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Us Investigations Services, LLC v. Susan Callihan and Sarah Leeann Baucom

April 19, 2012

US INVESTIGATIONS SERVICES, LLC, PLAINTIFF,
v.
SUSAN CALLIHAN AND SARAH LEEANN BAUCOM, DEFENDANTS.



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

MEMORANDUM OPINION AND ORDER OF COURT

Pending before the Court is the MOTION FOR PARTIAL SUMMARY JUDGMENT filed by Plaintiff, US Investigations Services, LLC (Document No. 70). The motion has been thoroughly briefed by all parties (Document Nos. 71, 88, 90, 91, 93, 95, and 97). The parties have fully stated their respective positions regarding the Concise Statement of Material Facts and have submitted numerous exhibits (Document Nos. 72, 74, 77,78, 78, 89, and 92). The motion is ripe for disposition.

PROCEDURAL BACKGROUND

The genesis of this lawsuit is the voluntary termination from employment of two trusted US Investigations Services, LLC ("USIS") employees, Susan Callihan ("Callihan") and Sarah LeeAnn Baucom ("Baucom"), who both immediately went to work for two direct competitors of USIS -- Jupiter Corporation ("Jupiter") and KeyPoint Government Solutions, Inc. ("KeyPoint"). Upon Callihan and Baucom terminating their employment, USIS discovered that Callihan and Baucom both had allegedly "caused sensitive, proprietary and restricted information and proposal information of USIS to be purloined from USIS' computers and services and, on information and belief, to be disclosed and possibly used by direct competitors of USIS. . . ."

Amended Complaint at 2. On March 18, 2011, USIS filed an eight-count Complaint in this Court against Callihan, Baucom, and another ex-USIS employee, Sharon Vernick.*fn1 On March 29, 2011, USIS filed its First Amended Complaint in which it dismissed Sharon Vernick as a defendant and all claims against her.

USIS has filed the instant motion in which it seeks summary judgment only as to Count I - breach of contract against Callihan; Count II - breach of contract against Baucom; and Count V - breach of fiduciary duty against both defendants. USIS is moving for summary judgment only as to Defendants' liability, as the exact amount of damages suffered by USIS remains to be calculated. See Pl's Br. at 45, n. 17.

Factual Background

USIS performs security and investigatory work for a number of clients, one of which is the United States Office of Personnel Management ("OPM"). On behalf of OPM, USIS conducts highly confidential employee background checks, record investigations, and security reviews of applicants seeking employment with the United States government. USIS performs this investigatory work pursuant to various contracts between USIS and OPM, each of which is competitively bid pursuant to federally mandated procurement procedures.

Callihan was employed by USIS from October 4, 1999 to January 21, 2011 and Baucom was employed by USIS from September 15, 2003 to January 24, 2011. Callihan was a team leader in the Military Records Unit at USIS, responsible for much of the security and investigatory work USIS performed under its existing contracts with OPM.

Baucom was an Operations Manager for USIS and was responsible for managing several aspects of USIS' work with OPM, including managing the Military Records Unit. In that capacity, she served as the supervisor for Callihan.

A. USIS Confidentiality Agreements With Callihan and Baucom

On September 6, 2001, Callihan signed, in connection with her employment with USIS, a Confidentiality, Non-Compete and Non-Solicitation Agreement ("Confidentiality Agreement"), which provides, in pertinent part, as follows:

"Proprietary Information" means the Company's trade secrets, customer lists, government data base information used or gathered by the Company for its customers, information provided to the Company by its Customers, and any and all information related to the Company's business operations or employees. (emphasis added.)

Callihan Confidentiality Agreement, at ¶ 1.b.

Employee recognizes and acknowledges that because of his or her duties and position of trust as an employee of the Company, he or she will obtain Proprietary Information. Employee agrees that he or she will not, during his or her employment with the Company or at any time thereafter, either directly or indirectly, disclose or use, without the prior written consent of the Company, any Proprietary Information; and that upon termination of his or her employment with Company promptly deliver to the Company all original and any copies of Proprietary Information.

Callihan Confidentiality Agreement, at ¶ 2 (emphasis added).

Employee agrees that during his or her term of employment and for a six (6) month period commencing on the last day of Employee's employment with Company, whether terminated for cause or otherwise, he or she may not without the Company's written consent, directly or indirectly . . .

e. disrupt or interfere or attempt to disrupt or interfere with any existing business relationship between the Company and its Customers. Callihan Confidentiality Agreement, at ¶ 3.

Baucom executed multiple Confidentiality Agreements throughout her career with USIS: on July 29, 2003; August 10, 2003; October 8, 2004; and June 27, 2006. Baucom's June 27, 2006 Confidentiality Agreement provides, in pertinent part, as follows:

"Proprietary Information" means the Company's trade secrets, customer lists, government data base information used to gather data for Company customers, and any and all information related to the Company's business operations or employees. (emphasis added.)

Baucom Confidentiality Agreement, at ¶ 1.b.

"Confidential Information" means any and all knowledge, information, data, methods or plans, which are now or any time in the future developed, used or employed by Company, which are treated as confidential by Company and not generally disclosed to the public and which relate to the business operations or financial affairs of Company, including, but not limited to, financial statements and information, marketing strategies, business development plans and product or process enhancement plans. (emphasis added.)

Baucom Confidentiality Agreement, at ¶ 1.d.*fn2

Employee recognizes and acknowledges that because of his or her duties and position of trust under this Agreement, he or she will obtain Proprietary and Confidential Information. Employee agrees that he or she will not, during or at any time after the term of this Agreement, either directly or indirectly, disclose or use, without prior written consent of the Company, any Proprietary or Confidential Information; and that upon termination of his or her employee with Company to promptly deliver to Company all original and any copies of the Company's Proprietary and Confidential Information.

Baucom Confidentiality Agreement, at ¶ 2 (emphasis added).

Employee states that during his or her term of employment and for a one (1) year period commencing on the last day of Employee's employment with Company, whether terminated for cause or otherwise, he or she may not without Company permission, directly or indirectly . ..

b. divert, disrupt, interfere with, disturb or take away, or attempt to divert, disrupt or interfere with, disturb or take away any existing business relationship between Company and any of its customers.

Baucom Confidentiality Agreement, at ¶ 3.b.

B. USIS' Contracts with OPM

Prior to 2011, USIS performed the majority of its work for OPM under a Background Investigations Support Services Contract (the "2006 Support Services Contract"), which was awarded by OPM to USIS in 2006. The 2006 Support Services Contract between USIS and OPM was scheduled to expire on June 30, 2011 and, as a result, OPM decided in November 2010 to "rebid" the work.

The services to be provided under the new 2011 Support Services Contract, however, were different than the services provided under the original 2006 Support Services Contract. For example, the 2006 Support Services Contract included a consolidated leads function, which pertained to the military records component of the contract.*fn3 However, OPM determined that the consolidated leads function work would now be provided under a separate contract (hereinafter referred to as the "Consolidated Leads Contract") and thus, sought separate proposals for the consolidated leads function and limited the range of potential prime contractors to include only qualifying small businesses.

Given the small business requirement, USIS decided not to bid for the Consolidated Leads Contract. In November 2010, USIS conducted Town Hall Meetings at the Roadhouse Cafeteria during which Michael Santelli ("Santelli"), USIS President of Information Management, informed USIS employees that USIS would not be pursuing the Consolidated Leads Contract. During his deposition, Santelli explained that the purpose of the meetings was to explain to USIS employees that they would no longer have functions in the military records division, but that USIS would help them in finding employment. USIS told its employees involved with military records that it would either (1) facilitate access to other employers or (2) work with employees who wanted to stay with USIS.

Santelli testified that shortly after conducting the Town Hall Meetings, USIS learned that a small business could partner with a larger company for the purpose of bidding on the Consolidated Leads Contract.*fn4 The small business would be the prime contractor, with the option to contract with a larger company, as a subcontractor. In early December, USIS was contacted by Jupiter to discuss a possible teaming arrangement to bid on the Consolidated Leads Contract. Santelli declined Jupiter's request and informed Jupiter that USIS was not going to pursue the contract. However, on or about December 21, 2010, USIS agreed to team with NT Concepts Corporation ("NT Concepts"), which would serve as the qualifying small business contractor.

USIS advised Baucom on December 21, 2010 that it would be jointly submitting a proposal for the Consolidated Leads Contract as a subcontractor to NT Concepts. Accordingly, as of December 2010, USIS was attempting to secure two OPM contracts: the "rebid" 2011 Support Services Contract directly and the Consolidated Leads Contract indirectly as a subcontractor to NT Concepts.

USIS and NT Concepts worked together to submit a detailed and comprehensive proposal for the Consolidated Leads Contract, which proposal was submitted to OPM on February 3, 2011. Baucom was heavily involved in the preparation of USIS' confidential proposals for both the 2011 Support Services Contract and the Consolidated Leads Contract. In fact, Baucom worked on the USIS 2011 Support Services Contract proposal up until November 2010 and worked on the USIS Consolidated Leads Contract proposal until the time she left USIS on January 24, 2011.

C. The Jupiter /KeyPoint Relationship and the Jupiter Job Fair

As stated supra, Jupiter and KeyPoint are competitors of USIS. For the purpose of bidding on the Consolidated Leads Contract, Jupiter was to team with KeyPoint. Jupiter was the designated small business enterprise and KeyPoint was to serve as the subcontractor to Jupiter.

Like USIS, KeyPoint was also directly bidding on OPM's 2011 Support Services Contract.

On or about December 14, 2010, Jupiter held an Open House / Job Fair, the purpose of which was to interview and recruit potential employees to assist in bidding on the Consolidated Leads Contract and performing work on the contract in the event Jupiter and KeyPoint were the successful bidders. Callihan and Sharon Vernick*fn5 attended the job fair.

On December 16, 2010, Callihan, Vernick, and Baucom met at a restaurant in Butler, Pennsylvania to discuss possible employment opportunities with Jupiter and each completed a Jupiter employment application. Baucom and Callihan gave their Jupiter employment applications to Vernick to fax to Jupiter's owners, Clyde and Pat Jupiter, which she did the next day, December 17, 2010.

Callihan testified in her deposition that she was looking for another job because, "I was looking for a promotional move. I also knew that at that time, I believe, that USIS was not going to be bidding on that contract, and I knew that portion of the contract [the Consolidated Leads Contract] would be going, that there would be other companies bidding on it." App. Ex. 2, Callihan Depo. at 47. Callihan further testified that she was not informed of USIS's decision to bid on the Consolidated Leads Contract until January 5, 2011, after she had already accepted a position with Jupiter.

Baucom testified in her deposition that she initially pursued employment with Jupiter because she did not consider Jupiter a competitor of USIS based on the decision of USIS not to bid on the Consolidated Leads Contract.

D. Employment with Jupiter and KeyPoint

While still employed by USIS, Vernick, Baucom, and Callihan negotiated the terms of their employment with Clyde Jupiter, CEO of Jupiter, and his wife, Pat. One of the terms of employment sought by the three women was indemnification against any claims that might be advanced against them by USIS in the future. Jupiter agreed to the indemnification language and agreed to defend Vernick, Callihan, and Baucom in connection with any litigation initiated by USIS.

On December 20, 2010, Jupiter, through its Human Resources Director, Wynette Fouche-Gibson, emailed a contingent offer letter to Baucom for employment with Jupiter. By email dated December 20, 2010, Baucom responded as follows: "We are still awaiting some advice from legal counsel Sharon [Vernick] has been speaking to in regards to proprietary information and also my role as holding a key personnel [position] on the Support Services' effort for USIS . . . ." App. Ex. 58 (emphasis added).

On December 22, 2010, Baucom sent the following email to Clyde Jupiter, Pat Jupiter, and Wynette Fouche-Gibson:

I wanted to let you know that due to a new project I have (sic) placed on with my current organization I feel as though it would be a conflict of interest to continue to pursue a position with Jupiter for the Consolidated Leads contract. I just learned of this yesterday late afternoon and took the evening to try and weigh everything and ensure I was making the best decision for both organizations. I very much appreciate your offer of a role within your organization and do truly believe that I would have enjoyed working for you and in the contract. I am currently at work is the reason I am not doing this via telephone but would gladly take some time later today to discuss over the phone if anyone would prefer further explanation. Again I apologize for the means of communication but wanted to get the information on my decision as soon as possible and do very much appreciate the opportunities that were offered to me this past week. Best regards in your endeavors in pursuing the OPM business.

Thanks,

LeeAnn Baucom

App. Ex. 58.

Baucom testified in her deposition that the "new project" she referred to in her email was the Consolidated Leads Contract that OPM was putting out for bids. On December 21, 2010, Baucom had been informed by her supervisor, Tracy Grasha, that USIS had decided to submit a proposal with NT Concepts for the Consolidated Leads Contract.

In her capacity as Operations Manager, Baucom was heavily involved in the preparation of USIS' confidential proposals for both the 2011 Support Services Contract and the Consolidated Leads Contract. In fact, Baucom had worked on the USIS 2011 Support Services Contract proposal up until November 2010 and worked on the Consolidated Leads Contract from December 22, 2010 until the time she left USIS on January 24, 2011.

Callihan received an initial contingent letter of employment from Jupiter on December 23, 2010, which contained the ...


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