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Banner Industries of Ne, Inc. v. Wicks

United States District Court, Second Circuit

October 21, 2013


REGNANTE, STERIO & OSBORNE LLP, SETH H. HOCHBAUM, ESQ., LAURA R. MCKELLIGOTT, ESQ., Wakefield, Massachusetts, Attorney for Plaintiff.

McNAMEE, LOCHNER LAW FIRM, GLENN P. DOHERTY, ESQ., Albany, New York, Attorney for Plaintiff.

McCARTER & ENGLISH, LLP, PATRICK J. COMERFORD, ESQ., Boston, Massachusetts, Attorney for Non-Party Adam Herbert.


RANDOLPH F. TREECE, Magistrate Judge.

On November 30, 2011, Banner Industries of N.E., Inc., (hereinafter "Banner") commenced a lawsuit against its former employee, Kenneth Wicks for, inter alia, breach of employment and settlement agreements, conversion, and fraud, and against Harrington Industrial Plastics, LLC, (hereinafter "Harrington"), a competitor of Banner and currently Wicks's new employer, for tortious interference with those employment agreements. Dkt. No. 1-1, Compl.[1] As discovery progressed between these parties, other third parties, including Asahi/America, Inc. (hereinafter "Asahi"), were served with subpoenas seeking documents. In addition to seeking documents from Asahi, Banner served subpoenas to depose Adam Herbert, Asahi's Business Development Manager, which have been resisted by both Herbert and Asahi.

On July 12, 2013, Banner filed a Motion to Enforce Subpoena and Compel Attendance of Adam Herbert at a Deposition as well as holding Asahi and Herbert in civil contempt in order to assess compensatory sanctions, including attorney fees. Dkt. No. 78, Pl.'s Mot. to Compel.[2] Asahi not only opposes the Motion to Compel but filed a Cross-Motion for Sanctions as well. See Dkt. No. 80, Asahi Opp'n & Cross-Mot., dated Aug. 2, 2013.[3] Banner filed a Reply to Asahi's Opposition and Cross-Motion. Dkt. No. 82, Pl.'s Reply Mem. of Law & Exs. For the following reasons, Banner's Motion is granted in part and denied in part, and Asahi's Cross-Motion for Sanctions is denied.


A. The Parties and the Genesis of the Lawsuit

Both Banner and Harrington are manufacturer's representatives and multiline retail distributors of industrial and high purity flow component parts such as valves, tubing, gauges, and other industrial and high purity flow components, and actively compete for customers in every market in which they coexist. Dkt. No. 1-1, Compl. at ¶¶ 8 & 27-32. From 2005 to 2009, Wicks served as Banner's National Sales Manager. Id. at ¶¶ 9-11 & 15. While employed by Banner, Wicks executed a written agreement not to divulge Banner's proprietary information and trade secrets nor to compete against Banner for a three (3) year period upon termination of his employment. Upon his separation on September 16, 2009, Wicks further executed a settlement agreement wherein he agreed, in relevant part, to adhere to the obligations of non-disclosure and non-compete provisions of his employment agreement. Id. at ¶¶ 12-13 & 21. On or about August 22, 2011, Wicks became Harrington's Technical/Outside Sales Representative in its Malta, New York Office. Id. at ¶ 26; Dkt. No. 80-9, Robert Bacon Decl., dated Aug. 2, 2013, at ¶ 15.

Asahi is a manufacture of corrosion resistant piping, valves, fittings, and accessories, and yet it does not have direct sales accounts with the end-users. Essentially, Asahi relies upon distributors, who are selected by the end-user, to sell and service it products. Dkt. No. 80-8, Daniel Anderson Decl., dated Aug. 1, 2013, at ¶ 8. At various times and locales, both Banner and Harrington have served as Asahi's distributors.[4]

In 2010, computer chip magnate, Globalfoundries, was constructing an enormous semiconductor fabrication plant ("Malta Project") which, obviously, would require a tremendous amount of piping, valves, and fittings. Both Banner and Harrington were interested in attaining work on this Project, but neither were in a position to supply piping alone, so both approached Asahi to compete for its business, especially in the New York market and, in particular, in securing this Project. Anderson Decl. at ¶¶ 15-16. The distributor/manufacturer business model is highly complex, with many factors to be considered in the construction and finalization of a deal between the two entities. Id. at ¶ 17. While Asahi was willing to back a distributor that could match its standards, it was incumbent upon the distributor to create a comprehensive channel for a piping program that may win the bid from Globalfoundries before Asahi committed to the plan. These distributors would have to demonstrate that they could meet Asahi's prerequisites, handle the size of the project, and win the bid. Essentially, under this business model, the business relationship between the distributor and manufacturer is not solidified until the distributor has taken the appropriate steps to commit to and create a realistic channel to the project. Id. at ¶¶ 16-18. Although Banner had served as a channel distributor for Asahi products in other states, it did not have a similar license for New York. Dkt. No. 80, Asahi Mem. of Law at p. 2.

Both Banner and Harrington pursued the next steps, without any promises or commitment from the manufacturer, in order to be Asahi's New York distributor for the Malta Project. Harrington had leased a 14, 000 square foot facility in the vicinity of the Malta Project during the Spring of 2011 and prepared to compete with other local distributors for the Malta Project. And after taking all of the necessary steps, by June 2011, "Asahi had made their first order with Harrington." Anderson Decl. at ¶ 19. Thirty days later, Banner presented its "non-competitive plan, " which comprised of a mobile home set-up in the parking lot on the site of the Malta Project. Id. at ¶ 20. Asahi visited Banner's site but was not impressed with that infrastructure, ultimately concluding that the mobile home approach was "too little, too late." Id. And, on September 12, 2011, Asahi notified Banner of its decision not to extend to it a distribution license for New York. Dkt. No. 80-3, E-mail, dated Sept. 12, 2011.

B. The Lawsuit

As noted above, Wicks was Banner's National Sales Manager from August 11, 2005, until September 16, 2009, at which time his conditions of employment were subject to a non-disclosure/non-compete agreement. Dkt. No. 79-2, Eric Richard Aff., dated July 12, 2013, at ¶ 2. While serving as Banner's National Sales Manager, Wicks had negotiated with Adam Herbert, Asahi's Business Development Manager, on previous manufacture/distributor agreements. During 2010 and 2011, after Wicks had left Banner's employment, Eric Richard, Banner's Vice President, was negotiating with Asahi for access to its product line in New York and to sell those products to end-users. Id. at ¶ 5. It appears that while Richard was negotiating with Herbert, Wicks commenced his employment with Harrington as its Technical/Outside Sales Representative for the Malta Office on August 31, 2011. Id. at ¶¶ 4 & 6. Banner alleges that Wicks assisted Harrington in securing the distributorship with Asahi and also depriving Banner of an opportunity to represent Asahi in New York, and consequently breaching his non-competitive agreement with Banner. Id. at ¶ 7. Furthermore, Banner alleges that in violation of the agreements and by using Banner's confidential information, Wicks assisted Harrington, a competitor, to solicit and take business away from Banner. Dkt. No. 1-1, Compl. at ¶¶ 34-35. Anderson, Asahi's Senior Vice President, avers that he did not know of Wicks's employment departure from Banner to Harrington until after the Harrington deal was finalized, and Asahi posits that Wicks's involvement in the Malta Project did not occur until after the deal was settled. Anderson Decl. at ¶ 21; Asahi Mem. of Law at pp. 4-5.

On December 5, 2011, Banner initiated this lawsuit against Wicks alleging several common law causes of action against him, however, only the breach of contract causes of action against Wicks and a tortious interference with a contract against Harrington survived. Dkt. No. 71, Mem-Dec. & Order, dated June 11, 2013; see generally Compl.

C. Subpoenas

Initially, a subpoena duces tecum was served upon Asahi for records related to Wicks and Harrington.[5] Objections aside, Asahi produced 400 pages of "responsive documents" with the understanding that it "will not produce a witness for deposition... without a court order[.]" Asahi Mem. of Law at pp. 5-6; Dkt. No. 80-4, Lt., dated Aug. 24, 2012. Asahi's admonition notwithstanding, on February 15, 2013, Banner caused a subpoena to be issued from the District of Massachusetts upon Herbert for his testimony in this matter. Dkt. No. 79-3, Pl.'s Mass. Subpoena. Upon being advised that Herbert was not an officer of Asahi and resided in New Jersey, as well as raising other objections to the subpoena, Dkt. No. 79-4, Lt., dated Apr. 4, 2013, Banner caused yet another subpoena to be served upon Herbert but this time issued from the District of New Jersey, Dkt. No. 79-5. Likewise, Asahi and Herbert registered their objections to Herbert being compelled to provide depositional testimony in this lawsuit.[6]

Succinctly, Asahi opposes Banner's Motion to Compel Herbert's deposition on the grounds that: (1) Herbert's deposition is not relevant to the claims in this action; (2) the subpoena does not designate the nature of Banner's inquiry of Herbert; (3) any information sought is confidential business information which deserves to be protected; (4) the request for testimony is an undue burden; and (5) the information being sought would be duplicative or already available from the parties. See generally Dkt. No. 80, Asahi Mem. of Law. Of heightened concern for Asahi, which very well may be Banner's objective, is the disclosure of the factors Asahi employs in selecting its distributors, and may ...

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