Leonard v. Sunset Mortgage ( 2007 )


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  •                                                                          F I L E D
    United States Court of Appeals
    Tenth Circuit
    UNITED STATES CO URT O F APPEALS
    January 12, 2007
    FO R TH E TENTH CIRCUIT                  Elisabeth A. Shumaker
    Clerk of Court
    ANGELA M . LEONARD, Personal
    Representative of the Estate of Roy F.
    Leonard; A ETN A MO R TG A G E
    CONSULTANTS, INC., a D elaw are
    corporation,
    Plaintiffs-Appellees,                Nos. 04-4310 & 05-4116
    (D.C. No. 1:03-CV-92-J)
    v.                                                      (D. Utah)
    SUN SET M OR TGA GE,
    a Pennsylvania limited partnership,
    Defendant-Appellant.
    OR D ER AND JUDGM ENT *
    Before H E N RY, BR ISC OE, and M U RPH Y, Circuit Judges.
    Plaintiffs Angela M . Leonard, as personal representative for the estate of
    her deceased husband, Roy F. Leonard, and Aetna M ortgage Consultants, Inc., the
    couple’s wholly-owned mortgage corporation, (Leonard Parties) sued defendant
    *
    After examining the briefs and appellate record, this panel has determined
    unanimously that oral argument would not materially assist the determination of
    these appeals. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The cases are
    therefore ordered submitted without oral argument. This order and judgment is
    not binding precedent, except under the doctrines of law of the case, res judicata,
    and collateral estoppel. It may be cited, however, for its persuasive value
    consistent w ith Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
    Sunset M ortgage for breach of contract, alleging that Sunset M ortgage owed
    M r. Leonard unpaid commissions. Upon consideration of cross-motions for
    summary judgment, the district court granted the Leonard Parties’ motion,
    holding that Sunset M ortgage ow ed the Leonard Parties the unpaid commissions,
    and denied Sunset M ortgage’s motion for summary judgment. Sunset M ortgage
    appealed. 1 (Appeal No. 04-4310.) It also appealed the district court’s order
    granting attorney’s fees to the Leonard Parties. (Appeal No. 05-4116.) W e
    reverse both decisions and remand for further proceedings.
    I. Background
    M r. Leonard, doing business as Aetna M ortgage Consultants, worked as
    marketing director, an independent contractor position, for Sunset M ortgage
    recruiting persons to establish Sunset M ortgage branch offices. M r. Leonard’s
    and Sunset M ortgage’s duties and obligations were set forth in an Independent
    Contractor Agreement (Agreement). Under the terms of that Agreement,
    M r. Leonard received commissions based on the productivity of the branches.
    The Agreement set forth provisions for terminating the Agreement with or
    1
    The district court denied the Leonard Parties’ claim for death benefits. By
    failing to file a cross-appeal, the Leonard Parties have not preserved that claim.
    See M ontgomery v. City of Ardm ore, 
    365 F.3d 926
    , 944 (10th Cir. 2004)
    (requiring cross-appeal where appellee seeks to enlarge own rights or lessen
    rights of adversary); Trigalet v. Young, 
    54 F.3d 645
    , 647 n.3 (10th Cir. 1995)
    (noting that where plaintiffs did not cross-appeal on issue, this court lacked
    jurisdiction to consider district court’s grant of summary judgment to defendants
    on that issue).
    -2-
    without cause. Aplt. App. at 80-81. If Sunset M ortgage terminated without
    cause, it was obligated to pay M r. Leonard commissions for twelve months. If it
    terminated with cause, “all compensation . . . terminate[d] and cease[d] to
    accrue.” Id. at 81. The Agreement defined “cause” to include “willful violation
    of any Sunset policy.” Id. Also, the Agreement set forth confidentiality
    provisions:
    It is understood and agreed by [Leonard], as a condition of the
    payment of fees to [Leonard], that the nature of Sunset’s business . . .
    require[s] confidentiality be maintained throughout the process, and
    therefore, [Leonard] agrees as follows:
    (a) [Leonard] understands and agrees that all conversations, records,
    correspondence, files, customer and supplier lists, data and other
    information pertaining to or concerning Sunset, its affiliates, and
    their customers and suppliers are confidential information, and
    therefore, during the term of this agreement and for a period of two
    (2) years thereafter, [Leonard] shall not divulge or communicate any
    such confidential information to any person or organization without
    the express written authorization of Sunset. [Leonard] agrees that,
    upon the termination of this agreement, he/she will immediately
    surrender to Sunset any and all files, memoranda, forms, customer
    and supplier lists, other business service data and everything in
    his/her possession pertaining to Sunset and/or its affiliates and their
    businesses, it being distinctly understood that all such lists, books
    and records and any copies thereof, whether prepared by [Leonard]
    or by others, are the property of Sunset;
    (b) [Leonard] shall disclose information to those persons who have a
    need to receive information and that such disclosure shall be limited
    to only so much of the information as is necessary for the
    performance of [Leonard’s] services; and
    (c) Disclosure of any such confidential information shall require the
    express written consent of Sunset.
    -3-
    Id. at 84-85.
    In July 2002, Sunset M ortgage exercised its right to terminate the
    Agreement without cause. By doing so, it was obligated under the Agreement to
    pay M r. Leonard commissions for twelve months after termination. After making
    six payments, Sunset M ortgage determined that M r. Leonard had violated the
    confidentiality provisions and breached the Agreement by maintaining a website
    under the domain name www.sunsetmortage.biz, w hich disseminated allegedly
    confidential proprietary information both before and after termination of the
    Agreement. On January 31, 2003, Sunset M ortgage sent a letter to M r. Leonard,
    who had passed away on January 19, stating that it had suspended any of its
    requirements under the Agreement and that he should “cease and desist”
    disseminating its proprietary information through the website within ten days. Id.
    at 125.
    After Sunset M ortgage denied the Leonard Parties’ requests for the
    remaining six commission payments, they brought suit in Utah state court alleging
    that Sunset M ortgage breached the Agreement when it failed to make the
    remaining six payments. Sunset M ortgage removed the case to federal court
    based on diversity jurisdiction and defended, in part and as relevant now, on the
    ground that M r. Leonard did not perform all of his obligations under the
    Agreement and had materially breached the confidentiality provision of the
    Agreement. The parties filed cross-motions for summary judgment. The district
    -4-
    court granted the Leonard Parties’ motion for summary judgment, directing that
    Sunset M ortgage make the six remaining payments, totaling $77,088.43, plus
    pre- and post-judgment interest and costs. The court denied Sunset M ortgage’s
    motion for summary judgment. Sunset M ortgage appealed. (Appeal
    No. 04-4310.)
    Thereafter, the Leonard Parties filed a motion for attorney’s fees. The
    district court granted the motion in the amount of $39,620.00. Sunset M ortgage
    again appealed. (Appeal No. 05-4116.)
    II. Appeal No. 04-4310
    A. Standard of Review
    W e review the district court’s grant or denial of summary judgment
    de novo, applying the same legal standard that the district court applied. M ontero
    v. M eyer, 
    13 F.3d 1444
    , 1446 (10th Cir. 1994). Under that standard, summary
    judgment is appropriate “if the pleadings, depositions, answ ers to interrogatories,
    and admissions on file, together with the affidavits, if any, show that there is no
    genuine issue as to any material fact and that the moving party is entitled to a
    judgment as a matter of law .” Fed. R. Civ. P. 56(c). “A n issue of fact is
    ‘genuine’ if the evidence allows a reasonable jury to resolve the issue either way
    and is ‘material’ when it is essential to the proper disposition of the claim.”
    Haynes v. Level 3 Commc’ns, LLC, 
    456 F.3d 1215
    , 1219 (10th Cir. 2006)
    (quotation omitted), petition for cert. filed, 75 U.S.L.W . 3266 (U.S. Nov. 3, 2006)
    -5-
    (N o. 06-638). “O n an appeal from cross-motions for summary judgment, we
    construe all factual inferences in favor of the party against whom summary
    judgment was obtained.” NISH v. Rumsfeld, 
    348 F.3d 1263
    , 1266 (10th Cir.
    2003).
    Although federal law controls our review of w hether the district court
    properly granted the Leonard Parties’ motion for summary judgment,
    Pennsylvania law, the law designated by the Agreement, governs the analysis of
    the substantive breach-of-contract claims. See Kaiser-Francis Oil Co. v.
    Producer’s Gas Co., 
    870 F.2d 563
    , 565 (10th Cir. 1989) (applying Oklahoma
    substantive law, consistent with contracts’ choice-of-law provisions).
    B. Analysis
    Sunset M ortgage argues that the district court erred in denying its motion
    for sum mary judgment and in granting the Leonard Parties’ motion for summary
    judgment because M r. Leonard breached the Agreement by publishing Sunset
    M ortgage’s confidential information on an unauthorized website bearing its trade
    name. It contends that the Leonard Parties did not prove that M r. Leonard
    performed his obligations under the Agreement, that M r. Leonard’s right to
    receive compensation was conditioned upon his compliance with the
    confidentiality provisions, and that M r. Leonard’s breach was material.
    There are genuine issues of material fact whether M r. Leonard actually
    breached the confidentiality provisions of the Agreement by publishing
    -6-
    confidential information concerning Sunset M ortgage on the website. Sunset
    M ortgage maintains that it first learned of the website in January 2003, after it
    had made six commission payments. To support this assertion, Sunset M ortgage
    relies on the declaration of its President and Chief Operating Officer, Samuel B.
    M orelli. In that declaration, M r. M orelli first stated that he was “familiar with
    the ‘sunsetmortage.biz’ web site that was once used by M r. Leonard during the
    life of the Agreement and which [M r. Leonard] continued to use, without
    authorization, after the Agreement was terminated.” Aplt. A pp. at 121.
    According to M r. M orelli, the website published the following confidential
    information: a list of branches, a sample branch manager agreement, Sunset
    M ortgage’s application to become a branch manager, and compensation
    information for branch managers. 
    Id.
     M r. M orelli further stated that there was no
    written authorization to disseminate this information, as was required by the
    Agreement. Id. at 121-22. M r. M orelli also stated that upon learning
    that M r. Leonard, M rs. Leonard and/or AETNA were publishing vast
    amounts of Sunset’s confidential information via the web site, Sunset
    demanded that they immediately cease and desist from any and all
    dissemination of such confidential information. This demand w as
    made by letter on January 31, 2003. This letter noted that
    M r. Leonard was in direct violation of the Agreement and that
    because of the violations, Sunset was suspending any and all of its
    requirements under the Agreement, thus terminating the Agreement
    for cause.
    Id. at 122; see also id. at 125 (letter of January 31, 2003, directing M r. Leonard to
    cease and desist disseminating information and using Sunset M ortgage trade name
    -7-
    within ten days, notifying him Agreement had been violated thereby causing
    Sunset M ortgage harm, and suspending Sunset M ortgage’s requirements under
    Agreement). 2
    The Leonard Parties counter that Sunset M ortgage was aware of the website
    earlier than M r. M orelli’s declaration suggests. M s. Leonard testified at her
    deposition that she did not remember showing the website to anyone at Sunset
    M ortgage or asking anyone at Sunset M ortgage to look at the website, but she
    thought that she told someone at Sunset M ortgage that there was a website or that
    she was working on one. Id. at 94. Based on this testimony, the Leonard Parties
    contend that Sunset M ortgage knew of the website and did nothing about it, and
    the website was either authorized or the information on the website was not
    confidential or proprietary.
    W hen Sunset M ortgage learned about the website and whether it acquiesced
    in its existence are questions of fact appropriate for a jury to decide. W e cannot
    say that the underlying facts are undisputed or that we can hold as a matter of law
    that M r. Leonard breached the contract. Instead, we conclude that there is a
    genuine question of fact whether M r. Leonard breached the Agreement and, if so,
    2
    On summary judgment, Sunset M ortgage did not provide copies of the
    pages of the website to prove what was on the website or if the website contained
    confidential information. See Aplt. App. at 323 (admission by Sunset M ortgage’s
    attorney that it did not have copy of website). It provided only the declaration of
    M r. M orelli.
    -8-
    whether Sunset M ortgage had a duty to continue to make the final six commission
    payments. 3 Accordingly, we conclude that the district court erred in granting
    summary judgment in favor of the Leonard Parties. Correspondingly, the district
    court properly denied Sunset M ortgage’s summary judgment motion.
    III. Appeal No. 05-4116
    Sunset M ortgage also appeals the district court’s award of attorney’s fees to
    the Leonard Parties. Because we reverse the district court’s decision in favor of
    the Leonard Parties, we must also reverse the district court’s award of attorney’s
    fees to them.
    IV. Conclusion
    The district court’s judgment and its order granting attorney’s fees are
    REVERSED, and the case is REM ANDED for further proceedings.
    Entered for the Court
    M ichael R. M urphy
    Circuit Judge
    3
    If a factfinder finds that M r. Leonard breached the Agreement, that
    factfinder must also decide whether that breach was material. See Forest City
    Grant Liberty Assocs. v. Genro II, Inc., 
    652 A.2d 948
    , 951 (Pa. Super. Ct. 1995)
    (recognizing that materiality of breach is question of fact).
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