The Ballard Grp. Inc. v. BP Lubricants USA Inc.

Cite as 2014 Ark. 276

SUPREME COURT OF ARKANSAS

No. CV-13-976

THE BALLARD GROUP, INC. Opinion Delivered June 19, 2014

APPELLANT

APPEAL FROM THE BENTON

V. COUNTY CIRCUIT COURT

[NO. CV-2012-2197-4]

BP LUBRICANTS USA, INC., AND

TRACY CURTIS KING HONORABLE JOHN R. SCOTT,

APPELLEES JUDGE

AFFIRMED IN PART; REVERSED

AND REMANDED IN PART.

DONALD L. CORBIN, Associate Justice

Appellant, The Ballard Group, Inc. (Ballard), appeals the second amended order of the

Benton County Circuit Court dismissing with prejudice its first amended complaint against

Appellees, Tracy Curtis King (King) and her employer BP Lubricants USA, Inc. (BP), for

failure to state a claim upon which relief could be granted. For reversal, Ballard contends that

the circuit court erroneously granted the dismissal because its first amended complaint

sufficiently pleaded claims for breach of contract, misappropriation of trade secrets, tortious

interference with a contract and business expectancy, and civil conspiracy. In addition,

Ballard contends that any dismissal granted should have been without prejudice. The

Arkansas Court of Appeals certified this case as one involving a significant question of law

concerning the interpretation of a court rule, specifically the two-dismissal component of

Rule 41(b) of the Arkansas Rules of Civil Procedure. Jurisdiction is therefore properly in this

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court pursuant to Arkansas Supreme Court Rule 1-2(b)(5) and (d) (2013). We affirm that

part of the second amended order dismissing with prejudice the breach-of-contract claim, and

we reverse and remand the parts of the order dismissing with prejudice the claims relating to

trade secrets, tortious interference, and civil conspiracy.

I. Procedural History

Appellant initiated the present litigation by filing a complaint against King and BP that

alleged four causes of action: breach of contract, misappropriation of trade secrets, tortious

interference with a contract and with a business expectancy, and civil conspiracy. The

complaint described Ballard as a marketing firm, which for over twenty-five years had

provided marketing services, such as the planning and executing of promotional and

educational events for customers, employees, and vendors of Wal-Mart at various Wal-Mart

Stores. The complaint referenced a marketing event known as the “Smart Driver Tour,”

which was designed to promote various automotive products that were manufactured or

distributed by Wal-Mart vendors described as “Tour Sponsors,” such as Meguiar’s, Michelin,

BP, and JCI/Everstart. The complaint alleged that, in addition to the Smart Driver Tour,

which was classified as a Primary Event, there was an additional Primary Event known as the

Wal-Mart Vendor Fair, and that these two Primary Events accounted for a substantial portion

of Ballard’s annual business. The complaint also alleged that significant additional business

routinely occurred every year from additional and supplemental promotions known as

“Spinoff Events” that were assigned as a matter of routine practice to the firm servicing the

Primary Events. According to the complaint, Ballard had a series of contracts with BP for

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these marketing events, and Ballard attached as exhibits to the complaint written contracts for

the years 2008 and 2009.

The gist of the complaint was that King, at all times acting within the scope of her

employment at BP, designed and executed a nepotistical plan in which her brother, Jason

Curtis (Curtis), would be employed by Ballard, obtain Ballard’s trade secrets and proprietary

information, and then use that information to begin working at Threads Production, Inc.

(Threads), which was a new company formed with King’s influence to employ King’s brother

and her husband and to compete with Ballard for the business of BP and other vendors.

Threads and Curtis are not parties to this case, although the complaint does allege that in

separate litigation Ballard obtained a preliminary injunction to restrain Curtis from

misappropriating trade secrets.

King and BP jointly filed a motion to dismiss the complaint pursuant to Rule 12(b)(6)

of the Arkansas Rules of Civil Procedure, asserting that Ballard had failed to plead facts upon

which relief could be granted against either BP or King. King and BP argued that Ballard’s

complaint consisted primarily of legal conclusions rather than specific facts. The circuit court

entered an order granting the motion to dismiss on all four causes of action and giving Ballard

thirty days to file an amended complaint. The circuit court later entered an “Order to

Reinstate,” declaring that the court’s intent in issuing the previous order of dismissal was to

allow the matter to remain open until the thirty days for Ballard to file an amended complaint

had expired.

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Ballard timely filed a first amended complaint asserting the same four causes of action

and pleading additional facts. BP and King filed a motion to dismiss the first amended

complaint pursuant to Rule 12(b)(6), noting that the first amended complaint was substantially

the same as the original complaint because it stated primarily legal conclusions rather than

specific facts from which a jury could find for Ballard on any of its claims. The circuit court

entered an order granting the motion to dismiss all four causes of action based on its failure

to plead sufficient facts upon which relief could be granted. The order did not state whether

the dismissal was to be with or without prejudice.

Ballard then filed a motion to clarify or correct the order to reflect that the dismissal

would be without prejudice and for Ballard to plead further and file a second amended

complaint within thirty days. The circuit court entered an order, essentially granting Ballard’s

request to clarify. This order was dated July 15, 2013, and stated that the Rule 12(b)(6)

dismissal of the first amended complaint was being granted without prejudice for Ballard to

plead further by August 12, 2013.

BP and King then filed a motion for reconsideration of the July 15 order, arguing that

the July 15 order was a second dismissal and therefore should have been granted with

prejudice pursuant to the “two-dismissal” rule in Rule 41(b). The circuit court then entered

a “Second Amended Order Granting Motion to Dismiss” dated August 2, 2013, essentially

granting BP’s motion for reconsideration and then reflecting that the July 15 order was to be

a dismissal with prejudice pursuant to Rule 12(b)(6) and Rule 41(b).

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Ballard filed a motion for reconsideration of the second amended order, which the

circuit court denied by written order. This appeal followed.

Ballard presents two points on appeal. First, Ballard challenges the circuit court’s

determination that the second Rule 12(b)(6) dismissal was subject to the two-dismissal

component of Rule 41(b). Second, Ballard challenges the merits of the circuit court’s ruling

on the motion to dismiss pursuant to Rule 12(b)(6). We address the merits of the Rule

12(b)(6) dismissal first, because if we determine that the dismissal was erroneously granted,

then there would be only one dismissal and any opinion expressed on the two-dismissal rule

would be advisory. If, however, we determine that the circuit court correctly decided the

merits of the Rule 12(b)(6) dismissal, then there would arguably be two dismissals, and we

would then need to address Ballard’s argument concerning the two-dismissal rule.

II. Standard of Review

Generally speaking, the granting of both a Rule 12(b)(6) dismissal and a Rule 41(b)

dismissal are reviewed under the abuse-of-discretion standard. J.B. Hunt, LLC v. Thornton,

2014 Ark. 62, ___ S.W.3d ___ (Rule 12(b)(6)); Jonesboro Healthcare Ctr., LLC v. Eaton-Moery

Envtl. Servs., Inc., 2011 Ark. 501, 385 S.W.3d 797 (Rule 41(b)). However, when this court

must construe a court rule, our appellate review is de novo. Jonesboro Healthcare Ctr., 2011

Ark. 501, 385 SW.3d 797. Thus, in this case, we must determine whether the circuit court

abused its discretion in dismissing the complaint; if it did not, then we determine whether the

circuit court erred in applying the two-dismissal rule as expressed in Rule 41(b).

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III. The Merits of the Rule 12(b)(6) Dismissal

In determining whether the circuit court abused its discretion in dismissing Ballard’s

complaint pursuant to Rule 12(b)(6), we treat the facts alleged in the complaint as true and

view them in the light most favorable to the plaintiff. J.B. Hunt, 2014 Ark. 62, ___ S.W.3d

___. We construe the pleadings liberally and resolve all reasonable inferences in favor of the

complaint. Id. This court has summarized the requirements for pleading facts as follows:

Arkansas has adopted a clear standard to require fact pleading: “a pleading which sets

forth a claim for relief . . . shall contain (1) a statement in ordinary and concise

language of facts showing that the pleader is entitled to relief . . .” ARCP Rule

8(a)(1). Rule 12(b)(6) provides for the dismissal of a complaint for “failure to state

facts upon which relief can be granted.” This court has stated that these two rules

must be read together in testing the sufficiency of the complaint; facts, not mere

conclusions, must be alleged. In testing the sufficiency of the complaint on a motion

to dismiss, all reasonable inferences must be resolved in favor of the complaint, and

pleadings are to be liberally construed. Id.; ARCP Rule 8(f).

Brown v. Tucker, 330 Ark. 435, 438, 954 S.W.2d 262, 264 (1997) (citation omitted) (quoting

Malone v. Trans-States Lines, Inc., 325 Ark. 383, 386, 926 S.W.2d 659, 661 (1996) (quoting

Hollingsworth v. First Nat’l Bank & Trust Co., 311 Ark. 637, 639, 846 S.W.2d 176, 178

(1993))). This court’s rules require fact pleading, and a complaint must state facts, not mere

conclusions, in order to entitle the pleader to relief. Ark. R. Civ. P. 8(a) (2013); Perry v.

Baptist Health, 358 Ark. 238, 189 S.W.3d 54 (2004). The court will look to the underlying

facts supporting an alleged cause of action to determine whether the matter has been

sufficiently pled. Id. Where the complaint states only conclusions without facts, we will

affirm the trial court’s decision to dismiss the complaint pursuant to Rule 12(b)(6). Brown,

330 Ark. 435, 954 S.W.2d 262.

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There are four causes of action at issue here, and we address them individually, as did

the circuit court.

A. Breach of Contract

In its first dismissal order, the circuit court found that neither of the written contracts

attached to Ballard’s complaint as Exhibits 4 and 5 bound BP for the year 2010. The circuit

court noted that Exhibit 4 plainly and unambiguously did not obligate BP for any period of

time beyond 2008 and then concluded that, “In the absence of a valid and enforceable

contract, Ballard’s contract claim against BP and King must be dismissed.” In its second

amended order, the circuit court noted that Ballard had alleged that parol evidence in the

form of course of dealing and industry practice would show that a three-year commitment

is customary in the industry. However, the circuit court ruled that the 2008 and 2009

contracts were unambiguous, and therefore parol evidence would be inadmissible. The circuit

court ultimately concluded that “the breach of contract claim fails as it did in [Ballard’s]

original Complaint. . . . [and] is dismissed.”

The circuit court’s ruling on this claim was correct. Exhibit 4 binds BP and Ballard

for the year 2008. It does have a provision to make it binding for three years “[b]y signing

a three-year commitment” at the end of the contract, but that provision is left blank and is

not signed. Exhibit 5 is for the year 2009. Because the first amended complaint alleges that

BP was required to employ Ballard for the “2010 Primary Events or the 2010 Smart Driver

Tour,” 2010 is the operative year for the breach-of-contract claim. Generally, to state a cause

of action for breach of contract the complaint need only assert the existence of a valid and

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enforceable contract between the plaintiff and defendant, the obligation of defendant

thereunder, a violation by the defendant, and damages resulting to plaintiff from the breach.

Perry, 358 Ark. 238, 189 S.W.3d 54. The circuit court cited Perry, and concluded that Ballard

had not pleaded a valid and enforceable contract for 2010, the year the alleged breach

occurred. We agree. The first amended complaint simply does not contain facts upon which

a breach-of-contract claim could be granted, and that part of the circuit court’s order

dismissing the contract claim is affirmed.

B. Misappropriation of Trade Secrets

We next consider Ballard’s claim for violation of the Arkansas Trade Secrets Act (the

Act), Arkansas Code Annotated sections 4-75-601 to -607 (Repl. 2011). We note that the

circuit court did not rule that Ballard failed to allege the existence of any trade secrets as

defined in the Act. Rather, the circuit court ruled that “[t]he complaint fails to allege that

King or BP acquired, disclosed, or used Ballard’s trade secrets.”

The Act provides that actual or threatened misappropriation of a trade secret may be

enjoined. Ark. Code Ann. § 4-75-604. “Misappropriation” is defined in the Act as follows:

(2) “Misappropriation” means:

(A) Acquisition of a trade secret of another by a person who knows or has

reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied

consent by a person who:

(i) Used improper means to acquire knowledge of the trade secret; or

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(ii) At the time of disclosure or use, knew or had reason to know that

his knowledge of the trade secret was:

(a) Derived from or through a person who had utilized improper

means to acquire it;

(b) Acquired under circumstances giving rise to a duty to

maintain its secrecy or limit its use; or

(c) Derived from or through a person who owed a duty to the

person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of his position, knew or had reason to

know that it was a trade secret and that knowledge of it had been acquired by

accident or mistake.

Ark. Code Ann. § 4-75-601(2). This court has cited subsection (2)(B) of this definition and

stated that “[m]isappropriation of a trade secret includes use of a trade secret taken by

another.” Pro-Comp Mgmt., Inc. v. R.K. Enters., LLC, 366 Ark. 463, 469, 237 S.W.3d 20,

25 (2006).

As we are required to do when testing the sufficiency of a complaint, we look to

Ballard’s first amended complaint, which contains the following specific allegations. For the

convenience of the reader, we also recite allegations that are relevant to our later discussion

of Ballard’s other causes of action for tortious interference and civil conspiracy:

16. Jason Curtis was hired by Plaintiff Ballard Group on or about October 1,

2007, at the request of his sister, Defendant Tracy Curtis King. After his hire, he was

entrusted at the suggestion of Defendants with the task and purpose of working on

Primary Events, Spinoff Events and Derivative Events by among other things, using

the methods, algorithms and other trade secrets of Plaintiff Ballard Group to analyze

and prepare the budgeting and scheduling of current events and to develop new events

to offer to Plaintiff Ballard Group’s client base . . . .

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17. Before he was hired by Plaintiff Ballard Group, Jason Curtis . . . had no

prior work experience servicing Wal-Mart or Wal-Mart vendors. All information that

was received by Jason Curtis regarding the Primary Events, Spinoff Events and

Derivative Events was due solely to his employment by Plaintiff Ballard Group. The

information received by Jason Curtis was not known outside Plaintiff Ballard Group,

and specifically was not known by Jason Curtis who had to be trained and educated

regarding this information and the processes and methods by which to use the

information by Plaintiff Ballard Group through a lengthy series of meetings, supervised

trips and tutorial sessions, at significant expense to Plaintiff Ballard Group.

18. Before Jason Curtis was hired by Plaintiff Ballard Group, and before he was

entrusted with any of the confidential information or trade secrets . . . Curtis was

required to execute a Non-Compete/Non-Disclosure Agreement. A true and correct

copy of this contract is attached hereto as Exhibit 1.

19. These non-disclosure and non-compete terms were repeatedly and

consistently renewed and supplemented each year that Jason Curtis worked for Plaintiff

Ballard Group.

20. . . . [T]rue and correct cop[ies] of th[ese] Agreement[s are] attached hereto

as Exhibit 2.

21. . . . [and] as Exhibit 3.

....

23. As part of his work, Jason Curtis regularly dealt with executives and

principals of Plaintiff Ballard Group and its clients, including but not limited to

Defendant BP Lubricants USA, Inc., and other Tour Sponsors. . . .

....

31. . . . Threads Productions, Inc., exists solely due to the actions of Defendant

Tracy Curtis King, and is merely a “funnel” for money to her family members, to the

injury of Plaintiff Ballard Group.

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32. . . . [T]he non-disclosure and non-competition terms of the Agreement

applying to Jason Curtis . . . . w[ere] made known to Keesha Akins,1 [and] these terms

were actively discussed between Jason Curtis and Keesha Akins and others, including

Defendant Tracy Curtis King, in or about September 2007. . . .

....

34. . . . This information was also independently made known to Defendants

no later than October 2009, when it was again disclosed to Defendants during

conversations with Defendant Tracy Curtis King. Defendants were further apprised

of these restrictions during bankruptcy proceedings [of Jason Curtis] in April 2010 and

when the Preliminary Injunction was issued in July 2010. . . .

....

36. The misappropriation of trade secrets by Jason Curtis was enjoined by a

Temporary Restraining Order and Preliminary Injunction entered on July 7, 2010, in

The Ballard Group, Inc. v. Jason Curtis, No. CV-2010-2167-2 (Benton C[nty]. Cir.

Ct.). This order was known to the Defendants within days of its entry.

....

42. . . . Defendant Tracy Curtis King’s husband also was hired away from

Plaintiff Ballard Group to work for Threads Productions, Inc., in addition to her

brother, Jason Curtis.

43. . . . .

(a) . . . King, stopped by the office of Keesha Akins in person and covertly

solicited the bid by Threads Productions, Inc., in September or October 2009, even

before that entity was formed;

(b) . . . King, personally assisted Keesha Akins in preparing the details of the

bid by Threads Productions, Inc.;

(c) . . . King, actively and personally discussed and encouraged Jason Curtis and

other employees of Plaintiff Ballard Group, including but not limited to Shane Akins,

1

Elsewhere in the first amended complaint, Keesha Akins was alleged to have

supervised and controlled all relevant actions of Threads Productions, Inc.

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Phillip Easley, and her husband (Robert King) to seek employment with Threads

Productions, Inc., on at least two occasions during 2009;

(d) Defendant BP Lubricants USA, Inc., by and through Defendant Tracy

Curtis King, contracted with Threads Productions, Inc., for the Primary Events

through a collusive and anti-competitive bid process which concealed the fact that the

per event costs, normally the predominant factor in deciding whom to award a

contract, were $1298.08 per event with Threads Productions, Inc., and cheaper, at

$1142.31 per event with Plaintiff Ballard Group, which was the low bidder due to the

competitive advantages resulting from its trade secrets and confidential information.

As a result, the Defendants’ anti-competitive actions were not based upon business

judgment, and actually increased the costs to Tour sponsors as a result of Defendant

Tracy Curtis King’s nepotistic motives which gave Threads Productions, Inc., an

unfair trade advantage in its competition with Plaintiff Ballard Group, Inc.;

...

(f) Defendants, Jason Curtis, Keesha Akins, Threads Productions, Inc., and

others obtained and diverted the Tour after having been given a specific dollar amount

for bid by Defendant Tracy Curtis King who worked for Defendant BP Lubricants

USA, Inc., in a position that gave her effective control of the business;

...

(i) . . . King, actively promoted Threads Productions, Inc., and encouraged

other Tour Sponsors to cease communication with Plaintiff Ballard Group . . . ;

(j) . . . [and] provided false and misleading information regarding Plaintiff

Ballard Group, to other Tour Sponsors thereby inducing them to cease doing business

with Plaintiff Ballard Group and do business instead with Threads Productions, Inc.,

in a further nepotistic effort to promote Threads Productions, Inc., for the benefit of

the family members of Defendant Tracy Curtis King, and to conceal the Defendants’

anti-competitive and collusive activities in restraint of trade.

....

45. As a result, Defendants have also misappropriated Plaintiff Ballard Group’s

trade secrets and other confidential information by inducing breach of the Agreements

by Jason Curtis, who has breached the confidentiality and non-competition terms of

the Agreements, and by inducing breach of contract by Defendant BP Lubricants

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USA, Inc., and by actively inducing the other Tour Sponsors to cease doing business

with Plaintiff Ballard Group through specific communications as described herein.

46. Defendants have misappropriated Plaintiff Ballard Group’s trade secrets and

other confidential information by taking the actions described herein which

individually and collectively constitute using these trade secrets which Defendants, by

and through Defendant Tracy Curtis King, had reason to know were derived from or

through a person who had utilized improper means to acquire the trade secrets, to wit,

Jason Curtis and Threads Productions, Inc.

In ruling that Ballard’s first amended “complaint faile[d] to allege that King or BP had

acquired, disclosed, or used” Ballard’s trade secrets, the circuit court observed that, according

to the complaint, it was Jason Curtis who misappropriated Ballard’s trade secrets to Threads,

but Threads is not a defendant in this case. While that is true, this ruling stops short of

recognizing other allegations in the complaint, such as that in September 2007, prior to Jason

Curtis being hired at Threads, that King and Curtis had met with Keesha Akins to discuss the

non-compete and non-disclosure agreement that Curtis had made with Ballard; or that in

September or October 2009, King and Threads, armed with the knowledge that was

protected in the non-compete/non-disclosure agreement, colluded and conspired to prepare

and submit a bid from Threads that falsely appeared to underbid Ballard. Construing these

and the foregoing allegations liberally and resolving all inferences in favor of the complaint

as we are required to do, we conclude that these allegations state facts that King, acting within

the scope of her employment with BP, used the trade secrets that her brother Curtis had

acquired at Ballard to help Threads prepare a bid on behalf of Threads to compete with

Ballard. Given our statement in Pro-Comp Mgmt., 366 Ark. 463, 237 S.W.3d 20, that

misappropriation of a trade secret includes use of a trade secret taken by another, we conclude

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that Ballard has sufficiently stated a cause of action for violation of the Arkansas Trade Secrets

Act.

In sum, the foregoing portions of the first amended complaint constitute specific events

and conversations occurring on at least three different occasions in 2007, 2009, and 2010 to

support Ballard’s allegation that King and BP acquired and used Ballard’s trade secrets to

formulate and prepare a bid to divert BP’s business from Ballard to Threads. Whether Ballard

can produce evidence to prove these alleged facts remains to be determined later in these

proceedings; however, the foregoing allegations describe particular events in sufficient detail

to state a cause of action for misappropriation of trade secrets. Accordingly, we conclude that

the circuit court abused its discretion is dismissing the trade-secrets cause of action for failure

to allege facts that BP “acquired, disclosed or used” Ballard’s trade secrets.

C. Tortious Interference

We turn now to Ballard’s claim of tortious interference with a contract and business

expectancy. The elements of tortious interference are (1) the existence of a valid contractual

relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the

part of the interfering party; (3) intentional interference inducing or causing a breach or

termination of the relationship or expectancy; and (4) resultant damage to the party whose

relationship or expectancy has been disrupted. Brown, 330 Ark. 435, 954 S.W.2d 262; Mason

v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969). A fifth requirement has been added by

this court: the conduct of the defendant must be “improper.” Faulkner v. Ark. Children’s

Hosp., 347 Ark. 941, 959, 69 S.W.3d 393, 405 (2002). In addition to the above, another

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essential element of a tortious-interference-with-contractual-relations claim is that there must

be some third party involved. Id.

In the present case, the circuit court’s second amended order concluded that,

“[b]ecause there is not a valid contractual relationship or business expectancy, and a party

cannot interfere with its own contract, facts are not stated upon which relief can be granted,

and [Ballard’s] tortious interference claim is dismissed.” This would be a correct ruling if the

basis of Ballard’s claim was the alleged contract between Ballard and BP. See Faulkner, 347

Ark. 941, 69 S.W.3d 393 (stating that a party to a contract and its employees and agents,

acting within the scope of their authority, cannot be held liable for interfering with the party’s

own contract). But this ruling stops short of correctly identifying the contracts and

expectancies that Ballard alleged King and BP had interfered with. The first amended

complaint clearly states, “The interests with which the Defendants’ actions interfered were

well established contract rights between Plaintiff Ballard Group and Jason Curtis and Plaintiff

Ballard Group’s legitimate business expectancies based upon lengthy business relationships and

agreement with the Tour Sponsors.”

The circuit court abused its discretion here by overlooking Ballard’s allegations that

the contract that King and BP interfered with was the non-compete/non-disclosure

agreement between Ballard and Jason Curtis. The circuit court’s second amended order did

not consider that such agreements or contracts existed despite the fact that there were three

of them attached to Ballard’s complaint. Curtis executed one of these agreements every year

for the years 2007–2009, and they were attached to the complaint as Exhibits 1-3. Ballard’s

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first amended complaint alleged that King and BP “discussed and encouraged Jason Curtis

. . . to seek employment with Threads . . . on at least two occasions during 2009.” This

allegation, when considered with the allegations previously recited in our consideration of

Ballard’s trade-secrets claim, sufficiently pleads facts to state a claim for tortious interference

with a contract, and the circuit court abused its discretion in overlooking this aspect of

Ballard’s tortious-interference claim.

As for the claim that King and BP tortiously interfered with Ballard’s contracts and

business expectancies with other Tour Sponsors, the first amended complaint alleges that King

“actively instruct[ed] Tour Sponsors to terminate communications with [Ballard] in order to

cement and preserve the unfair anti-competitive advantage” gained by Threads. The first

amended complaint also alleged that King, while actively promoting Threads, provided false

and misleading information regarding Ballard to other Tour Sponsors, thereby inducing them

to cease doing business with Ballard and to start doing business instead with Threads. The

first amended complaint gives specific allegations of each 2010 Tour Event that Ballard claims

it lost to Threads. There are seven specific events named and itemized (e.g., Primary Event

on or about May 31–June 3, 2010, at 2010 Shareholder Meeting; and Spinoff Event at

“October Road Show” on or about October 7–14, 2010), and a total of roughly $375,000

is alleged in lost expected revenue to Ballard. Other Tour Sponsors identified with these

enumerated events include Michelin, Everstart, and Meguiar’s. Clearly then, Ballard’s first

amended complaint recited certain events alleged to have happened at particular times that,

when considered together with the allegations previously recited in our consideration of

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Ballard’s trade-secrets claim, sufficiently plead facts to state a claim for tortious interference

with a business expectancy, and the circuit court abused its discretion in overlooking this

additional aspect of Ballard’s tortious-interference claim.

In sum, the circuit court’s ruling that there was not a valid contract or business

expectancy alleged because there was not a valid contract between Ballard and BP overlooked

the other allegations in the complaint concerning the agreement between Ballard and Curtis

and Ballard’s business expectancies with the other Tour Sponsors. When considered with the

allegations previously discussed with respect to the trade-secrets claim, the three signed non-

compete/non-disclosure agreements between Ballard and Curtis attached to the complaint

suffice to allege a claim of BP’s tortious interference with a contract, and the enumeration of

the seven specific events that Ballard claims it lost to Threads are sufficient to allege a claim

of tortious interference with a business expectancy. We therefore conclude that the circuit

court abused its discretion in dismissing the cause of action for tortious interference with a

contract and business expectancy.

D. Civil Conspiracy

The circuit court ruled that, because Ballard’s contract, trade secrets, and tortious-

interference claims had been dismissed as a matter of law, Ballard could not state a claim for

civil conspiracy. To prove a civil conspiracy, a plaintiff must show that two or more persons

have combined to accomplish a purpose that is unlawful or oppressive or to accomplish some

purpose, not in itself unlawful, oppressive or immoral, but by unlawful, oppressive or immoral

means, to the injury of another. Faulkner, 347 Ark. 941, 69 S.W.3d 393. A civil conspiracy

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is not actionable in and of itself, but a recovery may be had for damages caused by acts

committed pursuant to the conspiracy. Id. A civil conspiracy is an intentional tort that

requires a specific intent to accomplish the contemplated wrong. Id. Based on this law, then,

because we are reversing the dismissal of the underlying claims of tortious interference and

misappropriation of trade secrets, we also reverse the dismissal of the civil-conspiracy claim.

See Se. Distrib. Co. v. Miller Brewing Co., 366 Ark. 560, 237 S.W.3d 63 (2006) (reversing

summary judgment on civil-conspiracy claim due to reversal of summary judgment on

underlying claims for tortious interference and violation of two statutes).

IV. Rule 41(b)—The Two-Dismissal Rule

Because we have concluded that the claim for breach of contract was properly

dismissed pursuant to Rule 12(b)(6), we must now address Ballard’s argument that the second

dismissal with prejudice is reversible error and should be modified to reflect a dismissal

without prejudice. Ballard contends that the second amended order’s dismissal with prejudice

is contrary to the explicit text of Rule 41(b), which refers to a dismissal being without

prejudice to a future action. King and BP respond that the second amended order was a

second dismissal and therefore the circuit court correctly applied the two-dismissal rule found

in Rule 41(b) such that the second dismissal was properly with prejudice.

Stated in its most basic form, the issue here presented is whether two Rule 12(b)(6)

dismissals, the second of which is granted after the plaintiff has been given the opportunity to

plead further under Rule 12(j), combine to trigger the two-dismissal rule in Rule 41(b). We

conclude that the answer is yes. This means that, on the facts here presented, the circuit court

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was correct in concluding that the second Rule 12(b)(6) dismissal of Ballard’s claim for breach

of contract was a dismissal with prejudice.

Our analysis begins with the principle that when a dismissal pursuant to Rule 12(b)(6)

is granted because the complaint is determined to be factually insufficient, then it is improper

for such a dismissal to be granted with prejudice and without leave to plead further pursuant

to Rule 12(j). See, e.g., Matter of Poston, 318 Ark. 659, 887 S.W.2d 520 (1994); see also

Hubbard v. Shores Grp., Inc., 313 Ark. 498, 855 S.W.2d 924 (1993). This is because “[i]t is

well-settled that such a dismissal is to be without prejudice so that the plaintiff may elect

whether to plead further or appeal.” Malone, 325 Ark. at 386, 926 S.W.2d at 661. But it is

also well settled that “there is a limit to the number of times a case can be dismissed,”

regardless of whether the dismissals are voluntary or involuntary. See Bakker v. Ralston, 326

Ark. 575, 579, 932 S.W.2d 325, 327 (1996) (citing Ark. R. Civ. P. 41 rep. nn.).

Continuing our analysis with a reading of Rule 41(b), we see that the rule provides as

follows:

(b) Involuntary Dismissal. In any case in which there has been a failure of the

plaintiff to comply with these rules or any order of court or in which there has been

no action shown on the record for the past 12 months, the court shall cause notice to

be mailed to the attorneys of record, and to any party not represented by an attorney,

that the case will be dismissed for want of prosecution unless on a stated day

application is made, upon a showing of good cause, to continue the case on the court’s

docket. A dismissal under this subdivision is without prejudice to a future action by

the plaintiff unless the action has been previously dismissed, whether voluntarily or

involuntarily, in which event such dismissal operates as an adjudication on the merits.

Ark. R. Civ. P. 41(b) (2013).

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This court has noted that a failure to comply with the requirements of Arkansas Rule

of Civil Procedure 4 regarding the issuance and service of a summons is a “failure of the

plaintiff to comply with these rules” as contemplated in Rule 41(b) and that a dismissal

granted for such failure to properly serve a summons under Rule 12(b)(5) constitutes an

involuntary dismissal under Rule 41(b). Bakker, 326 Ark. at 579, 932 S.W.2d at 327. By the

same reasoning, a failure to comply with the requirements of Arkansas Rule of Civil

Procedure 8 for pleading facts is likewise a “failure of the plaintiff to comply with these rules”

as contemplated in Rule 41(b); thus, a dismissal granted for failure to state facts upon which

relief can be granted under Rule 12(b)(6) constitutes an involuntary dismissal under Rule

41(b).

In Brown, 330 Ark. 435, 954 S.W.2d 262, this court applied Rule 41(b) and the

principle announced in Bakker, 326 Ark. 575, 932 S.W.2d 325, and modified a Rule 12(b)(6)

dismissal to one with prejudice when it was subsequent to a prior dismissal due to a voluntary

nonsuit. In Middleton v. Lockhart, 344 Ark. 572, 43 S.W.3d 113 (2001), however, this court

declined to apply Brown where two Rule 12(b)(6) dismissals had been granted in the absence

of a voluntary nonsuit. In so doing, this court noted in Middleton that Rule 41(b) was not

applicable because not all the causes of action alleged had been dismissed twice. Unlike

Middleton, the present case involves two Rule 12(b)(6) dismissals granted on the same four

causes of action alleged against the same party defendants. The facts in Middleton are therefore

so distinguished from the facts of the present case that Middleton simply does not apply here.

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Keeping in mind that the operation of Rule 41(b)’s two-dismissal rule is invoked when

two dismissals have been granted, “whether voluntarily or involuntarily,” we return then to

the principle applied in Brown that, for purposes of calculating the two dismissals subject to

Rule 41(b), an involuntary dismissal under Rule 12(b)(6) counts as a second dismissal. Based

on Brown, we therefore conclude that an involuntary dismissal under Rule 12(b)(6) may also

constitute a first dismissal when calculating the two dismissals subject to Rule 41(b). Applying

the plain language of Rule 41(b), we hold that when a first Rule 12(b)(6) dismissal is granted

with an opportunity to plead further under Rule 12(j), and a second Rule 12(b)(6) dismissal

is suffered on the same claims after the attempt to plead further, then by operation of the two-

dismissal component of Rule 41(b), the second Rule 12(b)(6) dismissal is with prejudice and

operates as an adjudication on the merits. Our holding that two Rule 12(b)(6) involuntary

dismissals combine to trigger the two-dismissal component of Rule 41(b) gives effect to both

the purpose of Rule 12(j) in allowing a trial court to exercise its discretion to allow a plaintiff

to plead further “if appropriate” and the purpose of Rule 41(b) to limit the number of times

a case can be dismissed “whether voluntarily or involuntarily.” Ark. R. Civ. P. 12(j); Ark.

R. Civ. P. 41(b). Under Rule 12(j), a trial court has the discretion to allow further pleading

“if appropriate.” Regardless of the number of times a complaint is amended, however, a

complaint may be dismissed only twice pursuant to Rule 41(b).

V. Conclusion

The circuit court correctly dismissed Ballard’s claim for breach of contract pursuant to

Rule 12(b)(6) due to Ballard’s failure to plead a valid and enforceable contract. Because the

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circuit court had previously dismissed the contract claim based on Rule 12(b)(6) and had

allowed Ballard the opportunity to further plead the claim, the second dismissal was properly

granted with prejudice by operation of Rule 41(b). That part of the circuit court’s second

amended order dismissing Ballard’s contract claim is therefore affirmed.

The circuit court, however, abused its discretion in overlooking specific allegations of

fact in the first amended complaint and in dismissing the remaining trade-secrets, tortious-

interference, and civil-conspiracy claims. When the allegations of these remaining claims in

Ballard’s first amended complaint are construed liberally and all inferences are resolved in favor

of the complaint, they go beyond mere conclusions and sufficiently state facts upon which

relief could be granted. Whether Ballard can ultimately produce evidence to prove these

alleged facts remains to be determined. However, the first amended complaint relates

particular actions and events alleged to have been taken at certain times that sufficiently state

a cause of action for misappropriation of trade secrets, tortious interference, and civil

conspiracy. Stating facts upon which relief can be granted is all that is required at this point

in this case. The parts of the circuit court’s second amended order dismissing the claims

concerning trade secrets, tortious interference, and civil conspiracy are accordingly reversed

and remanded for further proceedings.

Affirmed in part; reversed and remanded in part.

HANNAH, C.J., and HART, J., dissent.

JIM HANNAH, Chief Justice, dissenting. I respectfully dissent from that portion of

the majority opinion holding that Arkansas Rule of Civil Procedure 41(b) applies to two

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dismissals under Arkansas Rule of Civil Procedure 12(b)(6). Rule 41(b) was intended to

permit trial courts to clean up their dockets and get stale cases dismissed where the plaintiff

fails to prosecute, fails to comply with rules, or fails to comply with any order of the court.

Cory v. Mark Twain Life Ins. Corp., 286 Ark. 20, 22, 688 S.W.2d 934, 935 (1985). Likening

Arkansas Rule of Civil Procedure 8 to Arkansas Rule of Civil Procedure 4 regarding service

of process, the majority concludes that “a failure to comply with the requirements of Arkansas

Rule of Civil Procedure 8 for pleading facts is likewise a ‘failure of the plaintiff to comply

with these rules’ as contemplated in rule 41(b)”. I disagree.

First, I do not agree that a failed attempt by a plaintiff to state “in ordinary and concise

language. . .facts showing. . .that the pleader is entitled to relief (Arkansas Rule of Civil

Procedure 8(a)) constitutes a “failure of the plaintiff to comply with these rules” under rule

41(b). Second, I do not believe that the analogy to Rule 4 is helpful because Rule 4 sets out

very specific tasks to be completed for service of process, and stating a cause of action is an

issue governed by Rule 12, not Rule 41. Arkansas Rule of Civil Procedure 12(j) grants the

trial court the discretion to permit further pleading, which clearly means that Rule 41(b) is

not applicable to dismissals under Rule 12. Nothing in this case indicates that the plaintiff was

not prosecuting the case or that any rules of civil procedure subject to Rule 41 were being

violated. The majority improperly and unnecessarily limits the discretion of the trial courts

to handle pleading issues. On this basis, I respectfully dissent.

HART, J., joins.

The Kester Law Firm, by: Charles M. Kester; and Kelley Law Firm, by: Glenn E. Kelley,

for appellant.

Friday, Eldredge & Clark, LLP, by: Christopher Heller, Tory H. Lewis, and R. Christopher

Lawson, for appellees.

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