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Intellor Group, Inc. v. Cicero

United States District Court, D. Maryland

April 16, 2019

INTELLOR GROUP, INC., Plaintiff,
v.
BRIAN J. CICERO, Defendant.

          MEMORANDUM OPINION

          THEODORE D. CHUANG JUDGE

         Plaintiff Intellor Group, Inc. ("Intellor") has filed this civil action against Defendant Brian J. Cicero, a former Intellor employee, alleging that Cicero misappropriated confidential information in breach of his contractual and fiduciary obligations and in violation of the Maryland Uniform Trade Secrets Act ("MUTSA"), Md. Code Ann., Com. Law §§ 11-1201 to 1209 (West 2013). Now pending is Cicero's Motion to Dismiss the Amended Complaint. Having reviewed the submitted materials, the Court finds that no hearing is necessary. See D. Md. Local R. 105.6. For the reasons set forth below, the Motion to Dismiss will be denied, but this case will be transferred to the United States District Court for the Western District of New York.

         BACKGROUND

         Intellor, a Delaware corporation based in Maryland, provides webinar and event conferencing services. Cicero began working for Intellor as Director of Sales/Business Development on January 15, 2008. Throughout the duration of his employment with Intellor, Cicero worked remotely from his home in New York. Originally, Cicero's job responsibilities were to originate and close new customer sales on behalf of Intellor, but at some point after March 2010, Intellor changed Cicero's primary responsibilities to supporting AT&T's efforts to resell Intellor's webinar and related event conferencing services under a resale agreement between AT&T and Intellor. In light of this change in responsibilities and Cicero's increased exposure to Intellor's and AT&T's confidential information, Cicero signed a Confidentiality Agreement at Intellor's request on or about August 1, 2017. Section 5 of the Confidentiality Agreement bars Cicero from disclosing or using for personal gain the confidential information of Intellor or its customers and any other proprietary information obtained through employment with Intellor. It also requires Cicero to return all confidential or proprietary information to Intellor upon the termination of his employment with Intellor. Section 6 similarly bars Cicero from disclosing confidential customer information procured through any servicing of webinars and related events. Section 7 of the Confidentiality Agreement prohibits Cicero from soliciting or competing for Intellor's customers for a period of two years after the termination of his employment with Intellor.

         On October 10, 2018, Intellor sent a letter to Cicero terminating his employment and offered him severance pay in return for his execution of a Separation Agreement. In response, Cicero's attorney, Jill K. Schultz, sent a letter to Intellor on October 25, 2018 proposing various revisions to the Separation Agreement. The letter stated that Intellor had failed to pay Cicero sales commissions required under New York labor law and that Intellor owed Cicero unpaid bonuses. It further asserted that the Confidentiality Agreement was unenforceable. Attached to the letter was a spreadsheet detailing the commission balance that Cicero claimed Intellor owed him. Finally, the letter stated, "While Cicero would have successful legal claims against Intellor, he would prefer, if possible, to conclude the matter amicably." Joint Record ("J.R.") 47, ECF No. 38.

         On November 6, 2018, counsel for Intellor, Thomas J. Sawyer, sent an email to Schultz requesting until November 13, 2018 to investigate the matters raised in Schultz's October 25, 2018 letter and extending the deadline for Cicero to execute the Separation Agreement to that date. In a November 9, 2018 letter, Schultz responded by accepting the extension of time for Cicero to execute the Separation Agreement and stating, "Likewise, I agree not to commence litigation against Intellor prior to November 13, 2018." J.R. 52. In that letter, Schultz provided an analysis of Intellor's "liability and damages" for failing to pay Cicero his earned commissions and ended with the statement, "If this matter is not resolved, we will commence litigation against Intellor, Rist, and any other eligible Intellor shareholder." J.R. 52, 54. The letter also requested that Intellor amend the Separation Agreement to state that Cicero is not bound by the Confidentiality Agreement.

         Once again, Sawyer responded to Schultz with an email requesting additional time-until November 20, 2018-to consider Cicero's allegations and agreeing in turn to extend the deadline for Cicero to execute the Separation Agreement to the same date. Then, on November 14, 2018, Sawyer sent a letter to Schultz stating that the spreadsheets attached to Schultz's previous two letters reflected highly sensitive AT&T customer and revenue information, in violation of Sections 5 and 6 of the Confidentiality Agreement. The letter demanded the return of all proprietary information and for the first time threatened that, should Cicero fail to return the confidential information by November 20, 2018, "Intellor would have no alternative but to pursue an appropriate civil action against him in a Maryland court as provided under sections 10 and 11 of the Confidentiality Agreement and for his related violation of the Maryland Uniform Trade Secrets Act and breach of fiduciary duty." J.R. 58.

         On November 20, 2018, Sawyer sent Schultz another letter in which he rejected Cicero's claims for unpaid commission and bonuses and stated that Intellor would vigorously defend against any lawsuit filed by Cicero. The letter again stated that Cicero's retention and use of Intellor's confidential information to support his unpaid compensation claims violated Sections 5 and 6 of the Confidentiality Agreement. It also stated, "Contrary to the assertion in your October 25 letter, Mr. Cicero will not be able to avoid such liability by challenging the enforceability of the Confidentiality Agreement." J.R. 64.

         On November 20, 2018 and November 21, 2018, Sawyer and Schultz exchanged voicemails in an effort to arrange to discuss this matter. Sawyer called Schultz and left a voicemail again on November 26, 2018. On November 27, 2018, Cicero filed a complaint ("the New York Complaint") in the Supreme Court in Monroe County, New York, and served it on Intellor that same day. The New York Complaint names Intellor and Richard A. Rist, Chief Executive Officer of Intellor, as defendants and contains three causes of action: (1) a claim against Intellor for unpaid compensation under New York Labor Law § l9l(1)(c) and § 198(1-a); (2) a claim against Rist for unpaid compensation under New York Business Corporation Law § 630; and (3) a claim seeking a declaratory judgment, pursuant to New York Civil Practice Law and Rules § 3001, concluding that the Confidentiality Agreement is unenforceable in all respects and that Cicero has not breached any of its terms. On December 21, 2018, Intellor and Rist removed the New York Complaint to the United States District Court for the Western District of New York and in that case ("the New York Case") filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which remains pending. Finally, on January 2, 2019, Intellor filed the instant action in this Court against Cicero, asserting causes of action for (1) breach of contract, (2) breach of fiduciary duty, and (3) a violation of MUTSA.

         DISCUSSION

         In his Motion to Dismiss, Cicero seeks dismissal of Intellor's Amended Complaint pursuant to the first-to-file rule. He argues that the New York Complaint, filed prior to the instant action, is substantially similar to this case such that litigating both cases would risk inconsistent rulings and constitute a waste of resources for both the parties and the courts. In its memorandum in opposition to the Motion, Intellor contends that: (1) there is no proper motion before the Court; (2) the New York Case and the present case are separate and distinct cases; (3) the declaratory judgment count in the New York Complaint was improperly filed in anticipation of litigation to be filed by Intellor in Maryland; and (4) if the Court finds the first-to-file rule applicable, rather than dismissing this case, it should sever the breach of contract count from the Amended Complaint, transfer it to the Western District of New York, and retain the MUTSA claim.

         I. Legal Standard

         The first-to-file rule provides that "when multiple suits are filed in different Federal courts upon the same factual issues, the first or prior action is permitted to proceed to the exclusion of another subsequently filed." Allied-Gen. Nuclear Servs. v. Commonwealth Edison Co., 675 F.2d 610, 611 n.l (4th Cir. 1982). Under the rule, "the first suit should have priority, 'absent the showing of balance of convenience in favor of the second action.'" Ellicott Mach. Corp. v. Modern Welding Co., Inc., 502 F.2d 178, 180 n.2 (4th Cir. 1974) (quoting Remington Products Corp. v. American Aerovap, Inc., 192 F.2d 872, 873 (2d Cir. 1951)). The rule is not inflexible; rather, a court could allow a later filed case to proceed if it has progressed further toward resolution, because the rule's purpose is "to promote the efficient use of judicial resources and it should be applied in a manner serving sound judicial administration." United States v. Brick, 846 F.2d 74, 1988 WL 33796, at *1 (4th Cir. 1988) (unpublished).

         In considering whether to apply the first-to-file rule, most courts begin by considering three non-exhaustive factors: (1) the chronology of events, (2) the similarity of the parties involved, and (3) the similarity of the issues or claims at stake. See, e.g., Wakaya Perfection, LLC v. Youngevity Int'l, Inc.,910 F.3d 1118, 1124 (10th Cir. 2018); Baatz v. Columbia Gas Transmission, LLC, 814 F.3d 785, 789 (6th Cir. 2016); Butler v. DirectSat USA, LLC,800 F.Supp.2d 662, 666 (D. Md. 2011). Even if applicable based on these factors, a court may decline to apply the rule if the "balance of convenience" favors the second action. Ellicott Mack Corp., 502 F.2d at 180 n.2. Some courts have also declined to apply the first-to-file rule when they have found compelling circumstances supporting its abrogation, such as "bad faith, anticipatory suit, and forum shopping." Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 628 (9th Cir. 1991) (internal citations omitted). The United States Court of Appeals for the Fourth Circuit has not stated explicitly whether such special circumstances may warrant an exception to the first-to-file rule, see Learning Network, Inc. v. Discovery Communications, Inc.,11 Fed.Appx. 297, 301 n. 2 (4th Cir. 2001), but it has consistently looked with disfavor upon races to the courthouse and forum shopping, particularly in the context of declaratory judgments. See, e.g., Myles Lumber Co. v. CNA Financial Corp.,233 F.3d 821, 824 (4th Cir. 2000); ...


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