gpac, LLP v. Andersen
| Decision Date | 10 May 2022 |
| Docket Number | 4:21-CV-4201-LLP |
| Parties | gpac, LLP, Plaintiff, v. BLAKE ANDERSEN and CYBERCODERS, INC., Defendants. |
| Court | U.S. District Court — District of South Dakota |
Pending before the Court are Defendant, Blake Andersen's (“Andersen”) Motion for Judgment on the Pleadings (Doc. 19) and Defendant, CyberCoders, Inc.'s (“CyberCoders”) Morion for Judgment on the Pleadings (Doc. 24.) For the following reasons, the motions will be denied.
Gpac is a recruiting company that provides personnel placement services. (Doc. 1-1, Complaint, ⁋ 1.) Gpac is a limited liability partnership with its principal place of business in Lincoln County. South Dakota, but gpac does business throughout the United States. (Id. ⁋⁋ 1 5.) Andersen, a Colorado resident, formerly worked as a recruiter for gpac. On January 17, 2019, Andersen signed an Account Executive Employment Agreement (“Agreement”) with gpac. A copy of the Agreement is attached as Exhibit A to the Complaint. (Doc. 1-1.)
Pursuant to the Agreement. Andersen was employed at gpac's “Office, ” which is defined at its location in Sioux Falls, South Dakota. (Agreement §§11 and 2.1.) In its Answer to CyberCoder's Counterclaim, gpac admits that “Andersen lived and worked in Colorado while employed by gpac at the time he resigned from gpac ” but gpac asserts that “Andersen lived and worked in South Dakota when the Agreement was executed.” (Doc. 7, Answer to Counterclaim, p 4.⁋19.) In his Memorandum in Support of Motion for Judgment on the Pleadings, Andersen admits that he signed the Agreement while working for gpac in South Dakota. (Doc. 20, p.10.) And again, in his Reply Brief, Andersen states:
Although Blake executed his EA while he lived in. and worked for GPAC, in South Dakota, he was intentionally transferred by GPAC to Colorado. By opening an office in Colorado, and by hiring Colorado residents to 'work for the company, GPAC assumed the legal obligation to follow Colorado's employment laws. While Blake's EA may not have been void when it was first executed, it became avoidable and unenforceable once GPAC chose to have Blake and others live and work for it in Colorado.
The Agreement contains four provisions that are relevant to the breach of contract allegations in Count 1 of the Complaint. The first is a nondisclosure provision in Section 8 of the Agreement which prohibits employees from using or disclosing “to any person the Company's Proprietary Information either during or after Employee's employment.” (Agreement § 8.2.) This provision also requires employees to return Proprietary Information to gpac upon termination of employment, and to delete such information from their personal property and social media sites. (Id. at § 8.1.) “Company's Proprietary Information” is defined elsewhere in the Agreement as “the Company's confidential information” including a long list of items ranging from customer lists, identity of candidates and clients, billing rates, computer programs and data, to “all such information developed by its employees, whether or not during working hours, that is relaxed to the Company 's business.” (Agreement § 1.12.) The Agreement reflects that gpac considers its Propriety Information as constituting ‘trade secrets.” (Id.)
The second provision is a non-solicitation covenant in Section 9 of the Agreement which provides:
For a period of two years following the effective date of the termination of the Employee's employment, the Employee shall not, in the course of the personnel placement service business, solicit or provide services to any client interim employee or candidate or solicit for employment or employ any interim employee or candidate, who resides in the United States, and who contacted the Company or had been contacted by the Company for personnel placement service business and shall not assist, directly or indirectly, any other person other than the Company in so doing, provided that the Company remains in the personnel placement service business in the United States.
The third provision is a convenant not to compete in Section 10 which prevents the employee from engaging “in the activities of an Account Executive, outside sales representative, coordinator, research assistant, project coordinator, manager, or trainer in the personnel placement service business within a two hundred mile radius of the Office, any Remote Office, or any Home" for a period of two years following termination of employment with gpac. (Agreement §§ 10.1, 10.1.1.) “Office” is defined as “the office of the Company located at 116 Wesr 69J| Street, Sioux Falls, South Dakota. (Id. § 1.1.) The “Remote Office” is “any location approved by the Company in which the employee is regularly doing business on behalf of the Company other than the 'Office.'” (Id. § 1.2.) “Home” means “any location which is the employee's primary residence at any time while the employee is employed by the Company.” (Id. § 1.3.)
Finally, under Section 12 of the Agreement, the employee agrees not to induce any other employees of gpac to quit their employment with gpac or otherwise contribute to other employees violating their contractual obligations to gpac. (Agreement § 12.2.)
Andersen resigned employment at gpac on January 4, 2021 (Complaint ⁋ 14.) He went to work for CyberCoders as an Executive Recruiter on or about September 2021. (Doc. 5, Answer and Counterclaim by CyberCoders, p. 11, ⁋⁋18-19.) CyberCoders, a California company with its principal place of business in Irvine, California, is a nationwide permanent placement recruiting firm. (Doc. 5, p. 9, ⁋ 8.)
Gpac originally brought this action in the Second Judicial Circuit Court. Lincoln County, South Dakota on October 20, 2021. (Doc. 1-1.) On November 23, 2021, CyberCoders removed the case to this Court pursuant to 28 U.S.C. §§ 1441 and 1446 based on diversity jurisdiction. (Doc 1.)
Gpac asserts five counts in its Complaint. The breach of contract claim in Count 1 alleges that Andersen breached Sections 8. 9, 10 and 12 of the Agreement:
Employee has breached the Agreement through: (a) using or disclosing gpac's confidential information in violation of Section 8 of the Agreement; (b) solicitation of gpac's current or prospective clients and candidates within two years of termination of employment with gpac within the restricted geographic area in violation of Section 9 of the Agreement; (c) being employed by or in a service relationship with New Employer within two years of termination of employment with gpac within the restricted geographic area in violation of Section 10 of the Agreement; or (d) engaging in acts to induce other gpac employees to terminate their employment with gpac or otherwise contributing to other employees of gpac violating their contractual obligations to gpac.
(Doc. 1-1, Complaint, p. 3, ⁋ 17.) In Count 2 of the Complaint, gpac asserts that both Andersen and CyberCoders misappropriated gpac's trade secrets. Count 3 is a claim against CyberCoders for tortious interference with gpac's Agreement by hiring and continuing to employ Andersen. Gpac asserts an unfair competition claim against both Andersen and CyberCoders in Count 4. Finally, gpac seeks punitive damages from both Defendants in Count 5 of the Complaint.
Andersen filed an Answer to the Complaint (Doc. 16.) CyberCoders filed an Answer and a Counterclaim seeking, among other things, a declaration that the restrictive covenants m the Agreement are unenforceable. (Doc. 7.) Both Defendants now move for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c).
Defendants argue that Colorado law governs the Agreement based on Andersen's residence in Colorado for the majority of his employment with gpac, and that the Agreement is unenforceable under Colorado law. Alternatively, Defendants argue that, even if South Dakota law applies, Andersen is still entitled to judgment in his favor on gpac's breach of contract claim, and thus CyberCoders also is entitled to judgment in its favor on gpac's tortious interference with contract claim because that claim is premised on an Agreement that is invalid and unenforceable. Defendants further argue that Count 2, misappropriation of trade secrets, is not supported by sufficient facts alleged in the Complaint, and therefore they are entitled to judgment on that claim. Andersen also contends that Count 4, unfair competition, is not a separate, independent cause of action, but “is more of a label used to generally describe more specific claims or causes of action.” (Doc. 20. p. 31.) Finally, Anderson asserts that the claim for punitive damages in Count 5 cannot be a stand-alone claim.
A motion for judgment on the pleadings is appropriately granted “where no material issue of fact remains to be resolved and the movant is entitled to judgment as a matter of law.” Clemons v. Crawford, 585 F.3d 1119, 1124 (8th Cir. 2009). In considering a motion under Federal Rule of Civil Procedure 12(c), it is analyzed under the same rubric as that of a Rule 12(b)(6) morion to dismiss for failure to state a claim upon which relief can be granted. See Id. See also E.E.O.C. v Northwest Airlines Inc., 216 F.Supp.2d 935. 937 (D. Minn. 2002). Under Rule 12(b)(6). the factual allegations of a complaint are assumed true and construed in favor of the plaintiff, “even if it strikes a savvy judge that actual proof of those facts is improbable.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007), cited in Data Mfg. Inc. v United Parcel Serv., Inc., 557 F.3d 849, 851 (8th Cir. 2009). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual...
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