The Campbells file motion to dismiss TCT federal lawsuit

TCT

BY KYNLI SMITH

Joe and Barbara Campbell along with their lawyers recently submitted a memorandum in support of a motion to disqualify counsel and a motion to dismiss in the recently filed Tri County Telephone Association vs. Joe and Barbara Campbell.

TCT flipped the tables on the Campbells in late May by filing with federal court in the U.S. District Court in Cheyenne. This federal suit comes after the ongoing Campbell vs. Tri County Telephone Association lawsuit. The Campbells’ lawsuit has been ongoing for nearly two years. The suit alleges that TCT held more than $90 million in hard assets when it was sold for $51 million in 2014. Of the $51 million sale price, $12 million was to retire debt and $10 million was held back for “unseen liabilities,” leaving just $29 million to be paid to TCT cooperative owners.

The Campbell suit names TCT chief executive officer Chris Davidson, TCT chief financial officer Steve Harper and former board members Dalin Winters, J.O Sutherland, Daniel Greet, Clifford Alexander and John K. Johnson as defendants. Also included as defendants are Neil Schlenker, accounting firm Hathaway and Kunz and attorney Michael Rosenthal.

The new federal lawsuit filed by TCT on May 25 lists allegations of misappropriation of trade secrets as well as interference with contract and business expectancy. In the federal suit it names the Campbells along with John and Jane Does as defendants.

In the newly filed court documents by the Campbells they argue that counsel for TCT, Burge, Simpson, Eldredge, Hersh & Jardine law firm, is suing their own clients, the Campbells.

Attorney Chris Edwards, who works for the law firm representing TCT in the federal case, also has given legal advice to the Campbells and is their estate-planning lawyer.

“The plaintiff in this action seeks to impose personal liability on Joe and Barbara Campbell. Mr. Simpson, if left unchecked, will be allowed to violate the trust Joe and Barbara Campbell has placed in Mr. Simpson’s firm as a weapon against them in the litigation,” the memorandum states.

They also argue that the lawyers for TCT were told that Chris Edwards had given legal advice to Joe and Barbara Campbell on the very subject of the lawsuit and knew of the conflict of interest with Simpson’s law firm.

Edwards warning of a takeover?

In the newly filed documents in the federal case, the defense explains that Edwards used to provide legal counsel to TCT before the 2014 sale when it was still a cooperative.

According to court documents, Edwards along with attorney John Ruppert advised the board in 2009 after Schlenker’s first attempt of a “takeover “of TCT.

They advised the board that the owners’ interest could “not be bought” and attempted to educate the board on their fiduciary duties.

The documents allege that Davidson became “furious” at Ruppert for giving advice on fiduciary duties and limitations of the board and officers. In 2010, Ruppert resigned as counsel for TCT.

Edwards became concerned about the rights of the owners after the 2009 bid and proposed to send out a mailing to owners informing them of what Schlenker had tried to do.

In a letter, Edwards states, “The decision to sell Tri County Telephone Association Inc. is ultimately up to the members of this cooperative. We rejected the offer that was made to the board because the offer was only for approximately $12 million, and your company had $9 million cash on hand at the time of the offer. In other words, Neil Schlenker of Big Horn Telecommunications was trying to use our own cash to purchase the company.”

In response to her proposed letter, court documents allege that Davidson moved to oust Edwards by replacing her with attorney Rosenthal and the law firm of Hathaway & Kunz.

After Edward’s departure, Joe Campbell remained on the board for the cooperative and was very vocal in opposition of Schlenker’s second offer. The documents allege that counsel for TCT as well as Davidson tried to push Campbell out of the board. It alleges that Rosenthal proposed a tiered litigation approach that could be implemented in case Campbell said anything to the owners of the cooperative about the takeover.

The documents allege that Rosenthal stated that the cooperative’s insurance policy would not cover Campbell’s cost of defending the lawsuit that he and the board were threatening to file against him.

“Davidson told Joe Campbell that Mr. Campbell could ‘lose his ranch’ if he were faced with a lawsuit. Chris Davidson went so far as telling Joe Campbell that he was elderly and was senile and should not oppose Davidson or the board,” the memorandum states.

During and after the sale of TCT in 2014, the Campbells sought advice from Edwards on efforts and issues now raised in the class action state case the Campbell’s filed. They even met with Edwards at the law firm’s offices that are now suing them in the federal case. 

According to the Rules of Professional Conduct, Rule 1.7 “prohibits a lawyer from undertaking representation against a current client if the matter would directly adverse to the existing client.”

According to Joe Campbell’s affidavit, both him and his wife are current clients of Simpson’s law firm and they claim the federal lawsuit filed against them is directly adverse to them. Grounds for dismissal?

In the memorandum for the defense in the federal case, the Campbells’ lawyers claim that TCT’s federal complaint is defective for four reasons, which they outline as follows:

The complaint does not state what trade secrets are at issue. “It merely states in conclusory fashion, that there are trade secrets,” the memorandum states. Because of this they argue that TCT cannot invoke protection under the Trade Secrets Act.

The complaint fails to state that they claimed action on the part of Joe and Barbara Campbell was taken in interstate commerce. “The plaintiff has failed to invoke federal jurisdiction under the Act and this court does not have subject matter jurisdiction,” it states.

The complaint makes clear that the alleged “misappropriation” occurred on Jan. 1, 2015, which is the date Campbell’s service on the board ended. The Campbells’ lawyers argue that the plaintiff’s claim did not come into effect until May of 2016 and that the complaint “fails to specify when Joe Campbell allegedly disclosed claimed ‘trade secrets,’ when such alleged disclosures occurred, or any act that has occurred after passage of the Act.”

The Act the plaintiff’s used makes clear that it does not seek to inhibit whistleblowers. “From the face of the complaint  in this case and from the Second Amended Complaint in the class action, Mr. and Mrs. Campbell are whistleblowers entitled to protection from this kind of lawsuit.”

The defense also addressed the plaintiff’s protective computer allegations. After Campbell no longer served on the board, he was asked to return his laptop to TCT so trade secrets could be removed from the laptop.

“Joe Campbell acquired TCT’s trade secrets and knew or had reason to know he acquired TCT’s trade secrets through improper means,” the plaintiff’s complaint states.

The defense argues that the plaintiff’s failed to allege any facts that would indicate the computer was a protected computer. Under 18 U.S.C 1030 (a)(4) the plaintiff’s cannot state a cause of action because “the complaint fails to allege the first element required to invoke protection under the state, namely, that Joe and Barbara Campbell actually accessed computer-stored information as opposed to merely using the computer. Using the computer for the receipt of emails from the company using a personal email account is not accessing the information on the computer, it is mere use of the computer, and is not prohibited by the statute.”

Class action case moves forward

Back in April, the plaintiffs, the Campbells, alleged the defendants in the Campbell Class Action suit were blocking discovery. The Campbells claim that they have produced 14,500 documents along with 71 witnesses while out of all the defendants only one document was produced.

The defendants filed a motion for bifurcation of discovery; however, on May 5, Ninth District Court Judge Norman E. Young denied the defendants’  motion. Twenty days later, the federal lawsuit was filed by TCT against the Campbells.

In April, the defense also put forth a motion to quash the subpoena of Rep. Mike Greear R-Worland. A subpoena was also served to Greear who represented BHT Holdings and Schelenker when purchasing TCT. Greear objected to the subpoena, stating that the subpoena did not allow enough time, was a burden and that it violated attorney-client privileges.

On June 22, the motion to quash the subpoena was denied, which means Greear will now have to answer to the subpoena.

On June 16, defendants Davidson and Harper along with their counsel filed a motion for a protective order regarding confidential information.

“Not only is competitive information at issue, but private and personal information that has no place in the public sphere will necessarily be a part of production in this case. Financial information related to individual members and information regarding employee compensation are part of the documents requested in this case,” the motion states.

The defendants also filed a 30-page proposed protective order on June 16. The scope for the protective order covers all materials produced or adduced in the course of discovery, including initial disclosures, response to discovery requests or subpoenas, depositions testimony and exhibits.