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C.A., Inc. v. Stonebranch, Inc.

United States District Court, E.D. New York

March 7, 2014

C.A., INC., Plaintiff,



Before the Court is the Report and Recommendation ("Report") of Magistrate Judge Arlene R. Lindsay, dated January 27, 2013 (DE 37), which recommends that defendants' motion to dismiss plaintiffs complaint be granted in part and denied in part. For the following reasons, the Report is adopted in part and rejected in part. Defendant Turpin's motion to dismiss pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(2) and (3) is DENIED. Defendant Stonebranch's motion to dismiss for lack of personal jurisdiction based on FRCP 12(b)(2) is DENIED without prejudice to renew if and when plaintiff moves and is granted leave to amend the complaint. If plaintiff does not so move or leave is not granted, the complaint shall be dismissed as against Stonebranch upon its motion. Plaintiff's request for the Court to sua sponte grant leave to amend the complaint is DENIED. Plaintiff's request for jurisdictional discovery is GRANTED to the extent set forth herein.

I. Background

A. Facts

Plaintiff C.A., Inc. ("CA" or "plaintiff") is a leading management software and solutions company that offers information technology and business process services to a wide range of business and institutional clients. Compl. ¶ 8. Defendant Stonebranch, Inc. ("Stonebranch") is plaintiff's competitor in the mainframe and distributed computer (client/server) job scheduling and workload automation software market, selling and delivering such software to businesses, municipalities and other institutions in North America. Id. at ¶ 12. Defendant Turpin ("Turpin") resides in St. Petersburg, Florida. Id. at ¶ 5.

On January 3, 2006, plaintiff hired Turpin, who reported to CA's office in Tampa, Florida, as a Director of Technical Sales. Id. at ¶ 6. Turpin executed an Employment and Confidentiality Agreement ("employment agreement") wherein he agreed to maintain the confidentiality of CA's proprietary information. The employment agreement also included a covenant not to compete and a forum selection clause, which provided that the agreement was to be governed by and construed in accordance with New York State law and that any legal action with respect to the agreement or Turpin's employment was to be brought exclusively in the federal or state courts located in Suffolk County, New York. Id. at ¶ ¶ 46, 48; Mem. in Supp., Exh. B, ¶ 16(d).

On May 8, 2012, Turpin resigned from CA and on May 11, 2012, he left plaintiff's employ. Compl. ¶ ¶ 31, 33. On May 14, 2012, Turpin became employed by Stonebranch as Director of Technical Sales and Services Operations, and worked primarily from his home in St. Petersburg, Florida. Id. at ¶ 35; Turpin Decl. ¶¶ 2, 7.

The complaint alleges that Turpin provided Stonebranch with confidential and proprietary CA information in order for Stonebranch to formulate a bid for a Software Upgrade Project for one of CA's existing clients, the Ohio Public Employee Retirement System ("OPERS"). Compl. ¶ ¶ 25-38. On June 7, 2012, OPERS advised CA that it awarded the upgrade project to Stonebranch instead of CA. Id at ¶ 39. CA alleges that it lost more than $1.8 million in revenue as a result of losing the contract with OPERS. Id. at ¶ 40.

B. Case History

On December 4, 2012, CA commenced this action against defendants alleging the following claims: (1) breach of contract against Turpin; (2) tortious interference with existing and prospective economic relations against both defendants; (3) misappropriation of trade secrets against both defendants; (4) unfair competition against both defendants; (5) breach of fiduciary duties against Turpin; and (6) faithless servant against Turpin. CA also seeks an injunction enjoining Stonebranch and Turpin from using CA's proprietary information and attorney's fees and costs against Turpin based on the employment agreement.

Defendants moved to dismiss the complaint pursuant to FRCP 12(b)(2) for lack of personal jurisdiction and 12(b)(3) for improper venue, which was referred to Magistrate Judge Arlene R. Lindsay to report and recommend. After the Report was issued, defendants filed their objections, [1] and plaintiff filed its response on February 24, 2014 (DE 40-1).

II. Discussion

A. Standard of Review

Title 28 U.S.C. § 636(b)(1)(C) provides that a "judge of the court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made." See also Fed.R.Civ.P. 72(b)(3) ("The district judge must determine de novo any part of the magistrate judge's disposition that has been properly objected to."). After reviewing a report, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). "[I]n providing for a "de novo determination"... Congress intended to permit whatever reliance a district judge, ...

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