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Staples v. H. Walker Enterprises LLC

United States District Court, N.D. Alabama, Western Division

July 24, 2019

KIMBERLY STAPLES, et al., Plaintiffs,
v.
H. WALKER ENTERPRISES, LLC, et al., Defendants.

          MEMORANDUM OF OPINION

          L. Scott Coogler, United States District Judge.

         I. Introduction

         Plaintiffs, John and Kimberly Staples (collectively “Plaintiffs”), bring this action against Defendants, H. Walker Enterprises, LLC (“HWE”), Renaissance Man Food Services, LLC (“RMFS”), and Simmons Food, Inc. (“Simmons”) (collectively “Defendants”). Presently before the Court are cross motions for summary judgment filed by all parties. Specifically, Plaintiffs have each filed a motion for summary judgment asking the Court to grant summary judgment on liability for all claims asserted in their Second Amended Complaint. (See Docs. 69 & 71.) Defendants have filed motions for summary judgment seeking dismissal of all of Plaintiffs' claims against them. (See Docs. 72 & 76.) Additionally, Defendant RMFS moves for summary judgment in its favor on two of the three counterclaims it has filed against Plaintiffs. (See Doc. 76.) Defendants HWE and RMFS also ask that this Court strike an affidavit submitted as part of Plaintiffs' evidentiary submissions. (Doc. 106.) Finally, the parties have filed a Joint Status Report requesting that the Court schedule an oral argument to consider these pending motions. (Doc. 103.)

         These motions have been fully briefed and are ripe for decision.[1] For the reasons that follow, Plaintiff John Staples's (“Mr. Staples's”) motion (doc. 69) is due to be DENIED, and Plaintiff Kimberly Staples's (“Mrs. Staples's”) motion (doc. 71) is also due to be DENIED. Defendant Simmons's motion (doc. 72) is due to be GRANTED in PART and DENIED in PART, and Defendants HWE and RMFS's motion (doc. 76) is also due to be GRANTED in PART and DENIED in PART. Defendants HWE and RMFS's motion to strike (doc. 106) is due to be DENIED. The parties' request for oral argument (doc. 103) is due to be DENIED.

         II. Background[2]

         This case involves claims surrounding the termination of John Staples (“Mr. Staples”) as well as Defendants' alleged interference with the relationship between his wife, Kimberly Staples (“Mrs. Staples”), and her employer DSM Sales and Marketing, LLC (“DSM3”). In 2009, Mr. Staples began his employment with Defendant Simmons, a food services industry business. During Mr. Staples's employment, Simmons provided him with written employment rules related to job performance, progressive discipline, and fair treatment. However, the parties dispute whether Simmons ever made any representations to Mr. Staples that his employment would only be terminated for cause. Although Simmons was Mr. Staples's direct employer, his job duties included serving as the general manager of Defendant RMFS, an entity that buys chicken from Simmons. RMFS would refund Simmons for Mr. Staples's compensation. Defendant HWE, which is owned by Herschel Walker (“Walker”), is the sole owner of RMFS. Under a profit-sharing agreement between HWE and Simmons, Simmons receives 35% of the profits generated by RMFS. Additionally, Simmons provides the back-office accounting functions for RMFS.

         DSM3 is a company owned by Mrs. Staples and Julie Blanchard (“Blanchard”), who is also employed by HWE. DSM3 had a brokerage agreement with RMFS to broker the sale of RMFS's product. Mr. Staples signed the brokerage agreement on behalf of RMFS, and Mrs. Staples signed the agreement on behalf of DSM3. As part of its performance of administrative functions for RMFS, Simmons would send DSM3 commission checks representing the amount of commissions RMFS owed DSM3 under the brokerage agreement. These checks would be mailed to Mrs. Staples who would then deposit them in a DSM3 bank account. In addition to her ownership interest in DSM3, Mrs. Staples received an $85, 000 annual salary from the company. DSM3 paid Mr. Staples $40, 000 per year to work as a consultant for it.

         On December 27, 2017, Mr. Staples lost his position as general manager of RMFS. The next day, on December 28, 2017, Mr. Staples's employment with Simmons was terminated. Around the same time period, on December 30, 2017, RMFS terminated its brokerage agreement with DSM3. Additionally, in either December 2017 or January 2018, Simmons withheld commission payments RMFS owed DSM3. Plaintiffs contend that these actions were taken in a concerted effort to sever their relationships with HWE, RMFS, Simmons, and DSM3. As evidence of this, Plaintiffs point to a memo sent to Walker on December 21, 2017. In the memo, Ronald Eisenman (“Eisenman”), an attorney who represented Walker and prepared the paperwork necessary to form DSM3, detailed two proposals concerning Plaintiffs' future with these business entities. According to the memo, the proposals were discussed during a meeting held between Simmons's President and Walker on December 12, 2017.

         Under Proposal A, which contemplated Plaintiffs going along with the proposal, Mr. Staples would agree to terminate his employment as general manager of RMFS, and his role as paid consultant to DSM3 would end. He would then sign a one-year consultant agreement with RMFS. Mrs. Staples would resign from her position with DSM3 and sign over her ownership interest in the company to Blanchard. Under Proposal B, which contemplated Plaintiffs refusing to cooperate with Proposal A, Simmons would terminate Mr. Staples's employment and RMFS would end its brokerage agreement with DSM3. Plaintiffs did not accept Proposal A, which they argue led to the actions taken by Simmons and RMFS in late December 2017. Mr. Staples testified that he believes that Defendants took these actions against him and his wife because he raised ethical concerns as to whether Simmons should be paying an invoice on behalf of RMFS for waffle packaging that Mr. Staples asserts was being sold through HWE rather than RMFS.

         RMFS contends that it was Mr. Staples who acted unethically during his tenure as RMFS's general manager. RMFS asserts that while it employed Mr. Staples he: (1) sent an email to a competitor which contained confidential information concerning RMFS's sales and volume revenue; (2) caused RMFS to enter into a broker arrangement with Diversified Sales & Marketing, an entity that Mrs. Staples had a 60% ownership interest in; (3) paid unauthorized commissions on behalf of RMFS to DSM3; (4) asked a prospective broker for RMFS to hire Mrs. Staples and his daughter as a quid pro quo for RMFS's business; and (5) approved reimbursement of his personal expenses by RMFS.

         At some point, Walker contacted Kristin Caffey (“Caffey”), a professional within the food services industry, to complain about Mr. Staples. Mr. Staples contends that at the time this conversation took place Sysco Corporation (“Sysco”) employed Caffey. HWE and RMFS assert that Caffey was employed by Radian, another food services industry business. According to Caffey, Walker made disparaging remarks about Mr. Staples and told her that Mr. Staples had “stolen money from him or his business.” (See Doc. 70-8 at 4.) Caffey then began to hear from others in the food services industry who reported receiving similar calls from Walker about Mr. Staples.

         The parties agree that Mr. Staples's employment relationship with Simmons arose in Arkansas. Around May 2015, Mrs. Staples moved from Arkansas to Alabama. Mr. Staples followed Mrs. Staples to Alabama in either August or September of 2015 and worked remotely for Simmons until his termination. Thus, at the time of the events giving rise to this lawsuit, Plaintiffs were full-time residents of Alabama.

         III. Standard

         Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact[3] and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A dispute is genuine if “the record taken as a whole could lead a rational trier of fact to find for the nonmoving party.” Hickson Corp. v. N. Crossarm Co., Inc., 357 F.3d 1256, 1260 (11th Cir. 2004). A genuine dispute as to a material fact exists “if the nonmoving party has produced evidence such that a reasonable factfinder could return a verdict in its favor.” Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258, 1263 (11th Cir. 2007) (quoting Waddell v. Valley Forge Dental Assocs., 276 F.3d 1275, 1279 (11th Cir. 2001)). The trial judge should not weigh the evidence, but determine whether there are any genuine issues of fact that should be resolved at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).

         In considering a motion for summary judgment, trial courts must give deference to the non-moving party by “view[ing] the materials presented and all factual inferences in the light most favorable to the nonmoving party.” Animal Legal Def. Fund, 789 F.3d at 1213-14 (citing Adickes, 398 U.S. at 157. However, “unsubstantiated assertions alone are not enough to withstand a motion for summary judgment.” Rollins v. TechSouth, Inc., 833 F.2d 1525, 1529 (11th Cir. 1987). Conclusory allegations and “mere scintilla of evidence in support of the nonmoving party will not suffice to overcome a motion for summary judgment.” Melton v. Abston, 841 F.3d 1207, 1219 (11th Cir. 2016) (per curiam) (quoting Young v. City of Palm Bay, Fla., 358 F.3d 859, 860 (11th Cir. 2004)). In making a motion for summary judgment, “the moving party has the burden of either negating an essential element of the nonmoving party's case or showing that there is no evidence to prove a fact necessary to the nonmoving party's case.” McGee v. Sentinel Offender Servs., LLC, 719 F.3d 1236, 1242 (11th Cir. 2013). Although the trial courts must use caution when granting motions for summary judgment, “[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole.” Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986). This standard does not change when a court is presented with cross-motions for summary judgment. See Griffis v. Delta Family-Care Disability, 723 F.2d 822, 824 (11th Cir. 1984).

         IV. Discussion[4]

         The parties' summary judgment motions involve several discrete issues. Central to the parties' dispute is whether Alabama or Arkansas law applies to several of the claims asserted. The Court will first address which state's substantive law applies. After disposing of this choice of law issue, the Court will then address the claims brought by Plaintiffs in their Second Amended Complaint. The Court will finally address whether RMFS is entitled to summary judgment on its counterclaims.

         A. Choice of Law

         The parties dispute whether Arkansas or Alabama law governs Mr. Staples's claims for wrongful termination and tortious interference with his employment relationship with Simmons.[5] A federal court sitting in diversity must apply the choice of law rules of the state in which it sits. U.S. Fid. & Guar. Co. v. Liberty Surplus Ins. Corp., 550 F.3d 1031, 1033 (11th Cir. 2008) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). “Alabama law follows the traditional conflict-of-law principles of lex loci contractus and lex loci delicti.” Precision Gear Co. v. Cont'l Motors, Inc., 135 So.3d 953, 956 (Ala. 2013) (quoting Lifestar Response of Ala., Inc. v. Admiral Ins. Co., 17 So.3d 200, 213 (Ala. 2009)). Under these principles, a contract is governed by the law of the place where the contract is made, and tort claims are governed according to the law of the state where the injury occurred. See Id. Accordingly, to determine which state's substantive law applies, the Court must first determine whether these claims sound in contract or in tort.

         Regardless of whether a tort claim arose from a business relationship, it is still treated as a tort claim for the purposes of Alabama's conflict-of-law precedent. See Batey & Sanders, Inc. v. Dodd, 755 So.2d 581, 583 (Ala. Civ. App. 1999). Thus, Mr. Staples's claim for tortious interference with his business relationship with Simmons sounds in tort and is governed by the law of the state where Mr. Staples's alleged injury occurred.

         Mr. Staples argues that Arkansas law governs this claim because his employment relationship with Simmons was based in Arkansas. However, under lex loci delicti, “it is not the site of the alleged tortious act that is relevant, but the site of the injury, or the site of the event that created the right to sue.” Glass v. S. Wrecker Sales, 990 F.Supp. 1344, 1347 (M.D. Ala. 1998). Where a plaintiff's damages are primarily financial in nature “the ‘injury' for choice of law purposes occurs in the jurisdiction where those economic damages are felt.” See Doug's Coin & Jewelry, Inc. v. Am.'s Value Channel, Inc., No. 2:12-cv-1095-MHH, 2015 WL 3632228, at *8 (N.D. Ala. June 10, 2015) (citing Fitts v. Minn. Mining & Mfg. Co., 581 So.2d 819, 820 (Ala. 1991)). Consistent with this principle, federal courts applying lex loci delicti to tortious interference claims have repeatedly concluded that those claims are governed by the law of the state in which the plaintiff suffered an economic impact. See, e.g., Chambers v. Cooney, No. 07-0373-WS-B, 2007 WL 2493682, at *11 (S.D. Ala. Aug. 29, 2007); Bradbury Co. v. Teissier-duCros, 387 F.Supp.2d 1167, 1173 (D. Kan. 2005).

         Here, the tortious interference with business relationship claim at issue is based on Mr. Staples's assertion that HWE and RMFS took actions that caused Simmons to terminate his employment. The damage that Mr. Staples alleges to have suffered from this interference is loss of income. Because this injury is financial in nature, the Court concludes that the law of the place where Mr. Staples suffered the economic impact of HWE and RMFS's alleged actions should be applied to this claim. It is undisputed that at the time of his termination and the alleged interference with his employment Mr. Staples resided in Alabama. Therefore, Mr. Staples's financial injury from his loss of employment was necessarily felt in Alabama rather than Arkansas. Thus, Alabama law governs this claim.

         Mr. Staples's wrongful termination claims are brought under three different theories of liability: (1) breach of express contract; (2) breach of the implied covenant of good faith and fair dealing; and (3) termination in violation of public policy. (See Doc. 70 at 24-30.) Mr. Staples's claims for breach of the implied covenant of good faith and fair dealing and termination in violation of public policy are essentially claims for retaliatory discharge. This is evidenced by the cases Mr. Staples cites to support these claims. See, e.g., Smith v. Am. Greetings Corp., 804 S.W.2d 683, 684- 85 (Ark. 1991) (noting that under Arkansas law there is an implied covenant of good faith and fair dealing which includes a prohibition on discharges “which contravene[ ] public policy”); Scholtes v. Signal Delivery Serv., Inc., 548 F.Supp. 487, 494 (W.D. Ark. 1982). Similar to retaliatory discharge claims, which in Alabama are recognized when an employer terminates an employee for seeking to recover workers' compensation benefits, see Ala. Code § 25-5-11.1, the principles discussed in these cases apply to situations where an employee is fired for refusing to commit a wrong, for exercising a statutory right, or for otherwise seeking to “further the public good.” See Smith, 804 S.W.2d at 684-85.

         Under Alabama choice of law principles, “a claim alleging retaliatory discharge sounds in tort, not in contract.” Batey, 755 So.2d at 583. Thus, these claims are also governed by the law of the place of Mr. Staples's injury. Simmons asserts that, as with Mr. Staples's interference with business relationship claim, Alabama law should control Mr. Staples's wrongful termination claims because it is where he felt the economic impact of his termination. The Court disagrees. The Alabama Supreme Court has cautioned against utilizing a broad test where the place of financial harm is always determinative as to where a plaintiff's alleged injury occurred. See Ex parte U.S. Bank Nat'l Ass'n, 148 So.3d 1060, 1071-72 (Ala. 2014). Instead, the court has reiterated that under lex loci delicti “the place of injury is in the state where the ‘fact which created the right to sue' occurs.” See Id. at 1070 (quoting Ala. Great S. R.R. v. Carroll, 11 So. 803, 806 (Ala. 1892)). Thus, to determine whether it should apply the law of the place of financial harm a court must first look to the nature of the particular claim at issue. See Id. (distinguishing malicious prosecution and bad faith insurance claims from tortious interference and fraud claims where federal courts sitting in Alabama have looked to the law of the state of plaintiffs' financial injuries).

         Applying these principles, the Court concludes that the law of the place of termination should control Mr. Staples's wrongful discharge claims. Unlike with tortious interference and fraud claims, retaliatory discharge claims do not require plaintiffs to prove, as an element of those claims, financial injury. See Ala. Power Co. v. Aldridge, 854 So.2d 554, 563 (Ala. 2002) (noting that pursuant to Ala. Code § 25-5-11.1 a prima facie case of retaliatory discharge requires a showing of: “(1) an employment relationship, (2) an on-the-job injury, (3) knowledge on the part of the employer of the on-the-job injury, and (4) subsequent termination of employment based solely upon the employee's on-the-job injury and the filing of a workers' compensation claim”). As such, although the place where a plaintiff suffered financial injury from an alleged retaliatory discharge and the location of the plaintiff's termination are typically the same, Alabama courts have mainly focused on where the plaintiff was terminated when conducting a choice of law analysis on these types of claims. See, e.g., Batey, 755 So.2d at 583 (“It is undisputed that [plaintiff's] employment was terminated in Georgia. Because the wrong complained of occurred in Georgia, the law of Georgia applies.”). Here, the record reflects that Simmons terminated Mr. Staples in Arkansas. Thus, the Court will apply Arkansas law to his retaliatory discharge claims.[6] Any contract that existed between Simmons and Mr. Staples was made in Arkansas. Accordingly, Arkansas law governs Mr. Staples's claims for breach of express contract as well.

         B. Count One: Interference with Business Relationship of Mr. Staples and Simmons

         In Count One, Mr. Staples alleges that HWE and RMFS tortiously interfered with his employment relationship with Simmons by seeking to have Simmons terminate his employment. Under Alabama law, the elements of a claim for wrongful interference with a business relationship are: “(1) the existence of a [protectable] business relationship; (2) of which the defendant knew; (3) to which the defendant was a stranger; (4) with which the defendant intentionally interfered; and (5) damage.” White Sands Grp., LLC, v. PRS II, LLC, 32 So.3d 5, 14 (Ala. 2009). A defendant is a participant in rather than a stranger to a business relationship if “(1) [it] is an essential entity to the purported business relations; (2) the allegedly injured relations are inextricably a part of or depend upon [its] contractual or business relations; (3) [it] would benefit economically from the alleged injured relations; or (4) both [it] and the plaintiff are parties to a comprehensive interwoven set of contracts or relations.” Waddell & Reed, Inc. v. United Inv'rs Life Ins. Co., 875 So.2d 1143, 1156 (Ala. 2003) (quoting Britt/Paulk Ins. Agency, Inc. v. Vandroff Ins. Agency, Inc., 952 F.Supp. 1575, 1584 (N.D.Ga. 1996)).

         Here, HWE and RMFS were participants in Mr. Staples's employment relationship with Simmons. Although Simmons was Mr. Staples's direct employer, Mr. Staples performed work for RMFS through Simmons. Indeed, it is undisputed that Mr. Staples's job duties for Simmons included serving as RMFS's general manager. Additionally, as part of the business relationship between Simmons and RMFS, RMFS would reimburse Simmons for the compensation it paid Mr. Staples. Therefore, Mr. Staples's employment relationship with Simmons was “inextricably a part of or depend[ed] upon” Simmons's relationship with RMFS. Id. As it is undisputed that HWE is the sole owner of RMFS, RMFS only existed because of HWE. Thus, without HWE, there would be no RMFS for Mr. Staples to manage. The fact that HWE and Simmons have a profit-sharing agreement where they split the profits generated by RMFS further demonstrates that these entities were interdependent and that HWE was not a stranger to Mr. Staples's employment relationship with Simmons. Mr. Staples acknowledges that HWE and RMFS were parties to what he refers to as “the Joint Venture [that he] managed.” (See Doc. 87 at 15.) Based on these facts, it is apparent that Mr. Staples, Simmons, HWE, and RMFS were all “parties to a comprehensive interwoven set of . . . [business relations]” connected to Mr. Staples's employment. See Waddell, 875 So.2d at 1156.

         Simply put, HWE, RMFS, and Simmons were all working together to generate profits from RMFS's sales. Simmons employed Mr. Staples to help generate profits for these three business entities. Accordingly, HWE and RMFS were not strangers to Mr. Staples's employment relationship with Simmons. Thus, with respect to Count One, Mr. Staples's motion for summary judgment is due to be denied, and HWE and RMFS's motion for summary judgment as to this Count is due to be granted.

         C. Count Two: Interference with Business Relationship of Mr. Staples and DSM3

         In Count Two, Mr. Staples alleges that RMFS and HWE wrongfully interfered with his consulting agreement with DSM3.[7] As with Count One, this claim fails because HWE and RMFS were participants in Mr. Staples's relationship with DSM3. Mr. Staples argues that HWE and RMFS were strangers to his relationship with DSM3 because neither entity was a party to his consulting agreement with DSM3. However, the test for whether or not a defendant was a stranger to a business relationship is not this narrow. Instead, a defendant is a participant in a business relationship if the defendant “has any beneficial or economic interest in, or control over, that relationship.” Tom's Foods, Inc. v. Carn, 896 So.2d 443, 454 (Ala. 2004) (citation omitted).

         Here, the brokerage agreement between RMFS and DSM3 provided that DSM3 was to broker the sale of RMFS's products. Because DSM3 was RMFS's broker, RMFS had an economic interest in DSM3's success. This included the success of its relationship with its consultants, such as Mr. Staples. As HWE is entitled to the majority of profits generated by RMFS, it too had an economic interest in Mr. Staples's success as a DSM3 consultant. Moreover, DSM3, Mr. Staples, HWE, and RMFS were all parties to a “comprehensive set of interwoven contracts.” See Waddell, 875 So.2d at 1156. As RMFS and HWE note, under the brokerage agreement, DSM3 received commissions from RMFS in exchange for selling RMFS's products. These commissions produced income for DSM3, which allowed it to pay Mr. Staples's consulting fee. Thus, Mr. Staples's ability to receive his $40, 000 consultant fee was directly tied to RMFS's, and by extension HWE's, relationship with DSM3. Accordingly, HWE and RMFS were not strangers to Mr. Staples's consulting arrangement with DSM3. Therefore, with respect to Count Two, Mr. Staples's motion for summary judgment is due to be denied, and HWE and RMFS's motion for summary judgment as to this Count is due to be granted.

         D. Count Three: Civil Conspiracy - Interference with Business ...


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