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Allied Fire Protection, Inc. v. Thai

United States District Court, D. Maryland, Southern Division

October 2, 2017

ALLIED FIRE PROTECTION, INC., Plaintiff,
v.
HUY THAI, Defendant.

          MEMORANDUM OPINION AND ORDER

          Paul W. Grimm, United States District Judge.

         Allied Fire Protection, Inc. (“Allied Fire”) filed suit against former employee Huy Thai, alleging that, after Thai's employment ended, he breached a purported “Non-Compete/NonDisclosure Agreement” that he signed and, specifically, the non-compete, non-solicitation, and non-disclosure provisions of that contract, as well as a provision requiring Thai to return his employer's property when his employment with the company ended. Allied Fire also claims that Thai is liable for tortious interference with contractual relations and prospective advantage, as well as intentional misrepresentation. Thai has moved to dismiss the case. ECF No. 7.[1] Thai's Motion to Dismiss is granted, as Allied Fire has failed to state a claim for which relief can be granted. But Allied Fire may amend its claims for breach of contract, tortious interference, and intentional misrepresentation, as discussed below if it has a good faith basis for doing so. Allied Fire's other claims are dismissed with prejudice.

         BACKGROUND[2]

         Allied Fire, a Maryland corporation engaged in the business of “fire protection, suppression, consulting, design, engineering, fabrication and equipment installation, ” Compl. ¶ 3, ECF No. 2, employed Thai from 2006 to 2014. Id. ¶¶ 11-12. Thai was “initially hired . . . as an engineer to complete designs and drawings for some of the projects Plaintiff was hired to complete, ” and he “headed Plaintiff's business” during its chief executive officer's absence. Id. ¶¶ 4, 15. In that capacity, “Plaintiff's CEO trained the Defendant on how Plaintiff[] does business and revealed to the Defendant Plaintiff's industry trade secretes [sic] and advantages in the fire protection field.” Id. ¶ 16. In 2013, Thai purportedly signed a “Non-Compete/NonDisclosure Agreement” (“Agreement”). Id. ¶ 18.

         For reasons that are not discernable from the record, and despite predicating its Complaint on two breaches of a purportedly written contract, Allied Fire did not attach the contract underlying its claims to its Complaint or any subsequent filing and has not produced it in response to Thai's numerous attempts to obtain it. See Compl.; Emails, ECF No. 18-1. Instead, Allied Fire summarizes the relevant provisions of the purported Agreement, and Thai does not appear to dispute the summary, which follows:

         Defendant [is] not to:

[1] Provide or engage in any way business of a similar nature (i.e., engineering, consulting and general construction) to the business of the Plaintiff without written consent of the Plaintiff.
[2] Directly or indirectly engage in any similar business (i.e., engineering, consulting and general construction) with Plaintiff's former, current or future clients for Sixty (60) months after separation from Plaintiff's business.
[3] Solicit any client of Plaintiff for the benefit of a third party.
[4] Perform any work for any other company while working for Plaintiff.
[5] Keep Plaintiff's property (all documents and other tangible materials).
[6] Disclose any technical/nontechnical, data or other proprietary information related to products, inventions, plans, methods, processes, know-how, developmental or experimental work, computer programs, databases, authorship, customer list, vendors, suppliers, marketing methods, reports, analysis, plans, consultants, licensees, files, notebooks, samples, lists correspondence, software or other written or graphic records.

Compl. 2-3. Although the parties refer generally to a non-compete clause in their briefing, the first, second, and fourth provisions are the non-compete clauses; the third is a non-solicitation clause; the sixth is a non-disclosure clause; and the fifth provision, one not typically discussed in the context of restrictive covenants, I will refer to as the company property clause.

         After Thai's employment with Allied Fire ended, [3] the employer filed suit against him in the Circuit Court for Prince George's County, Maryland, alleging four causes of action: (I) breach of contract (specifically, the Non-Compete/Non-Disclosure Agreement); (II) breach of the non-compete and non-solicitation provisions of the Agreement; (III) tortious interference with contractual relations and prospective advantage; and (IV) intentional misrepresentation. Allied Fire claims that Thai breached the Agreement when he “unlawfully obtained access to proprietary software” and used it to “perform work for one of Plaintiff's clients/competitors, ” which as best I can discern, is an allegation that Thai breached the non-disclosure agreement, and that Thai breached the Agreement when he retained company property, including a computer, cell phone, and documents, in violation of the company property clause. Compl. ¶¶ 12-13. Allied Fire also claims that Thai breached the non-compete and non-solicitation clauses when he “went to work for one of Plaintiff's clients to do the work that the client once hired Plaintiff to do” immediately upon termination, id. ¶ 20, and thereafter began “soliciting Plaintiff's clients to do the work that such clients once hired the Plaintiff to perform, ” id. ¶ 21. Additionally, Allied Fire alleges that Thai tortiously interfered with its contractual relations by intentionally and willfully “steering [] business opportunities away” from Allied Fire and to himself or to Allied Fire's competitors “for a financial kickback”; offering unauthorized discounts and kickbacks; and “improperly pay[ing] people that Defendant would fire for work that never was done to obtain future favors from [them].”. Id. ¶¶ 26-28. Lastly, Allied Fire contends that, after it terminated Thai's employment, he defrauded his former employer by intentionally misrepresenting himself as authorized to “handle clients['] contract matters.” Id. ¶¶ 30-31.

         Thai removed the case to this Court under diversity jurisdiction on February 24, 2017 and filed the pending motion on March 3, 2017. Allied Fire an untimely opposition thirty-three days later on April 5, 2017, and Thai filed a timely reply on April 19, 2017.

         PERSONAL JURISDICTION

         In its Opposition, Allied Fire challenges this Court's jurisdiction to resolve its claims because, it believes, to do so would violate Article I, § 10, Clause 1 of the United States Constitution, the so-called “Contracts Clause.” Pl.'s Opp'n, 5, 10-13. Specifically, Allied Fire asserts that the purported Agreement included a “choice of law section” that stated:

Any disputes arising from or related to the subject matter of this agreement shall be heard in an appropriate court of PG County, Maryland and the parties hereby consent to the personal jurisdiction and venue of these courts.

Id. at 11. In its view, if this Court maintained jurisdiction, it would interfere with the parties' obligations under this contractual provision, in violation of the Contracts Clause. Allied Fire seeks remand back to the Circuit Court for Prince George's County.

         Thai argues that Allied Fire has waived the benefit of any forum selection clause that might have existed because the request for remand was untimely under 28 U.S.C § 1447(c), which requires that removal must be challenged within 30 days of filing of the notice of removal. Def.'s Reply 9. Additionally, Thai contends that the purported forum selection clause does not constitute a waiver of the right to removal because the clause is ambiguous, not “clear and unequivocal.” Id. at 10-11.

         The contracts Clause provides that “[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . .” U.S. Const. art. I, § 10, cl. 1. Insofar as Thai insists that it would violate the Contracts Clause for this Court-part of the judiciary branch of the federal government-to maintain jurisdiction, his argument is completely without merit because “[t]he Contracts Clause applies only to the states, not to the federal government or individuals.” Nix v. NASA Fed. Credit Union, 200 F.Supp.3d 578, 587-88 (D. Md. 2016) (citing Pension Ben. Guar. Corp. v. R.A. Gray & Co., 467 U.S. 717, 734 n.9 (1984)).

         Moreover, although a party may assert lack of personal jurisdiction as a defense in a lawsuit, failure to do so in a timely manner waives this defense. Ins. Corp. of Ireland, Ltd., v. Conmpagnie des Bauxites de Guinee, 456 U.S. 694, 703 (1982). Allied Fire did not file a timely motion to remand. Instead, it challenged personal jurisdiction in its Opposition, which it filed forty days after Thai removed the case to this Court and filed its Notice of Removal, ECF No. 1. An opposition is an inappropriate means of seeking remand on any ground other than lack of subject matter jurisdiction. See Fed. R. Civ. P. 7(b)(1); MHD-Rockland Inc. v. Aerospace Distribs. Inc., No. CCB-13-2442, 2014 WL 31677, at *6 (D. Md. Jan. 3, 2014) (“[A] district court can remand a case based on a defect other than a lack of subject matter jurisdiction only if a party makes a motion for the court to do so within thirty days of the filing of the notice of removal. By contrast, a district court can remand a case based on defects in subject matter jurisdiction at any time sua sponte. (citing Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 198-99 (4th Cir. 2008))). Further, Allied Fire did not challenge the validity of the removal to this Court in the required 30 days from the filing of notice of removal, see 28 U.S.C. § 1447(c); MHD-Rockland, 2014 WL 31677, at *6. Consequently, Allied Fire has forfeited the right to challenge the jurisdiction of this Court. Therefore, this Court has personal jurisdiction over Plaintiff. See Ins. Corp. of Ireland, 456 U.S. at 703.

         In any event, the purported forum selection clause, stating that disputes “shall be heard in an appropriate court of PG County, Maryland, ” does not vest exclusive jurisdiction in the state courts. See Mims v. Arrow Fin. Servs., LLC, 565 U.S. 368, 374, 380 (2012) (construing statutory provision that “[a] person or entity may, if otherwise permitted by the laws or rules of court of a State, bring a private action in an appropriate court of that State” and concluding that “[n]othing in th[at] permissive language . . . makes state-court jurisdiction exclusive . . . .” (emphasis added)). Indeed, under federal law, [4] “[a] general maxim in interpreting forum-selection clauses is that ‘an agreement conferring jurisdiction in one forum will not be interpreted as excluding jurisdiction elsewhere unless it contains specific language of exclusion.'” IntraComm, Inc. v. Bajaj, 492 F.3d 285, 290 (4th Cir. 2007) (quoting John Boutari & Son, Wines & Spirits, S.A. v. Attiki Imp. & Distrib., Inc., 22 F.3d 51, 53 (2d Cir. 1994)) (emphasis in John Boutari; internal citation and quotation marks omitted)). Therefore, this Court, which is located in Prince George's County, Maryland, has jurisdiction under the forum selection clause to hear this case.[5]See Mims, 565 U.S. at 380.

         MOTION TO DISMISS

         Standard of Review

         Federal Rule of Civil Procedure 12(b)(6) provides for “the dismissal of a complaint if it fails to state a claim upon which relief can be granted.” Velencia v. Drezhlo, No. RDB-12-237, 2012 WL 6562764, at *4 (D. Md. Dec. 13, 2012). This rule's purpose “is to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Id. (quoting Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006)). To that end, the Court bears in mind the requirements of Rule 8, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009) when considering a motion to dismiss pursuant to Rule 12(b)(6). Specifically, a complaint must contain sufficient factual matter in the form of “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Additionally, the complaint must state, on its face, “a plausible claim for relief, ” as “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S. at 678-79. See Velencia, 2012 WL 6562764, at *4 (discussing standard from Iqbal and Twombly). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. The plaintiff must raise a “right to relief above the speculative level” and “nudge[] [his] claims . . . across the line from conceivable to plausible.” See, e.g., McCleary-Evans v. Md. Dep't of Transp., 780 F.3d 582, 587 (4th Cir. 2015) (quoting Twombly, 550 U.S. at 570).

         Breach of Contract (Count I) and Breach of Covenant Not to Compete (Count II)

         Thai insists that Allied Fire's claims for breach of contract and breach of the non-compete and non-solicitation claims[6] should be dismissed “because the Agreement is unenforceable as a matter of law.” See Def.'s Mem. 4. He argues that the Agreement “is far wider in scope and duration that is necessary to protect the employer's interests and . . . imposes an undue hardship on Defendant.” Id. at 4-5. Notably, his argument pertains specifically to “[t]he non-compete and non-solicitation provisions in the Agreement, ” however. See Id. at 5-6, 8-13. He does not address the enforceability of the non-disclosure and company property provisions of the Agreement that are at issue in Count I.

         Allied Fire, which alleged (in conclusory language) in its Complaint that the Agreement was reasonable given the “nature of Plaintiff's disclosures, industry trade secretes [sic] and Defendant['s] level of authority and responsible [sic], ” Compl. ¶ 19, counters that the restrictive covenants are reasonably limited in terms of “area and duration” in a manner that is necessary to protect its “legitimate business interest, ” Pl.'s Opp'n 6. Additionally, Allied Fire contends that no geographical limitation is necessary because the Agreement only restricts access to its “established clients.” Id. at 8-9. Alternatively, Allied Fire argues that, should any provision of the Agreement be determined to be overly broad, “blue penciling”[7] would be appropriate. Thai counters that blue-penciling would be inappropriate here because the provisions in questions are intertwined and cannot be separated.

         Enforceability

         Restrictive covenants in employment contracts limit an individual's right to employment, and therefore they are generally viewed “with caution and read narrowly.” SNS One, Inc. v. Hage, No. L-10-1592, 2011 WL 2746713, at *3 (D. Md. July 11, 2011).[8] For restrictive covenants (which include non-compete, non-solicitation, and non-disclosure clauses) to be enforceable,

(1) the employer must have a legally protected interest,
(2) the restrictive covenant must be no wider in scope and duration than is reasonably necessary to protect the ...

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