Ecology Services, Inc. v. Clym Environmental Services, LLC

JAMES R. EYLER, Judge. This case arises from a complaint filed by Ecology Services, Inc., appellant, in the Circuit Court for Frederick County ³ against Robert Volkert, Kenneth Eubanks, Jerriel Neloms, and Osborne Raymond, all former employees of appellant, and Clym Environmental Services, LLC (“Clym”), appellees. In the complaint, appellant alleged that Clym’s employment of appellees Volkert, Eubanks, Neloms, and Raymond at the campus of the National Institutes of Health (NIH) in Bethesda, Maryland, violated covenants not to compete that the appellee-employees had executed during their prior employment with appellant. Based upon these covenants not to compete, appellant requested that appellees Volkert, Eubanks, Neloms, and Raymond be enjoined from working for Clym at the NIH.

Appellees filed a motion for summary judgment, which the circuit court granted. On appeal, appellant raises the following issues: (1) whether the circuit court erred by resolving factual disputes against appellant when it granted appellees’ motion for summary judgment; (2) whether the circuit court erred by failing to apply principles of Maryland law regarding enforceability of covenants not to compete; and (3) whether the circuit court erred when it held appellant did not have a protectable interest in the confidentiality of trade secrets, unique skills of the appellee-employees, and personal relationships between the appellee-employees and the NIH. 1 Finding no error below, we shall affirm. Factual Background Appellant, a Maryland corporation headquartered in Columbia, Maryland, is in the business of providing waste management services related to the treatment and disposal of low-level radioactive waste and hazardous waste materials. Appellee Clym, a Maryland limited liability company based in Frederick, Maryland, is in the same business and is a competitor of appellant.

Appellee Clym is owned by Charles and ⁴ Finley Watts, who are brothers, both formerly employed by appellant. This appeal revolves around two contracts that appellant previously held with the NIH. Under the first contract, appellant was in charge of managing the delivery of radioactive waste and medical pathological materials to and from research buildings located on the NIH campus in Bethesda, Maryland, and from satellite facilities in the Baltimore-Washington metropolitan area (“Package Delivery Contract”). Under the other contract, appellant managed the transportation, processing and disposal of nuclear waste from research buildings on the NIH campus (“Radioactive Waste Contract”). 2 The Package Delivery and Radioactive Waste contracts with the NIH are competitively-bid contracts.

Companies submitting bids on these contracts have to submit cost proposals as well as technical proposals to the NIH describing the practices and procedures to be applied in performing the contracts. These proposals are kept confidential by the NIH. 3 In 2004, when the term of appellant’s Package Delivery Contract was about to expire, the NIH started accepting bids on the contract. The Package Delivery Contract was designated to be set aside for a small business, and due to appellant’s growth, by 2004 appellant no longer qualified as a small business. Therefore, it could not bid on the Package Delivery Contract.

Clym successfully bid on the Package Delivery Contract and the NIH awarded the contract to Clym. Appellant’s contract term expired in December 2004, and Clym took over the contract after that date. ⁵ In 2005, the term of appellant’s Radioactive Waste Contract was about to expire when the NIH started accepting bids on the contract. Appellant submitted a bid to renew its contract term, but appellant lost the bidding to Clym. Appellant’s contract term for the Radioactive Waste Contract expired in August 2005, and Clym took over the contract. 4 Despite losing the Package Delivery and Radioactive Waste contracts, appellant still holds other contracts with the NIH.

Appellee Neloms, while employed by appellant, worked at the NIH pursuant to the Package Delivery Contract, and his job title was “Delivery Person and Radioactive Materials Technician.” Mr. Neloms’ employment -with appellant ended in December 2004, after the Package Delivery Contract expired. 5 Appellees Raymond, Eubanks, and Volkert were employed by appellant to work at the NIH pursuant to the Radioactive Waste Contract. Appellee Raymond’s term of employment with appellant started around 1995, and he worked in the position of “Radioactive Waste Specialist” at the NIH campus. 6 Appellees Eubanks and Volkert both worked for appellant in the same position of “Radioactive Waste Technician” at the NIH campus. Before working for appellant, both Messrs. Eubanks and Volkert had originally worked at the NIH for “Radiation Services Organization” (RSO), the predecessor company to appellant on the Radioactive Waste Contract.

When appellant first won the Radioactive Waste contract in 1992, Messrs. Eubanks and Volkert continued in their positions at the NIH, while employed by appellant. ⁶ Appellees Raymond, Eubanks, and Volkert stopped working for appellant in August 2005, when the Radioactive Waste Contract expired. Appellees argue Messrs. Raymond, Eu-banks, and Volkert were terminated by appellant following expiration of the contract.

Appellant asserts, however, that prior to expiration of the Radioactive Waste Contract, appellees Raymond, Eubanks, and Volkert were all informed of other employment opportunities with appellant. 7 Within the terms of the Radioactive Waste Contract, the positions of “Radioactive Waste Specialist” and “Radioactive Waste Technician” are designated as “Key Personnel,” and employees filling Key Personnel positions must be approved in advance by the NIH before they can be assigned to work on the contract. The two positions have specific job descriptions in the contract. Radioactive Waste Specialists are required to have a degree in a natural science or engineering that includes at least 30 semester hours in health physics, engineering, radiological science, chemistry, physics, biology, mathematics, and/or calculus, or a combination of education and experience, such as courses shown above plus appropriate experience or other education certification as a health physicist by the American Board of Health Physics plus appropriate experience, and other education that provides an understanding of sciences applicable to health physics and radioactive waste management. In addition, the Contractor shall provide each Specialist with specific training in packing and shipping of radioactive wastes as required by DOT and NRC regulations.

Radioactive Waste Technicians are required to have “specialized experience” related to the work of the position that has equipped the technician with “the particular knowledge, ⁷ skills, and abilities to perform the duties, or one full year of college education or an internship that is directly related to the work of the position, or a combination of specialized experience and education.” Additionally, the contractor must train the technicians on the packing and shipping of radioactive waste as required by federal regulations. The job requirements of Mr. Neloms’ position as “Delivery Person and Radioactive Materials Technician” for the Package Delivery Contract were that he possess a valid commercial driver’s license with a hazardous materials endorsement, and completion of an on-site radiation safety training course. The actual job duties of Mr. Raymond, as a Radioactive Waste Specialist, involves the packaging and disposal of dry waste and radioactive waste collected from research buildings on the NIH campus. Mr. Raymond is in charge of compacting the radioactive waste into containers for disposal.

NIH researchers place tags on the waste stating its level of radioactivity, and the waste is compacted according to federally mandated procedures for handling radioactive waste. Appellees Volkert and Eubanks, as Radioactive Waste Technicians, work on the disposal of radioactive waste collected from the NIH campus and satellite facilities located in Baltimore, Lanham, and Rockville, Maryland. Messrs. Volkert and Eubanks travel in teams of two to different buildings on the NIH campus and to the satellite facilities to retrieve liquid and other waste, and then return with the waste to “Building 21” on the NIH campus.

Upon returning with the waste, Messrs. Volkert and Eubanks enter data about the waste into a database and ensure that the waste is eventually disposed. Appellees assert the process for collecting and disposing of nuclear waste on the NIH campus and from the satellite facilities has not changed since the late 1980s. As a Delivery Person and Radioactive Materials Technician, Mr. Neloms delivers packages containing small amounts of radioactive materials from “Building 21” on the NIH campus to researchers on the campus that have submitted requests for the materials.

Mr. Neloms transports the radioactive materi ⁸ ais around the campus in a van, and carries a “Geiger counter” during the deliveries to assess levels of radiation and contamination at different locations. Following deliveries, Mr. Neloms is responsible for entering data as to who received the materials and the timing of the delivery. Mr. Neloms then repeats this process as more packages arrive at the NIH campus. The Covenants Not to Compete In 1997, as a condition of their continued employment with appellant, appellees Raymond, Eubanks, Volkert, and Neloms were required to execute covenants of “nondisclosure and non-competition” with appellant (“non-competition covenants”).

All four employees signed the covenants, and the covenants provided, in pertinent part, that the employees would neither: (i) directly or indirectly, divulge or disclose to any person or entity any of the Proprietary and Confidential Information or any other information or knowledge respecting the business or affairs of [appellant] ... but shall hold all of the same confidential and inviolate, nor (ii) for a period of one (1) year after the cessation of ... employment with [appellant] for any reason whatsoever and within a radius of one hundred (100) miles from [appellant’s principal place of business ... [c]ompete with [appellant] or in any manner whatsoever engage in any business similar to that of [appellant] in any capacity, ... [s]olicit or induce any employee of [appellant] to leave the employ of [appellant], ... [s]olicit or accept employment by or be retained by any person or entity who, at any time during the Employee’s employment with [appellant] was a competitor of [appellant] or was a person or entity that contracted with [appellant]. Appellee Neloms’ employment with appellant ended in December 2004, when the Package Delivery Contract expired. After Mr. Neloms’ employment ended with appellant, he was hired to work as a truck driver for a paper disposal company, “Shred-It.” Mr. Neloms testified at deposition that the boxes he had to carry while working for Shred-It were much heavier ⁹ than the boxes he had to carry when he worked for appellant. In February 2005, Mr. Neloms was contacted by Charles Watts at Clym about working for Clym at the NIH in the same capacity that he had worked for appellant.

Mr. Neloms testified Mr. Israel Putnam, who Mr. Neloms described as the “head man” in the radiation department at the NIH, had probably referred Mr. Neloms to Mr. Watts. Mr. Putnam had also written a letter of recommendation on Mr. Neloms’ behalf when Mr. Neloms left the employ of appellant in 2004. On April 26, 2005, after appellant learned Mr. Neloms had been hired to work for Clym at the NIH, appellant’s counsel wrote to Mr. Neloms and Clym demanding enforcement of Mr. Neloms’ non-competition covenant with appellant. Appellees Eubanks, Volkert, and Raymond all testified at deposition that their jobs with appellant ended when appellant’s Radioactive Waste Contract with the NIH expired in August 2005.

Mr. Eubanks testified that appellant offered him a position at a different waste facility but the position entailed a salary cut for Mr. Eubanks in the amount of $8,000-$9,000, and he did not take the job. Mr. Eubanks was unemployed for a week until he was contacted by Clym and offered a job to continue working as a Radioactive Waste Technician at the NIH, and Mr. Eubanks accepted the job offer. Appellee Yolkert started working for Clym as a Radioactive Waste Technician at the NIH in August 2005, after his employment with appellant ended. At deposition, appellee Raymond testified that after his job with appellant ended in August 2005, he attempted to find a job with appellant in Gaithersburg, Maryland, and he called someone about the job but “found out [he] couldn’t do it.” In December 2005, appellee Raymond started working for Clym as a Radioactive Waste Specialist at the NIH.

On December 6, 2005, appellant filed a verified complaint, motion for temporary restraining order, motion for preliminary injunction, and motion for permanent injunction in the circuit court against appellees alleging breach of the non- ¹⁰ competition covenants. On January 31, 2006, appellant filed a verified amended complaint for indemnification, temporary restraining order, and preliminary and permanent injunctive relief (“amended complaint”). In the amended complaint, appellant alleged Messrs. Raymond, Eubanks, Volkert, and Neloms were violating their respective non-competition covenants with appellant by working for Clym.

Additionally, appellant alleged that during their employment with appellant, the appellee-employees “had access to trade secrets and confidential proprietary information” of appellant’s, and that upon information and belief, they had disclosed this information to Clym, further breaching their respective non-competition covenants with appellant. In the two-count amended complaint, appellant requested, in count one, a temporary restraining order to enjoin appellees from further breach of the non-competition covenants, as well as preliminary and permanent injunctions against further breach of the covenants. In count two, appellant requested indemnification for all losses and expenses arising out of or in connection with the appelleeemployees’ breaches of the non-competition covenants. On February 27, 2006, appellees answered appellant’s amended complaint.

On April 13, 2007, appellees filed motions for summary judgment on all of the claims in appellant’s amended complaint. Appellant opposed appellees’ motions for summary judgment. On June 12, 2007, the circuit court held a hearing on appellees’ motions for summary judgment. On July 2, 2007, the circuit court entered an opinion and order granting appellees’ motions for summary judgment as to all claims in appellant’s amended complaint.

The court denied appellant’s request for attorney’s fees. In granting the motions for summary judgment, the court noted in its opinion that it was “disputed whether [appellees Raymond, Eubanks, Volkert and Neloms] were let go by [appellant] or whether they chose to leave [appellant] voluntarily. In any event, [the appellee-employees] were subse ¹¹ quently employed by Clym and continued to work at essentially the same jobs as they had previously with [appellant].” The court noted that (1) neither appellant nor appellees contested the reasonableness of the limits or duration of the non-competition covenants; (2) appellees Raymond, Eubanks, Yolkert and Neloms were “clearly low level employees not utilizing skills against whom covenants not to compete could be enforced,” and while appellant “allege[d] they possess unique skills!’,] no factual basis for this allegation ha[d] been demonstrated;” (3) the activities of the appellee-employees did not involve “the solicitation of customers, private customer lists, or assigned routes which involve solicitation of customers,” and no facts were presented to support appellant’s allegation that appellees used trade secrets in their employment with appellant; (4) “[b]ecause of the nature of [the appellee-employees’] services,” there was “no exploitation of personal contact between employee and the customer (NIH)[;]” (5) enforcement of the covenants against appellees “would constitute an undue hardship on them;” and “the public interest would not be served by the enforcement of the covenants[;]” and (6) appellant had “failed to articulate the unique nature of the services these workers perform or the trade secrets which they allegedly possess.” Appellant filed a timely notice of appeal to this Court. Additional facts will be added as necessary.

Standard of Review Under Maryland Rule 2-501, a motion for summary judgment “is appropriate ‘on all or part of an action on the ground that there is no genuine dispute as to any material fact and that the party is entitled to judgment as a matter of law.’ ” Haas v. Lockheed Martin Corp., 396 Md. 469, 478 , 914 A.2d 735 (2007) (quoting Rule 2-501 (a)). When considering a trial court’s grant of summary judgment, we review the record in the light most favorable to the non-moving party and construe any reasonable inferences that may be drawn from the facts against the moving party. See Rhoads v. Sommer, 401 Md. 131, 148 , 931 A.2d 508 (2007); see also Harford County v. Saks ¹² Fifth Ave. Distrib.

Co., 399 Md. 73, 82 , 923 A.2d 1 (2007) (court resolves any disputed material facts in favor of the non-moving party); Lovelace v. Anderson, 366 Md. 690, 695 , 785 A.2d 726 (2001). Where no material facts are in dispute, we must determine whether the trial court correctly entered summary judgment as a matter of law, applying a de novo standard of review. See Saks Fifth Ave., 399 Md. at 82 , 923 A.2d 1 ; Prop. & Cas. Ins.

Guar. Corp. v. Yanni, 397 Md. 474, 480-81 , 919 A.2d 1 (2007); Standard Fire Ins. Co. v. Berrett, 395 Md. 439, 450 , 910 A.2d 1072 (2006); Ross v. State Bd. of Elections, 387 Md. 649, 658-59 , 876 A.2d 692 (2005). When opposing a motion for summary judgment, “general allegations which do not show the facts in detail and with precision are insufficient to prevent the entry of a summary judgment,” Shaffer v. Lohr, 264 Md. 397, 404 , 287 A.2d 42 (1972), and a non-moving party “may not rely on bare allegations or ‘a mere scintilla’ of evidence to defeat a motion for summary judgment.” Labor Ready, Inc. v. Abis, 137 Md.App. 116, 125 , 767 A.2d 936 (2001) (quoting Helman v. Kim, 130 Md.App. 181, 192 , 745 A.2d 451 (2000)); see also Beatty v. Trailmaster Prods., Inc., 330 Md. 726, 738 , 625 A.2d 1005 (1993) (“[WJhen a movant has carried its burden, the party opposing summary judgment ‘must do more than simply show there is some metaphysical doubt as to the material facts.’ ” (citation omitted)).

Discussion In challenging the circuit court’s grant of appellees’ motions for summary judgment, appellant argues the court erred in deciding several issues of material fact in favor of appellees. First, appellant argues there was a dispute of material fact about whether personal contacts between appellees Raymond, Eubanks, Volkert, and Neloms and the NIH made the covenants necessary for the protection of appellant’s business. Appellant argues the trial court erred in finding there could not have been exploitation of the personal contacts between the appellee-employees and the NIH, and appellant offers ¹³ facts that it contends show there is an issue of fact as to exploitation. Appellees respond that based on the job duties and responsibilities of appellees Raymond, Eubanks, Volkert, and Neloms, there was no opportunity for exploitation of the personal contacts between the employees and the NIH.

Appellees explain there is no evidence that personal contacts between the appellee-employees and the NIH were essential to appellant’s continued well-being as a business. Appellees argue that at the time appellant lost the Package Delivery and Radioactive Waste contracts to Clym, the appellee-employees were still employed by appellant under the respective contracts, which they contend shows personal contacts between the employees and the NIH had no bearing on appellant’s ability to retain the NIH as a customer. Next, appellant argues the circuit court erred in finding there was no factual basis for appellant’s allegation that appellees Raymond, Eubanks, Volkert, and Neloms possess unique or specialized skills, and appellant argues it offered evidence to raise a dispute of fact on this issue. Appellees respond that appellant has not submitted evidence to raise an issue of fact about whether appellees Raymond, Eubanks, Volkert, and Neloms possess unique or specialized skills, and they argue the appellee-employees are unskilled workers.

Appellant next argues the court erred in finding that enforcement of the non-competition covenants would impose undue hardship on appellees Raymond, Eubanks, Volkert, and Neloms, and that the finding is inconsistent with the facts. Appellant explains that appellees Volkert, Eubanks, and Raymond were each informed about other job opportunities with appellant following expiration of the Radioactive Waste Contract, and that any dispute of fact on this issue should have been resolved in appellant’s favor. As to Mr. Neloms, appellant argues any job dissatisfaction Mr. Neloms experienced while working for Shred-It, compared to working at the NIH, does not constitute undue hardship. ¹⁴ Appellees respond that enforcement of the covenants would impose undue hardship based on the number of years that appellees Volkert and Eubanks had worked at the NIH as Radioactive Waste Technicians; the salary cut Mr. Eubanks would have endured had he taken the other job appellant was offering when the Radioactive Waste Contract expired; the fact Mr. Neloms had to carry heavier boxes working for “Shred-It,” compared to the boxes he had to carry working at the NIH; and that Mr. Raymond had been unemployed for several months prior to being hired by Clym in December 2005. Finally, appellant argues there was nothing in the record to support the court’s finding that the public interest would be best served by invalidating the non-competition covenants.

Appellees respond enforcement of the covenants does not support the public interest, and that the court took proper judicial notice of the public policy against government contractors restricting the federal government’s access to trained, experienced personnel. I. Maryland Law on Covenants Not To Compete In Maryland, covenants not to compete may be applied and enforced generally “only against those employees who provide unique services, or to prevent the future misuse of trade secrets, routes or lists of clients, or solicitation of customers.” Becker v. Bailey, 268 Md. 93, 97 , 299 A.2d 835 (1973). The Court of Appeals in Becker defined the standard for determining the enforceability of covenants not to compete: The general rule in Maryland is that if a restrictive covenant in an employment contract is supported by adequate consideration and is ancillary to the employment contract, an employee’s agreement not to compete with his employer upon leaving the employment will be upheld ‘if the restraint is confined within limits which are no wider as to area and duration than are reasonably necessary for the protection of the business of the employer and do not impose undue hardship on the employee or disregard the