Ensley v. Turnage

MEMORANDUM OPINION AND ORDER

The plaintiffs have asked the Court to reconsider several rulings on the parties’

motions for summary judgment. (Doc. 565). For the reasons stated below, the Court

will reinstate the plaintiffs’ claims for breach of loyalty and fraudulent suppression

against the Gemstone employees who engaged Mike Ensley to recruit customers for

Farm Fresh while the employees still held managerial positions at Gemstone.

I.

Pursuant to Federal Rule of Civil Procedure 54(b), when an action involves

multiple claims or multiple parties, “the court may direct entry of a final judgment

as to one or more, but fewer than all, claims or parties only if the court expressly

determines that there is no just reason for delay.” Fed. R. Civ. P. 54(b). If a court

does not certify a partial final judgment under Rule 54(b), “any order or decision”

which “adjudicates fewer than all the claims or the rights and liabilities of fewer than

all the parties . . . may be revised at any time before the entry of a judgment

adjudicating all the claims and all the parties’ rights and liabilities.” FED. R. CIV. P.

54(b). In other words, “an interlocutory order is subject to reconsideration at any

time prior to entry of final judgment.” Covenant Christian Ministries, Inc. v. City of

Marietta, 654 F.3d 1231, 1242 (11th Cir. 2011) (citing Harper v. Lawrence Cty.,

592 F.3d 1227, 1231 (11th Cir. 2010)). A motion to revise an interlocutory order

“is not subject to the limitations of Rule 59.” Toole v. Baxter Healthcare Corp., 235

F.3d 1307, 1315 (11th Cir. 2000) (quoting Gallimore v. Mo. Pac. R.R. Co., 635 F.2d

1165, 1171 (5th Cir. Unit A Feb. 1981)). The Eleventh Circuit reviews a district

court’s alteration of an interlocutory order for abuse of discretion. See Harper, 592

F.3d at 1231–32 (citing Lanier Constr., Inc. v. Carbone Props. of Mobile, LLC, 253

Fed. Appx. 861, 863 (11th Cir. 2007); see also Region 8 Forest Serv. Timber

Purchasers Council v. Alcock, 993 F.2d 800, 805–06 (11th Cir. 1993).

The Advisory Committee Notes to Rule 60 of the Federal Rules of Civil

Procedure, the rule that governs relief from final orders and judgments, distinguishes

the standard for Rule 60 from the standard under Rule 54(b): “The addition of the

qualifying word ‘final’ emphasizes the character of the judgments, orders or

proceedings from which Rule 60(b) affords relief; and hence interlocutory

judgments are not brought within the restrictions of the rule, but rather they are left

subject to the complete power of the court rendering them to afford such relief from

them as justice requires.” FED. R. CIV. P. 60 Advisory Committee Notes, 1946

Amendment, Subdivision (b); see Six Dimensions, Inc. v. Perficient, Inc., 969 F.3d

219, 227 (5th Cir. 2020) (“Under Rule 54(b), the trial court is free to reconsider and

reverse its decision for any reason it deems sufficient, even in the absence of new

evidence or an intervening change in or clarification of the substantive law.”)

(quoting Austin v. Kroger Tex., L.P., 864 F.3d 326, 336 (5th Cir. 2017)); Cobell v.

Jewell, 802 F.3d 12, 25 (D.C. Cir. 2015) (“In contrast [to Rule 59(e)], Rule 54(b)’s

approach to the interlocutory presentation of new arguments as the case evolves can

be more flexible, reflecting the ‘inherent power of the rendering district court to

afford such relief from interlocutory judgments as justice requires.’”) (quoting

Greene v. Union Mut. Life Ins. Co. of Am., 764 F.2d 19, 22 (1st Cir. 1985) (Breyer,

J.)).

Because Gemstone and RCF ask the Court to reconsider its analysis of the

defendants’ motions for summary judgment, the Court considers the evidence in the

light most favorable to Gemstone and draws inferences from the evidence in

Gemstone’s favor. See Sconiers v. Lockhart, 946 F.3d 1256, 1263 (11th Cir. 2020)

(citing Allen v. Bd. of Pub. Educ. for Bibb Cty., 495 F.3d 1306, 1315 (11th Cir.

2007)).

II.

The unusual procedural posture of this case counsels in favor of the Court’s

review of its summary judgment analysis of the plaintiffs’ state law claims. As the

Court noted in its summary judgment opinion, the parties filed a total of six motions

for summary judgment in these consolidated cases. (Doc. 579, p. 3). To manage the

briefing and resolve the extensive motions before a mediation with Judge Ott, the

Court issued party-specific—and in some instances claim-specific—briefing orders.

The Court did not ask counsel for the plaintiffs to submit a summary judgment brief

concerning the plaintiffs’ state law claims against the defendants other than Mr.

Wester.1 Consequently, the plaintiffs’ motion to alter summary judgment rulings

1 Gemstone and RCF responded to Mr. Wester’s summary judgment motion and addressed his

arguments concerning their state law claims. Gemstone and RCF focused their opposition on

arguments concerning the Wester laptop and the PWW cross-docking scheme. (Doc. 454, pp. 51–

contains the plaintiffs’ first summary judgment arguments regarding their state law

claims against the managerial defendants and the evidence relevant to those claims.

The Court has considered those arguments and the defendants’ response.

III.

Under Alabama law, general principles of agency provide that an agent owes

his principal a duty of loyalty to act “with due regard to the interest of the principal.

In accepting the agency [an agent] impliedly undertakes to give his principal his best

care and judgment, and to use the powers conferred upon him for the sole benefit of

his principal consistent with the purposes of the agency.” Edwards v. Allied Home

Mortg. Capital Corp., 962 So. 2d 194, 210 (Ala. 2007) (quoting Dudley v. Colonial

Lumber Co., 137 So. 429, 431 (Ala. 1931)). An agent must, “in all circumstances,”

act “with due regard for the interests of his principal, and [] act with the utmost good

faith and loyalty.” Allied Supply Co. v. Brown, 585 So. 2d 33, 37 (Ala. 1991) (citing

Williams v. Williams, 497 So. 2d 481 (Ala. 1986)). “Implicit in this duty is an

obligation not to subvert the principal’s business by luring away customers or

employees of the principal, or to otherwise act in any manner adverse to the

principal’s interest” while employed by the principal. Allied Supply Co., 585 So. 2d

58). Gemstone and RCF did not discuss in that opposition the conduct of the other managerial

defendants who allegedly breached their duty of loyalty to Gemstone and RCF and committed

fraudulent suppression.

at 37 (citing Naviera Despina, Inc. v. Cooper Shipping Co., 676 F. Supp. 1134 (S.D.

Ala. 1987)).

To succeed on a claim for breach of the duty of loyalty, a plaintiff must prove

that a duty exists between the plaintiff and the defendant, that the defendant breached

that duty, and that the plaintiff incurred damages as a result. Aliant Bank, a Div. of

USAmeribank v. Four Star Invs., Inc., 244 So. 3d 896, 907 (Ala. 2017) (citing

Regions Bank v. Lowrey, 101 So. 3d 210, 219 (Ala. 2012)).

Because Gemstone did not have non-compete agreements with the Gemstone

employee defendants, a breach of duty claim relating to those employees’ alleged

solicitation of Gemstone employees, vendors, and customers may span only the brief

window of time when the managerial employees took steps to launch Farm Fresh

while they were employed at Gemstone. That window is no more than a few

months—and a shorter period for some defendants who left Gemstone earlier than

others. By itself, that short period of time does not warrant summary judgment for

the defendants. Allied Supply Co., 585 So. 2d at 34–35, 37 (denying summary

judgment on breach of loyalty claim against managerial employees for conduct that

occurred over six-week period).

Viewing the evidence in the light most favorable to Gemstone and RCF, Mr.

Welborn and Eddie Hill first discussed the possibility of creating a new processing

company in December 2014, and the Gemstone employees who founded Farm Fresh

became owners of Farm Fresh in January 2015, a month or so before most of them

left Gemstone. The Court has not located evidence from which jurors could infer

that, while they were employees of Gemstone, Mr. Welborn, Mr. Pass, Mr. Wester,

Gary Hill or Ms. Campos solicited Gemstone employees to go to work for Farm

Fresh. Thus, Gemstone and RCF cannot maintain a breach of duty claim against the

managerial employees on that basis.2

Gemstone and RCF have identified evidence from which reasonable jurors

could conclude that the managerial defendants engaged Mr. Ensley to recruit

customers like Tyson, a significant Gemstone customer, as Farm Fresh customers

before the managerial employees left Gemstone. The record demonstrates that after

Mr. Ensley left Gemstone, between December 2014 and March 2015, he began

“setting up a customer base for farm fresh [sic]” by “prenotif[ying] [] specific

customers” of “start-up dates.” (Doc. 525-55, pp. 1–2). To accomplish the work for

the new company, Mr. Ensley travelled 18,000 miles over four months. (Doc. 525-

55, p. 2).3 It is undisputed that Mr. Ensley did not become an owner of Farm Fresh,

2 In their motion to alter, Gemstone and RCF list several managers who purportedly resigned from

Gemstone between February 2015 and March 2015. The plaintiffs do not cite evidence to support

the allegations, and the plaintiffs have not provided evidence that indicates that the non-party

managers who purportedly resigned from Gemstone became Farm Fresh employees. (Doc. 565-

1, pp. 18–19). Therefore, Gemstone and RCF have not offered evidence to overcome the

managerial defendants’ motion for summary judgment as it pertains to recruitment of Gemstone

employees.

3 Mr. Ensley testified that he incurred those miles consulting for Tyson, Raising Cane, and Dallas

USA. (Doc. 422-18, p. 62, tpp. 242–43). Jurors may believe or disbelieve Mr. Ensley’s testimony,

so he was not recruiting customers for a company that he owned (which he was free

to do because he did not sign a non-compete agreement); he was recruiting “a

customer base for farm fresh,” the company that the managerial employees owned

as of January 2015. While Mr. Ensley was notifying customers of Farm Fresh’s

start-up dates, in January 2015, using the email address from which Mr. Ensley

requested payment for his efforts to set up Farm Fresh’s customer base, Mr. Pass

copied Mr. Ensley on messages to the managerial defendants to which Mr. Pass

attached Gemstone schedules and work orders. (Docs. 565-13 through 565-20; Doc.

525-55, p. 1). Jurors could conclude that Mr. Ensley used the information in these

reports to help him pre-notify potential Farm Fresh customers. John LaCour of

Tyson testified that Mr. Ensley communicated to him that he and “some of the key

people” at Gemstone, namely the team who had worked with Mr. Ensley at Diamond

Foods before moving to Gemstone, were leaving Gemstone. (Doc. 422-16, p. 23,

tp. 88). Mr. LaCour stated that after Mr. Ensley left Gemstone, Tyson sent business

to Farm Fresh that otherwise would have gone to Gemstone. (Doc. 422-16, p. 22,

tpp. 83–84).4

taking into account, for example, his written representation to Mr. Welborn that he (Mr. Ensley)

incurred 18,000 of the total 24,000 miles that he traveled over four months for “your company,”

meaning Farm Fresh. (Doc. 525-55, p. 2).

4 In its initial opinion, the Court noted that Mr. Turnage was confident that Farm Fresh took

Gemstone customers, including Tyson and Koch, but because he “was not at the table when the

deals were cut,” (Doc. 422-1, p. 67, tp. 257), he presumably did not know when the defendants

struck deals with Gemstone’s customers. Therefore, jurors would be left to speculate about

The managerial defendants argue that, even if Gemstone and RCF can

demonstrate that Mr. Ensley contacted potential customers on behalf of the

managerial defendants while those defendants still worked at Gemstone, Gemstone

and RCF cannot establish damages that the companies allegedly suffered as a result.

The defendants argue that “the undisputed testimony is that Gemstone did not lose

any customers or business to Farm Fresh.” (Doc. 577, p. 8). But, as noted, Mr.

LaCour testified that Tyson moved business to Farm Fresh that otherwise would

have gone to Gemstone. (Doc. 422-16, p. 22, tpp. 83–84; see also Doc. 422-12, p.

42, tpp. 156–57) (explaining that Gemstone sales volume to Tyson fell in 2015 as

compared to the previous year after Farm Fresh began operating).

Ultimately, Gemstone and RCF may struggle to tie one or two months of

conduct to specific profits lost because the managerial defendants—viewing the

evidence in the light most favorable to Gemstone—had Mr. Ensley recruit Gemstone

customers for Farm Fresh between December 2014 and March 2015, but Gemstone’s

evidence of a breach of the duty of loyalty may support an award of nominal

damages. Welch v. Evans Bros. Constr. Co., 66 So. 517, 552 (Ala. 1914) (“[I]t may

not be inappropriate to call attention to the fact that where there is, in an action of

possible breaches of the managerial defendants’ duties of loyalty as that claim relates to

recruitment of Gemstone customers while the managerial employees still worked for Gemstone.

The documentary and testimonial evidence that the Court discusses in this opinion removes the

timing issue from the realm of speculation.

tort, a breach of duty shown, and the amount of the injury resulting from it is not

shown, nominal damages are proper.”); see also L.A. Draper & Son, Inc. v.

Wheelabrator-Frye, Inc., 813 F.2d 332, 338 (11th Cir. 1987) (explaining that under

Alabama law, “where an agent breaches his fiduciary duty, his employer is entitled

to nominal damages even where there is a failure of proof regarding actual

damages”). And “an award of nominal damages may support an additional award

of punitive damages” under Alabama law. Raley v. Royal Ins. Co., 441 So. 2d 916,

918 (Ala. Civ. App. 1983) (citing Walker v. Cleary Petroleum Corp., 421 So. 2d 85,

88 (Ala. 1982)).

The managerial defendants’ duty of loyalty impacts not only the plaintiffs’

claim for breach of that duty but also the plaintiffs’ suppression claim against the

managerial defendants. Under Alabama law, “[s]uppression of a material fact which

the party is under an obligation to communicate constitutes fraud. The obligation to

communicate may arise from the confidential relations of the parties or from the

particular circumstances of the case.” Alabama Code § 6-5-102. Under Alabama

law, to establish a claim for fraudulent suppression, a plaintiff must prove: “(1) a

duty on the defendant to disclose a material fact; (2) the defendant’s concealment or

nondisclosure of that fact; (3) inducement of the plaintiff to act; and (4) action by

the plaintiff to his injury.” Brushwitz v. Ezell, 757 So. 2d 423, 431 (Ala. 2000)

(citing Foremost Ins. Co. v. Parham, 693 So. 2d 409, 423 (Ala. 1997)); see also

Booker v. United Am. Ins. Co., 700 So. 2d 1333, 1339 n.10 (Ala. 1997).

Under the first element, a defendant may have a duty to disclose material facts

because of “(1) the relationship of the parties; (2) the relative knowledge of the

parties; (3) the value of the particular fact; (4) the plaintiff’s opportunity to ascertain

the fact; (5) the customs of the trade; and (6) other relevant circumstances.” Bethel

v. Thorn, 757 So. 2d 1154, 1162 (Ala. 1999) (quoting State Farm Fire & Cas. Co.

v. Owen, 729 So. 2d 834, 842–43 (Ala. 1998)). “[W]hen one party has superior

knowledge of a fact that is unknown to the other party, and the lack of knowledge

will induce the other party to act in a manner in which he otherwise might not act,

the obligation to disclose is particularly compelling.” Flying J Fish Farm v. Peoples

Bank of Greensboro, 12 So. 3d 1185, 1192 (Ala. 2008) (quoting Liberty Nat’l Life

Ins. Co. v. McAllister, 675 So. 2d 1292, 1296 (Ala. 1995)) (internal quotations

omitted).

Here, viewing the evidence in the light most favorable to the plaintiffs, during

the early part of 2015, while they worked for Gemstone, the managerial employees

launched Farm Fresh; they created their new company, engaged Mr. Ensley to recruit

customers for the new company, and shared with Mr. Ensley internal Gemstone

documents to help him pre-notify customers. The employment relationship between

the managerial employees and Gemstone weighs in favor of a duty to disclose. So

does the relative knowledge of the parties, the value of the particular fact, and

Gemstone’s and RCF’s opportunity to ascertain the fact. Gemstone did not know

that its managers, through an agreement with Mr. Ensley, were inviting Gemstone

customers to send their business to Farm Fresh. The fact of that solicitation was

very valuable to Gemstone; Gemstone would have wanted to know that its managers,

through Mr. Ensley, were reaching out to Gemstone customers to encourage

Gemstone customers to direct their business to Farm Fresh. While they worked at

Gemstone, the managerial defendants had a duty to disclose this clandestine work to

Gemstone. Jurors may conclude that the managerial defendants breached that duty

and that the breach prevented Gemstone from intervening to prevent their managers

from undermining Gemstone’s and RCF’s business. As noted above, although

Gemstone may have difficulty establishing lost profits stemming from the

managerial defendants’ conduct over one or two months, a breach of a duty to

disclose a material fact may support an award of nominal and punitive damages.

The claims for breach of loyalty and fraudulent suppression support a claim

for civil conspiracy against the managerial defendants and Mr. Ensley. To succeed

on a civil conspiracy claim under Alabama law, a plaintiff “must prove a concerted

action by two or more people that achieved an unlawful purpose or a lawful end by

unlawful means.” Luck v. Primus Auto. Fin. Servs., Inc., 763 So. 2d 243, 247 (Ala.

2000) (citing McLemore v. Ford Motor Co., 628 So. 2d 548 (Ala. 1993)). “The gist

of an action alleging civil conspiracy is not the conspiracy itself but, rather, the

wrong committed.” Hooper v. Columbus Reg’l Healthcare Sys., Inc., 956 So. 2d

1135, 1141 (Ala. 2006) (quoting Keith v. Witt Auto Sales, Inc., 578 So. 2d 1269,

1274 (Ala. 1991)). “A civil conspiracy claim operates to extend, beyond the active

wrongdoer, liability in tort to actors who have merely assisted, encouraged, or

planned the wrongdoer’s acts.” DGB, LLC v. Hinds, 55 So. 3d 218, 234 (Ala. 2010)

(quoting 16 AM. JUR. 2D Conspiracy § 57 (2009)).

Here, the wrong is the managerial defendants’ breach of their duties to

Gemstone while they were Gemstone employees. Mr. Ensley participated in that

breach by agreeing, for a fee, to do for the managerial defendants what they could

not do themselves lawfully while they worked at Gemstone—contact Gemstone

customers and encourage them to send business that would have been Gemstone’s

to Farm Fresh when Farm Fresh began its portioning operations. To be sure, after

Mr. Ensley left Gemstone in November of 2014, he could compete with Gemstone,

and he could provide consulting services to companies like Farm Fresh. But he

could not take Gemstone data from Gemstone employees to build a customer base

for the new company that the Gemstone managerial employees created while on

Gemstone’s payroll. Viewed in the light most favorable to Gemstone and RCF, Mr.

Ensley assisted, encouraged, and helped plan the wrongdoers’ unlawful acts, and he

and the managerial defendants may be liable under Alabama law for their

conspiratorial conduct while the managerial defendants worked at Gemstone. DGB,

LLC, 55 So. 3d at 234 (“We have previously concluded that the trial court erred in

dismissing the investors’ claims of fraudulent misrepresentation and fraudulent

suppression as they relate to Hinds, Decatur, Kirkland, and Gulf Stream. The

investors allege that those defendants agreed and worked together, with Jacobsen, to

knowingly misrepresent information to and conceal material facts from the

investors. The investors, therefore, have alleged that this combination of persons

and entities—Hinds, Decatur, Kirkland, Gulf Stream, and Jacobsen—agreed and

acted together to engage in unlawful conduct that injured the investors. Because the

investors have alleged valid underlying causes of action and because acts of

coconspirators are attributable to each other, see Reindel, supra, the investors have

stated a claim of civil conspiracy upon which relief may be granted against each of

these defendants.”) (citing Ex parte Reindel, 963 So. 2d 614 (Ala. 2007)).

The Court considered the plaintiffs’ RICO arguments and evidence before the

Court ruled on the motions for summary judgment on the RICO claims. (Docs. 494,

525, 526). The Court will not revisit its analysis. Consequently, the Court denies as

moot the defendants’ motion to strike Exhibit C, new evidence submitted in support

of reinstating Gemstone’s § 1962(c) claim against Mr. Ensley and Gary Hill for the

PWW/Galleria scheme. (Doc. 573).

IV.

Accordingly, the Court vacates its order granting the defendants’ motion for

summary judgment on Gemstone’s duty of loyalty claim and fraudulent suppression

claim as those claims relate to the defendants’ alleged solicitation of Gemstone

customers. The Court reinstates those claims against Mr. Welborn, Mr. Pass, Mr.

Wester, Gary Hill, and Ms. Campos. The Court reinstates a civil conspiracy claim

against those defendants and Mr. Ensley based on the alleged unlawful solicitation

of Gemstone customers while the managerial defendants worked for Gemstone. The

Court asks the Clerk to please TERM Doc. 565.

DONE and ORDERED this May 6, 2022.

adit SM Hosa

Malas SP

UNITED STATES DISTRICT JUDGE

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