affidavits or
declarations…, and other admissible evidence cited in the motion for summary judgment or the
response thereto.” Metzler argues that the omission of evidence submitted in a reply brief from
this rule is “conclusive evidence” to demonstrate that the affidavits, declarations, or other
evidence submitted in conjunctive with a reply brief is not “proper summary judgment evidence”
under these rules. Metzler goes on to argue that it is “well-settled” in Texas federal district
courts that new evidence may not be submitted in a reply brief, citing cases from the Northern
District of Texas in support of this proposition.
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XPO asserts that its initial summary judgment evidence was proper, that it was entitled to
respond to Metzler’s objections to the evidence with further declarations that established the
authenticity and personal knowledge of the affiants, and that it was proper to address matters
raised by Metzler in his responsive brief with evidence responsive to those matters in its reply
brief. XPO contends that federal courts have recognized a movant’s right on summary judgment
to address in reply briefs issues raised by an opponent in its response, especially when the
opponent has an opportunity to respond to the evidence submitted.
There is no provision of the Federal Rules of Civil Procedure or the Local Rules that
prohibits filing evidence in a reply brief.2 In fact, the Local Rules themselves contemplate this
procedure. See Local Rule CV-7(a) (referring to “attachments” to a reply brief). The Court does
not adopt Metzler’s view that the exclusion of evidence submitted in support of a reply brief
from the definition of “proper summary judgment evidence” as set out in Local Rule CV-56(d)
necessarily means that evidence may not be submitted in a reply brief at all. This Court’s
general practice is to allow the submission of evidence in a reply brief when the evidence
submitted responds to issues raised by the response brief.3 The Fifth Circuit has addressed this
issue, stating that “Rule 56(c) merely requires the court to give the non-movant an adequate
opportunity to respond prior to a ruling” and noted that “those circuits that have expressly
addressed this issue have held that a district court may rely on arguments and evidence presented
for the first time in a reply brief as long as the court gives the nonmovant an adequate
opportunity to respond.” Vais Arms., Inc. v. Vais, 383 F.3d 287, 292 (5th Cir. 2004) (quoting
Southwestern Bell Tel. Co. v. City of El Paso, 346 F.3d 541, 545 (5th Cir. 2003)).
2
The Court agrees with XPO that a discussion of the Local Rules of the Northern District of Texas, as well as case
law interpreting those rules, is irrelevant to the discussion before the Court as this issue relies heavily on Eastern
District of Texas local rules and their interpretation.
3
This Court has also permitted, in rare and limited circumstances, a party to file evidence in a sur-reply brief that
responds to evidence submitted in a reply brief.
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In this case, XPO’s submission of evidence in its reply brief is in response to Plaintiff’s
objections to the original summary judgment evidence submitted by XPO. It does not raise any
new substantive issues to which Metzler was required to respond.
Further, any potential
prejudice to Metzler was alleviated by the ability to file a sur-reply brief to the summary
judgment motion (Dkt. #108), a reply brief in support of its objections to the summary judgment
evidence (Dkt. #106), a motion to strike (Dkt. #109), and a response to XPO’s motion for leave
to supplement (Dkt. #113). Further, the Local Rules also permit a party to ask for leave from the
Court to submit additional evidence if necessary, and motions for leave to exceed page
limitations if more briefing is required. See Local Rule CV-7(k) & (l). Thus, the Court finds
that the evidence submitted by XPO in its reply was proper to respond to Metzler’s objections to
the evidence, and there is no basis to strike that evidence. Accordingly, Metzler’s Motion to
Strike XPO’s Reply in Further Support of Its Summary Judgment Motion (Dkt. #109) is denied,
and XPO Logistics, Inc.’s Opposed Motion for Leave to Supplement Summary Judgment Record
(Dkt. #110) is granted.
B. Plaintiff’s Motion for Partial Summary Judgment (Dkt. #76)
Metzler moves for partial summary judgment on his claims for invasion of privacy and
conversion, and on XPO’s counterclaims for breach of contract-return of property provision,
breach of contract-cooperation provision, and conversion.
In order to demonstrate a right to a claim for invasion of privacy, specifically intrusion
upon the plaintiff’s seclusion or solitude, Metzler must demonstrate: (1) an intentional intrusion,
physically or otherwise, upon another’s solitude, seclusion, or private affairs or concerns, which
(2) would be highly offensive to a reasonable person. Valenquela v. Aquino, 853 S.W.2d 512,
513 (Tex. 1993); see also Billings v. Atkinson, 489 S.W.2d 858, 859-60 (Tex. 1979). Metzler
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argues that XPO intentionally delved into Metzler’s personal solitude, seclusion, and private
affairs when they took possession of his personal laptop and gained access to it, took possession
of his personal iPad and attempted to gain access to it, fully imaged and copied the contents of
his personal laptop and business laptop, demanded he give XPO access to his personal iPhone,
personal hard drives, usernames and passwords to personal email accounts, and username and
passwords to personal online storage accounts, and demanded he turn over to XPO all
communications with the companies that he advised.
First, the Court finds that there is no intentional intrusion into Metzler’s solitude,
seclusion, or private affairs with regard to XPO’s demands that Metzler give XPO access to his
personal iPhone, hard drives, accounts, and other communications received by Metzler.
Plaintiff’s assertion is that XPO demanded access to this information, and Metzler refused.
Thus, no intentional intrusion actually took place. As to the imaging of the business laptop,
under Texas law, an employee has no reasonable expectation of privacy in the contents of
materials sent or stored on a company computer system. See McLaren v. Microsoft Corp., No.
05-97-00824-CV, 1999 WL 339015, at *4 (Tex. App. – Dallas, May 28, 1999, no pet.). The
McLaren court found that the e-mail messages at issue “contained on the company computer
were not [plaintiff’s] personal property, but were merely an inherent part of the office
environment” and that such e-mails “were first transmitted over the network and were at some
point accessible by a third-party.” Id. at *4. The same is true here of materials sent or stored on
the company laptop provided to Metzler.
The Court will now turn to the allegations that XPO intruded into Metzler’s personal
solitude, seclusion, and private affairs when they took possession of his personal laptop and iPad,
gained access to these devices, and had the personal laptop fully imaged and the contents copied.
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Metzler asserts that at the outset of his employment he was not provided with a company
computer for XPO business purposes, and, therefore, he was required to use his personal laptop
and iPad to conduct XPO business. XPO asserts that its policies put Metzler on notice that he
had “no right of privacy” in anything, that material placed on XPO’s systems or equipment was
“not confidential,” and was “the property of XPO” (Dkt. #90, Ex. D). XPO also has a policy
prohibiting employees from “conduct[ing] Company business on personal computers” or
“send[ing] any Company confidential or proprietary material to a personal computer or personal
email account.” Id. at Ex. B, Ex. D. XPO further claims that because no one has reviewed the
contents of the personal devices, that there has been no intrusion at all, and that if a review was
conducted, it would have been entirely warranted so that XPO could remove its property. The
Court finds that there is a fact issue as to whether there was an intentional intrusion into the
seclusion of Metzler that a reasonable person would have found highly offensive. Summary
judgment is denied on this claim.4
In order to demonstrate a claim for conversion, Metzler must show that: (1) the plaintiff
owned, had legal possession of, or was entitled to possession of the property; (2) the defendant
assumed and exercised dominion and control over the property in an unlawful and unauthorized
manner, to the exclusion of and inconsistent with the plaintiff’s right; and (3) the defendant
refused the plaintiff’s demand for the return of the property. City Bank v. Compass Bank, 717 F.
Supp. 2d 599, 611-12 (W.D. Tex. 2010) (citing Huffmeyer v. Mann, 49 S.W.3d 554, 558 (Tex.
App. – Corpus Christi 2001, no pet.)). It is undisputed that Metzler owned, had legal possession
of, or was entitled to possession of his personal property – the laptop and iPad. Further, XPO
assumed and exercised dominion and control over the property when it seized Metzler’s personal
4
XPO also moves for summary judgment on Metzler’s claim for alleged intrusion of privacy. For the same reasons
as stated supra, summary judgment is denied on this claim.
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property, and prohibited him from obtaining it back. The Court is not persuaded by XPO’s
argument that the devices contain XPO property, which means that Metzler is not entitled to
possession of the devices. The devices are the personal property of Metzler, and remain in the
possession of XPO. Additionally, it is true that Metzler’s counsel agreed to allow counsel for
XPO to retain the laptop and iPad for a period of time until the parties could mutually agree upon
a reasonable protocol to review these devices; however, Metzler’s counsel did not agree to allow
XPO to keep Metzler’s personal property forever. Metzler’s evidence reveals that as of May 29,
2013, a mutually-agreeable protocol for imaging the devices was in place (Dkt. #93 at Ex. AC).
However, the parties reached an impasse as to whether Metzler would share equally in the costs
of imaging. Id. Apparently both devices have been imaged already. However, the Court is
unable to determine from the evidence submitted whether there has been a request for return of
the property after the May 29, 2013 protocol was agreed to by the parties. Metzler asserts that he
has requested the return of his personal property many times, and XPO asserts that he has not.
Thus, there is a fact issue, and summary judgment is denied on this claim.5
Metzler also moves for summary judgment on XPO’s counterclaim of conversion. In
support of its claim for conversion, XPO asserts that Metzler was given the use of XPO property,
including, but not limited to, XPO computers, phones, and other electronic devices, and XPO
proprietary and confidential information. XPO asserts that Metzler failed to return the property
and/or failed to allow XPO to retrieve the information from his personal devices despite multiple
demands. Metzler contends that there is no evidence to support this claim. XPO does not
substantively address this claim, other than to state that Metzler has never returned XPO
information that Metzler imbedded into his personal devices, and that Metzler is not entitled to
5
XPO also moves for summary judgment on Metzler’s claim for conversion. For the same reasons as stated supra,
summary judgment is denied on this claim.
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retain this information. In response, Metzler argues that his initial instructions from XPO were
to delete all XPO electronic data in his possession (Dkt. #93 at Ex. L, Ex. X; Metzler Declaration
¶ 115-116). Metzler complied with this request, and hired a computer forensic expert to locate
and delete all XPO-related information from his personal devices.
Id.
XPO received
confirmation of the deletion of data, but has since shifted its position to now request the return of
the documents. Metzler did not have any XPO hard documents in his possession to return. (Dkt.
#93, Metzler Declaration ¶ 117-118). Metzler no longer has any electronic information to return
since he complied with XPO’s initial request to delete the information. Thus, there is no basis
for XPO’s claim of conversion, as Metzler did not retain the information. Further, the electronic
information on the devices allegedly retained by Metzler was not exclusive of XPO’s rights to
the information, as other copies were stored elsewhere on XPO’s server systems. Thus, the
Court finds that summary judgment should be granted in favor of Metzler on XPO’s claim for
conversion, and XPO’s claim for conversion will be dismissed.
Metzler also moves for summary judgment on XPO’s claims for breach of contractreturn of property provision and breach of contract-cooperation provision; however, the Court
will address these two claims and Plaintiff’s arguments when it considers them infra.
C. Defendant/Counterclaim Plaintiff XPO Logistics, Inc.’s Partial Summary Judgment Motion
(Dkt. #78)
Defendant moves for summary judgment on its contract counterclaims asserting that
Metzler breached the Full Efforts and Best Interests clause, the No-Consultation clause, the
Confidentiality clause, the Competitive Opportunity clause, the Return of Property clause, and
the Cooperation clause of the Employment Agreement. XPO also moves for summary judgment
on its declaratory judgment counterclaims that Metzler was validly and properly terminated for
cause, its RSU forfeiture claim, on Metzler’s claim for breach of contract, its claims for breach
15
of the duty of loyalty, Metzler’s claim for age discrimination, and Metzler’s claim for tortious
interference.
The first argument that must be addressed it what law applies to the Employment
Agreement entered into by the parties. Metzler asserts that Texas law governs the Employment
Agreement, whereas XPO contends that New York law should be applied.
To determine the applicable law, a federal court sitting in diversity applies the choice of
law rules of the forum. Benchmark Electronics, Inc., v. J.M. Huber Corp., 343 F.3d 719, 726
(5th Cir. 2003) (citing Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 311 (5th Cir. 2000)).
Accordingly, Texas choice of law rules apply.
The Employment Agreement contains a choice of law provision that states:
This Agreement shall be governed by and construed in accordance with its
express terms, and otherwise in accordance with the laws of the State of New
York without reference to its principles of conflicts of law.
(Dkt. #78, Ex. A at 16 § 10(k)). Both parties executed this agreement by signing the agreement.
Before we apply New York law to the issues here, we must determine whether the choice of law
provision contained in the parties’ Employment Agreement is enforceable.
Texas courts analyze the enforceability of choice of law provisions under sections 187
and 188 of the Restatement (Second) of Conflict of Laws (the “Restatement”). See DeSantis v.
Wackenhut, Corp., 793 S.W.2d 670, 677-78 (Tex. 1990). Section 187(1) provides that “[t]he law
of the state chosen by the parties to govern their contractual rights and duties will be applied if
the particular issue is one which the parties could have resolved by an explicit provision in their
agreement directed to that issue.” Restatement § 187(1); see also DeSantis, 793 S.W.2d at 67778. The initial inquiry – whether the issue is one which the parties could resolve by an explicit
agreement – must be conducted pursuant to the laws of the state identified by applying the test
16
outlined in section 188 of the Restatement. See Restatement § 187(1) cmt. c. Thus, the Court
will consider (1) the place of contracting, (2) the place of negotiation of the contract, (3) the
place of performance, (4) the location of the subject matter of the contract, and (5) the domicil,
residence, nationality, place of incorporation and place of business of the parties.
See
Restatement § 188(2). Metzler signed the agreement in Texas, and Mr. Jacobs for XPO signed
the agreement, although it is unclear where. Metzler negotiated the contract from Texas, and
XPO asserts that counsel for XPO negotiated the agreement from New York. The place of
performance of the contract was primarily Texas, as that is where Metzler lived and worked;
however, Metzler did negotiate with potential customers or clients of XPO in various locations
across the United States, and Metzler traveled to New York on occasion to conduct XPO
business.
The location of the subject matter of the contract is the same as the place of
performance. XPO is incorporated in Delaware and headquartered in Connecticut, and Metzler
is located in Texas. Based on this test, it appears that the state with the most significant
relationship to the contract is Texas, since Metzler both lived and worked here and conducted
most of his part of the contract from Texas. While there were other activities connected to other
parts of the United States, Texas has the most significant relationship to the contract. Thus, the
Court will look to the law of Texas to identify whether the issue is one which the parties could
resolve by an explicit provision in the parties’ agreement.
XPO asserts that Texas law would permit parties to agree to provide particular remedies
for breach of one party’s contractual duties, such as a return of compensation in the event of a
breach of duty pursuant to an employment agreement. XPO contends that here the parties could
have entered into an explicit agreement providing for a return to XPO of compensation during
any period in which Metzler was breaching the contract by being disloyal in breach of his
17
fiduciary duty. Metzler contends that a provision of this sort would be fundamentally opposed to
Texas law and public policy because the “faithless servant” doctrine requires disgorgement of
the entirety of the employee’s compensation paid during the period of alleged faithlessness
without any right to an offset or equitable retention of the value the employee provided during
the period (Dkt. #108 at 9 (citing Phansalkar v. Andersen Weinroth & Co., L.P., 344 F.3d 184,
200 (2d Cir. 2003)). Metzler contends that New York law requires automatic forfeiture of any
and all compensation upon a showing of liability. The Court disagrees. In the Phansalkar case,
cited by Metzler, the Second Circuit considered the fact that forfeiture can be limited in some
circumstances; however, the ultimate conclusion was that in the Phansalkar case, the forfeiture
could not appropriately be limited to only some transactions because the agreement called for
general compensation and did not limit compensation to specific amounts paid for the
completion of specific tasks. 344 F.3d at 207-08. However, the Second Circuit does not state
that forfeiture is automatic and due without any proof that an employer suffered any damages.
Further, the Texas Supreme Court found that “courts may fashion equitable remedies such as
profit disgorgement and fee forfeiture to remedy a breach of fiduciary duty,” and going on to
explain that “a fiduciary may be required to forfeit the right to compensation for the fiduciary’s
work.” ERI Consulting Engineers, Inc. v. Swinnea, 318 S.W.3d 867, 873 (Tex. 2010). The
Texas Supreme Court also stated, “the remedy of forfeiture is necessary to prevent such abuses
of trust, regardless of proof of actual damages.” Id. at 874. Thus, the remedy of fee forfeiture is
certainly one that is contemplated and applied by Texas law, and does not controvert Texas
public policy.
Thus, the Court finds that the parties could have entered into an explicit
agreement providing for a return to XPO of compensation paid during any period in which
Metzler was breaching the contract by being disloyal in breach of his fiduciary duty.
18
Accordingly, Restatement Section 187(1) applies, and New York law, the law chosen by the
parties in the Employment Agreement, will govern the contract dispute and breach of fiduciary
duty claim in this case.6
A claim for breach of contract requires the formation of a contract, performance by one
party, failure to perform by another, and resulting damage.
New York State Workers’
Compensation Bd. v. SGRisk, LLC, 116 A.D.3d 1148, 983 N.Y.S.2d 642, 648 (App. Div. 2014)
(citing Torok v. Moore’s Flatwork & Founds., LLC, 106 A.D.3d 1421, 1422, 966 N.Y.S.2d 572
(App. Div. 2013)). “When interpreting contracts, we have repeatedly applied the ‘familiar and
eminently sensible proposition of law [] that, when parties set down their agreement in a clear,
complete document, their writing should… be enforced according to its terms.’” Vermont Teddy
Bear Co. v. 538 Madison Realty Co., 1 N.Y.3d 470, 475 (N.Y. 2004). “Hence, ‘courts may not
by construction add or excise terms, nor distort the meaning of those used and thereby make a
new contract for the parties under the guise of interpreting the writing.’” Id.
XPO moves for summary judgment for breach of contract of the full efforts and best
interest clause, the non-consultation clause, the confidentiality clause, the competitive
opportunity clause, the return of property clause, and the cooperation clause of the Employment
Agreement. Metzler similarly moves for summary judgment on the return of property clause and
the cooperation clause.
The full efforts and best interest clause requires that Metzler “devote his full working
time, energy and attention to the performance of his duties and responsibilities hereunder and
shall faithfully and diligently endeavor to promote the business and best interests of the
6
The Court also notes that the parties agree that Texas law should govern the invasion of privacy, conversion, and
tortious interference with a contract claims, as the parties cited Texas law exclusively to the Court for its
consideration of the relevant law. In addition, Metzler’s age discrimination claim is governed by the relevant federal
law.
19
Company” (Dkt. #78, Ex. A § 1(c)). The Court finds that there are genuine disputes as to
material facts at issue in determining whether Metzler breached this provision of the agreement,
and denies summary judgment on this claim.
The non-consultation clause prohibits Metzler from “engag[ing] in business with,
serv[ing] as an agent or consultant to, becom[ing] an employee, partner, member, principal,
stockholder or other owner… of, any Competitive Business.”
Id. at § 7(b).
It defines
Competitive Business as “any individual, employeeship, corporation, limited liability company,
partnership, unincorporated organization, trust, joint venture or other entity (i) that engages in or
may engage in acquisition related or mergers and acquisition activities related to the
transportation or third-party logistics industry… (ii) … providers of third-party logistics services,
including, without limitation, freight brokerage, freight forwarding, expediting or intermodal
providers.” Id. The Court finds that there are genuine disputes as to material facts at issue in
determining whether Metzler breached this provision of the agreement, and denies summary
judgment on this claim.
The confidentiality clause requires Metzler to “hold in strict confidence any Confidential
information related to any of the Company Entities.” Id. at § 7(a). Confidential Information is
defined as “all confidential or proprietary information of any of the Company Entities.” Id. The
Court finds that there are genuine disputes as to material facts at issue in determining whether
Metzler breached this provision of the agreement, and denies summary judgment on this claim.
The competitive opportunity clause states that if, during his employment, Metzler:
(i) acquires knowledge of a potential investment, investment opportunity or
business venture which may be an appropriate for investment by the Company, or
in which the Company could otherwise have an interest or expectancy (a
“Competitive Opportunity”), or (ii) otherwise is then exploiting any Competitive
Opportunity, Employee shall promptly bring such Competitive Opportunity to the
Company. In such event, Employee shall not have the right to hold any such
20
Competitive Opportunity for his (and his agents’, employees’ or affiliates’) own
account and benefit or to recommend, assign or otherwise transfer or deal in such
Competitive Opportunity with persons other than the Company.
Id. at § 7(d). The Court finds that there are genuine disputes as to material facts at issue in
determining whether Metzler breached this provision of the agreement, and denies summary
judgment on this claim.
The return of company property clause states that:
All documents, data, recordings, or other property, including, without limitation,
smartphones, computers and other business equipment, whether tangible or
intangible, including all information stored in electronic form, obtained or
prepared by or for Employee and utilized by Employee in the course of his
employment with the Company shall remain the exclusive property of the
Company and Employee shall return all copies of such property upon any
termination of his employment and as otherwise requested by the Company
during his Term.
Id. at § 7(e). XPO asserts that Metzler has never returned XPO information that Metzler
imbedded into his personal devices in breach of this provision, and that Metzler is not entitled to
retain this information. In response, Metzler argues that his initial instructions from XPO were
to delete all XPO electronic data in his possession (Dkt. #93 at Ex. L, Ex. X; Metzler Declaration
¶ 115-116). Metzler complied with this request, and hired a computer forensic expert to locate
and delete all XPO-related information from his personal devices.
Id.
XPO received
confirmation of the deletion of data, but has since shifted its position to now request the return of
the documents. Metzler did not, and does not, have any XPO hard documents in his possession
to return. (Dkt. #93, Metzler Declaration ¶ 117-118). Metzler no longer has any electronic
information to return since he complied with XPO’s initial request to delete the information.
Thus, there is no basis for XPO’s claim of breach of the return of property provision, as Metzler
complied with the request of XPO to delete the information. Thus, XPO’s motion for summary
21
judgment on this claim will be denied, and Metzler’s motion for summary judgment on this
claim will be granted.
Finally, the cooperation clause in the Employment Agreement requires Metzler to
provide his “reasonable cooperation in connection with any suit, action or proceeding… and any
investigation occurring during Employee’s employment with any Company Entity” (Dkt. #78,
Ex. A at § 7(g)).
The Court finds that there are genuine disputes as to material facts at issue in
determining whether Metzler breached this provision of the agreement, and denies summary
judgment on this claim.
Based on the finding of the Court that there are genuine issues of material fact regarding
many of the contract provisions that Metzler allegedly breached, the Court finds that there are
genuine issues of material fact that must be resolved before the Court can determine whether
Metzler was terminated for cause as defined in the contract, and whether XPO is entitled to
declaratory judgment. Those same issues of material fact must first be resolved prior to finding
whether or not XPO is entitled to recover the net proceeds received by Metzler on his sale of
stock covered by the RSUs, as outlined in Section 5(g) of the Employment Agreement. Thus,
the Court finds that summary judgment is denied on these claims as well.
XPO moves for summary judgment on its claim for breach of fiduciary duty. “An
employee’s fiduciary duty to his employer prohibits him from ‘acting in any manner inconsistent
with his agency or trust,’ and he is ‘at all times bound to exercise the utmost good faith and
loyalty in the performance of his duties.” Gortat v. Capala Bros., Inc., 585 F. Supp. 2d 372,
376-77 (E.D.N.Y. 2004) (applying New York law). XPO asserts that Metzler failed to exercise
good faith and loyalty in the performance of his duties, and acted inconsistently with XPO’s
interests. Metzler asserts that he was a good employee, performed well for XPO, and did not act
22
in a way that was inconsistent or adverse to XPO’s interests. The Court finds that there are
genuine disputes as to material facts at issue in determining whether Metzler breached his
fiduciary duty of loyalty, and denies summary judgment on this claim.
XPO also moves for summary judgment on Metzler’s claim for tortious interference with
a contract. As a preliminary matter, the Court does not condone including complete summary
judgment arguments in footnotes to the Court.
However, the Court will consider XPO’s
arguments. Under Texas law, “[t]he elements of a cause of action for tortious interference with
an existing contract are (1) the existence of a contract subject to interference, (2) a willful and
intentional act of interference, (3) such act was a proximate cause of damage, and (4) actual
damage or loss occurred.” COC Services, Ltd. v. CompUSA, Inc., 150 S.W.3d 654, 670 (Tex.
App. – Dallas 2004, pet. denied). XPO asserts that this claim should be dismissed because
Metzler cannot show that XPO had knowledge of any contractual confidentiality provisions he
had with any party, that XPO intentionally induced Metzler to breach his contracts with these
third parties, and that confidentiality has been breached at all by XPO (Dkt. #78 at 18 n.8).
Metzler contends that prior to his employment with XPO, XPO conducted an
investigation into the business practices of the companies that Metzler advised to determine
whether it would allow Metzler to continue to serve as a board member (Dkt. #93, Declaration of
Metzler ¶¶ 108-112, Exs. V & W). Metzler disclosed all of his board and advisory positions
with other companies, and informed XPO that he owed a duty of confidentiality to those
companies. Id. Metzler states that XPO’s actions in seizing his personal laptop and iPad caused
him to involuntarily disclose confidential information regarding those companies. Id. Metzler
has demonstrated that there is a genuine issue of material fact as to this claim, and XPO’s motion
for summary judgment is denied on this claim.
23
Finally, XPO moves for summary judgment on Metzler’s claim for age discrimination
and retaliation. Under the ADEA, it is “unlawful for an employer... to discharge any individual
or otherwise discriminate against any individual with respect to compensation, terms, conditions,
or privileges of employment, because of such individual’s age.”
29 U.S.C. § 623(a)(1).
Intentional discrimination may be shown by either direct or circumstantial evidence. Alvarado v.
Texas Rangers, 492 F.3d 605, 611 (5th Cir. 2007) (citing Wallace v. Methodist Hosp. Sys., 271
F.3d 212, 219 (5th Cir. 2001)). “Direct evidence is evidence that, if believed, proves the fact of
discriminatory animus without inference or presumption.” Sandstand v. CB Richard Ellis, Inc.,
309 F.3d 893, 897 (5th Cir. 2002). Metzler presents no direct evidence of discrimination;
therefore, his claim will be analyzed using the framework in McDonnell Douglas Corp. v. Green,
411 U.S. 792 (1973). Alvarado, 492 F.3d at 611. A plaintiff must first establish a prima facie
case of intentional discrimination. Id. If Metzler satisfies this requirement, the burden shifts to
the employer to articulate a legitimate, non-discriminatory reason for its actions. Id. “If the
employer sustains its burden, the prima facie case is dissolved, and the burden shifts back to the
plaintiff to establish either: (1) that the employer’s proffered reason is not true but is instead a
pretext for discrimination; or (2) that the employer’s reason, while true, is not the only reason for
its conduct, and another motivating factor is the plaintiff’s protected characteristic.” Id. (citing
Rachid v. Jack in the Box, Inc., 376 F.3d 305, 312 (5th Cir. 2004)).
To establish a prima facie case for age discrimination, Metzler must show: (1) he was
discharged; (2) he was qualified for the position; (3) he was within the protected class at the time
of discharge; and (4) he was either (i) replaced by someone outside the protected class, (ii)
replaced by someone younger, or (iii) otherwise discharged because of his age. Palasota v.
Haggar Clothing Co., 342 F.3d 569, 575-76 (5th Cir. 2003); Rexses v. Goodyear Tire & Rubber
24
Co., 401 F. App’x 866, 868 (5th Cir. 2010). The third alternative of the last element applies in
circumstances where the plaintiff is not replaced. Rexses, 401 F. App’x at 868. XPO asserts that
Metzler cannot demonstrate that he was replaced by someone outside the protected class, or that
he was otherwise discharged because of his age. XPO has not replaced Metzler (Dkt. #78,
Declaration of Jacobs ¶ 5 n.1). Metzler does not respond to XPO’s arguments regarding age
discrimination, and presents no evidence that Metzler was terminated because of his age. XPO
has clearly asserted a variety of reasons for its termination of Metzler, none of which are related
to age, and, if true, would be legitimate, non-discriminatory reasons for an adverse employment
decision.
Thus, the Court finds that Metzler cannot make out a prima facie case of age
discrimination, summary judgment should be granted in favor of XPO on this claim, and
Metzler’s claim for age discrimination should be dismissed.
XPO also asserts that Metzler cannot satisfy his burden on summary judgment to
demonstrate that XPO retaliated against him for asserting a claim for age discrimination. As
XPO asserts, the actual timing of events demonstrates that Metzler’s first mention of alleged age
discrimination was in his original state court petition, filed on May 15, 2013 (Dkt. #78,
Declaration of Robinson, Ex. B, No. 5). As of that date, the undisputed facts demonstrate that
XPO’s investigation was already underway, Metzler had already been put on paid leave, and he
had already received XPO’s Notice of Cause for Termination letter (Dkt. #78, Declaration of
Jacobs ¶ 19). Metzler does not respond to this argument or provide any evidence at summary
judgment regarding this claim. Thus, the Court finds that Metzler cannot establish a claim for
retaliation, and summary judgment should also be granted in favor of XPO on this claim.
25
CONCLUSION
Based on the foregoing, the Court finds that Plaintiff’s Motion for Partial Summary
Judgment
(Dkt.
#76)
is
GRANTED
IN
PART
and
DENIED
IN
PART,
Defendant/Counterclaim Plaintiff XPO Logistics, Inc.’s Partial Summary Judgment Motion (Dkt.
#78) is GRANTED IN PART and DENIED IN PART, Metzler’s Motion to Strike XPO’s
Reply in Further Support of Its Summary Judgment Motion (Dkt. #109) is DENIED, and XPO
Logistics, Inc.’s Opposed Motion for Leave to Supplement Summary Judgment Record (Dkt.
#110) is GRANTED.
Accordingly, XPO’s claims for conversion and for breach of the return of property
provision in the contract are dismissed with prejudice. In addition, Metzler’s claims for age
discrimination and retaliation are dismissed with prejudice.
Metzler’s claims for declaratory judgment, breach of contract, invasion of privacy –
intrusion on seclusion, conversion, and tortious interference with a contract remain for trial.
XPO’s counterclaims for breach of contract regarding the full efforts and best interests provision,
the non-consultation provision, the confidentiality provision, the competitive opportunity
.
provision, and the cooperation provision, declaratory judgment regarding termination for cause,
breach of contract regarding the RSU forfeiture provision, breach of fiduciary duty, usurpation of
corporate opportunity, and injunctive relief remain for trial.
IT IS SO ORDERED.
SIGNED this 25th day of September, 2014.
___________________________________
AMOS L. MAZZANT
UNITED STATES MAGISTRATE JUDGE
26
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