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CertainTeed Corp. v. Nichiha USA

October 29, 2009

CERTAINTEED CORPORATION, PLAINTIFFS
v.
NICHIHA USA, INC. AND BRUNO C. DEMEY DEFENDANTS



The opinion of the court was delivered by: Stengel, J.

MEMORANDUM OPINION

Defendant Nichiha USA, Inc. ("Nichiha") and Defendant Bruce Demey filed motions to dismiss, transfer, or stay on September 2, 2009 and September 5, 2009, respectively. For the reasons set forth below I will deny the motions.

I. FACTS

Plaintiff CertainTeed Corporation ("CertainTeed") and Nichiha are competitors in the business of manufacturing fiber cement. See First Amended Complaint at ¶ 40, CertainTeed Corp. v. Nichiha USA, Inc., No. 09-3932 (E.D. Pa. filed Sept. 3, 2009) [hereinafter First Amended Complaint]. Demey was employed by CertainTeed from March 2003 until he resigned on August 20, 2009. Id. at ¶ 18. Demey has accepted an offer of employment from Nichiha. Id. at ¶ 38.

CertainTeed's headquarters is located in Valley Forge, Pennsylvania, and it has manufacturing plants in Indiana, North Carolina, and Oregon. Id. at ¶¶ 1, 10. The majority of CertainTeed's confidential information and trade secrets are located in Valley Forge Pennsylvania, and its computer servers are located in Valley Forge. Id. at ¶ 16. Although Demey resided in South Carolina, he made repeated trips to Valley Forge, including trips to attend product development, business strategy, technical, and manufacturing-related meetings. See First Amended Complaint at ¶ 19.

While employed by CertainTeed, Demey was the Director of Manufacturing and Technology. Demey traveled between CertainTeed's plants and its headquarters. Id. at ¶ 23. He was the "highest ranking manufacturing and technical employee within CertainTeed's fiber cement siding business and knew virtually every manufacturing and technical aspect of the business." Id. at ¶ 24. This knowledge included information learned at, and presented to, CertainTeed's parent Saint-Gobain Corporation. Id. During his employment, Demey was familiar with, and was involved in the development of, confidential information and trade secrets, including information relating to manufacturing formulations and processes, product development plans, manufacturing processes and technical operations information. Id. at 26.

On September 16, 2004, Demey executed a Non-Compete Employee Agreement ("Non-Compete Agreement") with CertainTeed in exchange for a lump sum payment of $25,000. See First Amended Complaint at ¶ 29. Among other provisions, the Non-Compete Agreement states Demey shall "use his best efforts and diligence" both during and after his employment "to protect the confidential, trade secret, and/or proprietary nature of all Confidential Information." See First Amended Complaint at Exh. A at ¶¶ 4, 6. It also provides that during the one-year period following his termination he shall not, without written consent of a company officer, "engage in or contribute [his] knowledge to any work or activity that involves a product, process, apparatus, service or development . . . which is then competitive with or similar to" those he worked on while CertainTeed, or which he had gained confidential information about while at CertainTeed. Id. at ¶ 8. The Non-Compete Agreement provides Pennsylvania law would apply. Id. at ¶ 13. On June 25, 2009, Saint-Gobain Corporation wrote to Demey to further explain the terms of the Non-Compete Agreement. See First Amended Complaint at ¶ 67.

CertainTeed alleges prior to Demey's August 20, 2009 resignation, he negotiated a position with Nichiha as Director of Engineering and Manufacturing, and claims Demey had accepted an offer of employment before he resigned. Id. at ¶ 38. CertainTeed alleges Demey would use the confidential information and trade secrets obtained during his CertainTeed employment to fulfill his responsibilities with Nichiha. Id. at 52. It also alleges negotiations between Nichiha and Demey likely included disclosure of confidential information and trade secrets. Id. at ¶ 46. CertainTeed maintains Demey's employment with Nichiha is contingent upon the termination of Demey's non-compete obligations with CertainTeed. Id. at ¶ 62.

CertainTeed alleges a breach of contract claim and breach of fiduciary duty claim against Demey, a tortious interference with contractual relations claim and an unfair competition claim against Nichiha, and a violation of the Pennsylvania Uniform Trade Secrets Act, a violation of the South Carolina Trade Secrets Act, a violation of the North Carolina Trade Secrets Protection Act, a violation of the Indiana Uniform Trade Secrets Act, a violation of the Oregon Uniform Trade Secrets Act, and a civil conspiracy claim against Demey and Nichiha.

II. COURT PROCEEDINGS AND FILINGS

On August 24, 2009 Demey filed a complaint and motion for a preliminary injunction in the Superior Court of Fulton County, State of Georgia against CertainTeed seeking, inter alia, declaratory relief pursuant to Georgia State law "that the non-compete and non-disclosure terms of the Non-Compete Agreement are an impermissible restraint of trade and competition, and thus are unlawful, invalid, and unenforceable under Georgia law." Notice of Removal at Ex. 1, Verified Complaint for Declaratory Judgment and Other Injunctive Relief at ¶ 19, Demey v. CertainTeed Corp., No. 09-2338 (N.D. Ga. filed Aug. 26, 2009). Demey also sought an injunction preventing CertainTeed from taking action to enforce the covenants against Demey, recover damages or other remedies based on the covenants, or preclude or disrupt Demey's ability to engage in employment with Nichiha. Id. at ¶¶ 24-25.

On August 26, 2009, CertainTeed removed the state court action to the United States District Court for the Northern District of Georgia ("Georgia Action"). On September 2, 2009, United States District Court Judge Timothy C. Batten, Sr. granted Demey's motion for a temporary restraining order. The order enjoined CertainTeed from enforcing the non-competition covenant in Georgia, required Demey post a $15,000 bond with the Clerk, bound Demey to Georgia's trade secret laws, and granted expedited discovery. If Demey does not move to Georgia, Judge Batten indicated he would reconsider his ruling on the TRO and preliminary injunction.*fn1 On September 9, 2009, Nichiha and Demey filed a first amended complaint in the Georgia Action, which adds Nichiha as a party to the Georgia Action.*fn2

CertainTeed commenced this action in the Eastern District of Pennsylvania on August 28, 2009 ("Pennsylvania Action"). On August 31, 2009, it requested a preliminary injunction and temporary restraining order.*fn3

On September 2, 2009, Nichiha filed a motion to dismiss, transfer or stay the Pennsylvania Action. On September 3, 2009, CertainTeed filed a first amended complaint in the Pennsylvania Action, removing any ...


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