This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2006).
STATE OF MINNESOTA
IN COURT OF APPEALS
Tony L. Everette,
Department of Employment and Economic Development,
Filed December 11, 2007
Department of Employment and Economic Development
File No. 6769 06
Stephen H. Parsons, Charles A. Horowitz, Andrew T. Jackola, Mansfield, Tanick & Cohen, P.A., 1700 U.S. Bank Plaza South, 220 South 6th Street, Minneapolis, MN 55402 (for relator)
C-Aire Inc., P.O. Box 129, Wyoming, MN 55092 (respondent)
Lee B. Nelson, Minnesota Department of Employment and Economic Development, 1st National Bank Building, 332 Minnesota Street, Suite E200, St. Paul, MN 55101 (for respondent department)
Considered and decided by Dietzen, Presiding Judge; Randall, Judge; and Halbrooks, Judge.
In this certiorari appeal, relator challenges the decision of an unemployment-law judge (ULJ) that he is disqualified from receiving unemployment benefits. We affirm.
Relator Tony Everette is the owner of two interchangeable sole proprietorships, DE Parts Supply and Everette Marketing Services (collectively DE Parts). Through DE Parts, Everette sells Chinese-made cast-iron pumps and replacement parts for air compressors. In 2005, he had 15 to 20 regular customers.
Respondent C-Aire Incorporated is a manufacturer and distributor of air compressors. C-Aire’s president is George Folk. C-Aire sells over 20 models of air-compressor pumps, manufactured primarily in Italy and the United States. While these pumps are similar to the Chinese version sold by DE Parts, they are made from aluminum and are higher quality. When C-Aire wanted a Chinese pump, it purchased it through DE Parts.
In March 2005, Everette approached Folk with a business proposition. C-Aire would buy 90 containers of Chinese pumps from Everette at a reduced price and would pay the freight and duty charges from the importer. Everette saved the costs of shipment and warehousing. Everette would then resell the pumps to his preexisting customers at a markup of 15% over the price that C-Aire paid the importer. Everette reduced this offer to writing in a memo to Folk dated March 23, 2005, but it was never signed by the parties. Nevertheless, the parties began operating under an oral agreement, with the first container of pumps arriving on June 7, 2005.
In May 2005, Everette was hired as C-Aire’s marketing director. His job duties included expanding C-Aire’s sales. But the parties also continued to operate under the pre-employment agreement, and Everette was permitted to continue sales through DE Parts. This combined relationship of business partners/employer-employee worked well for a time, until three incidents led to Everette’s termination from C-Aire.
The first incident occurred when Everette presented Folk with a proposed order for approximately 100 Chinese pumps. Everette proposed billing 30 pumps from the order directly to DE Parts so that he could in turn sell them, cutting C-Aire out of the arrangement. After Folk objected and told Everette that he was violating their agreement, Everette changed the order so that the entire order went through C‑Aire.
The second incident occurred when Folk found an invoice order dated March 14, 2006, from Steve’s Wholesale Distributors, Inc., in Oklahoma City that had been sent to C-Aire and DE Parts. Folk assumed that Everette would fill the order in the manner that they had agreed to, i.e., purchasing C-Aire’s inventory and then selling to Steve’s Wholesale Distributors. Instead, Everette filled the order through DE Parts, using parts from a warehouse in Atlanta where, unbeknownst to Folk, Everette was also storing parts. When Folk confronted Everette about the transaction, Everette said that he had shipped pumps from Atlanta because it was less expensive.
The third incident occurred when Everette quoted prices on Italian and Chinese pumps for Air Supply Company, a customer of C‑Aire’s for 3-4 years. Some of the prices quoted were for pumps that were stocked only by C-Aire, and some were stocked by both C-Aire and DE Parts. Air Supply ultimately decided to order a type of pump that both C-Aire and DE Parts stocked. Everette wrote up an order, using DE Parts to sell the pumps. When confronted by Folk, Everette incorrectly claimed that Air Supply was a preexisting customer of DE Parts.
Folk discharged Everette on March 31, 2006, based on his lack of trustworthiness in directly competing against C-Aire. Everette sought unemployment benefits through the Minnesota Department of Employment and Economic Development, which initially found Everette to be eligible. C-Aire appealed to the ULJ, who reversed the decision, based on a determination of employment misconduct. After reconsideration, the ULJ affirmed her decision. This appeal follows.
When reviewing a ULJ decision,
[t]he Minnesota Court of Appeals may affirm the decision of the unemployment law judge or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioner may have been prejudiced because the findings, inferences, conclusion, or decision are:
(1) in violation of constitutional provisions;
(2) in excess of the statutory authority or jurisdiction of the department;
(3) made upon unlawful procedure;
(4) affected by other error of law;
(5) unsupported by substantial evidence in view of the entire record as submitted; or
(6) arbitrary or capricious.
Minn. Stat. § 268.105, subd. 7(d) (2006).
Employment-misconduct cases present mixed questions of fact and law. Schmidgall v. FilmTec Corp., 644 N.W.2d 801, 804 (Minn. 2002). Whether the employee committed a particular act is a question of fact. Skarhus v. Davanni’s Inc., 721 N.W.2d 340, 344 (Minn. App. 2006). Whether the employee’s act constitutes disqualifying misconduct is a question of law, which this court reviews de novo. Schmidgall, 644 N.W.2d at 804; Wichmann v. Travalia & U.S. Directives, Inc., 729 N.W.2d 23, 27 (Minn. App. 2007).
Findings of fact are viewed in the light most favorable to the ULJ’s decision, and upheld if supported by substantial evidence. Minn. Stat. § 268.105, subd. 7(d)(5); Skarhus, 721 N.W.2d at 344. Substantial evidence means: (1) “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion; (2) more than a scintilla of evidence; (3) more than some evidence; (4) more than any evidence; and (5) evidence considered in its entirety.” Cable Commc’ns Bd. v. Nor-West Cable Commc’ns P’ship, 356 N.W.2d 658, 668 (Minn. 1984).
“Employment misconduct” means
any intentional, negligent, or indifferent conduct, on the job or off the job (1) that displays clearly a serious violation of the standards of behavior the employer has the right to reasonably expect of the employee, or (2) that displays clearly a substantial lack of concern for the employment.
Inefficiency, inadvertence, simple unsatisfactory conduct, a single incident that does not have a significant adverse impact on the employer, conduct an average reasonable employee would have engaged in under the circumstances, poor performance because of inability or incapacity, good faith errors in judgment if judgment was required, or absence because of illness or injury with proper notice to the employer, are not employment misconduct.
Minn. Stat. § 268.095, subd. 6(a) (Supp. 2005).
The ULJ determined that Everette’s conduct in continuing to warehouse pumps at locations other than C-Aire’s warehouse and in selling Chinese pumps to other than preexisting DE Parts customers without C-Aire’s express permission constituted direct competition and a conflict of interest of the duty that Everette owed to C-Aire. The ULJ’s factual findings have substantial support in the record.
Everette contends that their agreement did not give C-Aire exclusive warehousing rights. The only other evidence regarding exclusivity apart from the parties’ testimony is Everette’s written proposal for the agreement. It states, “George [Folk], in a nutshell, you buy at approximately my cost . . .and warehouse the product. I will buy my pumps for  DE Parts . . . from you.” Everette argues that this language is ambiguous. But the ULJ found Folk’s testimony to be credible, and this court defers to the ULJ’s determinations of credibility. Skarhus, 721 N.W.2d at 344.
In addition, the ULJ’s finding that Air Supply was not Everette’s preexisting customer is supported by substantial evidence. Richard Gates, Air Supply’s president, stated in writing that he had never purchased pumps from DE Parts. And Folk testified that Gates told him that Gates did not know who Everette was until Everette contacted him as an employee of C-Aire.
Generally, misconduct occurs when an employee creates a conflict of interest with his or her employer. Green Tree Acceptance, Inc. v. Reed, 348 N.W.2d 387, 387 (Minn. App. 1984); see also Rehab. Specialists, Inc. v. Koering, 404 N.W.2d 301, 303-05 (Minn. App. 1987) (holding that, when employee’s job includes soliciting business and negotiating contracts for her employer, fact issue exists as to whether employee breached her duty of loyalty by soliciting businesses that were formerly in contract with her employer for her own new business).
In addition, the ULJ found that Everette was not truthful when he told Folk that Air Supply was his former customer. “Dishonesty that is connected with employment may constitute misconduct.” Baron v. Lens Crafters, Inc., 514 N.W.2d 305, 307-08 (Minn. App. 1994). Based on this record, we conclude that the ULJ did not err in its determination that Everette’s conduct constituted misconduct.