MARVIN J. GARBIS, District Judge.
The Court has before it:
and the materials submitted relating thereto. The Court has held a hearing and has had the benefit of the arguments of counsel.
At all times relevant hereto, Plaintiff Structural Preservation Systems, LLC ("SPS"), based in Hanover, Maryland, has been a specialty contractor providing construction and engineering services. In 2006 and 2007, SPS entered into employment contracts with Defendants Sean Turner ("Turner"), Benjamin Ball ("Ball"), and James Andrews ("Andrews") (collectively, the "Defendants"), each of whom is presently a resident of California.
Following SPS's termination of the Defendants' employment, the Defendants engaged in a business venture and other post-SPS employment activities. SPS claims that in the course of so doing, the Defendants violated their respective employment agreements and the Maryland Uniform Trade Secrets Act ("MUTSA"). In particular, SPS alleges — among other things — that the Defendants have wrongfully used and continue to use SPS's financial data, pricing and bidding information, marketing and sales information, and other trade secret or confidential business information.
The Complaint presents claims in five Counts, one of which
By the instant motions, each Defendant seeks dismissal of the Complaint against him for lack of personal jurisdiction and/or improper venue under Federal Rules of Civil Procedure 12(b)(2) and (3) or, alternatively, transfer to the Central District of California under 28 U.S.C. § 1404(a). In addition, Andrews seeks dismissal of all claims pending against him pursuant to Federal Rule of Civil Procedure 12(b)(6).
A defendant may move for dismissal on the basis of a lack of personal jurisdiction and/or improper venue pursuant to Rule 12(b)(2) and (3).
In the Fourth Circuit, a motion to dismiss based on a forum-selection clause is generally treated as a motion under Rule 12(b)(3) to dismiss on the basis of improper venue rather than under Rule 12(b)(2) as a motion to dismiss for lack of personal jurisdiction. See e.g., CoStar Realty Info., Inc. v. Meissner, 604 F.Supp.2d 757, 763 (D.Md.2009); Sucampo Pharm., Inc. v. Astellas Pharm., Inc., 471 F.3d 544, 549-50 (4th Cir.2006); Silo Point II, LLC v. Suffolk Constr. Co., 578 F.Supp.2d 807, 809 (D.Md.2008). Yet, a valid forum-selection clause is capable of conferring personal jurisdiction upon a defendant under principles of consent and waiver. See CoStar, 604 F.Supp.2d at 763 ("A forum selection clause can be a consent to personal jurisdiction, or at least a waiver of any objection, when invoked by the plaintiff."); Corrosion Tech. Int'l, LLC v. Anticorrosive Indus. Ltda., 1:10-CV-915 AJT/TCB, 2011 WL 3664575, at *3 (E.D.Va. Aug. 19, 2011); Allstate Ins. Co. v. Cherry, CIV.A. ELH-11-2898, 2012 WL 1425158, at *9 n. 10 (D.Md. Apr. 23, 2012) ("To be sure, matters concerning forum selection clauses are resolved as an issue of venue, under Rule 12(b)(3), rather than personal jurisdiction, under Rule 12(b)(2). Nevertheless, I find Offshore persuasive, because forum selection clauses permit parties to an agreement, in essence, to contract around principles of personal jurisdiction by consenting to resolve their disputes in specified tribunals."). Under either Rule 12(b)(2) or (3), the court is permitted to consider evidence outside the pleadings in resolving the motion. Silo, 578 F.Supp.2d at 809; CoStar, 604 F.Supp.2d at 763.
A motion to dismiss filed pursuant to Rule 12(b)(6) tests the legal sufficiency of a complaint. A complaint need only contain "a short and plain statement of the claim showing that the pleader is entitled
Inquiry into whether a complaint states a plausible claim is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. Thus, if the well-pleaded facts contained within a complaint "do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not shown — that the pleader is entitled to relief." Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)) (internal quotation marks omitted).
SPS maintains that this Court has personal jurisdiction over each Defendant and venue is proper by virtue of the forum-selection clauses included in their respective employment agreements and thus dismissal under Rule 12(b)(2) or (3) is improper.
On March 15, 2006, Ball — then a resident of Maryland — entered into an employment agreement with "Structural Group, Inc." and "all of its subsidiaries and affiliates." Ball's employment agreement contains the following forum-selection clause:
Ball's Employment Agreement ¶ 13.
Ball contends that SPS cannot enforce the forum-selection clause or employment agreement against him because SPS is not a subsidiary or affiliate of Structural Group, Inc. ("Structural Group"). However, it is undisputed that:
Black's Law Dictionary defines the term "affiliate" to include a "corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent, or sibling corporation" and a "subsidiary" as a corporation "in which a parent corporation has a controlling share." Black's Law Dictionary (9th ed. 2009). Here, Structural Group is the (more than) 90% owner of SGI, the entity that wholly owns SPS, as well as the general manager of SPS. Thus, the Court finds the relationship sufficient to constitute SPS a subsidiary and/or affiliate of
Accordingly, the Court finds that SPS has standing to enforce the forum-selection clause against Ball.
The forum selection clause in Ball's employment agreement is a "permissive one" in that it does not require that suit be brought in Maryland. However, the "merely permissive" nature of the clause does not provide a ground for dismissal of the case against Ball on personal jurisdictional or venue grounds. See S & D Coffee, Inc. v. GEI Autowrappers, 995 F.Supp. 607, 609 (M.D.N.C.1997) (explaining that permissive forum-selection clauses are sometimes referred to as "consent to jurisdiction" clauses because such clauses specify one court empowered to hear the litigation which, in effect, waives any objection to personal jurisdiction or venue in that jurisdiction); CoStar Realty Info., Inc. v. Meissner, 604 F.Supp.2d 757, 772 (D.Md.2009) (explaining that the "phrase `irrevocably consents' clearly expresses the Defendants' consent to suit in Maryland").
Ball contends that the forum-selection clause should be set aside because its enforcement would be unreasonable. He relies on the fact that he was only 21-years-old when he signed the agreement and the allegation that he could not afford to defend the case if it were to proceed in Maryland. Ball does not, however, show that he could afford to defend this case in California but that the additional cost of proceeding in a Maryland court would deprive him of that ability.
Under Maryland law,
The Court does not find the fact that Ball was a 21-year-old when he signed the employment agreement indicative of "overreaching." Indeed, at the time the agreement was entered into, Ball was a Maryland resident. He has not made the "strong showing" necessary to set aside the forum-selection clause on "overreaching" grounds.
Generally, the "increased expense of litigating outside the defendant's home state does not affect the validity of the forum selection clause." LTVN Holdings LLC v. Odeh, CIV. A. CCB-09-0789, 2009 WL 3736526, at *2 (D.Md. Nov. 5, 2009); CoStar, 604 F.Supp.2d at 765 ("Mere allegations
In regard to pretrial proceedings, particularly including discovery, there need be no substantial increase in the cost to the Defendants by virtue of the pendency of the case in this District. The Court will neither require the Defendants to appear at depositions in Maryland, to provide discovery documents in Maryland, or to appear in court prior to trial.
To the extent that Defendants choose to be represented by Maryland-based attorneys in depositions in California, they would incur additional travel expenses for counsel. Of course, if the case were transferred to California so that Defendants retained counsel from that State and not Maryland, they would incur the expense of getting the California attorneys to depositions held in Maryland and other eastern locations.
The Court does not find the asserted extra cost to a defendant of having the case pending in Maryland sufficient to warrant a refusal to enforce the choice of forum provision contained in the employment agreement.
Defendant Turner entered into an employment agreement with SPS on November 26, 2007, which contains a forum-selection clause identical to the forum-selection clause included in Ball's employment agreement.
As discussed above, the fact that the forums selection clause is "merely permissive" does not provide a basis for dismissal. Moreover, for the same reasons discussed as to Ball, the Court does not find that the asserted increased cost of litigation in California warrants dismissal of the instant case.
Turner asserts an "overreaching" contention that, as discussed at the hearing on the instant motions, presents substantial factual issues. Accordingly, the Court finds it necessary to conduct an evidentiary hearing to resolve the factual disputes surrounding Turner's claim of overreaching by SPS. See generally Bay Tobacco, LLC v. Bell Quality Tobacco Prod., LLC, 261 F.Supp.2d 483, 492 (E.D.Va.
Defendant Andrews entered into an employment agreement with SPS on April 1, 2007,
The employment agreement provides:
Andrews' Employment Agreement ¶ 10.
The asset purchase agreement provides:
Asset Purchase Agreement ¶ 5.7.
For jurisdictional purposes, it is immaterial whether the instant case is subject to the employment agreement or the asset purchase agreement choice of forum provision. Both are mandatory, providing exclusive jurisdiction in Maryland courts subject to SPS's right to seek injunctive relief in any court of competent jurisdiction. IntraComm, Inc. v. Bajaj, 492 F.3d 285, 290 (4th Cir.2007) (internal quotations omitted); Koch v. Am. Online, Inc., 139 F.Supp.2d 690, 692-93 (D.Md.2000) (explaining a forum-selection clause is considered mandatory if it contains "clear language showing that jurisdiction is appropriate only in the designated forum") (internal quotations omitted).
Moreover, even if the clauses were deemed to be "merely permissive," they would nevertheless provide consent to personal jurisdiction in Maryland. Therefore, the claims against Andrews shall not be dismissed pursuant to Rule 12(b)(2) and/or (3).
All Defendants seek to have the Court transfer the instant action to the Central District of California pursuant to 28 U.S.C. § 1404(a).
Section 1404(a) provides that for "the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Certainly, a transfer under § 1404(a) is not precluded by the existence of a forum-selection clause. See Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29-31, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). However, a plaintiff's choice of forum is "a paramount consideration" that "should not be lightly disturbed." Datasouth Computer Corp. v. Three Dimensional Techs., Inc., 719 F.Supp. 446, 451 (W.D.N.C.1989) (quoting Western Steer-Mom `N' Pop's, Inc. v. FMT Invs., Inc., 578 F.Supp. 260, 265 (W.D.N.C.1984)); see also Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981).
A district court is vested with great discretion in determining whether to grant a transfer under § 1404. See Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 34, 118 S.Ct. 956, 140 L.Ed.2d 62 (1998); Southern Ry. Co. v. Madden, 235 F.2d 198, 201 (4th Cir. 1956). The burden lies with the defendant to show that a transfer is in the interests of justice. Stratagene v. Parsons Behle & Latimer, 315 F.Supp.2d 765, 771 (D.Md. 2004). As the Fourth Circuit has stated, "a district court is required to weigh the factors involved and `[u]nless the balance is strongly in favor of the defendant, the plaintiff's choice of forum should rarely be disturbed." Collins v. Straight, Inc., 748 F.2d 916, 921 (4th Cir.1984) (quoting Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055 (1947)).
The factors to be considered in determining if defendants have presented grounds that outweigh the weight accorded a plaintiff's choice of venue include witness convenience and access, convenience of the parties, and the interest of justice. See Lynch v. Vanderhoef Builders, 237 F.Supp.2d 615, 617 (D.Md.2002).
As discussed above, in regard to pretrial proceedings, so long as the Defendants are not required to appear for depositions in Maryland, the only substantial additional cost to Defendants by virtue of the pendency of the case in Maryland would be incurred where they choose to have Maryland attorneys travel to California for depositions and/or other related matters.
The Court will accept that the Defendants will find it more convenient to proceed to trial in California and SPS will find it more convenient to proceed in Maryland. However, even if the Defendants would suffer more inconvenience, they have not shown that any relative inconvenience warrants a transfer at the present stage of the case.
It is not now possible, despite (or, perhaps better said, because of) the Parties' respective conflicting predictions, to determine with reasonable certainty which issues will be tried and who will be trial witnesses. Hence, it is not now possible to determine the effect of the trial subpoena range of the two Districts with regard to non-party witnesses.
The Court finds the statement of Judge Swygert in Bohnen v. Baltimore & O.C.T.R. Co., 125 F.Supp. 463, 464 (N.D.Ind.1954) apt where, as here, there is no determinative difference for venue purposes in regard to pretrial proceedings. As he said, more than a half century ago:
(footnote in original).
The Court will deny the motions seeking transfer pursuant to 28 U.S.C. § 1404(a) without prejudice to reconsideration in light of the circumstances existing when and if trial is necessary.
Andrews contends that all remaining
Andrews contends Count I should be dismissed as redundant or duplicative of Count II (Violation of MUTSA).
The "Confidentiality Provisions" in Andrews' employment agreement provide that Andrews:
Andrews' Employment Agreement ¶ 7(a)(1).
Andrews' employment agreement defines "Trade Secrets or Confidential or Proprietary Information" to include information that would be considered a "trade secret" within the meaning of MUTSA as well as information that is "unique to [SPS] which has a significant business purpose and is not known or generally available from sources outside [SPS] or typical of industry practice" or "the disclosure of which would have a material adverse effect on the business of [SPS]." Id. ¶ 7(c)(4); Md. Code Ann., Com. Law § 11-1201(e). The employment agreement defines "Misappropriation" in substantively the same manner as MUTSA. Compare Andrews' Employment Agreement ¶ 7(c)(2), with Md. Code Ann., Com. Law § 11-1201(c).
As the employment agreement's definition of "Trade Secrets or Confidential or Proprietary Information" makes clear, the Confidentiality Provisions are broader and afford greater rights to SPS than those provided under MUTSA. Thus, Count I as pleaded is not redundant of Count II.
Andrews contends that the Confidentiality Provisions are unenforceable as an unreasonable restraint on trade or a back-door non-compete clause to the extent such
The Parties dispute whether Maryland or California law controls.
As stated in Republican Party of N. Carolina v. Martin, 980 F.2d 943, 952 (4th Cir.1992), "[a] motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.".
The Court will not dismiss the claims in Count I as redundant or duplicative of Count II. However, as discussed infra, the factual allegations supporting Count I, which are identical to those supporting Count II, lack clarity and are insufficient to state a plausible claim for relief. Hence, the Court shall dismiss Count I for failure to state a claim.
In Count II, SPS alleges that the Defendants have misappropriated SPS's "pricing structure, pricing knowledge and research, and established customer relationships to directly compete with SPS and to usurp SPS's business opportunities and relationships in violation of the MUTSA."
Andrews asserts Count II should be dismissed because the Complaint does not allege facts sufficient to state a plausible claim that the listed items are protectable as "trade secrets" under MUTSA.
The MUTSA defines a trade secret as:
Md. Code Ann., Com. Law § 11-1201(e).
"The existence of a trade secret is a conclusion of law based upon the applicable facts." Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 661 (4th Cir. 1993). The Restatement of Torts sets forth six factors relevant to determining whether given information constitutes a trade secret:
Id. (quoting Restatement (First) of Torts § 757 cmt. b.). Maryland courts consider the restatement factors to provide "helpful guidance to determine whether the information in a given case constitutes `trade secrets' within the definition of [MUTSA]." Optic Graphics, Inc. v. Agee, 87 Md.App. 770, 591 A.2d 578, 585 (1991) (holding that pricing information and market strategies did not meet the statutory definition of a trade secret where the pricing information had no "economic value" to a competitor because it was composed of so many variables, generally subject to change, and specific to the plaintiff company and the marketing strategies were readily available to the marketplace).
The Court finds that the Complaint lacks sufficient factual allegations and clarity to present a plausible claim that the information relied upon is protectable as a "trade secret" under the MUTSA. For example, it is unclear what the term "established customer relationships" means and how such "relationships" are plausibly construed as a trade secret. If SPS is referring to customer lists, it must say so with specificity and consistency. See NaturaLawn of Am., Inc. v. W. Grp., LLC, 484 F.Supp.2d 392, 399 (D.Md.2007) (finding "customer lists" of national franchisor of organic based lawn care services to be trade secrets where customers were not widely known outside company and customer lists were carefully guarded).
The Complaint does not allege facts upon which a reasonable inference can be drawn that the claimed "trade secrets" hold independent economic value because such information is not generally known to or readily ascertainable by others in the relevant business. Further, the Complaint does not allege what "trade secret(s)" it is that Andrews (or any particular Defendant for that matter) misappropriated.
Accordingly, all claims in Count II shall be dismissed.
The "Non-Disparagement Provision" of Andrews' employment agreement provides that, for two years following the date Andrews ceases to be an employee of SPS, Andrews:
Andrews' Employment Agreement ¶ 7(b)(5).
Andrews contends that the Complaint does not include factual allegations that "Andrews disparaged [SPS] to any customer, or what, when, where, and most importantly, to whom Andrews made any alleged actionable disparaging statement." Andrews' Mem. [Document 28-1], at 18. The Court must agree.
In the Complaint, SPS alleges that Andrews made
Compl. ¶ 32. However, SPS does not allege the particular nature of the remarks or to whom or when such remarks were made.
Accordingly, the Court shall dismiss the claims in Count IV due to the failure to allege facts sufficient to present a plausible claim.
In Count V of the Complaint SPS requests a declaratory judgment that Section 12 of Andrews' employment agreement entitles it to set off any damages incurred by SPS as a result of Andrews' breach of the Non-Disparagement Provision against any amount of severance owed to Andrews by SPS.
SPS concedes that Andrews is entitled to a severance payment but seeks to satisfy its obligation by virtue of its setoff rights under Section 12 of Andrews' employment agreement. This section provides:
28 U.S.C. § 2201 authorizes federal courts to afford the remedy of declaratory judgment, and provides in pertinent part that "any court of the United States ... may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." Courts consider the following in determining whether to grant declaratory relief: "(1) the complaint must allege an actual controversy between the parties of sufficient immediacy and reality to warrant issuance of a
"For a declaratory judgment to issue, there must be a dispute which calls, not for an advisory opinion upon a hypothetical basis, but for an adjudication of present right upon established facts." Ashcroft v. Mattis, 431 U.S. 171, 172, 97 S.Ct. 1739, 52 L.Ed.2d 219 (1977) (internal quotations omitted).
As matters now stand, by virtue of the dismissal of the disparagement claims in Count IV, SPS has not adequately pleaded a dispute calling for an adjudication of present rights. That is, without a pending disparagement claim, the "set-off" claim is purely hypothetical.
Inasmuch as SPS shall be given leave to file an Amended Complaint, it may seek to present a viable disparagement claim rendering the "set-off" claim adequately "real" for declaratory judgment. If so, the Court will address any issues that may be raised, including those relating to the effect of the now pending related state court proceeding.
Thus, the Court will dismiss Count V.
SPS moves to strike portions of Andrews' Motion to Dismiss and the Declaration of James L. Andrews attached thereto to the extent such documents contain inadmissible hearsay and/or allegations of facts of which Andrews does not have first-hand knowledge.
The Court has not relied upon any of the matters in Andrews' Declaration that are subject to the Motion to Strike. However, the Court does not foreclose Defendants Andrews and Ball from seeking relief, including a transfer of venue, should the Court dismiss (or transfer) all claims against Defendant Turner. Accordingly, the Motion to Strike shall be denied.
For the foregoing reasons: