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Armstrong Development Properties, Inc. v. Ellison

United States District Court, W.D. Pennsylvania

April 14, 2014





This case arises out of the "West Coast Operations" of Butler, Pennsylvania-based real estate developer Plaintiff Armstrong Development Properties, Inc., ("ADPI"). (Docket No. 32). ADPI challenges the activities of six of its former employees in its offices in California and Arizona, Defendants, SG Ellison, Peter G. Shimkus, Brandon M. Stein, William R. McDermott, Christopher Czyz, and Alesha Karlsson, (collectively, the "Former Employees"). ( Id. at ¶¶ 9-11, 15-22, 24). ADPI alleges that the Former Employees set up a competing business, Defendant First Street Development, LLC, ("First Street"), while still working at ADPI, and misappropriated ADPI's confidential and proprietary information which they took with them upon their departure, downloading files containing such materials from their computers and smartphones. ( Id. at ¶¶ 9-11, 126-186). ADPI believes that the Former Employees and First Street are now using such information to unfairly compete with it for real estate development business in "West Coast" markets. ( Id. ). In addition to suing the Former Employees and First Street, ADPI has also sued three other individuals who are allegedly investors in First Street or business partners of the Former Employees in their new venture, Defendants David Grieve, Mark Miller and Brett Del Valle, (collectively "Non-Employees"), all of whom are residents of California. ( Id. at ¶¶ 12, 27-28).

Defendants have filed three separate motions arguing that this case should be dismissed for lack of personal jurisdiction under Rule 12(b)(2), improper venue under Rule 12(b)(3), and/or for failure to state a claim under Rule 12(b)(6). (Docket Nos. 41, 44, 46). Alternatively, each of the Defendants maintains that this matter should be transferred to one of the United States District Courts in California pursuant to 28 U.S.C. § 1404(a). ( Id. ). Plaintiff opposes all of these Motions, which have now been fully and exhaustively briefed by all of the parties, with the Court having received responses, opposing briefs, replies and sur-replies as to each motion. ( See Docket Nos. 53-59; 61-62; 65-67). Upon consideration of the parties' positions, and for the following reasons, Defendants' Motions [41], [44], [46] will be granted, in part and denied, in part. Specifically, Defendants' Motions to Transfer will be granted; the Motions challenging personal jurisdiction and venue in this District will be denied, as moot; and, the Motions to Dismiss for failure to state a claim will be denied, without prejudice, with leave to refile same in the transferee court, i.e., the United States District Court for the Eastern District of California.


As noted, ADPI maintains its corporate headquarters in Butler, Pennsylvania and also has offices in California and Arizona, through which it conducts its "West Coast Operations" in the states of California, Arizona, Utah, New Mexico, Nevada, Colorado, and Oklahoma. (Docket No. 32 at ¶ 8). ADPI admits that this case emanates from disputes with its Former Employees who previously worked in its "West Coast" offices. ( Id. at ¶¶ 1, 6-7). Of the Former Employees, Defendants Ellison, Shimkus, Stein, Czyz and Karlsson worked out of ADPI's Phoenix, Arizona office while McDermott worked out of its Sacramento, California office. ( Id. at ¶ 55). Defendants Ellison and Shimkus each held the title of Vice President with the company and supervised the other Former Employees. ( Id. at ¶¶ 9-11). In their roles, Defendants Ellison and Shimkus reported directly to the President of ADPI, Doug Kyle, who works out of its Butler headquarters. ( Id. at ¶¶ 9-11, 30). ADPI's Butler headquarters was involved with business strategy of the "West Coast" offices and also provided back office support to the employees at those locations, including certain information technology and human resources functions. ( Id. ). Accordingly, the Former Employees maintained significant contact with the Butler headquarters throughout their employment, particularly Ellison, who reported and corresponded with his direct supervisor, President Kyle, on a near daily basis. ( Id. at ¶¶ 9-11, 30).

ADPI contends that the Former Employees improperly accessed and downloaded its confidential and/or proprietary information from their electronic devices while they were physically located at the "West Coast" offices but that this information was stored on ADPI's servers at the Butler headquarters. ( Id. at ¶¶ 9-11, 30, 126-186). ADPI argues that these activities were undertaken for the purpose of damaging ADPI's "West Coast" operations and to permit their newly formed entity, First Street, to unfairly compete with ADPI for business in that area. ( Id. ). ADPI continues that Defendants Ellison and Shimkus also recruited the other Former Employees to join them in this new venture and that they have since participated in the unfair competition. ( Id. at ¶ 11). Specifically, ADPI believes that the Defendants' activities collectively have impaired its relationship with its primary client on the "West Coast, " CVS Pharmacy, Inc., ("CVS"), for which it has acted as a real estate developer and built many CVS retail stores in that area. ( Id. at ¶ 9-12). To this end, ADPI claims that CVS determined that ADPI was not able to compete for fifteen potential CVS development sites in, among other states, California and Arizona. ( Id. at ¶¶ 187-209).

ADPI maintains that the Non-Employees facilitated the loss of the CVS business, particularly Miller, who was the former Regional Vice President of Real Estate for CVS and the person in charge of the relationship between ADPI and CVS, until he was terminated by CVS on September 26, 2013. ( Id. at ¶¶ 12, 28). ADPI further alleges that the confidential and proprietary information taken by the Former Employees includes information which is subject to its Preferred Development Agreement with CVS, thereby causing ADPI to be in breach of such agreement.[1] ( Id. at ¶¶ 57-81).

Through its Amended Complaint, ADPI seeks both injunctive relief and damages against the Former Employees but admits that it has separately initiated very similar claims against them in AAA arbitration in Pittsburgh pursuant to their respective employment agreements which expressly provide that "any claims" arising out of their employment would be subject to arbitration in Pittsburgh. ( Id. at ¶¶ 2-6). Such employment agreements contain confidentiality clauses, which were allegedly breached, but do not contain any non-compete provisions. (Docket Nos. 38-40). ADPI seeks injunctive relief against the Former Employees for claims asserted against them during their employment[2] but has also advanced claims for money damages against the Former Employees "for their misconduct outside of their employment and, thus, beyond the scope of the Arbitration including, but not limited to, misrepresenting themselves as ADPI in the relevant market." (Docket No. 32 at ¶ 6). As to First Street and the Non-Employees, ADPI brings claims for both damages and injunctive relief based on their having engaged in conspiratorial activities with the Former Employees and the harm they have allegedly caused to ADPI's "West Coast Operations." (Docket No. 32 at ¶¶ 6-7).

Defendants seek dismissal of this case and/or a transfer of venue to a District Court within California. (Docket Nos. 41, 44, 46). Only Non-Employee Defendant Miller specifies the District within California to which he would prefer such a transfer as he suggests that the case should be transferred to the Central District of California, near his home in the Los Angeles area. (Docket No. 45). First Street maintains offices in Phoenix, Arizona, within the District of Arizona and Sonoma, California, within the Northern District of California. (Docket No. 32 at ¶¶ 21-22). Of the Former Employees, only McDermott resides in California, while the others (Smikus, Ellison, Stein, Czyz, and Karlsson) live in Arizona. ( Id. at ¶¶ 15-20). The Non-Employees, Miller, Grieve and Del Valle, reside in either the Central or Northern Districts of California. ( Id. at ¶¶ 24, 27-28). Finally, aside from the Former Employees having previously worked in the "West Coast" Offices of Pennsylvania-based ADPI, it has adduced no evidence or even alleged that any of the Defendants have a legitimate personal or business connection to the Western District of Pennsylvania. ( See generally Docket No. 32).

ADPI states that it has a strong preference for this case to remain in this District due to its headquarters being located here and the harm it allegedly felt within this District caused by Defendants' actions. (Docket Nos. 54, 56, 58). It also cites the ongoing AAA arbitration against the Former Employees in the Pittsburgh area. (Docket No. 32 at ¶¶ 2-6). Yet, ADPI admits that neither First Street nor the Non-Employees are involved in the arbitration and also that its claims against the Former Employees for their activities during their employment at ADPI are limited to preliminary injunctive relief. ( Id. ). ADPI argues that its main witness in this action, President Kyle, works out of the Butler Office, but acknowledges that his duties include being the direct supervisor of all of the "West Coast Operations, " including over the Former Employees. ( Id. at ¶ 30). ADPI also maintains electronic records in Butler and that office provides back office support to the "West Coast" locations, but there is no evidence that the records could not be produced in another judicial District. ( Id. ). ADPI has not proposed an alternative district in the event of a transfer but, despite its loss of the Former Employees, it continues to operate offices in Sacramento, California, within the Eastern District of California and Phoenix, Arizona, within the District of Arizona. ( Id. at ¶ 8).

In short, this case involves disputes between two real estate developers with competing offices within the same judicial District in Phoenix, Arizona, and across two separate judicial Districts in California, i.e., the Eastern and Northern Districts. Further, according to Google Maps, the opposing California offices of these entities in Sonoma and Sacramento are 72.8 miles apart and separated by an estimated drive time of a little over an hour on Interstate 80 ("I-80").[3] However, First Street's Sonoma office is located approximately 2, 555 miles away from ADPI's headquarters in Butler, Pennsylvania, which, coincidentally, could be reached by driving across the country on I-80 for an estimated 37 hours.


ADPI initiated this case by filing its Complaint against all of the Defendants on November 1, 2013. (Docket No. 1). Shortly thereafter, ADPI filed a Motion for Preliminary Injunction, (Docket No. 4), and Brief in Support, (Docket No. 5), to which Defendant Miller promptly responded by filing a Motion to Dismiss and Brief in Support, (Docket Nos. 24-25). ADPI next filed an Amended Complaint, (Docket No. 32), and a Motion for a Temporary Restraining Order, (Docket No. 30), without re-filing its previously submitted Motion for Preliminary Injunction. The Court entered an Order on December 23, 2013, denying ADPI's Motion for a Temporary Restraining ...

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