H.B. Fuller Company v. Hamm

Background

H.B. Fuller alleged that Timothy Hamm, a former sales manager, breached contractual and common-law duties and violated federal and state trade-secret laws by improperly collecting and using H.B. Fuller’s proprietary information for the benefit of his new employer, IFS Industries, Inc. Hamm had signed a Non-Disclosure and Non-Competition Agreement requiring him to protect H.B. Fuller’s confidential information and restricting certain competition for 12 months after his employment ended.

After Hamm left H.B. Fuller for a job with a competitor, a forensic review identified company files on personal devices and accounts in his possession. A later preliminary forensic review found hundreds of H.B. Fuller files on USB drives, in personal email, and on an iPhone. It also found that Hamm accessed at least 31 files on four occasions after joining IFS, apparently using an IFS-issued laptop. H.B. Fuller alleged that some files contained sensitive customer, pricing, and rebate information and that IFS later proposed pricing to one customer that was just below H.B. Fuller’s pricing.

H.B. Fuller moved to amend its complaint to add those factual allegations and two new claims: breach of the non-compete provisions of the agreement and specific performance, which is a court order requiring a party to carry out a contractual duty. Hamm opposed adding the new claims, arguing that the proposed allegations did not plausibly connect him to soliciting the customer, helping IFS compete, or using H.B. Fuller’s confidential information.

Legal standard

Under Federal Rule of Civil Procedure 15(a)(2), courts should generally allow amendments when justice requires, but may deny leave because of undue delay, bad faith, prejudice, repeated failure to fix deficiencies, or futility. An amendment is futile if the proposed complaint could not survive a motion to dismiss for failure to state a claim under Rule 12(b)(6). At that stage, the court accepts well-pleaded factual allegations as true but requires facts supporting a plausible claim rather than merely a possible one.

Court’s analysis

The court concluded that H.B. Fuller adequately alleged that a non-compete contract existed and that H.B. Fuller performed its own contractual obligations. The problem was the allegation of breach. Retaining confidential files, by itself, supported H.B. Fuller’s existing claim that Hamm improperly retained confidential information, but did not show that he used the information to compete.

The court found that the proposed complaint did not explain what “accessed” meant, did not clearly allege that Hamm accessed or used sensitive pricing information about the relevant customer, and did not allege facts showing that Hamm directly helped IFS pursue that customer. The allegations were consistent with a breach of the non-compete agreement, but they did not allow the court to infer more than the possibility of misconduct. The court expressly did not base its decision on the argument that H.B. Fuller failed to plead specific damages; it stated that damages need not be pleaded at this stage under the Minnesota authorities discussed in the opinion.

Disposition

The court granted H.B. Fuller’s motion to the extent it sought to add the new factual allegations because those allegations could relate to the claims already in the complaint. It denied without prejudice the request to add the new non-compete breach and specific-performance claims, leaving open the possibility that additional information obtained in discovery could support a later amendment. The order states that the motion was “GRANTED IN PART AND DENIED WITHOUT PREJUDICE IN PART.”