Opinion ID: 1989929
Heading Depth: 1
Heading Rank: 3

Heading: Evidence concerning Revere's claim for tortious interference with contractual relations.

Text: Having determined that Revere's agreement with Delfino and Eckart is valid and enforceable, we next consider Deere's contention that even if the agreement is enforceable, the evidence is not sufficient to support the jury's verdict that Deere tortiously interfered with Revere's nondisclosure agreement with Delfino and Eckart. This issue was raised by Deere's motions for directed verdict and for judgment notwithstanding the verdict.
This action was tried at law. In such cases, we review for correction of errors of law. Iowa R.App.P. 4. Our scope of review in such cases is quite limited and factual findings of the jury are binding upon us if supported by substantial evidence. Iowa R.App.P. 14(f)(1); Toney v. Casey's General Stores, Inc., 460 N.W.2d 849, 851 (Iowa 1990). We examine the evidence in a light most favorable to the verdict. Toney, 460 N.W.2d at 851-52. We are, however, not bound by the district court's application of legal principles or conclusions of law. Power Eng'g & Mfg., Ltd. v. Krug Int'l, 501 N.W.2d 490, 493 (Iowa 1993).
Instruction no. 11 informed the jury that in order to recover on its claim for intentional interference with a contract, Revere had to prove all of the following: (1) The Plaintiff had written contracts with Gregory Eckart and Francis Delfino. (2) The Defendant knew of those contracts. (3) The Defendant intentionally and improperly interfered with those contracts. (4)(A) The interference caused Gregory Eckart and Francis Delfino to breach their contracts. OR (B) The interference caused Plaintiff's performance of the contract to be more burdensome or expensive. (5) The amount of damages caused. This is a correct statement of the law. See Jones v. Lake Park Care Center, Inc., 569 N.W.2d 369, 377 (Iowa 1997) (quoting Nesler v. Fisher & Co., 452 N.W.2d 191, 198 (Iowa 1990)); Robert's River Rides v. Steamboat Dev. Corp., 520 N.W.2d 294, 303 (Iowa 1994).
We concluded above that Revere had an enforceable agreement with Delfino and Eckart. Revere thus presented substantial evidence to satisfy the first element.
Deere contends Revere presented no evidence to prove that it had knowledge of Revere's agreement with Delfino and Eckart. Jury instruction no. 13 stated: In order for you to find for the Plaintiff, you must determine that the Defendant knew of the existence of a contract. It is not necessary that the Defendant had actual knowledge of the specific contract. It is sufficient that the Defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to the disclosure of the contractual relationship between the Plaintiff and Francis Delfino and Gregory Eckart. We believe that the jury instruction correctly states the law concerning the knowledge element of a claim for tortious interference with contract. See Kallok v. Medtronic, Inc., 573 N.W.2d 356, 362 (Minn.1998) (Tortious interference is not justified when a plaintiff demonstrates that the `defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to a complete disclosure of the contractual relations and rights of the parties.') (quoting Swaney v. Crawley, 154 Minn. 263, 265, 191 N.W. 583, 584 (1923)); Callmann, § 9.01.50, at 99 (1996) (There must be knowledge by the defendant. . . of the contract or relationship interfered with; or at least of sufficient facts which, if followed by reasonable inquiry, would have revealed it.). Eckart testified that Delfino told Baxter and Kunath of Deere about their employment agreements with Revere prior to the time they resigned. The record also shows that Delfino made statements to Deere employees about an employment agreement with Revere. The record also includes notes that Kunath of Deere wrote to himself concerning the formation of D E Sensor. The notes contain comments regarding signed corp. papers as D E Sensor Mfg. Inc, their lawyer recommended talking to pat atty, lawyer recommended leave Revere within a short time. These notes were obviously written before Delfino and Eckart left Revere. Additionally, the jury could infer from these notes that Delfino and Eckart told Kunath about their employment agreement with Revere and their lawyer's comments on the subject. Baxter of Deere testified he signed an agreement whereby he agreed to assign any patent rights to Deere. On the other hand, Deere employees Kunath, Baxter, Dewey and Ramsey testified on Deere's behalf that they either did not know or did not inquire whether Delfino and Eckart had a nondisclosure-confidentiality agreement with Revere. We conclude that substantial evidence exists in the record to support the jury's verdict that Deere had knowledge of sufficient facts to put it on notice regarding Revere's agreement with Delfino and Eckart concerning disclosure of confidential information and/or discoveries and inventions and assignment of rights thereto. While the evidence presented was conflicting, it was the jury's duty to evaluate the evidence and make a decision concerning whether Deere had knowledge of Revere's agreement with Delfino and Eckart.
In order to find in favor of Revere concerning its claim of tortious interference with business relations, the jury had to find that Delfino and Eckart violated their agreement with Revere concerning disclosure of Revere's proprietary information and assignment of rights to inventions. See Iowa-Illinois Gas & Elec. Co. v. Black & Veatch, 497 N.W.2d 821, 825 (Iowa 1993) (questions of performance or breach are for the jury). Deere argued to the jury that the March 12 proposal did not contain confidential information or trade secrets belonging to Revere, but rather that the drawings were in fact based on prior art of a welded-in sensor. Deere also presented evidence that drawings of the Gozinta that Revere submitted to Deere did not contain proprietary stamps, which were required if the information was to be considered confidential between the parties. Deere thus contends that Revere cannot argue that information Delfino, and Eckart disclosed in the March 12 proposal was confidential when in fact Revere disclosed essentially the same information to Deere. Upon our review, we conclude that substantial evidence supports the jury's verdict that Delfino and Eckart breached their agreement with Revere either based on the conclusion that they made a discovery or invention which they failed to disclose or assign to Revere, or wrongfully disclosed confidential information, knowledge or data. First, the agreement required Delfino and Eckart to disclose or assign any inventions and/or discoveries to Revere made during the course of their employment and likewise precluded them from disclosing confidential information, knowledge or data belonging to Revere. Trade secrets would clearly fall within the definition of confidential information. Revere thus did not have to prove that the confidential information disclosed amounted to a trade secret, but rather only had to convince the jury that information depicted in the March 12 proposal amounted to a discovery or invention or that the proposal contained confidential information, knowledge or data belonging to Revere. [2] This fact is consistent with the jury's finding that Deere tortiously interfered with Revere's agreement with Delfino and Eckart, but did not misappropriate Revere's trade secrets. Second, Revere presented evidence from which the jury could conclude that Delfino and Eckart's March 12 proposal to Deere contained confidential information, knowledge or data, belonging to Revere that was not generally published or made available to the public, including to Deere. By comparing the drawings depicted in D E's March 12 proposal to Deere with Revere's original drawings of the Gozinta, Elengo of Revere testified that in his opinion the diameter of the holes depicted in the March 12 proposal were identical to those depicted in the drawings of Revere's Gozinta. Elengo also testified that the diameter of holes depicted in a document entitled Draft Sensor Development Program, D E Sensor Manufacturing, were Revere trade secrets, that this information was not publicly available and that this information was not disclosed in the Gozinta patent. Additionally, Elengo testified that Delfino and Eckart had access to Revere's drawings of the Gozinta during the course of their employment with Revere and further testified that the device described in the March 12 proposal could not have been designed in four or five days without using Revere's trade secrets. A proprietary stamp appears on Revere's drawings of the Gozinta stating, [t]his drawing contains proprietary information which shall not be reproduced or transferred to other drawings or disclosed to others or used for manufacturing or any other purpose without written permission of Revere Corporation of America. Delfino and Eckart were thus put on notice that Revere considered any information that appeared in the Gozinta drawings to be confidential. Delfino and Eckart likewise affixed a proprietary stamp with language similar to Revere's stamp on the drawings they submitted with the March 12 proposal, which the jury could find incorporated Revere confidential proprietary information. Deere presented evidence through its witness, Walt Jacobson, the inventor of the Gozinta, that size and placement of the strain gauges, and all the other features of the product are allegedly common knowledge. Jacobson also testified that what he invented, or the strong part of the invention, was the knurl feature of the device. Deere also presented evidence that the idea of welding a sensor had been the subject of prior patents. Despite this testimony, and even if true, the jury could still conclude that the Gozinta drawings as a whole, on which D E's March 12 proposal was based, represented the substantial time and money expended by Revere in how it thought the sensor should be designed and manufactured. It was this specific information that Delfino and Eckart acquired by virtue of their employment with Revere and it was this information which they were precluded from disclosing under their agreement to the detriment of Revere. See Basic Chems., Inc. v. Benson, 251 N.W.2d 220, 229-30 (Iowa 1977) (rejecting defendant's contention that he had right to take skills and knowledge he acquired during employment with former employer, including formulas and information contained in buy books and cost books because they were the result of his efforts; knowledge acquired by employee cannot be used to injury of employer during employment) (quoting Sperry Rand Corp. v. Rothlein, 241 F.Supp. 549, 564-65 (D.Conn.1964)); Callmann, § 14.12, at 53 (1996) (one who receives information in a confidential capacity has a duty not to use or disclose such information even though others might already be aware of it). [3] Additionally, we find no merit in Deere's contentions that the device D E actually sold to Deere was different from that outlined in the original proposal. The critical facts are that Delfino and Eckart, while still employed by Revere, began working on a device, prepared drawings and designs that incorporated Revere's confidential information, and disclosed this information to a third party. From this evidence the jury could reasonably find that D E's March 12 proposal for a sensor was substantially similar to Revere's Gozinta or at least used Revere's designs of the Gozinta as a starting point for D E's sensor. Cf. Olson v. Nieman's, Ltd., 579 N.W.2d 299, 315 (Iowa 1998) (noting that minor modifications did not insulate defendant from liability for misappropriation of trade secrets where evidence showed later device was based on plaintiff's diagram). At the very least, the jury could find that Delfino and Eckart used the technology. Revere had developed with respect to the Gozinta, including the problems associated with the knurl strap interface, to develop a welded-in sensor to Revere's detriment. In effect, Delfino and Eckart took Revere's proprietary information concerning what would not work and used it as a basis to develop a device that would directly compete with Revere. We also reject Deere's contention that the terms of Revere's agreement with Deere concerning what those parties defined as proprietary information, and how that information was disclosed, somehow dictates what information is considered to be confidential under Revere's agreement with Delfino and Eckart. Each agreement establishes its own restrictions and responsibilities upon the parties governed thereunder and the terms of one are not applicable to the other. The record also shows that Delfino and Eckart consulted with a patent attorney concerning whether the welded-in disc sensor was a patentable device and that the attorney opined that the device was patentable. We believe that the jury could conclude from this and other evidence presented that Delfino and Eckart's work on developing the replacement for the Gozinta, following their employment with Revere, amounted to an invention or discovery which Delfino and Eckart were required to disclose to Revere and which they wrongfully disclosed to Deere. Upon our review of the record, we conclude that the jury's finding that Delfino and Eckart breached their agreement with Revere is supported by substantial evidence.
We now consider the evidence relating to the intentional/improper interference element. [4] Instruction no. 14 stated that, in determining whether Deere's conduct was improper, the jury could consider the following factors: 1. The nature of the conduct. 2. The Defendant's motive. 3. The interests of the party with which the conduct interferes. 4. The interest sought to be advanced by the Defendant. 5. The social interests in protecting the freedom of action of the Defendant and the contractual interests of the other party. 6. The nearness or remoteness of the Defendant's conduct to the interference. 7. The relations between the parties. This is a correct statement of the law. See Jones, 569 N.W.2d at 377. Upon our review of the record, we conclude substantial evidence exists in the record from which the jury could conclude that Deere intentionally and improperly interfered with Revere's agreement with Delfino and Eckart. Revere presented evidence that Kunath of Deere allegedly contacted Eckart concerning a proposal for a device to replace the Gozinta, while Deere contends that it was Eckart who contacted Kunath. Regardless of who actually initiated the idea for the proposal, Delfino, Eckart and Kunath not only discussed the idea of developing an alternative to replace the Gozinta, but took affirmative steps towards development and manufacturing such a device. All of this was done, including Deere's promise that it would appropriate the funds for development, while Delfino and Eckart were still employed by Revere and when Deere, through its employees, had knowledge or were on notice of Delfino and Eckart's agreement with Revere concerning disclosure of inventions and/or discoveries and confidential information. Furthermore, not only did Deere, Delfino and Eckart purposely not disclose their activities to Revere, but the parties also continued their relationship with Revere, giving Revere a false sense of security that Deere would continue to purchase Gozintas. Evidence in the record also shows that Deere asked Revere's permission to consult with former Revere employees about problems associated with the Gozinta/Deere project, yet did not bother to mention to Revere that it was negotiating a business deal with current employees for a replacement part for the Gozinta. Deere also encouraged Delfino and Eckart to stay on at Revere, according to Kunath, to ensure that Deere continued to receive good product. Eckart also testified he would not have sent a bid to Kunath regarding the replacement part for the Gozinta if Kunath had not told him to do so. While Deere certainly had the right to persuade Delfino and Eckart to work for Deere at some time in the future, Deere had no right to induce Delfino and Eckart to breach their agreement with Revere concerning disclosure of Revere's confidential information. Cf. Moye v. Eure, 21 N.C.App. 261, 204 S.E.2d 221, 223 (1974) (noting that defendant, a competitor of plaintiff, had right to persuade plaintiff's employees to work for defendant, so long as defendant did not induce employees to breach any existing contracts; plaintiff had no contract with its former employees and thus defendant could not be held liable for tortious interference with contract). The fact that the idea of a welded-in sensor was presented and rejected by Revere did not relieve Delfino and Eckart of their ongoing duty to refrain from disclosing Revere's confidential information, knowledge or data, or their duty to disclose their inventions or discoveries to Revere. We conclude that substantial evidence exists in the record to support the jury's verdict that Deere intentionally and improperly interfered with Revere's agreement with Delfino and Eckart. Accordingly, the district court properly overruled Deere's motion for judgment notwithstanding the verdict on this issue.