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Johnson v. Farm Journal, Inc.

United States District Court, E.D. Pennsylvania

August 1, 2019

GREGORY JOHNSON
v.
FARM JOURNAL, INC.

          MEMORANDUM

          Juan R. Sánchez, C.J.

         Plaintiff Gregory Johnson seeks an advancement of litigation expenses from his former employer, Defendant Farm Journal, Inc., for the defense of a lawsuit it filed against him in the Western District of Missouri (the Underlying Action). The Underlying Action alleges Johnson, inter alia, stole trade secrets, wrongly converted a Twitter account bearing his name, and breached his fiduciary duty. Johnson has moved for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65. In response, Farm Journal moved to transfer venue pursuant to 28 U.S.C. § 1404(a) to the Western District of Missouri where the Underlying Action is currently pending, or, in the alternative, to dismiss Johnson's advancement claim pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, Johnson's motion for a preliminary injunction will be denied and Farm Journal's motion will be granted insofar as the above-captioned case shall be transferred to the Western District of Missouri.

         BACKGROUND

         Farm Journal is “the nation's leading agricultural media company” and has been in business for more than 140 years. Farm Journal is a Pennsylvania corporation and is governed by its Amended and Restated Articles of Incorporation (the Articles) and Amended and Restated Bylaws (the Bylaws) in accordance with the Pennsylvania Business Corporation Law (BCL). The Articles were enacted and filed with the Pennsylvania Department of State on June 30, 1994. See Decl. of James M. Heiser ¶ 3, June 3, 2019. The Bylaws were enacted at an unknown later date as a result of a merger, in which Farm Journal was the surviving entity.[1] See Decl. of Jeffrey Pence Ex. A, at 1, May 20, 2019 (labeling the Bylaws “Exhibit C to Agreement and Plan of Merger, ” but not providing any identifying information regarding the merger).

         To receive advancement under both governing documents, the person seeking advancement must be entitled to indemnification. Farm Journal's Articles and Bylaws both contain provisions regarding indemnification and advancement, but neither governing document cross-references the other.

         With regard to indemnification, Farm Journal's Articles provide:

[e]ach person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, . . ., is or was a director, officer or employee of the Corporation . . . whether the basis of such proceeding is alleged action in an official capacity . . . or in any other capacity . . . , shall be indemnified and held harmless by [Farm Journal] to the fullest extent authorized by the Pennsylvania Business Corporation Law . . . against all expense, liability and loss . . . reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent . . . .

Compl. Ex. A, at 2 (emphasis added). The indemnification right set forth in the Articles also includes a right to advancement, stating:

[t]he right to indemnification conferred in this Section B shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided[, ] however, that if the Pennsylvania Business Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer . . .) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section B or otherwise.

Id. at 2-3 (italic emphasis added).

         Under Section 7.01(a) of the Bylaws, subject to certain exclusions not at issue here, Farm Journal “shall indemnify an indemnified representative against any liability incurred in connection with any proceeding in which the indemnified representative may be involved as a party or otherwise by reason of the fact that such person is or was serving in an indemnified capacity . . . .”[2] Decl. of Jeffrey Pence Ex. A, at 17. Section 7.01(d)(2) defines an “indemnified representative” as:

any and all directors of the corporation and any other person designated as an indemnified representative by the board of directors of the corporation (which may, but may not, include any person serving at the request of the corporation, as a director, officer, employee, agent, fiduciary, or trustee of any other corporation . . .).

Id. at 18 (emphasis added). With regard to advancement, Section 7.03 provides that Farm Journal:

shall pay the expenses (including attorneys' fees and disbursements) incurred in good faith by an indemnified representative in advance of the final disposition of a proceeding described in Section 7.01 . . . upon receipt of an undertaking by or on behalf of the indemnified representative to repay the amount if it is ultimately determined . . . that such person is not entitled to be indemnified . . . .

Id. (emphasis added).

         As an agricultural media company, Farm Journal publishes a trade publication known as The Packer. From December 2015 through July 2018, Johnson was an employee of Farm Journal and an editor of The Packer. In July 2018, Johnson left Farm Journal for employment with Blue Book Services, Inc., a credit and marketing information agency. On February 8, 2019, Farm Journal filed the Underlying Action against Johnson and Blue Book Services, alleging Johnson (1) “surreptitiously copied more than 11, 000 files from Farm Journal's internal computer network to a personal ‘DropBox' account, ” Compl. ¶ 13; (2) attached a USB storage device to his Farm Journal laptop and retrieved industry contact and source lists, see Id. ¶ 14; and (3) wrongfully converted a Twitter account bearing his name with 2, 500 followers, see Id. ¶ 17-18. Johnson retained Chapman and Cutler LLP to represent him in the Underlying Action.

         On March 28, 2019, Johnson demanded that Farm Journal advance the actual and reasonable legal expenses he will incur in connection with his defense of the Underlying Action pursuant to the Articles. Farm Journal denied Johnson's demand for advancement stating the advancement provisions of the Articles do not apply and he is not entitled to advancement. Following Farm Journal's denial of his advancement claim, Johnson filed the instant action on May 6, 2019. On May 13, 2019, Johnson moved for a preliminary injunction. On May 20, 2019, Farm Journal moved to dismiss the Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). The motions are now ripe for disposition.

         DISCUSSION

         A. Preliminary Injunction Motion

         The Court first turns to Johnson's motion for a preliminary injunction. A plaintiff seeking a preliminary injunction must establish “[1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” Winter v. Natural Res. Def. Council Inc., 555 U.S. 7, 20 (2008). A court may not grant injunctive relief, “regardless of what the equities require, ” unless the plaintiff establishes both a likelihood of success and irreparable harm. See Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir. 2000). The plaintiff's already difficult burden is further heightened in cases where, as here, the plaintiff is asking the Court to order the defendant to affirmatively act. See Bennington Foods LLC v. St. Croix Renaissance, Grp., LLP, 528 F.3d 176, 179 (3d Cir. 2008) (“[W]here the relief ordered by the preliminary injunction is mandatory and will alter the status quo, the party seeking the injunction must meet a higher standard of showing irreparable ...


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