CENTRAL TRUST AND INVESTMENT COMPANY, Appellant, v. SIGNALPOINT ASSET MANAGEMENT, LLC, Respondent.
No. SC93182.
Supreme Court of Missouri, En Banc.
Feb. 25, 2014.
422 S.W.3d 312
ZEL M. FISCHER, Judge.
Why does this matter? It matters because it makes the difference in whether this Court or any court considers the merits of Mr. Price‘s post-conviction motion. And, unlike so many post-conviction motions, here the motion court found the motion meritorious. It found serious instances of inadequacy of counsel at trial, which were sufficient to undermine its confidence in the verdict. Indeed, it devotes 22 pages of its 51-page judgment to detailing some 10 aspects of trial counsel‘s deficient performance, including the failure to object to instructions not requiring the jury to be unanimous and the failure to call an expert witness. The latter ground alone so concerned the motion court that it said: “The court would vacate the conviction ... without reference to errors discussed elsewhere in these findings and conclusions.”
The principal opinion never reaches the motion court‘s determination that Mr. Price would not have been convicted but for counsel‘s errors because it erroneously finds this was not a matter of abandonment. True, under Martinez v. Ryan, — U.S. —, 132 S.Ct. 1309, 1315, 182 L.Ed.2d 272 (2012), a federal court is likely to look at the merits of the motion because the Missouri courts have denied relief from errors caused by ineffective assistance.5
But, for the reasons discussed above, I believe this Court can and should reach the merits, and should affirm the motion court‘s grant of a new trial. I therefore dissent.
Warren E. Harris and Lance A. Roskens, Taylor, Stafford, Clithero, Fitzgerald & Harris LLP, Springfield, for SignalPoint.
Ronald Baird and Brett W. Roubal, Baird Lightner Millsap & Harpool PC, Springfield, for Troy Kennedy and ITI Financial.
ZEL M. FISCHER, Judge.
This appeal concerns, primarily, whether a company can be liable for misappropriation of trade secrets, pursuant to the Missouri Uniform Trade Secrets Act,
Factual Background
In 2009, Central Trust purchased Springfield Trust & Investment Company (STC), which was a company that provided financial management services. Troy Kennedy worked for STC as a director and executive officer before the business‘s sale. His primary job responsibilities were to develop new business and act as a relationship manager to existing clients. Although Kennedy signed an employment agreement to work for STC through 2013, which contained a covenant not to compete, the agreement stated that the covenant not to compete did not apply if the company was sold.2
Kennedy left STC‘s employment on November 20, 2009, the day Central Trust purchased STC via a stock purchase agreement. The next day, Kennedy founded a new company, ITI Financial Management, LLC (ITI), which provides financial advice and investment management services in competition with Central Trust. Kennedy then began soliciting Central Trust‘s clients. As of May 2010, 85 of ITI‘s 90 clients were former clients of STC or Central Trust.
Kennedy knew about the merger negotiations while he was still an employee of STC, and he prepared for his potential departure. He told clients he planned to leave the company if the sale of STC was consummated, and he solicited other STC employees to leave with him. Kennedy placed a list of the clients, for whom he provided services while at STC, in a safe deposit box. This list was attached as an exhibit to his employment contract. Kennedy also placed in a safe deposit box, upon advice of counsel, a cell phone containing the contact information of approximately 200 STC clients and 39 pages of documents containing information about STC‘s clients, including names, addresses, telephone numbers, email addresses, and confidential financial information.3 Kennedy also admitted that he compiled a list of client names from memory after leaving STC.
Instead of registering himself or ITI with the Securities and Exchange Commission (SEC) as an “investment adviser,”
Central Trust filed a petition against Kennedy and ITI, alleging a myriad of claims; it later filed a first amended petition adding SignalPoint as a defendant. The first amended petition alleges three claims against SignalPoint: (1) misappropriation of trade secrets, (2) tortious interference with business relations, and (3) civil conspiracy.
The first amended petition alleges that Kennedy, ITI, and SignalPoint had a business relationship, but it does not state that Kennedy or ITI acted as an agent of SignalPoint. For the misappropriation of trade secrets claim against SignalPoint, the first amended petition states that only SignalPoint “used and continues to misappropriate” Central Trust‘s trade secrets. For the second claim, tortious interference with business relations, the first amended petition states: that “SignalPoint has a business arrangement with ... Kennedy in which ... Kennedy has solicited and continues to solicit Central Trust‘s customers to transfer their accounts to ... SignalPoint;” that SignalPoint received trade secret information from Kennedy; that SignalPoint knew “Kennedy was misappropriating Central Trust‘s trade secrets to solicit Central Trust‘s clients;” and that SignalPoint “assist[ed] and work[ed] with ... Kennedy to induce ... Central Trust‘s clients” to transfer their accounts to SignalPoint. For the third claim, civil conspiracy, the first amended petition alleges that Kennedy, ITI, and SignalPoint “reached an agreement, understanding, and meeting of the minds whereby ... Kennedy and ... ITI ... agreed to solicit Central Trust‘s customers to transfer their accounts to ... SignalPoint.” No statement appears in the first amended petition alleging that Kennedy or ITI was SignalPoint‘s agent or employee, and there is no allegation that SignalPoint had the right to control Kennedy or ITI.6
Central Trust filed an appeal. While the appeal was pending in the court of appeals, Central Trust voluntarily dismissed its claims against Kennedy and ITI in the circuit court. This Court ordered transfer after the court of appeals issued an opinion and, therefore, has jurisdiction. See
Standard of Review
This Court set out the summary judgment standard in Goerlitz v. City of Maryville:
The trial court makes its decision to grant summary judgment based on the pleadings, record submitted, and the law; therefore, this Court need not defer to the trial court‘s determination and reviews the grant of summary judgment de novo. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993);
Rule 74.04 . In reviewing the decision to grant summary judgment, this Court applies the same criteria as the trial court in determining whether summary judgment was proper. Id. Summary judgment is only proper if the moving party establishes that there is no genuine issue as to the material facts and that the movant is entitled to judgment as a matter of law. Id. The facts contained in affidavits or otherwise in support of a party‘s motion are accepted “as true unless contradicted by the non-moving party‘s response to the summary judgment motion.” Id. Only genuine disputes as to material facts preclude summary judgment. Id. at 378. A material fact in the context of summary judgment is one from which the right to judgment flows. Id.A defending party ... may establish a right to summary judgment by demonstrating: (1) facts negating any one of the elements of the non-movant‘s claim; (2) “that the non-movant, after an ade-
quate period for discovery, has not been able and will not be able to produce sufficient evidence to allow the trier of fact to find the existence of any one” of the elements of the non-movant‘s claim; or (3) “that there is no genuine dispute as to the existence of the facts necessary to support movant‘s properly pleaded affirmative defense.” Id. at 381. Each of these three methods individually “establishes the right to judgment as a matter of law.” Id. “The record below is reviewed in the light most favorable to the party against whom summary judgment was entered, and that party is entitled to the benefit of all reasonable inferences from the record. However, facts contained in affidavits or otherwise in support of the party‘s motion are accepted as true unless contradicted by the non-moving party‘s response to the summary judgment motion.” Hammack v. Coffelt Land Title, Inc., 284 S.W.3d 175, 177-78 (Mo. App. 2009) (internal quotations and citations omitted). See also ITT Commercial Fin., 854 S.W.2d at 376. However, an appellate court reviewing the ruling of a circuit court is bound to consider the forms of the affidavits supporting and opposing summary judgment in accord with
Rule 74.04(e) , which requires the affidavits to be made on personal knowledge and set forth facts that would be admissible in evidence. Additionally, the affidavit “shall show affirmatively that the affiant is competent to testify to the matters stated therein.”Rule 74.04(e) .
333 S.W.3d 450, 452-53 (Mo. banc 2011). In addition, the non-movant must support denials with specific references to discovery, exhibits, or affidavits demonstrating a genuine factual issue for trial.
Misappropriation of Trade Secrets
A claim for misappropriation of trade secrets under the MUTSA has three elements: (1) a trade secret exists, (2) the defendant misappropriated the trade secret, and (3) the plaintiff is entitled to either damages or injunctive relief.
Resolution of this case does not require this Court to decide whether Central Trust‘s client list qualifies as a trade secret under the MUTSA because, even if it is a trade secret, there was no misappropriation of the client list by SignalPoint.9 The MUTSA defines “misappropriation” in the following way:
(a) Acquisition of a trade secret of a person by another person who knows or has reason to know that the trade secret was acquired by improper means; or
(b) Disclosure or use of a trade secret of a person without express or implied consent by another person who:
a. Used improper means to acquire knowledge of the trade secret; or
b. Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake; or
c. At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:
i. Derived from or through a person who had utilized improper means to acquire it;
ii. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
iii. Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; ....
Although Central Trust supported the allegation that Kennedy acquired a client list, it provided no support in its response to SignalPoint‘s motion for summary judgment that SignalPoint ever obtained a copy of Central Trust‘s client list, or that it ever accessed any safe deposit box that contained Kennedy‘s cell phone or a list of Central Trust‘s clients. SignalPoint asserted, in its statement of uncontroverted material facts, that “Kennedy never provided SignalPoint with any client or customer list or other document from [STC] or Central Trust.” SignalPoint supported this statement of fact by an affidavit of an officer of SignalPoint. Central Trust denied this statement of fact with a citation only to the affidavit of Kennedy. The cited portions of the affidavit state nothing about whether SignalPoint had ever been given a client list. Accordingly, it is deemed admitted that SignalPoint had not been provided the client list. See
Because Central Trust provided no support for the allegation that SignalPoint ever had access to the client list, it could not have acquired, disclosed, or used it. The MUTSA requires acquisition of a trade secret or “knowledge of the trade secret” for misappropriation. SignalPoint must at least have had some way of knowing what was on the list to have used or disclosed it, regardless of whether SignalPoint knew that such a list existed and that Kennedy had access to it. There is no support for the allegation that SignalPoint ever saw the client list that Central Trust characterizes as a “trade secret.”
Although SignalPoint performs services for and bills people who were once Central Trust or STC clients and who eventually became clients of Kennedy and SignalPoint, there is no support in the record that SignalPoint had any way of knowing which of Kennedy‘s clients are new clients and which are former clients of STC or Central Trust. Indeed, Central Trust admits in its brief to this Court that “[t]here is no evidence SignalPoint asked Kennedy which clients were transferred from Central Trust after being notified.” SignalPoint can identify which of its clients are also Kennedy‘s clients, but this is not the compilation of names that Central Trust argues is a “trade secret.” Because Central Trust has failed to demonstrate with citations to the record that SignalPoint ever had access to the client list, there is no genuine issue of material fact that SignalPoint misappropriated any “trade secret” of Central Trust.
Central Trust also argues that SignalPoint is vicariously liable for Kennedy‘s misappropriation. However, Central Trust never pleaded the existence of a principal-agent or employer-employee relationship between Kennedy and SignalPoint.
Generally, the wrongful acts of an agent can be imputed to the principal where an agency relationship exists. See Bach v. Winfield-Foley Fire Protection Dist., 257 S.W.3d 605, 608 (Mo. banc 2008). Agency is the fiduciary relationship resulting from the manifestation of consent by an agent to a principal that the agent will act on the principal‘s behalf and subject to his or her control. Id. Likewise, where an employer-employee relationship exists, the doctrine of respondeat superior holds that the employer is vicariously liable for the injury-causing conduct of an employee done within the course and scope of the employment. Cluck v. Union Pac. R.R. Co., 367 S.W.3d 25, 29 (Mo. banc 2012). An employer generally is not held vicariously liable, however, for the acts of its independent contractors, who are not considered employees for purposes of respondeat superior. Kaplan v. U.S. Bank, N.A., 166 S.W.3d 60, 66 (Mo.App.2003). For a principal-agent or employer-employee relationship to exist, the principal or employer must have the “right to control” the agent or employee. Bach, 257 S.W.3d at 608; Kaplan, 166 S.W.3d at 66.
Kennedy signed an “Independent Advisor Representative Agreement” with SignalPoint. The agreement states that Kennedy is an independent contractor, disclaims the existence of an employer-employee relationship, and states that Kennedy has no right to bind SignalPoint by his actions. Central Trust‘s first amended petition alleges only that Kennedy and SignalPoint had a “business arrangement” through which SignalPoint “assist[ed] and work[ed] with” Kennedy to induce Central Trust clients to transfer their accounts to SignalPoint.
There is no allegation in the first amended petition that Kennedy or ITI was SignalPoint‘s agent or employee or that SignalPoint had the right to control Kennedy or ITI. The first amended petition does not state a claim for SignalPoint‘s liability based on a principal-agent or employer-employee relationship. See Bach, 257 S.W.3d at 608; Kaplan, 166 S.W.3d at 66. Therefore, Kennedy‘s actions in acquiring the client list cannot be imputed to SignalPoint. See Smith v. City of St. Louis, 395 S.W.3d 20, 24 (Mo. banc 2013) (stating that a court cannot enter a valid judgment on a claim not raised in the petition); see also Allen Quarries, Inc. v. Auge, 244 S.W.3d 781, 783 (Mo.App.2008) (“It is axiomatic that a trial court cannot grant judgment on a cause of action not pleaded.“).11
Because there is no genuine issue of material fact as to Central Trust‘s claim of misappropriation of trade secrets, there is also no genuine issue of material fact as to Central Trust‘s second claim of tortious interference with business relations. To prove a claim for tortious interference with a contract or a business expectancy, the plaintiff must prove the following five elements: “(1) a contract or a valid business expectancy; (2) defendant‘s knowledge of the contract or relationship; (3) intentional interference by the defendant inducing or causing a breach of the contract or relationship; (4) absence of justification; and (5) damages resulting from defendant‘s conduct.” Western Blue Print Co. v. Roberts, 367 S.W.3d 7, 19 (Mo. banc 2012). The plaintiff cannot prove the fourth element, absence of justification, if the defendant has a legitimate economic interest in the business expectancy, unless the plaintiff proves the defendant employed “improper means.” Id. at 20. “Improper means” can be any independently wrongful act recognized by statute or the common law. Id.
Central Trust concedes in its appellate brief that SignalPoint has a legitimate economic interest in Central Trust‘s expectation of continuing to do business with its former clients because the two companies are direct competitors. See Briner Elec. Co. v. Sachs Elec. Co., 680 S.W.2d 737, 743 (Mo.App.1984) (holding that competition is a legitimate economic interest and valid justification for interference with a business expectancy, where there is no evidence of improper means). The only “improper means” alleged by Central Trust is that SignalPoint misappropriated a trade secret. See Lyn-Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 700 (Mo.App.1999) (holding that “use of a misappropriated trade secret obtained in violation of a fiduciary duty is not a valid justification“). Because there is no genuine issue of material fact as to Central Trust‘s misappropriation claim against SignalPoint, Central Trust cannot prove “improper means,” which is an essential element of its claim of tortious interference with business relations. Therefore, summary judgment on the second claim is also appropriate. Goerlitz, 333 S.W.3d at 453; ITT Commercial Fin. Corp., 854 S.W.2d at 381.
Civil Conspiracy
Central Trust claims that SignalPoint, Kennedy, and ITI conspired to commit the torts of misappropriation of trade secrets and interference with business relations. The civil conspiracy claim is moot because Central Trust voluntarily dismissed its claims against Kennedy and ITI in the circuit court while this appeal was pending.
“Although civil conspiracy has its own elements that must be proven, it is not a separate and distinct action.” Western Blue Print Co., 367 S.W.3d at 22. “‘[R]ather, it acts to hold the conspirators jointly and severally liable for the underlying act.‘” Id. The doctrine of joint and several liability allocates the financial burden of harm among multiple parties at fault for the plaintiff‘s injuries. Gramex Corp. v. Green Supply, Inc., 89 S.W.3d 432, 439-40 (Mo. banc 2002). “Joint and several liability depends on the existence of two or more defendants.” Kibbons v. Union Elec. Co., 823 S.W.2d 485, 491 (Mo. banc 1992).
“[A] cause of action is moot when the question presented for decision seeks a judgment upon some matter which, if the judgment was rendered, would not have any practical effect upon any then existing controversy.” State ex rel. Reed v. Reardon, 41 S.W.3d 470, 473 (Mo. banc 2001)
Motion for Reconsideration and for New Trial
Central Trust moved for reconsideration and for a new trial due to newly discovered evidence after the circuit court entered summary judgment in favor of SignalPoint. Central Trust argues that the circuit court should not have overruled this motion because Central Trust did not discover the contents of the safe deposit box until after the circuit court entered judgment.
A party can move for a new trial following the entry of summary judgment; the motion is considered a motion for a new trial in a court-tried case. Taylor v. United Parcel Serv., Inc., 854 S.W.2d 390, 393 (Mo. banc 1993); see
This Court reviews a circuit court‘s judgment overruling a new trial motion for abuse of discretion. Badahman v. Catering St. Louis, 395 S.W.3d 29, 39 (Mo. banc 2013). An abuse of discretion occurs when the circuit court‘s ruling “is clearly against the logic of the circumstances then before it and is so arbitrary and unreasonable as to shock the sense of justice and indicate a lack of careful consideration.” St. Louis Cnty. v. River Bend Estates Homeowners’ Ass‘n, 408 S.W.3d 116, 134 (Mo. banc 2013). Motions for new trial based on newly discovered evidence “are looked upon with disfavor, and the party urging such an error on appeal must carry a heavy burden.” Soehlke v. Soehlke, 398 S.W.3d 10, 21 n. 6 (Mo. banc 2013). To obtain a new trial based on newly discovered evidence, the movant must show:
1) the evidence has come to the knowledge of the party since the trial; 2) failure to discover the evidence sooner was not the result of a lack of due diligence; 3) the evidence is so material that a new trial would produce a different outcome; and 4) it is not cumulative only or merely impeaching the credibility of a witness.
Hancock v. Shook, 100 S.W.3d 786, 798 (Mo. banc 2003).
The circuit court did not abuse its discretion in overruling Central Trust‘s motion because the newly discovered evidence could not produce a different outcome. The only new evidence proffered by Central Trust was the contents of the safe deposit box, which was 39 pages of documents detailing information about Central Trust‘s clients and a cell phone containing
Conclusion
There is no genuine issue of material fact as to Central Trust‘s claim that SignalPoint misappropriated its client list. Central Trust failed to support the allegation that SignalPoint ever had access to the client list with citation to the record that was considered by the circuit court. Further, Central Trust failed to plead an agency or employment relationship between SignalPoint and Kennedy, so as to state a claim based on vicarious liability. There is no genuine issue of material fact as to the claim of tortious interference with business relations because the misappropriation claim fails, and the claim of civil conspiracy is moot because Central Trust voluntarily dismissed the other two defendants from the case. The circuit court did not abuse its discretion in overruling SignalPoint‘s motion for reconsideration of summary judgment and for a new trial due to newly discovered evidence because the newly discovered evidence could not produce a different outcome. The judgment of the circuit court is affirmed.
BRECKENRIDGE, STITH, DRAPER, WILSON and TEITELMAN, JJ., and BICKEL, Sp.J., concur.
RUSSELL, C.J., not participating.
Notes
Central Trust argues that its client list is a trade secret because Central Trust derives “independent economic value” from the “compilation” of names on the list and because it spent substantial resources compiling and protecting its contents. It contends the client list is not merely useful to its competitors as a reference tool for the contact information of each individual client, but that it also has value because it is a compilation of people who are likely to have money on hand to invest and who are willing to use personal financial asset management services. Central Trust additionally contends that this list of clients is not “readily ascertainable” by its competitors merely by searching the Internet or looking through trade publications or a phonebook.
Courts in other jurisdictions have employed case specific factual analyses under their own statutes or common law to determine whether a client list is a trade secret. Some courts have found a client list to be a trade secret, and some have found that it is not. E.g., JPMorgan Chase Bank, N.A. v. Kohler, No. 3:09CV-677-H, 2009 WL 2913897, at *1 (W.D.Ky. Sept. 8, 2009) (stating that the weight of authority is that client lists of financial firms are considered trade secrets); Morgan Stanley DW Inc. v. Rothe, 150 F.Supp.2d 67, 76 (D.D.C.2001) (stating that client lists of financial firms are trade secrets under the District of Columbia Uniform Trade Secrets Act). Compare Town & Country House & Home Serv., Inc. v. Newbery, 3 N.Y.2d 554, 170 N.Y.S.2d 328, 147 N.E.2d 724 (1958) (holding that the client list of an in-home cleaning company, which spent years soliciting potential clients to compile a list of those likely to use in-home cleaning services, was a protectable trade secret under New York common law), with Corroon & Black-Rutters & Roberts, Inc. v. Hosch, 109 Wis.2d 290, 325 N.W.2d 883, 886 (1982) (holding that the client list of an insurance agency was not a trade secret under Wisconsin common law and stating that “customer lists are the periphery of the law of unfair competition” “because legal protection would not provide the incentive to compile such lists; most are developed in the normal course of business, anyway“), superseded by statute as stated in Burbank Grease Servs., LLC v. Sokolowski, 294 Wis.2d 274, 717 N.W.2d 781, 791 & n. 7 (2006).