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Omega Morgan, Inc. v. Heely

United States District Court, W.D. Washington, Seattle

April 29, 2015

OMEGA MORGAN, INC., Plaintiff,
JAROD AUSTIN HEELY, et al., Defendants.


ROBERT S. LASNIK, District Judge.


This matter comes before the Court on defendants' "Motion for Partial Summary Judgment." Dkt. #25. Summary judgment is appropriate if, viewing the evidence in the light most favorable to the nonmoving party, "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); L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir. 2012). The moving party "bears the initial responsibility of informing the district court of the basis for its motion." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). It need not "produce evidence showing the absence of a genuine issue of material fact" but instead may discharge its burden under Rule 56 by "pointing out... that there is an absence of evidence to support the nonmoving party's case." Id. at 325. Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to designate "specific facts showing that there is a genuine issue for trial." Id. at 324. "The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient"; the opposing party must present probative evidence in support of its claim or defense. Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir. 2001); Intel Corp. v. Hartford Accident & Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991). "An issue is genuine' only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party." In re Barboza, 545 F.3d 702, 707 (9th Cir. 2008) (internal citations omitted).

Having reviewed the memoranda, declarations, and exhibits submitted by the parties, and taking the evidence in the light most favorable to plaintiff, the Court finds as follows:


Plaintiff employed defendants on an at-will basis until defendants left the company on March 31, 2014. Heely Decl. (Dkt. #26) ¶ 11; Hill Decl. (Dkt. #27) ¶ 9. Defendant Heely initially started working for plaintiff in 2000. Heely Decl. (Dkt. #26) ¶ 3. Defendant Heely worked for plaintiff for several years before leaving in early 2011. Heely Decl. (Dkt. #26) ¶ 7. He was rehired in late September 2011. Id .; Ryan Decl. (Dkt. #36) ¶ 16. At some point after his rehiring, defendant Heely was given an employee manual outlining plaintiff's policies. On October 10, 2011, he signed an acknowledgment form stating that he agreed to follow plaintiff's policies, including "maintain[ing] in confidence all proprietary information." Ryan Decl. (Dkt. #36) Ex. D. Defendant Hill was hired by plaintiff in 2003. Ryan Decl. (Dkt. #36) ¶ 17. On January 25, 2006, she signed an acknowledgment form regarding plaintiff's policies in the employment manual, including plaintiff's confidentiality policy. Ryan Decl. (Dkt. #36) Ex. E.

Before they left plaintiff's employ, defendants began setting up their own business in the same industry. Heely Decl. (Dkt. #26) ¶ 10; Hill Decl. (Dkt. #27) ¶ 8. Defendants' new business competed with plaintiff and obtained business from at least one of plaintiff's clients. This included soliciting and contracting with SGL Automotive Carbon Fibers LLC (SGL) for work that was originally given to plaintiff. Ryan Decl. (Dkt. #36) Ex. F.

Plaintiff brought suit alleging, inter alia, that defendants misappropriated confidential information, misused company property, and interfered with its contracts. Compl. (Dkt. #1). Defendants now move for partial summary judgment. Motion (Dkt. #25).


Defendants seek summary judgment on plaintiff's claims for breach of contract and breach of the implied covenant of good faith and fair dealing. In addition, defendants contend that the Washington Uniform Trade Secrets Act (WUTSA), RCW 19.108.010 et seq., preempts plaintiff's claims for conversion; violation of the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030; violation of the Stored Communications Act (SCA), 18 U.S.C. § 2701 et seq.; breach of fiduciary duty and the duty of loyalty; breach of confidential relationship; and intentional interference with a contractual relationship and business expectancy.

A. Breach of Contract

Defendants assert that they did not enter into a contract with plaintiff for the protection of confidential information. They first argue that the confidentiality provisions are spelled out in the employee manual, which did not constitute a binding contract. Motion (Dkt. #25) at 5-6. Second, they argue that their signed acknowledgments relating to the employee manual provisions are not enforceable due to lack of consideration.[1] Id. at 6-7.

The Court rejects defendants' first argument. Washington courts have recognized that an employee policy manual may create binding obligations on employers and employees in two situations: (1) when the parties agree to be bound to the policies or (2) when the employee justifiably relies on a promise of specific treatment contained in a policy manual. Duncan v. Alaska USA Fed. Credit Union, Inc., 148 Wn.App. 52, 60 (2008). Only the first scenario is implicated in the present case. The Washington State Supreme Court has held that "an employee and employer can contractually obligate themselves concerning provisions found in an employee policy manual and thereby contractually modify the [employment] relationship." Thompson v. St. Regis Paper Co., 102 Wn.2d 219, 228-29 (1984). Here, both defendants signed separate acknowledgments that they would specifically abide by plaintiff's confidentiality policy. Ryan Decl. (Dkt. #36) Exs. D, E. The Court rejects defendants' argument that the employee manual could not create a binding obligation because the manual contained a disclaimer. Because defendants signed separate formal acknowledgments agreeing to be bound to plaintiff's policies, defendants' acknowledgments may operate as contracts in Washington.

Defendants' also argue that the acknowledgments themselves cannot operate as binding contracts because they lack independent consideration. "The general rule in Washington is that contracts signed when an employee is first hired, such as non-competition agreements, arbitration clauses, and confidentiality provisions, are supported by consideration." E.E.O.C. v. Fry's Electronics, Inc., No. C10-1562RSL, 2011 WL 666328, at *1 (W.D. Wash. Feb. 14, 2011) (citing Labriola v. Pollard Grp., Inc., 152 Wn.2d 828, 834 (2004)). At the time of first hiring, consideration exists because the parties exchange promises and obligations: "the employer promises to hire the employee in exchange for the employee's promise to comply with policies, procedures, and terms set forth in the contract." Int'l Paper Co. v. Stuit, No. C11-2139JLR, 2012 WL 1857143, at *3 (W.D. Wash. May 21, 2012). A contract entered into after employment or a modification of an existing employment contract will be enforced if it is supported by independent, additional consideration. ...

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