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Crabar/GBF, Inc. v. Wright

United States District Court, D. Nebraska

August 26, 2019

CRABAR/GBF, INC, Plaintiff,
v.
MARK WRIGHT, et al., Defendants.

          MEMORANDUM AND ORDER

          John M. Gerrard Chief United States District Judge

This dispute involves the purchase of a custom printing business located in Omaha, Nebraska. The plaintiff, Crabar/GBF, Inc., bought the business from the defendants, Mark Wright and Wright Printing Co., in autumn 2013. Now, Crabar is suing Wright and Wright Printing for allegedly breaching various contractual obligations by reentering the custom printing business and using assets previously sold to Crabar. Crabar is also suing Wright Printing's now CEO, Mardra Sikora, and two Wright Printing employees, Jamie Fredrickson and Alexandra Kohlhaas, for their part in various alleged wrongdoings associated with the Wright Printing re-launch. See filing 224.

         This matter is before the Court on Crabar's motion to set aside the Court's previous Memorandum and Order (filing 244) dismissing its breach of contract claim against Wright Printing, and two motions to dismiss filed by the defendants (filing 226 and filing 228). For the reasons set forth below, the Court will grant Crabar's motion to set aside, and grant in part and deny in part the defendants motions to dismiss.

         I. BACKGROUND

         The facts of this case are set forth in detail in the Court's prior Memorandum and Order. Briefly summarized, the corporate parties in this case, Crabar and Wright Printing, are both in the custom printing business. Filing 224 at 3. Mark Wright is the president of Wright Printing. Filing 224 at 23. Mardra Sikora is Wright's daughter and now CEO of Wright Printing, and Jamie Fredrickson and Alexandra Kohlhaas are former Crabar employees who now work for Wright Printing. Fling 224 at 3, 23.

         In September 2013, Wright Printing sold its custom printing business to Crabar for approximately $15 million. Filing 45 at 48-90. In effectuating that sale, the parties entered into a series of agreements, two of which are particularly important for purpose of this suit: the Asset Purchase Agreement ("the Purchase Agreement") and the Release Agreement. SeeFiling 45 at 48-100; filing 45 at 93-100.

         Under the Purchase Agreement, Crabar acquired the assets of three custom printing entities: (1) "Folder Express," (2) "Progress Music," and (3) "Progress Publications" (collectively, the "custom printing business"), all of which were previously owned and operated by Wright Printing. Filing 45 at 3-5; see also filing 45 at 48-90. As part of the Purchase Agreement, Wright Printing also promised that it would not, at any time, use the tradenames, domain names, and other intellectual property associated with its custom printing business. Filing 45 at 63. Nor would it use or disclose any confidential information involving the "manufacturing processes, methods of operation, products, financial data, sources of supply and customers." Filing 45 at 64.

         In addition to acquiring various assets under the Purchase Agreement, the parties agreed that Crabar would enter into a lease with 11616 I Street, LLC-a limited liability company managed by Wright. Filing 45 at 12. The lease allowed Crabar to operate the custom printing business out of the same Omaha facility in which Wright Printing had operated it before the acquisition. Filing 45 at 12.

         But in the spring of 2015, tensions between the parties began to rise. Around this time, Wright notified Crabar that 11616 I Street, LLC, would not renew Crabar's lease, and that Crabar would need to vacate the property by September 30, 2015. Wright offered to extend Crabar's lease to December 30, 2015 to give Crabar enough time to find an alternative location, but on two conditions: (1) that Crabar release and return $1.1 million held in escrow as security for legal claims arising under the terms of the Purchase Agreement, and (2) that Crabar release Wright Printing from all representations and warranties under the Purchase Agreement. Filing 45 at 16. Crabar agreed to those terms, and on June 25, 2015, Crabar released the escrow funds and the parties executed the second agreement at issue in this case-the Release Agreement. Filing 45 at 93-100.

         The Release Agreement, in essence, extinguished nearly[1] all existing rights and obligations of the parties under the Purchase Agreement. See filing 45 at 93-100. Indeed, the Release Agreement explicitly terminated "all indemnification and other obligations of performance for which [the parties are] otherwise responsible under the Purchase Agreement[.]" Filing 45 at 94. And it released all causes of action and claims for relief arising under the Purchase Agreement. Filing 45 at 95. It also included a non-disparagement provision which prohibited the parties from making negative, derogatory, or disparaging comments about one another. Filing 45 at 96-97.

         It is against that backdrop that this litigation ensued. Once the lease ended-and Crabar vacated the Omaha facility-on December 30, 2015, Wright Printing began using the building to re-launch two custom printing businesses: "Pocket Folders Fast" and "Bandfolder Press." This re-launch, Crabar alleges, violates several of Crabar's contractual, common law, and statutorily protected rights.

         II. PROCEDURAL HISTORY

         The procedural history of this case is somewhat unique, so it bears explanation. In December 2016, Crabar filed its initial complaint (filing 1) against Wright and Wright Printing only. That complaint was amended in May 2017-adding a single breach of contract cause of action. Compare filing 1 at 1-100 with filing 45 at 1-100. Shortly after Crabar filed its amended complaint, the parties filed cross-motions for partial summary judgment on Crabar's first claim for relief, breach of the Purchase Agreement. Filing 56 at 1. Crabar also moved to dismiss Wright and Wright Printing's counterclaim. The Court granted Wright and Wright Printing's motion for partial summary judgment as to §§ 5.1 (c) and (e) under the Purchase Agreement and dismissed Wright and Wright Printing's counterclaim. See filing 137 at 16.

         After the Court's March 16, 2019 Memorandum and Order, a series of discovery disputes arose and revealed information previously unknown to Crabar. Based on this new evidence, Crabar moved for leave to file a second amended complaint, which was granted by the Magistrate Judge. Filing 223 at 3. Crabar's second amended complaint added three additional defendants- Sikora, Fredrickson, and Kohlhaas-and a series of additional claims.

         Specifically, Crabar's second amended complaint now asserts fourteen theories of recovery: (1) breach of contract (against Wright Printing only); (2) misappropriation of trade secrets in violation of Neb. Rev. Stat. § 87-504; (3) tortious interference with business relationships; (4) federal trademark infringement in violation of 15 U.S.C. § 1114(1) (against Wright Printing only); (5) federal unfair competition in violation of 15 U.S.C. § 1125(a) (against Wright Printing only); (6) unfair competition (against Wright Printing only); (7) violation of the Nebraska Deceptive Trade Practices Act, Neb. Rev. Stat. § 87-302 (against Wright Printing only); (8) fraud (against Wright and Wright Printing only); (9) breach of contract (against Wright and Wright Printing only); (10) Violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq.; (11) misappropriation of trade secrets in violation of 18 U.S.C. § 1836 et seq.; (12) breach of the implied covenant of good faith and fair dealing (against Wright Printing only); (13) breach of contract (against Kohlhaas only); (14) breach of contract (against Fredrickson only).

         At this stage of the proceedings, there are various motions pending before the Court-some relating to the Court's prior Memorandum and Order dismissing Crabar's claim alleging that Wright and Wright Printing breached the Purchase Agreement, seefiling 242 at 1-3, and others seeking to dismiss various claims under Crabar's second amended complaint. More specifically, Fredrickson and Kohlhaas have filed a motion to dismiss Crabar's breach of contract claims against them arising under a Confidentiality Agreement signed by both employees. Filing 226 at 1-3. And Fredrickson and Kohlhaas also join the remaining defendants in their collective motion to dismiss the following claims: (1) fraud, (2) breach of contract, (3) breach of the implied covenant of good faith and fair dealing, (4) violation of the Computer Fraud and Abuse Act, (5) tortious interference with business relationships, and (6) breach of the federal Defend Trade Secrets Act. Filing 228 at 3-4.

         III. DISCUSSION

         1. Crabar's Motion to Set Aside

         First, Crabar moves the Court to set aside its previous order (filing 137) granting partial summary judgment to Wright Printing and dismissing Crabar's breach of contract claim. In essence, Crabar is asking the Court to reconsider whether partial summary judgment is appropriate. See Fed. R. Civ. P. 54(d) (any order that adjudicates fewer than all the claims does not end the action as to any of the claims and may be revised at any time before the entry of a judgment adjudicating all the claims).

         (a) Standard of Review

         Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). The movant bears the initial responsibility of informing the Court of the basis for the motion, and must identify those portions of the record which the movant believes demonstrate the absence of a genuine issue of material fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc). If the movant does so, the nonmovant must respond by submitting evidentiary materials that set out specific facts showing that there is a genuine issue for trial. Id.

         On a motion for summary judgment, facts must be viewed in the light most favorable to the nonmoving party only if there is a genuine dispute as to those facts. Id. Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the evidence are for the trier of fact. Id. But the nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts. Id. In order to show that disputed facts are material, the party opposing summary judgment must cite to the relevant substantive law in identifying facts that might affect the outcome of the suit. Quinn v. St. Louis County, 653 F.3d 745, 751 (8th Cir. 2011). The mere existence of a scintilla of evidence in support of the nonmovant's position will be insufficient; there must be evidence on which the trier of fact could conceivably find for the nonmovant. Barber v. C1 Truck Driver Training, LLC, 656 F.3d 782, 791-92 (8th Cir. 2011). Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Torgerson, 643 F.3d at 1042.

         Rule 56 also allows the Court to grant summary judgment as to some issues but not as to others. See Fed. R. Civ. P. 56(a). Upon doing so, the Court may "enter an order stating any material fact-including an item of damages or other relief-that is not genuinely in dispute," and thereby treat such a fact "as established in the case." Fed.R.Civ.P. 56(g).

         (b) Discussion

         In its March 16, 2018 Memorandum and Order the Court dismissed Crabar's breach of contract claim. Filing 137 at 7-12. That claim was based on §§ 5.1 (c) and (e) of the Purchase Agreement. Generally speaking, those provisions contain restrictive covenants prohibiting Wright Printing from utilizing the "Names, Domain Names, any derivations thereof and all other Intellectual Property currently used in the [custom printing] Business" and from using, or disclosing, any "Confidential Information" it acquired while working in the custom printing business. Filing 45 at 63-64. "Confidential Information" is further defined in the Purchase Agreement as "(i) all trade secrets as defined under applicable statute or common law, and (ii) other confidential information of or about [Wright Printing], including, without limitation, any such information regarding the business of [Wright Printing], its manufacturing processes, methods of operations, products, financial data, sources of supply and customers." Filing 45 at 64. According to Crabar, Wright Printing breached §§ 5.1(c) and (e) by using its trademarks, trade secrets, and product specifications in its operation of Pocket Folders Fast and Bandfolder Press. See generallyfiling 58 at 32-58.

         But the dispositive issue before the Court was not actually whether Wright Printing's actions violated §§ 5.1(c) and (e) of the Purchase Agreement. Rather, the parties' dispute turns on the legal significance of the parties' subsequent agreement: the Release Agreement. That agreement generally released Wright Printing from obligations imposed under the Purchase Agreement, including the those imposed under §§ 5.1(c) and (e). Filing 45 at 70-71. More specifically, § 2(c) states in relevant part:

In addition, except as otherwise provided in this Agreement, all indemnification and other obligations of performance for which [Wright Printing] is otherwise responsible under the Purchase Agreement from and after the date hereof, and Purchaser's rights to seek any recourse or remedy in relation thereto are hereby immediately terminated and cancelled by the parties and of no further force and effect.

Filing 45 at 94. And because the language of the Release Agreement undisputedly released Wright Printing from its existing obligations under the Purchase Agreement, in Wright Printing's view, the Release Agreement precluded Crabar's allegations under the Purchase Agreement as a matter of law.

         In opposition to Wright Printing's motion, Crabar generally took issue with Wright Printing's reading of the phrase "obligations of performance." In particular, Crabar suggested that the language of § 2(c) only released Wright Printing from some of its obligations of performance under the Purchase Agreement. That is, in Crabar's view, §2(e) terminated affirmative obligations (i.e. shall indemnify), but not restrictive obligations (i.e. shall not use confidential information) under the Purchase Agreement. Filing 87 at 21-22.

         Crabar also briefly suggested that Wright Printing induced Crabar into executing the Release Agreement by falsely representing that Wright intended to sell "the building and cease being a landlord because he wanted to 'close out and slow down.'" Filing 87 at 5. That is, in Crabar's view, it agreed to release and return $1.1 million held in escrow as security for legal claims arising under the terms of the Purchase Agreement, and release Wright Printing from all representations and warranties under the Purchase Agreement, only because Wright Printing represented that it wanted out of the custom printing business entirely. Filing 45 at 16. Crabar suggested that in reality, however, Wright Printing was actually preparing to re-launch its competing printing business while negotiating the terms of the Release Agreement.[2]

         The Court was not, at that time, persuaded by Crabar's arguments. Particularly with respect to Crabar's latter contention, the Court suggested that there was little, if any, evidence in the record to support Crabar's vague assertion that Wright Printing was secretly preparing to re-launch its custom printing business. See filing 137 at 9 n.3. In fact, the only evidence Crabar could point to in support of its allegation that Wright Printing began preparing to launch "Pocket Folders Fast" prior to 2016, was based on the conduct of Wright's daughter, Mardra Sikora. More specifically, Crabar claimed that Sikora purchased the domain name www.pocketfoldersfast.com in August, 2014 which, if believed by the trier of fact, would support an inference that Wright Printing must have secretly been plotting to re-enter the printing business once it was released from its obligations under the Purchase Agreement. Filing 58 at 16.

         But the problem with that argument was twofold. To begin with, Sikora was not even a part of this litigation-nor was she a party to the Purchase Agreement or Release Agreement. More fundamentally, Sikora made several representations to the Court suggesting that when she purchased the domain name in August 2014 she was neither employed by Wright Printing, nor was she associated with the custom printing business-much less connected to Wright Printing. Filing 73-3 at 1-2. Instead, Sikora explained that from 2011 until January 2016, she was operating as a full-time author, speaker, and advocate. Filing 73-3 at 2. She also testified that when she purchased the domain name pocketfoldersfast.com she was "trying to learn more about website search engine optimization and studying Google Adwords." Filing 73-3 at 2. Most importantly, Sikora claimed that when she purchased the domain name she "had no intention of launching a custom folder printing business, and [] had not spoken to [her] father, Defendant Mark Wright, about running the domain purchase." Filing 73-3 at 2.

         Simply put, there was no evidence that would allow a reasonable fact finder to impute the conduct of Sikora to Wright or Wright Printing. And absent the evidence of the domain name purchase, Crabar could not support its contention that Wright and Wright Printing were-despite their representations to Crabar-already planning to re-enter the printing business. Based on the record before it, the Court concluded that ...


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