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Liberty Fencing Club LLC v. Fernandez-Prada

United States District Court, E.D. Pennsylvania

July 14, 2017



          ROBERT F. KELLY, Sr. J.

          Presently before the Court is Defendant Kenneth D. Fernandez-Prada's ("Fernandez -Prada") Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6), Plaintiff Liberty Fencing Club LLC's ("Liberty Fencing") Response to Defendant's Motion to Dismiss, and Defendant's Reply Brief in Further Support of His Motion to Dismiss the Amended Complaint. For the reasons noted below, Defendant's Motion is denied.

         I. BACKGROUND[1]

         Liberty Fencing is a limited liability company that provides fencing lessons, training, coaching facilities, tournaments, and other activities to a variety of clients. (Id. ¶¶ 1, 6.) Marshal Davis ("Davis"), a "top active coach" at Liberty Fencing, and Fernandez-Prada were close friends for a number of years. (Id. ¶¶ 3, 7, 9.) Arising out of that close friendship, Davis hired Fernandez-Prada to work for Liberty Fencing as a coach. (Id. ¶ 3.)

         On April 16, 2013, Liberty Fencing and Fernandez-Prada entered into a "Coach Agreement, " ("Coach Agreement" or "Agreement") where Fernandez-Prada agreed to provide private and paired fencing lessons to Liberty Fencing customers as an independent contractor. (Id. ¶ 10.) The Coach Agreement also allowed Fernandez-Prada to provide lessons and coaching to Swarthmore College, as well as to the general public, but that Liberty Fencing would receive a portion of the profits. (Id. ¶ 11.) The Agreement had a term of five years and would terminate on April 16, 2018.[2] (Id. ¶ 12.) Fernandez-Prada agreed to perform the duties and responsibilities in the Agreement, which included "giving lessons on his own time, making his own schedule . . . and giving lessons in accordance with his own program." (Coach Agreement § 1(b).) The Agreement further stated that "Coach is free to follow his own pattern of work."[3] (Id.)

         The Coach Agreement also contained a number of covenants that are relevant to the Amended Complaint. The Agreement contained a "Covenant Not to Compete, " which provides that

Coach agrees that during the Term and, for an additional period of two (2) years thereafter, he shall not directly or indirectly, as an employee of any person or entity (whether or not engaged in business for profit), individual proprietor, partner, agent, consultant, independent contractor, stockholder, officer, director, joint venturer, investor, lender or in any other capacity whatsoever, participate, directly or indirectly in the Company business, except on Company's behalf within fifty miles of the Premises and any other or subsequent location at which the Company's business is being conducted.

(Id. § 5(a).) Regarding a covenant of "Nondisclosure, " Fernandez-Prada agreed that, for two years following the term, he would not

reveal, disclose or make known to any third party, or use for his own benefit or for the benefit of any third party, any confidential or other proprietary information relating to Company, Company's services, the markets, clients, customers, suppliers, contacts or current or planned business operations of Company, or any of Company's shareholders, subsidiaries or affiliates (the "Confidential Information"), whether or not obtained with the knowledge and permission of Company and whether or not developed, devised or otherwise created in whole or in part by the efforts of the Company.

(Id. § 5(b) (emphasis omitted).) Lastly, the Agreement contained a "Non-Solicitation" provision, where Fernandez-Prada agreed that following a two-year period after the term, he would not

recruit or solicit any employee, customer, former customer, customer family member, or supplier of Company, or otherwise induce such employee, customer, former customer, customer family member, or supplier to leave the employment of Company or to cease doing business with Company, as applicable, or to become an employee of or otherwise be associated or do business or take fencing classes or lessons with Coach or any individual, club, company, firm, corporation, business, or institution with which Coach is or may become associated in any capacity. Customers include anyone who at any time participated in any lessons, classes, camps, or competitions at the Company and/or on its Premises.

(II § 5(c).)

         After signing the Coach Agreement, Fernandez-Prada regularly taught fencing classes at Liberty Fencing approximately two to three days per week. (Am. Compl. ¶ 17.) He also gave private fencing lessons to Liberty Fencing students and began traveling with customers to provide coaching at tournaments held around the country, which is a concept known as "strip coaching." (Id.)

         According to Liberty Fencing, it developed an elite fencing program with exponential growth in the first twenty months Fernandez-Prada began working there. (Id. ¶ 18.) Around January 2015, however, Fernandez-Prada informed Davis of a job opportunity in London and his intent to terminate the Agreement three years early. (Id. ¶ 22.) Liberty Fencing claims that despite Fernandez-Prada's "plans" to go to London for a job opportunity, he remained in the area and thus could have honored the Coach Agreement by continuing to coach at Liberty Fencing. (Id¶26.)

         Additionally, and around the same time, Fernandez-Prada accompanied "two of [Liberty Fencing's] most valuable students/customers" to a national tournament run by USA Fencing. (Id. ¶ 28.) While at these tournaments, coaches would follow the "Strip Coaching Policy, " (id.; Ex. 4 ("Strip Coaching Policy")), which Liberty Fencing claims both Fernandez-Prada and Davis jointly drafted. (Id. ¶¶ 28, 29.) The Strip Coaching Policy was "the official [Liberty Fencing] policy for all coaches and students. . . ." and "[a]ll coaches, including [Fernandez-Prada], agreed to be bound by the terms of [it]." (Id. ¶ 29.) Under the Strip Coaching Policy, students would pay Liberty Fencing, who in turn would pay coaches a portion of the proceeds. (Id. ¶ 30.) Liberty Fencing alleges that during the entirety of the aforementioned tournament, Fernandez-Prada solicited payment directly from a student and the student's father in direct violation of the Strip Coaching Policy. (Id. ¶ 31.) Liberty Fencing claims it was never paid a portion of the proceeds by either the student (or his father) or Fernandez-Prada. (Id. ¶ 32.)

         Liberty Fencing also avers that in the same timeframe, Fernandez-Prada affiliated himself with Zeljkovic Fencing Academy ("ZFA"), a direct competitor that is located only six miles away from Liberty Fencing. (Id. ¶ 34.) According to Liberty Fencing, Davis found out that Fernandez-Prada had fabricated his London job opportunity in an effort to join, compete, and promote ZFA, all of which was in direct violation of the Coach Agreement. (Id. ¶ 35, 44.) Liberty Fencing claims Fernandez-Prada's affiliation with ZFA lasted until at least December 2015, and that he registered himself as a member of ZFA on the USA Official Fencing Membership List from August 1, 2015 through July 31, 2016. (Id. ¶¶ 38, 39.) In addition, Liberty Fencing contends that Fernandez-Prada sent emails to current and former Liberty Fencing students to join ZFA and/or take lessons or coaching directly from him, which constitutes solicitation of Liberty Fencing students. (Id. ¶ 36, 41.) He also appeared on Facebook alongside former Liberty Fencing customers who were dressed in ZFA apparel. (Id. ¶ 37.) Lastly, Liberty Fencing alleges Fernandez-Prada shared confidential information about Liberty Fencing's fencers, proprietary coaching information and techniques, details about his coaching relationship and exit from Liberty Fencing, as well as the operations, philosophies, strategies, tactics, and coaching knowledge of Liberty Fencing. (Id. ¶ 40.)

         On April 10, 2017, Liberty Fencing filed an Amended Complaint against Fernandez-Prada alleging breach of contract and unjust enrichment. (Am. Compl.) Liberty Fencing claims this Court has subject matter jurisdiction over the case by the way of diversity of citizenship pursuant to 28 U.S.C. § 1332(a). (Id. ¶ 4.) On May 2, 2017, Fernandez-Prada filed the instant Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Specifically, Fernandez-Prada contends that we lack subject matter jurisdiction over the Amended Complaint because Liberty Fencing cannot meet the amount in controversy requirement in 28 U.S.C. § 1332(a). (Def's Mem. Support Mot. to Dismiss at 5.) He also argues that Liberty Fencing's claims of breach of contract and unjust enrichment fail as a matter of law and should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). (Id. at 1.)


         A. Rule 12(b)(1) Standard

          "The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs, and is between citizens of different states." 28 U.S.C. § 1332(a). The diversity statute requires that there be complete diversity between the parties, meaning that "each defendant is a citizen of a different State from each plaintiff." Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373 (1978). The statute further requires that the amount in controversy exceed $75, 000 in order to properly invoke diversity jurisdiction. 28 U.S.C. § 1332(a); Auto-Owners Ins. Co. v. Stevens & Ricci Inc., 835 F.3d 388, 394-95 (3d Cir. 2016). The party asserting subject matter jurisdiction bears the burden of proving its existence. Lincoln Ben. Life Co. v. AEI Life, LLC, 800 F.3d 99, 105 (3d Cir. 2015) (citing DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342 n.3 (2006)); Morgan v. Gay, 471 F.3d 469, 474 (3d Cir. 2006).

         A party may challenge the court's subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). "At issue in a Rule 12(b)(1) motion is the court's 'very power to hear the case.'" Petruska v. Gannon Univ., 462 F.3d 294, 302 (3d Cir. 2006) (quoting Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977)) (footnote omitted). A motion filed under Rule 12(b)(1) may take two forms: (1) a facial attack, where the party contesting subject matter jurisdiction attacks the face of the complaint; or (2) a factual attack, where the existence of subject matter jurisdiction is attacked as a matter of fact. See id. n.3. "A facial attack concerns an alleged pleading deficiency[, ] whereas a factual attack concerns the actual failure of a plaintiffs claims to comport factually with the jurisdictional prerequisites." Lincoln Ben., 800 F.3d at 105 (internal quotation marks and alterations omitted); Constitution Party of Pa. v. Aichele, 757 F.3d 347, 358 (3d Cir. 2014).

         When a party files a Rule 12(b)(1) motion that mounts a facial attack to subject matter jurisdiction, a court may consider only "the allegations of the complaint and documents referenced therein and attached thereto, in the light most favorable to the plaintiff." Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). In reviewing a factual attack, on the other hand, a court "may consider evidence outside the pleadings, " ii, but there is "no presumptive truthfulness attache[d] to plaintiffs allegations, " Mortensen, 549 F.2d at 891.

         It should be noted that in deciding a Rule 12(b)(1) motion on the allegation that the amount in controversy does not meet the jurisdictional minimum, "the sum claimed by the plaintiff controls if the claim is apparently made in good faith." St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (footnotes omitted). Additionally, in determining whether a case involves the jurisdictional amount, it must be '"apparent, to a legal certainty, that the plaintiff cannot recover the amount claimed, or if, from the proofs, the court is satisfied to a like certainty that the plaintiff never was entitled to recover that amount.'" Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 397 (3d Cir. 2004) (quoting Red Cab, 303 U.S. at 289).

         B. Rule 12(b)(6) Standard

         A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). Pursuant to Rule 12(b)(6), the defendant bears the burden of demonstrating that the plaintiff has failed to set forth a claim from which relief may be granted. Fed.R.Civ.P. 12(b)(6); see also Lucas v. City of Phila., No. 11-4376, 2012 WL 1555430, at *2 (E.D. Pa. May 2, 2012) (citing Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005)). In evaluating a motion under Rule 12(b)(6), the court must view any ...

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