MARCO A. HERNÁNDEZ, District Judge.
Defendants Amdocs Management Limited and Amdocs, Inc. move to dismiss Plaintiff Vesta Corporation's Third Amended Complaint. Defendants' motion is denied.
Plaintiff is an electronic payments solution and fraud prevention technology company. TAC Intro, ECF 222. Defendants are telephone billing software and services companies.
Over the years, the parties have shared many of the same customers because MNOs generally require both a payment solution and a billing platform to serve their end-users.
In the course of jointly collaborating on marketing and the possibility of acquisition, the parties shared detailed technical information with each other.
Given the proprietary nature of such information, the parties entered into a series of confidentiality and non-disclosure agreements (the "NDAs").
The first round of acquisition discussions took place in 2010.
In the spring of 2012, the parties again discussed the possibility of acquisition.
In July of 2013, Plaintiff learned that, during or shortly after the failed joint pitch to MetroPCS, Defendants sold MetroPCS an integrated payment solution and billing platform, thereby excluding Plaintiff from the sale.
Plaintiff further alleges that Defendants are actively marketing their "copycat payment solution" to other potential buyers.
Plaintiff also alleges that Defendants used the confidential information they learned from Plaintiff in order to underbid Plaintiff in a proposal to provide a single payment processing solution for all of T-Mobile's wireless services.
Plaintiff filed this action in state court in June of 2014 and Defendants removed the case to federal court on July 17, 2014. Notice of Removal, ECF 1. The original complaint brought claims of breach of contract, theft of trade secrets, and fraud. Compl., ECF 1-1. On January 13, 2015, this Court dismissed Plaintiff's fraud claim. Opinion & Order, Jan. 13, 2015, ECF 42.
On April 7, 2015, Plaintiff filed a First Amended Complaint (FAC), in which Plaintiff made several changes to the original complaint. FAC, ECF 52. Plaintiff omitted the fraud claim, added three antitrust claims, and made changes to the damages allegations.
On December 2, 2015, this Court granted Plaintiff leave to file an amended complaint to remove an inaccurate statement in the First Amended Complaint. Order, Dec. 2, 2015, ECF 146. In that order, the Court noted:
On December 9, 2015, Plaintiff filed a Second Amended Complaint (SAC) in which Plaintiff removed the inaccurate statement in ¶ 40 of the FAC and removed all of the antitrust claims. However, Plaintiff did not remove all of the factual allegations relating to the antitrust claims, which spurred Defendants to file a motion to strike allegations in the SAC. Mot. Strike, Dec. 21, 2015, ECF 159.
On December 29, 2015, the Court entered an order striking several paragraphs of the SAC because Plaintiff did not have leave of Court or consent of Defendants to convert its prior antitrust allegations into trade secret misappropriation allegations. Order, Dec. 29, 2015, ECF 162. Plaintiff was directed to file an amended complaint within 10 days that complied with the order and removed "factual allegations and claims that were included in Plaintiff's First Amended Complaint as part of Plaintiff's now-dismissed antitrust claims."
On April 1, 2014, the Court granted Plaintiff leave to amend to file a Third Amended Complaint (TAC). Plaintiff filed the TAC, which expands the allegations of damages to include lost profits and royalties stemming not only from the MetroPCS deal, but also Sprint and T-Mobile accounts. Defendants now move to dismiss the TAC to the extent it includes new allegations regarding Sprint, T-Mobile, and Vodafone.
Where a plaintiff's claims are founded upon separate transactions or occurrences, they are properly "stated in a separate count ... [because] a separation facilitates the clear presentation of the matters set forth."
"In such cases, separate counts permit pleadings to serve their intended purpose to frame the issue and provide the basis for informed pretrial proceedings."
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the claims.
A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the "grounds" of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]"
To survive a motion to dismiss, a complaint "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[,]" meaning "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."
Where the court lacks subject-matter jurisdiction, the action must be dismissed. Fed. R. Civ. P. 12(b)(1). A motion to compel arbitration is appropriately raised pursuant to Rule 12(b)(1).
Defendants argue that this Court should dismiss the TAC because (1) the TAC fails to comply with Federal Rule of Civil Procedure 10(b); (2) the TAC fails to state a claim for breach of contract or theft of trade secrets in connection with the parties' dealings with Sprint and T-Mobile; and (3) Plaintiff's allegations regarding Sprint, T-Mobile, and Vodafone are subject to arbitration. For the reasons that follow, Defendants' arguments are unavailing.
Before delving into the specifics of each of Defendants' arguments, the Court notes a fundamental difference between how Defendants and this Court characterize Plaintiff's TAC. Defendant contends that Plaintiff has added "new claims" related to Sprint, T-Mobile, and Vodafone. Defs.' Mot. Dismiss 6, ECF 236. The Court disagrees. While Plaintiff's complaints have evolved over the course of almost two years of litigation, the essential claims of breach of contract and theft of trade secrets have remained the same. When the case was filed in June of 2014, Plaintiff alleged that Defendants had obtained confidential solution methods and risk information over the course of acquisition discussions and collaborating on a joint pitch to MetroPCS, and then had used such information, in violation of the parties' NDAs, to secure the MetroPCS business without involving Plaintiff. The complaint pled damages as to the lost revenue on the MetroPCS account as well as "other damages . . . including lost revenue on other accounts." Compl. ¶¶ 70, 77, 86, 97, ECF 8.
During the course of litigation, the business dealings with Sprint and T-Mobile at issue in the present complaint developed. Now, Plaintiff adds allegations that Defendants used their knowledge of this confidential information to replace Plaintiff's provision of services to Sprint and to threaten Plaintiff's business with T-Mobile. Thus, Plaintiff contends that it has now suffered damages not only due to lost business with MetroPCS but also due to lost profits and royalties on the Sprint and T-Mobile accounts.
As this Court explained in its Opinion & Order granting Plaintiff leave to file the TAC, Plaintiff is now, for the first time, expressly seeking to include the Sprint and T-Mobile allegations as part of the breach of contract and theft of trade secrets claims. Opinion & Order, April 1, 2016, ECF 220. Plaintiff's additional allegations, however, are not "new claims." Instead, they expand the existing claims to encompass a wider range of behavior and, thus, potential damages.
Finally, Defendants assert that Plaintiff brings claims related to Vodafone.
Defendants ask the Court to dismiss the TAC pursuant to Federal Rule of Civil Procedure 10(b), which requires that "each claim founded on a separate transaction or occurrence . . . be stated in a separate count," if doing so would promote clarity. Defendants contend that Plaintiff's TAC adds two additional transactions—Defendants' development of a payment solution for Sprint and Defendants' pitch to T-Mobile—without stating each transaction in a separate count within the TAC's claims. Defendants contend that the allegations "just appear out of nowhere in the middle of the Third Amended Complaint, thereby failing to provide Amdocs with fair notice as to what it allegedly did wrong in connection with Sprint and T-Mobile." Defs.' Mot. 12.
The Court agrees with Plaintiff that Defendants "invent[] confusion where there is none." Pl.'s Opp. 18, ECF 241. The TAC sets out two claims—breach of contract and theft of trade secrets. The essential allegations in the TAC remain the same as in all of the previous iterations of the complaint—Plaintiff alleges that Defendants misappropriated its confidential and proprietary information, in "direct breach of the 2009 NDA and/or the 2012 NDA." TAC ¶ 73(a), 80(a). As a result of Defendants' alleged breach and theft of trade secrets, Plaintiff suffered lost profits and royalties on various accounts, including MetroPCS, Sprint, and T-Mobile.
The Court finds the TAC sufficiently clear to frame the issue and put Defendants on notice as to the claims being brought against them. There is no need for Plaintiff to further separate the claims.
Defendants argue that Plaintiff fails to state a claim for breach of contract related to Sprint or T-Mobile. Defendants contend that Plaintiff fails to identify the governing contract or contractual provisions. Furthermore, Defendants contend that Plaintiff cannot rely on its allegations regarding MetroPCS (which this Court already found sufficient to withstand a motion to dismiss) to state a claim regarding Sprint and T-Mobile. Finally, Defendants argue that Plaintiff fails to plead a cognizable damages claim with respect to Sprint or T-Mobile.
Defendants also argue that Plaintiff fails to state a claim for theft of trade secrets as to Sprint or T-Mobile. Defendants contend that Plaintiff alleges only legal conclusions and that Plaintiff has not pled any facts supporting a theory that Defendants had access to Plaintiff's Solution Methods or Risk Information relating to Sprint or T-Mobile.
As explained at the beginning of this Opinion, the Court rejects Defendants' proposed interpretation of Plaintiff's TAC. The Court reads the TAC to allege that Defendants breached the 2009 and/or 2012 NDAs and stole trade secrets from Plaintiff. As a result, Plaintiff suffered damages on various accounts, including MetroPCS, Sprint, and T-Mobile. Taking the facts as alleged by Plaintiff, Plaintiff sufficiently states a claim for all of the reasons this Court already explained in declining to dismiss Plaintiff's breach of contract and theft of trade secrets claims over a year ago.
Defendants argue that the Court should dismiss or strike Plaintiff's allegations related to Sprint, T-Mobile, and Vodafone for lack of subject matter jurisdiction due to the parties' agreement to arbitrate.
The Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA"), removes the court's subject matter jurisdiction to hear a claim when there is a valid, enforceable arbitration clause. Therefore, Defendants' motion to dismiss is "one means to raise its arbitration defense. In effect, [Defendants'] motion is a petition to this court within the meaning of § 4 of the FAA."
The FAA limits the district court's role to determining whether a valid arbitration agreement exists, and whether the agreement encompasses the disputes at issue.
Courts strongly favor arbitration and broadly construe arbitration clauses.
While public policy favors arbitration, such a presumption does not apply if the contractual language is clear that arbitration of a particular controversy is not within the scope of the arbitration provision. Mundi v. Union Sec. Life Ins. Co., 555 F.3d 1042, 1044-45 (9th Cir. 2009); see also United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960) ("[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.") In other words, the policy favoring arbitration cannot displace the necessity for a voluntary agreement to arbitrate. Id.
Defendants contend that the entire TAC is subject to dismissal pursuant to the arbitration provision contained in a Memorandum of Understanding ("MOU") the parties signed on September 30, 2010. Rosenzweig Decl. Ex. A ("MOU"), ECF 238. However, Defendants move only to dismiss Plaintiff's "new claims" as to Sprint, T-Mobile, and Vodafone. Defendants explain: "Amdocs is only moving to dismiss with respect to the non-MetroPCS claims in light of the Court's extensive experience and understanding of that claim." Defs.' Mot. 9, n.3; see also Defs.' Reply 7, ECF 250 (reiterating that Defendants do not invoke the arbitration provision with respect to the claims involving MetroPCS).
The parties entered into the MOU "to provide the Parties with a commercial framework for marketing and reselling [Plaintiff's] and its Affiliates' services . . . by [Defendants] and its Affiliates to their respective customers and prospective customers." MOU at 3. Thirty-nine customers and prospective customers, including Vodafone, MetroPCS, Sprint, and T-Mobile, were listed in an attachment to the MOU.
The MOU provided a framework by which the parties could opt-in, on a customer-by-customer basis, to have Defendants sell or recommend Plaintiff's services in exchange for a percentage of Plaintiff's profits from that customer, also referred to as an "end-user." MOU § 1.1. The MOU detailed "two contracting models": resale and referral. MOU § 3.1.1. In a resale, Plaintiff's services would be provided to the end-user pursuant to a written service agreement between Defendants and the end-user. In a referral, Defendants would refer the end-user to Plaintiff for services and the written agreement would be executed between Plaintiff and the end-user. MOU § 1.2. In either case, the written agreement would include the services' terms and provisions as approved by Plaintiff "in its sole reasonable discretion."
By the terms of the MOU, prior to engaging an end-user in a sales process, the parties would execute an "Opportunity Registration Form."
The MOU contained a "Confidentiality" provision, which stated "that exchange and treatment of confidential information shall be treated in accordance with the Non-Disclosure Agreement between [the parties] dated June 24, 2009."
The MOU also provided a "dispute resolution" process for "any dispute under this MOU." MOU § 10.9. The dispute resolution process provided that:
MOU at 8-9 (emphasis added).
Defendants contend that Plaintiff's allegations in the TAC regarding Sprint, T-Mobile, and Vodafone "arise under" or are "in connection with" the MOU and, thus, are subject to arbitration. According to Defendants, the MOU establishes a framework to address the parties' rights before, during, and after a joint pitch to customers such as Sprint, T-Mobile, and Vodafone. Furthermore, the MOU incorporates confidentiality duties from the 2009 NDA, which is the "umbrella confidentiality agreement governing all of the parties' communications," as referenced in the TAC. TAC ¶ 17.
The Court recognizes that the parties chose broad language in the MOU to describe the kinds of disputes the arbitration provision would encompass. The use of "arising under or in connection with this MOU" requires the Court interpret the language broadly and apply the arbitration provision to "every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract." Simula, 175 F.3d at 721 ("Every court that has construed the phrase `arising in connection with' in an arbitration clause has interpreted that language broadly.") To require arbitration, Plaintiff's factual allegations need only "touch matters" covered by the MOU and all doubts are to be resolved in favor of arbitrability.
However, no matter how broad the parties framed the language in the MOU's arbitration provision and no matter how "emphatic [the] federal policy [is] in favor of arbitral dispute resolution,"
The dispute that has arisen between the parties as to Sprint and T-Mobile relates to conduct allegedly taken by Defendants that had nothing to do with this MOU. The parties never executed an Opportunity Registration Form regarding Sprint or T-Mobile. Fieldhouse Decl. ¶ 2, ECF 242. Plaintiff's allegation is that Defendants took actions to secure or attempt to secure Sprint and T-Mobile's business, not as a resale or referral in partnership with Plaintiff, but as a replacement of Plaintiff. Such conduct cannot be said to have any connection to the MOU, nor did it arise under the MOU. Accordingly, the dispute regarding Sprint and T-Mobile is not subject to the arbitration provision.
As to Vodafone, it appears based on the parties' arguments that the parties may have executed an Opportunity Registration Form. However, as discussed at the beginning of this Opinion, the Court fails to see how the TAC can be construed to state an independent claim regarding Vodafone, such that there would be any dispute to refer to arbitration. Most importantly, nowhere does Plaintiff allege that it suffered any damages due to Defendants' behavior in relation to Vodafone.
Plaintiff contends that, even if the allegations regarding Sprint and T-Mobile are arbitrable, Defendants waived their right to compel arbitration. Because the Court finds that the allegations regarding Sprint and T-Mobile are not subject to the arbitration provision, there is no need to reach the waiver argument.
The Court denies Defendants' Motion to Dismiss [236]
IT IS SO ORDERED.