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Billion v. Oxford

United States District Court, D. South Dakota, Southern Division

July 22, 2016

DAVID H. BILLION, individually, OG ENERGY LLC, a South Dakota Limited Liability Company, and WATER SOLUTIONS INC., a South Dakota Corporation, Plaintiffs,
v.
DEREK OXFORD, individually, and VERDE WATER SOLUTIONS LLC, a Texas Limited Liability Company, Defendants.

          ORDER DENYING IN PART AND GRANTING IN PART DEFENDANTS’ MOTION TO DISMISS

          KAREN E. SCHREIER UNITED STATES DISTRICT JUDGE

         Defendants, Derek Oxford and Verde Water Solutions LLC, move the court for an order to dismiss Count II (Breach of Contract against defendants), Count III (Breach of Contract against Oxford), Count IV (Tortious Interference with Contract against Verde), Count V (Unjust Enrichment/Quantum Meruit against Verde), and Count VI (Unfair Competition against defendants). Plaintiffs, David H. Billion, OG Energy LLC, and Water Solutions Inc., resist the motion.

         FACTS

         The facts as alleged by plaintiffs in their complaint are as follows:

         OG Energy, LLC (OG Energy Georgia) is a dissolved Georgia Limited Liability Company that previously had its principle place of business in Douglasville, Georgia. OG Energy Georgia specialized in providing equipment, machinery, and spare parts for oil, gas, mining, and construction businesses. OG Energy Georgia was owned by non-party Mike Locascio and Oxford. On February 16, 2010, OG Energy Georgia entered into a term loan agreement with Billion. Under the note on the loan, OG Energy Georgia agreed to pay Billion $720, 000 plus interest. Locascio and Oxford also personally guaranteed the repayment obligations of OG Energy Georgia.

         On December 1, 2010, Oxford, Locascio, and plaintiffs entered into a settlement agreement regarding the outstanding debt on the note. Under the settlement agreement, Oxford and Locascio agreed to transfer all of the assets of OG Energy Georgia to OG Energy South Dakota, which was a newly formed LLC organized under the laws of South Dakota. Additionally, OG Energy South Dakota assumed $360, 000 of OG Energy Georgia’s indebtedness, Locascio assumed $112, 000, plus interest, of the indebtedness, and Oxford assumed $112, 000, plus interest, of the indebtedness.

         OG Energy South Dakota and Water Solutions[1] developed a waste water treatment system for the removal of animal processing contaminants. The System utilizes a specific formula of one or more chemical coagulants that pass through a microfiltration membrane. The System removes animal processing contaminants such as fats, oils, and greases from waste water. Plaintiffs state that the various parts and the specific formula that make up the System are confidential and proprietary information that belong to OG Energy South Dakota and Water Solutions.

         OG Energy South Dakota and Water Solutions had been in discussions with non-party Valley Proteins, Inc., regarding the construction of a System for one of Valley Proteins’ facilities. Before entering into a contract with Valley Proteins, OG Energy South Dakota and Water Solutions performed laboratory tests and analyses to determine the unique chemical and mechanical processes needed to construct a System for Valley Proteins. Plaintiffs assert these preliminary designs were the confidential and proprietary information of OG Energy South Dakota and Water Solutions. The information was stored in a secured location and was not disclosed to the public.

         On November 1, 2010, Oxford entered into an Independent Sales Representation Agreement with OG Energy South Dakota. Oxford agreed to sell products and technology owned by Water Solutions and OG Energy South Dakota in exchange for a commission. On February 15, 2012, Oxford was notified by letter that the Sales Agreement was terminated effective thirty days from the date of the letter. The letter also notified Oxford that he was still bound by the provisions of the Settlement Agreement, the Sales Agreement, and the note.

         Section 4 of the Settlement Agreement contained a confidentiality clause that stated:

any information obtained regarding the operation of OG South Dakota or Water Solutions, their products, services, policies, or any other aspect of their business is confidential, and shall not be revealed or disclosed to any person, company or other entity without the prior written consent of OG South Dakota and Water Solutions . . . . Upon termination of the relationship between Releasing Parties and the Released Parties, the Releasing Parties agree to return all proprietary and confidential information to OG and Water Solutions . . . and not make use of any proprietary or confidential information known by them. Releasing Parties are not authorized to use any of this information upon termination of the Agreement. Any technology, modifications, improvements or enhancements which . . . become known to Releasing Parties during the term of this Agreement shall be, in all respects the sole and exclusive property of OG South Dakota and Water Solutions.

Docket 12-1 at § 4 (Exhibit A: Settlement Agreement and Release).

         Section 6 of the Sales Agreement contained a confidentiality clause that is nearly identical to that of the Settlement Agreement:

any information obtained regarding the operation of OG or Water Solutions, their products, services, policies or any other aspect of their business is confidential, and shall not be revealed or disclosed to any person, company or other entity without ...

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