MARIANNE O. BATTANI, District Judge.
Before the Court is Defendants' Motion for Summary Judgment. Plaintiffs filed the instant action alleging Defendants misappropriated trade secrets and intentionally interfered with their contractual and business relationships in an effort to establish a competing company. The Court heard oral argument on the motion on June 16, 2014, and at the conclusion of the hearing, took the matter under advisement. For the reasons stated below, Defendants' motion is
Plaintiff Ajuba International, L.L.C. ("Ajuba Int'l") is a Michigan limited liability company having its principal place of business in Jackson, Michigan. Plaintiff Ajuba Solutions (India) Private, Ltd. ("Ajuba India") is an Indian corporation having its principal place of business in Chennai, India. Plaintiff MiraMed Global Services, Inc. ("MiraMed") is a Michigan corporation having its principal place of business in Jackson, Michigan. MiraMed wholly owns Ajuba Int'l. Ajuba Int'l wholly owns non-party Ajuba Solutions Mauritius Ltd., which in turn wholly owns Ajuba India. The above Plaintiff companies are collectively referred to as "Ajuba." Hamid Mirafzali, aka "Tony Mira," is the chairman and CEO of the Ajuba group of companies.
Ajuba is in the business of providing revenue cycle outsourcing to medical centers, hospitals, and healthcare systems. Companies in this industry enter data into third-party billing applications to generate and send bills to patients and insurance companies and also provide bill collection services. The industry is highly uniform, with many companies performing services for the same customers.
Defendant Devendra Kumar Saharia, a former Michigan resident, is a citizen and current resident of India who co-founded Ajuba and served as its president from 2005 to 2011. Defendant Adroit Global Solutions India Private Ltd. ("AGS India") is a corporation organized under the laws of India, with its principal place of business in India. Defendant Adroit Global Solutions, Inc. ("AGS U.S.") is a Delaware corporation that has no operations, assets or place of business. Defendant AGS Health, Inc. ("AGS Health") is a Delaware corporation, with its principal place of business in New York. The above Defendant companies are owned by Saharia and are collectively referred to as "AGS."
In 2000, Saharia co-founded Ajuba Int'l's predecessor company with Tony Mira. In July 2005, Saharia sold his ownership stake in that company to MiraMed. However, MiraMed refused to purchase Saharia's stake unless he signed a non-compete agreement with Ajuba Int'l. On July 8, 2005, Saharia signed an Employment Agreement ("2005 Employment Agreement") with Ajuba Int'l and Ajuba India, which contained a noncompetition provision and named him as president of both companies. (Doc. 202, Ex. 25). He also signed a separate Noncompetition Agreement ("2005 Noncompetition Agreement") with Ajuba Int'l. (Doc. 222, Ex. 30). The Employment Agreement expired by its own terms on July 7, 2008. Shortly thereafter, Saharia signed a new Employment Agreement ("2008 Employment Agreement") with Ajuba India. (Doc. 202, Ex. 26). This agreement does not contain a non-compete provision.
On February 18, 2011, Maya Mohan, Ajuba's Director of Operations, resigned. On February 23, 2011, Shankar Narasimhan, Ajuba's Director of Finance and Human Resources, resigned. The next day, Saharia submitted his formal resignation to Ajuba, but continued working until March 31, 2011. Around the same time, Saharia and several other employees negotiated the purchase of their company laptops from Ajuba.
On April 6, 2011, Saharia purchased AGS and hired Mohan and Narasimhan. In May 2011, AGS began working with customers and eventually signed McKesson, one of Ajuba's former clients. AGS also hired several former Ajuba employees.
On July 7, 2011, Plaintiffs filed a ten-count complaint against Defendants. A lawsuit was also filed in India. On October 17, 2011, Plaintiffs filed an amended complaint alleging: (1) breach of fiduciary duties; (2) aiding and abetting breach of fiduciary duties; (3) breach of noncompetition agreement; (4) breach of employment agreement; (5) tortious inference; (6) misappropriation of trade secrets; (7) violation of federal Computer Fraud and Abuse Act ("CFAA"); (8) fraud; (9) silent fraud; (10) unjust enrichment; and (11) civil conspiracy. Defendants filed a motion to dismiss for lack of personal jurisdiction, lack of subject matter jurisdiction, failure to state a claim, and several other arguments. The Court granted-in-part and denied-in-part the motion, dismissing the federal CFAA count but retaining jurisdiction over the remaining claims under 28 U.S.C. § 1332(a)(3). Defendants now seek summary judgment on all counts, or alternatively, an order listing the facts not in dispute under Fed. R. Civ. P. 56(g).
Summary judgment is appropriate only when there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law."
The moving party bears the initial burden of showing the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. Once the moving party meets this burden, the non-movant must come forward with specific facts supported by affidavits or other appropriate evidence establishing a genuine issue for trial.
In addition, as the Court is exercising diversity jurisdiction over the subject matter of this action, Michigan law applies.
In the Amended Complaint, Plaintiffs allege that Saharia breached his fiduciary duties to Ajuba in three general ways: (1) allowing Ajuba's contract with McKesson to expire so he could move the business to AGS; (2) soliciting several of Ajuba's top management and employees to work for AGS during his term as president; and (3) damaging Ajuba's relationship with its longstanding customer, MedData. In addition, Plaintiffs assert that Defendants are liable for aiding and abetting Saharia's breach of fiduciary duties by assisting and participating in Saharia's plan to set up AGS at the expense of Ajuba. In contrast, Defendants assert that Saharia only took actions to prepare for competition and that any transfer of employees or customers to AGS occurred after Saharia left Ajuba.
Corporate directors and officers "have unique obligations to further the interests of the corporation generally and its owners specifically."
Plaintiffs allege that during the initial stages of Saharia's plan to start AGS, Ajuba's business with one of its customers, MedData, substantially declined. This allegation is supported by the declaration of Ann Barnes, Chief Executive Officer of MedData. In late 2010, Barnes noticed a decrease in the quality of Ajuba's services, specifically, a lack of responsiveness from Ajuba employees Jim Phillips and Maya Mohan. (Doc. 222, Ex. 47, ¶ 3). In February 2011, Barnes traveled to Ajuba India and met with Saharia and Mohan. (
At the later meeting, Mohan informed Barnes that Mohan and Phillips were leaving Ajuba to join a new company. (
It is undisputed that, as president, Saharia was required to act in the best interests of Ajuba. Although Defendants are correct that "preparing to compete is qualitatively different than actually competing with one's present employer and will not, by itself, support a breach of loyalty claim,"
In addition, Plaintiffs assert AGS is liable for aiding and abetting Saharia's breach of fiduciary duties. This requires Plaintiffs to demonstrate: "(1) a breach of fiduciary duty by a person; (2) knowledge by the defendant of the other person's breach of fiduciary duty; (3) substantial assistance or encouragement by the defendant to the person breaching the fiduciary duty; and (4) resulting harm."
Next, Plaintiffs assert breach of contract against Saharia under the nondisparagement and confidentiality provisions of the 2005 Noncompetition Agreement and the 2008 Employment Agreement. At oral argument, Plaintiffs abandoned their claim for breach of the non-disparagement provisions of the agreements. Specifically, Plaintiffs claim that Defendants purchased their laptops from Ajuba knowing they contained confidential information and trade secrets, which furthered AGS's ability to become "production ready" so quickly.
Under Michigan law, the elements of a breach of contract claim are (1) the existence of a valid contract, (2) the terms of the contract, (3) that defendant breached the contract, and (4) that the breach caused the plaintiff injury.
The parties do not dispute that both agreements contain confidentiality provisions that prohibit use or disclose of such information without the consent of Ajuba. (Doc. 222, Ex. 30, p. 3; Ex. 31, p. 5). In support of breach, Plaintiffs provided evidence that the laptop of Stephanie Gregory, an Ajuba employee that moved to AGS, contained files with confidential information that were accessed after Gregory left Ajuba. The expert report submitted by Plaintiffs indicates that several files containing Ajuba information were accessed after April 1, 2011, Gregory's last day at Ajuba. (Doc. 222, Ex. 19, p. 19-20).
In her deposition, Gregory stated that she accessed her laptop once after she left Ajuba to retrieve her personal files. (Doc. 222, Ex. 20, p. 117). She stated that she did not purchase the laptop, and that someone was supposed to come pick it up. (
Assuming that both the 2005 Noncompetition Agreement and the 2008 Employment Agreement are valid only for purposes of this motion, a reasonable jury could not find that Saharia breached the confidentiality provisions in either agreement. Essentially, Plaintiffs suggest that Saharia committed a breach because Gregory accessed her laptop a few days after she left Ajuba. But, Gregory is not a party to this action and there is no evidence that Saharia conspired with or directed Gregory to access and disclose confidential information on her laptop for the benefit of AGS. In fact, Gregory testified that she did not even want to purchase the laptop and that she had no reason to access any of the confidential files post-employment.
In addition, there is no evidence that Saharia personally accessed information on any laptops for use in forming AGS. Ajuba's failure to wipe its company laptops before selling them to future AGS employees is insufficient to establish a breach of the confidentiality agreements between Ajuba and Saharia. Thus, the Court declines to impute a breach by Saharia through the conduct of Gregory, a third-party, based purely on a scintilla of circumstantial evidence. Summary judgment will be granted in favor of Saharia on Counts III and IV.
Next, Plaintiffs claim that Defendants sabotaged Ajuba's business relationships with MedData and McKesson. Plaintiffs also claim Defendants interfered with the protectable business relationships of their employees. Defendants assert that these claims fail because no contracts were breached and normal competition is privileged. Defendants' arguments are unpersuasive.
Under Michigan law, "tortious interference with a contract or contractual relations is a cause of action distinct from tortious interference with a business relationship or expectancy."
Plaintiffs' claims are more properly construed as tortious interference with a business relationship or expectancy, as it is undisputed that no contracts were breached with any customers and the employees served in "at-will" capacities without the benefit of employment contracts. Defendants do not dispute that Ajuba had valid business relationships with its customers. They do, however, argue that Ajuba did not have valid business relationships with its employees. But, Defendants' assertion that "there can be no claim of tortious interference with a contract with respect to at-will employees" is misplaced. Michigan courts clearly recognize that such a claim is actionable.
As previously stated, the declaration of Ann Barnes creates at least one genuine dispute of fact regarding whether Saharia and Mohan wrongfully solicited business on behalf of AGS. The same evidence provides a basis upon which a reasonable jury could determine that Defendants intentionally interfered with Ajuba's business relationship with MedData. Therefore, summary judgment is inappropriate on Count V.
Count VI of Plaintiffs' complaint asserts a claim of misappropriation of trade secrets against all Defendants. The Michigan Uniform Trade Secrets Act ("MUTSA") defines "trade secret" accordingly:
Mich. Comp. Laws § 445.1902. In determining whether information constitutes a trade secret, courts look to several factors:
A person is liable under the Act if they misappropriate a trade secret. This means
Mich. Comp. Laws § 445.1902.
Plaintiffs claim Defendants misappropriated (1) proprietary training programs; (2) confidential information regarding Ajuba's revenue cycle management services; (3) proprietary software and automation tools; (4) confidential personnel information; and
(5) client relationship information. Plaintiffs argue that it developed most of this information and that it is not generally known to the public. In addition, Plaintiffs assert that the information has independent economic value and that it took reasonable steps to protect the information.
In contrast, Defendants argue that Plaintiffs failed to establish the existence of any trade secrets, instead relying on generic terms and overly broad references. In addition, Defendants assert that there is no evidence of misappropriation. After review, the Court agrees and finds that Plaintiffs (1) failed to meet their burden to specifically identify at least one trade secret upon which they could recover for misappropriation, and (2) failed to produce any evidence of misappropriation. See Dura Global, 662 F. Supp. 2d at 859 (noting that the plaintiff in a trade secret case bears the burden of proving the specific nature of the trade secrets).
Generally, "trade secret law does not protect `an idea which is well known or easily ascertainable.'"
Defendants submitted a declaration from P.K. Prasad, Company Secretary and Associate Director of Legal and Corporate Affairs for AGS, who described the revenue cycle outsourcing industry as highly standardized with uniform pricing, uniform contract terms, and uniform claims and coding processes. (Doc. 202, Ex. 1) Prasad asserts that no "unique trade secrets [are] required to run an offshore RCM company." (Id.) Much of the work is done on the client's billing systems in accordance with the client's instructions using standardized medical coding. (Doc. 202, Ex. 4, p. 222-24). Client lists are openly available given the high turnover rate of employees and gaining access to new clients is achievable through using professional networking sites. (Doc. 202, Ex. 1, p. 4). In addition, clients often have multiple vendors handle similar work for hedging reasons. (
With respect to employee training and human resource information, much of this information can be found in online portals. (
Defendants also rely on
Like Dice, Plaintiffs in this case failed to specifically identify any trade secrets and explain how such items are protectable under MUTSA. Plaintiffs' brief refers to generic descriptions such as "procedures" and "training programs" without explaining why the information provides them a competitive advantage in the revenue cycle outsourcing industry. Items such as "personnel and client information" and "instruction manuals" are identified as trade secrets. Information such as customer lists are not trade secrets where the information is readily ascertainable from other channels, as is the case here.
Similar to
In an attempt to save their MUTSA claim, Plaintiffs assert that their discovery responses to Defendants' interrogatories adequately describe the alleged trade secrets. (Doc. 222, Ex. 69, p. 5; Ex. 70, p. 5-11). However, he same general descriptions and conclusory allegations that are found in Plaintiffs' brief are also found in the responses and provide little help to the Court. Moreover, it is Plaintiffs' burden to present specific evidence of trade secrets supported by exhibits in the record. Referencing several pages of discovery responses without any supporting explanation or independent evidence is insufficient.
Consequently, Plaintiffs failed to demonstrate that any of the alleged trade secrets qualify as such under MUTSA. In addition, there is no evidence that Defendants misappropriated any trade secrets. Plaintiffs provided no direct evidence, instead relying on an argument that AGS must have used trade secrets to become "production ready" so quickly. This circumstantial evidence, alone, is insufficient, especially where Plaintiffs provided no evidence of the average amount of preproduction time and resources necessary to start a revenue cycle outsourcing company. Therefore, no genuine dispute of fact exists and summary judgment will be granted in favor of Defendants on Count VI.
In Counts VIII and IX, Plaintiffs allege that Saharia committed fraud by allegedly telling Mira that he was not going to compete with Ajuba upon his departure. Plaintiffs also assert that Saharia had a duty to disclose the expiration of the McKesson contract, concerns with the McKesson relationship, the corporate opportunity for the Per Se segment of McKesson, MedData's concerns with Ajuba's performance, Mohan's solicitation of MedData, and that he was moving several employees with him to AGS.
In order to demonstrate intentional misrepresentation, a plaintiff must show:
As President of Ajuba, Saharia had a duty to disclose information harmful to the company. However, an officer need not disclose "possible future competition."
Nonetheless, there is a genuine dispute of fact regarding whether Saharia failed to disclose Mohan's solicitation of MedData while Saharia was still the acting president of Ajuba. Although this may not rise to the level of fraud, Saharia had a duty to not divert business from Ajuba or undermine preexisting relationships with customers. This claim requires similar facts as Plaintiffs' breach of fiduciary duty claim and will be resolved by a jury. Thus, summary judgment is inappropriate on Counts VIII and IX.
The elements of unjust enrichment are "(1) receipt of a benefit by the defendant from the plaintiff and, (2) which benefit it is inequitable that the defendant retain."
The parties do not dispute that one of the contracts governs any breach of confidentiality. Because unjust enrichment is inapplicable where contract law governs, any alleged unjust enrichment on this theory is improper. Moreover, in their brief, Plaintiffs claim that Defendants have been unjustly enriched by Plaintiffs in "several ways" without citing a single instance independent of any contractual duty. Plaintiffs failed to fully develop their argument in their brief, and this is fatal to their claim. Therefore, Defendants are entitled to summary judgment on Count X.
"A civil conspiracy is a combination of two or more persons, by some concerted action, to accomplish a criminal or unlawful purpose, or to accomplish a lawful purpose by criminal or unlawful means."
As stated above, there is at least one genuine dispute of fact regarding Plaintiffs' claims of breach of fiduciary duties, tortious interference with business relationships, and fraud. In addition, a conspiracy between Saharia, Mohan, and Narasimhan to divert business and employees away from Ajuba could be supported by the transcript of the online chat session between Saharia and Narasimhan in which they discuss receiving information from Ajuba employees and modifying start dates for former Ajuba employees. See (Doc. 222, Ex. 52). Thus, the existence of such a conspiracy is a question of fact for the jury, and therefore Plaintiffs' civil conspiracy count survives.
Last, Defendants request the Court issue an order listing undisputed material facts. Fed. R. Civ. P. 56(g) provides that if a district court does not grant "all the relief requested" by a motion for summary judgment, the court may enter an order setting forth any material fact not in dispute. Whether such an order is appropriate is subject to the court's discretion. "The court may conclude that it is better to leave open for trial facts and issues that may be better illuminated by the trial. . . ." Fed. R. Civ. P. 56 advisory committee's notes (2010).
The Court declines to issue an order under Rule 56(g). The facts underlying Plaintiffs' claims are substantially interrelated and a vast majority are disputed. Thus, it is more appropriate for a jury make the factual determinations in this matter.
Accordingly, Defendants' motion is