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Eagle Creek Software Services, Inc. v. Jones

United States District Court, D. Minnesota

March 10, 2015

Eagle Creek Software Services, Inc., Plaintiff,
v.
Daniel Jones, Ron Sowers, Daniel Kush and Digital Desert Resourcing, Inc., Defendants.

Michael E. Obermueller, Esq., Winthrop & Weinstine, P.A., Minneapolis, MN, on behalf of Plaintiff.

Kurt Erickson, Esq., Jackson Lewis P.C., Minneapolis, MN, on behalf of Defendants Jones, Kush and Digital Desert Resourcing Inc.

Ron Sowers, pro se Defendant.

MEMORANDUM OPINION AND ORDER

ANN D. MONTGOMERY, District Judge.

I. INTRODUCTION

This matter came before the undersigned United States District Judge on December 22, 2014 on Plaintiff Eagle Creek Software Services, Inc.'s ("Eagle Creek") Motion for a Temporary Restraining Order ("TRO") [Docket No. 4]. The parties agreed to engage in settlement discussions assisted by Magistrate Judge Franklin Noel after the TRO hearing, but were unable to reach an agreement. See Settlement Conf. Minutes [Docket Nos. 49 and 59]. The Court heard Defendants Daniel Jones ("Jones"), Daniel Kush ("Kush") and Digital Desert Resourcing Inc.'s (the "DDR Defendants") Motion to Dismiss [Docket No. 36] on February 20, 2015. The Court has considered Ron Sowers' ("Sowers") Motion to Dismiss [Docket No. 21] on the filings of record.[1] For the reasons discussed below, Eagle Creek's Motion for a TRO and the DDR Defendants' Motion to dismiss are granted in part and denied in part. Sowers' Motion to Dismiss is denied.

II. BACKGROUND

Eagle Creek is a Minnesota corporation that provides enterprise software products and services to a wide range of customers in the United States and Canada. Pl.'s Mem. Supp. TRO [Docket No. 5] ¶ 1. Defendants Jones, Sowers and Kush all worked for Eagle Creek in Arizona. In early 2013, Jones and Sowers worked on a project designed to increase Eagle Creek's business from Information Technology ("IT") customers in Arizona. Compl. [Docket No. 1-1] ¶ 17. The business plan became known as the Arizona Digital Desert Resourcing model ("DDR Model"). The DDR Model sought to create new business opportunities for Eagle Creek by developing public-private partnerships between leading Arizona corporations, local government agencies and Arizona's higher education institutions. Id . ¶ 18. Specifically, the DDR Model sought to create an "on shore" alterative for companies' IT needs by utilizing talented IT students from Arizona universities. Eagle Creek had implemented a similar training model in North and South Dakota. Id . ¶ 25. In short, the DDR Model was designed to create more jobs in Arizona, provide high quality IT work to local companies, and expose IT students in Arizona to specialized, on-the-job training. Id . ¶¶ 19-20.

By mid-2014, Jones, Sowers and Kush were at odds with Eagle Creek management about how to move forward with the DDR Model. Id . ¶¶ 33-37. Eagle Creek believed that the project was consuming too much time, resulting in the neglect of other work. Id . Jones, Sowers and Kush wanted Eagle Creek to start a separate business solely dedicated to the DDR Model. Eagle Creek refused and in July 2014, Jones, Sowers and Kush resigned from Eagle Creek and founded a new company called "Digital Desert Resources, Inc." ("DDR"). Id . ¶¶ 38-45. Eagle Creek brought suit against Jones, Sowers, Kush and DDR in December 2014 on ten counts: (1) breach of confidentiality and non-disclosure agreement; (2) Jones' breach of employment agreement; (3) Sowers' breach of employment agreement; (4) conversion; (5) breach of common law duty of loyalty; (6) Jones' and Sowers' breach of common law duty of confidentiality; (7) violation of the Minnesota Trade Secret Act; (8) misappropriation; (9) unfair competition; and (10) unjust enrichment.[2] Compl. ¶¶ 47-139.

A. Jones' employment contract

Jones started working for Eagle Creek in 2004 as the Regional Vice President of Eagle Creek's Western Territory. Compl. ¶ 10. Jones' duties included creating, developing and implementing strategic growth plans in the Western Territory. Jones' employment contract included non-competition, non-disclosure, non-solicitation, and arbitration provisions. Specifically, Jones agreed to "devote his work efforts to the performance of this Agreement and will not, without the Employer's prior written consent, ... engage in other business activities that would materially interfere with the performance of his duties...." See Compl. at 36-39 ("Jones Agreement") ¶ 2.[3] Jones also agreed to not compete directly with Eagle Creek during his term of employment or "take any action without the Employer's prior written consent to establish, form, or become employed by a competing business on termination of employment by the Employer." Id . ¶ 3. The language of Jones' agreement prohibits him from disclosing trade secrets and confidential information for two years after termination of his employment. Id . ¶ 14.

B. Sowers' employment contract

Sowers started working for Eagle Creek in 2012 as an Account Relations Manager, reporting directly to Jones. Sowers' employment contract includes a restrictive covenant, provisions related to non-disclosure of confidential information, injunctive relief and a forum selection clause specifying Minnesota as the litigation venue for any actions arising out of the contract. See Compl. at 41-45 ("Sowers Agreement").[4] Confidential information is defined by the contract as "any information or compilation of information not generally known which is proprietary to Employer, including, without limitation, trade secrets, financial information, and information relating to products, processes, methods, pricing, marketing and customer information." Id . ¶ 5. Sowers' agreement prohibits him from disclosing confidential information without written permission from Eagle Creek during his employment and "at all times thereafter." Id.

Sowers also agreed that all inventions are the property of Eagle Creek. Inventions are defined in the contract as:

[D]iscoveries, improvements, and ideas (whether in writing or reduced to practice) and works of authorship, whether patentable or copyrightable (1) which relate directly to the Company's business or its actual or demonstrably anticipated research or development; (2) which result (or resulted) from any work performed by the Employee for the Company, (3) for which the Employee utilizes the Company's equipment, supplies, facilities, Confidential Information, or Company Product or (4) which were developed during the Employee's employment relationship with the Company.

Id. ¶ 6. Sowers' restrictive covenant states that for one year he "shall not, directly or indirectly, for himself or others, individually, jointly or as a partner... contact or seek to do business with any client of the Employer on whose accounts Employee worked at any time during Employee's employment...." Id . ¶ 8.1.

C. Kush's confidentiality and non-disclosure agreement

Kush was a prospective business consultant introduced to Eagle Creek by Jones in January 2014. Kush signed a Confidentiality and Non-Disclosure Agreement with Eagle Creek. See Compl. at 33-34 ("Kush Agreement").[5] Kush agreed that confidentiality and non-disclosure obligations survive for 5 years after termination of the agreement. Id . ¶ 4. Confidential information is defined in Kush's contract as:

[A]ll information or materials, documents, data, plans, programs, specifications, techniques, processes, policies, both written and oral, of a secret, confidential or proprietary nature, including without limitation any and all information relating to Eagle Creek's business model, employees and candidates, recruiting and retention methods, marketing methods, employee pay rates, financial information, forecasts, clients and potential clients, client bill rates, and any related information thereto (collectively "Confidential Information").
Id. ¶ 1.

III. DISCUSSION

A. Motion to Dismiss Standard

Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to dismiss a complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true. Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994) (citation omitted). However, the factual allegations must "raise a right to relief above the speculative level, " and push claims "across the line from conceivable to plausible." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In other words, the complaint must establish more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "Determining whether a complaint states a plausible claim for relief will... be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679. In doing so, the court must draw reasonable inferences in the plaintiff's favor, but it need not make unreasonable inferences or accept unrealistic assertions. See Brown v. Medtronic, Inc., 628 F.3d 451, 461 (8th Cir. 2010).

B. Personal Jurisdiction

Sowers and DDR challenge the Court's jurisdiction.[6] Sowers argues that the forum selection clause included in his employment contract is "unenforceable" because it was signed under "extraordinary and unconscionable" circumstances. DDR argues that it lacks sufficient contacts with Minnesota and should be dismissed from this action. Defendants argue that the forum selection clause in Sowers' contract is valid and that the Court's jurisdiction over DDR is proper because DDR's owners-Jones and Kush-act as DDR's agents and have sufficient minimum contacts with Minnesota.

A non-moving party need only make a prima facie showing of jurisdiction to survive a motion to dismiss. Bell Paper Box v. U.S. Kids, 22 F.3d 816, 818 (8th Cir. 1994). Federal courts acting on a diversity action may assume jurisdiction over nonresident defendants only to the extent permitted by the long-arm statute of the forum state and by the Due Process Clause. Morris v. Barkbuster, Inc., 923 F.2d 1277, 1280 (8th Cir. 1991). The Minnesota Supreme Court has extended maximum extraterritorial effect to Minnesota's long-arm statute. B.F. Goodrich Co. v. Auxitrol S.A., 2001 U.S. Dist. LEXIS 21165, *10 (D. Minn. Nov. 30, 2001). The longarm statute requires a defendant have minimum contacts with the forum state unless the party otherwise agrees to the jurisdiction of the forum state. Id . Minimum contact with the forum state must reveal "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464, 474-477 (1985). Absent minimum contacts, due process "is satisfied when a defendant consents to personal jurisdiction by entering into a contract that contains a valid forum selection clause." St. Paul Fire & Marine Ins. Co. v. Courtney Enters., 270 F.3d 621, 624 (8th Cir. 2001) (citing Dominium Austin Partners, L.L.C., v. Emerson, 248 F.3d 720, 726 (8th Cir. 2001)). A forum selection clause is enforceable unless it is invalid or enforcement would be unreasonable and unjust. Capsource Fin., Inc. v. Moore, 2012 U.S. Dist. LEXIS 88618, *9 (D. Minn. June 27, 2012).

Sowers argues that his employment contract is unconscionable because he worked for Eagle Creek for seven months, unpaid, before he was offered an employment contract. Sowers argues that he could not abandon his seven month investment in Eagle Creek, but Sowers does not allege that he was coerced to work for free, nor that he was pressured to sign the employment contract. Thus, there are no facts that support the conclusion that Sowers' employment contract was unreasonable or otherwise unjust. Because the forum selection clause included in Sowers' employment contract is valid and enforceable, this Court has personal jurisdiction over Sowers.

DDR maintains that it is an Arizona company with no Minnesota contacts. DDR does not do business in Minnesota, nor is it licensed to do so. Nevertheless, Eagle Creek argues that the minimum contacts of its agents-Jones and Kush- establish jurisdiction over DDR. Eagle Creek cites Personalized Brokerage Serv., LLC v. Charles Luicius, et al., in support of its argument that this Court has personal jurisdiction over DDR. 2006 WL 208781, *3 (D. Minn. Jan. 25, 2006). That case is distinguishable, however, because the owners of the ...


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