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SKF USA Inc. v. Okkerse

United States District Court, Third Circuit

January 15, 2014

SKF USA INC.
v.
PIETER JOHANNIS LEENDERT OKKERSE, ET AL.

MEMORANDUM

R. BARCLAY SURRICK J.

Presently before the Court is the Motion to Dismiss of Defendants Pieter Johannis Leendert Okkerse, Wayne Blanchard, Frank Powers, and Bobby Hampton (ECF No. 25). For the following reasons, the Motion will be denied.

I. BACKGROUND

A. Procedural Background

On August 30, 2013, Plaintiff, SKF USA, Inc. (“SKF”), filed this lawsuit against Defendants, Pieter Johannis Leendert Okkerse, Wayne Blanchard, Frank Powers, and Bobby Hampton. (Compl., ECF No. 1.) On the same day, Plaintiff filed a Motion for Preliminary Injunction (ECF No. 3), a Motion for Hearing on the Motion for Preliminary Injunction (ECF No. 8), a Motion for Expedited Discovery (ECF No. 5), and a Motion to Preserve Evidence (ECF No. 7). Plaintiff’s three-count Complaint alleges that Defendants violated a valid and enforceable non-competition agreement. (Compl.) Counts One and Two allege breach of contract and tortious interference with contract against all Defendants. (Id.) Count Three alleges tortious interference with prospective and/or contractual relations against Defendant Okkerse. (Id.)

On September 27, 2013, Defendants filed the instant Motion to Dismiss. (Defs.’ Mot., ECF No. 25.) Defendants’ Motion challenges personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2) and venue under Rule 12(b)(3). (Id.) Defendants also contend that Plaintiff has failed to state a claim upon which relief can be granted and ask for dismissal under Rule 12(b)(6). (Id.) On October 7, 2013, Plaintiff filed a Response in opposition to Defendants’ Motion. (Pl.’s Resp., ECF No. 26.)

B. Factual History[1]

Plaintiff is a Delaware corporation that provides a wide array of products and technology to a diverse industrial customer base. (Compl. ¶¶ 3, 11, 12.) Plaintiff employs thousands of employees in multiple states and maintains a principal place of business in Lansdale, Pennsylvania. (Id. at ¶ 3; St. Pierre Decl. ¶ 8, Pl.’s Resp. Ex. A.) On or about December 27, 2012, Plaintiff merged with its affiliate Machine Support USA Inc. (“Machine Support”). SKF was the surviving entity. (Compl.)[2] Machine Support is an organization that provides engineering services on a global scale. (Compl. ¶ 13.) Machine Support has a large customer base in the marine industry and has significant business operations in and around Houma, Louisiana. (Id. at ¶ 14.) Since at least 2010, SKF’s Lansdale, Pennsylvania headquarters has performed essential functions for Machine Support including payroll and human resources services. (St. Pierre Decl. ¶ 6.) The Lansdale, Pennsylvania headquarters also provides legal counsel with respect to customer contracts and other matters. (Id.)

Defendants are former employees of Machine Support and SKF.[3] Defendant Okkerse, who has resided in Louisiana for 2 years, was employed as the branch manager of Machine Support’s service department in Houma, Louisiana. (Compl. ¶ 4; Defs.’ Mot. 6.) Defendant Blanchard, a forty-six year resident of Louisiana, was employed as an alignment engineer. (Compl. ¶ 6; Defs.’ Mot. 6.) Defendant Hampton, a twenty-eight year resident of Louisiana was employed as a support engineer. (Compl. ¶ 7; Defs.’ Mot. 8.) Defendant Powers, has resided in Alabama for the past eighteen years and was employed as a machinist and support engineer. (Compl. ¶ 5; Defs.’ Mot. 7.) Defendants performed the majority of their work for Plaintiff in the state of Louisiana, with some work also being done in Texas, Alabama, Florida, Georgia, and Mississippi. (Defs.’ Mot. 6-8; St. Pierre Decl. ¶ 16.) Defendant Blanchard performed work in Pennsylvania in late 2010 through early 2011. (St. Pierre Decl. ¶ 16.) Defendants Powers and Hampton were also performing work in Pennsylvania when they terminated their employment with Plaintiff. (Id. at ¶ 13.) On or about July 26, 2013, Defendants resigned from Machine Support and began working for On Site Alignment LLC (“On Site”), a “direct competitor of Machine Support.” (Compl. ¶ 38.)

Sometime prior to terminating their employment with Plaintiff, Defendants had signed Employee Confidentiality and Non-competition Agreements (“Agreements”). (Id. at ¶ 18 & Exs. A, B, C, D.) The Agreements, which apply post termination, contain a choice of law provision stating that they are governed by “the substantive laws of the Commonwealth of Pennsylvania without reference to the choice of law provisions of Illinois or any other state.” (Id. at ¶ 11 & Exs. A, B, C, D.) The Agreements further state that “[a]ny disputes arising under this Agreement shall be tried in the courts sitting within the Commonwealth of Pennsylvania, and Employee hereby consents and submits his or her person to the jurisdiction of any such court for any such purpose.” (Id.) In addition, the Agreements stipulate that “([b]y executing this Agreement, Employee expressly represents that he or she had read it, understands its terms and has had the opportunity (whether exercised or not) to consult with legal counsel regarding it.”) (Id. at ¶ 14 & Exs. A, B, C, D.)

II. DISCUSSION

A. Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction

Defendants argue that Plaintiff’s Complaint should be dismissed because this Court lacks personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2). (Defs.’ Mot. 10.) Defendants’ argument is based on the assertion that the forum selection clause - “the sole potential basis for specific jurisdiction” - in this case is invalid. (Id.) More specifically, Defendants argue that Louisiana law, which generally prohibits choice of law, forum selection, non-competition, and non-solicitation clauses, should govern this action. (Id. at 12.) In the alternative, Defendants argue that the forum selection clause is not enforceable under Pennsylvania law. (Id. at 14-15.)

Plaintiff counters that the choice of law provision contained within the Agreements is valid and that under Pennsylvania law the forum selection clause should be upheld. (Pl.’s Resp. 8.) We address the choice of law question first since it is a primary basis upon which the parties’ arguments are based.

1.Choice of Law

It is well established that “[a] federal court exercising diversity jurisdiction must apply the choice of law rules of the forum state.” Kruzits v. Okuma Mach. Tool, Inc., 40 F.3d 52, 55 (3d Cir. 1994) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 497 (1941)). In Pennsylvania, courts will “generally honor the intent of the contracting parties and enforce choice of law provisions in contracts executed by them.” Id. More specifically, Pennsylvania has adopted Section 187 of the Restatement, (Second) of Conflict of Laws, which provides that the law of the chosen state will be applied:

unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no reasonable basis for the parties’ choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue . . . .

Id. (citing Schifano v. Schifano, 471 A.2d 839, 843 n.5 (Pa.Super. Ct. 1984)); Restatement (Second) of Conflict of Laws § 187 (1971).

i. Section 187(2)(a)

Defendants assert that we should apply Louisiana law because Pennsylvania does not have a substantial relationship to the parties or the transaction. (Defs.’ Mot. 11.) We disagree. It is well settled that when a corporation has a principal place of business within a state, that state bears a substantial relationship to the parties. Kruzits, 40 F.3d at 56; see also Perma-Liner Indus. Inc. v. U.S. Sewer & Drain, Inc., 630 F.Supp.2d 516, 522 (E.D. Pa. 2008) (finding that the contractually chosen state had a substantial relationship to the parties since it was the location where the plaintiff maintained its principal place of business); Intermetro Indus. Corp. v. Kent, No. 07-0075, 2007 WL 518345, at *2 (E.D. Pa. Feb. 12, 2007) (“Pennsylvania does have a substantial relationship to this matter as it is where [the plaintiff] maintains its principal place of business . . . .”). In the instant case, Plaintiff maintains a principal place of business in Lansdale, Pennsylvania. Therefore, we find that Pennsylvania bears a substantial relationship to the parties.

ii. Section 187(2)(b)

Section 187(2)(b) of the Restatement requires a two part inquiry. First, we must determine whether Louisiana has a materially greater interest in this case than Pennsylvania. Coface Collections N. Am. v. Newton, 430 F. App’x 162, 167 (3d Cir. 2011). If we determine that Louisiana has a materially greater interest, then we must decide whether application of Pennsylvania law would be contrary to a fundamental public policy of that state. Id.

Courts have differing views as to what is necessary to demonstrate a “materially greater interest.” The Court of Appeals for the Fourth Circuit and the Court of Appeals for the Eighth Circuit have held that the state in which an individual lives and works has a materially greater interest in the determination of an issue than the state in which a corporate litigant conducts business. Barnes Grp., Inc. v. C & C Prods., Inc., 716 F.2d 1023, 1030 (4th Cir. 1983) (striking down a choice of law clause and finding that a state’s interest in protecting its resident workers is greater than any generalized interest that a contractually chosen state has in applying its law to protect the interstate contracts of its domiciliary); DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 896 (8th Cir. 2006) (striking down a choice of law clause where the only connection to the chosen state was the plaintiff’s headquarters and principal place of business).

Similarly, the Court of Appeals for the Seventh Circuit and the Court of Appeals for the Tenth Circuit have held that a party’s incorporation within a state, standing alone, is an insufficient basis upon which to uphold a choice of law clause. For example, in Curtis 1000, Inc. v. Suess, the defendant was incorporated in the state of Delaware and headquartered in Georgia. 24 F.3d 941, 948-49 (7th Cir. 1994). The Seventh Circuit struck down the choice of law clause designating Delaware law because the defendant had no other connections to that state. Id. However, in dicta, the Court noted that a clause designating Georgia law would likely have been upheld since “Georgia has as much interest in regulating the out of state operations of ‘its firm’ as [the plaintiff’s state] does in protecting its citizens . . . .” Id. at 949; see, e.g., King v. PA ...


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