H.B. Fuller Company v. Hamm
- Donovan Frank
- 0:17-cv-05562
- U.S. District Court · District of Minnesota
- 19
In H.B. Fuller Co. v. Hamm, Judge Bowbeer allowed added facts but denied without prejudice new non-compete claims as inadequately pleaded.
H.B. Fuller may add the new factual allegations, but the order does not allow it to add the proposed non-compete-breach and specific-performance claims at this stage; Timothy Hamm opposed adding those claims.
What happened
H.B. Fuller Co. v. Timothy Hamm concerns H.B. Fuller’s request to add facts based on a forensic review of Hamm’s devices and accounts. H.B. Fuller alleged that Hamm kept company information after leaving and accessed some files while working for IFS Industries, Inc.
H.B. Fuller also sought to add claims that Hamm breached his non-compete agreement and that the court should order him to comply with it. Hamm argued those claims were based only on speculation because the proposed allegations did not show that he used the information to compete or helped IFS solicit a customer.
Judge Hildy Bowbeer granted the motion in part, allowing the additional factual allegations, but denied without prejudice the request to add the two new claims. The court ruled that the allegations were consistent with a possible breach but did not provide enough facts to make the proposed claims plausible.
The detailed version
- H.B. Fuller Company v. Hamm · No. 0:17-cv-05562
- Donovan Frank
- Aug. 27, 2018
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 the company’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 imposing certain competition restrictions for 12 months after his employment ended.
After Hamm left H.B. Fuller, a forensic examination of his company laptop found that he had used a personal email account, inserted a USB drive, and “accessed” company files. A later preliminary forensic review found H.B. Fuller files on USB drives, in personal email, and on Hamm’s iPhone. The proposed amended complaint alleged that Hamm accessed at least 31 files on four occasions after joining IFS, including files relating to two customers. It also alleged that IFS later proposed pricing to one customer that was just below H.B. Fuller’s pricing.
Motion to Amend
H.B. Fuller asked to add factual allegations and two claims based on the non-compete provisions of the agreement: breach of contract and specific performance, meaning a court order requiring compliance with a contractual duty. H.B. Fuller argued that the forensic findings supplied facts supporting those claims.
Hamm opposed adding the new claims, arguing that the allegations did not plausibly connect his conduct to competition against H.B. Fuller. He emphasized that the proposed complaint did not explain what “accessed” meant, did not allege that the two customer files contained pricing information, and did not allege that Hamm solicited the customer or directly assisted IFS. He also argued that H.B. Fuller had not adequately alleged damages.
Court’s Analysis
Under Federal Rule of Civil Procedure 15(a)(2), courts should generally allow amendments when justice requires, but may deny amendments for reasons including futility. An amendment is futile if the amended 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 enough facts to support a plausible claim rather than merely a possible one.
The court found that H.B. Fuller adequately alleged the existence of the agreement and its own performance of contractual conditions. But the court concluded that the proposed allegations did not adequately show that Hamm breached the non-compete provisions. The allegations showed that Hamm retained hundreds of H.B. Fuller files and later accessed 31 files, some involving confidential information. However, the proposed complaint did not specify what “accessed” meant, did not clearly identify confidential or pricing information in the two Customer B files, and did not allege that Hamm actually accessed or used confidential pricing information about that customer.
The court also found no sufficient allegation that Hamm helped IFS compete for Customer B’s business. IFS’s proposal with pricing just below H.B. Fuller’s pricing could have had explanations other than Hamm’s use of confidential information, including information obtained directly from the customer. The court therefore held that the allegations were suggestive and consistent with a non-compete violation, but did not allow an inference beyond the mere possibility of misconduct.
The court separately rejected Hamm’s argument that the proposed claim had to be denied because H.B. Fuller had not pleaded specific damages. It stated that, under the cited Minnesota authority, a plaintiff may not need to plead damages at the contract-claim stage and that H.B. Fuller had alleged significant damages.
Disposition
The court granted H.B. Fuller’s motion in part, allowing the complaint to be amended to include the new factual allegations. Judge Hildy Bowbeer denied without prejudice the remainder of the motion, including the request to add claims for breach of the non-compete obligations and specific performance of those obligations. The order states that additional information from discovery might later provide a plausible basis for seeking to add such a claim.
Read the full 19-page opinion on CourtListener, the free public archive maintained by the Free Law Project.