CH Bus Sales, Inc. v. Geiger

Background

CH Bus Sales, Inc. (CHB) sued Duane Geiger and REV Group, Inc. CHB alleged that Geiger had violated employment and shareholder-related obligations after resigning from CHB and beginning work for REV, which CHB described as a competitor. Geiger had held senior positions at CHB, including President and CEO, and retained a minority ownership interest in CHB.

The employment agreement included confidentiality, non-solicitation, and non-compete provisions. The non-solicitation and non-compete provisions applied during Geiger’s employment and for two years afterward. CHB alleged that Geiger joined REV, offered a CHB employee a job, and misappropriated or used CHB’s confidential information and trade secrets. CHB also alleged that REV knowingly assisted Geiger’s conduct.

CHB asserted eight claims: breach of contract against Geiger; tortious interference with contractual relations against REV; breach of fiduciary duty against Geiger; state and federal trade-secret misappropriation claims against Geiger and REV; unjust enrichment against Geiger and REV; unfair competition against Geiger and REV; and tortious interference with actual and prospective business relations against Geiger and REV.

Legal standard

The defendants moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). That motion asks whether, taking the complaint’s adequately pleaded facts as true, the complaint states a plausible claim for relief. The court generally does not decide disputed facts at this stage.

Contract claims

The court denied the defendants’ motion on CHB’s breach-of-contract and tortious-interference-with-contractual-relations claims. The defendants argued that the employment agreement ended when CHB promoted Geiger from Executive Vice President to President and CEO. The court found the agreement ambiguous on that issue because some language could support the defendants’ interpretation, while other provisions—including the references to Geiger’s employment with CHB, automatic renewals, and the requirement of a written modification—supported CHB’s interpretation.

Because the defendants’ interpretation was not the only reasonable interpretation as a matter of law, the court would not reject the contract claims at the pleadings stage. The court also found that CHB plausibly alleged a legitimate economic interest in enforcing the agreement and plausibly alleged that REV intentionally interfered with it. The court specifically referenced allegations concerning REV’s hiring of Geiger in violation of the two-year non-compete provision and Geiger’s alleged solicitation of a CHB employee in violation of the two-year non-solicitation provision.

Fiduciary-duty claim

The court granted the defendants’ motion, without prejudice, on CHB’s fiduciary-duty claim. CHB did not allege a plausible fact showing that Geiger breached duties of loyalty, care, or good faith while he was serving as a CHB officer or director. The alleged conduct described in the complaint—joining REV and contacting a former colleague—occurred months after Geiger resigned.

The court also ruled that any fiduciary-duty theory based on obligations in the employment or shareholder agreements was precluded by the viable contract claims. In addition, CHB did not allege that Geiger was a controlling shareholder, so his stock ownership alone did not establish continuing fiduciary duties under the law applied by the court.

Trade-secret claims

The court granted the defendants’ motion, without prejudice, on CHB’s claims under the Minnesota Uniform Trade Secrets Act and the federal Defend Trade Secrets Act. The court did not definitively decide whether CHB had adequately alleged the existence of a trade secret. Instead, it held that CHB had not plausibly alleged that Geiger or REV acquired, disclosed, or used any particular trade secret through improper means.

The complaint described broad categories of information, including customer lists, customer preferences, pricing, business practices, and strategic plans. The court found the allegations insufficiently specific and noted that some of the information was months old. General fears that Geiger might have taken undefined trade secrets and that REV might use them in the future did not plausibly allege misappropriation.

Miscellaneous claims

The court granted the defendants’ motion, without prejudice, on CHB’s unfair-competition claim because it duplicated CHB’s contract, fiduciary-duty, and trade-secret claims. Under the law applied by the court, unfair competition is a general category rather than a separate tort with independent elements, so the plaintiff must identify an underlying, non-duplicative tort.

The court also granted the motion, without prejudice, on CHB’s claim for tortious interference with actual and prospective business relations. The complaint did not identify a specific customer or business relationship that CHB lost, or might lose, because of the defendants’ conduct. The court treated this claim as one for interference with prospective economic advantage.

Finally, the court granted the motion, without prejudice, on CHB’s unjust-enrichment claim. CHB did not allege specific facts showing what valuable thing Geiger or REV knowingly received. The court also held that, to the extent the claim was based on conduct governed by the express employment agreement, the contract barred recovery under an unjust-enrichment theory.

Order and jurisdiction

The final order stated: “Defendants’ Motion for Judgment on the Pleadings” was “GRANTED IN PART AND DENIED IN PART, WITHOUT PREJUDICE.” The order did not finally determine the parties’ ultimate liability on the contract claims.

Because the order eliminated CHB’s federal trade-secret claims, the court stated that it no longer had original subject-matter jurisdiction over the lawsuit and would have only discretionary supplemental jurisdiction over the remaining state-law claims. The court ordered the parties to submit short letter briefs explaining why the case should remain in federal court. The opinion did not decide whether the court would retain or decline jurisdiction over those remaining claims.