Jacam Chemical Company 2013, LLC v. Shepard et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NORTH DAKOTA
Jacam Chemical Company 2013, LLC, )
) ORDER GRANTING MOTION
Plaintiff, ) FOR RELIEF FROM STIPULATION
)
vs. )
) Case No. 1:19-cv-093
Arthur H. Shepard, Jr., and Geo Chemicals, )
LLC, )
)
Defendants. )
Before the Court is Defendant Arthur H. Shepard, Jr.’s “Motion for Relief from the Joint
Stipulation” filed on March 31, 2020. See Doc. No. 100. Defendant Geo Chemicals, LLC filed a
response in support of the motion on April 2, 2020. See Doc. No. 101. The Plaintiff filed a
response in opposition to the motion on April 7, 2020. See Doc. No. 104. Defendant Shepard
filed a reply on April 9, 2020. See Doc. No. 105. For the reason set forth below, the motion is
granted.
I. BACKGROUND
On May 31, 2019, Jacam Chemical Company 2013, LLC (“Jacam”) filed this suit against
its former employee, Arthur H. Shepard, Jr. (“Shepard”), and the company Shepard went to go
work for, Geo Chemicals, LLC (“Geo”), alleging breach of contract, tortious interference with
existing contract/business relations, breach of duty of loyalty, breach of the North Dakota Uniform
Trade Secrets Act, and civil conspiracy. See Doc. No. 1. On June 13, 2019, Jacam filed a motion
for a temporary restraining order, preliminary injunction, and expedited discovery. See Doc. No.
9. On June 18, 2019, the parties filed a stipulation regarding the motion for a temporary restraining
order, preliminary injunction, and expedited discovery. See Doc. No. 29. Numbered paragraph 4
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of the stipulation provides: “Shepard agrees and represents that he will not perform any work for,
on behalf of, or for the benefit of, Geo Chemicals LLC unless jointly agreed to by the parties or in
the event that the Court denies Jacam 2013’s motion for a preliminary injunction.” See Doc. No.
29. Additional provisions include: Shepard’s preservation of any potentially relevant
electronically stored information on his mobile phone and laptop computer; the parties’ procedure
for imaging and reviewing that electronically stored information; a discovery schedule; Jacam’s
withdrawal of its motion for a temporary restraining order and expedited discovery; and a schedule
for a hearing on Jacam’s motion for a preliminary injunction. See Doc. No. 29. The Court adopted
the stipulation and found as moot Jacam’s motion for a temporary restraining order and motion for
expedited discovery. See Doc. No. 30. The hearing on the motion for a preliminary injunction
has yet to occur due to a number of reasons, including an extended briefing period on the motion,
limited availability of the parties and the Court, and, most recently, COVID-19 pandemic concerns.
Shepard now seeks to be released from the provision in the stipulation which prevents him from
working for Geo.
II. DISCUSSION
Stipulations are generally classified as either procedural or contractual in nature:
Procedural stipulations are aimed at facilitating the course of a lawsuit. They
simplify proof or foreshorten procedural requirements. Contractual stipulations
affect the subject matter of a lawsuit. They deal with the rights or property at issue.
They are styled stipulations only because they occur in connection with litigation.
In essense they are contracts and are entitled to all the sanctity of a conventional
contract.
Lawrence v. Lawrence, 217 N.W.2d 792, 796 (N.D. 1974). “The essential distinction between
contractual stipulations and contracts lies in remedy.” Id. “The court retains management and
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control over all stipulations.” Id. “Stipulations made by parties to a lawsuit may always be
nullified by the court for good cause.” Id.
The stipulation at issue is largely contractual in nature, although procedural elements are
present. Thus, we begin by reviewing contract law. N.D. Cent. Code § 9-08-06 provides, “A
contract by which anyone is restrained from exercising a lawful profession, trade, or business of
any kind is to that extent void, except: 1. A person that sells the goodwill of a business . . . 2.
Partners, members, or shareholders, upon or in anticipation of a dissolution of a partnership,
limited liability company, or corporation . . . .” See also Osborne v. Brown & Saenger, Inc., 904
N.W.2d 34, 38-39 (N.D. 2017) (North Dakota has a “longstanding and strong public policy against
non-compete agreements.”). Because numbered paragraph 4 of the stipulation prevents Shepard
from working for Geo, it is in direct conflict with North Dakota law. Accordingly, numbered
paragraph 4 must be voided.
III. CONCLUSION
For the reason set forth above, Shepard’s “Motion for Relief from the Joint Stipulation”
(Doc. No. 100) is GRANTED. Numbered paragraph 4 in the stipulation is null and void.
IT IS SO ORDERED.
Dated this 13th day of April, 2020.
/s/ Daniel L. Hovland
Daniel L. Hovland, District Judge
United States District Court
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