Total Quality Logistics, LLC v. EDA Logistics LLC ( 2024 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 24a0400n.06
No. 23-3713
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT FILED
Oct 02, 2024
TOTAL QUALITY LOGISTICS, LLC, ) KELLY L. STEPHENS, Clerk
)
Plaintiff-Appellant, )
ON APPEAL FROM THE
)
v. UNITED STATES DISTRICT
)
COURT FOR THE
)
EDA LOGISTICS LLC; RYAN C. DANIELS, SOUTHERN DISTRICT OF
)
OHIO
Defendants-Appellees. )
)
OPINION
)
Before: GILMAN, STRANCH, and LARSEN, Circuit Judges.
LARSEN, Circuit Judge. Ryan Daniels worked as a Logistics Account Executive for Total
Quality Logistics, LLC (TQL), for four and a half years. His employment agreement included a
non-compete and non-solicitation clause. Daniels resigned from TQL in June of 2020, after a
disagreement over TQL’s return-to-the-office COVID-19 policy. Daniels later started a competing
logistics firm. The firm worked with some of the same customers Daniels had serviced during his
employment at TQL. TQL sued. After a bench trial, the district court concluded that Daniels had
breached the non-compete agreement. But the court refused to enjoin Daniels’ participation in the
logistics industry generally, concluding that the non-compete was enforceable only to the extent
that it prevented solicitation of customers that Daniels knew through his time at TQL. The court
also concluded that a fee-shifting provision in the parties’ contract was unenforceable, and that
TQL had failed to prove its case on certain claims or a non-speculative amount of money damages.
TQL now appeals. We AFFIRM.
No. 23-3713, Total Quality Logistics, LLC v. EDA Logistics LLC, et al.
I.
TQL is a logistics company that connects customers who need freight moved with trucking
companies able to perform the work. The logistics industry is very competitive, with many brokers
working to make those connections. TQL hired Ryan Daniels as a Logistics Account Executive
(LAE), or broker, in 2016. TQL intentionally hires job candidates with little to no logistics
experience so that it can teach them the TQL “recipe.” Trial Tr., R. 31, PageID 809. Upon joining
TQL, Daniels had no third-party logistics experience, though he had some general sales
experience.
As a condition of employment, Daniels executed an “Employee Non-Compete,
Confidentiality and Non-Solicitation Agreement.” Joint Ex. 2003, R. 44-4, PageID 1241–47. TQL
made the agreement available for Daniels’ review before his first day of work. Daniels agreed that
he would not, for one year after termination of his employment, “directly or indirectly[] own,
operate, maintain, consult with, be employed by (including self-employment), engage in, or have
any other interest . . . in any Competing Business.” Id. at 1244 (§ 9(b)(i)). The Agreement defines
“Competing Business” as “any person, firm, corporation, or entity that is engaged in shipping,
third-party logistics, freight brokerage, truck brokerage, or supply-chain management services
anywhere in the Continental United States.” Id. at 1246 (§ 9(f)). The Agreement further prohibits
the solicitation of any of TQL’s customers and the use of any trade secrets, including “[c]ustomer
lists,” for the benefit of any entity other than TQL. Id. at 1245 (§ 9(b)(iii), (c)). Finally, the
Agreement provides that Daniels “shall be liable for costs, expenses, and reasonable attorneys’
fees incurred by TQL” if a court finds that he violated the agreement. Id. (§ 9(e)). The fees
provision is unilateral; it would not allow Daniels to recover fees if TQL were to bring an
unsuccessful enforcement action, or if Daniels sued TQL for breach of the agreement. At trial,
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TQL’s witness testified that he had never heard of any potential employee negotiating different
terms for the agreement.
Daniels joined TQL as an LAE trainee. TQL’s witness, Marc Bostwick, testified about the
training generally provided to LAEs, though he acknowledged that he “lacked direct knowledge
of much of the training that Daniels received.” Total Quality Logistics, LLC v. EDA Logistics LLC
(TQL/EDA), 685 F. Supp. 3d 563, 569 (S.D. Ohio 2023). Bostwick described an LAE’s training
as including information about the logistics industry, such as common acronyms and lingo. An
LAE typically makes many cold calls to discover whether potential customers need freight moved.
Bostwick explained that TQL had a flow chart and scripts to help LAEs learn how to get past
“gatekeepers” and speak to customer decisionmakers. TQL has prepared training courses and
compiled information to teach these skills along with other general sales and industry tactics like
how to penetrate an account, get to know a customer, and find motor carriers. Bostwick also
discussed TQL’s proprietary “Load Manager” system, used to log customer information,
preferences, contacts, and the like. Bostwick explained that TQL spends considerable money and
resources in curating its training, though he acknowledged that much of the training content is
available on the internet.
Daniels worked for TQL for four and a half years. During that time, he built relationships
with customers who needed freight moved. Daniels input some customer-contact information into
his personal cell phone, and he regularly used his cellphone to conduct business on behalf of TQL.
During his time at TQL, he developed relationships with nine customers relevant to this dispute.
Eight were preexisting TQL customers for whom Daniels assumed responsibility; one Daniels
helped bring into “the TQL fold” (though that customer was previously on TQL’s radar). Trial
Tr., R. 31, PageID 989–90.
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Daniels resigned from TQL in June of 2020 after a disagreement over TQL’s return-to-
office COVID-19 policy. Daniels’ son had respiratory issues, so Daniels wished to continue
working from home. Upon his departure, TQL emailed Daniels to remind him of his obligations
under the non-compete agreement. When he left TQL, Daniels retained the customer-contact
information that was in his personal cell phone.
Daniels began working “at a better rate” for an “old friend” who operated Direct Freight
Solutions. Id. at 1003. Like TQL, Direct Freight was a third-party logistics company. Daniels
went to Direct Freight Solutions with the understanding that he would eventually take over the
business. Daniels did not solicit any TQL customers while working for Direct Freight. Daniels’
employment with Direct Freight soon ended, however, when the owner suddenly passed away.
Daniels then obtained a license to broker freight and started his own LLC, EDA Logistics
(EDA). Daniels, on behalf of EDA Logistics, solicited customers that he knew from his time at
TQL. Daniels acknowledged that “all the training and knowledge and experience [he] had in third-
party logistics” “came from TQL.” Id. at 973. And because of that experience and knowledge, he
was able to “hit the ground running” after starting his LLC. Id. at 1009.
Most of EDA’s business came from customers with whom Daniels had formed
relationships while at TQL. The bulk of EDA’s work came from one customer in particular,
Sunland Trading, an account Daniels had serviced while at TQL. From his time at TQL, Daniels
was aware of the “lanes,” or routes, for which Sunland often needed freight services. Daniels
began providing that service for Sunland through EDA.
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Meanwhile, TQL re-assigned Daniels’ former customer accounts to other LAEs. Just what
efforts TQL made to continue servicing those customers remains uncertain.1 At any rate, TQL
experienced a decline in business from some customers that Daniels had serviced while at TQL.
TQL began to suspect that Daniels was operating a competing business, so it investigated
whether he was violating the non-compete agreement. TQL discovered that Daniels had started
EDA Logistics and obtained brokerage authority. TQL sued Daniels and EDA Logistics in Ohio
state court, asserting claims for breach of contract, misappropriation of trade secrets, tortious
interference with contract, and tortious interference with business relations. TQL sought
preliminary and permanent injunctive relief, as well as money damages. Daniels removed the case
to the United States District Court for Southern District of Ohio.
After discovery, the case proceeded to a bench trial. TQL called its risk manager, Marc
Bostwick, as well as Daniels as witnesses. Daniels’ counsel cross-examined Bostwick and elicited
testimony from Daniels; Daniels called no new witnesses. The district court found for TQL on its
breach-of-contract claim. It concluded that the non-compete agreement was enforceable, but only
to the extent that it prevented Daniels from contacting customers with whom he had developed
relationships while employed at TQL. TQL/EDA, 685 F. Supp. 3d at 575–76. The district court
reasoned that a money-damages award would be impermissibly speculative, however, because
TQL had failed to prove a specific amount of lost profits. Id. at 579–80. The court enjoined
Daniels from servicing any customers with whom he had done business while at TQL for 313 days
from the entry of the order—the contractual period of one year less the time Daniels had spent at
1
During pre-trial discovery, Daniels requested documents regarding TQL’s efforts to retain the
customers Daniels later serviced for EDA. TQL refused to produce those documents. So the
district court did not permit TQL’s witness to testify about their contents. TQL does not challenge
the district court’s evidentiary ruling on appeal.
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Direct Freight, where he did not solicit former customers. Id. at 580 & n.5. The district court
concluded that TQL had not proved its claims for misappropriation of trade secrets, see id. at 577,
but found for TQL as to its tortious-interference claims against Daniels (but not against EDA), id.
at 578. Finally, the court concluded that the contractual provision allowing for the unilateral
recovery of TQL’s attorneys’ fees was unenforceable under Ohio law. Id. at 583.
TQL now appeals, arguing that it did not get all the relief to which it is entitled. Daniels
and EDA do not cross-appeal the adverse portions of the district court’s judgment, including the
entry of injunctive relief. TQL does not challenge the district court’s judgment as to the tortious-
interference claims against EDA.
II.
In an appeal from a bench trial, we review factual findings for clear error and legal
conclusions de novo. Walsh v. KDE Equine, LLC, 56 F.4th 409, 412–13 (6th Cir. 2022). Clear-
error review means that when the “district court’s account of the evidence is plausible in light of
the record viewed in its entirety,” we “may not reverse,” even if we “would have weighed the
evidence differently.” Anderson v. City of Bessemer City, 470 U.S. 564, 573-74 (1985). This rule
controls “even when the district court’s findings do not rest on credibility determinations, but are
based instead on physical or documentary evidence or inferences from other facts.” Id. at 574.
No party disputes that Ohio law governs the parties’ contract.
A.
TQL first challenges the district court’s decision not to award money damages. The district
court concluded that money damages would be impermissibly speculative because TQL had failed
to show that, “absent Daniels’ intervention, the customers would have used TQL, or relatedly the
profits that TQL would have generated if they did.” TQL/EDA, 685 F. Supp. 3d at 579. It reasoned
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that TQL had not shown the efforts it took to pursue the at-issue customers after Daniels left, or
how Daniels’ “competition thwarted TQL’s efforts to secure business from these companies.” Id.
at 579 n.4. Finally, the district court noted that TQL did not “present any evidence regarding its
profit on contracts with these customers or with customers generally.” Id.
TQL argues that it proved damages with the “reasonable certainty” needed to satisfy Ohio
law. TQL asserts that the district court imposed a direct-evidence requirement, disregarding the
circumstantial evidence that TQL proffered. That evidence, TQL notes, included Daniels’
admission to soliciting former TQL customers; the profits Daniels earned from servicing those
customers; the fact that any load Daniels brokered for the customer would be a load “off the table
for TQL to broker”; and that TQL’s profits from those customers diminished in the quarter
immediately following Daniels’ departure. Appellant Br. at 28–30. “Thus, EDA’s and Daniels’s
profits prove with sufficient certainty the profits on which TQL lost out.” Id. at 28.
The district court’s account of the evidence was not clearly erroneous. TQL failed to
produce evidence that Daniels’ unlawful competition (rather than, say, his mere departure and
TQL’s failure to meaningfully pursue its customers) caused TQL’s lost profits. TQL continues to
ask for the entire profit that Daniels made by servicing the at-issue customers, $148,821.80. Yet
a factfinder could reasonably conclude that TQL did not demonstrate that, had Daniels not serviced
those loads, the work would have flowed to TQL. TQL/EDA, 685 F. Supp. 3d at 579; see also id.
at 570.
Moreover, we find no error in the district court’s refusal to grant TQL an inferential leap
from the profits that Daniels earned for EDA Logistics. Though TQL points out that some Ohio
courts have accepted, as a permissible measure of damages, an accounting of the profits earned by
an unlawfully competing former employee, none mandates TQL’s preferred measure of damages
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as a matter of law. See Try Hours, Inc. v. Swartz, No. L-06-1077, 2007 WL 867106 (Ohio Ct.
App. Mar. 23, 2007); Am. Logistics Grp., Inc. v. Weinpert, No. 85041, 2005 WL 2240987 (Ohio
Ct. App. Sept. 15, 2005); Cleveland Cotton Prods. v. James, No. 70051, 1996 WL 631079 (Ohio
Ct. App. Oct. 31, 1996). And in each case the non-breaching employer made significantly more
effort than TQL did to substantiate and make concrete its claimed lost profits. In Try Hours, for
example, the company presented a damages expert who used a methodology that accounted for, in
addition to the breaching employee’s profits, a “general business rule of thumb of ‘approximately
20 percent turnover and 80 percent retainage’” as well as a calculation of “the amount of costs Try
Hours would have incurred in generating the additional revenue.” Try Hours, Inc., 2007 WL
867106, at *4; see also Cleveland Cotton Prods, 1996 WL 631079, at *2 (accounting for similar
offsets of employer’s overhead, expenses, and commission). TQL’s request for the entirety of
Daniels’ total profit, by contrast, does not even account for the commission that TQL would owe
Daniels in the counterfactual in which Daniels secured those loads while still employed for TQL.
We cannot fault the district court for finding TQL’s proof of damages lacking.
Finally, TQL claims that the district court mistakenly applied the “clear and convincing”
standard required for injunctive relief to its claim for money damages. But our examination of the
record reveals no error. The district court required a “clear and convincing” showing that the non-
compete was reasonable; it did not apply this standard to the question whether TQL had proven
damages. Compare TQL/EDA, 685 F. Supp. 3d at 575 (party seeking enforcement “must establish
reasonableness under [Ohio law] test by clear and convincing evidence”), with id. at 578–80
(discussion of money damages); see also Chi. Title Ins. Corp. v. Magnuson, 487 F.3d 985, 991 n.3
(6th Cir. 2007).
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The district court did not clearly err by declining to award TQL money damages following
the bench trial.
B.
TQL next argues that the district court erred by finding that TQL had justified enforcing
the parties’ non-compete agreement only to the extent that it prevented Daniels from soliciting
customers with whom Daniels worked while at TQL. In TQL’s view, the district court should
have enjoined Daniels from working in the logistics industry at all.
Under Ohio law, a non-compete agreement may be enforced “to the extent necessary to
protect an employer’s legitimate interests.” Raimonde v. Van Vlerah, 325 N.E.2d 544, 548 (Ohio
1975). Ohio courts compare the reasonableness of contractual restrictions against an employer’s
legitimate interests “using three factors.” James B. Oswald Co. v. Neate, 98 F.4th 666, 673 (6th
Cir. 2024). “The agreement must (1) be ‘no greater than is required for the protection of the
employer,’ (2) ‘not impose undue hardship on the employee,’ and (3) not be ‘injurious to the
public.’” Id. (quoting Raimonde, 325 N.E.2d at 547). Courts “keep in mind nine ‘fact-specific
considerations’” that guide this inquiry.2 Id. (quoting Union Home Mortg. Corp. v. Cromer,
2
“The nine fact-specific considerations are as follows: (1) The absence or presence of
limitations as to time and space; (2) whether the employee represents the sole contact with
the customer; (3) whether the employee is possessed with confidential information or trade
secrets; (4) whether the covenant seeks to eliminate competition which would be unfair to
the employer or merely seeks to eliminate ordinary competition; (5) whether the covenant
seeks to stifle the inherent skill and experience of the employee; (6) whether the benefit to
the employer is disproportional to the detriment to the employee; (7) whether the covenant
operates as a bar to the employee’s sole means of support; (8) whether the employee’s
talent which the employer seeks to suppress was actually developed during the period of
employment; and (9) whether the forbidden employment is merely incidental to the main
employment.” Some Ohio courts assess the covenant’s reasonableness using the three
general factors only, but others consider these nine factors. So the nine fact-specific factors
help guide the analysis but are not individually necessary.
James B. Oswald Co., 98 F.4th at 673 n.4 (internal citations omitted).
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31 F.4th 356, 366 (6th Cir. 2022)). “It is the employer’s burden to prove that there is a legitimate
business interest to be protected” by a non-compete agreement. MetroHealth Sys. v. Khandelwal,
183 N.E.3d 590, 596 (Ohio Ct. App. 2022). It must do so with “clear and convincing evidence.”
Id. at 595.
The district court recognized that employers have a legitimate business interest in
protecting confidential information, providing training that gives an employee a valuable skill, and
protecting customer goodwill. TQL/EDA, 685 F. Supp. 3d at 573–74. It found that TQL
substantiated with evidence its interest in protecting customer goodwill and relationships, and that
this interest is adequately protected by the agreement’s non-solicitation provision. Id. at 576. Yet
the district court also found that TQL had fallen short of proving by clear and convincing evidence
that it had “provided Daniels access to sufficient training or information to support enforcing a
nationwide ban on Daniels’ participation in the logistics industry.” Id. at 575. That is because
TQL “failed to prove the content or extent of [the] training, show how the material conveyed was
proprietary or trade secret, or show how Daniels’ access to that information could or did harm
TQL in his new employment.” Id.The record supports the district court’s observations. TQL’s witness, Bostwick, admitted
that he “lacked direct knowledge of much of the training that Daniels received.” Id. at 569. TQL’s
documentary evidence of Daniels’ training reflected that many courses lasted for only a few
minutes or were not completed. And some of the substance of that training indisputably could be
found on YouTube. TQL’s failure to prove clearly and convincingly the specific aspects of its
training that warranted protection beyond enforcement of the agreement’s non-solicitation
provision reasonably drove the district court’s decision.
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TQL’s arguments to the contrary are not persuasive. TQL protests that the district court
ignored TQL’s “legitimate interest in retaining employees in which it invested significant
resources and training.” Appellant Br. at 34. TQL tells us that the district court imposed a new
“proprietary” requirement on a business asserting a legitimate interest in training employees. And
it notes that, even if not proprietary or “trade secret,” TQL nevertheless spends considerable time
and money curating its training.
But it is not clear that the district court actually imposed any “proprietary” requirement for
the training. And when setting forth the relevant legal principles, the district court recognized the
existence of the very interest that TQL says it ignored—“where an employer pays to provide
training that gives an employee a valuable skill,” the employer may be justified in preventing
competitors from poaching those employees. TQL/EDA, 685 F. Supp. 3d at 573. Rather, the
district court’s analysis “turn[ed] in large part on the evidence that TQL offered.” Id. at 575. The
district court simply found TQL’s evidence lacking—a finding that was not clearly erroneous.
We acknowledge, as did the district court, that at least some Ohio courts have been willing
to grant TQL’s request to enforce industry-wide non-compete restrictions on former TQL
employees. See Total Quality Logistics, LLC v. Leonard (TQL/Leonard), 220 N.E.3d 225, 232–
33 (Ohio Ct. App. 2023). Yet Ohio law requires each case evaluating the reasonableness of a non-
compete agreement to “be decided on its own facts.” Raimonde, 325 N.E.2d at 547 (citation
omitted). The evidence TQL presented in TQL/Leonard is not necessarily what TQL presented at
trial in this case. See TQL/EDA, 685 F. Supp. 3d at 576 (“The Court does not know what training
evidence TQL provided [in TQL/Leonard.] But here, TQL failed to prove the necessary
training.”).
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On this record, the district court did not clearly err in declining to enjoin Daniels from
working in the entire logistics industry.
C.
TQL next contests the district court’s conclusion that it failed to prove its trade-secret
claim.
Ohio law protects against the misappropriation of trade secrets. See Ohio Rev. Code
§ 1333.61 et seq. Under Ohio law, a trade secret is information, including “business information
or plans,” or a “listing of names, addresses, or telephone numbers,” that “derives independent
economic value” from not being known or “readily ascertainable by proper means” and that is the
subject of reasonable efforts to maintain its secrecy. Id. § 1333.61(D)(1)–(2). “[W]hether
something is a ‘trade secret’ and whether it has been ‘misappropriated’” are “factual questions”
reviewable under the clear-error standard. James B. Oswald Co., 98 F.4th at 675; see also Fred
Siegel Co. v. Arter & Hadden, 707 N.E.2d 853, 862 (Ohio 1999). TQL asserts two trade
secrets: customer and pricing information.
1.
Regarding customer information, the district court agreed that customer lists could, “if
organized into a compilation,” be trade secrets under Ohio law. TQL/EDA, 685 F. Supp. 3d at 577.
But TQL did not prove that Daniels took any “customer information database” or compilation with
him when he left TQL’s employ. Id. Though Daniels retained contact information for some
customers that he directly serviced, the district court noted that “telephone numbers for a small
number of companies are ‘readily ascertainable by proper means,’” and “easily discovered as part
of the cold-calling process.” Id. (quoting Ohio Rev. Code § 1333.61(D)(1)).
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TQL argues that an ability to cold call potential customers does not prevent customer
information from being protectable as a trade secret. And it notes that it has spent considerable
time in compiling customer information, “often gathered through trial and error and maneuvering
past gatekeepers.” Appellant Br. at 46. TQL asserts that its customer list cannot be duplicated by
scrolling the internet, and points out that Daniels and EDA did not need to spend any time or
resources developing their own customer list.
We are sympathetic to TQL’s concerns. After all, Daniels did not need to curate his own
customer list; because of the time he spent servicing TQL customers, Daniels was ready to “hit the
ground running” upon starting his own, competing business. Trial Tr., R. 31, PageID 1009. And
it is true that Ohio law treats customer lists as presumptively entitled to trade-secret protection.
State ex rel. Besser v. Ohio State Univ., 732 N.E.2d 373, 380 (Ohio 2000). Yet Ohio limits that
protection when the identity of the customers is “readily ascertainable through ordinary business
channels.” Salemi v. Cleveland Metroparks, 49 N.E.3d 1296, 1302 (Ohio 2016) (citation omitted).
In that circumstance, to be a protectable trade secret under Ohio law, a customer list “must contain
information not generally known to or readily ascertainable by the public.” Id. (emphasis added).
Ohio courts have applied this principle in declining to recognize a protectable trade secret in
customer-contact information that a departing employee retained in a cell phone. See Kross
Acquisition Co., LLC v. Groundworks Ohio LLC, 236 N.E.3d 453, 459-60 (Ohio Ct. App. 2024).
The “limited nature of the customer contact information”—as compared to the “master customer
list” that the employer maintained (and that the employee did not download or take)—meant that
the information retained in the cell phone could not support a trade-secret claim. Id. at 459.
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The district court applied these principles to the case at hand. It heard testimony that TQL
employees developed customer contacts via trial-and-error and cold-calling. And, setting aside
the contact information for customers with whom Daniels previously worked, TQL offered no
proof that Daniels retained access to, or information from, TQL’s customer-information database
or “Load Manager” system when he left the company. In short, the district court’s account of the
evidence finds ample support in the record and Ohio trade-secret law.
TQL responds primarily with a district court case arising in a preliminary posture. In MP
TotalCare Services, Inc. v. Mattimoe, the district court determined that an employer’s customer
list could be protectable as a trade secret under Ohio law because recreating “such a list would
require a large investment of time and resources.” 648 F. Supp. 2d 956, 966 (N.D. Ohio 2009). It
did so, however, in the context of denying a motion for summary judgment, ultimately concluding
that “a jury could find” that the employer’s customer list was a trade secret. Id. Here, by contrast,
the district court issued its decision after hearing TQL’s evidence presented at a bench trial. And
the district court’s decision sits comfortably with Ohio cases presenting similar claims, like Kross
Acquisition. See 236 N.E.3d at 459.
The district court did not clearly err in finding for Daniels on this claim.
2.
TQL also contends that Daniels misappropriated its “pricing information.” The district
court concluded that pricing information in the logistics industry is “volatile” and has a “short
shelf-life, if any, as a trade secret.” TQL/EDA, 685 F. Supp. 3d at 577. The district court asserted
that, “to the extent that Daniels learned the margin TQL normally tacks on, the testimony showed
logistics is a price-sensitive industry. Customer calls often included TQL employees engaging in
price discovery efforts to see what price the market, or at least that specific customer, would bear.”
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Id. So, the court determined, much of TQL’s pricing information, like customer information,
“could have been learned by legitimate means (during the sale process).” Id.
TQL argues that price volatility is no bar to finding a trade secret, and that its pricing
strategies derive independent economic value from being secret. TQL asserts that Daniels had a
competitive edge from knowing TQL’s pricing and margins, which allowed him to win bids.
TQL is right that pricing policies can rise to the level of a protectable trade secret under
Ohio law. E.g., Poseidon Env’t Servs., Inc. v. Nu Way Indus. Waste Mgmt., LLC, 102 N.E.3d
1145, 1156 (Ohio Ct. App. 2017); Litig. Mgt., Inc. v. Bourgeois, No. 95730, 2011 WL 2270553,
at *3 (Ohio Ct. App. June 9, 2011). Moreover, unlike a general market price determinable by price
discovery, we recognize that TQL’s margin expectations or pricing strategies might not be “readily
ascertainable by proper means.” Ohio Rev. Code § 1333.61(D)(1). A competing former
employee, privy to his former employer’s pricing strategies or margin expectations per job, might
be able to outbid his former employer on future jobs.
Yet TQL failed to articulate precisely what concrete “pricing information” it thinks Daniels
misappropriated. The record is unclear whether TQL had any standard route pricing or margin
expectation that Daniels could have misused. And, critically, TQL’s witness explained that LAEs
had wide discretion in setting price—even to the point of opting to break even or lose money on
individual bids, presumably to build a customer relationship. TQL provided no information about
whether it restricted that discretion in any regular or standardized way. See Poseidon Env’t Servs.,
102 N.E.3d at 1156 (considering trial testimony in which former-employer plaintiff explained how
it taught a former employee its job-bidding process and price quote formulas). And it offered no
evidence of any concrete policy or practice regarding the margins it considered acceptable. On this
record, we cannot conclude that the district court clearly erred in finding for Daniels on this claim.
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D.
Finally, we take up TQL’s contention that the district court improperly failed to award TQL
its attorneys’ fees. There is no dispute that the parties’ contract allows TQL to recover costs,
expenses, and reasonable attorneys’ fees. But the fee-recovery provision was unilateral, allowing
only TQL to recover fees. The district court found this provision unenforceable under Ohio law
because it resulted from a “contract of adhesion,” in which Daniels had little or no bargaining
power and no realistic choice as to terms. TQL/EDA, 685 F. Supp. 3d at 581–83.
TQL responds primarily that unilateral fee-shifting provisions are unenforceable only upon
a showing of duress—a narrower standard than a showing of “unequal bargaining power.”
[Appellant Br. at 55.] But the district court’s application of Ohio law and Sixth Circuit precedent
was sound; unenforceability under Ohio law is not limited to instances of duress.
Start with Wilborn v. Bank One Corp., 906 N.E.2d 396 (Ohio 2009). That case involved a
residential-mortgage contract with a one-sided attorneys’ fee provision, requiring a borrower to
pay a lender’s fees as a condition of reinstating the borrower’s defaulted mortgage. Id. at 399.
The Ohio Supreme Court explained that “agreements to pay attorney fees in a ‘contract of
adhesion, where the party with little or no bargaining power has no realistic choice as to terms,’
are not enforceable.” Id. at 401 (citation omitted). In that case, however, the court determined
that the parties’ bargaining power was not unequal because the mortgage documents were form
contracts created by sophisticated parties acting as proxies for consumers and lenders. Id. at 403.
This court later considered Wilborn’s effect on Ohio law. In Allied Industrial Scrap, Inc. v.
OmniSource Corp., we remarked that “Wilborn makes it clear that when not confronted with a
direct statutory conflict, Ohio law will generally give effect to [unilateral] fee-shifting provisions
when there is no duress.” 776 F.3d 452, 453 (6th Cir. 2015).
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TQL seizes on our use of the word “duress” to argue that a party seeking to avoid a
unilateral fee-shifting provision must show “unequal bargaining power and indicia of compulsion
or duress.” Reply Br. at 28; see also id. at 30 (“[The district court] should have assessed whether
Daniels was under duress in addition to lacking equivalent bargaining power.”). TQL’s reading
of Allied Industrial is not persuasive. Context matters, and “the language of an opinion” should
not “be parsed as though” “dealing with [the] language of a statute.” Reiter v. Sonotone Corp.,
442 U.S. 330, 341 (1979). Allied Industrial did not, and could not, limit the Ohio Supreme Court’s
unenforceability standard from Wilborn. Wilborn focused on the parties’ relative bargaining
power and whether the contract is adhesive, though also implied that duress could foreclose
enforcement. See Wilborn, 906 N.E.2d at 400 (“The presence of equal bargaining power and the
lack of indicia of compulsion or duress are characteristics of agreements that are entered into
freely.”).
This framework also accords with later Ohio cases addressing unilateral fee-shifting
provisions. For example, the district court relied heavily on Professional Solutions Insurance Co.
v. Novak, a recent decision from the Court of Appeals of Ohio. There, Novak and his professional
malpractice insurance carrier had a dispute about an underlying legal malpractice lawsuit. No.
108839, 2020 WL 5949853, at *1 (Ohio Ct. App. Oct. 8, 2020). The court held that a unilateral
fee-shifting provision in the parties’ contract was unenforceable; it was offered on a “take it or
leave it” basis, was the “product of unequal bargaining power,” and was “not freely negotiated.”
Id. at *5. Other Ohio cases are of a piece. See 2-J Supply, Inc. v. Garrett & Parker, L.L.C., No.
13CA29, 2015 WL 4113330, at *1 (Ohio Ct. App. July 1, 2015) (unilateral fee-shifting provision
enforceable because there was “no evidence that the attorney fee provisions in the parties’ contract
were ambiguous, the product of compulsion or duress, or [of] unequal bargaining power”);
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Clean Wood Recycling, Inc. v. Tony’s Landscaping, Inc., No. L-14-1074, 2014 WL 6679181, at
*3 (Ohio Ct. App. Nov. 26, 2014) (similar).
TQL also argues in reply that Ohio courts apply a separate set of factors “used to assess
procedural unconscionability to determine whether a contract is one of adhesion.” Reply Br. at
29. Thus, unequal bargaining power alone, TQL asserts, is insufficient. This court seldom
considers arguments not presented to the district court, let alone that are raised for the first time in
a reply brief. McGee v. Armstrong, 941 F.3d 859, 867 n.11 (6th Cir. 2019); United States v.
Galaviz, 645 F.3d 347, 362 (6th Cir. 2011). In any event, neither Wilborn nor Novak analyzed
whether the at-issue contracts were separately procedurally unconscionable; instead, each case
considered, at length, the respective bargaining positions of the parties. Wilborn, 906 N.E.2d at
403; Novak, 2020 WL 5949853, at *5–6.
Applying this framework, the district court found that Daniels “did not have any
meaningful opportunity to negotiate the employment agreement.” TQL/EDA, 685 F. Supp. 3d at
582. It noted that TQL’s witness “could not identify a single occasion on which TQL had accepted
any change to any term in its standard employment agreement.” Id. And the court found that the
parties had unequal bargaining power because Daniels “had no experience at all in the logistics
industry,” whereas “TQL is a large company that employs scores of LAEs and LAE trainees.” Id.
These factual findings are supported by the record and are not clearly erroneous. The district court
drew a reasonable analogy between the facts of this case and those present in Novak, concluding
that the fee-shifting provision is unenforceable under Ohio law.
TQL responds that the employment context is different; it recruited Daniels, and so he had
an opportunity to negotiate terms. It points to Hilb, Rogal & Hamilton Agency of Dayton, Inc. v.
Reynolds, a case in which an Ohio court affirmed a fee-shifting provision in an employment
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contract, noting that a “disparity in bargaining power is inherent in the [employment] relationship”
and therefore is insufficient to “render a contract unenforceable absent a showing of duress,
misrepresentation, fraud, illegality, or other improper action.” See 610 N.E.2d 1102, 1107 (Ohio
Ct. App. 1992). But the district court persuasively distinguished Hilb, noting both that it precedes
the Ohio Supreme Court’s decision in Wilborn by nearly 17 years and that the parties in Hilb did
not specifically raise the “troublesome issue” that the fee-shifting provision there was unilateral.
TQL/EDA, 685 F. Supp. 3d at 582 (quoting Hilb, 610 N.E.2d at 1109 (Fain, J., concurring)).
Setting aside Hilb, TQL points to only one contemporaneous Ohio case in support of its arguments:
TQL/Leonard. The district court’s reason for discounting TQL/Leonard is persuasive—the court
there enforced the provision by its plain terms without analyzing the respective bargaining
positions of the parties or whether the provision is enforceable under Ohio law. See TQL/Leonard,
220 N.E.3d at 237; TQL/EDA, 685 F. Supp. 3d at 582. Indeed, it appears that the parties in
TQL/Leonard never asked the court to consider the question. See Appellant Total Quality
Logistics, LLC’s Merit Brief at 18, TQL/Leonard, 220 N.E.3d 225 (Ohio Ct. App. 2023) (No.
CA2022-09-048), 2022 WL 20686580; Brief of Appellees at 13, TQL/Leonard, 220 N.E.3d 225(Ohio Ct. App. 2023) (No. CA2022-09-048), 2022 WL 20686597.
Finally, TQL distinguishes the cases on which the district court relied as dealing with the
enforceability of unilateral agreements against a “passive,” defaulting party rather than an actively
breaching party. But TQL does not explain why this distinction makes a difference. Just as TQL
argues that Daniels “invited the accrual of attorneys’ fees by affirmatively” breaching the contract,
Appellant Br. at 56, the same could be said about Novak, who affirmatively breached his contract
by refusing to pay a deductible under the insurance policy, Novak, 2020 WL 5949853, at *2. The
district court did not clearly err in declining to award TQL attorneys’ fees.
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***
We AFFIRM.
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