Cdi Corp. v. HCL Am., Inc.
| Decision Date | 07 March 2019 |
| Docket Number | No. 5:17-CV-550-D,5:17-CV-550-D |
| Court | U.S. District Court — Eastern District of North Carolina |
| Parties | CDI CORPORATION, Plaintiff, v. HCL AMERICA, INC., Defendant. |
On October 2, 2017, CDI Corporation ("CDI" or "plaintiff") filed a complaint in Wake County Superior Court against HCL America, Inc. ("HCL" or "defendant"), alleging claims for breach of contract, tortious interference with contract, and violations of the Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1, et seq. [D.E. 1-4]. On October 30, 2017, HCL removed the action to this court pursuant to 28 U.S.C. § 1441 [D.E. 1]. On November 17, 2017, CDI filed an amended complaint [D.E. 14]. On December 1, 2017, HCL answered and counterclaimed for breach of contract [D.E. 24]. On December 21, 2017, CDI answered the counterclaim [D.E. 27]. On June 28, 2018, HCL moved for partial judgment on the pleadings concerning CDI's tortious interference with contract and UDTPA claims [D.E. 40] and filed a memorandum in support [D.E. 41]. On July 30, 2018, CDI responded in opposition [D.E. 43]. On August 13, 2018, HCL replied [D.E. 44]. As explained below, the court grants HCL's motion for partial judgment on the pleadings.
CDI provides recruitment and staffing solutions for companies in multiple industries, including industrial equipment, aerospace, chemicals, and energy. See Am. Compl. [D.E. 14] ¶¶ 1, 11.1 HCL provides information technology services to companies. See id. ¶ 1. On December 1, 2014, CDI and HCL entered a three-year contract under which CDI would provide temporary staffing and recruitment services to HCL. See id. ¶¶ 1, 16; Simons Aff. Ex. A [D.E. 17-1]. "Pursuant to the [a]greement, CDI would identify and provide to HCL certain temporary solutions for staffing projects with personnel who were experienced and skilled in certain computer functions." Am. Compl. [D.E. 14] ¶ 17.
On November 4, 2015, the parties amended the contract. See id. ¶¶ 1, 18, 21. The amendment provided that CDI would pay HCL $1.75 million to be a "lead vendor" of HCL, which "facilitate[d] HCL's efforts to consolidate resources onto CDI's payroll" to improve efficiency and decrease costs. Id. ¶¶ 18, 21; Simons Aff. [D.E. 16-1] ¶¶ 9, 12. Because CDI was a lead vendor, the contract required HCL to terminate its contracts with "Other Suppliers." See Am. Compl. [D.E. 14] ¶ 22. HCL also agreed not to engage in the practice known in the industry as "delayering." See id. ¶ 23. In other words, HCL agreed that it would not contract directly with CDI subcontractors or independent contractors performing work for HCL before December 1, 2017. See id. ¶¶ 2, 23; Simons Aff.[D.E. 16-1] ¶¶ 14, 20.
To perform under the contract, CDI contracted with numerous third-party subcontractors and independent contractors to provide temporary staffing solutions to HCL. See Am. Compl. [D.E. 14] ¶ 26. These subcontracts contained post-termination restrictive covenants prohibiting the subcontractors, independent contractors, and suppliers from working directly or indirectly with HCL "other than through CDI." Id. ¶ 27. Thus, while the contract between HCL and CDI prohibited HCL from directly or indirectly contracting with CDI's subcontractors and independent contractors beforeDecember 1, 2017, the subcontracts contained restrictive covenants prohibiting HCL from doing so after that date. See id. ¶ 28.
In March 2016, CDI learned that HCL hired a CDI subcontractor in violation of the contract. See id. ¶ 30; Simons Aff. [D.E. 16-1] ¶ 21. CDI raised this issue with HCL, and HCL assured CDI that HCL would not engage in any further delayering. See Am. Compl. [D.E. 14] ¶ 30. HCL, however, continued to do so. See id. ¶¶ 30-31, 36. Moreover, HCL demanded that CDI pay extra-contractual rebates "to receive the benefit of [CDI's] bargain." Id. ¶ 31. CDI alleges that HCL's conduct, including the demands for extra-contractual rebates and delayering of CDI's subcontractors, negatively affected CDI. See Dent Aff. [D.E. 15-1] ¶¶ 7-8; Simons Aff. [D.E. 16-1] ¶¶ 29-31.
On March 14, 2017, and May 23, 2017, CDI notified HCL that CDI's financial performance triggered a contractual condition requiring HCL to repay the $1.75 million that CDI paid for lead vendor status to CDI. See Am. Compl. [D.E. 14] ¶ 32; [D.E. 17-2]; [D.E. 16-5]. HCL's management allegedly acknowledged that HCL owes the $1.75 million to CDI, but HCL failed to repay CDI. See Am. Compl. [D.E. 14] ¶¶ 33. CDI also complied with an audit that HCL demanded concerning CDI's financial circumstances, which CDI alleges "confirmed CDI's entitlement to the $1.75 million payment." Id. ¶ 34. CDI further alleges that HCL's true intent in demanding the audit was to force renegotiation of the contract's anti-delayering terms. See id. ¶ 35. In July 2017, the parties met, and HCL conditioned resolving the repayment issue on an amendment to the contract that would permit HCL to contract with some of CDI's subcontractors directly. See id. CDI also claims that HCL's complaint that CDI deployed resources at a rate exceeding the "rate card" was also pretextual. See id. ¶¶ 37-38. Finally, CDI alleges that HCL failed to terminate its relationships with a majority of CDI's subcontractors and suppliers identified by CDI as required by the contract. See id. ¶ 39.
A party may move for judgment on the pleadings at any time "[a]fter the pleadings are closed—but early enough not to delay trial." Fed. R. Civ. P. 12(c). A court should grant the motion if "the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law." Park Univ. Enters. v. Am. Cas. Co. of Reading, 442 F.3d 1239, 1244 (10th Cir. 2006) (quotation omitted), abrogated on other grounds by Magnus, Inc. v. Diamond State Ins. Co., 545 F. App'x 750 (10th Cir. 2013) (unpublished); see Mayfield v. Nat'l Ass'n for Stock Car Auto Racing, Inc., 674 F.3d 369, 375 (4th Cir. 2012); Burbach Broad. Co. of Del. v. Elkins Radio Corp., 278 F.3d 401, 405-06 (4th Cir. 2002). A court may consider the pleadings and any materials referenced in or attached to the pleadings, which are incorporated by reference. See Fed. R. Civ. P. 10(c); Fayetteville Inv'rs v. Commercial Builders, Inc., 936 F.2d 1462, 1465 (4th Cir. 1991). A court also may consider "matters of which a court may take judicial notice." Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).
The same standard applies under Rule 12(c) and Rule 12(b)(6). See Burbach Broad. Co., 278 F.3d at 405-06. Thus, a court construes the facts and reasonable inferences "in the light most favorable to the [nonmoving party]." Massey v. Ojaniit, 759 F.3d 343, 347, 352-53 (4th Cir. 2014) (quotation omitted); see Clatterbuck v. City of Charlottesville, 708 F.3d 549, 557 (4th Cir. 2013), abrogated on other grounds by Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015); Burbach Broad. Co., 278 F.3d at 406. Nevertheless, when analyzing a motion for judgment on the pleadings, a court must determine whether a pleading is legally and factually sufficient. See Ashcroft v. Iqbal, 556 U.S. 662, 677-80, 684 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-70 (2007); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). Therefore, a pleading "must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 678(quotation omitted); see Twombly, 550 U.S. at 570; Giarratano, 521 F.3d at 302. Moreover, a court need not accept a pleading's legal conclusions drawn from the facts. See Iqbal, 556 U.S. at 678-79; Giarratano, 521 F.3d at 302. Similarly, a court "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation omitted).
Because subject-matter jurisdiction is based on diversity, the court applies state substantive law and federal procedural rules. See Erie R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002). The parties agree that North Carolina law applies to all claims. Accordingly, this court must predict how the Supreme Court of North Carolina would rule on any disputed state-law issue. See Twin City Fire Ins. Co. v. Ben Arnold-Sunbelt Beverage Co. of S.C., 433 F.3d 365, 369 (4th Cir. 2005). In doing so, the court must look first to opinions of the Supreme Court of North Carolina. See id. at 369; Wade v. Danek Med., Inc., 182 F.3d 281, 286 (4th Cir. 1999). If there are no governing opinions from that court, this court may consider the opinions of the North Carolina Court of Appeals, treatises, and "the practices of other states." Twin City Fire Ins. Co., 433 F.3d at 369 (quotation omitted). In applying state law, a federal court should not create or expand a state's public policy. See Time Warner Entm't-Advance/Newhouse P'ship v. Carteret-Craven Elec. Membership Corp., 506 F.3d 304, 314-15 (4th Cir. 2007); Wade, 182 F.3d at 286; St. Paul Fire & Marine Ins. Co. v. Jacobson, 48 F.3d 778, 783 (4th Cir. 1995).
CDI alleges that HCL is liable for tortious interference with contract See Am. Compl. [D.E. 14] ¶¶ 49-59. Under North Carolina law, a plaintiff must prove five elements to state a claim for tortious interference with contract: (1) a valid contract between the plaintiff and a third-party that gives the plaintiff a contractual right against the third-party, (2) the defendant knows of the contract, (3) the defendant intentionally induces the third-party "not to perform the contract," (4) the defendantacts without justification, and (5) the defendant's conduct causes actual damages to the plaintiff. Krawiec v. Manly, 370 N.C. 602, 606-07, 811 S.E.2d 542, 546 (2018); Embree Const. Grp. v. Rafcor, Inc., 330 N.C. 487, 498, 411 S.E.2d 916, 924 (1992); United Labs., Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988).
Under North Carolina's "economic loss rule," a plaintiff...
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