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West Plains, L.L.C. v. Retzlaff Grain Co. Inc.

United States District Court, D. Nebraska

February 26, 2013

WEST PLAINS, L.L.C. d/b/a CT Freight Company, Plaintiff,
v.
RETZLAFF GRAIN COMPANY INCORPORATED d/b/a RFG Logistics, Bryce Wells, Jeffrey Bradley, Thomas Danner, Rebecca Danner, Jody May, Chad Needham, Todd Payzant, Samantha Rhone, Crystal Konecky, Cindy Scholting, Drew Waggoner, Defendants.

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Kathryn A. Dittrick, Paul M. Shotkoski, Sarah L. McGill, Fraser, Stryker Law Firm, Omaha, NE, for Plaintiff.

Edward D. Hotz, Michael R. Peterson, Patrick M. Flood, Hotz, Weaver Law Firm, Omaha, NE, for Defendants.

MEMORANDUM AND ORDER

SMITH CAMP, Chief Judge.

This matter is before the Court on the Plaintiff's Motion for Preliminary Injunction (Filing No. 5). Having considered the parties' briefs, evidence, and arguments heard on February 20, 2013, the Court will grant the Plaintiff's Motion, in part.

PROCEDURAL HISTORY

Plaintiff West Plains, L.L.C. d/b/a CT Freight Company (" CT Freight" ) asserts seven causes of action: (1) misappropriation of trade secrets in violation of Neb.Rev.Stat. § 87-504 against former employees of CT Freight; (2) misappropriation of trade secrets in violation of Neb.Rev.Stat. § 87-504 against Defendants Retzlaff Grain Company, Inc., and Bryce Wells; (3) tortious interference with business relationships against all Defendants; (4) tortious interference with employment relationships against Defendants Retzlaff Grain Company, Inc., and Bryce Wells; (5) breach of the duty of loyalty against former employees of CT Freight; (6) conspiracy against all Defendants; and (7) violation of the computer fraud and abuse act, 18 U.S.C. § 1030, against Defendant Chad Needham. CT Freight generally seeks to enjoin the Defendants from soliciting its clients or using its confidential information and trade secrets during the pendency of this action, and requests tat the Defendants be required to return to CT Freight any documentation that contains its confidential information. At the hearing held on February 20, 2013, counsel for CT Freight acknowledged that the basis for its Motion for Preliminary Injunction is its claims for misappropriation of trade secrets and breach of duty of loyalty.

CT Freight filed its Complaint (Filing No. 1) on February 8, 2013, and its Motion for Temporary Restraining Order (" TRO" ) and Preliminary Injunction (Filing No. 5) on February 11, 2013. The Court held a hearing on CT Freight's Motion for TRO that day, and entered a TRO (Filing No. 17) on February 12, 2013. The TRO expires, at the latest, on February 26, 2013, at 3:20 p.m. ( Id. )

FACTUAL BACKGROUND

I. The Freight Brokerage Industry

Both CT Freight and Retzlaff Grain Company Incorporated d/b/a RFG Logistics (" RFG Logistics" ) are in the business of freight brokerage. (Filing No. 9-1 ¶ 3; Filing No. 40-2.) Freight brokerages match customer loads for shipment with available trucks and drivers. (Filing No. 40-1, Affidavit of Michael T. Fouts, ¶ 7.) Individual freight brokers arrange transportation of a customer's freight with a shipper or carrier. ( Id. ¶¶ 12, 13.) Brokers generate revenue by arranging transport at a price that is lower than the price a customer is willing to pay, and collecting the difference as the broker's fee. ( Id. ¶ 12.) Customers of freight brokerages include companies of all sizes, and in many cases, customers use multiple freight brokerages to arrange and satisfy their shipping needs. ( Id. ) Evidence has been presented that there are approximately 12,000 freight brokers in the United States, and approximately 50,000 motor carriers. ( Id. ¶¶ 7, 9).

The parties disagree about the relative availability of carrier and customer information in the brokerage business. CT Freight has submitted evidence that its business as a freight logistics brokerage depends on special relationships maintained

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by its brokers with CT Freight's customers and contract carriers, and CT Freight's special knowledge about such customers and carriers. (Filing No. 9-1 ¶ 4.) By maintaining close relationships with customers and contract carriers, CT Freight brokers can quickly and economically source customer load requests and arrange for return loads for the contract carriers. ( Id. ¶ 6.) These relationships depend on the use of information such as customer needs [1]; pricing processes and rates; driver databases and/or spreadsheets and information contained therein or derived therefrom; proposals made or planned by CT Freight for such customers; and technical analyses or other data provided by CT Freight for use by CT Freight's brokers in servicing customers and contract carriers (this information referred to collectively herein as the " Confidential Information" ). ( Id. ¶¶ 14, 32; see also Filing No. 5 at 2.) CT Freight has submitted evidence that it required its employees to adhere to a confidential information policy, and its employees agreed through the employee handbook to refrain from working for competitors while employed with CT Freight. (Filing No. 9-1 ¶ 15; Filing No. 9-7.)

Defendants presented evidence suggesting that the names and contact information for companies in the business of shipping freight— and those carriers that can ship freight— is available in the public domain. For example, Defendants stated that such information can be obtained from Google, phone books, and multiple websites. (See Filing No. 40-1, Affidavit of Michael Fouts, ¶¶ 9-11; Filing No. 40-3, Affidavit of Chad Needham, ¶¶ 8-11, and Filing Nos. 40-4, 40-6, 40-7, 40-8, 40-9, 40-10, and 40-11; Filing No. 40-14, Affidavit of Cindy Scholting, ¶ 21; Filing No. 40-15, Affidavit of Drew Waggoner, ¶ 31; Filing No. 40-16, Affidavit of Todd Payzant, ¶ 30; Filing No. 40-18, Affidavit of Crystal Konecky, ¶ 22; Filing No. 40-20, Affidavit of Samantha Rhone, ¶ 26; Filing No. 40-17, Affidavit of Jeffrey Bradley, ¶ 23; Filing No. 40-13, Affidavit of Thomas Danner, ¶ 24; Filing No. 40-21, Affidavit of Rebecca Danner, ¶ 15). Defendants also stated that data on shipping rates in specific lanes (origin to destination) are available by monthly subscription to such public sites as Truckload rate.com, Transcore (DAT), Transcore.DAT.com, Freightquote.com, and www. rateindex. transcore. com. (Filing No. 40-1 ¶¶ 10, 15.) The data available to all subscribers include prices paid by shippers and prices paid to carriers, as well as the availability of trucks anywhere in the United States. (Filing No. 40-1 ¶ 10.)

II. Asset Purchase and Operations Under West Plains, LLC

Plaintiff purchased the assets of West Plains CO (" WPCO" ) on or about February 25, 2012. (Filing No. 40-2, Affidavit of Bryce Wells, ¶ 4.) Defendant Bryce Wells owned WPCO at the time of the asset purchase. (Filing No. 9-1 ¶ 5.) After the purchase, the Plaintiff obtained all the assets, intellectual property, and records of WCPO ( id. ¶ 5; see also Filing No. 40-2 at 10) and operated its freight logistics and brokerage services division using the CT Freight trade name. ( Id. ) CT Freight also hired many of WPCO's former employees, including Defendants Jeffrey Bradley, Thomas Danner, Rebecca Danner, Jody May, Chad Needham, Todd Payzant, Crystal Konecky, Samantha Rhone, Cindy Scholting and Drew Waggoner (the " Individual

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Defendants" ). ( Id. ¶¶ 7, 8.) The Individual Defendants composed the vast majority of CT Freight's brokers and support staff. ( Id. ¶ 8.) The Individual Defendants also brought in almost all of CT Freight's customer freight broker business, and all of CT Freight's non-livestock broker business. ( Id. ¶¶ 8, 10, 13.) CT Freight brokers and support staff secure and manage business in large part through access to CT Freight's electronic data and other sources included within the Confidential Information described above. ( Id. ¶ 13.)

III. RFG and Departure of Individual Defendants

In the fall of 2012, Bryce Wells decided to start a new freight brokerage venture. (Filing No. 39 at 2.) He began contacting employees of CT Freight about coming to work for his company. ( Id. ) Wells had numerous meetings and contacts with those individuals, and all the Individual Defendants agreed to work for his new business venture, RFG Logistics. ( Id. )

On February 5, 2013, all the Individual Defendants submitted their resignations to CT Freight. (Filing No. 9-1 ¶ 17; see also Filing No. 39 at 3-4.) The Individual Defendants' departure dates were staggered, with the last resignation scheduled to take effect on February 13, 2013. ( Id. ) When Defendant Bradley submitted his resignation, he was locked out of his work computer at CT Freight's Manning, Iowa, office. (Filing No. 40-17 ¶ 14.) Also on February 5, 2013, Defendants Waggoner, May, Rhone, and Konencky were informed that since they no longer wanted to work at CT Freight, they must hand over their keys and cell phones, not touch anything on their desks, and leave immediately. (Filing Nos. 40-15 ¶ 15; 40-19 ¶ 13; 40-20 ¶ 15; 40-18 ¶ 9.) CT Freight later invited some of the Individual Defendants to return to help CT Freight in the transition. ( See Filing ...


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