Menu

Bits & Pieces

FLS TRANSPORTATION SERVICES (USA) INC., a Delaware foreign corporation, Plaintiff, v. ARLIEN CASILLAS, an individual and OPEN ROAD TRANSPORTATION, INC.

United States District Court,

  1. Nevada.

FLS TRANSPORTATION SERVICES (USA) INC., a Delaware foreign corporation, Plaintiff,

v.

ARLIEN CASILLAS, an individual and OPEN ROAD TRANSPORTATION, INC., an Oregon foreign corporation, Defendants.

Case No. 3:17-cv-00013-MMD-VPC

|

Filed 09/18/2017

 

 

ORDER

MIRANDA M. DU UNITED STATES DISTRICT JUDGE

 

  1. SUMMARY

*1 Before the Court are Defendant Arlien Casillas’s Motion to Dismiss (“Casillas’s Motion”) (ECF No. 11) and Defendant OpenRoad Transportation, Inc.’s (“OpenRoad”) Motion to Dismiss (“OpenRoad’s Motion”) (ECF No. 18). The Court has reviewed Plaintiff FLS Transportation Services (USA) Inc.’s (“FLS”) responses to both motions (ECF Nos. 20, 24) and Defendants’ respective replies (ECF No. 27, 29). Both motions raise overlapping arguments and will be addressed collectively.

 

The Court denies both of Defendants’ Motions to Dismiss for the reasons discussed below.

 

 

  1. BACKGROUND

The following facts are taken from the Complaint. (ECF No. 1.)

 

FLS is in the logistics business. It connects customers (retailers and manufacturers who need to ship things) with carriers (trucking companies and rail companies that can ship them). FLS alleges that one of its former employees conspired with a competitor, OpenRoad, to appropriate FLS’s customers, carriers, and employees in violation of duties imposed by contract and common law.

 

The trouble began when an FLS branch office operating in Reno suddenly failed in September 2016. The branch director—Arlien Casillas—resigned, and some of the long-term customers for whom Casillas was the principal FLS contact ceased nearly all of their business with FLS immediately. Berenisa Orozco and Cindy Dillard, employees of the FLS Reno branch office, also resigned.

 

About a month later, FLS’s Reno office was reborn (in the same office space), but under the name of OpenRoad, another third-party logistics business and competitor to FLS. OpenRoad had no other offices in Nevada at the time, and this was only its second office outside the Pacific Northwest. FLS alleges the office is a near replica of its own—it is staffed by former FLS employees, patronized by former FLS customers, and provides services through former FLS carriers. The former FLS employees include Arlien Casillas, Berenisa Orozco, Cindy Dillard, and Melia Shively (an individual who worked for FLS from 2010 to 2016). The former FLS customers are those who stopped doing business with FLS when Casillas resigned. The former FLS carriers include those who provided services to FLS’s long-term customers.

 

FLS further alleges that this reincarnation was a product of conspiracy, not happenstance. FLS surmises that Casillas began preparing for and implementing this transition (with OpenRoad’s assistance) while still working for FLS, partly because the customers Casillas and OpenRoad purportedly appropriated “relied on FLS for a significant and complex volume of shipping needs. Enabling a seamless transition of their business from FLS to a competitor, like OpenRoad, would have taken weeks, if not months, of preparation.” (ECF No. 1 at ¶ 55.) FLS alleges that the conduct of Casillas and OpenRoad has caused it to lose hundreds of thousands of dollars in profits.

 

 

  1. FLS’s Business Model

FLS connects customers and carriers through its employees, called brokers, who determine customer needs and find carriers who can meet those needs. The brokers solicit long-term customers through the use of proprietary information, such as carriers’ specific routes, specific equipment, or price structures. The brokers execute contracts with customers on behalf of FLS. The brokers also execute contracts with carriers (“Carrier Contracts”) on behalf of FLS. The Carrier Contracts prohibit carriers from cutting out the middleman (here, FLS):

*2 During the term of this Contract and for a period of one (1) year following its termination, Carrier shall not provide transportation services or related services to any of [FLS’s] customers for which Carrier has provided services under this Contract, unless the shipments are tendered by [FLS]; provided, however, this provision shall not apply if Carrier has conducted business with such customer during the two years before [FLS] first tendered shipments to Carrier for such customer.

(ECF No. 1 at ¶ 58.)

 

FLS alleges that Casillas and OpenRoad induced FLS’s carriers to violate this contractual provision, contending that former FLS carriers are providing services to former FLS customers with OpenRoad acting as the middleman.

 

 

  1. Casillas’s Employment at FLS

FLS employed Defendant Arlien Casillas as the branch director of its Reno office beginning in September 2006. Casillas coordinated and managed the services that FLS provided through that office. She also managed and supervised other employees in the office, including Berenisa Orozco and Cindy Dillard. Casillas and her colleagues in the Reno branch office were the primary or exclusive contacts for several of FLS’s large customers, and they used confidential information to do their jobs.

 

FLS and Casillas executed an agreement (“Casillas Employment Agreement”) about confidentiality and solicitation of FLS employees several years into her employment, on or around October 11, 2013. The “Confidentiality Provision” of that agreement prohibits Casillas from disclosing certain information deemed confidential:

Any information relating to our policies, processes, structures, operations, customers, or other employees acquired by you in the course of, or as a result of, your employment with [FLS] is considered confidential. Such information shall be treated as confidential, and may not be disclosed by you to any other person, firm or company during your employment or after without prior written authorization. Confidential information or material includes but is not limited to financial information, plans, strategies, corporate information and any other information deemed “confidential”, unless information is available to the general public or in the public domain.

(ECF No. 1 at ¶ 23.) The “Non-Solicitation Provision” of that agreement prohibits Casillas from encouraging any FLS employees to leave FLS:

It is a term of this offer that you agree that during your employment, and for a period of 6 months following the termination of such employment for any reason whatsoever, you shall not either individually or in partnership or conjunction with any person or persons, firms, association, syndicate, company or corporation as principal, employee, contractor, shareholder or agent, directly or indirectly encourage any [FLS] employee to leave employment with [FLS].

(Id. at ¶ 24.)

 

Casillas voluntarily resigned from FLS about three years later. She first went on medical leave on September 8, 2016, then resigned “due to illness and inability to perform her duties at FLS” on September 26, 2016. (ECF No. 1 at ¶ 30.) FLS sent a letter to Casillas reminding her to comply with the Casillas Employment Agreement, including the Confidentiality and Non-Solicitation Provisions.

 

FLS alleges that, while still working for FLS, Casillas disclosed FLS’s confidential information to OpenRoad and solicited FLS customers and carriers to do business with OpenRoad, all with OpenRoad’s assistance, cooperation, and inducement.

 

 

  1. Orozco and Dillard’s Employment at FLS

*3 Berenisa Orozco and Cindy Dillard both resigned from FLS in September, shortly before Casillas resigned. Orozco was a relatively new FLS employee, having started in November 2015. Dillard had been working for FLS longer, having started in July 2010. Both “were entrusted with confidential, proprietary, and strategic information concerning FLS’s services and business and its relationships with customers and carriers.” (ECF No. 1 at ¶ 40.) When Orozco and Dillard resigned, FLS executed “Separation Agreements” with both of them that prohibited them from disclosing confidential information:

Employee shall not use for any purpose or disclose to any person or entity any confidential information acquired during the course of employment with [FLS]. Employee shall not, directly or indirectly, copy, take, or remove from [FLS’s] premises any of [FLS’s] books, records, customer lists, or any other documents or materials. The term “confidential information” as used in this Agreement includes, but is not limited to, records, lists, and knowledge of [FLS]’s customers, suppliers, methods of operation, processes, trade secrets, methods of determination of prices, financial condition, profits, sales, net income, and indebtedness, as the same may exist from time to time.

(ECF No. 1 at ¶ 42.)

 

FLS alleges that Casillas (with OpenRoad’s assistance) “encouraged, recruited, and induced” Orozco and Dillard to leave FLS while all three were still working for FLS. (ECF No. 1 at ¶¶ 43, 44.) FLS further alleges that Casillas and OpenRoad encouraged Orozco and Dillard “to use or disclose FLS’s confidential information” in violation of the Separation Agreements. (ECF No. 1 at ¶ 43.)

 

 

  1. OpenRoad’s Website Posts

OpenRoad posted on its website twice about the Reno branch office. One article, titled “Reno Office Added to OpenRoad’s Roster,” notes that “[t]he Reno team started up in the fall of 2016.” (ECF No. 1 at ¶ 46.) This article was published on November 4, 2016. Another article, titled “Arlien Casillas Leading OpenRoad Reno’s Hot Start,” attributes “[t]he early success of the office … to the leadership of Arlien Casillas and her experienced team of transportation professionals.” (ECF No. 1 at ¶ 47.) This article was published on December 8, 2016.

 

 

III. LEGAL STANDARD

A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8 does not require detailed factual allegations, it demands more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Thus, to survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a claim to relief that is plausible on its face.” Id. at 570.

 

In Iqbal, the Supreme Court clarified the two-step approach district courts are to apply when considering motions to dismiss. First, a district court must accept as true all well-pleaded factual allegations—but not legal conclusions—in the complaint. Id. at 678. Mere recitals of the elements of a cause of action, supported only by conclusory statements, do not suffice. Id. Second, a district court must consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s complaint alleges facts that allow a court to draw a reasonable inference that the defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but has not shown—that the pleader is entitled to relief. Id. at 679. When the claims in a complaint have not crossed the line from conceivable to plausible, the complaint must be dismissed. Twombly, 550 U.S. at 570.

 

 

  1. DISCUSSION
  2. Breach of Duty of Loyalty and Fiduciary Duties

*4 Casillas argues that FLS’s claim for breach of duty of loyalty and fiduciary duties should be dismissed for three reasons: FLS failed to plead facts sufficient to support the claim; the claim is subsumed by FLS’s breach of contract claim under the economic loss doctrine; and employees do not breach their duty of loyalty by preparing to compete with their employers. (ECF No. 11 at 9-11.) The Court disagrees with Casillas and denies her motion as to FLS’s claim for breach of duty of loyalty and fiduciary duties.

 

 

  1. Adequacy of Factual Allegations

FLS adequately pleaded its claim for breach of duty of loyalty and fiduciary duties in its complaint. The claim has three elements: “(1) existence of a fiduciary duty; (2) breach of the duty; and (3) the breach proximately caused the damages.” New England Life Ins. Co. v. Lee, No. 2:14-cv-1797-JCM-NJK, 2015 WL 1413391, at *6 (D. Nev. Mar. 27, 2015) (quoting Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152, 1162 (D. Nev. 2009)).

 

FLS satisfies the first element—existence of a duty—by alleging that an agency relationship existed between FLS and Casillas. Specifically, FLS alleges that it employed Casillas as the branch director of FLS’s branch office in Reno, Nevada from September 2006 to September 26, 2016. (ECF No. 1 at ¶¶ 21, 25.) An employment relationship gives rise “to a duty not to compete with the principal concerning the subject matter of his agency.” Restatement (Second) of Agency § 393 (1958).

 

FLS satisfies the second element—breach—by alleging facts from which the Court can reasonably infer breach of the duty not to compete. FLS alleges that its long-term customers stopped doing business with FLS when Casillas (their sole contact at FLS) resigned, only to become customers of OpenRoad about a month later. (ECF No. 1 at ¶¶ 46, 48, 50.) Plaintiff alleges that this transition, “would have taken weeks, if not months, of preparation.” (Id. at ¶ 55.) The coinciding departures of Casillas and FLS customers, along with the speed at which the same customers began patronizing OpenRoad, leads to the reasonable inference that Casillas began laying the groundwork for OpenRoad while she was employed by FLS.

 

FLS satisfies the third element—damages—by alleging that it lost “hundreds of thousands of dollars in profits” as a result of losing the customers Casillas purportedly appropriated for OpenRoad. (ECF No. 1 at ¶¶ 48-50.)

 

 

  1. Economic Loss Doctrine

The Court cannot conclude at this early stage of litigation that the economic loss doctrine bars FLS’s claim for breach of duty of loyalty and fiduciary duties. The economic loss doctrine bars unintentional tort actions when plaintiffs seek to recover purely economic losses, as opposed to damages involving physical harm to person or property. Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865, 879 (9th Cir. 2007); Terracon Consultants W., Inc. v. Mandalay Resort Grp., 206 P.3d 81, 86 (Nev. 2009) (en banc). Intentional torts, by contrast, “are not barred by the economic loss doctrine.” Halcrow, Inc. v. Eighth Judicial Dist. Court, 302 P.3d 1148, 1154 n.2 (Nev. 2013), as corrected (Aug. 14, 2013). This Court has repeatedly declined to apply the economic loss doctrine to dismiss intentional torts, including breach of fiduciary duty. See, e.g., Bank of Am. v. Bailey, No. 2:14-cv-885-JCM-GWF, 2016 WL 3410174, at *5 (D. Nev. June 15, 2016) (holding that economic loss doctrine did not bar claim for breach of fiduciary duty).1

 

*5 Nevertheless, the economic loss doctrine does bar a subset of intentional torts—those that duplicate breach of contract claims. See, e.g., Kenny v. Trade Show Fabrications W., Inc., No. 2:15-cv-00410-JCM-VCF, 2016 WL 697110, at *5 (D. Nev. Feb. 18, 2016) (dismissing claim of conversion for failure to pay compensation when such failure amounted to a breach of contract).2 The Nevada Supreme Court has suggested it would take the same position. See Davis v. Beling, 278 P.3d 501, 514 (Nev. 2012) (“The economic loss doctrine does not, however, bar the recovery of purely economic losses when the defendant intentionally breaches a duty that is imposed independently of the obligations arising from contract.”) (emphasis added). The Court cannot determine how much FLS’s claim for breach of contract overlaps its tort claim for breach of duty of loyalty and fiduciary duties at this stage of litigation, though the tort claim may be subject to dismissal under the economic loss doctrine if it ultimately duplicates the contract claim.3

 

 

  1. Preparations to Compete

The privilege workers enjoy to prepare to compete with their employers does not bar any claim at this stage of litigation. Workers do not breach a duty by making preparations during their jobs to compete after leaving their jobs. White Cap Indus. v. Ruppert, 67 P.3d 318, 319 (Nev. 2003); see also Restatement (Second) of Agency § 393 cmt. e (1958). There are certain restrictions, however. An agent preparing to compete “cannot properly use confidential information peculiar to his employer’s business and acquired therein.” Restatement (Second) of Agency § 393 cmt. e. Nor can an agent “solicit customers for such rival business before the end of his employment [or] properly do other similar acts in direct competition with the employer’s business.” Id.

 

Accepting FLS’s allegations as true, Casillas engaged in conduct the Restatement prohibits. Casillas used confidential information acquired through her employment at FLS to appropriate FLS’s customers, carriers, and employees for OpenRoad while still employed by FLS. (ECF No. 1 at ¶ 68.) Therefore, FLS has plead a colorable claim for breach of the duty of loyalty and fiduciary duties.

 

 

  1. Breach of Contract

Casillas argues that FLS failed to adequately plead facts sufficient to support its breach of contract claim. (ECF No. 11 at 12.) Casillas also argues that the contract is unenforceable. (Id.) The Court disagrees with Casillas’s first argument and declines to consider her second argument at this stage of litigation.

 

 

  1. Adequacy of Factual Allegations

Plaintiffs must show four elements to succeed on claims for breach of contract: “(1) formation of a valid contract; (2) performance or excuse of performance by the plaintiff; (3) material breach by the defendant; and (4) damages.” Laguerre v. Nevada Sys. of Higher Educ., 837 F. Supp. 2d 1176, 1180 (D. Nev. 2011).

 

*6 Casillas disputes that FLS adequately pleaded the third element—material breach—with respect to both the Confidentiality and Non-Solicitation Provisions of the Casillas Employment Agreement. (ECF No. 11 at 15-16.)

 

 

  1. Confidentiality Provision

FLS pleads breach of the Confidentiality Provision by alleging that Casillas disclosed FLS’s confidential information to OpenRoad. (ECF No. 1 at ¶¶ 52, 69, 75.) FLS supports this conclusion by alleging that FLS customers, carriers, and employees seamlessly transitioned from FLS to OpenRoad over the same, impossibly short, time period. (Id. at ¶¶ 38, 40, 48, 50, 54-56.) The Court can reasonably infer that Casillas enabled this seamless transition by disclosing confidential information to OpenRoad.

 

 

  1. Non-solicitation Provision

FLS pleads breach of the Non-Solicitation Provision by alleging that Casillas encouraged, recruited, and induced other FLS employees to work at OpenRoad, all while she was still employed by FLS. (Id. at ¶¶ 43-44, 68, 75.) FLS has alleged facts that make these assertions plausible. FLS alleges that Casillas, Orozco, and Dillard resigned in the same month (ECF No. 1 at ¶¶ 30, 39), only to find themselves working together in the same office space for OpenRoad about a month later (Id. at ¶¶ 35, 38, 46). Coupled with the seamless transition of FLS’s long-term customers and carriers to OpenRoad (which necessitated previously laid groundwork), it is reasonable to infer that Casillas recruited Orozco and Dillard while still working for FLS in violation of the Non-Solicitation Provision.

 

Casillas also contends that the information she allegedly divulged was not confidential (ECF No. 11 at 16), but FLS alleges it was (ECF No. 1 at ¶¶ 52, 69, 75). The Court must accept FLS’s allegations as true at this stage of the litigation. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

 

 

  1. Contract Enforceability

Casillas argues that the Confidentiality and Non-Solicitation Provisions of the Casillas Employment Agreement are unenforceable because they are unreasonable. (ECF No. 11 at 12-15.) Restrictive covenants must be “reasonable under the circumstances.” Sheehan & Sheehan v. Nelson Malley & Co., 117 P.3d 219, 224 (Nev. 2005). “A restrictive covenant on employment will be upheld only if it is reasonably necessary to protect the business and goodwill of the employer. The amount of time the covenant lasts, the territory it covers, and the hardship imposed upon the person restricted are factors for the court to consider in determining whether such a covenant is reasonable.” Jones v. Deeter, 913 P.2d 1272, 1275 (Nev. 1996) (internal citation omitted).

 

This standard invites resolution of factual questions—such as the circumstances surrounding the agreement and hardship imposed upon Casillas—that are not appropriately addressed at this stage of litigation. See Boart Longyear, Inc. v. Nat’l EWP, Inc., No. 2:11-cv-2106-JCM-RJJ, 2012 WL 1985293, at *3 (D. Nev. June 4, 2012) (“At the motion to dismiss stage, the court is not inclined to weigh the reasonableness of the non-competition agreement.”); see also Yarn v. Hamburger Law Firm, LLC, No. 1:12-03096, 2014 WL 2964986, at *4 (D. Md. June 30, 2014) (“The issue of enforceability is not grounds to grant a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6).”). Consequently, the Court declines to consider the reasonableness of the Confidentiality and Non-Solicitation Provisions of the Casillas Employment Agreement at this stage of litigation.

 

 

  1. Intentional Interference with Contractual Relations

*7 FLS alleges that Casillas and OpenRoad intentionally interfered with several different contracts. Against Casillas, FLS alleges intentional interference with the Separation Agreements binding Orozco and Dillard as well as unspecified Carrier Contracts. (ECF No. 1 at ¶ 82.) Casillas argues that FLS failed to plead facts showing that Casillas acted with intent. (ECF No. 11 at 16.) Casillas further argues that the competitor’s privilege bars FLS’s claim. (Id.)

 

Against OpenRoad, FLS alleges intentional interference with the following contracts: the Casillas Employment Agreement, the Separation Agreement between FLS and Orozco, the Separation Agreement between FLS and Dillard, and the Carrier Contracts. (ECF No. 1 at ¶ 82.) OpenRoad argues that FLS failed to plead facts showing that breach of these contracts occurred (ECF No. 18 at 9-11); that the competitor’s privilege bars FLS’s claim (Id. at 11); and that the contract provisions OpenRoad allegedly disrupted are unenforceable (Id. at 7-9).

 

The Court finds Defendants’ arguments for dismissing FLS’s claim for intentional interference with contractual relations unpersuasive.

 

 

  1. Adequacy of Factual Allegations

The elements of an intentional interference with contractual relations claim are: “(1) a valid and existing contract; (2) the defendant’s knowledge of the contract; (3) intentional acts intended or designed to disrupt the contractual relationship; (4) actual disruption of the contract; and (5) resulting damage.” New England Life Ins. Co. v. Lee, No. 2:14-cv-1797-JCM-NJK, 2015 WL 1413391, at *9 (D. Nev. Mar. 27, 2015) (quoting J.J. Indus., LLC v. Bennett, 71 P.3d 1264, 1267 (Nev. 2003)). Casillas argues that FLS failed to plead the third element—intent. (ECF No. 11 at 16-17.) OpenRoad argues that FLS failed to plead the fourth and fifth elements—breach and damage. (ECF No. 18 at 9-12; ECF No. 29 at 8-9.)

 

 

  1. Intent

Casillas argues that FLS failed to plead facts showing that Casillas acted with intent to disrupt the Separation Agreements and the Carrier Contracts. (ECF No. 11 at 16-17.) With respect to the Separation Agreements, it is reasonable to infer that Casillas acted with intent from the fact that FLS customers, carriers, and employees seamlessly transitioned from FLS to OpenRoad over the same, impossibly short, time period. (Id. at ¶¶ 38, 40, 48, 50, 54-56.) It is reasonable to infer that this chain of events was the product of intent rather than chance.

 

With respect to the Carrier Contracts (which prohibited carriers from cutting out the middleman and selling their shipping services directly to customers), it is reasonable to infer that Casillas acted with intent from the fact that FLS customers (for whom Casillas was the primary or exclusive FLS contact) transitioned to OpenRoad during the same, impossibly short, time period as Casillas. (Id. at ¶¶ 27, 48, 50.) It is reasonable to infer that hundreds of thousands of dollars’ worth of business migrated from FLS to OpenRoad (Id. at ¶ 49-50) at the same time as Casillas because she acted with the intent to cause that result. It is less reasonable to chalk it up to coincidence.

 

 

  1. Breach

OpenRoad argues that FLS failed to adequately allege breach of the confidentiality provisions contained in the Casillas Employment Agreement and the Separation Agreements, the Non-Solicitation Provision of the Casillas Employment Agreement, and the Carrier Contracts. (ECF No. 18 at 9-11.)

 

With respect to the Confidentiality Provision of the Casillas Employment Agreement and the Separation Agreements, OpenRoad argues that the information Casillas, Orozco, and Dillard allegedly shared with OpenRoad was not confidential and that the Complaint fails to specify what confidential information was shared. (Id. at 10.) But at this point in the litigation, the Court must accept FLS’s factual allegations that the information was indeed confidential (ECF No. 1 at ¶ 52) as true. Ashcroft v. Iqbal, 566 U.S. 662, 678-79 (2009). It is not necessary at this stage of litigation for FLS to specify what confidential information was shared. It is sufficient that FLS has alleged facts from which a reasonable inference can be drawn that Casillas, Orozco, and Dillard shared confidential information. The facts that support this inference are: (1) Casillas, Orozco, and Dillard had access to confidential information such as knowledge of FLS’s customers (ECF No. 1 at ¶¶ 28, 40); (2) Casillas opened a new branch office for OpenRoad in the same office space where she operated the branch office for FLS (Id. at ¶¶ 35, 37); (3) Orozco and Dillard worked there with Casillas (Id. at ¶ 38); and (4) FLS employees and long-term customers left FLS for OpenRoad around the same time that Casillas, Orozco, and Dillard left FLS for OpenRoad (Id. at ¶¶ 40, 48, 50). It is reasonable to infer from these facts that Casillas shared “information relating to [FLS’s] policies, processes, structures, operations, customers, or other employees” with OpenRoad. (Id. at ¶ 23.) It is also reasonable to infer that Orozco and Dillard shared confidential information including “records, lists, and knowledge of [FLS’s] customers” with OpenRoad. (Id. at ¶ 42.)

 

*8 With respect to the Non-Solicitation Provision of the Casillas Employment Agreement, OpenRoad argues that FLS failed to allege facts from which the Court can reasonably infer that Casillas solicited Orozco and Dillard to work for her at Open Road (likely a breach of the Non-Solicitation Provision). (ECF No. 18 at 10-11.) OpenRoad seems to contend that it would be unreasonable to infer that Casillas solicited Orozco and Dillard to work for her at OpenRoad for two reasons.

 

First, OpenRoad argues, Casillas was on leave when Orozco and Dillard left. (Id. at 10.) But it is reasonable to infer that Casillas was working with OpenRoad to make plans for the new office before or while she was on medical leave. The factual basis for this inference is the inconsistency between her words and her actions. She resigned from FLS “due to illness and inability to perform her duties at FLS,” yet she reconstituted FLS’s Reno branch office for OpenRoad about a month later. (ECF No. 1 at ¶¶ 30, 46, 47.)

 

Second, OpenRoad argues, Orozco, and Dillard resigned from FLS before Casillas. (ECF No. 18 at 10.) But it is reasonable to infer that Casillas induced Orozco and Dillard to resign because they all resigned in the same month (ECF No. 1 at ¶¶ 30, 39), only to find themselves working together in the same office space for OpenRoad about a month later (Id. at ¶¶ 35, 38, 46). The proximity—not the sequence—of the resignations is what grounds the inference. Moreover, Casillas was as good as gone when Orozco and Dillard left because she was presumably on medical leave (from which she never returned). (See id. at ¶¶ 29, 30, 40.)

 

With respect to the Carrier Contracts, OpenRoad argues that the contract only prevents the carriers from contacting FLS’s competitors—not vice versa. (ECF No. 18 at 11.) While this seems to be true from the short excerpt of the Carrier Contracts that appears in the Complaint, FLS alleges a different kind of breach. The Carrier Contracts forbid carriers from providing services to “any of [FLS’s] customers for which Carrier has provided services under this Contract, unless the shipments are tendered by [FLS].” (ECF No. 1 at ¶ 58.) FLS alleges that carriers have provided services to FLS customers with the shipments being tendered by OpenRoad (Id. at ¶ 57), an apparent violation of the plain language of the contract. Consequently, FLS has sufficiently pleaded breach.

 

 

  1. Damage

OpenRoad argues that FLS has failed to allege any damages resulting from OpenRoad’s purported interference with the Separation Agreements. (ECF No. 29 at 8-9.) This is incorrect. FLS alleges that it lost business worth hundreds of thousands of dollars (ECF No. 1 at ¶ 49) when OpenRoad (and Casillas) induced Orozco and Dillard to disclose confidential information in violation of the Separation Agreements (Id. at ¶ 43.)

 

 

  1. Competitor’s Privilege

Casillas and OpenRoad both argue that the competitor’s privilege bars FLS’s claim for intentional interference with the Carrier Contracts. (ECF No. 11 at 17-18; ECF No. 18 at 11.) “[A] competitor is privileged to divert business to itself by all fair and reasonable means.” Custom Teleconnect, Inc. v. Int’l Tele-Servs., Inc., 254 F. Supp. 2d 1173, 1181 (D. Nev. 2003). If FLS’s allegations are true (that Casillas and OpenRoad conspired to appropriate FLS’s customers, carriers, and employees in violation of duties imposed by contract and common law), then Casillas and OpenRoad failed to divert business by “fair and reasonable means.” Accepting FLS’s allegations as true, the Court cannot dismiss FLS’s claim based on the competitor’s privilege at this stage of litigation.

 

 

  1. Contract Enforceability

*9 OpenRoad argues that the confidentiality and non-solicitation provisions of the Casillas Employment Agreement are overly broad and unenforceable and that the confidentiality provisions (identical) in the Separation Agreements are overly broad and unenforceable. (ECF No. 18 at 7-9.) The Court will not consider these arguments at this stage of litigation. See supra Section IV.B.ii.

 

 

  1. Breach of Implied Covenants of Good Faith and Fair Dealing

Casillas argues that FLS’s claim for breach of implied covenants of good faith and fair dealing must be dismissed because it duplicates FLS’s claim for breach of contract. (ECF No. 11 at 19.) “A contractual breach of the implied covenant of good faith and fair dealing occurs when the terms of a contract are literally complied with, but where the defendant takes some action to deprive the plaintiff of his benefit under the contract.” Romm v. Hartford Ins. Co. of the Midwest, No. 2:12-cv-01412-RCJ-PAL, 2012 WL 4747137, at *3 (D. Nev. Oct. 2, 2012). FLS’s breach of contract claim concerns breach of the Confidentiality and Non-Solicitation Provisions of the Casillas Employment Agreement. (See ECF No. 1 at ¶ 75.) FLS’s breach of implied covenant claim is different. It includes FLS’s “justified expectations under her employment agreement [that she would not work] with a competing company during her employment.” (ECF No. 20 at 19-20.) It is conceivable that Casillas literally complied with the terms of the Casillas Employment Agreement but still deprived FLS of its justified expectations that she would not work with OpenRoad while she worked for FLS. Thus, the Court finds that the claims are sufficiently distinct to preclude dismissal at this stage.

 

 

  1. Unjust Enrichment

Casillas and OpenRoad both argue that FLS’s unjust enrichment claim must be dismissed because FLS alleges breach of express, written contracts. (ECF No. 11 at 19; ECF No. 18 at 11-12.) Such a contract usually precludes a claim of unjust enrichment. LeasePartners Corp. v. Robert L. Brooks Tr., 942 P.2d 182, 187 (Nev. 1997). The Court agrees with FLS, however, that it is too early to rule out unjust enrichment when Defendants argue the contracts in question are either unenforceable (ECF No. 11 at 12-15; ECF No. 18 at 7-9) or invalid (ECF No. 11 at 3 n.3). Liggio v. Weigner, No. 2:15-cv-01973-APG-CWH, 2016 WL 5661906, at *3 (D. Nev. Sept. 28, 2016) (finding that dismissal of the plaintiffs’ claim for unjust enrichment would be “premature” when the defendant “denie[d] that the promissory notes [were] enforceable contracts”); Hydrotech, Inc. v. Ames Constr., Inc., No. 3:12-cv-00262-LRH-WGC, 2013 WL 551510, at *2 (D. Nev. Feb. 12, 2013) (same).

 

OpenRoad additionally argues that FLS has “failed to allege or demonstrate any benefit which FLS conferred on Defendant OpenRoad.” (ECF No. 18 at 12.) “Unjust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.” Topaz Mut. Co. v. Marsh, 839 P.2d 606, 613 (Nev. 1992) (quoting Nevada Indus. Dev., Inc. v. Benedetti, 741 P.2d 802, 804 n.2 (Nev. 1987)). “The essential elements of unjust enrichment ‘are a benefit conferred on the defendant by the plaintiff, appreciation by the defendant of such benefit, and acceptance and retention by the defendant of such benefit.” Id. (quoting Unionamerica Mortg. & Equity Tr. v. McDonald, 626 P.2d 1272, 1273 (Nev. 1981)). OpenRoad contends that the only benefit FLS alleged to have conferred upon OpenRoad was “a benefit … in the form of revenues derived from customer and carrier and employee relationships and infrastructure that … OpenRoad improperly diverted from FLS.” (ECF No. 18 at 12.) OpenRoad basically argues that the lost revenue was never FLS’s to give. This is beside the point, however. Unjust enrichment includes “the unjust retention of a benefit to the loss of another.” Coury v. Robison, 976 P.2d 518, 521 (Nev. 1999) (quoting Nevada Indus. Dev., Inc. v. Benedetti, 741 P.2d 802, 804 n.2 (Nev. 1987)). Here, FLS alleges that OpenRoad received the benefit of something that was undoubtedly FLS’s to lose—its long-term customers that Casillas recruited to OpenRoad. (ECF No. 1 at ¶¶ 53-56.) In addition, OpenRoad fails to acknowledge that FLS alleged OpenRoad received the benefit of FLS’s confidential information to FLS’s detriment. (Id. at ¶¶ 52, 68.) Accepting FLS’s allegations at true, as this Court must at the motion to dismiss stage, FLS has adequately pleaded a claim for unjust enrichment.

 

 

  1. Aiding and Abetting Breaches of Contractual and Legal Duties

*10 Defendants first argue that FLS’s aiding and abetting claim is barred because the underlying claims fail. (ECF No. 11 at 20; ECF No. 18 at 12-13.) The Court cannot dismiss FLS’s claim on this ground because the Court cannot yet conclude that FLS’s underlying claims fail as a matter of law.

 

OpenRoad argues in the alternative that FLS has failed to plead facts from which the Court can reasonably infer that the elements of the claim are satisfied. (ECF No. 18 at 12-13.) Under Nevada law, “liability attaches for civil aiding and abetting if the defendant substantially assists or encourages another’s conduct in breaching a duty to a third person.” See Dow Chem. Co. v. Mahlum, 970 P.2d 98, 112 (Nev. 1998), overruled in part on other grounds by GES, Inc. v. Corbitt, 21 P.3d 11, 15 (Nev. 2001). Thus, FLS must allege facts showing that (1) Casillas breached her contractual or legal duties to FLS; (2) OpenRoad was aware of its role in assisting or encouraging the breach; and (3) OpenRoad knowingly and substantially assisted Casillas. See G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., Inc., 460 F. Supp. 2d 1246, 1261 (D. Nev. 2006).

 

FLS has alleged facts from which the Court can reasonably infer each of these elements. FLS satisfies the first element—breach—by alleging that Casillas recruited customers to OpenRoad while employed by FLS using confidential information in violation of the Casillas Employment Agreement. (ECF No. 1 at ¶¶ 50-52.) This conclusion is supported by the fact that long-term FLS customers transitioned to OpenRoad at the same time as Casillas (and over an impossibly short time period). (Id. at ¶¶ 54-56.) FLS also satisfies the first element by alleging that Casillas recruited FLS employees to OpenRoad in violation of the Non-Solicitation Provision of the Casillas Employment Agreement. (Id. at ¶¶ 43-44.) This conclusory allegation is supported by the fact that Orozco and Dillard resigned from FLS when Casillas did (Id. at ¶ 40) and joined OpenRoad when Casillas did (See id. at ¶ 38).

 

FLS satisfies the second element—knowledge—by alleging that Casillas went to work for OpenRoad, taking FLS’s customers, carriers, and employees with her. (Id. at ¶¶ 38, 48, 50, 54-57.) It is reasonable to infer that OpenRoad knew that Casillas was using confidential information to secure former FLS customers, carriers, and employees for OpenRoad.

 

FLS satisfies the third element—substantial assistance—by alleging that OpenRoad hired Casillas. (Id. at ¶ 35.) Accepting as true the fact that Casillas used confidential information to recruit customers from FLS to OpenRoad, it is reasonable to infer that OpenRoad’s employment of Casillas constituted substantial assistance in helping her accomplish that act.

 

 

  1. Civil Conspiracy

Defendants challenge the sufficiency of the factual allegations in the Complaint. (ECF No. 11 at 20; ECF No. 18 at 13-14.) “An actionable conspiracy consists of a combination of two or more persons who, by some concerted action, intend to accomplish an unlawful objective for the purpose of harming another, and damage results from the act or acts.” Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 862 P.2d 1207, 1210 (Nev. 1993) (quoting Sutherland v. Gross, 772 P.2d 1287, 1290 (Nev. 1989)). FLS alleges details in the Complaint that reasonably give rise to the inference that conspiracy occurred. FLS alleged that FLS customers, carriers, and employees all moved from FLS to OpenRoad in the same, impossibly short, time period. (Id. at ¶¶ 38, 40, 48, 50, 54-56.) It is reasonable to infer that Casillas and OpenRoad worked together to make that happen. Casillas attributes the change to competition (ECF No. 27 at 11), but that theory fails to account for the speed and scope of the transition.

 

 

  1. CONCLUSION

*11 The Court notes that the parties made several arguments and cited to several cases not discussed above. The Court has reviewed these arguments and cases and determines that they do not warrant discussion as they do not affect the outcome of either of Defendants’ Motions.

 

It is therefore ordered that Casillas’s Motion to Dismiss (ECF No. 11) is denied.

 

It is further ordered that OpenRoad’s Motion to Dismiss (ECF No. 18) is denied.

 

DATED THIS 18th day of September 2017.

 

All Citations

Slip Copy, 2017 WL 4127980

 

 

Footnotes

1

 

See also Gaming v. Trustwave Holdings, Inc., No. 2:15-cv-02464-GMN-PAL, 2016 WL 5799300, at *5 (D. Nev. Sept. 30, 2016) (holding that economic loss doctrine did not bar claim of fraud); Las Vegas Metro. Police Dep’t v. Harris Corp., No. 2:13-cv-01780-GMN-VCF, 2014 WL 3474278, at *2 (D. Nev. July 11, 2014) (holding that economic loss doctrine did not bar claim of fraudulent misrepresentation); First Nat. Bank of Ely v. Progressive Cas. Ins. Co., No. 3:11-cv-00859-RCJ-WGC, 2012 WL 5944847, at *6 n.2 (D. Nev. Nov. 27, 2012) (holding that economic loss doctrine did not bar claim of fraud); Silver State Broad., LLC v. Beasley FM Acquisition Corp., No. 2:11-cv-01789-MMD-CWH, 2012 WL 4049481, at *5 (D. Nev. Sept. 12, 2012) (holding that economic loss doctrine did not bar claims of intentional torts including breach of fiduciary duty); Fuoroli v. Westgate Planet Hollywood Las Vegas, LLC, No. 2:10-cv-2191-JCM-GWF, 2011 WL 1871236, at *5 (D. Nev. May 16, 2011) (holding that economic loss doctrine did not bar claim of fraudulent misrepresentation); Menalco v. Buchan, No. 2:07-cv-01178-PMP-PAL, 2010 WL 428911, at *31 (D. Nev. Feb. 1, 2010) (holding that economic loss doctrine did not bar claim of fraud).

2

See also First Magnus Fin. Corp. v. Rondeau, No. 2:07-cv-132-JCM-PAL, 2012 WL 607563, at *2 (D. Nev. Feb. 24, 2012) (“The economic loss doctrine further bars breach of fiduciary duty claims premised on a contractual relationship.”); G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., Inc., 460 F. Supp. 2d 1246, 1260 (D. Nev. 2006) (concluding that a claim for breach of duty of loyalty was “subject to dismissal pursuant to the economic loss doctrine” if the defendant’s conduct were prohibited by contract). The Ninth Circuit has barred a tort claim that amounted to a breach of contract claim, though the tort was negligent rather than intentional. GCM Air Grp., LLC v. Chevron U.S.A., Inc., 386 F. App’x 717, 718 (9th Cir. 2010).

3

Moreover, dismissing the tort claim would be premature at this stage of litigation when Defendants argue the contracts in question are either unenforceable (ECF No. 11 at 12-15; ECF No. 18 at 7-9) or invalid (ECF No. 11 at 3 n.3).

 

 

 

 

 

EDWARD BUJNOCH, JUDY BUJNOCH, JOSE C. AGUILLON, AS NEXT FRIEND OF TINLEY BUJNOCH AGUILLON, A MINOR CHILD AND MONICA JANSSEN, AS DEPENDENT ADMINISTRATRIX OF THE ESTATE OF AMANDA LAUREN BUJNOCH, DECEASED, Appellants v. NATIONAL OILWELL VARCO, L.P.

Court of Appeals of Texas,

Houston (14th Dist.).

EDWARD BUJNOCH, JUDY BUJNOCH, JOSE C. AGUILLON, AS NEXT FRIEND OF TINLEY BUJNOCH AGUILLON, A MINOR CHILD AND MONICA JANSSEN, AS DEPENDENT ADMINISTRATRIX OF THE ESTATE OF AMANDA LAUREN BUJNOCH, DECEASED, Appellants

v.

NATIONAL OILWELL VARCO, L.P., Appellee

  1. 14-16-00286-CV

|

Affirmed in Part, Reversed in Part, and Remanded and Opinion filed September 21, 2017.

On Appeal from the 113th District Court

Harris County, Texas

Trial Court Cause No. 2012-71172

Panel consists of Chief Justice Frost and Justices Christopher and Wise.

 

 

OPINION

Ken Wise Justice

Amanda Bujnoch was a passenger in a vehicle that slid off the roadway and rolled over after the vehicle encountered some oil-based mud cuttings. Amanda was ejected from the vehicle and killed. National Oilwell Varco, L.P (NOV) had loaded the mud into an open-top dump trailer that was operated by an independent trucking company (Big Red). Neither Big Red nor NOV ensured that the truckload of mud had been secured before the truck departed the drill site. Appellants—Amanda’s parents, the next friend of Amanda’s minor daughter, and the administrator of Amanda’s estate—sued NOV and others for negligence and other claims.

 

NOV filed a traditional motion for summary judgment, contending that it owed no duty to Amanda as a matter of law because: Big Red had a non-delegable duty to secure the load under federal and state regulations; NOV’s internal policies did not create a duty to secure the load of an independent contractor; and it was not foreseeable that Big Red would act in a negligent manner. The trial court granted the motion.

 

We reverse the trial court’s judgment on Appellants’ negligence claim and remand for further proceedings.

 

 

  1. PRESERVATION OF ERROR IS NOT REQUIRED

Initially, NOV asks this court to affirm because Appellants have failed to preserve error for all of their issues on appeal by not raising them in the trial court. We hold that Appellants are challenging the motion as insufficient as a matter of law to support summary judgment, for which no error preservation is required. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).

 

The general rule is that a non-movant must expressly present to the trial court any reasons seeking to avoid the movant’s entitlement to summary judgment, such as those set out in Rules 93 and 94 of the Texas Rules of Civil Procedure. See id.; see also McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 343 (Tex. 1993). However, the party moving for a traditional summary judgment has the initial burden to submit sufficient evidence that establishes (1) there is no genuine issue as to any material fact and (2) the movant is entitled to judgment as a matter of law. Amedisys, Inc. v. Kingwood Home Health Care, LLC, 437 S.W.3d 507, 511 (Tex. 2014). If the movant never meets this burden, the burden never shifts to the non-movant, and the non-movant need not respond or present any evidence. Id. Summary judgments must stand or fall on their own merits. Id. A trial court may not grant summary judgment by default. Id. at 512.

 

Although a non-movant may not urge on appeal “any and every new ground that he can think of,” a non-movant need not preserve a contention that grounds presented in the motion are “insufficient as a matter of law to support summary judgment.” Clear Creek, 589 S.W.2d at 678; see also Amedisys, 437 S.W.3d at 512 (“Thus, a non-movant who fails to raise any issues in response to a summary judgment motion may still challenge, on appeal, the legal sufficiency of the grounds presented by the movant.” (quotation omitted)). For example, in Amedisys the trial court granted the plaintiff summary judgment on its breach-of-contract claim. See id. at 510. The Supreme Court of Texas held that the non-movant did not need to preserve error to argue on appeal that the plaintiff failed to show the existence of a contract. See id. at 511–12.

 

NOV had the burden to conclusively negate at least one element of Appellants’ negligence claim—in particular, the existence of a duty. See Johnson Cty. Sheriff’s Posse, Inc. v. Endsley, 926 S.W.2d 284, 285 (Tex. 1996). In its motion, NOV attempted to negate the existence of a duty in part by arguing that Big Red was a “carrier” and thus had a “non-delegable duty under federal and Texas law to secure its load safely.” NOV cited federal and Texas regulations and the decision in Texas Specialty Trailers, Inc. v. Jackson & Simmen Drilling Co., No. 2-07-228-CV, 2009 WL 2462530 (Tex. App.—Fort Worth Aug. 13, 2009, pet. denied) (mem. op.). NOV also argued that its internal company policies did not create a duty, and it was not foreseeable that Big Red would fail to secure the load before entering a public highway.

 

In their response, Appellants did not refer to any legal authorities other than the standard of review and instead focused on the evidence of NOV’s “safe work” policy requiring NOV’s employee to verify that the driver of a disposal truck secured the load before leaving the drill site.1 On appeal, however, Appellants address NOV’s arguments concerning the regulations and Texas Specialty; and Appellants contend that Big Red’s duty does not relieve NOV of its separate common law duty to use reasonable care in the loading and securing of mud.

 

We hold that Appellants’ arguments on appeal concern whether NOV met its summary-judgment burden to negate duty as a matter of law. Appellants challenge the legal sufficiency of the grounds presented in NOV’s motion. Accordingly, Appellants have not forfeited their appellate complaints by failing to make more specific arguments to the trial court. See Amedisys, 437 S.W.3d at 511–12. We will consider whether NOV negated the existence of duty as a matter of law.

 

 

  1. DUTY

Appellants contend that the trial court erred by granting summary judgment based on NOV’s argument that it had no duty to secure the load of mud. Appellants contend that NOV had a common law duty to properly secure the load of mud, regardless of federal and state regulations applicable to Big Red, and that a vehicle accident was a foreseeable result of NOV’s conduct.

 

 

  1. Standard of Review and General Principles

We review the granting of summary judgment de novo. Lightning Oil Co. v. Andarko E&P Onshore, LLC, No. No. 15-0910, 2017 WL 2200343, at *3 (Tex. May 19, 2017). NOV, as the movant, had the initial burden to submit sufficient evidence that establishes (1) there is no genuine issue as to any material fact and (2) NOV is entitled to judgment as a matter of law. See Amedisys, 437 S.W.3d at 511. We review the evidence in the light most favorable to the Appellants, as non-movants, indulging every reasonable inference in their favor and resolving doubts against the motion. Lightning Oil, 2017 WL 2200343, at *3.

 

An element of negligence is the existence of a legal duty owed by one person to another. Greater Houston Transp. Co. v. Phillips, 801 S.W.2d 523, 525 (Tex. 1990). Whether a legal duty exists under a set of facts is a question of law for the court to decide from the facts surrounding the occurrence in question. Id. In making this determination, courts “consider several interrelated factors, including the risk, foreseeability, and likelihood of injury weighed against the social utility of the actor’s conduct, the magnitude of the burden of guarding against the injury, and the consequences of placing the burden on the defendant.” Id. Foreseeability of the risk is the foremost and dominant consideration. Id.

 

 

  1. Evidence

For purposes of summary judgment, it does not appear that the parties have relied on conflicting evidence. Sanchez Oil and Gas Corporation operated a drilling rig near Flatonia, Texas, and hired NOV for solids control. NOV’s solids control operator, one of two NOV employees at the drill site, testified that it was his responsibility to load the trailers that transported mud away from the drill site. The solids control operator did not rely on the driver of the Big Red trailer regarding how to load the trailer.

 

On the night of the accident, the solids control operator spent two hours using a backhoe to load mud into Big Red’s open-top dump trailer. Big Red’s trailer did not have a tarp or cover. The solids control operator described some of the material as small, hard solids—like pebbles—with oil-based mud film on them. The rest of the material was a “thick and slimy … paste-like material.” He believed that if mud leaked onto a highway, it would pose a risk to people driving on the highway.

 

The solids control operator testified that the driver did not get out of the trailer and walk around to do any type of verification that the load was secured. The solids control operator did not verify that the driver secured the load, which the solids control operator should have done under NOV’s “safe work” procedure. The solids control operator looked at the back of the trailer, and it looked latched. But, he never put his hands on it to see how tight it was. He did not notice that the trailer was leaking mud. After he and the driver signed some paperwork, the driver left immediately.

 

The driver testified that he did not expect the solids control operator to latch the trailer or to make sure that the driver had done it. The driver did not do anything to verify that the load was secured or that the rear latches on the trailer were locked and closed before leaving the drill site. He testified, “[I]t’s just something that slipped my mind.”

 

 

  1. Big Red’s Duty to NOV Not Dispositive of NOV’s Duty to Third Parties

NOV argued in its motion for summary judgment that “Big Red, as a carrier, has a non-delegable duty under federal and Texas law to secure its load safely,” and it is “solely the carrier’s duty to secure its load prior to transporting it on public highways.” NOV relied on federal regulations and related authority applicable to commercial motor carriers. We examine these authorities but hold that they do not negate as a matter of law the negligence duty of NOV upon which Appellants seek to recover in this case.

 

NOV relied on a federal regulation that requires drivers of commercial motor vehicles to secure their cargo.2 NOV also relied on the Fort Worth Court of Appeals’ decision in Texas Specialty Trailers, Inc. v. Jackson & Simmen Drilling Co., No. 02-07-228-CV, 2009 WL 2462530 (Tex. App.—Fort Worth Aug. 13, 2009, pet. denied) (mem. op.). This case involved a suit by the shipper against the carrier after the carrier’s trailer separated from the vehicle and rolled into a ditch, damaging the shipper’s property and causing lost profits. See id. at *1. Relying on the same regulations cited by NOV and the common law, the court of appeals reasoned that carriers are “solely responsible for distributing and loading cargo,” and carriers are generally “ ‘fully’ liable for any loss or injury to property occurring during transport.” Id. at *7. The court noted that carriers may avoid this liability by showing that the loss or injury at issue was caused solely by the fault of the shipper. Id. “This exception to carrier liability, however, only applies when the shipper assumes the carrier’s responsibility for loading and securing the cargo.” Id. The court of appeals noted that there was evidence that the carrier admitted it was responsible for loading and securing the cargo. Id. at *7–8. The carrier’s employee testified that the shipper only rendered assistance and did whatever the carrier directed the shipper to do. Id. at *7. Because the shipper had no duty as a matter of law with regard to loading the cargo under the evidence presented, the court of appeals held that the trial court did not err by failing to submit jury issues regarding the shipper’s proportionate responsibility. Id. at *8.

 

Texas Specialty applied the common law duty a carrier owes to a shipper for damaged cargo, sometimes referred to as the “Savage rule.” See id. at *7 & nn.65–67 (citing United States v. Savage Truck Line, Inc., 209 F.2d 442, 445–47 (4th Cir. 1953), and Mo. Pac. R.R. Co. v. Elmore & Stahl, 368 S.W.2d 99, 101 (Tex. 1963), aff’d, 377 U.S. 134 (1964)).3 Under the common law, a carrier’s liability for damage to cargo is similar to that of an insurer’s. See Savage Truck Line, 209 F.2d at 445; Elmore & Stahl, 368 S.W.2d at 102. If a loss is not due to one of several exceptions, it is immaterial whether the carrier has exercised due care or was negligent. Elmore & Stahl, 368 S.W.2d at 101. One of the exceptions is the fault of the shipper. Id.4

 

The common law Savage rule and the subsequent federal regulations are consistent because they require drivers to inspect the security of cargo both before driving a truck and during transport. See Smart v. Am. Welding & Tank Co., 826 A.2d 570, 575 (N.H. 2003). The Savage rule and attendant regulations reflect the “everyday practice and understanding in the trucking business … that carriers logically should have the final responsibility for the loads that they haul.” Decker v. New England Pub. Warehouse, Inc., 749 A.2d 762, 766–67 (Me. 2000) (“The Savage rule simply extends the industry’s reasonable understanding to negligence suits involving carriers and shippers.”); accord Vargo-Schaper v. Weyerhaeuser Co., 619 F.3d 845, 849 (8th Cir. 2010); Smart, 826 S.2d at 573–74. Outside of Texas, the rule has been extended beyond cases involving damage to cargo, including cases where employees of carriers have sustained personal injuries. Decker, 749 A.2d at 767.

 

But the parties do not cite, and this court has not found, any case applying the Savage rule and attendant regulations to negate a defendant’s duty owed to innocent third parties, such as Amanda Bujnoch. Some courts have reasoned that the Savage rule would not apply under these circumstances:

The situation would be markedly different in a case involving a party outside of the trucking industry. Pedestrians and non-commercial motorists, to name two possible third parties, injured in an accident caused by a shipper’s negligent loading of cargo would still be able to sue that shipper for compensation despite the Savage rule. Shippers could not rely on Savage to bar claims from those not involved in the industry and who had no opportunity to remedy any negligence.

Id. at 767 n.3; accord Syngenta Crop Prod., Inc. v. Doyle Brant, Inc., No. 3:06-CV-84-S, 2008 WL 167293, at *3 (W.D. Ky. Jan. 16, 2008) (denying summary judgment because the Savage rule was inapplicable to an injured party who was not involved in the trucking industry and had no opportunity to ensure that chemicals were properly loaded on the trailer).5

 

In sum, the common law rules regarding a carrier’s liability to a shipper, as reflected in Texas Specialty and attendant regulations, govern the rights and liabilities among carriers and shippers. But this case involves personal injury to an innocent third party with no connection to the trucking industry—someone who had no opportunity to remedy any negligence. Thus, we are not persuaded that NOV’s authorities negate duty as a matter of law in this case. We now turn to the issue of whether NOV owed a duty to Amanda under the familiar duty principles.

 

 

  1. NOV’s Duty to Use Reasonable Care in the Rendering of Services

NOV argued in its motion for summary judgment that (1) it did not “owe the traveling public a duty to inspect or ensure that Big Red, an independent contractor, secured its load prior to entering a public road or highway”; (2) NOV’s safe-work policy did not create a duty when none otherwise existed; and (3) it was not foreseeable that the driver would fail to exercise due care and secure his load before entering a public highway. Appellants contend that NOV owed Amanda a duty to exercise reasonable care in loading and securing the mud and that NOV undertook to perform a duty owed by another to Amanda.

 

Texas law generally imposes no duty to take action to prevent harm to others absent certain special relationships or circumstances. Torrington Co. v. Stutzman, 46 S.W.3d 829, 837 (Tex. 2000). Thus, as a matter of law, a mere bystander who did not create a dangerous situation is not required to become a good Samaritan and prevent injury to others. Id. (citing SmithKline Beecham Corp. v. Doe, 903 S.W.2d 347, 353 (Tex. 1995)). But, if a party negligently creates a dangerous situation, the party then has a duty “to do something about it to prevent injury to others if it reasonably appears or should appear to him that others in the exercise of their lawful rights may be injured thereby.” Id. (quoting SmithKline Beecham, 903 S.W.2d at 353). One who acts may thereby become subject to the duty of acting carefully. Fort Bend Cty. Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 396 (Tex. 1991) (citing Glanzer v. Shepard, 135 N.E. 275, 276 (N.Y. 1922)). Thus, “a duty to use reasonable care may arise when a person undertakes to provide services to another.” Torrington, 46 S.W.3d at 837.

 

As to third parties, specifically, the Restatement (Second) of Torts § 324A states the rule:

One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of a third person or his things, is subject to liability to the third person for physical harm resulting from his failure to exercise reasonable care to protect his undertaking, if … he has undertaken to perform a duty owed by the other to the third person[.]

Restatement (Second) of Torts § 324A (1965), quoted in Sbrusch, 818 S.W.2d at 396.

 

The First Court of Appeals has relied on the Restatement to uphold a duty for a defendant who supervised the loading of a pipe when the pipe later fell off a moving truck and killed another driver. See C & H Nationwide, Inc. v. Thompson, 810 S.W.2d 259, 267 (Tex. App.—Houston [1st Dist.] 1991), rev’d in part on other grounds, 903 S.W.2d 315 (Tex. 1994). In that case, Shell hired C & H Nationwide to transport Shell’s pipe from Energy Coatings’ facility after Energy Coatings had coated the pipe with epoxy. See id. at 262. Shell also hired Ecotech to “monitor the coating process and monitor the loading and securing of the pipe to ensure the coating was not damaged.” Id. Energy Coatings loaded the pipe onto the tractor trailer, and C & H Nationwide secured it with straps. Id. The court of appeals upheld the jury’s verdict against Ecotech despite Ecotech’s argument that it owed no duty to the decedent. See id. 266–67.

 

The court of appeals reasoned that “a duty arises when a person’s conduct poses a foreseeable risk to another that could be avoided by the exercise of ordinary care.” Id. at 266. The court also noted that a person should exercise ordinary care to avoid harm if a reasonable person would recognize that his conduct poses a risk of harm to another. Id. The court held that Ecotech could “foresee that if the pipe was not safely secured, the pipe might come off the trailer in transit and injure another motorist.” Id. at 267. And, “Ecotech could foresee that its conduct in supervising the loading of the pipe could create a risk of harm to another and that risk of harm could be avoided by exercising ordinary care in its conduct.” Id. Thus, the decedent was within the scope of Ecotech’s duty to exercise ordinary care in supervising the loading of the pipe. Id.

 

Also relying on the Restatement, the Dallas Court of Appeals reversed the trial court’s summary judgment for the defendant in Steward v. Costello, No. 05-02-00679-CV, 2003 WL 115453, at *1 (Tex. App.—Dallas Jan. 14, 2003, no pet.) (mem. op.). A customer purchased some pipes from Kaufman Pipe and Supply, and Kaufman’s employee assisted the customer in loading the pipe onto a flatbed trailer. Id. The customer secured the pipes to the trailer, and Kaufman’s employee measured the pipes extending over the end of the trailer to determine whether they required red flags. See id. at *1 & n.1. He told the customer that it was “legal,” and the customer left. Id. at *1. The plaintiff collided with the trailer and was injured by the pipes. Id. The plaintiff sued Kaufman and alleged that Kaufman was negligent by failing to ensure the pipes were properly secured and failing to put a red flag on the pipes. Id.

 

In Steward, the parties did not dispute that the customer had a duty to secure the pipes to the trailer and attach a red flag if they extended too far past the trailer. Id. at *2. The issue was whether Kaufman assumed this duty. Id. The court of appeals upheld Kaufman’s duty to the plaintiff because the Kaufman employee’s “job duties included loading pipe purchased from Kaufman into the customer’s vehicle,” and the employee “knew it was necessary to secure the pipe in order to prevent injury to third parties.” Id.

 

Here, the parties do not dispute that Big Red, as a carrier, ordinarily has the duty to load and secure cargo. See Texas Specialty, 2009 WL 2462530, at *7. NOV’s solids control operator testified, however, that it was NOV’s responsibility to load the open-top dump trailer with mud. As part of this responsibility, the solids control operator testified that he was supposed to verify that the driver had secured the load of mud. Yet, the solids control operator testified that the driver did not get out of the trailer or verify that the load was secured. And, the solids control operator recognized that if mud leaked onto a highway, it would pose a risk to people traveling on the highway, like Amanda Bujnoch.

 

NOV was not a mere bystander in this case. NOV, having undertaken the duty to load the mud, was required to use reasonable care in doing so to prevent an unreasonable risk of harm to other motorists who would be affected if the load was inadequately secured. Cf. Golden Spread Council, Inc. No. 562 of Boy Scouts of America v. Akins, 926 S.W.2d 287, 292 (Tex. 1996) (holding that the defendant, having undertaken to recommend someone for a position, had a duty to use reasonable care in doing so to prevent an unreasonable risk of harm to others who would be affected). By loading mud into an open-top dump trailer and foreseeing that spillage could cause injury to motorists, NOV had a duty “to do something about it to prevent injury to others.” See Torrington, 46 S.W.3d at 837. NOV’s loading the mud into an open-top dump trailer without allegedly securing the load or verifying that the load was secured, and with knowledge that the trailer would traverse Texas highways, posed a foreseeable risk to other motorists. See Thompson, 810 S.W.2d at 266. A reasonable actor in NOV’s position would recognize that its conduct posed a risk of harm to others. See id.

 

NOV contends that there is “no evidence cited by Appellants that NOV could foresee that [the driver] would not exercise due care and secure his load before entering a public highway.” But the analysis of foreseeability concerns the “risk of harm (injury) to others,” not whether another actor with a duty will fulfill that duty. See Phillips, 801 S.W.2d at 527. It is only in “exceptional cases” that a party with a duty may shift the “entire responsibility for the situation” to another; this is not one of those cases. See Restatement (Second) of Torts § 452, cmt. d–e (1965) (noting that when “the personal safety of third persons is threatened, it is probably true that normally any duty to exercise reasonable care for their protection cannot be shifted”). Regardless, Appellants have cited to sufficient evidence to raise a fact issue on the foreseeability of whether the driver would secure the load of mud. For example, NOV had a “safe work” procedure to verify that truck drivers secured their loads, and NOV knew that the driver did not get out of the truck and walk around to do any type of verification that the load was secure. Cf. Thompson, 810 S.W.2d at 267 (duty to third-party motorist established by undertaking to monitor the loading and securing of cargo performed by others).

 

Finally, NOV cites several cases concerning the duty a landowner owes to the traveling public on roads adjacent to their land.6 In each case, the court declined to place a duty on landowners to prevent accidents when motorists collided near the property. In Naumann for example, upon which NOV principally relies, a tractor-trailer was loaded with cargo at the landowner’s premises. 749 S.W.2d at 190. When the tractor-trailer left the premises, it made a right turn onto a two-lane road and blocked both lanes of traffic in the process. Id. Another driver struck the tractor-trailer. Id. The court of appeals held that the landowner owed no duty to the motorist because “a landowner’s duty to exercise reasonable care not to endanger the safety of persons on an abutting highway does not create an obligation to guard passing motorists against the possible negligence of an independent contractor over whom the landowner exercises no control and whose competence to perform his duties the landowner has no reason to doubt.” Id. at 191–92. Critically, the dangerous situation in Naumann was not created by the landowner. Id. at 192. The landowner was a “mere bystander who did not create the dangerous situation.” Id. “The same dangerous situation exists every time a tractor-trailer makes a right turn at an intersection of two-laned roads.” Id.

 

NOV’s landowner cases involve failures of the drivers to exercise due care while driving or parking on roadways, and the landowners had no reason to foresee that the drivers would act negligently. Here, NOV’s duty concerns conduct at the drilling site when NOV loaded the mud into an open-top dump trailer. Unlike in Naumann, NOV participated in creating the dangerous situation that led to the injury: NOV placed on a trailer, which NOV knew would traverse Texas highways, material that NOV knew could cause a hazard to other motorists if it was inadequately secured.

 

In sum, NOV did not meet its summary-judgment burden to negate duty as a matter of law. The trial court erred by granting summary judgment on NOV’s negligence claim.7

 

 

III. CONCLUSION

Having sustained Appellants’ issues concerning summary judgment on their negligence claim, we reverse that portion of the trial court’s judgment and remand for further proceedings.

 

All Citations

— S.W.3d —-, 2017 WL 4197451

 

 

Footnotes

1

In light of NOV’s arguments, Appellants’ response would not have been particularly helpful to the trial court. See Clear Creek, 589 S.W.2d at 678 (noting that it would be “prudent and helpful to the trial court” for a non-movant to file a response challenging the sufficiency of the motion for summary judgment).

2

The regulation, incorporated into Texas law, provides as follows:

(a) General. A driver may not operate a commercial motor vehicle and a motor carrier may not require or permit a driver to operate a commercial motor vehicle unless—

(1) The commercial motor vehicle’s cargo is properly distributed and adequately secured as specified in §§ 393.100 through 393.136 of this subchapter.

….

(b) Drivers of trucks and truck tractors. Except as provided in paragraph (b)(4) of this section, the driver of a truck or truck tractor must—

(1) Assure himself/herself that the provisions of paragraph (a) of this section have been complied with before he/she drives that commercial motor vehicle;

49 C.F.R. § 392.9; see also 37 Tex. Admin. Code § 4.11 (“The director of the Texas Department of Public Safety incorporates, by reference, the Federal Motor Carrier Safety Regulations, Title 49, Code of Federal Regulations, Parts … 390–393 … including all interpretations thereto ….”).

3

See generally Whiteside v. United States, No. 1:11-CV-154, 2013 WL 2355522, at *6–7 (E.D. Tex. May 28, 2013).

4

“Some courts have qualified [this] exception by holding the carrier liable even for damages resulting from the negligence of the shipper in loading, where such improper loading was known by the carrier at the time the shipment was accepted.” Abbott v. Tompkins, 283 S.W. 647, 648 (Tex. Civ. App.—Texarkana 1926, no writ); see Savage Truck Line, 209 F.2d at 445 (“When the shipper assumes the responsibility of loading, the general rule is that he becomes liable for the defects which are latent and concealed and cannot be discerned by ordinary observation by the agents of the carrier; but if the improper loading is apparent, the carrier will be liable notwithstanding the negligence of the shipper.”).

5

Furthermore, at least one court has held that the Savage rule and federal regulations did not negate the duty of a shipper in a case involving a contribution claim asserted by the carrier against the shipper after they had settled with injured third parties. See Locicero v. Interspace Corp., 266 N.W.2d 423, 425, 427 (Wis. 1978) (holding that the Savage rule and federal regulations impose a duty on the carrier to secure the load safely, “but they do not relieve those who breach a common law duty of care from liability for their negligence and their comparative share of the resulting damages”—in particular, they do not relieve a shipper from “common law or contractual liability for causing an unsafe load”).

6

NOV cites the following cases: Heubotter v. Diamond Shamrock Refining Co., No. 04-99-00243-CV, 1999 WL 1244422 (Tex. App.—San Antonio Dec. 22, 1999, no pet.) (not designated for publication); Lawson v. B Four Corp., 888 S.W.2d 31 (Tex. App.—Houston [1st Dist.] 1994, writ denied); Dixon v. Houston Raceway Park, Inc., 874 S.W.2d 760 (Tex. App.—Houston [1st Dist.] 1994, no writ); Carter v. Steere Tank Lines, Inc., 835 S.W.2d 176 (Tex. App.—Amarillo 1992, writ denied); Naumann v. Windsor Gypsum, Inc., 749 S.W.2d 189 (Tex. App.—San Antonio 1988, writ denied).

7

On appeal, Appellants challenge the summary judgment regarding their negligence claim only, not any of their other claims.

 

 

 

 

© 2017 Central Analysis Bureau