Core and Main, LP v. McCabe

Background

Core and Main, LP, a Florida limited partnership that supplies water, wastewater, drainage, and fire-protection products, purchased the assets of Minnesota Pipe and Equipment Company in 2017. Ron McCabe had been a part-owner of that company and was later hired by Core and Main as a salesperson.

McCabe and Core and Main signed an Employment Agreement on October 5, 2017. It included a restriction against competing with Core and Main during employment and for 12 months afterward. The next day, they signed a separate Noncompetition Agreement providing for 24 months of noncompetition from the date it was executed.

Core and Main alleged that, while McCabe worked there, he encouraged a customer to replace American Flow Control fire hydrants with Mueller hydrants, which were supplied by Dakota Supply Group, Inc. Core and Main also alleged that, after McCabe resigned on June 1, 2021, he sent messages to Core and Main customers and then began working for Dakota Supply Group as an operations manager.

Core and Main asserted five claims. Count I alleged breach of the duty of loyalty; Count II alleged breach of the duty of confidentiality; Count III alleged breach of the employment contract; and Counts IV and V alleged that Dakota Supply Group tortiously interfered with contractual and prospective contractual relationships. Core and Main later voluntarily dismissed Count I. After an earlier ruling dismissed the other claims, the United States Court of Appeals for the Eighth Circuit reversed as to Counts III, IV, and V, and the district court vacated the earlier ruling as to those counts.

Amendment and Motion to Strike

After the defendants filed a second motion to dismiss, Core and Main filed an amended complaint without first obtaining permission. Core and Main also filed an alternative motion for leave to amend, meaning permission from the court to file the amended pleading. The defendants opposed amendment and moved to strike the amended complaint, meaning to remove it from the court record.

The court held that Core and Main was entitled to only one 21-day period to amend its complaint as a matter of course under Federal Rule of Civil Procedure 15(a)(1)(B). That period began with the first motion to dismiss, which had been filed nearly two years earlier. The court rejected Core and Main’s argument that the second motion to dismiss created a new 21-day period.

The court also denied leave to amend under Rule 15(a)(2). Core and Main did not explain why justice required amendment, and the proposed amendment did not address the issues raised in the defendants’ motion. The court concluded that allowing amendment would further delay resolution of the case. The court therefore denied Core and Main’s motion to amend and granted the defendants’ motion to strike; the amended complaint was stricken from the record.

Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) tests whether a complaint alleges enough facts to state a plausible claim for relief. The court generally accepts the complaint’s factual allegations as true and draws reasonable inferences for the plaintiff, but it does not accept legal conclusions presented as facts.

The defendants argued that their second motion to dismiss was improper because it was effectively a motion for reconsideration filed without permission. The court disagreed. Although the defendants repeated some arguments from their first motion and appeal, neither the district court nor the Eighth Circuit had addressed the merits of the defendants’ alternative arguments. The court concluded that the rules did not bar consideration of the second motion to dismiss in this situation.

Breach of Contract

The defendants argued that the Employment Agreement was unenforceable because Core and Main’s chief executive officer had not signed it. Core and Main did not dispute the missing signature but argued that McCabe accepted the agreement’s benefits and acted under it.

The court rejected the defendants’ argument at the motion-to-dismiss stage. McCabe had worked for Core and Main and accepted benefits under the Employment Agreement for nearly four years. The court concluded that the missing signature did not make the agreement unenforceable based on the allegations and materials before it.

The defendants also argued that Core and Main had not alleged a legitimate business interest supporting the agreement’s restrictive covenants. The court explained that noncompetition restrictions may be enforceable when necessary to protect an employer’s business or goodwill, reasonably limited, and not harmful to the public. The court concluded that Core and Main sufficiently alleged that the restrictions protected its goodwill with longstanding customers.

The defendants further argued that Core and Main had not adequately pleaded violations involving noncompetition, supplier-nonsolicitation, or employee-nonsolicitation provisions. The court did not consider that argument because the defendants had not raised it in their first motion to dismiss, and Rule 12(g)(2) generally bars a party from later raising an available defense or objection that was omitted from an earlier Rule 12 motion.

The court denied the defendants’ motion to dismiss the breach-of-contract claim.

Tortious Interference with Contractual Relationships

A claim for tortious interference with a contractual relationship requires allegations of a contract, the defendant’s knowledge of it, intentional procurement of a breach, lack of justification, and resulting damages. The defendants argued that Core and Main had not pleaded an enforceable contract. Because the court concluded that Core and Main plausibly alleged that McCabe’s Employment Agreement was enforceable, it rejected this basis for dismissal.

Tortious Interference with Prospective Contractual Relationships

A claim for tortious interference with prospective contractual relationships requires allegations of a reasonable expectation of economic benefit, the defendant’s knowledge of that expectation, intentional interference, independently wrongful conduct or a violation of law, a reasonable probability that the benefit would have occurred without the interference, and damages.

The court concluded that Core and Main sufficiently alleged that it reasonably expected future sales relationships with certain customers, that Dakota Supply Group knew of those relationships, and that Dakota Supply Group intentionally interfered by hiring McCabe to solicit current and prospective customers. Core and Main also alleged that the interference was independently tortious and caused damages. The court therefore denied the defendants’ motion to dismiss this claim.

Disposition

The court ordered that: (1) Core and Main’s motion to amend was DENIED; (2) the defendants’ motion to strike was GRANTED, and the amended complaint was STRICKEN from the record; and (3) the defendants’ motion to dismiss was DENIED.