Bhatia v. Vaswani
| Decision Date | 25 September 2019 |
| Docket Number | Case No. 18-cv-2387 |
| Parties | SUNIL BHATIA, individually and derivatively on behalf of MEDVALUE OFFSHORE SOLUTIONS, INC., Plaintiff, v. RAJU VASWANI, an individual, KARAN VASWANI, an individual, MV OUTSOURCING INC., an Illinois Corporation Defendants. RAJU VASWANI, individually and derivatively on behalf of MEDVALUE OFFSHORE SOLUTIONS, INC., an Illinois Corporation, Counter-plaintiff and Third-party Plaintiff, v. SUNIL BHATIA, an individual, Counter-defendant, and VARSHA BHATIA, an individual, Third-Party Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Sunhil Bhatia and Raju Vaswani spent more than a decade operating a business together. Now they are suing each other over the breakdown of their business relationship. Sunil1 accuses Raju of using funds and assets from their joint venture, MedValue Offshore Solutions, Inc., to starting a competing business with his son, and he asserts some claims on behalf MedValue. In counterclaims and a third-party complaint, Raju accuses Sunil and his wife of operating a side business with MedValue funds, and he also asserts some claims on behalf of MedValue.
Of the fifteen counts at issue, only two arise from federal statutes. Now before the Court are Defendant (and counter-plaintiff) Raju Vaswani's motion [51] to dismiss the second amended complaint [44], Defendant Karan Vaswani's motion [52] to dismiss second amended complaint, and Third-party Defendant Varsha Bhatia's motion [70] to dismiss the first amended counterclaims and third-party complaint [64]. Raju's and Karan's motions [51] and [52] are granted in part and denied in part. Specifically, the motions to dismiss are granted with respect to Counts V through X in the second amended complaint, which are dismissed for lack of subject matter jurisdiction. The motions are denied with respect to Counts I through IV in the second amended complaint. Plaintiff Sunil Bhatia is directed to refile his second amended complaint with only the remaining counts (I through IV) as well as a certification page that complies with 28 U.S.C. § 1746 by October 15, 2019. The Court also dismisses the first amended counterclaim and third-party complaint [64] for lack of subject matter jurisdiction. Varsha's motion [70] is stricken as moot. This case is set for further status hearing on October 23, 2019 at 9:00 a.m.
Plaintiff Sunil Bhatia is a citizen and resident of Illinois who resides in Will County, Illinois. Third-party Defendant Varsha Bhatia is Sunil's wife. MedValue Offshore Solutions, Inc. is a corporation organized and existing under Illinois law with its principal place of business located in Oak Brook, Illinois. Defendant Raju Vaswani is a citizen and resident of Illinois who resides in DuPage County, Illinois. Defendant Karan Vaswani, Raju's son, is a citizen and resident of Illinois who resides in Cook County, Illinois. Defendant Assivo, Inc. (formerly MV Outsourcing, Inc.) is a corporation organized and existing under Illinois law.
Venue is proper in this district pursuant to 28 U.S.C. § 1391 because the acts described in the second amended complaint took place in this district, and at all relevant times Defendants regularly and continuously conducted business within this district. This Court has original jurisdiction over Counts I and III of the second amended complaint under 28 U.S.C. § 1331 because MedValue is asserting claims for unfair competition under the Lanham Act (15 U.S.C. § 1125(a)) (Count I), and trade secret misappropriation under the Defend Trade Secrets Act (18 U.S.C. § 1831) (Count III). Whether the Court has supplemental jurisdiction over the remaining state-law claims pursuant to 28 U.S.C. § 1367(a) remains in dispute, as discussed below.
MedValue Offshore Solutions provides data entry, data capture, and data-processing services. Sunil and Raju started MedValue together in 2003. They began as equal co-owners, each holding 50% of the company's stock. Since the company's beginning, Sunil and Raju have been its only employees and the only members of its Board of Directors, with Raju serving as theChairperson, President, and CEO, and Sunil serving as the Treasurer, Secretary, Vice President, Chief Operating Officer, and Chief Technology Officer.
Sunil alleges that, in 2006, Raju offered to buy 10% of MedValue's shares from him, but never paid. As a result, Sunil claims that they are still 50/50 owners of MedValue. The second amended complaint seeks, among other things, a declaratory judgment pursuant to 735 ILCS 5/2-701 that Sunil and Raju each owns 50% of MedValue. In contrast, Raju's first amended counterclaim and third-party complaint [64] alleges that, while they started as 50/50 co-owners, Sunil transferred to Raju 4% of the company's shares in exchange for $40 in cash on February 16, 2004. It further alleges that Sunil transferred to Raju another 6% of MedValue's shares in exchange for $60 in cash on January 1, 2006. Raju seeks a declaratory judgment stating that he owns 60% of MedValue, and Sunil owns 40%.
MedValue began by using India-based suppliers to provide data entry services to U.S. based healthcare providers. By 2006, it expanded beyond the healthcare market. Around that time and corresponding with the expansion of the business, MedValue registered its second domain name (data-entry-services.com) and began offering services under the mark "MV Outsourcing Solutions." Around that time, MedValue also began using the mark "MV Outsourcing" in connection with its services as a shortened version of the "MV Outsourcing Solutions" mark.
According to Sunil, in May 2017, Raju sought to have his son Karan made a partial owner or an employee of MedValue. Karan prepared proposed marketing materials and a new logo for MedValue. See [44-3]. The proposed marketing materials contained a copyright notice for MedValue Offshore Solutions, Inc. Sunil refused to bring Karan into the company. In June 2017, Raju repeated the request to make Karan an employee or partial owner of MedValue. Sunil againrefused, and Raju threatened that he and Karan would start a separate, competing business to draw customers away from MedValue.
The second amended complaint asserts that Raju and Karan made good on that threat by registering the corporate entity MV Outsourcing, Inc. with the Illinois Secretary of State, registering "TaskGenie" as an assumed name, and creating two domains for the new business, task-genie.com and mvoutsourcing.com. (MV Outsourcing's name was later changed to Assivo, Inc.) The home page of the mvoutsourcing.com website displayed the name "MV Outsourcing" in connection with the promotion, marketing and sale of services that compete with MedValue's services. See [44-4]. The website also displayed a logo that is identical to the one Karan used in the marketing materials that Raju proposed for MedValue. The copyright notice at the bottom of mvoutsourcing.com states that the webpages are copyrighted work of "MV Outsourcing," not MedValue. The second amended complaint asserts that mvoutsourcing.com is controlled by Assivo, Raju, and Karan.
The second amended complaint also describes certain alleged trade secrets owned by MedValue, including "advertising keywords and search terms, landing pages, advertising messages, negative keywords, campaign budgets, advertising text, and Google bid amounts, as part of various advertising and marketing strategies to attract business to MedValue and its service, MV Outsourcing, including extensive use of search engine optimization ('SEO') techniques." [44] at 10-11. Information relating to MedValue's alleged trade secrets is stored in a password protected MedValue AdWords account with Google. The second amended complaint alleges that Raju removed Sunil's access to the MedValue AdWords account, gave administrative access to an email address at Assivo, and gave Karan and Assivo access to MedValue's alleged trade secrets, allowing Assivo to divert customers away from MedValue.
The second amended complaint also alleges that Raju misused a MedValue credit card. According to Plaintiff, for years Raju has charged MedValue's monthly marketing expenses to a credit card that MedValue pays off. Over the past year or so, the monthly charges have remained consistent, but Sunil says the charges are for Assivo's marketing expenses, not MedValue's, even though MedValue continues to pay off the card.
On April 3, 2018, Sunil filed his first complaint [1] in the case before this Court. After various motions and filings not essential to resolving the motions now before the Court, Sunil filed his second amended complaint [44] on September 28, 2018, alleging eight state law claims and two federal claims:
On December 7, 2018, Raju filed a motion to dismiss [51] the second amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(l), 12(b)(6) and 23.1,...
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