Karen D'Onofrio v. Vacation Publications, I
Opinion
In this employment dispute, Karen D'Onofrio sued her former employer, Vacations to Go ("VTG" or "Vacation"), a division of Vacation Publications, Inc., the largest seller of ocean-going cruises in the world, for interfering with her rights under the Family Medical Leave Act. Vacation counter sued, alleging that Karen and her husband, Michael D'Onofrio, breached Karen's covenant not to compete, converted confidential information, and tortuously interfered with its business relationships, among other things, by conspiring to establish a competing vacation-sales franchise. A year after Vacation moved for summary judgment, the district court granted that motion-terminating all pending motions and entering final judgment on all claims, including those not addressed in its order. Finding numerous disputes of material fact, we reverse in part, affirm in part, vacate the district court's award of attorneys' fees, damages, and injunctive relief, and remand for further proceedings.
I.
A.
Karen D'Onofrio began working as a sales representative for Vacation in 2012.
*204 Vacation provided Karen with specialized training in sales and marketing and with industry knowledge and confidential information including client information and marketing and sales techniques. The employment contract she signed with Vacation stated that during the course of her employment and for 18 months thereafter she would not, among other things: (1) "[w]ork in any capacity ... for any direct or indirect competitor of VTG in any job related to sales or marketing of cruises, escorted or independent tours, river cruises, safaris, or resort stays"; (2) "[d]isclose directly or indirectly VTG's ... Confidential Information to any person ... for any purpose or reason whatsoever"; (3) "[d]irectly or indirectly use VTG's ... Confidential Information for [her] own benefit for any purpose whatsoever"; (4) "[s]olicit, engage in selling to, engage in business with, or call upon any person or entity who or which has purchased a cruise, escorted or independent tour, river cruise, safari or resort stay from VTG within the preceding 3 years"; or (5) "[s]olicit or induce any person that has been a customer of VTG within the preceding 3 years to terminate its relationship with VTG."
Michael is an aerospace engineer, but has supplemented his income throughout his career with various direct-sales ventures, including cookware, kitchen gadgets, and mattresses. In 2011, he was involved in a major car accident in which he sustained severe and lasting injuries requiring multiple surgeries. Due to the injuries he sustained, he found it impossible to continue his direct-sales business as he could no longer carry the products he sold to customers or trade shows. In April 2014, prior to undergoing major back surgery, Michael decided to pursue a "long-held desire" to sell travel services, which he could do without carrying heavy merchandise. He decided to purchase a franchise of CruiseOne, a company that also sells cruises and other travel-related products and services. In support of his application to purchase the franchise, Michael attached a screenshot of Karen's sales records at Vacation, including her sales totals but not customer information. In May 2014, the D'Onofrios executed a franchise agreement between CruiseOne and Tranquility Base Enterprises, an entity jointly owned by Michael and Karen.
On July 7, 2014, Karen received a confirmation e-mail stating that she was scheduled to attend a CruiseOne training in Florida beginning on July 10. On July 9, at the suggestion of Vacation's human resources ("HR") specialist, Karen requested leave from Vacation pursuant to the Family Medical Leave Act ("FMLA"),
On July 14, 2014, Vacation's senior director of HR e-mailed Karen confirming that her FMLA leave had begun on July 11 and asking that she update her e-mail away message to reflect that she was on leave but would be responding to clients periodically. On July 17, Karen's manager checked Karen's Vacation e-mail account to ensure that she had updated her away message, and noticed that Karen had not responded to any e-mails since July 12. Her manager had also received several complaints from Karen's clients that she had not responded to their voicemails. The HR director then sent Karen an e-mail reiterating Karen's responsibilities if she *205 wanted to continue servicing clients and receiving commissions while on leave. Karen responded on July 21, stating that her laptop had not been working. On August 11, after not being able to reach Karen for over a week, her manager accessed Karen's Vacation e-mail account and found 220 unread e-mails. Karen had not read a single e-mail since July 26.
In light of Karen's failure to respond to client e-mails and voicemails, the HR director decided to bring Karen's clients in house while she was on leave. He e-mailed her to inform her of the change, explaining that the clients would be returned to her upon her return from FMLA leave. Karen was also locked out of her Vacation accounts. The senior director of operations then e-mailed Vacation's in-house salespersons, informing them that they would be covering Karen's clients while she was on leave and asking that they inform Karen's clients of the arrangement. One manager mistakenly informed 23 clients via e-mail that Karen was no longer working at Vacation. One such e-mail went to Michael, as he had previously booked a cruise through his wife.
After being locked out of her Vacation accounts and learning of the e-mail that Michael received, Karen believed that she had been terminated from Vacation. She filed for unemployment benefits on August 24, 2014. In response, Vacation indicated that Karen was still employed and on FMLA leave. In October 2014, Vacation e-mailed Karen confirming that her FMLA leave had expired and asking whether she planned to return. Karen responded that she was not returning because she believed that she had been terminated in August.
Karen also alleges that she was sexually harassed during her employment with Vacation. She alleges that one Vacation employee, an IT technician, touched her breasts and, after she reported the conduct, continued to hover around her work area, stare at her, and make unwanted physical contact with her. After reporting the continued harassment, she was reassigned to another department on a different floor, but other employees, including supervisors, allegedly made inappropriate comments and jokes, used obscene language, and engaged in unwanted physical contact.
B.
Because it is relevant to several of the issues raised on appeal, we recount in some detail the tangled procedural history of this case. In February 2015, Karen filed suit against Vacation in state court alleging FMLA violations. Vacation filed counterclaims against Karen for breach of contract, conversion of confidential information, fraud, tortious interference with existing and prospective business relations, and breach of fiduciary duty. Vacation subsequently removed the case to federal court. It then sought and received leave to join Michael as a third-party defendant, asserting claims against him for conversion, civil conspiracy, tortious interference, and aiding and abetting breach of fiduciary duties.
In June 2015, Karen moved to voluntarily dismiss her FMLA claims, which Vacation opposed and the district court denied. In July, Michael moved to dismiss the complaint against him for lack of subject-matter jurisdiction. Then in August, Vacation moved for summary judgment on Karen's FMLA claims against it and its claims against both her and Michael. The next month, Karen, proceeding pro se , filed a separate federal lawsuit asserting claims for sexual harassment by two Vacation employees in violation of Title VII, which was consolidated with this case in December 2015.
*206 On August 22, 2016, the district court granted Vacation's motion for summary judgment. 1 The court terminated all pending motions, including Michael's motion to dismiss for lack of subject-matter jurisdiction (which was not addressed in the court's order) and issued a final judgment disposing of all claims, including the sexual harassment claims added in December 2015 (which were not addressed in either Vacation's motion for summary judgment or the court's order). The D'Onofrios timely appealed.
II.
A.
Michael first contends that the district court lacked subject-matter jurisdiction over the claims against him because they were state-law claims that did not arise out of the same nucleus of operative fact as Karen's federal FMLA claims against Vacation.
2
We "review[ ] a district court's assumption of subject-matter jurisdiction
de novo
."
Arena v. Graybar Elec. Co.
,
Federal district courts have "supplemental jurisdiction over all ... claims that are so related to claims in the action within [the district court's] original jurisdiction that they form part of the same case or controversy under Article III," including "claims that involve the joinder or intervention of additional parties."
Here, there is a "common nucleus of operative fact" between Karen's FMLA claims and Vacation's state-law claims
*207
against Michael. Karen alleged that Vacation interfered with her rights under the FMLA. In defense, Vacation argued that Karen was not eligible for FMLA leave because she misrepresented her reasons for taking leave and improperly used her leave to help Michael establish a CruiseOne franchise, including by attending a CruiseOne training. In its claims against Michael, Vacation alleges that he conspired with Karen in committing fraud, breaching her covenant not to compete, and breaching her fiduciary duty to Vacation. Thus, the question whether Karen was entitled to FMLA leave-or, more to the point, whether she misused her leave in order to start a competing enterprise with Michael-derives from the same nucleus of operative facts as Vacation's claims against Michael. Accordingly, the district court had subject-matter jurisdiction over Vacation's state-law claims against Michael.
See
State Nat. Ins. Co.
,
Section 1367(c) provides that district courts may decline to exercise supplemental jurisdiction over a claim if: (1) "the claim raises a novel or complex issue of State law"; (2) "the claim substantially predominates over the claim or claims over which the district court has original jurisdiction"; (3) "the district court has dismissed all claims over which it has original jurisdiction"; or (4) "in exceptional circumstances, there are other compelling reasons for declining jurisdiction."
Of the § 1367(c) factors, only the second even conceivably weighs in favor of declining supplemental jurisdiction. Vacation's claims arguably predominate "in terms of proof, ... the scope of the issues raised, [and] the comprehensiveness of the remedy sought,"
Jackson v. Stinchcomb
,
Consideration of the common-law factors of judicial economy, convenience, fairness, and comity further convince us that the district court did not abuse its discretion by exercising supplemental jurisdiction. By the time that Michael filed his motion to dismiss for lack of subject-matter jurisdiction, the parties had exchanged substantial discovery. 5 In fact, Vacation's motion for summary judgment was filed just one month later. Finally, there does not appear to be, nor does Michael identify, any unfairness resulting from the exercise of supplemental jurisdiction.
*208 B.
Before turning to the D'Onofrios' various challenges to the district court's grant of summary judgment, we first address their evidentiary challenges.
See
Christophersen v. Allied-Signal Corp.
,
1.
First, Karen contends that the district court erred by not sustaining her objections to various statements in the depositions of three Vacation employees. She argues that the following were either inadmissible conclusions or made without personal knowledge: statements in the affidavit of Thain Allen that Karen had violated the covenant not to compete, that the covenant was enforceable, and that Karen had made material misrepresentations to Vacation; statements in the affidavit of Emerson Hankamer that the covenant not to compete was reasonable; and statements in the affidavit of Robert Baker calculating damages based on his knowledge of "how commissions work in the industry" generally rather than how they work at CruiseOne specifically.
Rule 56(c)(4) of the Federal Rules of Civil Procedure provides that "[a]n affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed. R. Civ. P. 56(c)(4). At the summary judgment stage, evidence relied upon need not be presented in admissible form, but it must be "
capable
of being 'presented in a form that would be admissible in evidence.' "
LSR Consulting, LLC v. Wells Fargo Bank, N.A.
,
The objected-to statements of Allen and Hankamer are legal conclusions and thus are not competent summary judgment evidence.
See
Cutting Underwater Techs. USA, Inc. v. Eni U.S. Operating Co.
,
2.
Second, Michael contends that the district court erred by denying his motion for discovery. Shortly after he was joined as a party, Michael moved for permission to issue seven requests for production and nineteen interrogatories and to depose a corporate representative of Vacation pursuant to Rule 30(b)(6). 10 The district court never ruled on that motion; it simply terminated the motion when it granted Vacation's motion for summary judgment. Finding the evidence in the record sufficient to reverse the grant of summary judgment against Michael, we need not reach the issue.
C.
Karen contends that the district court erred by granting summary judgment against her on her claims of FMLA interference and hostile work environment. She contends that Vacation interfered with her right to FMLA leave by requiring her to perform work while on leave and that the district court erred by granting summary judgment sua sponte on her hostile work environment claim without giving her prior notice as required under Rule 56(f). We affirm the district court with respect to the FMLA claims, but find reversible error with respect to the hostile work environment claim.
1.
An employee is generally entitled to up to 12 weeks of unpaid leave to care for a spouse with a serious health condition, and employers may not interfere with the employee's attempt to take such leave.
See
*210
The parties agree that Karen was given the option to either take unpaid leave or continue to service her existing accounts while on leave in order to continue to earn commissions on those accounts. Giving employees the option to work while on leave does not constitute interference with FMLA rights so long as working while on leave is not a condition of continued employment.
See
Massey-Diez v. Univ. of Iowa Cmty. Med. Servs., Inc.
,
2.
Karen maintains that the district court also erred by granting summary judgment
sua sponte
on her hostile work environment claim without giving prior notice. While district courts may grant summary judgment
sua sponte
,
see
Leatherman v. Tarrant Cty. Narcotics Intelligence & Coordination Unit
,
Here, the district court granted summary judgment on Karen's hostile work environment claim despite there being no pending motion for summary judgment on that claim. It erred by failing to give notice of its intent to grant summary judgment
sua sponte
, as required by Rule 56(f).
13
Vacation defends that error as harmless because, according to Vacation, Karen failed to present sufficient evidence
*211
to support her hostile work environment claim. However, Karen's failure to marshal sufficient evidence
before
receiving any notice that the district court was considering the merits of her hostile work environment claim does not mean that the error was harmless. She contends that, had she received notice, she would have deposed key Vacation witnesses, including the individual employees who allegedly harassed her, and issued written discovery to Vacation on her harassment claim.
14
Where, as here, the lack of notice deprived the non-moving party of the opportunity to collect and submit summary judgment evidence, the error is not harmless.
See
Powell
,
D.
The D'Onofrios next contend that the district court erred by granting summary judgment in favor of Vacation on its various claims against them. We address each claim in turn.
1.
Karen contends that the district court erred by granting summary judgment on Vacation's claim for breach of contract. She insists that the covenants not to compete that Vacation alleges she breached were unreasonable and therefore unenforceable under Texas law. We agree that the covenants are unreasonable as written.
Reasonable covenants not to compete serve the legitimate business interest of preventing departing employees from "using the business contacts and rapport established" during their employment to take the employer's clients with them when they leave.
Peat Marwick Main & Co. v. Haass
,
Under Texas law, covenants not to compete that "extend[ ] to clients with whom the employee had no dealings during [her] employment" or amount to industry-wide exclusions are "overbroad and unreasonable."
*212
Gallagher Healthcare Ins. Servs. v. Vogelsang
,
Section 15.51 of the Texas Business and Commerce Code requires courts to reform covenants found to be unreasonable as to time, geographical area, or scope of activity. Tex. Bus. & Com. Code § 15.51(c). However, such reformation is impossible when, as here, the record lacks the requisite information concerning either the geographical territories in which the former employee worked or the customers with whom she did business. A remand is therefore appropriate to permit the district court to make those initial determinations and reform the covenants accordingly.
See
Wright
,
2.
The D'Onofrios further assert that the district court erred by granting summary judgment on Vacation's conversion of confidential information claims. Finding material disputes of fact, we agree and reverse.
"The elements of a conversion cause of action are: (1) the plaintiff[ ] owned, had legal possession of, or was entitled to possession of the property; (2) the defendant assumed and exercised dominion and control over the property in an unlawful and unauthorized manner, to the exclusion of and inconsistent with the plaintiff's rights; and (3) the defendant refused plaintiff's demand for the return of the property."
Cuidado Casero Home Health of El Paso, Inc. v. Ayuda Home Health Care Servs., LLC
,
*213
Express One Int'l, Inc. v. Steinbeck
,
Vacation argues that Karen had access to its confidential information and trade secrets, including customer lists, while involved with CruiseOne, but the only tangible property that it alleges she converted is a laptop computer. Even assuming that electronic information accessible through a laptop is the kind of "document" with which intangible rights can be merged and that can thus be converted, 16 there is a dispute of fact as to whether Karen exercised dominion or control over that information in an unlawful manner. Vacation points to evidence that Karen had access to such information, including during the time in which she was on FMLA leave but also involved with the CruiseOne franchise, but Karen points to evidence that she did not access any confidential information during that time and that, in fact, she was unable to do so because her access to Vacation's network had been terminated. Furthermore, there is no evidence that Karen shared any confidential information with Michael or that Michael otherwise unlawfully exercised control over any such information. 17 Accordingly, a reasonable jury could find that the D'Onofrios did not access or exercise control over customer lists or any other confidential information by unlawful means.
There is also a dispute of fact as to whether Karen refused Vacation's demand for the return of the property. Vacation points to a March 2014 e-mail from Vacation's president reminding all employees that they were "prohibited by their employment contracts and Texas law from diverting or stealing leads or sales, or otherwise competing with VTG, while working for VTG or for eighteen months after leaving VTG." It argues that that e-mail constituted a demand for return of VTG property which Karen ignored by maintaining possession of the laptop while involved with CruiseOne approximately six months later. A reasonable jury could find that the March 2014 e-mail was not a demand for the return of the laptop.
Finally, "[a] plaintiff must prove damages before recovery is allowed for conversion."
United Mobile Networks, LP v. Deaton
,
3.
The D'Onofrios next challenge the district court's grant of summary judgment on Vacation's claims against them for tortious interference with a prospective business relationship and tortious interference with an existing business relationship. We find issues of material fact that preclude summary judgment and reverse.
The elements of tortious interference with a prospective business relationship are "that (1) there was a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) the defendant either acted with a conscious desire to prevent the relationship from occurring or knew the interference was certain or substantially certain to occur as a result of the conduct; (3) the defendant's conduct was independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result."
Coinmach Corp. v. Aspenwood Apartment Corp.
,
Here, there is question of material fact as to the first element. Vacation argues that there is a reasonable probability that it would have entered into business relationships with clients who had either previously booked travel with Vacation or contacted it for travel bookings. However, the only evidence of a possible future business relationship that Vacation points to is a single customer, Focke, who had previously booked a cruise for her parents through Vacation and subsequently booked a vacation through the D'Onofrios. But Focke testified that she never had any plans to book another cruise. A reasonable jury could conclude that there was not a reasonable probability that Focke would have entered into a business relationship with Vacation in the future. Accordingly, the district court erred by granting summary judgment on this claim.
See
Caller-Times Pub. Co. v. Triad Commc'ns, Inc.
,
To the extent that Texas recognizes a cause of action for tortious interference with an existing business relationship,
18
its elements are: "(1) unlawful actions undertaken by [the defendant] without a legal right or justifiable excuse; (2) with the
*215
intent to harm [the plaintiff]; and (3) resulting actual harm or damage."
Am. Med. Int'l, Inc. v. Giurintano
,
Here, at the very least, a question of material fact as to whether Vacation suffered any actual harm or damage precludes summary judgment. As discussed above, Vacation points to only one individual with whom it even arguably had an existing business relationship, and that individual testified that she did not intend to ever purchase another cruise. Accordingly, Vacation has failed to show as a matter of law that the D'Onofrios caused it any harm by doing business with Focke.
4.
Michael also challenges the district court's grant of summary judgment on Vacation's claims against him for conspiracy to covert confidential information and conspiracy to interfere with existing business relationships.
19
The elements of civil conspiracy are: "(1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result."
Massey v. Armco Steel Co.
,
5.
Next, the D'Onofrios challenge the district court's grant of summary judgment in favor of Vacation on its claims for breach of fiduciary duty against Karen and knowing participation in a breach of fiduciary duty against Michael. We find the evidence insufficient to support summary judgment and reverse.
"The elements of a breach of fiduciary duty claim are: (1) a fiduciary relationship must exist between the plaintiff and defendant; (2) the defendant must have breached his fiduciary duty to the plaintiff; and (3) the defendant's breach must result in injury to the plaintiff or benefit to the defendant."
Hunn v. Dan Wilson Homes, Inc
,
*216
Karen first denies that she was in a fiduciary relationship with Vacation. It is generally true that employees are not fiduciaries of their employers simply by virtue of the employment relationship. However, under common-law principles of agency, employees do owe certain limited fiduciary duties to not compete with their employers.
See
Johnson v. Brewer & Pritchard, P.C.
,
Vacation contends that Karen breached her fiduciary duty by becoming a fifty-percent owner in the franchise of a competitor, using a screenshot of her sales record at Vacation to obtain the competing franchise, attending a training for that competitor, and working for that competing franchise while still employed by Vacation. However, becoming the part owner of a competing franchise is insufficient to establish breach of a fiduciary duty.
See
AbetterTrucking Co. v. Arizpe
,
There is some evidence that Karen answered the phones for the CruiseOne franchise as early as July 2014 (approximately a month before she believed she had been terminated). In a July 27, 2014 e-mail-which appears to relate to home repairs and not travel sales-Michael provides the phone number for "our travel agency" and states that "mostly Karen works this as her business line." However, there is no evidence that Karen actually spoke to customers on the phone or that
*217
she used her position at Vacation "to gain a business opportunity belonging to" Vacation or solicited business away from Vacation while still employed by Vacation.
20
See
Bray v. Squires
,
Furthermore, while there is some evidence that the D'Onofrios
wanted
to use Karen's book of business from Vacation to build up their CruiseOne business, there is also evidence that the sales Karen generated for CruiseOne were the result of her own personal contacts and not any sales lists or other confidential information from Vacation.
See
Ameristar Jet Charter, Inc. v. Cobbs
,
Summary judgment on the claim against Michael for knowing participation in the breach of a fiduciary duty cannot stand for the same reasons. Because Vacation failed to establish that there is no dispute of material fact as to whether Karen breached her fiduciary duty, it necessarily failed to establish that there is no dispute of material fact as to whether Michael participated in any such breach. We reverse the grant of summary judgment on these claims.
6.
We next turn to the district court's grant of summary judgment on Vacation's fraud claims. Vacation asserted claims against Karen for common-law fraud and fraud by nondisclosure, alleging that she misrepresented her need for FMLA leave and failed to disclose her ownership interest in the CruiseOne franchise and the fact that she was using her FMLA leave to travel and attend a CruiseOne training. Once again, we find disputes of material fact and reverse.
*218
The elements of common-law fraud are: "(1) that a material representation was made; (2) the representation was false; (3) when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the representation with the intent that the other party should act upon it; (5) the party acted in reliance on the representation; and (6) the party thereby suffered injury."
Aquaplex, Inc. v. Rancho La Valencia, Inc.
,
There is evidence that Karen made plans to attend the CruiseOne training in Florida before she made arrangements to go on leave, suggesting that her purpose in taking leave may have been to attend the training rather than care for Michael. However, that she did attend training while on leave does not itself establish that she misrepresented her need for FMLA leave. Vacation does not dispute that Michael needed care, and there is evidence suggesting that Karen did, in fact, care for him while on leave. Karen also testified that she was not even aware of the possibility of taking FMLA leave until it was suggested to her by her supervisor, who was aware of the stress she was under while working and also taking care of Michael. Accordingly, there is evidence from which a reasonable jury could conclude that Karen did not misrepresent her need for FMLA leave.
The district court also granted summary judgment on Vacation's claim for fraud by nondisclosure. "The elements of fraud by nondisclosure are (1) the defendant failed to disclose material facts to the plaintiff that the defendant had a duty to disclose; (2) the defendant knew the plaintiff was ignorant of the facts and the plaintiff did not have an equal opportunity to discover the facts; (3) the defendant was deliberately silent when the defendant had a duty to speak; (4) by failing to disclose the facts, the defendant intended to induce the plaintiff to take some action or refrain from acting; (5) the plaintiff relied on the defendant's nondisclosure; and (6) the plaintiff was injured as a result of acting without that knowledge."
White v. Zhou Pei
,
Vacation first argues that Karen failed to disclose her intent to compete with it as the partial owner of a CruiseOne franchise. This claim fails for essentially the same reasons as the breach-of-fiduciary-duty claim. "[A]n employee who plans to compete with his employer has no general duty to disclose his plans."
Navigant Consulting, Inc. v. Wilkinson
,
Vacation also argues that Karen failed to disclose her intention to attend a CruiseOne training while on FMLA leave. However, even assuming that the other elements have been met, Vacation's evidence with respect to damages is insufficient to establish injury as a matter of law. As discussed above with respect to the Baker affidavit, a reasonable jury could conclude that Vacation failed to establish an injury caused by Karen's allegedly wrongful conduct.
*219 E.
Finally, the D'Onofrios argue that the district court committed a number of errors relating to the relief awarded to Vacation. Because we reverse summary judgment on all of Vacation's claims against the D'Onofrios, we also vacate the district court's award of damages, injunctive relief, and attorneys' fees.
We note that the award of damages was independently erroneous in light of the infirm evidence used to support it, as discussed above. Furthermore, with respect to attorneys' fees, the district court awarded Vacation $50,000 in fees "in the event an appeal is filed with the Fifth Circuit Court of Appeals," and additional fees if a petition for
certiorari
is filed with the Supreme Court. However, "[a] trial court may not grant an unconditional award of appellate attorneys' fees."
Rittgers v. Rittgers
,
III.
For the foregoing reasons, we AFFIRM in part, REVERSE in part, VACATE the awards of damages, injunctive relief, and attorneys' fees, and REMAND for further proceedings consistent with this opinion.
The district court's order, which appears to be unchanged from the proposed order submitted by Vacation with its motion for summary judgment, erroneously states that it was issued in 2015. The district court's docket, however, makes clear that the order was issued in 2016.
Michael also briefly suggests that he was improperly made a party under Rule 14 of the Federal Rules of Civil Procedure. However, Vacation explicitly, and correctly, cited Rules 19 and 20 as the basis for joinder.
The district court never actually ruled on the motion to dismiss for lack of subject-matter jurisdiction. Rather, the motion remained pending for over a year and was simply terminated after the district court granted Vacation's motion for summary judgment-including on the claims Michael sought to have dismissed for lack of jurisdiction. That was error. A court may not assume its jurisdiction for purposes of deciding a case on the merits.
See
Steel Co. v. Citizens for a Better Environment
,
There are several exceptions contained in § 1367(b) for claims against joined parties that are not relevant here.
See
It does not appear that Michael was ever able to obtain discovery from Vacation. In April 2015, the district court issued an order quashing standard discovery and permitting discovery only as ordered by the court. In July 2015, Michael filed a motion for discovery. The district court never ruled on that motion, but simply terminated it after granting Vacation's motion for summary judgment. Nonetheless, Karen and Vacation had exchanged discovery addressing the same nucleus of facts.
There is, in fact, evidence in the record refuting the notion that there is a uniform commissions rate in the industry. The Hankamer affidavit explains that the commissions paid in the industry vary depending on the different overhead expenses incurred by different companies.
Furthermore, while the Baker affidavit calculates Vacation's lost-profit damages based on the D'Onofrio's gross revenues, Texas law requires that lost-profits damages be "based on net profits, not gross revenue or gross profits."
Kellmann v. Workstation Integrations, Inc.
,
Baker asserts in his affidavit that the "total sum of commissions" earned by the D'Onofrios "equals eighty percent (80%) of the total commission on the sales" and multiplies that amount by 1.25 to determine the "missing twenty percent (20%)," without ever explaining where he derived the relevant eighty-percent and twenty-percent figures.
While it is unclear whether the district court relied upon the Allen and Hankamer affidavits in granting summary judgment, the Baker affidavit is the only evidence of damages in the record, and the district court's final order awarded damages to Vacation in precisely the amount calculated by Baker.
The district court had previously entered an order quashing all standard discovery and permitting only that discovery specifically ordered by the court. Accordingly, at the time of Michael's motion, no Rule 26 disclosures had been made and no interrogatories served.
Prior to 2010, the notice requirement was contained in Rule 56(c), which defined a ten-day notice requirement.
See
Leatherman
,
Vacation contends that our review should be for plain error because Karen challenges the grant of summary judgment for the first time on appeal. However, we apply plain-error review when "the party against whom summary judgment is granted moves for reconsideration under Fed. R. Civ. P. 59(e), but does
not
, in that motion, challenge the procedural propriety of the summary judgment ruling."
Love v. Nat'l Med. Enters.
,
The district court also erred by failing to state the reasons for granting summary judgment with respect to the hostile work environment claim on the record, as is required by Rule 56(a). See Fed. R. Civ. P. 56(a) ("The court should state on the record the reasons for granting or denying the motion.").
Any delay in discovery with respect to Karen's hostile work environment claim in the 11 months between the time it was filed and the time the district court granted summary judgment appears not to be a failure on her part. The district court had issued an earlier order quashing standard discovery and permitting discovery only as ordered by the court, and it does not appear that the district court ever set a discovery schedule for the hostile work environment claim.
The parties do not dispute that the covenants here at issue were part of an otherwise enforceable agreement.
We note that Vacation frames its conversion claim as a claim for conversion of confidential information only, and does not contend that Karen converted the laptop itself.
While Karen did share a screenshot of her sales record with Michael, which Michael subsequently sent to CruiseOne, Vacation offers no argument for why that information was confidential. The shared screenshot included only information on the volume and amount of Karen's sales, not on the customers with whom she did business.
The D'Onofrios contend that there is no cause of action for tortious interference with an
existing
business relationship, only tortious interference with a
contract
or tortious interference with a
prospective
business relationship. In
Whisenhunt v. Lippincott
,
While the parties' briefs also address a conspiracy to commit conversion claim against Karen, Vacation's Second Amended Counterclaim against Karen did not allege a conspiracy count, and its motion for summary judgment sought judgment on conspiracy claims against Michael only. In any event, any conspiracy claims against Karen would fail for the same reasons as the conspiracy claims against Michael.
The only evidence that Vacation points to in the record of Karen's providing travel services to CruiseOne customers occurred in September 2014, after Karen contends that she believed she had been terminated. An employee's fiduciary duty to not compete with her employer ends when the employment relationship ends.
See
Bray
,
Reference
- Full Case Name
- Karen D'ONOFRIO, Plaintiff-Appellant v. VACATION PUBLICATIONS, INCORPORATED, Doing Business as Vacations to Go, Defendant-Third Party Plaintiff-Appellee v. Michael D'Onofrio, Doing Business as Tranquility Base Enterprises, Third Party Defendant-Appellant Karen D'Onofrio, Plaintiff-Appellant v. Vacation Publications, Incorporated, Doing Business as Vacations to Go, Defendant-Appellee
- Cited By
- 108 cases
- Status
- Published