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Aaron, Bell International, Inc. v. Rowell

United States District Court, D. Colorado

October 17, 2019

AARON, BELL INTERNATIONAL, INC., a Colorado corporation, Plaintiff,
v.
JOHN ROWELL, an individual, Defendant.

          ORDER

          R. BROOKE JACKSON UNITED STATES DISTRICT JUDGE

         This matter is before the Court on defendant John Rowell's motion for summary judgment. ECF No. 47. For the reasons discussed herein, the motion is granted in part and denied in part.

         BACKGROUND

         Plaintiff Aaron, Bell International, Inc., (“ABI”) is an investment banking service provider. It initiated this action against Defendant John Rowell, ABI's former executive vice president, chief operating officer, and managing director. ABI claims that Mr. Rowell intentionally interfered with ABI's business operations, primarily a transaction ABI had developed for its client, Skilcraft, LLC (“Skilcraft”). It also claims that Mr. Rowell misappropriated and disclosed trade secrets and other confidential information.

         Mr. Rowell joined ABI in 2016. ECF No. 47 (Defendant John Rowell's Motion for Summary Judgment). He alleges that shortly after he began, ABI president Ralph Bellizzi became “belligerent and hostile, repeatedly berating and degrading Mr. Rowell.” Id. Mr. Rowell no longer wished to work for ABI and executed a “Transition Employment Agreement and Release of All Claims” (“transition agreement”) with ABI on September 9, 2017. ECF No. 13 (Transition Agreement). Under the agreement, Mr. Rowell would continue to finish ongoing projects. His employment would cease either ten days after all “transition deals have been completed, ” “as agreed mutually in writing, ” or for cause. Id. The agreement also included a confidentiality provision, a two-year non-competition provision, and a non-disparagement provision. Id.

         During the transition period, Mr. Rowell was expected to finish a transaction for the sale of Skilcraft. Id. During his work on Skilcraft, Mr. Rowell generated two letters of interest as well as two letters of intent from potential buyers interested in purchasing Skilcraft. ECF No. 50 (Declaration of Ralph Bellizzi on behalf of ABI); ECF No. 47. Despite these offers, on December 5, 2017 Skilcraft terminated its agreement with ABI. ECF No. 49 (Plaintiff ABI's Response to Motion for Summary Judgment).

         A central question in this dispute is why Skilcraft chose to terminate. Mr. Rowell alleges that it had nothing to do with him. He asserts that he made diligent efforts to generate interest in the sale, shown by the multiple letters of interest and purchase offers for Skilcraft he received. ECF No. 47. He claims that despite his diligence, Skilcraft decided the offers were lower than desired, and that it was no longer interested in trying to sell. Id. Mr. Rowell points to testimony by Skilcraft's CEO and Rule 30(b)(6) representative John Zurborg to support this argument. ECF No. 47-1 (Deposition of John Zurborg). Mr. Zurborg testified that Skilcraft terminated its relationship with ABI only because it did not receive the value it had hoped for from the offers, not because of anything Mr. Rowell said or did. Id. at 59:19-21, 66:4-9. He further testified that he believed Mr. Rowell gave his best effort to try to create a transaction for Skilcraft while working for ABI. Id. at 41: 18-21. The letters of intent, according to Zurborg, offered purchase prices of approximately $28 million and $27 million respectively. Id. at 51:3-52:20. Yet Skilcraft was hoping for a differently structured transaction with a purchase price of at least $30 million. Id. at 51:14-15. Mr. Zurborg explained that the prices Mr. Rowell and ABI generated were likely hampered by concerns over Skilcraft's projected earnings and by Skilcraft's unionization. Id. at 53:7-9, 53:21-54:7.

         In contrast, ABI says that the Skilcraft deal fell through because of Mr. Rowell. It alleges that Mr. Rowell disparaged ABI to Skilcraft in an attempt to undermine ABI's agreement with Skilcraft and enrich himself. ABI claims it discovered this disparagement from former ABI employee Chuck Caswell. As evidence, ABI submitted a declaration of ABI president Ralph Bellizzi. ECF No. 50. According to Mr. Caswell, Mr. Rowell told Skilcraft that ABI was “grossly understaffed, ” “lacked sufficient resources to service Skilcraft's transaction, ” “did not prioritize Skilcraft's needs, ” and “was incapable of meeting Skilcraft's needs.” Id.

         ABI also alleges Mr. Rowell disclosed confidential and trade secret information about the Skilcraft deal to a competitor, First Line Advisors, LLC., (“First Line”). ECF No. 49. In January of 2018, ABI discovered an email sent by Patrick Vaughan of First Line. The email, sent on January 2, 2018 by Mr. Vaughan to the email “jrowell@aaron*bell.com, ” reads:

John, Thank you for taking the time to speak with me today re: Skilcraft. As a follow-up, I'd like to discuss potential next steps tomorrow with you and my colleague, Alison Kennedy. Please let me know how your schedule looks and we can arrange a call. Finally, can you please reply to this email to confirm you received this? Best, Patrick

ECF No. 50-10. Mr. Rowell says he did not receive this email, which seems likely because Mr. Rowell's email at ABI was “jrowell@aaron-bell.com” and not “jrowell@aaron*bell.com.” ECF No. 47. ABI does not allege that Mr. Rowell either received the email or responded to it. ECF No. 49.

         On January 10, 2018 ABI sent Mr. Rowell a letter terminating him for cause. ECF No. 47-1. The letter laid out allegations that Mr. Rowell had breached his transition agreement and demanded that Mr. Rowell return ABI “documents, ESI, and tangible things” in his possession and submit his devices to a forensic examination. Id.

         During discovery for this case, ABI also uncovered another email. This one was sent on January 4, 2018 by Mr. Vaughan to Mr. Zurborg at Skilcraft. Id. It reads:

John, We have a client who has an interest in your fabrication division. Upon some hunting, we learned that you are being represented by John Rowell, and therefore reached out to him. My colleague made a couple of attempts, leaving multiple voicemail messages. No. response. I also called John, and finally was able to reach him. He informed me that you may be “close” to finishing the transaction, therefore I asked for clarity if he wanted to speak further or if the deal was done. He said he would contact me the next morning but I never heard from him. Based on the transaction being close to the finish line, I tried calling him multiple times. my last attempt, he sent me a text to leave him alone. Based on this, I decided I would reach out to you directly to see if you are interested in a potential investment in/buyout of your fabrication division. Please let me know if there is room to get a seat at the table or if you already have decided on the right partner. Thank you very much in advance for reading my email, and I look forward to hearing from you. Best, Patrick.

Id.

         ABI also produced electronic records of an ABI communication log detailing a December 19, 2017 call between Skilcraft's Mr. Zurborg and ABI's Mr. Caswell. The subject of the communication was described in the ABI log as “Discuss Engagement Termination.” ECF No. 50-8.

         Based on these allegations, ABI brings six claims against Mr. Rowell. ABI claims (1) Mr. Rowell breached the transition agreement by (a) failing to maintain confidentiality of the existence and details of the Skilcraft transaction; (b) attempting to usurp and divert the Skilcraft transaction; (c) disparaging ABI to Skilcraft, and (d) failing to timely return ABI's information after termination; (2) Mr. Rowell misappropriated its trade secrets; (3) Mr. Rowell commercially disparaged ABI; (4) Mr. Rowell breached his duty of loyalty to ABI; (5) Mr. Rowell interfered with ABI's contracts and prospective business advantages; (6) Mr. Rowell unjustly enriched himself. ECF No. 49.

         STANDARD OF REVIEW

         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” Id. at 249-50. (internal citations omitted). The Court will examine the factual record and make reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).

         ANALYSIS

         A. Breach of Contract

         To recover on its Colorado state law breach of contract claim, ABI must prove (1) the existence of a contract (the transition agreement); (2) that ABI performed under the contract; (3) that Mr. Rowell failed to perform under the contract; and (4) resulting damages. Long v. Cordain, 343 P.3d 1061, 1067 (Colo.App. 2014). The parties do not dispute the first two elements. However, ABI claims Mr. Rowell failed to perform under his transition agreement and such failure resulted in damages. ABI asserts four theories of breach: that Mr. Rowell (a) breached the confidentiality provision; (b) attempted to usurp and divert the Skilcraft deal; (c) disparaged ABI to Skilcraft; and (d) failed to return ABI information as required. ECF No. 49. I address each theory and corresponding damages argument in turn.

         1. Confidentiality

         ABI claims Mr. Rowell breached the confidentiality provision by disclosing the existence of the Skilcraft deal and some of its details. ECF No. 4 (Plaintiff ABI's Compliant). ABI alleges that these disclosures “caused Skilcraft to terminate its relationship with ABI and to continue to not do business with ABI, ” which in turn caused ABI damages. ECF No. 49. In response, Mr. Rowell argues he did not disclose any confidential information about the Skilcraft deal, and that ABI cannot prove damages. ECF No. 47.

         a. Disclosure of Confidential Information

         The confidentiality provision in the transition agreement requires that the “employee will hold in strictest confidence and not disclose Confidential Information . . . to anyone who is not an employee of ABI or to any employee of ABI that does not have access to said Confidential Information without express written permission from ABI's President.” ECF No. 13. The agreement defines confidential information as “any trade secrets or ABI proprietary information, including, but not limited to techniques, processes, operating methods, cost, pricing, financial data, business plans, and proposals, customer lists, data and information that ABI received in confidence from any other party, or any other secret or confidential matters of ABI.” Id.

         ABI asserts that the very existence of its deal with Skilcraft is confidential information. It explains that “in the private M&A industry, clients, potential clients, deals, potential deals, and, essentially, everything related to our work, is highly confidential.” ECF No. 50. It seems to me that whether the existence of the deal was “confidential information” is a factual question ABI would have to prove at trial. However, Mr. Rowell has not argued that the existence of the deal was not covered by the confidentiality provision.

         To show that Mr. Rowell disclosed the existence of the deal, ABI points to the first Vaughan email, in which Mr. Vaughan states “[t]hank you for taking the time to speak with me re: Skilcraft.” ECF No. 50-10. ABI argues that this demonstrates that Mr. Rowell disclosed or at least acknowledged the Skilcraft deal's existence to Mr. Vaughan. ECF No. 49. This email could be read two ways: either to suggest that Mr. Rowell told Mr. Vaughan that the Skilcraft deal existed, or, in light of the other evidence, to suggest that Mr. Vaughan pestered Mr. Rowell for details about the Skilcraft deal to no avail. Yet I must take all evidence in the light most favorable to ABI, and so I find that a reasonable jury could conclude from this that Mr. Rowell disclosed that the Skilcraft deal existed.

         To show that Mr. Rowell disclosed details of the deal, ABI points to the second Vaughan email. Id. In that email Mr. Vaughan states that he discovered Skilcraft was represented by Mr. Rowell, and that the Skilcraft deal was “close” to finishing a transaction. Id. This is the only detail ABI can point to. It presents no specific facts showing Mr. Rowell disclosed any other details of the Skilcraft transaction. Despite this, ABI has at least raised a genuine dispute about whether Mr. Rowell told Mr. Vaughan that the transaction was close to finishing.

         b. Damages

         ABI claims that it incurred damages due to Skilcraft's termination of its agreement in December of 2017. If Skilcraft had accepted one of the offers ABI generated, Skilcraft would have owed ABI a significant fee. ECF No. 50. ABI also claims lost resources dedicated to the Skilcraft transaction. Id. All of ABI's damages are tied to the loss of the Skilcraft deal. This means ABI must show that the alleged breaches caused ABI's loss.

         I find that there is no genuine dispute as to whether Mr. Rowell's alleged breaches in confidentiality caused ABI's loss, because the evidence submitted indicates that they did not occur until after Skilcraft's termination. Skilcraft terminated the agreement on December 5, 2017. ECF No. 49. Both the disclosure of the deal and its details are alleged to have occurred in a conversation with Mr. Vaughan preceding the first Vaughan email, sent January 2, 2018. ECF No. 50-10. In that email, Mr. Vaughan thanks Mr. Rowell for speaking with him “today, ” suggesting that conversation occurred on January 2 as well. Taking Mr. Vaughan at his word, as ABI asks me to do, there is no question to submit to the jury as to whether Mr. Rowell's breaches of confidentiality caused ABI's damages from loss of the Skilcraft agreement.

         2. Non-Competition

         Next, ABI claims that Mr. Rowell breached his transition agreement by attempting to usurp the deal the Skilcraft deal for his own benefit and divert the deal to ABI's competitor, First Line. ECF No. 49. In response, Mr. Rowell argues there is no evidence he attempted to do either, and ABI cannot prove damages. ECF No. 47.

         a. Usurping and Diverting Mr. Rowell's transition ...


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