The opinion of the court was delivered by: Joseph N. Laplante United States District Judge
If this battle between brothers over their failed business does not quite reach Biblical proportions, cf. Genesis 4:1-16 (Cain and Abel), mythical proportions, cf. Plutarch, Plutarch Lives, I, Theseus and Romulus, Lycurgus and Nurma, Solon and Pulicola (1914) (Romulus and Remus), or even modern pulp literary proportions, cf. Mario Puzo, The Godfather (1969) (Michael and Fredo Corleone, also popularized on film), it easily equals the great "brother versus brother" storylines of professional wrestling,*fn1 at least in its bombast. Following the collapse of the business, Mii Technologies, L.L.C., the brothers, Glenn L. and Alan F. Beane (with Alan acting on behalf of either himself or Mii) have squared off in at least eight separate proceedings in at least three different courts. See Beane v. Mii Techs., LLC, No. 10-307 (D.N.H. June 4, 2010); Beane v. Beane, No. 06-446 (D.N.H. Nov. 30, 2006); Beane v. Beane (In re Beane), No. 09-269 (Bankr. M.D. Fla. May 4, 2009); Lawson & Persson, P.C. v. Beane, No. 09-E-113 (N.H. Super. June 15, 2009); Beane v. Mii Techs., LLC, No. 08-157 (N.H. Super. Nov. 10, 2008); Beane v. Beane, No. 08-E-270 (N.H. Super. Oct. 20, 2008); Beane v. Mii Techs., LLC, No. 08-C-79 (N.H. Super. June 10, 2008).
This particular action was commenced by Glenn, but, as explained infra, Alan has since consented to the entry of judgment on one of Glenn's claims--seeking a declaration that Glenn's membership in Mii ceased as of February 4, 2004--and the rest (with one minor exception) have been dismissed, either by Glenn or the court. See Order of March 22, 2010 (document no. 70). Alan, however, responded to Glenn's complaint in this action with a counterclaim in 14 counts, which has since grown to 21 counts as the result of several separate amendments. Alan has also joined Mii as a party to the counterclaim, as ordered by the court. See id.*fn2
The gist of the counterclaim is that Glenn caused Mii to fail through a variety of wrongful conduct, viz., mismanaging, its relationship with a key customer, Lovejoy, Inc., and then, after withdrawing from Mii, misappropriating that relationship as well as Mii's intellectual property. This court has supplemental jurisdiction over the counterclaim, see 28 U.S.C. § 1367(a), by virtue of its federal-question jurisdiction over Glenn's ERISA claim, see id. § 1331, and has elected to exercise that jurisdiction even after the federal claim was dismissed, based on the parties' expressed preference for this forum, see Order of March 22, 2010 (document no. 70). Glenn has now moved for summary judgment, see Fed. R. Civ. P. 56, on all counts of Alan's counterclaim.
Glenn argues, among other things, that (1) he did not agree to assign his intellectual property rights to either Alan or Mii, (2) there is no evidence Mii owned any protectible trade secrets, (3) Glenn had no duties to Mii (or Alan), at least after withdrawing from Mii in February 2004, (4) though Glenn did business with Lovejoy after his withdrawal from Mii, that did not amount to tortious interference with its relationship with Lovejoy, and (5) even if his withdrawal from Mii breached the limited liability company agreement, it did not cause any harm.
As fully explained infra, the court agrees with Glenn that he is entitled to summary judgment. Although this case had been pending for nearly three years before Alan filed his opposition to Glenn's motion for summary judgment (not counting the time the case was stayed), Alan has not developed any evidence to support several propositions that are essential to his counterclaim. First, there is no evidence of any agreement by Glenn to assign his interest in any intellectual property to Mii or Alan, only to another entity that is not a party to this case. Second, Alan has not properly identified, let alone come forward with evidence tending to show, any trade secret allegedly misappropriated by Glenn. Third, Glenn's duties to Mii (or Alan) by virtue of his management of or membership in Mii were limited to refraining from gross negligence or willful misconduct, and Alan has not come forward with evidence from which a rational factfinder could conclude that Glenn's actions amounted to either. Fourth, Alan has not provided anything to dispute Glenn's submissions establishing that, after he withdrew from Mii, he had no contact with Lovejoy until after Mii had abandoned their relationship, with the result that Glenn's contacts with Lovejoy are not actionable. Fifth, Alan has no evidence that Glenn's withdrawal from Mii, as such, caused any damages to the company or Alan.
As explained more fully below, the court grants Glenn's motion for summary judgment on the counterclaim, abstains from exercising jurisdiction over Glenn's remaining claim against Alan, and ends this episode of the parties' family feud.
Summary judgment is appropriate where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A dispute is "genuine" if it could reasonably be resolved in either party's favor at trial. See Estrada v. Rhode Island, 594 F.3d 56, 62 (1st Cir. 2010). A fact is "material" if it could sway the outcome under applicable law. Id.
Where, as here, "the moving party avers an absence of evidence to support the non-moving party's case, the non-moving party must offer definite, competent evidence to rebut the motion." Meuser v. Fed. Express Corp., 564 F.3d 507, 515 (1st Cir. 2009). In other words, the non-moving party "must proffer admissible evidence that could be accepted by a rational trier of fact as sufficient to establish the necessary proposition." Gomez-Gonzalez v. Rural Opportunities, Inc., 626 F.3d 654, 662 n.3 (1st Cir. 2010). This means that "conclusory allegations, improbable inferences, or unsupported speculation" will not suffice to defeat a properly supported summary judgment motion. Meuser, 564 F.3d at 515 (quotation omitted). In analyzing a summary judgment motion, the court must "view all facts and draw all reasonable inferences in the light most favorable to the non-moving party." Id. The following facts are set forth in accordance with this standard.
Alan and Glenn formed Mii, a limited liability company, in 1995. They had "equal membership interests," at least until February 2004. The most recent version of the limited liability company agreement, dated September 1997, reposited the right to manage the business of the company in the members, but allowed them to turn that right over to managers elected by the members. The parties agree that, at some point, Alan and Glenn became Mii's managers, that Alan has continued to serve in that capacity ever since, and that Glenn continued to serve in that capacity until his resignation in February 2004.
The membership agreement does not restrict a manager's ability to resign from that role (and specifically provides a procedure for replacing a manager who "ceases to be a Manager before his term expires for any reason"). The agreement does provide, however, that "[n]o member has power to withdraw by voluntary act from the Limited Liability Company."
As stated in the agreement, Mii's purpose was "to engage in the business of marketing and/or manufacturing of sensor materials, metallic powders and related parts." Alan recalls that he and Glenn wanted, specifically, to finish the work on "composite materials and net shape pressing technologies" they had begun at another company they had started, Materials Innovation, Inc., formed in 1989. By 2002, however, Materials "owed significant amounts of money to a number of creditors," so, Alan says, "it was decided that Materials would cease to operate as a going concern and that all of the resources of [Alan and Glenn] would be focused on" Mii.
Alan recalls that Glenn contributed "his creative talents and interests" to the Materials and Mii ventures, while Alan contributed some $23 million in capital. Thus, Alan explains, Glenn received "co-equal" interests with Alan in those businesses "without the necessity of having to come up with any cash equity." Neither Glenn nor Alan, though, ever served as an employee of Mii; Glenn recalls that this arrangement was "by design." Glenn never entered into any employment contract with Mii, including the "Invention, Non-Disclosure, and Confidentiality Agreement" that Mii made its employees sign.
2. Glenn's and Alan's agreements with Materials
In August 1996, Glenn and Alan entered into an agreement assigning certain intellectual property to Materials. In relevant part, this agreement provided that "the Inventors"--a term defined as Alan and Glenn "collectively"--"hereby assign, grant and convey to [Materials] their entire right, title and interest in and to U.S. Patent No. 5,453,293, together with . . . any patent applications or patents claiming improvement in or modification of the subject matter set forth in the Patent developed by either or both of the Inventors." Alan and Glenn were listed as the inventors of the '293 patent, which issued in September 1995.
The assignment agreement further provided that "[e]ach modification and improvement related to Composite and Engineered Materials"--a defined term--"covered by the patent now or hereafter conceived, made or developed by Inventors, or which shall become the property of Inventors in any manner whatsoever, shall be deemed to be included in the terms of this Agreement."
But Mii was not a party to the assignment agreement. Instead, Mii had agreements to license various patents and patent applications and other intellectual property (though not the '293 patent) from Materials.
In April 2001, Alan loaned Mii $1.5 million, receiving in return a promissory note with a one-year term. He loaned $600,000 to Materials at the same time. To provide collateral for these loans, Mii (and Materials) subsequently provided Alan (and his wife, Sara Beane) with a commercial security agreement, dated January 18, 2002, granting them a security interest in, among other things, "letters of patent, patent applications, and other rights to intellectual property in which [Mii and Materials] have ownership interests." The agreement entitled the lender to take possession of the collateral upon Mii's default. Within two weeks of the execution of the security agreement, Mii had defaulted on the note it had given Alan.
3. Beginning of Mii's relationship with Lovejoy
In July 2002, Mii entered into a contract to sell a 1,000-ton metal press to Lovejoy, an Illinois-based manufacturer of metal parts. In negotiating the contract, Lovejoy dealt with both Glenn and Alan, who acknowledges that he participated "in the portion of the negotiations related to the overall design of the press." Lovejoy was the last customer to commit to buying a press from Mii before it eventually ceased operations.
Alan recounts that in fall 2003, one of Lovejoy's customers demanded more precise tolerances on its parts, so that "Mii felt the original approach of the system configuration," which already featured a "modified volumetric feed shoe," was not "adequate to the task." According to Alan, "Mii realized" that it had another "higher technology" which "might be" modified "to meet the specification[s]," but that approach was not without its challenges. Alan alleges that "Mii's email files show many conversations between Glenn" and Lovejoy about "the perceived necessity to upgrade the capabilities of the system," though Glenn did not make Alan or anyone else at Mii aware of these "negotiations" until 2004. While Alan says that "Lovejoy claims they walked away from these discussions believing that Glenn had committed Mii to accomplish an upgrade capable of meeting the [new] specifications," Alan also insists that "[t]here is no paperwork or documentation available to Mii that would substantiate such a contractual commitment."
Alan also accuses Glenn of mismanaging the Lovejoy project in other ways during his time at Mii. First, Alan recalls that, given the technological demands of building the press even to Lovejoy's original specifications, Glenn agreed "to institute a detail design engineering relationship with a major Massachusetts mechanical engineering firm." Nevertheless, Alan says, Glenn ultimately "circumvented" this arrangement "by essentially engaging [the firm's] assistance in mechanical drafting as opposed to engineering oversight."
Second, Alan accuses Glenn of a design error in "the clearances between the outer walls of the inner cylinder components and the inner walls of the outer cylinder components," so that "thermal expansion" caused them to touch, resulting in "catastrophic press failure." Alan says that "cylinder design errors" necessitated a lengthy re-design and re-machining process that contributed to a "10-12 week" delay in delivering the press to Lovejoy. Alan acknowledges, however, that another cause of the delay was an error by a third party who "improperly specified/designed the hydraulic fluid cooling system," and does not attempt to lay that error at Glenn's feet. In any event, Alan recalls that the "total cost of the delay and rebuild was $600,000." That figure, Alan explains, does not include a delay in Lovejoy's making both progress payments--which "destroy[ed] Mii's operational cash flows and ability to pay vendors"--and "follow on orders"--which Lovejoy had "ostensibly" committed to make "concurrently" with the delivery of the press.
By November 2003, Mii had delivered the press to Lovejoy, but the press was missing a "required fluidization component" that was still being manufactured. It appears, though the record is unclear, that this component was the one Glenn allegedly caused Lovejoy to believe that Mii would deliver (even though, Alan says, this component was not included in the original specifications). Lovejoy's principals, Michael Hennessy and Woody Haddix, attest that, through January 2004, Alan, Glenn, and others from Mii were working on the component, but without success, so that during that time the press did not "perform at the contractually-agreed upon levels and tolerances."*fn3
4. Mii's efforts at further financing
Beginning around January 2004, Alan and Glenn (together with their brother, David, who had worked for Mii as a consultant, and Sara, Alan's wife) engaged in a series of negotiations, Alan says, "to restructure Alan['s] and Sara's respective rights in the Mii companies and to get [Alan's] personal guaranty and [Mii's] approval" of a $500,000 loan to Mii from an outside lender, Fleet Bank. Around the same time, Alan and Sara were working to resolve "property division issues relating to [her] suit for divorce."
At one point, Alan offered (among other things) to guarantee the loan personally in exchange for (among other things) Glenn's "assurance that all intellectual assets that have been or will be created by Glenn . . . and relate to [Mii's] business have been or will be assigned to Mii  without additional consideration as has been consistent with prior practice." Alan suggests that this assurance was necessary for him to provide certain representations (presumably as to Mii's right to the intellectual property it was using) that Fleet required to make the loan.
Alan recalls that "[b]ottom line, Glenn absolutely refused" to provide the assurance, so that Alan "decided he could not sign the Fleet [loan] documents" making the representations. Alan, "[w]ith the benefit of hindsight," has come to see this as an effort by Glenn to induce Alan to "violat[e] Federal Banking Law and be subject to both criminal and civil sanctions." In any event, Mii did not get the loan from Fleet--nor did Alan and Glenn reach agreement as to restructuring or refinancing Mii.
5. Glenn's departure from Mii
On February 3, 2004, Alan notified Glenn via letter that Alan and Sara were "exercising [their] rights under [the] Commercial Security Agreement to sell, lease, transfer or otherwise deal with Collateral in accordance with the terms of [the] Agreement." In the days before delivering this letter, Alan initiated discussions, and then a formal meeting, with Mii's employees about "trying to make it on the fly on our own without Glenn" because, Alan later explained, "at that point [he] had reason to believe Glenn may have 'walked away.'" The consensus, apparently, was "to see what we could do to make the business viable by working together" without Glenn.
On February 4, 2004--the day after Alan's letter announcing his exercise of dominion over Mii's assets--Glenn gave Alan letters announcing that, effective immediately, Glenn was "resign[ing] from his position(s) and duties as an Officer and as a member of the Board of Directors of Materials . . . and Mii." After dropping a company vehicle and customer files at Mii's facility within the next few days, Glenn had no further contact with the company until the onset of the various legal proceedings enumerated supra.
6. End of Mii's relationship with Lovejoy
One of Lovejoy's principals, Haddix, says that, after repeated attempts to call Glenn at Mii's facility in early February 2004, he was told by a Mii employee that Glenn was no longer with the company. Another of Lovejoy's principals, Hennessy, says that he eventually reached Alan, "who advised [Hennessy] that Glenn had left the company in all capacities and that Alan was going to continue operating Mii with its existing workforce and without Glenn."*fn4 Glenn, for his part, says that upon his resignation from Mii he "ceased all contact with Lovejoy and did not even inform [it] that I had left."
Haddix and Hennessy recall that, over the next several weeks, they repeatedly expressed "concern that Glenn's departure would make it very difficult, if not impossible, for Mii to complete installation of the fluidization function" of the press, but Alan responded that "Mii had the experience and wherewithal to continue its business." Haddix recalls a similar conversation at a subsequent meeting at Mii's facility, where "Alan insisted that Mii would be fine without Glenn and that the employees on board at the time were well versed in the capability and installation of the fluidization portion" of the press.
Alan does not dispute Lovejoy's account of this meeting, but he does suggest, as already mentioned, that Mii never agreed to provide a functioning fluidization system in the first place. Alan recalls that it was not until he spoke with Hennessy on or around February 10, 2004, that Alan "found out, to [his] complete surprise, that Mii had a very angry primary customer." In fact, Alan says, aside from a "concept sketch" of the fluidization system, "no work was undertaken on Mii's part presumably because Mii believed the project was a time and materials addition to the contract and such had not been authorized by Lovejoy." Nevertheless, Alan says, Mii "intended for Lovejoy to be a satisfied customer," and agreed to work on the fluidization component of the press.
By March or April 2004, Mii employees had installed the fluidization component of the press at Lovejoy's facility, but, after working on it, "admitted that they were at wit's end and that they were not going to able to make the fluidization system function properly according to the specifications of the press." Alan later gave Haddix and Hennessy the same message. Shortly thereafter, personnel at Mii--including Alan--stopped returning phone calls and emails from Haddix and Hennessy. So they "assumed that Mii had closed its doors" and "considered the contract terminated by Alan's actions, and particularly, by his admission that Mii could not make the press work, was not going to continue trying, and lacked funding to do so." Alan has not come forward with any evidence disputing Lovejoy's account of Mii's admissions of defeat or its failure to return Lovejoy's calls or emails beginning in the spring of 2004.*fn5 Nor does Alan dispute the testimony of Haddix and Hennessy that "[i]t was not until after Mii and Alan had failed to meet their obligations that [Lovejoy] contacted Glenn and asked him to help."
7. Glenn's alleged competition with Mii
Alan alleges that, by November 2004, Glenn "was pursuing active negotiations with Lovejoy for the immediate fabrication of two additional 1000-ton systems identical to that delivered to Lovejoy by Mii, and for a new 300-ton system." Alan also alleges that, in March 2004, Glenn--acting on behalf of a new limited liability company he had formed, Glenn Beane LLC--contacted several other of Mii's customers, or potential customers.
Glenn, for his part, says that he did not form Glenn Beane, LLC, or "even explore or consider the process of forming it," until after he had resigned from Mii (documents on file with the New Hampshire Secretary of State give the company's "entity creation date" as February 10, 2004, i.e., a week or so after Glenn's resignation). Alan has not come forward with any evidence tending to show that--at any time before Glenn resigned from Mii--Glenn formed, or made plans to form, Glenn Beane LLC, or that he had any contact with any of Mii's customers or potential customers on behalf of himself or Glenn Beane LLC.
On December 15, 2004, acting as attorney-in-fact for Materials, Glenn executed a document assigning a number of patents, including the '293 patent, from Materials to Alan and Glenn, then recorded that document with the United States Patent and Trademark Office. This "re-assignment" invoked a provision of the assignment agreement that, "[u]pon [its] termination for any cause, [Materials] agrees to immediately reassign to the Inventors all patent rights assigned" thereunder, together with "any and all right to any improvements or modifications which [Materials] shall have made during the life of this Agreement which relate to Composite and Engineering Materials" (a defined term). The provision further gave "the Inventors power of attorney to execute and file assignments with the [USPTO] . . . to change record title." Glenn points out that the assignment agreement gave "either Inventor . . . the right to terminate [it] effective immediately upon written notice to [Materials] in the event that" Materials was dissolved, including by an administrative or judicial order remaining in effect for 45 days.
In November 2003, Materials had been administratively dissolved by order of the New Hampshire Secretary of State, and nothing was (or has been) done to lift that order. See N.H. Rev. Stat. Ann. §§ 293-A:14.20--14.22. Mii has likewise been administratively dissolved, see id. § 304-C:52, by an order of the Secretary of State issued in August 2007, but, Alan says, "is engaged in the process of winding up its affairs," see id. §§ 304-C:52, II, 304-C:56.
1. Prior action in this court
In October 2006, Alan filed for bankruptcy in the United States Bankruptcy Court for the Middle District of Florida. In re Beane, No. 06-5723 (M.D. Fla. Oct. 19, 2006). Alan soon sought, and received, permission from the Bankruptcy Court to employ counsel to conduct litigation against Glenn. In November 2006, Alan and Mii commenced an action against Glenn and Glenn Beane LLC in this court, bringing many of the same claims that Alan later brought as a counterclaimant in this action. Beane v. Beane, No. 06-446 (D.N.H. Nov. 30, 2006). Glenn counterclaimed, bringing essentially the same claims he later brought as a plaintiff in this action.*fn6
After furious motion practice--which included Glenn's filing five separate motions to dismiss, and the Magistrate Judge's imposing monetary sanctions against both Alan and Glenn at different points--the court (McAuliffe, C.J.) ordered Alan and Mii to show cause why it should not dismiss their sole claim under federal law and decline to exercise supplemental jurisdiction over the rest of the case. In response, Alan argued, among other things, that diversity jurisdiction existed, because Mii was a nominal party whose citizenship should not be counted. But Judge McAuliffe disagreed, ruling that "[t]he rights upon which plaintiffs base their claims are Mii's rights, and the remedies sought would directly benefit Mii" and, furthermore, that Mii was an indispensable party under Rule 19(b). Beane v. Beane, 2008 DNH 082, 15-20. The court also ruled that the amended complaint failed to state any claim under federal law. Id. at 8-12. So the court dismissed the action for lack of subject-matter jurisdiction, id. at 21, entering judgment to that effect on April 30, 2008.
a. Claims and counterclaims
On June 11, 2008, Glenn brought this action against Alan. Around the same time, Glenn also commenced an action, consisting of many of the same claims, against Mii and other parties in Grafton County Superior Court. Beane v. Mii Techs., LLC, No. 2008-C-079 (N.H. Super. Ct. June 10, 2008). Glenn's amended complaint in this action is in five counts:
* equitable relief under the Employee Retirement Income Security Act ("ERISA"), specifically, 29 U.S.C. § 1132(a)(3)(B)(ii), to enforce certain administrative obligations under an employee benefit plan created by Mii and Materials (count 1);
* a declaratory judgment that Glenn's membership in Mii ceased as of February 4, 2004, and other declarations as to Mii's status after that date (count 2);
* as an alternative to count 2, the judicial dissolution of Mii (count 3);
* also as an alternative to count 2, an accounting from Mii (count 4); and
* voiding an allegedly fraudulent transfer from Mii to Alan (count 5).
Alan originally moved to dismiss this action, based on the pendency of similar litigation in other courts, but withdrew the motion around the same time that he filed ...