Hoffer v. Infospace.Com, Inc.

Decision Date29 June 2000
Docket NumberNo. Civ.A. 99-5881 (AJL).,Civ.A. 99-5881 (AJL).
Citation102 F.Supp.2d 556
PartiesRichard HOFFER, Plaintiff, v. INFOSPACE.COM, INC., and Naveen Jain, Defendants.
CourtU.S. District Court — District of New Jersey

Robert Novack, Mary L. Moore, Kenneth J. Cesta, Edwards & Angell, LLP, Short Hill, NJ, for plaintiff.

Thomas F. Campion, Drinker Biddle & Shanley LLP, Florham Park, NJ, Harry H. Schneider, Jr., Perkins Coie LLP, Seattle, WA, for defendants.

OPINION

LECHNER, District Judge.

This is an action brought by plaintiff, Robert Hoffer ("Hoffer"), against defendants InfoSpace.com, Inc. ("Infospace") and Naveen Jain ("Jain") (collectively, the "Defendants"). On 15 December 1999, Hoffer filed a complaint (the "Complaint") that alleges, inter alia, a claim for damages for breach of contract, misrepresentation, fraud, breach of the covenant of good faith and fair dealing and promissory estoppel. See Complaint, ¶¶ 1, 22-44. Hoffer further alleges the instant matter is within the jurisdiction of this court pursuant to 28 U.S.C. § 1332, see id., ¶ 2, and venue is properly laid in this District pursuant to 28 U.S.C. § 1391(a) ("Section 1391(a)"). See id. On 31 January 2000, the Defendants filed an answer and counter claims (the "Answer/Counterclaims"). In particular, the Defendants allege Hoffer breached the terms of a loan agreement with Infospace, misappropriated trade secrets and breached a confidential relationship with his employer, Infospace. See Answer/Counterclaims, ¶¶ 60-66.

Currently pending is a motion, filed by the Defendants, to dismiss the action, pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure for improper venue based on a forum selection clause (the "Forum Selection Clause") contained in an employee non-disclosure agreement (the "NDA") entered into by Hoffer and Infospace. In the alternative, the Defendants request that the court transfer the action (the "Motion to Transfer")1 to the United States District Court for the Western District of Washington (the "Western District of Washington") to cure a defect in venue, pursuant to 28 U.S.C. § 1406 ("Section 1406") and, or, for the convenience of the parties and witnesses, pursuant to 28 U.S.C. § 1404(a) ("Section 1404(a)").

For the reasons set out below, the Motion to Transfer is granted; the action is transferred for all purposes to the United States District Court for the Western District of Washington.

Background
A. Parties

Hoffer currently resides at One East Elbrook Drive in Allendale, New Jersey. See Complaint, ¶ 3. It appears Hoffer has been engaged in the business of licensing "yellow and white pages data" and syndicated services to internet, software, database, telecommunications and media firms. Id., ¶ 7. Hoffer alleges he began working for Infospace in or around the "late Spring of 1996 on a consulting basis." Id., ¶ 11.

Jain is the President and Chief Executive Officer of Infospace and resides in the State of Washington. Id., ¶ 4. See also Answer/Counterclaims, ¶¶ 4-5. Infospace is a Delaware corporation with its principal place of business located in Redmond, Washington. Id., ¶ 5. See also Answer/Counterclaims, ¶¶ 4-5. Infospace was founded in or around March 1996. Id., ¶ 6. Hoffer alleges Infospace is a provider of internet services. Id. Hoffer further alleges Infospace provides these services through its yellow pages, white pages and e-mail directories. Id.

B. Facts

As mentioned, Hoffer alleges the Defendants breached the terms of an employment agreement and, in addition, have prevented Hoffer from exercising certain stock options given to him in an employment agreement, dated 25 June 1996 (the "25 June 1996 Employment Agreement"). See id., ¶ 19.

Prior to March of 1996, it appears Hoffer was the general manager of the "electronic/interactive" media division of a firm known as Database America Companies, Inc. ("DAC"), located in Montvale, New Jersey. See id., ¶ 7. As mentioned, Hoffer was engaged in the business of licensing yellow and white pages data and syndicated services to internet, software, database, telecommunications and media firms. See id.

In or around March 1996, Hoffer alleges Jain approached him in New Jersey and had various discussions and meetings with Hoffer, in an attempt to solicit Hoffer to join him in a "new business venture"2 See id., ¶ 8. It is alleged that the "new business venture" later became known as Infospace. See id. Hoffer alleges Jain indicated that because the "new business venture" was a start-up, he could not pay Hoffer a salary that was commensurate with what Hoffer was earning at DAC. See id. It is alleged, however, that Jain represented that Hoffer "would share in the venture through the issuance of common stock. Jain further represented ... that he ... was wealthy from his prior employment with Microsoft and as such, Jain wouldn't need to take a salary and that Jain would also be compensated in the form of the issuance of stock." Id. ¶ 10.

In or around the late Spring of 1996, Hoffer began working with Jain on a consulting basis. See id., ¶ 11. Hoffer alleges he agreed to work with Jain to build an internet directory services company. See id., ¶ 12. For his part, Hoffer alleges he created a sales presentation for "co-branding" services as well as a revenue model for the business. See id. Hoffer further alleges he introduced Jain to several clients including "Playboy, the New York Times, The Wall Street Journal, Infoseek, Web TV, Advanced Internet and Riddler/Interactive Imagination." Id., ¶ 13. In addition, Hoffer alleges he "demonstrated to Jain a directory service application capable of supporting high traffic query and response into very large databases via HTTP." Id., ¶ 14. Hoffer alleges he introduced Jain to Timothy Day, a software developer, capable of engineering the software necessary to operate the directory services that Infospace was to provide to its customers. Id., ¶ 15.

Hoffer alleges he left DAC and officially joined Infospace based on the representation of Jain that Hoffer would be a 50% partner with Jain. See id., ¶ 16. Hoffer specifically alleges he "quit [DAC] in New Jersey and joined Infospace at its new offices in Redmond, Washington." Id. Upon arrival at Infospace, Hoffer alleges Jain "unilaterally reduced" his prior employment offer of a 50% partnership interest in Infospace and, instead, presented Hoffer with various employment proposals. See id., ¶ 17.

On or about 1 June 1996, Hoffer alleges Jain forwarded to him a "letter agreement" that provided that Hoffer would be paid $50,000 and granted the option to buy up to 300,000 shares of stock at $.10 per share. See id., ¶ 17. As a result of this new employment proposal, it is alleged that Hoffer and Jain entered into negotiations concerning an acceptable employment arrangement. See id. It appears that on 25 June 1996,3 Jain provided Hoffer with an employment agreement (see 25 June 1996 Employment Agreement), by which Jain granted Hoffer, in part, the right to the immediate purchase of up to 75,000 shares of stock at $1.00 per share.

Hoffer alleges the 25 June 1996 Employment Agreement was executed by Jain and accepted by Hoffer. See id. Thereafter, Hoffer alleges he began working as an Infospace employee for a period of approximately four months. See id., ¶ 18. Hoffer, however, alleges Jain fired him over the telephone during a business trip. See id.

Upon information and belief, Hoffer alleges that Jain has "engaged in a pattern and practice of soliciting the involvement and employment of key personnel of competing business by promising them senior management positions and lucrative compensation packages ... and then terminating the employee and reneging on his promises and agreements." Id., ¶ 20.

In count one of the Complaint, Hoffer alleges Infospace breached the 25 June 1996 Employment Agreement. See id., ¶ 23. Hoffer, moreover, alleges he has performed the terms of the 25 June 1995 Employment Agreement and completed all conditions necessary to entitle him to exercise the options contained in the 26 June 1996 Employment Agreement. See id.

In count two of the Complaint, Hoffer alleges the Defendants "breached the covenant of good faith and fair dealing implied in every contract." Id., ¶¶ 26-27.

In count three and count four of the Complaint Hoffer alleges the Defendants committed fraud and made negligent misrepresentations in that they misrepresented "material facts inducing [Hoffer] to terminate his employment with [DAC] and to accept an employment position with Infospace and to provide infospace with [Hoffer's] contacts and industry knowledge." Id., ¶ 29. Hoffer specifically alleges that based on the representations of Jain concerning "founders equity," he introduced the Defendants to various business contacts that are today part of the Infospace network. See id. Hoffer further alleges he introduced the Defendants to "technical people who were able to develop the database engineering tools that are used in creating the directory service and products provided by Infospace...." Id.

In addition, Hoffer alleges that based on the representations of Jain, he left his position at DAC and joined Infospace in Redmond, Washington, "where he was provided with paperwork which was different than the representations that have been made by Jain to induce Hoffer to leave his prior employment." Id., ¶ 30. See also id., 35-36.

Finally, in count five of the Complaint, Hoffer alleges the Defendants are estopped from denying the terms of the 25 June 1996 Employment Agreement because Hoffer reasonably relied on the misrepresentations and inducements made by the Defendants. See id., ¶¶ 40-44.

Discussion
A. The Forum Selection Clause

As mentioned, the Motion to Transfer is based, in part, on the Forum Selection Clause contained in the NDA negotiated and signed by Hoffer and Infospace in Redmond, Washington. See Moving Brief at 4-5, 8-14; Reply Brief at 2-9. The Defendants argued that as a result of...

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