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Beef Products, Inc. v. Hesse

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

November 14, 2019

BEEF PRODUCTS, INC., Plaintiff,
v.
MICHAEL HESSE, Defendant.

          ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

          KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

         Plaintiff, Beef Products, Inc., filed a complaint alleging that defendant, Michael Hesse, improperly solicited Beef Products' employees for employment with Hesse and Hesse's business, Automatic Equipment Manufacturing Co. Docket 64. Beef Products' amended complaint alleges four causes of action: breach of contract, breach of duty of loyalty, fraud in the inducement of contract, and declaratory judgment. Id. ¶¶ 31-58. Hesse filed counterclaims alleging a breach of contract claim and a breach of implied covenant of good faith and fair dealing claim. Docket 70 at 18-20. Hesse also requested a declaratory judgment that the non-solicitation provision of the contract was per se unenforceable. Id. at 17-18. Hesse moves for partial summary judgment. Docket 106. Beef Products opposes the motion. Docket 137. For the following reasons, the court denies Hesse's motion for partial summary judgment.

         FACTUAL BACKGROUND

         The facts, viewed in the light most favorable to the non-moving party, are as follows:

         Hesse began his employment at Beef Products on June 1, 1998. Docket 135 ¶ 7. During his time at Beef Products, Hesse served as Head of Sales and oversaw a fourteen-person sales group for over a decade. Docket 70 at 3; Docket 137 at 2. In June of 2016, Hesse informed Beef Products that he intended to leave Beef Products and run his family's company, Automatic. Id. at 3.

         Automatic sells roller mills, hammer mills, rotary mills, towing products, and braking products. Id. at 4. Beef Products does not sell any of those products. Id. Beef Products produces and sells “lean finely textured beef.” Docket 135 ¶ 1. Beef Products' customers include ground beef processors, supermarkets, and restaurants. Id. ¶ 3. Beef Products alleges that the limited amount of discovery received “suggests that Automatic was targeting the beef industry as a customer for its roller mills.” Docket 137 at 5. Beef Products and Automatic compete over the allocation of resources and spending by customers in the beef industry. Id.

         On August 3, 2016, Hesse and Beef Products entered into an agreement called the “Transitional Employment, On-Call Services Agreement and General Release” (Transition Agreement). Id.; Docket 64-1. The Transition Agreement stated that Hesse's full-time, regular employment at Beef Products would terminate on November 23, 2016 (Termination Date). Docket 64-1 at 1. For thirty-six months after the Transition Agreement's effective date, Hesse agreed to continue on-call employment with Beef Products. Id. at 2-3. The Transition Agreement also contained a non-solicitation provision that applied to customers, vendors, suppliers, and employees. Id. at 3-4. The non-solicitation provision stated:

Employee agrees that during the On-Call Period and for a period of one (1) year following the conclusion of the On-Call Period (the “Restrictive Period”), Employee will not, directly or indirectly, on Employee's own behalf or by aiding any other individual or entity . . . Solicit for employment any Company employee with whom Employee had personal contact during the twelve (12) month period immediately prior to the Termination Date.

Id. The Restrictive Period is from August 11, 2016 to August 11, 2020. Docket 137 at 6. The Transition Agreement did not contain any geographical limitations. Id.

         On November 23, 2016, Hesse began to provide full-time services to Automatic and serve as the Chairman of Automatic. Id. at 11. Beef Products also used Hesse's services from November 23, 2016, to September 22, 2017 in line with the terms of the Transition Agreement. Docket 70 at 2-3.

         Beef Products alleges that Hesse improperly solicited several employees of Beef Products' sales group to work at Automatic. Docket 64 ¶ 34. These employees include Chuck Szitas, Cameron Jacobs, Bryce Snyder, Britton Wall, and Alec Hannah (collectively, “Subject Individuals”). Id. ¶¶ 20-21. The Subject Individuals were at-will employees at Beef Products. Docket 137 at 12, 14, 16, 18, 19. Additionally, Szitas, Jacobs, Snyder, and Wall never signed non-compete or non-solicitation agreements with Beef Products. Id. at 20-30. Between December of 2016 and August of 2017, the Subject Individuals ended their employment at Beef Products and started employment at Automatic. Docket 70 at 5.

         LEGAL STANDARD

         Summary judgment is appropriate if the movant “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party can meet its burden by presenting evidence that there is no dispute of material fact or that the nonmoving party has not presented evidence to support an element of its case on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The moving party must inform the court of the basis for its motion and also identify the portions of the record that show there is no genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).

         To avoid summary judgment, “[t]he nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.' ” Mosley v. City of Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). Summary judgment is precluded if there is a genuine dispute of fact that could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When considering a summary judgment motion, the court views the facts and the inferences drawn from such facts “ ‘in the light most favorable to ...


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