Court Opinion

ID: 154584
Source: CourtListenerOpinion
Date Created: 2010-08-14 04:00:26+00
Date Added: 2024-06-11T15:02:05.571761
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                    UNITED STATES COURT OF APPEALS
                                                                         MAR 5 1997
                           FOR THE TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

    In re:

    MIDGARD CORPORATION,

             Debtor.                                   No. 96-6018
                                                 (D.C. No. CIV-94-1304-T)
                                                       (W.D. Okla.)
    MIDGARD CORPORATION,

             Plaintiff-Appellant,

    v.

    PAUL TODD, CUSTOM CUTTING
    MILLWORKS INCORPORATED and
    TODD’S RECYCLING CENTER
    INCORPORATED,

             Defendants-Appellees.

                           ORDER AND JUDGMENT *

Before PORFILIO, ANDERSON, and BRISCOE, Circuit Judges.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. The case is

therefore ordered submitted without oral argument.

      Debtor Midgard Corporation brought this adversary proceeding against

defendants alleging that they committed several business torts against it that led

to its filing for bankruptcy. After a trial, the bankruptcy court made oral findings

of fact and conclusions of law and granted judgment in favor of defendants on all

of Midgard’s claims. The court also imposed sanctions under Bankruptcy Rule

9011 of $500 each against Midgard’s attorney and its president for bringing an

action not well-grounded in fact or law. (Imposition of these sanctions is the

subject of separate appeals, Nos. 96-6016 and 96-6017.) The district court

affirmed, and Midgard again appeals. We have jurisdiction under 28 U.S.C.

§§ 158(d) and 1291, and apply the same standard of review as the district court;

that is, we review the bankruptcy court’s legal determinations de novo and its

factual findings for clear error. See Phillips v. White (In re White), 25 F.3d 931,

933 (10th Cir. 1994). We also affirm.

      The general facts are not in dispute. Midgard was in the business of

recycling waste products, and its primary activity was grinding scrap wood and

selling the resulting wood residue. In July 1992, it entered into a contract to

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supply wood residue to Medite of New Mexico, Inc., a fiberboard manufacturer.

Medite needs large supplies of residue to keep its plant operating and has

contracts with a variety of suppliers around the Southwest. Its contract with

Midgard did not mention anything about Midgard being an exclusive supplier of

wood residue to Medite, but an October 1992 letter sent under the authority of

Medite’s raw materials manager, who had signed the July contract on Medite’s

behalf, allegedly gave Midgard “an exclusive on the market for this material in

the Oklahoma City area.” Appellant’s App. Vol. I at 82.

      Defendant Paul Todd was a part-owner of the other two defendants, which

were located in the Oklahoma City area. Through its own operations, defendant

Custom Cutting Millworks (CCM) generated a considerable amount of scrap

wood. Prior to Midgard’s existence, CCM had its own wood-grinding equipment

and turned its wood residue into “artificial” fireplace logs or sold the residue to

farmers. In late 1991 and 1992, Todd and Midgard’s president, David Personette,

discussed Todd’s investing in or purchasing Midgard. Todd was informed of the

allegedly exclusive arrangement Midgard had with Medite as well as various other

aspects of Midgard’s business, such as the names of at least some of its wood-

scrap suppliers, its pricing arrangements with its suppliers and Medite, and

equipment Midgard planned to buy to expand its capacity. Todd decided not to

purchase or invest in Midgard but to expand his own wood-grinding operations,

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eventually buying one of the same wood-grinding machines that Midgard had

planned to buy. Though aware that Midgard claimed to have an exclusive

arrangement with Medite in the Oklahoma City area, Todd entered into a contract

with Medite in April 1993 to supply Medite with wood residue. Todd obtained

wood scrap from some of the same suppliers that had previously sent their scrap

to Midgard, on better terms than Midgard had offered them. In May 1993,

Midgard filed for Chapter 11 bankruptcy protection, and in September 1993,

brought this adversary proceeding.

      Midgard’s primary claim is that Todd tortiously interfered with its contract

with Medite. Under Oklahoma law, a party claiming tortious interference with

contract or business relations must prove that (1) it had a business or contractual

right that was interfered with, (2) the interference was malicious and wrongful

and neither justified, privileged, or excusable, and (3) the interference

proximately caused damage. See Morrow Dev. Corp. v. American Bank & Trust

Co., 875 P.2d 411, 416 (Okla. 1994). The bankruptcy court found that there was

some doubt as to the validity of the exclusivity agreement and thus, whether

Midgard had a valid contractual right that could be subject to interference.

However, it did not have to resolve that issue because it found that Todd’s actions

did not constitute wrongful interference.

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      Todd testified that in February 1993, he called Medite’s plant manager and

inquired whether anyone had an exclusive contract for supply of residue in the

Oklahoma City area. Todd testified that the plant manager replied that there was

no exclusive contract and that such contracts were against Medite’s policy. Todd

and the plant manager subsequently negotiated a contract under which Todd

would supply residue to Medite. Though the plant manager testified that he could

not recall Todd’s asking about exclusivity, the bankruptcy court specifically

found Todd’s testimony to be credible and found his subsequent negotiation of a

contract with Medite simply to be permissible competition and not wrongful. See

Overbeck v. Quaker Life Ins. Co., 757 P.2d 846, 849 (Okla. Ct. App. 1984)

(holding legitimate competition not wrongful interference). This is a factual

finding, see Jordan v. Shattuck Nat’l Bank, 868 F.2d 383, 387-88 (10th Cir.

1989), that is not clearly erroneous. Midgard’s tortious interference claim

therefore fails.

      Midgard also claims that Todd misappropriated its trade secrets in violation

of Oklahoma’s Uniform Trade Secrets Act, Okla. Stat. tit. 78, §§ 85-94. To

prevail on this claim, Midgard had to show the existence of a trade secret,

misappropriation of the secret by defendants, and use of the secret to its

detriment. See Micro Consulting, Inc. v. Zubeldia, 813 F. Supp. 1514, 1534

(W.D. Okla. 1990), aff’d, 959 F.2d 245 (10th Cir. 1992). For information to

                                         -5-
qualify as a trade secret, it must not be generally known to or readily

ascertainable by proper means to others who can obtain economic value from it,

and it must be the subject of reasonable efforts to maintain its secrecy. See Okla.

Stat. tit. 78, § 86(4); see also Central Plastics Co. v. Goodson, 537 P.2d 330,

333-34 (Okla. 1975). Whether information qualifies as a trade secret is a question

of fact. See Black, Sivalls & Bryson, Inc. v. Keystone Steel Fabrication, Inc., 584

F.2d 946, 951 (10th Cir. 1978); Central Plastics, 537 P.2d at 333-35.

      Midgard claims that the information it gave Todd about its operations and

plans constituted a trade secret. Like the bankruptcy court, we are hard-pressed

to understand what this secret information is. Midgard claims only generally that

the secret is “the compilation of information as to [its] customers, suppliers,

pricing and practices.” Appellant’s Br. at 34. As the bankruptcy court found,

Midgard made no effort to keep any of this information confidential or to limit

Todd’s use of the information. Midgard admitted it told hundreds of people about

its exclusivity agreement with its primary or sole customer, Medite. There is no

indication that the names of Midgard’s scrap suppliers were not “easily

ascertainable by observation or by reference to directories.” Central Plastics, 537

P.2d at 335 (further quotation omitted). Midgard complains that Todd bought the

same piece of wood-grinding equipment that it was planning to buy, but this was

an off-the-shelf machine advertised in trade publications. See id. at 334 (trade

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secret “must contain elements which are unique and, not generally known or used

in the trade”). We see no error in the bankruptcy court’s finding that Midgard did

not prove the existence of a trade secret.

      Midgard claims that Todd breached his duty of good faith and fair dealing

applicable to an alleged contract between Midgard and CCM. Though the

bankruptcy court does not appear to have expressly addressed this claim, we may

affirm the bankruptcy court on any grounds supported by the record. See

Sampson v. Sampson (In re Sampson), 997 F.2d 717, 721 (10th Cir. 1993).

Midgard contends that its “purchase [of] a load or two of saw dust from Custom

Cutting,” Appellant’s App. Vol. II at 319, apparently under an oral agreement

with no terms identified, somehow prevented Todd from dealing with Medite.

The absence of merit to this vague, undeveloped claim is readily apparent.

      Finally, Midgard claims the bankruptcy court was biased against it. We

have reviewed the record and see no evidence of bias.

      AFFIRMED.

                                                   Entered for the Court

                                                   Stephen H. Anderson
                                                   Circuit Judge

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