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Omnimax International, Inc. v. Dowd

Superior Court of Delaware

July 17, 2019

OMNIMAX INTERNATIONAL, INC., Plaintiff,
v.
NICK DOWD, Defendant.

          Submitted: April 26, 2019

         Defendant's Motion for Summary Judgment - DENIED IN PART, GRANTED IN PART Defendant's Motion for Sanctions - DENIED

          Seth T. Ford, Esquire (Argued); Troutman Sanders LLP, Attorney for Plaintiff.

          Jennifer C. Jauffret, Esquire; Lori A. Brewington, Esquire; Richards, Layton & Finger, P.A., Attorneys for Plaintiff.

          John A. Sensing, Esquire (Argued); Jesse L. Noa, Esquire; Potter Anderson & Corroon LLP, Attorneys for Defendant.

          MEMORANDUM OPINION

          William C. Carpenter, Jr. Judge

         Before the Court are Defendant Nick Dowd's ("Defendant" or "Dowd") Motion for Summary Judgment and Motion for Sanctions. For the reasons set forth below, the Motion for Summary Judgment is DENIED IN PART AND GRANTED IN PART. Defendant's Motion for Sanctions is DENIED.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The crux of this case is whether Dowd breached customer and employee non-solicitation provisions in the Employee Agreement Regarding Restrictive Covenants ("the Agreement") he had with Plaintiff, OmniMax International, Inc. ("Plaintiff or "OmniMax").

         OmniMax is an international building products company that manufactures aluminum, steel, vinyl, and copper products.[1] It is a Delaware corporation with its principal place of business in Georgia.[2] From June 1, 1998 until February 3, 2014, OmniMax employed Defendant, who resides in Texas.[3]

         During Dowd's employment with Plaintiff, he held executive level management positions and acted as the Senior Vice President of Commercial Products.[4] In this role, Defendant led the sales, marketing, and product development teams, which included Scott Bacon ("Mr. Bacon"), Plaintiffs Vice President of Commercial Sales.[5]

         As an OmniMax employee, Dowd participated in its Executive Incentive Plan ("the EIP").[6] To participate in the EIP, Dowd was required to execute an Agreement[7] containing several restrictive covenants, two of which are directly relevant to this dispute.[8] First, the employee non-solicitation provision provides:

Employee understands and agrees that the relationship between the Company Group and each of its Protected Employees constitutes a valuable asset of the Company Group and may not be converted to Employee's own use. Employee agrees that during his employment and for the two (2) years following the End Date, Employee will not, directly or indirectly, on Employee's own behalf or as a Principal or Representative of any other Person, solicit or induce or attempt to solicit or induce any Protected Employee[9] to terminate his employment with the Company or any member of the Company Group or to enter into employment with any other Person.[10]

Second, the customer non-solicitation provision states:

Employee understands and agrees that the relationship between the Company Group and each of its customers constitutes a valuable asset of the Company Group and may not be converted to Employee's own use. Employee hereby agrees that during his employment and for two (2) years following the End Date, Employee will not, without the prior written consent of Company, directly or indirectly, on Employee's own behalf or as a Principal or Representative of any other Person, solicit, divert, take away or attempt to solicit, divert, or take away any customer for the purpose of providing or selling Company Services; provided, however, that the prohibition of this covenant shall apply only to customers with whom Employee had Material Contact[11] on the Company or any member of the Company Group's behalf during the two (2) years immediately preceding the End Date.[12]

         In August 2013, Dowd left OmniMax.[13] Under the terms of his departure, Defendant was required to be available to Plaintiff until February 3, 2014 ("the Separation Period").[14] Defendant continued to receive his base compensation during the Separation Period, and the restrictive covenants contained in the Agreement expired on February 3, 2016. On August 5, 2015, Metal Sales, a competitor of Plaintiff, announced that Dowd had been appointed its President.[15]

         Several months later, on January 4, 2016, Mr. Bacon resigned from his position as Vice President of Commercial Sales at OmniMax.[16] Mr. Bacon then began working for Metal Sales as Vice President of Sales and Marketing on or around January 28, 2016.[17] Plaintiff allegedly could not find a suitable replacement for Mr. Bacon until May 2016, incurring $79, 950 in recruiter fees, and an additional $20, 000 in compensation for his replacement.[18]

         Dowd also allegedly engaged in communications regarding possible employment at Metal Sales with Donnie Arndt ("Mr. Arndt"), a salesman for Plaintiff.[19] Mr. Arndt reported these conversations to OmniMax, and Plaintiff subsequently increased his salary to ensure it retained his services.[20]

         On April 19, 2016, Plaintiff filed its Complaint in this Court, claiming that Defendant breached the Agreement by recruiting Plaintiffs employees to work with him at Metal Sales and by soliciting OmniMax customers.[21] Dowd removed the case to the United States District Court for the District of Delaware ("District Court") on June 14, 2016.[22] OmniMax subsequently filed a Motion to Remand, which was granted on August 9, 2016. Defendant filed the instant Motion for Summary Judgment and the Motion for Sanctions in December 2018. This is the Court's decision on the Motions.

         II. DISCUSSION

         Before the Court begins its analysis, it finds that Delaware law should be applied in the decision on Defendant's Motions. Section 3.2 of the Agreement contains a choice of law provision, which states that Delaware law will govern disputes arising from the Agreement "without regard to the principle of conflicts of laws."[23] Accordingly, "Delaware courts will generally honor a contractually-designated choice of law provision so long as the jurisdiction selected bears some material relationship to the transaction."[24] Here, the Court finds that Delaware, as OmniMax's state of incorporation, has a significant interest regarding the Agreement between Plaintiff and Defendant, and no other state has a greater material relationship. The Plaintiff is headquartered in Georgia, the Defendant resides in Texas, and the Plaintiffs work territory encompassed all of North America. Therefore, the Court sees no basis to disturb the parties' choice of law set forth in the Agreement.

         A. Motion for Summary Judgment

         In reviewing a Motion for Summary Judgment pursuant to Rule 56 of the Superior Court Civil Rules, the Court must determine whether any genuine issues of material fact exist.[25] Specifically, the moving party bears the burden of showing that there are no genuine issues of material fact so that he is entitled to judgment as a matter of law.[26] The Court must view all factual inferences in a light most favorable to the non-moving party.[27] Summary judgment will not be granted if there is a material fact in dispute or further inquiry into the facts would be appropriate.[28]

         i. Employee Solicitation Claim

         Defendant argues that he is entitled to summary judgment on Plaintiffs claim for breach of the Agreement's employee non-solicitation provision because he did not engage in any prohibited conduct during the Separation Period.[29] More specifically, Dowd contends that he did not solicit or induce Mr. Bacon or Mr. Arndt to join him at Metal Sales because they first approached Defendant about possible employment.[30]

         In response, Plaintiff argues that the Court should deny Defendant's Motion for Summary Judgment because Dowd did solicit OmniMax's employees.[31]According to OmniMax, Defendant's argument that he took no actions to elicit Mr. Bacon or Mr. Arndt's interest in Metal Sales is "untenable and, at a minimum establishes genuine disputes of material fact."[32] Plaintiff claims that Dowd acknowledged he "chased" Mr. Bacon, and that Defendant even recommended Mr. Bacon to the CEO of Metal Sales.[33] Further, Plaintiff contends that Mr. Arndt told OmniMax he was contacted by Defendant, and the two had an in person meeting about possible employment at Metal Sales.[34]

         It is clear to the Court that there are disputed facts surrounding how the Defendant's alleged interactions with Mr. Bacon and Mr. Arndt actually occurred, and consequently, whether he engaged in prohibited conduct under the terms of the Agreement. These underlying factual issues cannot be resolved at the summary judgment stage. Therefore, Defendant's Motion for Summary Judgment on the employee solicitation claim is denied.

         ii. Customer ...


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