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TKC Aerospace, Inc. v. Muhs

United States District Court, D. Alaska

October 22, 2015



H. RUSSEL HOLLAND, District Judge.

Motion for Summary Judgment and Sanctions

Plaintiff moves for summary judgment or in the alternative for sanctions.[1] This motion is opposed.[2] Oral argument has not been requested and is not deemed necessary.


Plaintiff is TKC Aerospace, Inc. (TKCA). Defendant is Charles Taylor Muhs.

TKCA, an Alaska Native Corporation 8(a) contractor, specializes in aircraft procurement and leasing and aerospace logistics support and professional staffing for government and private concerns. Muhs was employed by TKCA as its Vice President of Business Development. During Muhs' employment, TKCA supplied six Dash 8 aircraft to the Department of State (DoS). Muhs was significantly involved in all six Dash 8 sales.

In March 2011, Muhs resigned his employment with TKCA to begin working for Knowledge International. Muhs later agreed to continue to work part-time for TKCA. During this general time frame, Muhs learned that there might be another DoS Dash 8 solicitation. Muhs began working with Phoenix Heliparts, Inc. (PHP) to find aircraft and develop a bid for this possible solicitation. After the DoS issued the solicitation, Muhs continued to help PHP and PHP eventually was the successful bidder. TKCA was unable to submit a bid because it did not have an aircraft to propose and because by the time the bid was due, it knew Muhs was working with PHP.

On September 26, 2011, TKCA commenced this action. TKCA asserted seven claims against Muhs in its complaint: 1) breach of contract, 2) breach of the implied covenant of good faith and fair dealing, 3) breach of fiduciary duties, 4) unjust enrichment, 5) interference with prospective business relationships, 6) fraud, and 7) misappropriation of trade secrets. TKCA also moved for a preliminary injunction, [3] which was granted on October 14, 2011.[4] The preliminary injunction generally enjoined Muhs from assisting PHP with the Dash 8 solicitation.

On October 20, 2011, TKCA commenced an action against PHP in Arizona State court. Although filed later, the Arizona Action progressed far more rapidly than this case.

On February 21, 2012, Muhs moved to stay this case pending resolution of the Arizona Action.[5] At this time, Muhs was represented in this matter by the same counsel that was representing PHP in the Arizona Action.[6]

In the memorandum in support of his motion to stay, Muhs stated that the Arizona Action "involve[d] the same plaintiff... and [the] same factual and legal issues as those in the Alaska Action" and that "[t]he underlying factual allegations in the respective Verified Complaints in the two actions are virtually verbatim, the gravamen of the claims are identical, and the relief requested is virtually identical."[7] Muhs further stated "this pending action is so substantially similar to and significantly parallels the Arizona Action [as] reflected in the overwhelming overlap of TKCA's factual and legal arguments in the Arizona Action Preliminary Injunction (PI') Hearing Brief and its Summary Judgment (SJ') Motion Brief in this court - the fundamental linchpin of both being the alleged wrongdoing of Muhs."[8] Muhs stated that it was "a distinction without a difference" that he was the "sole defendant" because "TKCA's claims of wrongdoing by PHP are entirely based on the alleged wrongdoing of Muhs."[9] Muhs also pointed out that "all parties in the two cases have entered into a stipulation and agreed that any discovery and trial testimony from the Arizona Action can be used as evidence in this case, " which Muhs suggested was further evidence of "the substantial similarity between the two cases...."[10] In his reply brief, Muhs stated that "[a] resolution of the Arizona Action in TKCA's favor will dispose of any remaining liability and damage questions in the Alaska Action (again, but for the $20, 000 wage claim)."[11] Muhs also stated "[i]f TKCA prevails in the Arizona Action, ... then Muhs would be collaterally estopped from arguing differently in this Court."[12]

On March 8, 2012, the court denied Muhs' motion for a stay.[13] In doing so, however, the court observed that "Muhs' relationship to TKC[A] and his conduct as regards PHP is the keystone to all of the claims of substance in both the Alaska federal suit and the Arizona state suit."[14] The court also observed that

it is reasonably clear that the Arizona litigation will not necessarily resolve the whole of this litigation. That said, the Arizona litigation has the prospect of materially affecting this litigation. Because Muhs' conduct is at the heart of all the claims in this court and in Arizona, there is the prospect for substantial duplicative litigation even though the defendants in the respective cases are different.[15]

On May 2, 2012, TKCA and Muhs filed simultaneous motions for summary judgment.[16] All of the evidence offered in support of the motions for summary judgment had been developed in the Arizona Action as no discovery had yet taken place in this case. On January 17, 2013, the court denied TKCA's motion for summary judgment and granted Muhs' motion in part.[17] Muhs was granted summary judgment on TKCA's unjust enrichment claim and fraud claim and on portions of TKCA's breach of contract and trade secrets claims.[18]

The court thereafter deferred any further scheduling in this case until the Arizona Action was completed. The proceedings in the Arizona Action were finally completed on January 30, 2015. The Arizona court concluded

that PHP misappropriated TKCA's bid proposal, [Statements of Work] and labor rates in violation of the [Arizona Uniform Trade Secrets Act]. PHP profited from its misappropriation to TKCA's detriment and is ordered to pay TKCA the sum of the profits TKCA would have received under the DoS contract.... It is further ordered that PHP pay TKCA the calculated research and development cost[s].... It is further ordered that PHP pay exemplary damages pursuant to A.R.S. § 44-403(B) in an amount double awarded to TKCA for its lost profit and research and development costs. In addition, with respect to the common law claims, TKCA is awarded its lost profits and punitive damages.... It is also ordered that TKCA submit its applications for the amount awarded in sanctions (reasonable fees and expenses) and for reasonable attorney's fees pursuant to A.R.S. § 44-404 and A.R.S. § 12.349.[19]

The Arizona court's conclusion was based on findings that Muhs worked with PHP to compete for the DoS contract, that Muhs provided TKCA documents to PHP, and that Muhs worked on PHP's DoS Dash 8 proposal.[20] The Arizona court ...

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