United States District Court, D. Kansas
MEMORANDUM AND ORDER
Thomas Marten, Judge
hibu Inc. is a digital and print media marketing and
advertising company. Plaintiff claims that defendant Chad
Peck, a former employee, violated his employment agreement by
soliciting plaintiff's customers and competing against it
with a direct competitor, Dex Media. Plaintiff also alleges
that defendant tortiously interfered with plaintiff's
business expectancy and its employees' non-compete
agreements. Defendant moves for summary judgment (Dkt. 255),
and argues that plaintiff is not a party to the employment
agreement and further that defendant did not violate the
restrictions. For the reasons stated herein, defendant's
motion is granted in part, and denied in part.
parties dispute the majority of underlying facts surrounding
the events of this case. However, the following facts are
uncontroverted, or to the extent they are disputed, taken in
the light most favorable to plaintiff-the nonmoving party.
2006, defendant was employed as a sales manager with Yellow
Book Sales and Distribution Company, Inc. (“Yellow Book
S&D”). Defendant was responsible for overseeing a
team of sales representatives tasked with selling advertising
products to Yellow Book S&D's customers in Wichita
and portions of Kansas. Yellow Book S&D was a subsidiary
of Yellow Book USA, Inc. (“YB USA”).
23, 2006, defendant signed an agreement with YB USA (the
“2006 Agreement”). The 2006 Agreement
collectively referred to YB USA and its subsidiaries as the
“Company” and contained several restrictions.
Accordingly, you shall not, at any time while employed by the
Company or after termination of employment, reproduce or use
for your own purposes or disclose to anyone else, for any
reason or purpose other than in furtherance of the
Company's business, any Confidential and Proprietary
(Dkt. 1-1, at 2). Additionally, for a period of 12 months
commencing on the date of termination, defendant agreed not
to, in relevant part:
directly or indirectly solicit, call upon or service, or in
any other manner divert or take away or attempt to divert or
take away from the Company, on your own behalf or on behalf
of any third party, any customer whose account you serviced
or supervised during the twelve (12) months immediately
preceding termination of your employment.
. . .
directly or indirectly engage or become interested in (a) any
business in the Territory (as hereinafter defined) that
engages in the yellow pages directory publishing business, or
(b) any other business in the Territory that competes with
the yellow pages directory publishing business or the
internet advertising business of the Company. . . .
“Territory” means those Yellow Book directory
markets where you have been a manager at any time during the
eighteen (18) month period immediately [preceding] the
termination of your employment.
. . .
encourage or assist any of the Company's employees to
leave the Company and you shall not directly or indirectly
(on your own behalf or in cooperation with any other person
or entity) employ or retain or solicit the employment or
retention of any person who was an employee of the Company .
(Dkt. 1-1, at 2-3).
23, 2009, YB USA filed an Amendment of Withdrawal with the
Kansas Secretary of State, withdrawing its authority to
transact business in Kansas. On March 31, 2011, YB USA merged
with and into Yellow Book S&D. The Certificate of
Ownership and Merger stated that “Subsidiary will
possess all of Parent's property, rights, privileges and
powers and will assume all of Parent's liabilities and
obligations[.]” (Dkt. 256-13, at 4). Yellow Book
S&D was the surviving corporation and YB USA ceased to
exist. However, the surviving corporation changed its name to
Yellowbook Inc. at the time of the merger. About two years
later, the corporate name of Yellowbook Inc. became hibu
Inc., the plaintiff in this case.
January 2015, defendant's employment with plaintiff
ended. Defendant held a sales position with All-States
Exteriors for the first half of 2015. Defendant began working
with Dex Media in August 2015. Under the 2006 Agreement,
defendant's 12-month restricted period began on January
2, 2015, and ended on January 2, 2016. Based on
defendant's communications with Dex Media prior to his
hiring and subsequent work on Dex Media's expansion into
Wichita and other Kansas markets, plaintiff claims that
defendant breached the 2006 Agreement and tortiously
interfered with plaintiff's business expectancy.
judgment is appropriate if the moving party demonstrates 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). A fact is “material” when it
is essential to the claim, and the issues of fact are
“genuine” if the proffered evidence permits a
reasonable jury to decide the issue in either party's
favor. Haynes v. Level 3 Communs., 456 F.3d 1215,
1219 (10th Cir. 2006) (overruled on other grounds). The
movant bears the initial burden of proof and must show the
lack of evidence on an essential element of the claim.
Thom v. Bristol-Myers Squibb Co., 353 F.3d 848, 851
(10th Cir. 2004) (citing Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986)). The nonmovant must then bring
forth specific facts showing a genuine issue for trial.
Garrison v. Gambro, Inc., 428 F.3d 933, 935 (10th
Cir. 2005). The court views all evidence and reasonable
inferences in the light most favorable to the non-moving
party. LifeWise Master Funding v. Telebank, 374 F.3d
917, 927 (10th Cir. 2004).
asserts that plaintiff waived several legal theories and
factual claims by not preserving them in the pretrial order.
“Claims, issues, defenses, or theories of damages not
included in the pretrial order are waived.” Cortez
v. Wal-Mart Stores, Inc., 460 F.3d 1268, 1276-77 (10th
Cir. 2006) (internal quotation marks omitted). However,
“pretrial orders are to be ‘liberally construed
to cover any of the legal or factual theories that might be
embraced by their language.'” Zenith Petroleum
Corp. v. Steerman, 656 F. App'x 885, 887 (10th Cir.
2016) (quoting Trujillo v. Uniroyal Corp., 608 F.2d
815, 818 (10th Cir. 1979)).
pretrial order, plaintiff quoted provisions of the 2006
Agreement that referenced defendant's agreements with the
“Company.” (Dkt. 251, at 3-4). As discussed
below, plaintiff is the surviving corporation of the Company.
While plaintiff did not specifically state that defendant
signed an agreement with plaintiff's predecessor and/or
that plaintiff succeeded to the rights of Company identified
in the 2006 Agreement, the court finds that defendant had
adequate notice of plaintiff's claims. See Zenith
Petroleum Corp., 656 F. App'x at 887 (“[T]he
primary purpose of pretrial orders is to avoid surprise by
requiring parties to ‘fully and fairly disclose their
views as to what the real issues of the trial will
be.'”). Plaintiff is not attempting to assert an
entirely new legal theory, and the court will not exclude
plaintiff's claim from moving forward. See Koch v.
Koch Indus., Inc., 179 F.R.D. 591, 596 (D. Kan. 1998)
(“Since it is intended to facilitate a trial on the
merits, the pretrial order should not be used to defeat the
lawsuit on a technicality or be construed in the spirit of a
common law pleading.”); Daneshvar v. Graphic Tech.,
Inc., 18 F.Supp.2d 1277, 1288 n.15 (D. Kan. 1998)
(omission of entire theory from pretrial order constitutes
waiver, but omission of specific position is not fatal).
court further finds that plaintiff has not asserted new legal
theories with respect to its breach of contract claim.
Plaintiff alleges, “[a]s early as September 2015, Peck
reached out, directly and indirectly, to his former
colleagues at Hibu, including the six Hibu sales
representatives and others, such as Chris Hett, to recruit
them to Dex Media.” (Dkt. 251, at 4).
plaintiff did not waive any claims with respect to its
tortious interference claim. Plaintiff alleged that defendant
tortiously interfered with plaintiff's business
expectancy. Plaintiff also asserted that each of the six
sales representatives recruited by defendant had signed
similar employee agreements prohibiting them from soliciting,
for a period of 12 months, plaintiff's customers they had
serviced during the 12 months immediately preceding their
termination. Plaintiff alleged that under defendant's
direction, “these sales representatives merely traded
their former Hibu customers among themselves so as to create
the illusion that they were not servicing or soliciting
former customers in violation of their Employee
Agreements.” (Dkt. 251, at 5). Plaintiff's
arguments in opposition to summary judgment match these
claims. As such, plaintiff did not waive any legal theories
or factual contentions.
Parties to the 2006 Agreement
claims that he entered into the 2006 Agreement with YB USA,
not plaintiff. Defendant asserts that YB USA is a separate
entity-thus, plaintiff cannot enforce the contract because
there was not a valid agreement between plaintiff and
parties agree that Kansas law governs the substantive issues
in this case. Additionally, in diversity cases,
“district courts generally apply the substantive law,
including the choice-of-law rules, of the forum state.
‘Under Kansas choice-of-law rules, the lex loci
contractus doctrine requires the Court to apply the law
of the state where the contract is made.'”
Servi-Tech, Inc. v. Olson, No. 17-01148-EFM-JPO,
2017 WL 3839418, at *3 (D. Kan. Sept. 1, 2017).
order to state a claim for breach of contract under Kansas
law, plaintiff must establish that it was a party to the
contract. Shane v. Log Star Homes of Am., Inc., No.
6:14-CV-01273-JTM, 2016 WL 7242517, at *7 (D. Kan. Dec. 15,
2016). The 2006 Agreement stated that it was between YB USA
and defendant, however, it collectively referred to itself
and its subsidiaries as the “Company” throughout
the 2006 Agreement. Defendant agreed not to compete and/or
take away business from the Company, i.e. YB USA or its
subsidiaries, for a period of 12 months after his employment
was terminated. Thus, YB USA or a subsidiary of YB USA could
enforce the 2006 Agreement. Defendant acknowledges this point
in his reply. (Dkt. 269, at 18).
upon the merger, Yellow Book S&D possessed all of YB
USA's property, rights, privileges, and powers. Even if
the 2006 Agreement did not collectively include Yellow Book
S&D-plaintiff's predecessor-within the terms of the
agreement, Yellow Book S&D was able to enforce the
contract once it merged with YB USA. This is consistent with
Kansas law. See Equifax Servs., Inc. v. Hitz, 905
F.2d 1355, 1361 (10th Cir. 1990) (“Although an
employee's duty to perform under an employment contract
generally is not delegable, . . . the right to enforce a
covenant not to compete generally is assignable in connection
with the sale of a business[.]”). “In the case of
a merger, as here, the surviving corporation automatically
succeeds to the rights of the merged corporations to enforce
employees' covenants not to compete.” Id.;
see also Kan. Stat. Ann. § 17-6709(a) (upon
merger or consolidation, “all such constituent
corporations except the one into which the other or others of
such constituent corporations have been merged . . . shall
cease and the constituent corporations shall become a new
corporation, or be merged into one of such corporations . . .
possessing all the rights, privileges, powers and franchises
as well of a public as of a private nature, and being subject
to all the restrictions, disabilities and duties of each of
such corporations so merged or consolidated; and all and
singular, the rights, privileges, powers and franchises of
each of such corporations . . . shall be vested in the
corporation surviving or resulting from such merger or
same is true under Delaware law, where the Certificate of
Ownership and Merger was filed. Del. Ins. Guar. Ass'n
v. Christiana Care Health Servs., Inc., 892 A.2d 1073,
1077-78 (Del. 2006); 8 Del. C. § 259. “It is a
fundamental principle of corporation law that although a
merged corporation ceases to exist, in the absence of a
specific provision to the contrary, all property, rights, and
privileges of the corporation continue as the property of the
surviving entity.” Id. (citing 8 Del. C.
argument that substituting plaintiff for YB USA as the
counter-party to the 2006 Agreement would have somehow
revived, altered, and/or broadened the restrictive covenants
is also unpersuasive. At the time defendant signed the 2006
Agreement, defendant's employer was Yellow Book
S&D-the surviving corporation and predecessor to
plaintiff. Unlike YB USA, Yellow Book S&D did not cease
to exist. The fact that YB USA withdrew its authority to
transact business in Kansas is irrelevant as plaintiff is not
the successor to YB USA. Instead, plaintiff is the successor
to Yellowbook Inc. And Yellowbook Inc. is the successor to
Yellow Book S&D after Yellow Book S&D absorbed YB
references the anti-modification provision in the 2006
Agreement, which provides the agreement cannot be changed or
terminated except by an agreement in writing signed by
defendant and an officer of the “Company”-meaning
Yellow Book S&D and YB USA, not solely YB USA. After the
merger, defendant's restrictions did not change because
they also applied to Yellow Book S&D. It is true that
Yellow Book S&D “lost its status as a subsidiary of
[YB] USA” the day it merged with YB USA. (Dkt. 269, at
18). But it was the surviving corporation. Thus, it did not
lose its ability to enforce the 2006 Agreement.
2006 Agreement was not modified nor were defendant's
contractual obligations revived upon the merger of YB USA
with and into Yellow Book S&D. Defendant agreed not to
compete with or solicit customers from Yellow Book S&D
the day he executed the 2006 Agreement. Because plaintiff is
the surviving corporation following the merger of Yellow Book
S&D and YB USA, it can enforce the 2006 Agreement against
claims that plaintiff had a protocol for employees to sign an
agreement every 12 or 18 months. Defendant testified that he
signed two or three employment agreements after the 2006
Agreement, and argues the 2006 Agreement is not the
counters that there is no such protocol nor has defendant
produced a copy of a subsequent employee agreement executed
by defendant. Plaintiff acknowledges that there is evidence
that it sent employee agreements to defendant in July 2007,
March 2011, and June 2014, in connection with changes in his
position. However, plaintiff's CEO, Kevin Jasper, stated,
“[t]he Company is not aware of any later employee