Kforce, Inc. v. Surrex Solutions ( 2006 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 05-2224
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Kforce, Inc., *
* Appeal from the United States
Plaintiff-Appellant, * District Court for the
* Eastern District of Missouri.
v. *
*
Surrex Solutions Corporation, *
*
Defendant-Appellee. *
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Submitted: December 16, 2005
Filed: February 9, 2006
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Before BYE, BOWMAN, and GRUENDER, Circuit Judges.
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BYE, Circuit Judge.
Kforce, Inc. (Kforce) appeals a final order from the district court1 granting
summary judgment to Surrex Solutions Corporation (Surrex). We affirm.
1
The Honorable Stephen N. Limbaugh, United States District Judge for the
Eastern District of Missouri.
I
Kforce and Surrex are competitors. They provide personnel staffing solutions
in the information technology industry. In January 2004, Kforce’s St. Louis account
manager, Richard Albert, resigned. In March 2004, Kforce discovered Albert
accepted a position with Surrex, in violation of the non-compete agreement between
Albert and Kforce.
Kforce filed suit in state court against Albert in Kforce, Inc. v. Richard A.
Albert, Cause No. 04CC-001327, Division No. 32 (St. Louis County Cir. Ct. May 18,
2004) (Kforce I). The parties settled and the court entered a Final Judgment and
Permanent Injunction on May 18, 2004. The judgment included liquidated damages
in the amount of $20,000 and made no mention of attorneys’ fees.
On May 28, 2004, Kforce filed this action against Surrex in federal court,
Kforce, Inc. v. Surrex Solutions Corp., No. 4:04-CV-669-SNL (E.D. Mo. March 28,
2005) (Kforce II). It alleged violations of state law including tortious inference with
contract, conspiracy to breach contract, and violation of the Missouri Uniform Trade
Secrets Act (MUTSA), Mo. Ann. Stat. §§ 417.450-.467 (West 2006). Pursuant to the
Missouri collateral litigation doctrine, it also claimed attorneys’ fees it spent enforcing
the non-compete agreement against Albert in Kforce I.
The district court granted Surrex’s motion to dismiss under Federal Rule of
Civil Procedure 12(b)(6). It first concluded the election of remedies did not apply and
thus did not bar the suit because the theories of recovery were consistent with one
another—but a doctrine prohibiting double recovery did bar the claims. Second, the
district court found res judicata barred Kforce’s claims. Third, it held the collateral
litigation exception was inapplicable.
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II
We review a district court’s dismissal de novo. Stone Motor Co. v. General
Motors Corp., 293 F.3d 456, 464 (8th Cir. 2002) (citations omitted). “‘In determining
whether the district court properly granted the motion, we must accept all of the
allegations set forth in [the plaintiff’s] complaint as true, and we will affirm only if it
appears beyond doubt that he cannot prove any set of facts in support of his claim
which would entitle him to relief.’” Id. (alteration in original) (quoting Sisley v.
Leyendecker, 260 F.3d 849, 850 (8th Cir. 2001)).
A
It is well settled in Missouri that a party cannot be compensated for the same
injury twice. E.g., Ross v. Holton, 640 S.W.2d 166, 173 (Mo. Ct. App. 1982). In
Perez v. Boatmen’s National Bank of St. Louis, 788 S.W.2d 296, 299 (Mo. Ct. App.
1990), the court held:
In general, where a plaintiff can choose to proceed in tort or contract on
a course of conduct involving two possible defendants and he chooses
to proceed to a final judgment against one defendant in contract, he may
not later attempt to pursue a tort action against the second defendant; the
initial waiver of tort waived tort for all purposes.
Similarly, in Norber v. Marcotte, 134 S.W.3d 651, 661 (Mo. Ct. App. 2004) (citations
omitted), the court held:
A party cannot be compensated for the same injury twice. . . . whether
the injury arises out of contract or tort. Although a plaintiff is entitled
to proceed on various theories of recovery, he or she cannot receive
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duplicative damages; instead he or she must establish a separate injury
on each theory. While a single transaction may invade more than one
right, a plaintiff may not be made more than whole or receive more than
one full recovery for the same harm.
Here, the course of conduct was Albert’s breach of the non-compete agreement,
and the damages in both cases arose directly from the breach. As the district court
held: “While Albert and Surrex may have acted independently in committing separate
and distinct wrongful acts, such acts caused an indivisible injury . . .”
Further, the actual and compensatory damages sought in Kforce I and Kforce
II are the same. In Kforce I, Kforce sought injunctive relief and damages for breach
of the non-compete agreement. The injunctive relief is not at issue here. Regarding
damages for breach of contract, “[u]nder the contract claim the injured party can
recover actual damages for the direct and natural consequences of the breach, or for
damages that were within the contemplation of the contracting parties.” Ross, 640
S.W.2d at 173. Kforce alleged the contract breach damaged Kforce by soliciting and
diverting business from Kforce’s clients and forcing it to expend attorneys’ fees to
enforce the non-compete agreement. The non-compete agreement also contemplates
damages due in part to the “training and access to trade secrets provided . . . to
Employee.”
In Kforce II, Kforce sought relief for tortious interference with contract, civil
conspiracy, and violation of MUTSA. Kforce sought damages under a theory of
tortious interference for its lost business from one or more of its customers doing
business with Surrex, attorneys’ fees expended in Kforce I, and punitive damages.
The damages recoverable for intentional interference are: the pecuniary loss of the
benefits of the contract; consequential losses for which the interference is the legal
cause; and, emotional distress or actual harm to reputation if they are reasonably
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expected to result from the interference. Restatement (Second) Torts § 774 A (cited
in Ross, 640 S.W.2d at 173). Kforce sought damages under a theory of civil
conspiracy for attorneys’ fees related to Kforce I, the loss of business from losing
customers and their business due in part to misappropriating goodwill and confidential
information, and punitive damages. Kforce sought damages under the MUTSAfor the
misappropriation of confidential trade secret information (such as customer contact
information and the needs and preferences of its customers) that Albert disclosed to
Surrex, as well as punitive damages.
Therefore, regarding actual and compensatory damages, Kforce is seeking the
same damages from the same transaction in Kforce II as it sought in Kforce I. “The
nexus between the two [sets of] causes of action is the breach of the contract[;] . . .
[t]his is the element from which the injured party’s actual damages flow on both the
contract and tort claims.” Ross, 640 S.W.2d at 173. As to the actual and
compensatory damages from the tortious interference and conspiracy claims, Kforce
is seeking coextensive damages with the first litigation (with the exception of punitive
damages) because such tort damages are the direct and natural consequences of the
breach as per the contract claim. Actual and compensatory damages for
misappropriation of trade secrets “can include both the actual loss caused by
misappropriation and the unjust enrichment caused by misappropriation that is not
taken into account in computing actual loss,” Mo. Ann. Stat. § 417.457 (West 2006),
and are similarly thus coextensive with the contract claim.
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Although Kforce claims it neither received attorneys’ fees2 nor alleged punitive
damages in Kforce I,3 this is irrelevant under Perez. It received a full recovery under
a contract claim and cannot now pursue a tort or MUTSA action for the same injury
arising from the same course of conduct. Thus, the district court correctly dismissed
Kforce II. Because we affirm the district court on this basis, we need not address
Kforce’s claim the district court improperly found res judicata barred Kforce II.
B
Kforce also argues the district court erred in finding the collateral litigation
exception did not apply. “The general rule is that ‘absent statutory authorization or
contractual agreement, with few exceptions, each litigant must bear his attorney’s
fees.’ The few exceptions [include] . . . where the natural and proximate result of a
breach of duty is to involve the wronged party in collateral litigation.” Mo. Prop. &
Cas. Ins. Guar. Ass’n v. Pott Indus., 971 S.W.2d 302, 306 (Mo. 1998). When “the
natural and proximate result of a wrong or breach of duty is to involve the wronged
party in collateral litigation, reasonable attorney’s fees necessarily and in good faith
2
However, as the district court noted, the non-compete agreement provided for
attorneys’ fees should the employer bring a court action and prevail in any aspect of
such action. Whether attorneys’ fees were included in the liquidated damages award,
they were available to Kforce in Kforce I and there was a full recovery.
3
“Missouri follows the general rule that no punitive damages can be awarded
absent an award of actual or nominal damages.” Williams v. Williams, 99 S.W.3d
552, 556 (Mo. Ct. App. 2003) (citations omitted). Thus, when there is a full recovery
in the first action there are no actual or nominal damages recoverable in a later suit to
attach punitive damages to, regardless of whether punitive damages were available in
the first litigation.
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incurred in protecting [one]self from the injurious consequence thereof are proper
items of damages.” Id. (citation omitted).
Without addressing the underlying merits of the collateral litigation claim, we
find Missouri law implicitly provides, although no Missouri court has so explicitly
held, the collateral litigation doctrine does not afford a separate cause of action and
instead provides a party may recover attorneys’ fees expended in a prior action in a
collateral action. In City of Cottleville v. Charles County, 91 S.W.3d 148, 151 (Mo.
Ct. App. 2002), the court held “the collateral litigation exception allows a plaintiff, in
a case alleging a breach of duty against a defendant, to recover the attorneys’ fees.”
Implicitly, the cause of action is the breach of duty and not a claim for attorneys’ fees
under the collateral litigation doctrine. Moreover, previous Missouri cases involve
causes of action other than a claim under the collateral litigation doctrine.
This follows from a reading of the doctrine, stating the “result of a wrong or
breach of duty is to involve the wronged party in collateral litigation, reasonable
attorney’s fees . . . incurred in protecting [one]self from the injurious consequence
thereof are proper . . . damages.” Mo. Prop., 971 S.W.2d at 306 (citation omitted).
Here, the result of Surrex’s wrong was to involve the wronged party, Kforce, in the
collateral litigation against Albert, Kforce I. Hence, if Kforce could now maintain a
suit against Surrex, attorneys’ fees would be proper damages—not a proper cause of
action.
III
For the reasons stated above, the judgment of the district court is affirmed.
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