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Charleston, Inc. v. Pfeil

United States District Court, D. Nebraska

June 8, 2017

CHARLESTON, INC., a Nebraska Corporation, Plaintiff,
v.
DERRICK PFEIL, Defendant. CHARLESTON, INC., a Nebraska Corporation, Plaintiff,
v.
DANIEL PFEIL, Defendant.

          CHARLESTON, INC., Plaintiff, CROSBY GUENZEL LLP Richard L. Rice DANIEL PFEIL and DERRICK PFEIL, Defendants. Erik K. Eisenmann Laura L. Malugade HUSCH BLACKWELL LLP Gene Summerlin Marnie A. Jensen Attorneys for Defendants

          ORDER ON FINAL PRETRIAL CONFERENCE

          Chery L Zwart United States Magistrate Judge

         A final pretrial conference was held on the 6th day of June, 2017. Appearing for the parties as counsel were:

1. Counsel for Plaintiff: Richard L. Rice and Andrew C. Pease from Crosby Guenzel LLP.
2. Counsel for Defendant: Erik Eisenmann and Marnie Jensen from Husch Blackwell, LLP.

         (A) Exhibits. See attached Exhibit List.

         (B) Uncontroverted Facts. The parties have agreed that the following may be accepted as established facts for purposes of this case only:

         1. Charleston, Inc. is in the business of selling HVAC and plumbing products wholesale to plumbing and heating contractors.

         2. Daniel Pfeil (“Dan”) was employed by Charleston as a Sales Representative in Charleston's Sioux City Branch Office from about October 15, 2004, to July 12, 2016.

         3. Derrick Pfeil (“Derrick”) was employed by Charleston as Branch Manager for Charleston's Sioux City Branch Office from about October 15, 2004, to July 12, 2016.

         4. Bob Charleston, Charleston's president and owner, hired the Pfeils because he wanted them to bring their existing client relationships to Charleston.

         5. When the Pfeils were hired, they were given a packet of paperwork including a two-page non-compete agreement (the “Agreement”).

         6. Dan signed the Agreement.

         7. Derrick did not sign the Agreement.

         8. The Agreement provides, in part:

Upon termination of Employee's employment with employer for whatever reason, whether voluntary or involuntary, Employee agrees that he/she shall not, for a period of six months following separation from employment, contact or solicit business by any means or method, direct or indirect, any customers of Employer who were his/her accounts, or any company whom he/she solicited or called upon actively in an attempt to obtain business within the last six months prior to the date of separation from employment.

         9. Dan and Derrick primarily worked from Charleston's Sioux City, Iowa Branch Office, but on occasion worked from Charleston's Branch Offices in Fremont Nebraska, and Kansas City, Missouri.

         10. As employees of Charleston, Dan and Derrick were expected to develop customer relationships to expand Charleston's business primarily at Charleston's Sioux City, Iowa Branch Office.

         11. Dan and Derrick's “sales territory” at Charleston included primarily Iowa, but also certain geography in Minnesota, South Dakota, and Nebraska, and they both worked with and sold to customers in all of those states.

         12. Dan and Derrick worked for Charleston for approximately twelve years, and in the process gained knowledge regarding the business relationships with Charleston's customers, including pricing and customer lists.

         13. In 2008, Bob Charleston acquired property located at 1523 Center Street in Sioux City, Iowa.

         14. Bob Charleston established a Nebraska limited liability company to own the property at 1523 Center Street in Sioux City.

         15. Bob Charleston offered Dan and Derrick membership interests in 1523 Center Street LLC through a Membership Interest Incentive Plan (“MIIP”).

         16. Charleston, Inc. is not a party or signatory to the MIIP.

         17. Dan and Derrick signed the MIIP.

         18. The MIIP provided, in part:

Competition Limitation. Eligible Employees shall not, during his employment by Charleston, Inc., and for a period of one year following termination of employment, directly or indirectly compete with Charleston, Inc. with respect to any customer or account with which the Eligible Employee had substantial personal contact while employed by Charleston, Inc.

         19. Bob Charleston does not recall discussing this non-compete provision with Dan or Derrick 20. Dan was not aware that the MIIP contained a non-compete or competition restriction, and never discussed that non-compete language with Derrick, Bob Charleston, or anyone else at Charleston.

         21. Derrick was not aware that the MIIP contained a non-compete or competition restriction, and never discussed that non-compete language with Dan, ...


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