Focused Impressions, Inc. v. Sourcing Grp., LLC

• Decision Date: 16 April 2020
• Docket Number: Civil Action No. 19-cv-11307-ADB
• Citation: Focused Impressions, Inc. v. Sourcing Grp., Civil Action No. 19-cv-11307-ADB (D. Mass. Apr 16, 2020)
• Parties: FOCUSED IMPRESSIONS, INC. AND FOCUSED IMPRESSIONS TECHNOLOGY, LLC, Plaintiffs, v. THE SOURCING GROUP, LLC, Defendant. FOCUSED IMPRESSIONS, INC. AND FOCUSED IMPRESSIONS TECHNOLOGY, LLC, Plaintiffs, v. LYNN SMITH, Third-Party Defendant.
• Court: U.S. District Court — District of Massachusetts

FOCUSED IMPRESSIONS, INC. AND FOCUSED IMPRESSIONS TECHNOLOGY, LLC, Plaintiffs, v. THE SOURCING GROUP, LLC, Defendant.

FOCUSED IMPRESSIONS, INC. AND FOCUSED IMPRESSIONS TECHNOLOGY, LLC, Plaintiffs, v. LYNN SMITH, Third-Party Defendant.

Civil Action No. 19-cv-11307-ADB

UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS

April 16, 2020

MEMORANDUM AND ORDER ON THIRD-PARTY DEFENDANT SMITH'S MOTION TO DISMISS AND PLAINTIFFS' MOTION TO DISQUALIFY

BURROUGHS, D.J.

Focused Impressions, Inc.("FII") and Focused Impressions Technology, LLC("FIT")(collectively, "Plaintiffs"), brought this action against The Sourcing Group, LLC("TSG") alleging breach of contract and unfair and deceptive practices.[ECF No. 1-1at 5, 16].FII also filed a third-party complaint against Lynn Smith("Smith"), the former Chief Operating Officer ("COO") of FII and a former member of FIT.[ECF No. 38 ¶¶ 8, 10].Currently before the Court is Smith's motion to dismiss the third-party complaint and Plaintiffs' motion to disqualify Smith's counsel due to an alleged conflict of interest.[ECF Nos. 45, 43].For the reasons set forth below, Smith's motion to dismiss, [ECF No. 45], is GRANTED and Plaintiffs' motion to disqualify Smith's counsel, [ECF No. 43], is DENIED as moot.

I.BACKGROUND

As an initial matter, Smith notes that FIT was not a party to her employment agreement with FII (the "Smith Agreement") and asks the Court to dismiss the third-party complaint against her as to FIT.[ECF No. 46at 4-5;ECFNo. 38-1("Smith Ag.")at 1].Plaintiffs agree that FIT was not a party to the Smith Agreement and state that, despite the case caption on the third-party complaint which would suggest otherwise, FIT is not a party to that complaint.[ECF No. 52at 2].The Court will accordingly reference FII as the sole plaintiff in the third-party complaint against Smith.For the sake of clarity, assuming that FIT is a party to the third-party complaint by virtue of the caption, by the agreement of the parties that complaint is dismissed as to FIT.

A.Factual Background

For purposes of this motion, relevant facts are drawn from FII's third-party complaint against Smith,[ECF No. 38("Compl.")], and relevant documents referred to in the third-party complaint, and are viewed in the light most favorable to FII.Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90(1st Cir.2014).¹

Starting in 2015, FII's business was largely focused on managing relationships between paper and envelope suppliers and Liberty Mutual Insurance ("LMI").[Compl. ¶ 7].FII employed Smith as Chief Operating Officer ("COO") from May 2015 until she left the companyon November 30, 2017.[Id.¶ 8].Smith "was responsible for providing and overseeing customer service," maintaining consistent inventory for LMI, and managing the relationships between FII and its various clients.[Id.].FIT was formed in 2014 to create and sell software.[Id.¶ 9].Smith was a member and equity holder in that company from February 3, 2014 until December 1, 2017, during which time she also acted as the company's COO.[Id.¶ 10].In approximately September of 2017, Smith expressed her dissatisfaction with her involvement with FIT and proposed that FIT buy out her membership while also proposing to terminate her employment with FII.[Id.¶ 11].Smith and FII entered into a separation agreement, the Smith Agreement, which detailed the services she was to continue to provide as an independent contractor and also included both a mutual release of claims and a confidentiality provision.[Id.¶ 12;Smith Ag.at 2-4].The confidentiality agreement which is central to this case defines confidential information as:

any scientific, technical, trade or business secrets of [FII] or FIT, and any scientific, technical, trade or business materials that [FII] or FIT treats, or is obligated to treat, as confidential or proprietary, including, but not limited to, confidential information obtained by or given to [FII] about or belonging to its suppliers, licensors, licensees, partners, affiliates, customers, potential customers, or others.

[Smith Ag.at 4].With regard to confidential information, Smith was obligated to "maintain in confidence and not utilize Confidential Information except in performing services for [FII]."[Id.].She was also required to "not disclose any Confidential Information to any third party, except when specifically authorized in writing to do so for [the] purpose of furthering the business of [FII]."[Id.].The Smith Agreement was executed on November 10, 2017.[Id. at 7].

Prior to her separation from FII in 2017, Smith had been responsible for working with TSG, one of FII's clients and a supplier to LMI.[Compl. ¶ 17].Following her separation from FII, Smith, as an independent contractor, continued to provide services to TSG on FII's behalf.[Id.¶ 18].As both an employee and an independent contractor, she made $20,000 per month,though as an independent contractor the rate was adjustable after the first year based on FII's revenue from TSG.[Id.¶ 22].From December 1, 2017 through April 30, 2019, TSG made no material complaints to FII about Smith's performance.[Id.¶ 24].Beginning around December 2017, in addition to her work for TSG on behalf of FII, Smith began working directly for TSG as its Chief Marketing Officer.[Id.¶ 36].

Eventually, the relationship between FII, FIT, and TSG "began to deteriorate . . . ."[Compl. ¶ 25].FII and FIT filed suit against TSG and TSG responded by filing counterclaims.[Id.¶¶ 26, 29;ECF No. 1-1 ¶ 2].TSG alleged that Plaintiffs breached their agreement with regards to providing relationship management between TSG and LMI.[Compl. ¶ 30].FII now alleges that, if there was a breach of its agreement with TSG, Smith is responsible due to her obligations under the Smith Agreement.[Id.¶ 32].

Smith was exposed to confidential information about FII's clients, including The Regal Press, Inc.("Regal") and Wright Business Graphics, LLC("Wright"), including the prices these clients charged LMI for their products.[Compl. ¶ 35].TSG, Wright, and Regal were all FII's clients, but were also competitors.[Id.¶ 37].The complaint alleges that Smith used confidential information about Regal's pricing, which she had either obtained while working for FII or while working as an independent contractor for FII, to attempt to persuade LMI to buy products from TSG that were priced below Regal.[Id.¶¶ 38-39].Smith was not successful in these attempts.[Id.¶¶ 41-43].Smith later attempted to use Wright's pricing information to offer LMI products from TSG that were priced below Wright.[Id.¶¶ 44-45].Her attempts were again unsuccessful.[Id.¶¶ 46-47].

TSG terminated its agreement with FII and FIT, leading Smith to terminate the Smith Agreement on July 26, 2019.[Compl. ¶¶ 48, 50].Smith cited the loss of the agreement withTSG as the basis for her termination of the Smith Agreement.[Id.¶ 50].Smith is still employed by TSG.[Id.¶ 36].

B.Procedural Background

FII and FIT filed a complaint against TSG in Suffolk Superior Court on March 12, 2019, [ECF No. 1-1at 3], and an amended complaint on May 13, 2019, [id.].TSG filed its answer and counterclaims on June 3, 2019, [id.], and then filed a notice of removal on June 12, 2019, [ECF No. 1].On October 30, 2019, FII filed the third-party complaint against Smith, alleging breach of contract, common law implied contractual indemnity, breach of contract as to confidential information, breach of the implied covenant of good faith and fair dealing, tortious interference with contractual relationship, misappropriation of trade secrets in violation of Massachusetts General Laws ch. 93, §§ 42 et seq., and misappropriation of trade secrets in violation of 18 U.S.C. §§ 1831 et seq.See[Compl.].On December 12, 2019, FII filed a motion to disqualify Smith's counsel, who is also representing TSG.[ECF No. 43].Smith opposed, [ECF No. 50], and FII filed a reply brief, [ECF No. 58].On December 13, 2019, Smith moved to dismiss the complaint, [ECF No. 45], FII opposed, [ECF No. 52], and Smith filed a reply brief, [ECF No. 61].

II.LEGAL STANDARD

In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff, and draw all reasonable factual inferences in favor of the plaintiff.SeeGilbert v. City of Chicopee, 915 F.3d 74, 80(1st Cir.2019)."[D]etailed factual allegations" are not required, but the complaint must set forth "more than labels and conclusions,"Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555(2007), and must contain "factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory,"Gagliardi v. Sullivan,513 F.3d 301, 305(1st Cir.2008)(quotingCentro Médico del Turabo, Inc. v. Feliciano de Melecio, 406 F.3d 1, 6(1st Cir.2005)).The alleged facts must be sufficient to "state a claim to relief that is plausible on its face."Twombly, 550 U.S. at 570.

"To cross the plausibility threshold a claim does not need to be probable, but it must give rise to more than a mere possibility of liability."Grajales v. P.R. Ports Auth., 682 F.3d 40, 44-45(1st Cir.2012)(citingAshcroft v. Iqbal, 556 U.S. 662, 678(2009))."A determination of plausibility is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'"Id. at 44(quotingIqbal, 556 U.S. at 679)."[T]he complaint should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible."Hernandez-Cuevas v. Taylor, 723 F.3d 91, 103(1st Cir.2013)(quotingOcasio-Hernández v. Fortuño-Burset, 640 F.3d 1, 14(1st Cir.2011))."The plausibility standard invites a two-step pavane."A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80(1st Cir.2013)(citingGrajales, 682 F.3d at 45).First, the...