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Idg Usa, LLC v. Kevin J. Schupp and Abrasive-Tool Corp

October 21, 2012

IDG USA, LLC, PLAINTIFF,
v.
KEVIN J. SCHUPP AND ABRASIVE-TOOL CORP., DEFENDANTS.



The opinion of the court was delivered by: William M. Skretny Chief Judge United States District Court

DECISION AND ORDER

I. INTRODUCTION

Plaintiff IDG USA, LLC ("IDG") commenced this action on January 29, 2010, alleging that its former employee, Kevin J. Schupp, breached a Non-Compete Agreement and a Confidentiality Agreement, and engaged in unfair competition and theft of trade secrets. (Docket No. 1.) On May 12, 2011, IDG filed an Amended Complaint to add Abrasive-Tool Corp. ("Abrasive"), Schupp's subsequent employer, as a Defendant, asserting claims of tortious interference with contract, unfair competition, and unjust enrichment. (Docket No. 67.) In answer to the Amended Complaint, Schupp asserted one counterclaim against IDG. Presently before the Court is Abrasive's Motion for Summary Judgment and IDG's Motion for Partial Summary Judgment. For the reasons set forth below, Abrasive's motion is granted in its entirety, and IDG's motion is granted in part, and denied in part.

II. BACKGROUND

A. The Facts

The facts are drawn from the parties' respective Rule 56 statements, as supported by their citations to the record, and from prior relevant affidavits and exhibits.*fn1

1. The Parties

IDG is a national distributor of industrial materials and supplies, such as abrasives, brushes, chemicals, lubricants and adhesives, cutting tools, dispensing solutions, electrical supplies, fasteners, fluid power supplies, hand tools, janitorial supplies, material handling equipment, maintenance equipment and supplies, power tools, power transmission supplies, pumps, quality control supplies, safety supplies, saw blades, and tapes. Its corporate headquarters is located in Belmont, North Carolina, and it has facilities across the country, including in Amherst, New York. Salespersons from IDG's Amherst office call on customers and potential customers throughout upstate New York and western Pennsylvania (the "Sales Territory").

Abrasive also is a distributor of industrial materials and supplies, such as grinding wheels, cutting tools, carbide inserts, precision tools, measuring equipment, hand tools, machine accessories, shop supplies, and machinery. Its principle place of business is Rochester, New York, and it also has operations in Buffalo and Syracuse, New York.

Schupp is a former outside salesperson and employee of IDG's Amherst office, and is now working as an outside salesperson at Abrasive's Buffalo office. IDG and Abrasive are competitors in the Buffalo market and sell many of the same industrial products and supplies.

2. Schupp's Employment at IDG

In 1998, IDG acquired Austin Ford Logan, Inc., a cutting tool operation. IDG retained most of Austin's employees, including Schupp, who immediately commenced employment as an IDG sales associate. He was assigned to make calls within the Sales Territory and to solicit business from existing IDG customers and potential customers.

In or about early 2008, Schupp asked his supervisors, Robert Carbone and Thomas Lewis, for a pay raise. (Docket No. 25-2, ¶ 5.) Lewis told Edward Gerber, IDG's Vice President of Sales and Marketing, that Schupp deserved a promotion to account executive and an increase in his base salary. Gerber approved the promotion and a raise.

At some time prior to these events, Charles Lingenfelter, who became IDG's CEO in 2005, determined it was important that IDG employees entrusted with customer relations sign non-compete agreements to protect the investment IDG made in client development. By way of example, IDG notes that, from 2006 to 2009, it reimbursed Schupp for over $52,000 in business development and entertainment expenses, and provided him a company car and fuel credit card.

Lingenfelter directed IDG's personnel department to implement procedures by which sales associates and other upper management personnel would sign restrictive covenants. (Docket No. 24-2 ¶¶ 6-8.) Thereafter, new hires were presented with non-compete agreements. For current employees who had been working without a non-compete, IDG believed a promotion event was a reasonable time to bring up the subject, ask the individual to sign a non-compete, and advise the employee that IDG was willing to compensate him or her to enter into the non-compete.

As part of its decision to promote Schupp, IDG presented him with a non-compete. Currently, about 75 percent of IDG's outside salespersons have executed such agreements and, according to Gerber, Schupp could have refused to sign the NCA without consequences "to his current employment." (Gerber Dep. at 135, 137.) Schupp executed the NCA on May 27, 2008. The NCA identifies Schupp's new title, details his responsibilities, and sets forth his new annual base salary of $77,047, increased from $70,700. (Compl., Ex. A ¶¶ 1-2.) Schupp acknowledged his receipt of "additional compensation in the amount of Three Thousand Dollars ($3,000) in consideration for his execution, delivery, and performance of th[e] [NCA] (specifically including without limitation the non-competition and non-disclosure covenants contained in this paragraph (7))." (Id. at 5, 8.)

The following year, in March 2009, IDG reduced Schupp's base salary to approximately $71,000. (Docket Nos. 23 ¶ 4; 2-2 ¶ 80.) That action was pursuant to a company-wide Salary Reduction Plan ("Plan"),*fn2 adopted as a result of the economic downturn that began in late 2008 and led to a substantial decrease in IDG's sales. (Docket Nos. 2-2 ¶ 81; 24-1 ¶ 13.) The Plan, which became effective on March 1, 2009, was intended as a measure to avoid lay-offs. (Docket Nos. 2-2 ¶ 82; 24-1 ¶ 14.) Effective October 1, 2009, thirty percent of the March 1st salary reduction was restored to Schupp and others in his same salary range. (Docket No. 24-1 ¶ 14.) The actual salary reduction Schupp realized was 6.67 percent. (Docket No. 25-2 ¶ 7.) It is Schupp's contention that this salary reduction constituted a withdrawal of part of the consideration offered in connection with the NCA.

As discussed fully below, Schupp is no longer employed at IDG, and the enforceability of the NCA-specifically, the following provisions-is now in dispute:

(7) SCHUPP therefore covenants that in the event of the termination of his employment with [IDG], whether by him or [IDG], for cause or otherwise, he will not, either directly or indirectly:

(a) For a period of twelve (12) months from the date of his termination . . ., in any way within a radius of fifty (50) miles of the place of business of the Company in which SCHUPP is assigned or has been assigned at any time within the period of twelve (12) months immediately preceding the date of his termination, accept employment from . . . any business which is competitive with the business of the Company . . . if SHUPP will be required or expected to perform any services or engage in any activities which are substantially similar to the services performed or activities engaged in by SCHUPP during the period of his employment by the Company; nor

(b) For a period of twelve (12) months from the date of his termination . . . solicit competitive orders or patronage on behalf of any business which is competitive with the Company . . . from any customer of the Company which has been assigned by the Company to SCHUPP or with which SCHUPP has had any contact during the period of his employment by the Company; and for the purpose of this paragraph (7) "customer of the Company" shall be defined as any person, firm or corporation, wherever located, which within twelve (12) months immediately preceding the termination of the employment of SCHUPP has purchased services or goods from the Company having a total cost greater than Twenty-Five Thousand Dollars ($25,000.00); . . . .

3. Schupp's Departure from IDG

Schupp attests that he first considered leaving IDG around March 2009, the month in which IDG reduced his pay. At that time, he put out some "feelers" by telling people he knew in the industry-vendors, suppliers, and other distributors-that he was looking for work. According to Schupp, March of 2009 was the worst time in his 20 year career in the industry to be looking for a job. Nevertheless, he did hear about some opportunities. He decided not to follow up on them because they were far away or would require a lot of overnight travel, which Schupp wasn't interested in.

In approximately mid-2009, IDG adopted a "strategic pricing policy" that Schupp believed might cause him to lose business. He identifies this change, as well as some pre-2009 changes-i.e. a reduction in vacation time and 401(k) match-as some of the reasons he became further dissatisfied at IDG. In late summer 2009, Schupp ran into Dan Gemmer, a prior IDG employee who had been working as an outside salesperson for Abrasive since approximately 2002, and asked him if there were any openings at Abrasive. Also in or about that time, Schupp telephoned Abrasive's President, Mike Hanna, and inquired whether Abrasive had a position available in the Buffalo market. Hanna advised Schupp that there was not an opportunity for him at that time. According to Hanna, this was not the first time Schupp had inquired about opportunities at Abrasive. He believes the first inquiry occurred "a year or two prior to November 2009."

In November or December 2009, Schupp was upset with the pricing he was given for a particular customer order, which he believed was outrageous. Around the same time, Schupp had a conversation with IDG employee Bob Cardone, who at one time had been Schupp's supervisor but was demoted to the same position as Schupp. Carbone stated that he was not sure where IDG would be in a year. In or about the end of December 2009, four or five of Schupp's good accounts were take from him and given to another IDG salesperson.

At some time in this November-December time frame, Schupp consulted with an attorney, William Farner. He told Farner he was thinking about leaving IDG, he had a non-compete agreement, and he thought IDG had breached that agreement by reducing his base salary.

At a holiday gathering in December 2009, Schupp again ran into Dan Gemmer, who suggested that Schupp give Mike Hanna another call. Schupp did so, and he and Hanna agreed to meet at a Bob Evans restaurant. Hanna had heard over the years that Schupp was a good salesperson, and was considering creating a new position for him. At that time, Abrasive had three outside sales persons who were having a difficult time calling on all their assigned accounts, and Hanna believed some customers were not being properly served. Abrasive did not advertise for the position nor did Hanna interview any other ...


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