United States Court of Appeals For the Eighth Circuit
No. 18-2633
CRST Expedited, Inc., Plaintiff - Appellant, v. Transam Trucking, Inc., Defendant - Appellee.
No. 18-2752
CRST Expedited, Inc., Plaintiff - Appellee, v. Transam Trucking, Inc., Defendant - Appellant.
Appeals from United States District Court for the Northern District of Iowa - Cedar Rapids
May 27, 2020
Submitted: October 16, 2019
Submitted: October 16, 2019
Filed: May 27, 2020
Before LOKEN, SHEPHERD, and STRAS, Circuit Judges.
CRST Expedited, Inc. (CRST) sued TransAm Trucking, Inc. (TransAm), alleging TransAm wrongfully recruited and hired several long-haul truck drivers who were under contract with CRST. The district court denied TransAm‘s motion to dismiss and both parties moved for summary judgment. The district court granted TransAm‘s motion for summary judgment and dismissed all of CRST‘s claims with prejudice and denied CRST‘s motion. CRST appeals the adverse grant of summary judgment and TransAm cross appeals the district court‘s denial of TransAm‘s motion to dismiss finding that the drivers were not indispensable parties. Having jurisdiction under
I.
CRST is a long-haul trucking company. After suffering from a persistent shortage of drivers, CRST identified one of the primary causes of the shortage as the significant costs associated with becoming a trained, licensed driver. To work as a long-haul truck driver, potential drivers must obtain a commercial driver‘s license (CDL), which is normally obtained through a driver-training program. To address this cause of the shortage, CRST
This case involves 167 drivers who were subject to the CRST employment contract but left CRST to work for TransAm.1 TransAm is also a long-haul trucking company
For each of the 167 drivers at issue, TransAm sent employment verification requests to CRST. CRST responded to TransAm, noting that the drivers were under agreement with CRST. CRST also sent several follow-up letters, warning TransAm that CRST would not release its drivers from their contracts and citing another CRST lawsuit in which a different company had been enjoined from interfering with similar CRST contracts. Finally, in May 2014, CRST sent a cease-and-desist letter to TransAm. CRST alleges that, even after receiving the several letters detailing the drivers’ contractual obligations with CRST, TransAm continued to hire its drivers.
In April 2016, CRST filed a lawsuit against TransAm, alleging intentional interference with a contract, intentional interference with a prospective economic advantage, and unjust enrichment. TransAm moved to dismiss the complaint on the basis that the drivers were necessary and indispensable parties. The district court denied the motion, finding the drivers were not indispensable parties, and subsequently denied TransAm‘s motion for reconsideration of that ruling. TransAm later moved for summary judgment, and the district court granted its motion. As to the intentional interference with a contract claim, the district court determined that, while CRST had presented sufficient evidence as to the contract and knowledge elements of the claim, it failed to provide sufficient evidence to preclude summary judgment as to the causation element. Thus, the district court did not reach the remaining elements of the intentional interference claim. As to the unjust enrichment claim, the district court found that TransAm received no benefit from CRST, and in any case, its claim of unjust enrichment depended upon TransAm‘s tortious conduct, as to which the district court had already determined there was insufficient evidence.2
II.
CRST argues the district court erred in granting TransAm‘s motion for summary judgment on the intentional interference with a contract and unjust enrichment claims. “Summary judgment is appropriate when, viewing the facts in the light most favorable to the non-movant, there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law.” J.E. Jones Const. Co. v. Chubb & Sons, Inc., 486 F.3d 337, 340 (8th Cir. 2007). “We review a district court‘s grant of summary judgment de novo, including its interpretation
A.
CRST argues the district court erroneously determined CRST did not present sufficient evidence of the intentional interference with a contract claim to preclude summary judgment. Iowa courts apply the
The district court found that, while there was sufficient evidence to support the first two elements, the existence of a valid contract between CRST and the drivers and TransAm‘s knowledge of the contract, there was not sufficient evidence to support the causation element. For the reasons that follow, we conclude that the district court erred with respect to the causation element but did not err with respect to the existence of a valid contract element. We also conclude that the record contains sufficient evidence to support the intentional and improper interference element.
i.
We begin by addressing the causation element: whether TransAm‘s actions caused the drivers not to perform their contracts with CRST. The district court held there is no genuine issue of material fact on the element of factual causation because there is no evidence TransAm induced the drivers to breach or that the drivers would not have breached their contracts absent TransAm‘s involvement. We disagree. In analyzing causation, Iowa courts apply the traditional but-for standard. Sweeney v. City of Bettendorf, 762 N.W.2d 873, 883 (Iowa 2009). With respect to the causation element, the
CRST presented substantial evidence from which a reasonable juror could conclude that TransAm entered into agreements with the drivers not only with the knowledge that the drivers were under contract with CRST, and thus could not perform both contracts, but also with knowledge that its driver agreements provided for a higher rate of pay than provided for under the CRST-driver contracts.
TransAm discounts this evidence of causation, asserting that TransAm could not have knowingly offered the drivers superior terms because it lacked knowledge of the terms of the CRST-driver contracts. However, knowledge of the contract is a separate element of the intentional interference claim, which the district court found CRST had satisfied and is not an element in dispute on appeal. Even assuming it is appropriate to address knowledge within the causation context, CRST presented sufficient evidence to create a factual dispute as to whether TransAm knew the drivers were subject to a contract with CRST in which the drivers would necessarily be paid less than market rate. CRST sent several notices to TransAm, informing TransAm that the drivers were under contract and pointing TransAm to CRST‘s other lawsuit involving similar claims. R. Doc. 156-5, at 147; R. Doc. 167-5, at 1; R. Doc. 2-2, at 1. CRST also presented evidence that TransAm continued to hire its drivers even after CRST filed the instant lawsuit. Specifically, TransAm provided in its answer to an interrogatory the dates that the drivers started with TransAm, several of which occurred after the complaint was filed in April 2016. R. Doc. 155-2, at 20-28. The various letters and the complaint in this case outline the structure of CRST‘s training program, including the fact that the drivers are compensated below market rate so CRST can partially recoup the costs of the training program. Thus, a reasonable fact finder could determine that TransAm knew that it was offering the drivers better terms, i.e., market rate, than those provided under the CRST contract.
Nevertheless, we reject CRST‘s contention that any prospective employer offering terms it knows are better than an employee‘s fixed-term contract with his present employer commits tortious interference with that contract. The Restatement draws a clear distinction between contracts that include non-compete provisions and those that do not. With regard to an employee subject to a contract that does not include a non-compete provision, a competitor is “free, for his own competitive advantage, to obtain the future benefits for himself by causing the termination.”
The non-compete provision contained in the CRST-driver contracts provides that the employee “will not directly or indirectly provide truck driving services to any CRST Competitor” during the Restrictive Term. R. Doc. 156-3, at 24-25. But for the decision made by TransAm, a CRST competitor, to extend offers and employ the drivers, the drivers would not be in breach of the non-compete provision. While some drivers had initial contact with TransAm only after leaving CRST and some drivers were also applying to companies other than TransAm, a reasonable fact finder could conclude that the drivers would not have violated the non-compete provision absent TransAm‘s act of hiring. Although some of the drivers contacted TransAm only after leaving CRST, CRST presented evidence that many drivers return to CRST after a period of absence, suggesting the drivers would not have violated the non-compete provision had TransAm not hired them. R. Doc. 167-9, at 326. And although some drivers applied to companies other than TransAm, CRST presented evidence that at least one other trucking company does not hire drivers who are subject to non-compete provisions. R. Doc. 167-9, at 339-40.
Accordingly, we find CRST presented sufficient evidence to create a genuine issue of material fact with regard to the causation element. Additionally, as discussed above, although the district court did not address the issue, we find that the summary judgment record contains sufficient evidence to support a finding that TransAm intentionally and improperly interfered with the CRST-driver contracts.
ii.
TransAm argues that even if CRST presented sufficient evidence on the causation and intentional and improper elements, we may affirm the judgment on the basis that CRST has not established the first element of the intentional interference claim: that there was a valid contract between CRST and the drivers.3 On appeal, TransAm concedes that CRST and the drivers entered into employment contracts but asserts that CRST cannot satisfy this element because the non-compete provision is an unenforceable restrictive covenant. Specifically, TransAm argues the non-compete provision is unenforceable because it does not protect a legitimate business interest, its terms are broader than necessary to protect the stated interest, and it amounts to a lifetime ban from the trucking industry.
In the context of an intentional interference claim, the Restatement distinguishes between void contracts and voidable ones. A void contract is “[a] promise for breach of which the law neither gives a remedy nor otherwise recognizes a duty of performance
Iowa courts generally enforce non-compete provisions. Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376, 381 (Iowa 1983) (“The general rule in Iowa is that we will enforce a noncompetitive provision in an employment contract if the covenant is reasonably necessary for the protection of the employer‘s business and is not unreasonably restrictive of the employee‘s rights nor prejudicial to the public interest.“). Further, Iowa law allows even unreasonable non-compete provisions to be “enforced to whatever extent [the court] find[s] reasonable under the long established rule.” Farm Bureau Serv. Co. of Maynard v. Kohls, 203 N.W.2d 209, 211 (Iowa 1972) (finding the scope of the restrictive covenant to be unreasonable but reversing the finding of voidness). Because even unreasonable non-compete provisions may be partially enforced under Iowa law, TransAm‘s arguments aimed at the reasonableness of the non-compete provision challenge the contract as voidable, not void ab initio. The drivers did not seek to avoid the contract prior to the interference, and thus TransAm‘s voidable arguments are irrelevant for the purposes of CRST‘s intentional interference claim.
TransAm‘s argument that the non-compete provision operates as a lifetime ban from the trucking industry merits more discussion because such a lifetime ban may render the contract void. The Iowa Supreme Court has recognized that non-compete “contracts are always subject to the test of whether their purpose is contrary to public policy, and if there is any credible evidence to sustain a finding that they are deliberately unreasonable and oppressive, such covenants must be held invalid whether severable or not.” Ehlers v. Iowa Warehouse Co., 188 N.W.2d 368, 374 (Iowa), reh‘g denied and opinion modified, 190 N.W.2d 413 (Iowa 1971) (quoting Fullerton Lumber Co. v. Torborg, 70 N.W.2d 585, 592 (Wis. 1955)); see
Here, the non-compete provision limits the driver‘s ability to work for a competitor “for a period equal to the greater of the Restrictive term and the duration of CRST‘s employment of Employee.” R. Doc. 156-3, at 24-25. The Restrictive Term is defined as “any period of
Accordingly, as a matter of law, we find the CRST employment contract is valid for the purposes of its intentional interference with a contract claim. The district court did not err with respect to this determination.
Finally, because the parties did not brief the remaining elements of the intentional interference with a contract claim, we decline to address them here and leave them for the district court to consider on remand.
B.
CRST also argues the district court erred in granting TransAm‘s motion for summary judgment on CRST‘s unjust enrichment claim. “The doctrine of unjust enrichment is based on the principle that a party should not be permitted to be unjustly enriched at the expense of another or receive . . . benefits without paying just compensation.” State Dep‘t of Human Servs. ex rel. Palmer v. Unisys Corp., 637 N.W.2d 142, 154 (Iowa 2001). It “is a broad principle with few limitations.” Id. at 155. To recover under a theory of unjust enrichment, the plaintiff must establish: “(1) defendant was enriched by the receipt of a benefit; (2) the enrichment was at the expense of the plaintiff; and (3) it is unjust to allow the defendant to retain the benefit under the circumstances.” Id. at 154-55.
The district court found there was insufficient evidence that there was a benefit conferred on TransAm at the expense of CRST and that it would be unjust for TransAm to retain the alleged benefit. This conclusion was in error. First, in the unjust enrichment context, “[t]he word ‘benefit,’ . . . denotes any form of advantage.” Handlos v. Intercreditor Comm., 838 N.W.2d 870 (Iowa Ct. App. 2013) (quoting Okoboji Camp Owners Co-op v. Carlson, 578 N.W.2d 652, 654 (Iowa 1998)). “[B]enefits can be direct or indirect, and can involve benefits conferred by third parties.” Unisys, 637 N.W.2d at 155. Here, TransAm received the benefit of drivers who were trained at CRST‘s expense. The profits reaped by TransAm as a result of hiring these drivers are at the very least an indirect result of CRST‘s financial investment in the drivers’ training. TransAm‘s hiring of drivers for whom it did not
Second, whether it is unjust to profit at another‘s expense depends on the circumstances. See Johnson v. Leonard, 928 N.W.2d 149 (Iowa Ct. App. 2019) (finding “it is not unjust to allow the defendant to retain the benefit under the circumstances presented“). One such circumstance in which it may be unjust to retain a benefit is in the context of “contracts, torts, or other predicate wrongs.” Unisys, 637 N.W.2d at 154. As detailed above, there is sufficient evidence to create a factual dispute as to whether TransAm intentionally and improperly interfered with the contracts between CRST and the drivers. Thus, because there is sufficient evidence to show that TransAm engaged in tortious conduct, there is sufficient evidence to create a factual dispute as to whether TransAm unjustly retained a benefit.
Accordingly, we conclude the district court erred in granting TransAm‘s motion for summary judgment on CRST‘s unjust enrichment claim.
III.
In its cross-appeal, TransAm argues the district court erred in denying its motion to dismiss on the basis that the drivers were not indispensable parties pursuant to
an abuse of discretion. Pembina Treaty Comm. v. Lujan, 980 F.2d 543, 545 (8th Cir. 1992). Under
Here, the district court found that the drivers were necessary parties but could not be joined because they would defeat diversity jurisdiction. The court then carefully considered and weighed each factor in determining that the drivers were not indispensable. We find the district court did not abuse its discretion in weighing these considerations, and we agree with the district court that TransAm had the same interest as the drivers in challenging the non-compete provision‘s validity, and “the remaining factors militate[d]
Nonetheless, TransAm argues the drivers are indispensable parties because only the drivers have standing to challenge the reasonableness of the non-compete
provision, which prejudices both the drivers and TransAm. We are not persuaded. As explained above, an unreasonable non-compete provision would only make the provision voidable, and a voidable contract supports an intentional interference claim. Thus, there can be no prejudice to TransAm or the drivers by not joining the drivers as parties in this case.
Accordingly, we conclude the district court did not abuse its discretion in finding the drivers were not indispensable parties.
IV.
For the foregoing reasons, we reverse the district court‘s order granting TransAm‘s motion for summary judgment and remand for further consideration. Additionally, we affirm the district court‘s determination that the drivers are not indispensable parties to the proceeding.
STRAS, Circuit Judge, dissenting.
This case is about competition for long-haul truck drivers. CRST recruits drivers by providing a training program and then recoups its costs over the following ten months. TransAm, a direct competitor, finds its drivers through nationwide advertising and then provides training-reimbursement payments. These different business models happened to clash when TransAm recruited some of CRST‘s drivers before they had completed their ten-month contracts. The court holds that, under Iowa law, TransAm‘s actions could amount to tortious interference. As may be clear by now, I disagree.
Tortious interference with contract is not about favoring some business models over others. Rather, as Iowa law recognizes, it is about deterring improper interference with contracts. See Green v. Racing Ass‘n of Cent. Iowa, 713 N.W.2d 234, 243 (Iowa 2006). One factor matters most in determining whether an alleged tortfeasor has acted improperly: motive. See, e.g., Nesler v. Fisher & Co., 452 N.W.2d 191, 197 (Iowa 1990) (“Motive or purpose determines whether the interference was improper.“). To establish an improper motive, CRST had to “identify specific facts” revealing that TransAm was motivated by some “desire . . . to accomplish the interference.” Green, 713 N.W.2d at 244-45 (emphasis added; citation omitted); see also Nesler, 452 N.W.2d at 197-98.
CRST has nothing. There is no evidence that TransAm‘s recruiting efforts, including its nationwide advertisements, were aimed at anything more nefarious than finding qualified drivers. See Kern v. Palmer Coll. of Chiropractic, 757 N.W.2d 651, 663 (Iowa 2008) (distinguishing “legitimate business objectives” from “improper purpose[s]“). Without evidence of an improper motive, the wheels come off CRST‘s tortious-interference claim. See Green, 713 N.W.2d at 245 (“If the sole motive is a legitimate purpose derived from the law, then any interference is not improper as a matter of law.“).
To be sure, TransAm offered better terms than CRST, whose business model required it to pay drivers less until the company recouped its training costs. Even so, under the Restatement (Second) of Torts, which Iowa has adopted, simply offering better terms is not enough:
Another method [for A to induce] B to sever his business relations with C is to offer B a better bargain than that which he has with C. . . . A‘s freedom[, however,] to conduct his business in the usual
manner, to advertise his goods, to extol their qualities, to fix their prices and to sell them is not restricted by the fact that B has agreed to buy similar goods from C. Even though A knows of B‘s contract with C, he may nevertheless send his regular advertising to B and may solicit business in normal course. This conduct does not constitute inducement of breach of the contract.5
The bottom line is that TransAm was free, in the Restatement‘s words, to recruit through its “regular advertising“; “conduct [its] business in the usual manner“; and “extol [the job‘s] qualities.”
It would be one thing if TransAm had sent a targeted communication to CRST drivers offering them a “special” deal for breaking their contracts.
But what transpired here is different for at least two reasons. First, in its nationwide advertising, TransAm did not specifically target CRST drivers. Second, CRST drivers did not receive a “special” deal. Rather, their deal was actually worse in the sense that they were ineligible for the training-reimbursement payments that
other prospective drivers were offered. See ante at 7. Had TransAm‘s motive been to interfere with CRST‘s contracts, it would have offered drivers an extra incentive to breach them, not refused to provide them with the same incentives available to others. See
The court appears to agree with me, up to a point. See ante at 8 (discussing
The mere existence of non-compete agreements does not relieve CRST from proving that TransAm had an improper motive. See Green, 713 N.W.2d at 245 (discussing what a plaintiff must show); see also
Without evidence of TransAm‘s improper motive, CRST‘s unjust-enrichment claim falls apart too. See Fin. Mktg. Servs., Inc. v. Hawkeye Bank & Tr. of Des Moines, 588 N.W.2d 450, 460 (Iowa 1999); see also ante at 13-14 (explaining that the viability of CRST‘s unjust-enrichment claim depends on whether its tortious-interference claim survives). CRST could have tried to recover the money it had spent on training from the drivers themselves, who were the ones that breached their contracts. But as for its claims against TransAm, summary judgment should have been the end of the road.
Faced with a conflict between two competing business models, tort law does not require us to pick one over the other. And without evidence of an improper motive, the court should not put the brakes on legitimate competition. I respectfully dissent.
SHEPHERD, CIRCUIT JUDGE
STRAS, CIRCUIT JUDGE