United States District Court, W.D. Pennsylvania
MEMORANDUM OPINION AND ORDER
C. MITCHELL United States Magistrate Judge.
Siemens Industry, Inc. (“Siemens”), brings this
action under Pennsylvania law against Defendant, Harry C.
Nagel (“Nagel”), alleging claims of breach of
contract, fraudulent inducement/ misrepresentation and breach
of loyalty arising out of a Settlement Agreement previously
reached between the parties.
submitted for disposition is a motion to dismiss, filed by
the Defendant. In response, Plaintiff agrees to withdraw
Count II of the Amended Complaint, the claim for fraudulent
inducement/misrepresentation, but opposes the motion in all
other respects. For the reasons that follow, the motion will
be granted with respect to Counts II and III of the Amended
Complaint and denied with respect to Count I.
to May 9, 2012, Nagel was one of two co-owners of PHW, Inc.
(“PHW”). (Am. Compl. ¶ 7.) On May 9, 2012,
Invensys Rail Corporation (“Invensys”) purchased
all of the shares of PHW from Nagel and John Harrison
(“Harrison”) pursuant to a Stock Purchase
Agreement (“SPA”). (Id. ¶ 8 &
Ex. B.) As consideration for the sale of PHW, Invensys paid
Nagel and Harrison $17, 000, 000. (Id. ¶ 9.)
Under the terms of the SPA, Nagel and Harrison were also
eligible to receive additional “Contingent
Consideration” if certain conditions were met during
the relevant Measurement Periods. (Id. ¶ 10.)
connection with the SPA, Nagel entered into an Employment
Agreement with Invensys pursuant to which he agreed to be
employed as Senior General Manager of the PHW business unit.
(Id. ¶ 12.) On May 2, 2013, Siemens acquired
Invensys and assumed the SPA and Nagel's Employment
Agreement. (Id. ¶ 13.) On April 3, 2015, Nagel
resigned from his employment with Siemens. (Id.
April 2015 and December 2015, Siemens and Nagel had
communications regarding both the calculation and payment of
Contingent Consideration to Nagel for the final Measurement
Period. (Id. ¶ 15.) Nagel and Siemens did not
agree on the terms and conditions for the Contingent
Consideration to be paid to Nagel, and Nagel threatened suit.
(Id. ¶ 16.) Ultimately, Siemens and Nagel
agreed to resolve their dispute, with Siemens agreeing to pay
Nagel a final Contingent Consideration payment in the amount
of $950, 000, in exchange for Nagel agreeing, among other
things, to release any and all rights and claims under the
SPA. (Id. ¶ 17.)
the course of these negotiations, Nagel represented to
Siemens that he had not removed or retained any information
or documents belonging to Siemens, other than some older,
duplicate files that predated the sale of PHW to Invensys.
(Id. ¶ 19.) This was a material term of the
parties' agreement to resolve their dispute, and was a
term that Siemens insisted be included in the Settlement
Agreement. (Id. ¶ 20.) On December 9, 2015,
Nagel executed the Settlement Agreement, agreeing to its
terms. (Id. ¶ 21 & Ex. A.) By the terms of
the Settlement Agreement, Nagel represented and agreed that
he had not “removed from [Siemens] or Invensys Rail
Corporation or retained in any form, including electronic
form, any original or duplicated confidential information of
[Siemens] or Invensys Rail Corporation or any modified or
extracted version thereof.” (Id. ¶ 22
& Ex. A ¶ 4.) Siemens agreed that: “in
consideration of [Nagel] signing and not revoking this
Agreement and the satisfaction of [his] other commitments
provided herein, [Siemens] will provide [Nagel] with certain
benefits…specifically a lump sum amount of $950,
000.” (Id. ¶ 23 & Ex. A ¶ 5.)
November 17, 2015, Nagel filed a complaint against Siemens in
the Court of Common Pleas of Allegheny County, Pennsylvania.
In that complaint, Nagel alleged claims for breach of his
Employment Agreement by Siemens and for violation of the
Pennsylvania Wage Payment and Collection Law
(“WPCL”). On December 17, 2015, Siemens removed
that case to this Court. (See Civil Action No. 2:15-cv-1669
(the “Nagel Action, ” ECF No. 1)). On
December 23, 2015, Siemens timely filed its Answer to
Nagel's Complaint and Affirmative and Additional Defenses
(“Answer”). (Nagel Action, ECF No. 3.)
22, 2016, during discovery, Nagel's counsel informed
Siemens that Nagel was in possession of flash drives and
other electronic devices containing, inter alia, a .PST file
with “over 30, 000 emails” dating from 2011 to
2015, including files converted to Siemens Exchange server
from the legacy PHW and Invensys systems” as well an
unspecified number of “documents from the Microsoft
Office suite (.doc, .xls, .ppt, etc.)” and PDFs.”
(Am. Compl. ¶ 29 & Ex. C.)
August 15, 2016, Siemens filed a Motion for Leave to File an
Amended Answer (“Motion to Amend”) to include the
affirmative defense of after-acquired evidence.
(Nagel Action, ECF No. 19). The Court subsequently
entered an Order granting Siemens' Motion to Amend and
Siemens filed its Amended Answer on September 6, 2016.
(Nagel Action, ECF Nos. 44, 45.) The Amended Answer
does not contain counterclaims.
August 19, 2016, Siemens filed an Emergency Motion seeking,
inter alia, a court order directing Nagel to return
Siemens' property, preserve Nagel's electronic data
sources, and produce Nagel's data sources to a forensic
examiner. (Am. Compl. ¶ 30; Nagel Action, ECF
No. 28.) On August 26, 2016, Nagel served his response on
Siemens and the Court via email, per the Court's
instruction. The parties engaged in further meet and confer
discussions on August 29, 2016. Siemens indicates that,
during those discussions, the parties agreed that all matters
addressed in the Emergency Motion would be resolved amicably
and notified the Court regarding same. Accordingly, on that
same date, the Court entered an Order dismissing, without
prejudice, Siemens' Emergency Motion. (Nagel
Action, ECF No. 35.) The parties engaged in further meet and
confer discussions and developed a mutually agreeable
protocol for the forensic examination of Nagel's data
sources. On November 8, 2016, the parties filed their
agreed-upon Stipulated Protocol for Forensic Inspection of
Nagel's Electronic Data Sources (“Forensic
Protocol”). (Nagel Action, ECF No. 49.) On
November 9, 2016, the Court issued an Order approving the
Forensic Protocol. (Nagel Action, ECF No. 50.) (Am.
Compl. ¶¶ 30-33.)
March 10, 2017, Siemens deposed Nagel. (Am. Compl. ¶
37.) During his deposition, Nagel admitted that he had: (1)
entered into a Settlement Agreement with Siemens which
contained the clause cited above; (2) taken and retained
confidential documents and information belonging to Siemens,
including documents containing bids, pricing, and other
financial information; and (3) knowingly retained this
confidential information in breach of the Settlement
Agreement until November 2016, when he was forced to turn
them over pursuant to the Forensic Protocol. (Am. Compl.
¶¶ 38-39 & Ex. D at 48-49, 51-54, 118-19.)
April 3, 2017, Plaintiff filed this action (ECF No. 1) and on
April 24, 2017, it filed an Amended Complaint (ECF No. 6).
Jurisdiction is based upon diversity of citizenship in that:
Plaintiff is a Delaware corporation with its principal place
of business in Alpharetta, Georgia; Defendant is a citizen of
Pennsylvania; and the amount in controversy exceeds the sum
of $75, 000.00, excluding interest and costs. (Am. Compl.
alleges a claim of breach of contract. Count II alleges a
claim of fraudulent inducement/misrepresentation. Count III
alleges a claim of breach of the duty of loyalty.
17, 2017, Defendant filed a motion to dismiss (ECF No. 12).
On August 7, 2017, Plaintiff filed a brief in opposition (ECF
No. 20) and August 22, 2017, Defendant filed a reply brief
(ECF No. 21).
Supreme Court has issued two decisions that pertain to the
standard of review for failure to state a claim upon which
relief could be granted. The Court held that a complaint must
include factual allegations that “state a claim to
relief that is plausible on its face.” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“[W]ithout some factual allegation in the complaint, a
claimant cannot satisfy the requirement that he or she
provide not only ‘fair notice' but also the
‘grounds' on which the claim rests.”
Phillips v. County of Allegheny, 515 F.3d 224, 232
(3d Cir. 2008). In determining whether a plaintiff has met
this standard, a court must reject legal conclusions
unsupported by factual allegations, “[t]hreadbare
recitals of the elements of a cause of action, supported by
mere conclusory statements;” “labels and
conclusions;” and “‘naked assertion[s]'
devoid of ‘further factual enhancement.'”
Iqbal, 556 U.S. at 678 (citations omitted). Mere
“possibilities” of misconduct are insufficient.
Id. at 679. The Court of Appeals has summarized the
inquiry as follows:
To determine the sufficiency of a complaint, a court must
take three steps. First, the court must “tak[e] note of
the elements a plaintiff must plead to state a claim.”
Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937,
1947, 173 L.Ed.2d 868 (2009). Second, the court should
identify allegations that, “because they are no more
than conclusions, are not entitled to the assumption of
truth.” Id. at 1950. Third, “whe[n]
there are well-pleaded factual allegations, a court should
assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.”
Id. This means that our inquiry is normally broken
into three parts: (1) identifying the elements of the claim,
(2) reviewing the complaint to strike conclusory allegations,
and then (3) looking at the well-pleaded components of the
complaint and evaluating whether all of the elements
identified in part one of the inquiry are sufficiently
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
Court of Appeals has explained that: “In deciding a
Rule 12(b)(6) motion, a court must consider only the
complaint, exhibits attached to the complaint, matters of
public record, as well as undisputedly authentic documents if
the complainant's claims are based upon these
documents.” Mayer v. Belichick, 605 F.3d 223,
230 (3d Cir. 2010) (citation omitted). Therefore, the
documents from the Nagel Action cited by the parties
and the Settlement Agreement may be considered without
converting the motion into a motion for summary judgment.
contends that: 1) all of Siemen's claims are compulsory
counterclaims that should have been filed in the
Nagel Action and are now waived; 2) the parol
evidence rule bars claims for fraudulent inducement and
misrepresentation; 3) Siemens cannot state claims for
fraudulent inducement and misrepresentation or breach of the
duty of loyalty, which are torts, because of the gist of the
action doctrine; and 4) Siemens has failed to plead
sufficient facts to state claims for breach of contract or
breach of the duty of loyalty.
noted above, Siemens agrees to withdraw Count II, the claim
for fraudulent inducement/misrepresentation. However, it
argues that: 1) counterclaims are not compulsory if they have
not “matured” at the time a defendant files an
answer and in this case the claim did not mature until
Nagel's deposition on March 10, 2017, nor do Siemens'
claims arise out of the same transaction and occurrence as
Nagel's claims in the Nagel Action; 2) the gist
of the action doctrine does not bar a claim for breach of the
duty of loyalty which is based on a societal fiduciary duty
rather than a contractual provision; and 3) it has
sufficiently stated claims for breach of contract and breach
of the duty of loyalty.
reply brief, Nagel argues that: 1) Siemens' claims
accrued before it filed its answer in the Nagel
Action and it could not have filed them in a supplemental
pleading; 2) the breach of contract and breach of the duty of
loyalty claims are insufficient; and 3) if Nagel removed
confidential information, he must have done so while employed
by Siemens and therefore the breach of the duty of loyalty
claim is mutually exclusive with the breach of contract claim
and the duties violated were contemplated by Nagel's
employment documents and thus the gist of the action doctrine
does apply to bar the claim.