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Carlson Environmental Consultants, PC v. Slayton

United States District Court, W.D. North Carolina, Charlotte Division

September 21, 2017

CARLSON ENVIRONMENTAL CONSULTANTS, PC, Plaintiff,
v.
SEAN SLAYTON, Defendant.

          ORDER AND PRELIMINARY INJUNCTION

          FRANK D. WHITNEY DISTRICT JUDGE.

         THIS MATTER is before the Court on the Motion for Preliminary Injunction (Doc. No. 16) filed by Plaintiff Carlson Environmental Consultants, PC (“CEC”) pursuant to Federal Rule of Civil Procedure 65(a) to preliminarily enjoin its former employee, Defendant Sean Slayton (“Slayton”) from competing with it, from soliciting its customers and employees, and from using or disclosing its confidential information and trade secrets. On September 15, 2017, the Court held a hearing for the presentation of arguments and evidence by the parties. The Court issued an oral ruling that it would GRANT the motion, with a written order to follow. The Court has reviewed the pleadings, exhibits thereto, argument and evidence presented during the hearing, and applicable law. The Court also considered the competing proposed orders submitted by each party. For the reasons set forth herein, CEC's motion for preliminary injunction will be granted as follows:

         I. Findings of Fact

         The Court finds the following facts based upon the affidavits submitted by the parties and evidence presented at the hearing in this matter. The Court notes these findings of fact are based on the limited record before the Court during these preliminary injunction proceedings. Accordingly, while these findings of fact are the basis for issuance of this preliminary injunction, the Court notes these findings may change through the course of litigation based on evidence presented to the Court in any motion for summary judgment and/or trial.

         CEC was founded in 2004, and provides specialty engineering, operations and maintenance, and construction services to the solid waste industry across the United States. One of CEC's unique services is landfill gas construction, which consists of both well drilling and pipeline construction and installation. Kristofer Carlson is CEC's President, Seth Nunes is CEC's Vice President, Brent Ross is a Project Director and Thomas Lafollette is a Landfill Gas Pipeline Supervisor. Each has submitted an affidavit in support of this Motion. Carlson Aff., ¶¶2-3.

         One of the key services CEC provides is landfill gas well drilling, which is a highly specialized and complex service involving the use of special drilling equipment to drill holes in landfills and to then construct wells and related pipelines designed to extract the methane gas resulting from the natural decomposition of the landfill's contents. CEC has focused almost entirely on these segments of the solid waste market to grow its business. Id. at ¶4.

         CEC works on landfill gas well drilling projects throughout the United States for a number of companies. CEC's two most important clients for which it has provided landfill gas well drilling services are Waste Management, Inc. and Republic Waste Services, Inc., which are national owners/operators of landfills across the United States. Due to its long association with these clients, CEC is extremely familiar with their construction requirements, safety requirements, their project operations and personnel, and other expectations on these projects. Id. at ¶5; See Nunes Aff., ¶3.

         Landmarc Environmental Systems (“Landmarc”) is one of CEC's primary competitors in the landfill gas construction business. CEC and Landmarc have submitted competing bids on landfill gas projects across the United States. On a number of recent projects in 2017, CEC has lost business to Landmarc. Id. at ¶6; See Nunes Aff. at ¶¶4-6.

         Prior to November 19, 2015, Defendant Sean Slayton (“Slayton”) was a key principal and driller of Quality Drilling Services, LLP (“QDS”), an Ohio limited liability partnership with an office and principal place of business in Alton, Illinois, which provided landfill gas well drilling services across the United States. CEC and QDS frequently served as contractors on the same landfill gas well drilling projects, with CEC serving as the prime contractor and QDS performing the well drilling as a subcontractor. CEC purchased its own drilling equipment in May 2014. CEC had provided landfill gas construction services (pipeline installation and drilling) on projects in multiple states. CEC's competitors also frequently hired QDS for landfill gas well drilling on projects that CEC had bid on. Carlson Aff., ¶7.

         In the summer of 2015, with the volume of drilling work exceeding the capacity of CEC's existing drill rig and CEC utilizing drilling subcontractors such as QDS on a frequent basis, CEC concluded that it needed to become more competitive. CEC decided to increase its drilling capabilities by purchasing the assets of QDS, which included a drill rig and related tools, client contacts, client information, goodwill, bidding information, and other proprietary data. One of the other objectives of this plan was to limit CEC's competitors' ability to effectively compete on these projects by having QDS work exclusively through CEC. CEC's principals believed that this plan would put it in a position to obtain more business from Republic Waste Services, Waste Management and other companies putting these projects out for bid. Id. at ¶8.

         In June 2015, QDS and CEC held initial discussions regarding the terms of CEC's purchase of the assets of QDS. The parties' June 5, 2015 Business Plan and Agenda provides that the key objectives of the QDS purchase are to expand its drilling capabilities, to grow its drilling business by expanding to 5 or 6 crews, for Slayton to manage this business line, to use Slayton's knowledge and experience to more effectively compete against CEC's major competitors, which included Landmarc Environmental Systems, LLC (“Landmarc”), to add more clients by purchasing QDS's client base and to utilize Sean Slayton's extensive client and industry contacts. Carlson Supp. Aff. ¶6 and Exh. 4 (Business Plan and Agenda). The June 25, 2015 Memorandum of Understanding (“MOU”) provides that Slayton will be required to enter into a five-year non-compete agreement and he would be responsible for managing CEC's drilling operations. Id. at ¶3 and Exh. 1 (MOU). CEC subsequently reduced the five-year term of the non-compete agreement to two years at Slayton's request. Id. at ¶6.

         On or about July 20, 2015, CEC and Slayton entered into a “Short Term Employment Agreement”[1] pursuant to which Slayton would become employed for a fixed duration, which would expire at the time of the closing of the QDS transaction, at which time Slayton would be required to enter into new employment with CEC memorialized by a written employment agreement containing a covenant not to compete, customer and employee nonsolicitation provisions and a confidential information nondisclosure provision. Carlson Supp. Aff. ¶¶3, 4 and Exhs. 2 (Short Term Employment Agreement) and 3 (November 19, 2015 Offer of At-Will Employment).

         On November 19, 2015, CEC purchased the assets of QDS. Slayton was required to enter into a Confidentiality and Noncompetition Agreement (“Agreement”) with CEC as a specific term and condition of the foregoing transaction and as a prerequisite to his later becoming a CEC employee. Slayton's Agreement contained a confidential information non-disclosure provision, a covenant not to compete, non-solicitation provisions applicable to customers, employees and suppliers. Carlson Aff. ¶¶9-18 and Exh 1 (Agreement).

         In exchange for signing the Agreement, Slayton received new employment with CEC, as his short term employment had expired, as well as various benefits for which he was not previously eligible, including the CEC bonus pool, PTO and sick days, and CEC paid for his company truck and computer. Carlson Supp. Aff. ¶4 and Exh. 3. The Agreement recites that it is being entered into “in consideration of Employer's hiring of Employee as an at-will employee and other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged.” Carlson Aff. Exh. 1 (CEC Agreement) at p. 1.

         CEC required Slayton to sign the Agreement to protect its valuable client relationships, goodwill and CEC's confidential information to which Slayton would have access by virtue of his position at CEC. Carlson Aff. ¶10. Since 2004, CEC has expended substantial resources developing its business relationships, in establishing goodwill and obtaining a national reputation as a provider of landfill gas well drilling services. Id. CEC is an expert in its field and has developed pricing and bidding processes which give it a competitive advantage in the industry. Id. Slayton acknowledged the above when he signed his CEC Agreement and thereafter took advantage of his access to CEC's confidential information which he gained access to only after signing the CEC Agreement. Id.

         Slayton's Agreement contains a covenant not to compete which provides that during the Restricted Period of two (2) years following his separation from employment with CEC, within the Restricted Territory, Slayton:

(1) [. . . ] shall not develop, market, solicit, sell, or otherwise provide or perform services identical to those services that Employee developed, marketed, solicited, sold, provided or performed while employed with Employer; [or]
(2) [. . .] shall not become employed by (as an officer, director, employee, consultant or otherwise), or otherwise become commercially interested in or affiliated with (whether through direct, indirect, actual or beneficial ownership or through a financial interest), a Competitor, unless Employee accepts employment with a Competitor in an area of the Competitor's business which does not compete with the Employer.

Carlson Aff., ¶14, and Exh. 1, Sec. 4.c.

         In recognition of the nationwide basis of CEC's business and Slayton's involvement on a nationwide basis in the core activities of CEC's Business and the ease of competing with that Business in any part of the United States, the Agreement's Restricted Territory is defined as the United States. Id. at ¶15 and Exh. 1, Sec. 4.d. The territorial restriction also includes a number of successively smaller areas in which Slayton's competition against CEC is prohibited in the event that a court deems the nationwide territory to be unreasonable or otherwise invalid or unenforceable. Id.

         Slayton also agreed not to solicit CEC employees or suppliers for a two-year period following cessation of his employment. Id. at ¶¶16-17 and Exh.1, Secs. 4.e, 5.

         Throughout his CEC employment, Slayton served as a Drilling Superintendent/Supervisor where he oversaw CEC's drilling operations. Carlson Aff., ¶20; Carlson Supp. Aff., ¶11 and Exh. 11 (job description); See Motion for Preliminary Injunction, Exh. 3 (Slayton's Landmarc personnel file) at LES 0046 (Landmarc Employment Application)(filed under seal). Slayton was the client contact for multiple CEC clients, and was the point of contact when he was in the field at any landfill facility. Id. Slayton managed 3 CEC drillers and up to 12 employees. Id. Slayton was directly involved in CEC's pricing process and in formulating and submitting CEC's drilling proposals and bids. Id.; Carlson Supp. Aff., ¶8 and Exhs. 6-9 (bid proposals prepared and signed by Slayton); Cf. Slayton Aff., ¶¶17-18. Slayton negotiated pricing directly with CEC's customers. Carlson Supp. Aff., ¶9. Accordingly, Slayton had access to highly confidential pricing information and knew CEC's unique and proprietary method of creating proposals and bids, which provides CEC with a competitive advantage over its competitors like Landmarc. Id. Slayton was in charge of hiring and drill crew set-up and had direct knowledge of employee salaries and bonuses at CEC, thus making his employee non-solicitation provision particularly important, because he possessed information that could enable him to lure employees away were he to join a competitor. Carlson Aff., ¶20; Carlson Supp. Aff., ¶10 and Exh. 10 (Vince Coleman email regarding Chas Slayton's employment with Landmarc on “Sean Slayton's crew”).

         Slayton was also a CEC client liaison, which enabled him to have personal contact and develop relationships with CEC's existing and potential clients and to learn valuable insight regarding their business opportunities, needs and requirements and the key contacts within each. Carlson Aff., ¶21. The nature of Slayton's position and his supervision of drillers and other CEC employees provided him with high-level knowledge about CEC's operations which gave CEC a competitive edge against its competitors. Id.; See Motion for Preliminary Injunction, Exh. 3 at LES 0046.

         From July 15, 2015 through November 30, 2016, Sean Slayton performed his duties for CEC on 68 projects in multiple cities in the following states: Colorado, South Carolina, Indiana, Georgia, North Carolina, Kentucky, Kansas, Louisiana, Michigan, Alabama, Florida, Texas, Missouri, Tennessee, Minnesota, Arkansas, and West Virginia. Carlson Supp. Aff., ¶7 and Exh. 5 (CEC 2015-2016 Drilling Revenues spreadsheet); Carlson Aff., ¶22. Due to the nationwide scope of CEC's business, Slayton was subject to being required to perform his duties for CEC in other states across the country where CEC might have projects.

         In 2016 and 2017, CEC bid on landfill gas well drilling projects across the United States, from the Pacific Northwest, to Texas, to New England and all areas in between. Carlson Aff. ¶¶23, 26. In 2015 and 2016, CEC provided landfill gas construction services in 39 states ranging from Maine to Colorado. Id. Slayton was directly involved in preparing the bids for these projects using his knowledge of CEC's Confidential Information, including pricing and its bid formulation method. Id. at ¶¶23, 26; Carlson Supp. Aff., ¶8 and Exhs. 6-9.

         In 2016, CEC entered into an agreement with Landmarc to lease and then purchase a drill in exchange for Landmarc's agreement to hire CEC for as many drilling jobs as CEC had the resources to handle. It was expected that Landmarc had sufficient new and recurring business over the next 2 to 3 years to provide CEC with a substantial amount of drilling work. Id. at ¶24. Landmarc informed CEC's principals that this lease-purchase arrangement was part of its overall strategy to get out of the landfill gas well drilling business. Id. at ¶25.

         Also in 2016, Landmarc and CEC bid on many of the same landfill gas well drilling projects throughout Texas, Michigan, Ohio, Arkansas, Tennessee, Kentucky, and Alabama. Carlson Aff. ¶26.

         On December 14, 2016, CEC terminated Slayton's employment due to job-related misconduct and failure to operate CEC's drilling business in an acceptable manner. Carlson Aff., ¶27 and Exh. 2 (termination letter).

         On January 10, 2017, Slayton became employed with Landmarc as a Drilling Superintendent. Mot. for Prelim. Inj., Exh. 3 at LES 0001-0006 (filed under seal). Slayton's responsibilities included growing Landmarc's gas construction drilling business, training and supervising drilling crews and meeting with and updating clients. Id.; See, Id. at LES 0049-0050. In executing his Landmarc offer letter, Slayton denied that he was bound by an agreement not to compete which would preclude his employment with Landmarc. Id. at LES 0004 (filed under seal). Slayton also agreed to a covenant not to compete with Landmarc. Id. at LES 0005 (filed under seal).

         On January 27, 2017, CEC sent Slayon and Landmarc a cease and desist letter upon learning he was employed by Landmarc and enclosed a copy of Slayton's CEC Agreement. Id. at ¶32; See Complaint (Doc. 1), Exh. 3 (letter).

         On March 22, 2017, CEC filed this lawsuit against Slayton asserting claims for breach of his CEC Agreement and specifically the Noncompetition Covenant and Nonsolicitation provisions, tortious interference with existing and prospective business relations and unfair and deceptive trade practices. See Complaint (Doc. 1); Carlson Aff., ¶33.

         On March 28, 2017, Landmarc issued a letter to Slayton directing him not to engage in certain activities that would violate his post-employment obligations to CEC under his Agreement. Mot. for Prelim. Inj., Exh. 3 at LES 0051 (filed under seal). With regard to his Noncompetition provision, the letter provides that Slayton is not permitted to perform the same work he had performed for CEC for “non-Landmarc customers.” Id. This directive is inconsistent with Slayton's Noncompetition provision in his CEC Agreement. Slayton's own filings in opposition to CEC's motion reflect that he has performed landfill gas well drilling services for at least two of CEC's customers. See Ma Aff., ¶3 (chart).

         On April 17, 2017, Slayton brought a Motion to Dismiss (Doc. 4), contending that Slayton's Confidentiality and Noncompetition Agreement was overly broad and unenforceable. On May 9, 2017, CEC filed its Response in Opposition to Slayton's motion (Doc. 15). The Court denied Slayton's Motion to Dismiss on May 11, 2017.

         Since becoming employed by Landmarc, Slayton has performed the same services he provided to CEC. Carlson Aff., ¶¶29, 42-43. Slayton has supervised employees who perform landfill gas well drilling, he has consulted and provided technical assistance to those employees and he has personally operated drills on landfill gas well drilling projects for Landmarc in several states. Mot. for Prelim. Inj., Exh. 4; See Thomas Lafollette Aff., ¶¶3-4; Brent Ross Aff., ¶¶3-5. Slayton has performed landfill gas well drilling services for Landmarc, at a minimum, in the states of Kentucky, Indiana, Missouri, and Oklahoma. Id. In April 2017, a private investigator engaged by CEC observed Slayton with Landmarc employees at the site of a landfill project in Kentucky. Carlson Aff., ¶36; See Declaration of Richard Travelstead. In June 2016, Slayton provided off-site technical support and supervision to drilling employees in a Landmarc project in South Carolina. Brent Ross Aff., ΒΆΒΆ3-5. Also in ...


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