Thе BALLARD GROUP, INC., Appellant v. BP LUBRICANTS USA, INC., and Tracy Curtis King, Appellees.
No. CV-13-976.
Supreme Court of Arkansas.
June 19, 2014.
2014 Ark. 276 | 445 S.W.3d 445
Friday, Eldredge & Clark, LLP, Little Rock, by: Christopher Heller, Tory H. Lewis, and R. Christopher Lawson, for appellees.
DONALD L. CORBIN, Justice.
Appellant, The Ballard Group, Inc. (Ballard), appeals the second amended order of the Benton County Circuit Court dismissing with prejudice its first amended complaint against Appellees, Tracy Curtis King (King) and her employer BP Lubricants USA, Inc. (BP), for failure to state a claim upon which relief could be granted. For reversal, Ballard contends that the circuit court erroneously granted the dismissal because its first amended complaint sufficiently pleaded claims for breach of contract, misapprоpriation of trade secrets, tortious interference with a contract and business expectancy, and civil conspiracy. In addition, Ballard contends that any dismissal granted should have been without prejudice. The Arkansas Court of Appeals certified this case as one involving a significant question of law concerning the interpretation of a court rule, specifically the two-dismissal component of
I. Procedural History
Appellant initiated the present litigation by filing a complaint against King and BP that alleged four causes of action: breach of contract, misappropriation of trade secrets, tortious interference with a contract and with a business expectancy, and civil conspiracy. The complaint described Ballard as a marketing firm, which for over twenty-five years had provided marketing services, such as the planning and executing of promotional and educational events for customers, employees, and vendors of Wal-Mart at various Wal-Mart Stores. The complaint referenced a marketing event known as the “Smart Driver Tour,” which was designed to promote various automotive prоducts that were manufactured or distributed by Wal-Mart vendors described as “Tour Sponsors,” such as Meguiar‘s, Michelin, BP, and JCI/Everstart. The complaint alleged that, in addition to the Smart Driver Tour, which was classified as a Primary Event, there was an additional Primary Event known as the Wal-Mart Vendor Fair, and that these two Primary Events accounted for a substantial portion of Ballard‘s annual business. The complaint also alleged that significant additional business routinely occurred every year from additional and supplemental promotions known as “Spinoff Events” that were assigned as a matter of routine practice to the firm servicing the Primary Events. According to the complaint, Ballard had a series of contracts with BP for these marketing events, and Ballard attached as exhibits to the complaint written contracts for the years 2008 and 2009.
The gist of the complaint was that King, at all times acting within the scope of her employment at BP, designed and executed a nepotistical plan in which her brother, Jason Curtis (Curtis), would be employed by Ballard, obtain Ballard‘s trade secrets and proprietary information, and then use that information to begin working at Threads Production, Inc. (Threads), which
King and BP jointly filed a motion to dismiss the complaint pursuant to
Ballard timely filed a first amended complaint asserting the same four causes of action and pleading additional facts. BP and King filed a motion to dismiss the first amended complaint pursuant to
Ballard then filed a motion to clarify or correct the order to reflect that the dismissal would be withоut prejudice and for Ballard to plead further and file a second amended complaint within thirty days. The circuit court entered an order, essentially granting Ballard‘s request to clarify. This order was dated July 15, 2013, and stated that the
BP and King then filed a motion for reconsideration of the July 15 order, arguing that the July 15 order was a second dismissal and therefore should have been granted with prejudice pursuant to the “two-dismissal” rule in
Ballard filed a motiоn for reconsideration of the second amended order, which the circuit court denied by written order. This appeal followed.
Ballard presents two points on appeal. First, Ballard challenges the circuit court‘s determination that the second
II. Standard of Review
Generally speaking, the granting of both a
III. The Merits of the Rule 12(b)(6) Dismissal
In determining whether the circuit court abused its discretion in dismissing Ballard‘s complaint pursuant to
Arkansas has adopted a clear standard to require fact pleading: “a pleading which sets forth a claim for relief ... shall contain (1) a statement in ordinary and concise language of facts showing that the pleader is entitled to relief ...”
ARCP Rule 8(a)(1) .Rule 12(b)(6) provides for the dismissal of a complaint for “failure to state facts upon which relief can be granted.” This court has stated that these two rules must be read together in testing the sufficiency of the complaint; facts, not mere conclusions, must be alleged. In testing the sufficiency of the complaint on a motion to dismiss, all reasonable inferences must be resolved in favor of the complaint, and pleadings are to be be liberally construed. Id.;ARCP Rule 8(f) .
Brown v. Tucker, 330 Ark. 435, 438, 954 S.W.2d 262, 264 (1997) (citation omitted) (quoting Malone v. Trans-States Lines, Inc., 325 Ark. 383, 386, 926 S.W.2d 659, 661 (1996) (quoting Hollingsworth v. First Nat‘l Bank & Trust Co., 311 Ark. 637, 639, 846 S.W.2d 176, 178 (1993))). This court‘s rules require fact pleading, and a complaint must state facts, not mere conclusions, in order to entitle the pleader to relief.
There are four causes of action at issue here, and we address them individually, as did the circuit court.
A. Breach of Contract
In its first dismissal order, the circuit court found that neither of the written contracts attached to Ballard‘s complaint as Exhibits 4 and 5 bound BP for the year 2010. The circuit court noted that Exhibit 4 plainly and unambiguously did not obligate BP for any period of time beyond 2008 and then concluded that, “In the absence of a valid and enforceable contract,
The circuit court‘s ruling on this claim was correct. Exhibit 4 binds BP and Ballard for the year 2008. It does have a provision to make it binding for three years “[b]y signing a three-year commitment” at the end of the contract, but that provision is left blank and is not signed. Exhibit 5 is for the year 2009. Because the first amended complaint alleges that BP was required to employ Ballard for the “2010 Primary Events or the 2010 Smart Driver Tour,” 2010 is the operative year for the breach-of-contract claim. Generally, to state a cause of action for breach of contract the complaint need only assert the existence of a valid and enforceable contract between the plaintiff and defendant, the obligation of defendant thereunder, a violation by the defendant, and damages resulting to plaintiff from the breach. Perry v. Baptist Health, 358 Ark. 238, 189 S.W.3d 54. The circuit court cited Perry, and concluded that Ballard had not pleaded a valid and enforceаble contract for 2010, the year the alleged breach occurred. We agree. The first amended complaint simply does not contain facts upon which a breach-of-contract claim could be granted, and that part of the circuit court‘s order dismissing the contract claim is affirmed.
B. Misappropriation of Trade Secrets
We next consider Ballard‘s claim for violation of the Arkansas Trade Secrets Act (the Act),
The Act provides that actual or threatened misapprоpriation of a trade secret may be enjoined.
(2) “Misappropriation” means:
(A) Acquisition of a trade secret of another by a 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 another without express or implied consent by a person who:
(i) Used improper means to acquire knowledge of the trade secret; or
(ii) At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
(a) Derived from or through a person who had utilized improper means to acquire it;
(b) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(c) Derived from or through a person who owed a duty tо the person seeking relief to maintain its secrecy or limit its use; or
(iii) Before a material change of his 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.
As we are required to do when testing the sufficiency of a complaint, we look to Ballard‘s first amended complaint, which contains the following specific allegations. For the convenience of the reader, we also recite allegations that are relevant to our later discussion of Ballard‘s other causes of action for tortious interference and civil conspiracy:
16. Jason Curtis was hired by Plaintiff Ballard Group on or about October 1, 2007, at the request of his sister, Defendant Tracy Curtis King. After his hire, he was entrusted at the suggestion of Defendants with the task and purpose of working on Primary Events, Spinoff Events and Derivative Events by among other things, using the methods, algorithms and other trade secrets of Plaintiff Ballard Group to analyze and prepare the budgeting and scheduling of current events and to develop new events to offer to Plaintiff Ballard Group‘s client base....
17. Before he was hired by Plaintiff Ballard Group, Jason Curtis ... had no prior work experience servicing Wal-Mart or Wal-Mart vendors. All information that was received by Jason Curtis regarding the Primary Events, Spinoff Events and Derivative Events was due solely to his employment by Plaintiff Ballard Group. The information received by Jason Curtis was not known outside Plaintiff Ballard Group, and specifically was not known by Jason Curtis who had to be trained and educated regarding this information and the processes and methods by which to use the information by Plaintiff Ballard Group through a lengthy series of meetings, supervised trips and tutorial sessions, at significant expense to Plaintiff Ballard Group.
18. Before Jason Curtis was hired by Plaintiff Ballard Group, and before he was entrusted with any of the confidential information or trade secrets ... Curtis was required to execute a Non-Compete/Non-Disclosure Agreement. A true and correct copy of this contract is attached hereto as Exhibit 1.
19. Thesе non-disclosure and non-compete terms were repeatedly and consistently renewed and supplemented each year that Jason Curtis worked for Plaintiff Ballard Group.
20. ... [T]rue and correct cop[ies] of th[ese] Agreement[s are] attached hereto as Exhibit 2.
21. ... [and] as Exhibit 3.
...
23. As part of his work, Jason Curtis regularly dealt with executives and principals of Plaintiff Ballard Group and its clients, including but not limited to Defendant BP Lubricants USA, Inc., and other Tour Sponsors....
...
31. ... Threads Productions, Inc., exists solely due to the actions of Defendant Tracy Curtis King, and is merely a “funnel” for money to her family members, to the injury of Plaintiff Ballard Group.
32. ... [T]he non-disclosure and non-competition terms of the Agreement applying to Jason Curtis ... w[ere] made known to Keesha Akins,1 [and] and contrоlled all relevant actions of Threads Productions, Inc.
these terms were actively discussed between Jason Curtis and Keesha Akins and others, including Defendant Tracy Curtis King, in or about September 2007.... ...
34. ... This information was also independently made known to Defendants no later than October 2009, when it was again disclosed to Defendants during conversations with Defendant Tracy Curtis King. Defendants were further apprised of these restrictions during bankruptcy proceedings [of Jason Curtis] in April 2010 and when the Preliminary Injunction was issued in July 2010....
...
36. The misappropriation of trade secrets by Jason Curtis was enjoined by a Temporary Restraining Order and Preliminary Injunction entered on July 7, 2010, in The Ballard Group, Inc. v. Jason Curtis, No. CV-2010-2167-2 (Benton C[nty]. Cir. Ct.). This order was known to the Defendants within days of its entry.
...
42. ... Defendant Tracy Curtis King‘s husband also was hired away from Plaintiff Ballard Group to work for Threads Productions, Inc., in addition to her brother, Jason Curtis.
43. ...
(a) King, stopped by the office of Keesha Akins in person and covertly solicited the bid by Threads Productions, Inc., in September or October 2009, even before that entity was formed;
(b) King, personally assisted Keesha Akins in preparing the details of the bid by Threads Productions, Inc.;
(c) King, actively and personally discussed and encouraged Jason Curtis and other employees of Plaintiff Ballard Group, including but not limited to Shane Akins, Phillip Easley, and her husband (Robert King) to seek employment with Threads Productions, Inc., on at least two occasions during 2009;
(d) Defendant BP Lubricants USA, Inc., by and through Defendant Tracy Curtis King, contracted with Threads Productions, Inc., for the Primary Events through a collusive and anti-competitive bid process which concealed the fact that the per event costs, normally the predominant factor in deciding whom to award a contract, were $1298.08 per event with Threads Productions, Inc., and cheaper, at $1142.31 per event with Plaintiff Ballard Group, which was the low bidder due to the competitive advantages resulting from its trade secrets and confidential information. As a result, the Defendants’ anti-competitive actions were not based upon business judgment, and actually increased the costs to Tour sponsors as a result of Defendant Tracy Curtis King‘s nepotistic motives which gave Threads Productions, Inc., an unfair trade advantage in its competition with Plaintiff Ballard Group, Inc.;
...
(f) Defendants, Jason Curtis, Keesha Akins, Threads Productions, Inc., and others obtained and diverted the Tour after having been given a specific dollar amount for bid by Defendant Tracy Curtis King who worked for Defendant BP Lubricants USA, Inc., in a position that gave her effective control of the business;
...
(i) King, actively promoted Threads Productions, Inc., and encouraged other Tour Sponsors to cease communication with Plaintiff Ballard Group ...;
(j) ... [and] provided false and misleading information regarding Plaintiff Ballard Group, to other Tour Sponsors thereby inducing them to cease doing business with Plaintiff Ballard Group and do business instead with Threads Productions, Inc., in a further nepotistic effort to promote Threads Productions, Inc., for the benefit of the family members of Defendant Tracy Curtis King, and to conceal thе Defendants’ anti-competitive and collusive activities in restraint of trade.
...
45. As a result, Defendants have also misappropriated Plaintiff Ballard Group‘s trade secrets and other confidential information by inducing breach of the Agreements by Jason Curtis, who has breached the confidentiality and non-competition terms of the Agreements, and by inducing breach of contract by Defendant BP Lubricants USA, Inc., and by actively inducing the other Tour Sponsors to cease doing business with Plaintiff Ballard Group through specific communications as described herein.
46. Defendants have misappropriated Plaintiff Ballard Group‘s trade secrets and other confidential information by taking the actions described herein which individually and collectively сonstitute using these trade secrets which Defendants, by and through Defendant Tracy Curtis King, had reason to know were derived from or through a person who had utilized improper means to acquire the trade secrets, to wit, Jason Curtis and Threads Productions, Inc.
In ruling that Ballard‘s first amended “complaint faile[d] to allege that King or BP had acquired, disclosed, or used” Ballard‘s trade secrets, the circuit court observed that, according to the complaint, it was Jason Curtis who misappropriated Ballard‘s trade secrets to Threads, but Threads is not a defendant in this case. While that is true, this ruling stops short of recognizing other allegations in the complaint, such as that in September 2007, prior to Jason Curtis being hired at Threads, that King and Curtis had met with Keesha Akins to discuss the non-compete and non-disclosure agreement that Curtis had made with Ballard; or that in September or October 2009, King and Threads, armed with the knowledge that was protected in the non-compete/non-disclosure agreement, colluded and conspired to prepare and submit a bid from Threads that falsely appeared to underbid Ballard. Construing these and the foregoing allegations liberally and resolving all inferences in favor of the complaint as we are required to do, we conclude that these allegations state facts that King, acting within the scope of her employment with BP, used the trade secrets that her brother Curtis had acquired at Ballard to help Threads prepare a bid on behalf of Threads to compete with Ballard. Given our statement in Pro-Comp Mgmt., 366 Ark. 463, 237 S.W.3d 20, that misappropriation of a trade secret includes use of a trade secret taken by another, we conclude that Ballard has sufficiently stated a cause of action for violation of the Arkansas Trade Secrets Act.
In sum, the foregoing portions of the first amended complaint constitute specific events and conversations occurring on at least three different occasions in 2007, 2009, and 2010 to support Ballard‘s allegation that King and BP acquired and used Ballard‘s trade secrets to formulate and prepare a bid to divert BP‘s business from Ballard to Threads. Whether Ballard can produce evidence to prove these alleged facts remains to be determinеd later in these proceedings; however, the foregoing allegations describe particular events in
C. Tortious Interference
We turn now to Ballard‘s claim of tortious interference with a contract and business expectancy. The elements of tortious interference are (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted. Brown, 330 Ark. 435, 954 S.W.2d 262; Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969). A fifth requirement has been added by this court: the conduct of the defendant must be “improper.” Faulkner v. Ark. Children‘s Hosp., 347 Ark. 941, 959, 69 S.W.3d 393, 405 (2002). In addition to the above, another essential element of a tortious-interference-with-contractual-relations claim is that there must be some third party involved. Id.
In the present case, the circuit court‘s second amended order concluded that, “[b]ecause there is not a valid contractual relationship or business expectancy, and a party cannot intеrfere with its own contract, facts are not stated upon which relief can be granted, and [Ballard‘s] tortious interference claim is dismissed.” This would be a correct ruling if the basis of Ballard‘s claim was the alleged contract between Ballard and BP. See Faulkner, 347 Ark. 941, 69 S.W.3d 393 (stating that a party to a contract and its employees and agents, acting within the scope of their authority, cannot be held liable for interfering with the party‘s own contract). But this ruling stops short of correctly identifying the contracts and expectancies that Ballard alleged King and BP had interfered with. The first amended complaint clearly states, “The interests with which the Defendants’ actions interfered were well established contract rights between Plaintiff Ballard Group and Jason Curtis and Plaintiff Ballard Group‘s legitimate business expectancies based upon lengthy business relationships and agreement with the Tour Sponsors.”
The circuit court abused its discretion here by overlooking Ballard‘s allegations that the contract that King and BP interfered with was the non-compete/non-disclosure agreement between Ballard and Jason Curtis. The circuit court‘s second amended order did not consider that such agreements or contracts existed despite the fact that there were three of them attached to Ballard‘s complaint. Curtis executed one of these agreements every year for the years 2007-2009, and they were attached to the complaint as Exhibits 1-3. Ballard‘s first amended complaint alleged that King and BP “discussed and encouraged Jason Curtis ... to seek employment with Threads ... on at least two occasions during 2009.” This allegation, when considered with the allegations previously recited in our consideration of Ballard‘s trade-secrets claim, sufficiently pleads facts to state a claim for tortious interference with a contract, and the circuit court abused its discretion in overlooking this aspect of Ballard‘s tortious-interference claim.
As for the claim that King and BP tortiously interfered with Ballard‘s contracts and business expectancies with other Tour Sponsors, the first amended complaint alleges that King “actively instruct[ed] Tour
In sum, the circuit court‘s ruling that there was not a valid contract or business expectancy alleged because there was not a valid contract between Ballard and BP overlooked the other allegations in the complaint concerning the agreement between Ballard and Curtis and Ballard‘s business expectancies with the other Tour Sponsors. When considered with the allegations previously discussed with respect to the trade-secrets claim, the three signed non-compete/non-disclosure agreements between Ballard and Curtis attached to the complaint suffice to allege a claim of BP‘s tortious interference with a contract, and the enumeration of the seven specific events that Ballard claims it lost to Threads are sufficient to allege a claim of tortious interference with a business expectancy. We therefore conclude that the circuit court abused its discretion in dismissing the cause of action for tortious interference with a contract and business expectancy.
D. Civil Conspiracy
The circuit court ruled that, because Ballard‘s contract, trade secrets, and tortious-interference claims had been dismissed as a matter of law, Ballard could not state a claim for civil conspiracy. To prove a civil conspiracy, a plaintiff must show that two or more persons have combined to accomplish a purpose that is unlawful or oppressive or to accomplish some purpose, not in itself unlawful, oppressive or immoral, but by unlawful, oppressive or immoral means, to the injury of another. Faulkner, 347 Ark. 941, 69 S.W.3d 393. A civil conspiracy is not actionable in and of itself, but a recovery may be had for damages caused by acts committed pursuant to the conspiracy. Id. A civil conspiracy is an intentional tort that requires a specific intent to accomplish the contemplated wrong. Id. Based on this law, then, because we are reversing the dismissal of the underlying claims of tortious interference and misappropriation of trade secrets, we also reverse the dismissal of the civil-conspiracy claim. See Se. Distrib. Co. v. Miller Brewing Co., 366 Ark. 560, 237 S.W.3d 63 (2006) (reversing summary judgment on civil-conspiracy claim due to reversal of summary judgment on underlying claims for tortious interference and violation of two statutes).
Because we have concluded that the claim for breach of contract was properly dismissed pursuant to
Stated in its most basic form, the issue here presented is whether two
Our analysis begins with the principle that when a dismissal pursuant to
Continuing our analysis with a reading of
(b) Involuntary Dismissal. In any case in which there has been a failure of the plaintiff to comply with these rules or any order of court or in which there has been no action shown on the record for the past 12 months, the court shall cause notice to be mailed to the attorneys of record, and to any party not represented by an attorney, that the case will be dismissed for want of prosecution unless on a stated day application is made, upon a showing of good cause, to continue the case on the court‘s docket. A dismissal under this subdivision is without prejudice to a future action by the plaintiff unless the action has been previously dismissed, whether voluntarily or involuntarily, in which event such dismissal operates as an adjudication on the merits.
This court has noted that a failure to comply with the requirements of
In Brown, 330 Ark. 435, 954 S.W.2d 262, this court applied
Keeping in mind that the operation of
V. Conclusion
The circuit court correctly dismissed Ballard‘s claim for breach of contract pursuant to
The circuit court, however, abused its discretion in overlooking specific allegations of fact in the first amended complaint and in dismissing the remaining trade-secrets, tortious-interference, and civil-conspiracy claims. When the allegations of these remaining claims in Ballard‘s first amended complaint are construed liberally and all inferences are resolved in favor of the complaint, they go beyond mere conclusions and suffi-
Affirmed in part; reversed and remanded in part.
HANNAH, C.J., and HART, J., dissent.
JIM HANNAH, Chief Justice, dissenting.
I respectfully dissent from that portion of the majority opinion holding that
First, I do not agree that a failed attempt by a plaintiff to state “in ordinary and concise language ... facts showing that the pleader is entitled to relief (
HART, J., joins.
DONALD L. CORBIN
JUSTICE