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FLS Transportation Services (USA) Inc. v. Casillas

United States District Court, D. Nevada

September 18, 2017

FLS TRANSPORTATION SERVICES (USA) INC., a Delaware foreign corporation, Plaintiff,
v.
ARLIEN CASILLAS, an individual and OPEN ROAD TRANSPORTATION, INC., an Oregon foreign corporation, Defendants.

          ORDER (DEF.'S MOTION TO DISMISS - ECF NO. 11; DEF.'S MOTION TO DISMISS - ECF NO. 18).

          MIRANDA M. DU UNITED STATES DISTRICT JUDGE

         I. SUMMARY

         Before the Court are Defendant Arlien Casillas's Motion to Dismiss (“Casillas's Motion”) (ECF No. 11) and Defendant OpenRoad Transportation, Inc.'s (“OpenRoad”) Motion to Dismiss (“OpenRoad's Motion”) (ECF No. 18). The Court has reviewed Plaintiff FLS Transportation Services (USA) Inc.'s (“FLS”) responses to both motions (ECF Nos. 20, 24) and Defendants' respective replies (ECF No. 27, 29). Both motions raise overlapping arguments and will be addressed collectively.

         The Court denies both of Defendants' Motions to Dismiss for the reasons discussed below.

         II. BACKGROUND

         The following facts are taken from the Complaint. (ECF No. 1.)

         FLS is in the logistics business. It connects customers (retailers and manufacturers who need to ship things) with carriers (trucking companies and rail companies that can ship them). FLS alleges that one of its former employees conspired with a competitor, OpenRoad, to appropriate FLS's customers, carriers, and employees in violation of duties imposed by contract and common law.

         The trouble began when an FLS branch office operating in Reno suddenly failed in September 2016. The branch director-Arlien Casillas-resigned, and some of the long-term customers for whom Casillas was the principal FLS contact ceased nearly all of their business with FLS immediately. Berenisa Orozco and Cindy Dillard, employees of the FLS Reno branch office, also resigned.

         About a month later, FLS's Reno office was reborn (in the same office space), but under the name of OpenRoad, another third-party logistics business and competitor to FLS. OpenRoad had no other offices in Nevada at the time, and this was only its second office outside the Pacific Northwest. FLS alleges the office is a near replica of its own-it is staffed by former FLS employees, patronized by former FLS customers, and provides services through former FLS carriers. The former FLS employees include Arlien Casillas, Berenisa Orozco, Cindy Dillard, and Melia Shively (an individual who worked for FLS from 2010 to 2016). The former FLS customers are those who stopped doing business with FLS when Casillas resigned. The former FLS carriers include those who provided services to FLS's long-term customers.

         FLS further alleges that this reincarnation was a product of conspiracy, not happenstance. FLS surmises that Casillas began preparing for and implementing this transition (with OpenRoad's assistance) while still working for FLS, partly because the customers Casillas and OpenRoad purportedly appropriated “relied on FLS for a significant and complex volume of shipping needs. Enabling a seamless transition of their business from FLS to a competitor, like OpenRoad, would have taken weeks, if not months, of preparation.” (ECF No. 1 at ¶ 55.) FLS alleges that the conduct of Casillas and OpenRoad has caused it to lose hundreds of thousands of dollars in profits.

         A. FLS's Business Model

         FLS connects customers and carriers through its employees, called brokers, who determine customer needs and find carriers who can meet those needs. The brokers solicit long-term customers through the use of proprietary information, such as carriers' specific routes, specific equipment, or price structures. The brokers execute contracts with customers on behalf of FLS. The brokers also execute contracts with carriers (“Carrier Contracts”) on behalf of FLS. The Carrier Contracts prohibit carriers from cutting out the middleman (here, FLS):

During the term of this Contract and for a period of one (1) year following its termination, Carrier shall not provide transportation services or related services to any of [FLS's] customers for which Carrier has provided services under this Contract, unless the shipments are tendered by [FLS]; provided, however, this provision shall not apply if Carrier has conducted business with such customer during the two years before [FLS] first tendered shipments to Carrier for such customer.

(ECF No. 1 at ¶ 58.)

         FLS alleges that Casillas and OpenRoad induced FLS's carriers to violate this contractual provision, contending that former FLS carriers are providing services to former FLS customers with OpenRoad acting as the middleman.

         B. Casillas's Employment at FLS

         FLS employed Defendant Arlien Casillas as the branch director of its Reno office beginning in September 2006. Casillas coordinated and managed the services that FLS provided through that office. She also managed and supervised other employees in the office, including Berenisa Orozco and Cindy Dillard. Casillas and her colleagues in the Reno branch office were the primary or exclusive contacts for several of FLS's large customers, and they used confidential information to do their jobs.

         FLS and Casillas executed an agreement (“Casillas Employment Agreement”) about confidentiality and solicitation of FLS employees several years into her employment, on or around October 11, 2013. The “Confidentiality Provision” of that agreement prohibits Casillas from disclosing certain information deemed confidential:

Any information relating to our policies, processes, structures, operations, customers, or other employees acquired by you in the course of, or as a result of, your employment with [FLS] is considered confidential. Such information shall be treated as confidential, and may not be disclosed by you to any other person, firm or company during your employment or after without prior written authorization. Confidential information or material includes but is not limited to financial information, plans, strategies, corporate information and any other information deemed “confidential”, unless information is available to the general public or in the public domain.

(ECF No. 1 at ¶ 23.) The “Non-Solicitation Provision” of that agreement prohibits Casillas from encouraging any FLS employees to leave FLS:

It is a term of this offer that you agree that during your employment, and for a period of 6 months following the termination of such employment for any reason whatsoever, you shall not either individually or in partnership or conjunction with any person or persons, firms, association, syndicate, company or corporation as principal, employee, contractor, shareholder or agent, directly or indirectly encourage any [FLS] employee to leave employment with [FLS].

(Id. at ¶ 24.)

         Casillas voluntarily resigned from FLS about three years later. She first went on medical leave on September 8, 2016, then resigned “due to illness and inability to perform her duties at FLS” on September 26, 2016. (ECF No. 1 at ¶ 30.) FLS sent a letter to Casillas reminding her to comply with the Casillas Employment Agreement, including the Confidentiality and Non-Solicitation Provisions.

         FLS alleges that, while still working for FLS, Casillas disclosed FLS's confidential information to OpenRoad and solicited FLS customers and carriers to do business with OpenRoad, all with OpenRoad's assistance, cooperation, and inducement.

         C. Orozco and Dillard's Employment at FLS

         Berenisa Orozco and Cindy Dillard both resigned from FLS in September, shortly before Casillas resigned. Orozco was a relatively new FLS employee, having started in November 2015. Dillard had been working for FLS longer, having started in July 2010. Both “were entrusted with confidential, proprietary, and strategic information concerning FLS's services and business and its relationships with customers and carriers.” (ECF No. 1 at ¶ 40.) When Orozco and Dillard resigned, FLS executed “Separation Agreements” with both of them that prohibited them from disclosing confidential information:

Employee shall not use for any purpose or disclose to any person or entity any confidential information acquired during the course of employment with [FLS]. Employee shall not, directly or indirectly, copy, take, or remove from [FLS's] premises any of [FLS's] books, records, customer lists, or any other documents or materials. The term “confidential information” as used in this Agreement includes, but is not limited to, records, lists, and knowledge of [FLS]'s customers, suppliers, methods of operation, processes, trade secrets, methods of determination of prices, financial condition, profits, sales, net income, and indebtedness, as the same may exist from time to time.

(ECF No. 1 at ¶ 42.)

         FLS alleges that Casillas (with OpenRoad's assistance) “encouraged, recruited, and induced” Orozco and Dillard to leave FLS while all three were still working for FLS. (ECF No. 1 at ¶¶ 43, 44.) FLS further alleges that Casillas and OpenRoad encouraged Orozco and Dillard “to use or disclose FLS's confidential information” in violation of the Separation Agreements. (ECF No. 1 at ¶ 43.)

         D. OpenRoad's Website Posts

         OpenRoad posted on its website twice about the Reno branch office. One article, titled “Reno Office Added to OpenRoad's Roster, ” notes that “[t]he Reno team started up in the fall of 2016.” (ECF No. 1 at ¶ 46.) This article was published on November 4, 2016. Another article, titled “Arlien Casillas Leading OpenRoad Reno's Hot Start, ” attributes “[t]he early success of the office . . . to the leadership of Arlien Casillas and her ...


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