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Fyfe Co., LLC v. Structural Group, LLC

United States District Court, Fourth Circuit

May 30, 2013

FYFE CO., LLC, et al.,
v.
STRUCTURAL GROUP, LLC, et al.

MEMORANDUM

CATHERINE C. BLAKE, District Judge.

Now pending before the court is a motion to dismiss for lack of jurisdiction and failure to state a claim filed by defendants Jason Alexander, Mark Geraghty, Anna Pridmore, and Shaun Loeding (the "individual defendants") against plaintiffs Fyfe Co., LLC, Fibrwrap Construction Services, Inc., and Fibrwrap Construction Services USA, Inc. (the "plaintiffs"). The plaintiffs are suing the individual defendants and Structural Group, a Maryland corporation, alleging breach of contract and tort claims arising out of the individual defendants' resignation from Fyfe Co./Fibrwrap to join Structural Group, a competitor. For the reasons stated below, the motion to dismiss will be granted.

BACKGROUND

Fyfe Co. manufactures construction strengthening system products, particularly Fiber Reinforced Polymer ("FRP") systems, used for strengthening, repair, and restoration of masonry, concrete, steel, and wooden surfaces. Fibrwrap Construction Services, Inc., and Fibrwrap Construction Services USA, Inc. engage in concrete repairs and installation and construction of FRP composite materials. All three entities are incorporated under the laws of Delaware and headquartered in Missouri. On January 16, 2013, the plaintiffs filed a complaint against Structural Group, a Maryland corporation engaged in specialty construction, repair, and maintenance services, with whom Fyfe Co. had entered into a Private Label Agreement (PLA). The agreement gave Structural Group the right to purchase Fyfe Co.'s patented, trademarked products for re-branding and sale provided that Structural Group agreed not to compete with Fyfe Co. The complaint also named as individual defendants four former executives of Fyfe Co. and/or Fibrwrap: Jason Alexander, Mark Geraghty, and Anna Pridmore, residents of California; and Shaun Loeding, a resident of New York. Pursuant to an executive employment agreement (EEA), Defendant Alexander was subject to covenants not to compete, disclose or use confidential information, or solicit employees to leave the plaintiffs' employ.[1] The other three individual defendants were subject to employment agreements containing covenants not to disclose, use confidential information, or solicit.

The plaintiffs allege that in the fall of 2012, the individual defendants engaged in discussions with Structural Group regarding employment and subsequently began copying confidential information, concealing their actions by deleting files and running file cleaning software on their company-issued computers. In late October 2012, Structural Group purchased $2.1 million of product from Fyfe Co., which the plaintiffs claim Structural Group intended to "hoard" to compete with Fyfe Co. once the individual defendants began working for Structural Group. In December 2012, all four individual defendants resigned from Fyfe Co./Fibrwrap and accepted employment with Structural Group. They did not, however, move to Maryland, nor is it alleged their work for Structural Group will be performed in Maryland.

In their complaint, the plaintiffs claim breach of contract (Count I) and breach of fiduciary duty (Count II) against Alexander; breach of contract against the other three individual defendants (Count V); and misappropriation of trade secrets (Count III) and breach of the duty of loyalty (Count IV) against all four individual defendants. The plaintiffs also claim breach of contract against Structural Group (Count VI), and total interference with contract relations with the individual defendants against Structural Group and Alexander (Count IX). As to all defendants, the plaintiffs allege unfair business practices (Count VII), aiding and abetting (Count VIII), and civil conspiracy (Count X).

Along with the complaint, the plaintiffs filed a motion for temporary restraining order and preliminary injunction (ECF No. 2), as well as a motion to expedite discovery (ECF No. 3).[2] A hearing on the motion for temporary restraining order and preliminary injunction was held on January 17, 2013, at which time issues pertaining to personal jurisdiction and choice of law arose. The plaintiffs claimed the court has jurisdiction over the individual defendants under provisions of Maryland's long-arm statute and based upon the conspiracy theory of jurisdiction.[3] The defendants responded that the plaintiffs' allegations are insufficient to satisfy the requirements of Maryland's long-arm statute and due process. With regard to the choice of law question, Defendant Alexander claimed that California, not Delaware, law applied to his EEA despite the contract's Delaware forum selection clause.[4] Because the defendants had not yet been served, the court continued the hearing and ordered that Structural Group take steps to ensure that any information it received from the named individual defendants that the plaintiffs assert is a trade secret or proprietary information be secured and not utilized or destroyed pending continued hearing. The plaintiffs subsequently filed an amended complaint on January 22, 2013.

On January 24, 2013, the plaintiffs filed a supplemental memorandum of law in support of their motion for temporary restraining order and preliminary injunction in which they argued that, according to Maryland's choice of law rules, Delaware law should be applied to Alexander's EEA. On February 11, 2013, the individual defendants filed a motion to dismiss for lack of jurisdiction and to dismiss Count X (conspiracy) for failure to state a claim (ECF No. 31).[5]

ANALYSIS

A challenge to personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) "is to be resolved by the judge, with the burden on the plaintiff ultimately to prove grounds for jurisdiction by a preponderance of the evidence." Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 396 (4th Cir. 2003). Where a defendant moves to dismiss for lack of personal jurisdiction based only on the motion, memoranda, and the complaint, the plaintiff need only make a "prima facie showing of a sufficient jurisdictional basis to survive the jurisdictional challenge." Consulting Engineers Corp. v. Geometric Ltd., 561 F.3d 273, 276 (4th Cir. 2009). "[T]he court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.'" Mylan Labs., Inc. v. Akzo, N.V., 2 F.3d 56, 62 (4th Cir. 1993) (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)).

A federal court sitting in diversity may exercise personal jurisdiction over a non-resident defendant "if (1) an applicable state long-arm statute confers jurisdiction and (2) the assertion of that jurisdiction is consistent with constitutional due process." Nichols v. G.D. Searle & Co., 991 F.2d 1195, 1199 (4th Cir. 1993). Maryland courts consistently have held that ยง 6-103(b)(1) of the state's long-arm statute is coextensive with the scope of jurisdiction permitted by the Fourteenth Amendment due process clause; therefore, the statutory and constitutional inquiries merge. See Carefirst, 334 F.3d at 396-97.[6]

"To satisfy the constitutional due process requirement, a defendant must have sufficient minimum contacts' with the forum state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.'" Consulting Engineers Corp., 561 F.3d at 277 (quoting Int'l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)). "The minimum contacts test requires the plaintiff to show that the defendant purposefully directed his activities at the residents of the forum' and that the plaintiff's cause of action arise[s] out of' those activities." Id. (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985)).

The Fourth Circuit has outlined a three-pronged test for determining whether the exercise of specific jurisdiction comports with due process. Under this test, courts must consider "(1) the extent to which the defendant has purposefully availed itself of the privilege of conducting activities in the state; (2) whether the plaintiffs' claims arise out of those activities directed at the state; and (3) whether the exercise of personal jurisdiction would be constitutionally reasonable." Carefirst, 334 F.3d at 397 (internal quotation marks omitted).

The "purposeful availment" prong "articulates the minimum contacts requirement of constitutional due process." Consulting Engineers Corp., 561 F.3d at 278. Courts have considered a range of factors in evaluating whether a defendant has purposely availed himself of the privilege of conducting business under ...


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