Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Neopart Transit, LLC v. Management Consulting, Inc.

United States District Court, E.D. Pennsylvania

February 23, 2017

NEOPART TRANSIT, LLC, Plaintiff,
v.
MANAGEMENT CONSULTING, INC., JESHUA SMITH AND ROBERT MONTGOMERY, Defendants.

          MEMORANDUM

          ANITA B. BRODY, J.

         Plaintiff Neopart Transit, LLC (“Neopart”) brings suit against Management Consulting, Inc. (“Mancon”) as well as two individual defendants, Jeshua Smith and Robert Montgomery (the “Individual Defendants”). Neopart makes eleven separate allegations in its Complaint, sounding in both tort and contract, including Misappropriation of Trade Secrets, violation of the Defend Trade Secrets Act, Unfair Competition, Breach of Contract, Conversion, and Intentional Infliction with Prospective Business Advantage. Mancon and the Individual Defendants move to dismiss this suit for lack of personal jurisdiction over the Individual Defendants, as well as improper venue, and failure to state a claim on which relief can be granted. I exercise jurisdiction over this dispute pursuant to federal question jurisdiction, 28 U.S.C. § 1331, and supplemental jurisdiction, 28 U.S.C. § 1367.

         I. BACKGROUND

         Plaintiff Neopart and Defendant Mancon are competitors in the parts management and supply chain services market. Neopart deals primarily with transit authorities and bus manufacturers to provide bus parts and parts management services. Mancon's line of business is broader-they provide a wide array of services including staffing and industrial products, as well as transit parts management. Neopart is a Delaware limited liability company with its principal place of business in Sinking Springs, Pennsylvania.[1] Undisputed Facts ¶ 1, Joint Statement as to Undisputed and Disputed Facts Relevant to Personal Jurisdiction and Venue (“JSF”), ECF No. 60. Mancon is a Virginia corporation with its principal place of business in Virginia Beach, Virginia. Undisputed Facts ¶ 5, JSF.

         From 2010 until 2015, Neopart provided parts management services for transit buses at the Rochester-Genesee Regional Transport Authority (“RGRTA”) in Rochester, New York. Undisputed Facts ¶ 3, JSF. The RGRTA is a public benefit corporation of the State of New York. N.Y. Pub. Auth. Law § 1299-dd. Neopart provided these services to the RGRTA pursuant to a Parts Management Services Agreement dated February 12, 2010. Undisputed Facts ¶ 3, JSF. To effectuate performance of this contract, Neopart hired several individuals to carry out work at the RGRTA, including the Individual Defendants Jeshua Smith and Robert Montgomery.[2] Smith and Montgomery were already working at the RGRTA facility, although as employees of NAPA Auto Parts, the previous owner of the parts management service contract. Defs.' Disputed Facts ¶ 2-3, JSF. They are both residents of New York. Undisputed Facts ¶ 9, JSF.

         Although Pennsylvania personnel participated in the recruitment and hiring process, Neopart interviewed and hired Smith and Montgomery in New York for employment in New York. Undisputed Facts ¶ 10, JSF. As a condition of their employment, both Individual Defendants signed Confidentiality Agreements. Compl. ¶ 42-43, ECF No. 1. These agreements did not contain choice-of-law or forum selection provisions. Neither Smith nor Montgomery signed employment agreements. Although neither Individual Defendant was ever assigned to work outside of New York, both attended a one-day training session in Honey Brook, Pennsylvania in March 2011.

         In December 2014, the RGRTA decided to seek new bids for its parts management contract. It issued a request for proposals to which both Neopart and Mancon, among others, submitted bids. Undisputed Facts ¶ 7, JSF. On April 28, 2015, Mancon was awarded the RGRTA contract. Compl. ¶ 25. Neopart claims that Mancon, which allegedly had never provided parts management services for transit buses before, colluded with New Flyer, a transit bus parts distributor, to undermine Neopart's bid and secure the contract for itself. Compl. ¶ 20-24. Neopart claims that Mancon's request for proposal to the RGRTA required the use of confidential information and trade secrets that belonged to Neopart. Compl. ¶ 33. These trade secrets are “Neopart's methods of identifying unique supplier that provide parts for transit buses; its pricing arrangements with suppliers; its methods of storeroom operations; the identities and compensation or employees; and its unique inventory management.” Compl. ¶ 26. These alleged trade secrets were created and stored at Neopart's headquarters in Pennsylvania. Pl.'s Resp. Mot. Dismiss 12, ECF No. 27.

         As servicers of the RGRTA parts management contract had done in the past, Mancon sought to hire employees who already worked at the RGRTA. On May 22, 2015, in the midst of this turnover process, Neopart alleges that Mancon obtained copies of Neopart's trade secrets from the RGRTA. Compl. ¶ 36. Neopart claims that on June 17 and June 22, 2015, Mancon requested and Montgomery and Smith provided access to Neopart's trade secrets and other confidential information. Compl. ¶ 44-51. Neopart alleges that these requests were sent by Mancon to the personal email addresses of Smith and Montgomery. Neopart also alleges that on July 7, 2015, Montgomery provided Mancon with a credit application for one of Neopart's suppliers, in violation of his Confidentiality Agreement. Compl. ¶ 50. Further, in Montgomery's final days of employment with Neopart, Neopart alleges that he downloaded email files and other documents to a thumb drive and gave it to Robert Whitley, a Mancon executive. Pl.'s Disputed Facts ¶ 15, JSF; Montgomery Dep. 80:17-81:20; 109:2-10. Neopart claims that all of this occurred while Montgomery and Smith were still employees of Neopart. Compl. ¶ 51. On August 12, 2015, Montgomery and Smith left their positions with Neopart and became employees of Mancon. Compl. ¶ 51.

         On June 17, 2016, Neopart filed a Complaint in this Court against Mancon and eight individuals. ECF No. 1. On July 13, 2016, Mancon and the eight individuals moved to dismiss Neopart's Complaint in its entirety. ECF No. 15. On November 16, 2016, the parties voluntarily dismissed six of the individuals named in the Complaint, leaving only Jeshua Smith and Robert Montgomery as individual defendants. ECF No. 37. Neopart now asserts eleven claims against Mancon and the Individual Defendants, separately and collectively: (1) Misappropriation of Trade Secrets in violation of the Pennsylvania Uniform Trade Secrets Act, 12 Pa.C.S. §5301, et seq., (“PUTSA”), as to all Defendants; (2) Violation of the Defend Trade Secrets Act of 2016, 18 U.S.C. §1836, as to all Defendants; (3) Unfair Competition as to Mancon; (4) Breach of Contract as to the Individual Defendants; (5) Unjust Enrichment as to all Defendants; (6) Breach of Fiduciary Duty as to the Individual Defendants; (7) Aiding and Abetting the Breach of Fiduciary Duty as to all Defendants; (8) Conversion as to all Defendants; (9) Civil Conspiracy as to all Defendants; (10) Intentional Interference with Prospective Business Advantage as to all Defendants; and (11) Preliminary and Permanent Injunction pursuant to 12 Pa.C.S. § 5303 as to all Defendants. ECF No 1.

         II. DISCUSSION

         Mancon moves to dismiss this action primarily on two grounds: lack of personal jurisdiction over the Individual Defendants pursuant to Fed.R.Civ.P. 12(b)(2), and improper venue pursuant to Fed.R.Civ.P. 12(b)(3).[3] In the alternative, Mancon moves to dismiss several claims pursuant to Fed.R.Civ.P. 12(b)(6). Mancon asserts that New York law applies to this action and it moves to dismiss Counts I, VIII and XI as not cognizable under New York law. Further in the alternative, Mancon moves to dismiss Counts V, VI, VII and IX as not cognizable under Pennsylvania law, in the event Pennsylvania law applies to this action.

         A. PERSONAL JURISDICTION OVER THE INDIVIDUAL DEFENDANTS

         According to Fed.R.Civ.P. 12(b)(2), a court must grant a motion to dismiss if it lacks personal jurisdiction. “To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of establishing the court's jurisdiction over the moving defendants.” Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 97 (3d Cir. 2004). When a court restricts its review of the motion to affidavits and written evidence and does not hold an evidentiary hearing, the plaintiff need only make a prima facie showing that jurisdiction is proper. Id.; see also Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 142 n. 1 (3d Cir. 1992). At this stage, a plaintiff is entitled to have disputed facts construed in his or her favor. Pinker v. Roche Holdings Ltd., 292 F.3d 361, 368 (3d Cir. 2002) (citation omitted).[4] Plaintiff, however, must support allegations with affidavits or other competent evidence. See Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir. 1996).

         A federal court sitting in Pennsylvania may exercise jurisdiction over nonresident defendants to the extent provided under Pennsylvania law. See Fed. R. Civ. P. 4(k)(1). Pennsylvania's long-arm statute is co-extensive with the due process requirements of the United States Constitution. See 42 Pa. C.S.A. § 5322(b); Mellon Bank (East) PSFS, Nat'l Ass'n v. Farino, 960 F.2d 1217, 1221 (3d Cir. 1992). Thus, a court may exercise personal jurisdiction over a defendant as long as the defendant has “certain minimum contacts with . . . [Pennsylvania] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” O'Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 316 (3d Cir. 2007) (internal quotations and citation omitted). Analysis of personal jurisdiction requires a court to “examine the relationship among the [defendants], the forum, and the litigation.” Miller Yacht Sales, Inc., 384 F.3d at 96 (internal quotations and citation omitted).

         A court may have either general or specific personal jurisdiction over a nonresident defendant. Dollar Sav. Bank v. First Sec. Bank of Utah, N.A., 746 F.2d 208, 211 (3d Cir. 1984). General personal jurisdiction exists only when a defendant's contacts with a forum are “so continuous and systematic as to render [it] essentially at home in the forum State.” Daimler AG v. Bauman, 134 S.Ct. 746, 761 (2014) (quotations and citation omitted). Neopart concedes that the Individual Defendants are not “at home” in Pennsylvania and therefore are not subject to general personal jurisdiction. Pl.'s Resp. Mot. Dismiss 6. The only question, therefore, is whether this Court has specific jurisdiction over the Individual Defendants.

         Specific jurisdiction exists “when the claim is related to or arises out of the defendant's contacts with the forum.” Dollar Sav. Bank, 746 F.2d at 211. Usually, a court determines specific jurisdiction on a claim-by-claim basis. O'Connor, 496 F.3d at 318. Claim-specific analysis is appropriate for analyzing a case with both contract and tort claims because “there are different considerations in analyzing jurisdiction over contract claims and over certain tort claims . . . .” Remick v. Manfredy, 238 F.3d 248, 255-56 (3d Cir. 2001). However, claim-specific analysis may not be necessary “for certain factually overlapping claims.” O'Connor, 496 F.3d at 318 n. 3; see also Bhd. of Locomotive Eng'rs & Trainmen v. United Transp. Union, 413 F.Supp.2d 410, 417 (E.D. Pa. 2005) (“[W]here the considerations in analyzing jurisdiction do not differ between particular claims, a claim specific analysis is not necessary.”). Because Neopart's statutory, contract and tort claims all stem from the same conduct, the alleged misappropriation of confidential information and trade secrets, a claim-specific analysis is not necessary. See Defs.' Resp. to Supp. Br. on Jurisdiction and Venue 5, ECF No. 46 (“Here, Neopart's claims all arise from the same factual allegations.”).

         The Third Circuit has outlined a three-prong test for determining the existence of specific personal jurisdiction. Specific personal jurisdiction exists when: (1) the defendant “purposefully directed [its] activities” at the forum; (2) the litigation “arise[s] out of or relate[s] to” at least one of the defendant's activities in Pennsylvania; and (3) the exercise of jurisdiction comports with notions of ‘fair play and substantial justice.'” O'Connor, 496 F.3d at 317 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)). In intentional tort cases, if a court finds jurisdiction lacking after applying the preceding test, courts employ the Calder v. Jones effects test, which requires that: (1) a nonresident defendant committed an intentional tort; (2) the plaintiff felt the brunt of the harm in the forum; and (3) the defendant “expressly aimed” its tortious conduct at the forum. 465 U.S. 783, 789 (1984).

         The Individual Defendants Montgomery and Smith argue that they are each nonresidents of Pennsylvania and that they lack sufficient contacts with Pennsylvania to support the exercise of specific personal jurisdiction over them. Neopart contends, however, that specific personal jurisdiction exists in Pennsylvania over the Individual Defendants because the claims arise from their employment with a Pennsylvania company. I find that Neopart has alleged sufficient contacts to support the exercise of personal jurisdiction.

         1. Purposeful Availment

         The threshold inquiry is whether the defendant “purposefully avails itself of the privilege of conducting activities within the forum [s]tate.” Hanson v. Denckla, 357 U.S. 235, 253 (1958). Physical presence in the forum is not required, but a party must “deliberate[ly] target[]” the forum. O'Connor, 496 F.3d at 317 (internal quotations omitted). While “informational communications, ” such as intermittent phone calls or letters in furtherance of a contract, are insufficient on their own to establish jurisdiction, Vetrotex Certainteed Corp. v. Consolidated Fiber Glass Prods., Co., 75 F.3d 147, 152 (3d Cir. 1996) (citation omitted), “mail and telephone communications sent by the defendant into the forum may count toward the minimum contacts that support jurisdiction.” Grand Entm't Group, Ltd. v. Star Media Sales, Inc., 988 F.2d 476, 482 (3d Cir. 1993). In assessing jurisdiction for breach of contract claims, a court must consider “the totality of the circumstances, including . . . the parties' actual course of dealing.” Remick, 238 F.3d at 256; see also Burger King, 471 U.S. at 479 (“[C]ontemplated future consequences [of the contract] . . . must be evaluated in determining whether the defendant purposefully established minimum contacts with the forum.”). The Supreme Court has “emphasized the need for a highly realistic approach that recognizes that a contract is ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction.” Burger King, 471 U.S. at 479 (quotations omitted).

         In analyzing “purposeful availment” in suits by employers against nonresident employees, courts in this Circuit have found jurisdiction proper when “all of the essential functions that allowed [the nonresident employee] to earn a living were channeled through Pennsylvania.” Numeric Analytics, LLC v. McCabe, 161 F.Supp.3d 348, 355 (E.D. Pa. 2016). These “essential functions” include “payroll, benefits . . . [m]edical coverage, medical benefits, and retirement plans.” Id. Other Circuits have found an employee's contacts with a forum state “purposeful” even when such communications are required by the employer. Equifax Servs., Inc. v. Hitz, 905 F.2d 1355, 1359 (10th Cir. 1990) (“[W]hen forum contacts are a natural result of a contractual relationship, it indicates purposeful affiliation with the forum through an interstate contractual relationship.”); see also Burger King, 471 U.S. at 479-81. Furthermore, with respect to claims of misappropriation of trade secret claims against former employees, courts have found that purposeful availment is established when the former employee learns of trade secrets only as a consequence of his or her employment. See Thermal Components Co. v. Griffith, 98 F.Supp.2d 1224, 1229 (D. Kan. 2000) (“By misappropriating the trade secrets to which the individual defendants became privy only as a result of their employment by the plaintiff, and by using that information to interfere with [plaintiff's] pre-existing and future contractual relations . . . the individual defendants' previous employment relationship with[ a forum state] resident establishes the requisite contacts with the forum state.”).

         Although this is a close case, I find that the Individual Defendants have purposefully availed themselves of conducting activities in Pennsylvania. They were indeed interviewed in New York, hired in New York, and signed their Confidentiality Agreements in New York, but they nonetheless were employed by and interacted with a Pennsylvania corporation on a near daily basis. First, communicating with Pennsylvania was a necessary component of the Individual Defendants' employment. Montgomery's immediate supervisor, Paul Delong, was located in Pennsylvania and the two exchanged emails approximately three times a week. Montgomery Dep. 21:23-22:9. Montgomery regularly contacted the Neopart facility in Pennsylvania for questions related to parts, emergency orders and other issues related to RGRTA parts management. Montgomery Dep. 22:14-22. Performing Montgomery's job necessitated contact with Pennsylvania because approximately 30 to 50 percent of the parts supplied to the RGRTA project came from Neopart's facility in Honey Brook, PA. Boade Aff. ¶ 8, attached as Ex. A to Pl.'s Resp. Mot. Dismiss, ECF No. 27 (“Boade Aff.”). The email server by which each of the Individual Defendants conducted their job requirements was located in Pennsylvania. Boade Aff. ¶ 9. Over a two-year period of time, Neopart alleges that Montgomery and Smith sent, received or were copied on more than 10, 000 emails with Neopart personnel in Pennsylvania.[5]

         Also, the Individual Defendant's very ability to earn a living was channeled through Pennsylvania. At the time of hire, Neopart alleges that Smith and Montgomery completed paperwork that documented the employee's connection to Honey Brook. Boade Aff. ¶ 9. Neopart alleges that both Individual Defendants received paychecks from Pennsylvania, and each of their yearly tax documents listed Honeybrook, Pennsylvania as their employer's address. Boade Aff. ¶ 7; 2014 W-2 Forms, attached as Ex. 7-3 to Boade Aff. Both Individual Defendants visited their employer's home office in Pennsylvania in 2011. When Montgomery received a promotion to Parts Manager in June 2012, his offer letter listed “Honeybrook, Pennsylvania” as his employer's address. Boade Aff ¶ 9. Montgomery exchanged emails with human resources personnel in Pennsylvania on a regular basis, and he interacted with Human Resources personnel in Pennsylvania for all of his vacation and benefits. Montgomery Dep. 21:4-22. Smith as well made numerous, regular, sometimes daily phone calls to Honeybrook, PA. Boade Aff. ¶ 8.

         Finally, Neopart contends that the confidential information and trade secrets allegedly misappropriated by the Individual Defendants were created and prepared in Pennsylvania. Pl.'s Resp. Mot. Dismiss 12; Boade Aff. ¶ 12. Neopart alleges that the thumb drive Montgomery gave to Mancon executive Randy Whitman contained proprietary information and trade secrets that were downloaded from a computer connected to Neopart's computer servers in Pennsylvania. Pl.'s Disputed Facts ¶ 15, JSF.

         The Individual Defendants' contacts with Pennsylvania satisfy the purposeful availment requirement. Although the Individual Defendants were hired in New York to perform work in New York, they knew they were entering into a relationship with a Pennsylvania company. Amenability to suit in that jurisdiction is an “anticipated future consequence” of such a relationship. Burger King, 471 U.S. at 479. The contacts between the Individual Defendants and Neopart personnel in Pennsylvania were not merely “informational communications” but more “entangling contacts” that occurred on a near daily basis. Remick, 238 F.3d at 256. In order to both perform their jobs and earn a living, both Individual Defendants made repeated contacts with Pennsylvania. The realities of modern day electronic commerce, in which employees can perform their jobs remotely, call for a “highly realistic approach” to assessing purposeful availment in the personal jurisdiction context. When, as here, “all of the essential functions” that allowed Smith and Montgomery “to earn a living” and perform their jobs “were channeled through Pennsylvania, ” Numeric Analytics, LLC, 161 F.Supp.3d at 355, I find that both Individual Defendants have made purposeful contact with this state.

         2. Relatedness

         Once purposeful contact with the forum is identified, the analysis proceeds to the second step of the specific personal jurisdiction inquiry, the relatedness requirement. A plaintiff's claims must “arise out of or relate to” a defendant's forum contacts. For claims to “arise out of or relate to” a defendant's contacts, the “causal connection can be somewhat looser than the tort concept of proximate causation, but it must nonetheless be intimate enough to keep the quid pro quo proportional and personal jurisdiction reasonably foreseeable.” O'Connor, 496 F.3d at 323 (citation omitted). The inquiry is “necessarily fact-sensitive.” Id. “The animating principle behind the relatedness requirement is the notion of a tacit quid pro quo that makes litigation in the forum reasonably foreseeable.” Id. at 322.

         Neopart has satisfied the relatedness requirement. Neopart's claims are inherent to their employment relationship with the Individual Defendants. As explained above, it was reasonably foreseeable that, upon agreeing to employment with a Pennsylvania company and interacting with that company each day, Smith and Montgomery could be subject to suit in Pennsylvania. Courts in this Circuit have ruled that an action against a nonresident employee for breach of an employment-related agreement with a Pennsylvania company “certainly arise[s] out of and relate[s] to [the employee's] contacts with Pennsylvania.” Numeric Analytics, LLC, 161 F.Supp.3d at 355. What's more, Smith and Montgomery only had access to Neopart's trade secrets as a consequence of their employment. Smith and Montgomery became privy to Neopart's methods of identifying unique suppliers, pricing arrangements, and inventory management methods via emails and telephone calls to Pennsylvania and access to Pennsylvania computer ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.