Inst. for the Int'l Educ. of Students v. Qian Chen

• Decision Date: 02 May 2019
• Docket Number: No. 1:18-cv-02229-JRS-TAB,1:18-cv-02229-JRS-TAB
• Citation: 380 F.Supp.3d 801
• Parties: INSTITUTE FOR the INTERNATIONAL EDUCATION OF STUDENTS, Plaintiff, v. QIAN CHEN, et al., Defendants.
• Court: U.S. District Court — Southern District of Indiana

380 F.Supp.3d 801

INSTITUTE FOR the INTERNATIONAL EDUCATION OF STUDENTS, Plaintiff,

v.QIAN CHEN, et al., Defendants.

No. 1:18-cv-02229-JRS-TAB

United States District Court, S.D. Indiana, Indianapolis Division.

Signed May 2, 2019

Amanda L.B. Mulroony, Wayne C. Turner, Hoover Hull Turner LLP, Indianapolis, IN, John A. Conway, John David LaDue, Southbank Legal: LaDue Curran Kuehn, South Bend, IN, for Plaintiff.

Jacob R. Cox, Cox Law Office, Indianapolis, IN, for Defendants.

Order on Motion to Dismiss (ECF No. 21)

JAMES R. SWEENEY, II, JUDGE, United States District Court

Defendant International Education Foundation, Inc. ("IEF") moves to dismiss Counts II, III, and IV for failure to state a claim upon which relief can be granted and for failure to join a party under Rule 19. (ECF No. 21.) In the alternative, IEF moves for a more definite statement. (Id. ) IEF's motion, now fully briefed and ripe for decision, is denied for the following reasons.

I. Background¹

Plaintiff Institute for the International Education of Students ("Plaintiff") provides study abroad programs, international internships, customized programs, and direct enrollment study abroad opportunities to students worldwide. (Compl. ¶ 2, ECF No. 1-2 at 7.) In March 2017, Plaintiff merged with The Study Abroad Foundation, Inc. ("SAF"). (Id. ¶ 3.) As the surviving entity, Plaintiff owns all SAF's assets. (Id. ) On October 31, 2017, Plaintiff and its affiliates acquired SAF-IUNS, a Hong Kong company engaged in the recruitment of students in China exclusively on behalf of SAF. (Id. ¶ 4.) Plaintiff relies on the goodwill it generates through its representatives' contact with universities and member schools in the United States, China, and elsewhere. (Id. ¶ 8.) Plaintiff maintains strict confidentiality of sensitive student information, member school information, business information, program leads, and other information. (Id. )

Defendant Qian Chen ("Chen") began working for SAF as its Executive Director beginning July 5, 2016. (Id. ¶ 5.) Chen had access to confidential information about SAF and its sending and receiving schools, which information included customer leads, enrollment histories, pricing information, strategies, discounts provided and received, employee information, student information, and primary contact information. (Id. ¶ 12.) Chen further had access to SAF's marketing plans, recruiting methods, pricing information, strategies, enrollment figures, enrollment histories by institution, key school contacts, exclusive recruiting agreements and their terms, student information, employee information, customer lists, customer leads and information, revenues, programs, program costs, program margins, overall margins, cost information, commission information, markups, and know-how. (Id. ¶ 13.)

As SAF's Executive Director, Chen visited the offices of SAF-IUNS and met its employees, including Daniel Shen ("Shen"). (Id. ¶ 9.) Chen was aware that Shen's employment agreement with SAF-IUNS included a two-year non-compete agreement. (Id. ) As Executive Director, Chen had contact with SAF's and SAF-IUNS's key contacts and primary customer representatives at their member schools in China, their sending schools in China, and their receiving schools in the United States, Europe, the United Kingdom, and elsewhere. (Id. ¶ 10.)

Chen's employment with SAF ended February 2, 2017, when Chen and SAF entered into separation and non-disclosure agreements. (Id. ¶¶ 14–15.) The agreements provide that Chen be paid $ 30,833; that Chen not return to SAF's or its affiliates' property; and that Chen keep SAF's confidential information secret for five years. (Id. ¶ 15; id. , ex. 2, ¶¶ 4–6.)

The following month, Chen formed Defendant International Education Foundation, Inc. ("IEF"), which competes directly with Plaintiff. (Id. ¶ 5.) In September 2017, Chen, together with Shen, returned to SAF-IUNS's offices. (Id. ¶ 18.) There they met with SAF-IUNS employees, attempted to recruit the employees to Chen's and Shen's new companies, falsely told the employees that Plaintiffs would terminate all employees upon acquiring SAF-IUNS, and dissuaded the employees from meeting with Plaintiff's representatives to discuss the acquisition. (Id. ¶ 19.)

Chen, Shen, and IEF induced certain SAF-IUNS employees to solicit SAF's and SAF-IUNS's university partners and member schools on behalf of IEF. (Id. ¶ 20.) As part of this effort, Chen and IEF induced SAF-IUNS employees to use confidential information, to create an IEF website using SAF-IUNS resources, and to create and use deceptive email addresses. (Id. ¶¶ 46, 48.)

II. Failure to State a ClaimRule 12(b)(6)

A. Legal Standard

To survive a motion to dismiss for failure to state a claim, a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). In considering a Rule 12(b)(6) motion to dismiss, the court takes the complaint's factual allegations as true and draws all reasonable inferences in the plaintiff's favor. Orgone Capital III, LLC v. Daubenspeck , 912 F.3d 1039, 1044 (7th Cir. 2019). The court need not "accept as true a legal conclusion couched as a factual allegation."

Papasan v. Allain , 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). "[I]f a plaintiff pleads facts that show its suit [is] barred ..., it may plead itself out of court under a Rule 12(b)(6) analysis." Orgone Capital , 912 F.3d at 1044 (quoting Whirlpool Fin. Corp. v. GN Holdings, Inc. , 67 F.3d 605, 608 (7th Cir. 1995) ); Bogie v. Rosenberg , 705 F.3d 603, 609 (7th Cir. 2013) (on a motion to dismiss "district courts are free to consider ‘any facts set forth in the complaint that undermine the plaintiff's claim’ ") (quoting Hamilton v. O'Leary, 976 F.2d 341, 343 (7th Cir. 1992) ).

B. Counts II and III – Tortious Interference

Plaintiff alleges claims against IEF for tortious interference with a contract and for tortious interference with a business relationship.² Under Indiana law,

The elements of an action for tortious interference with a contract are (1) existence of a valid and enforceable contract; (2) defendant's knowledge of the existence of the contract; (3) defendant's intentional inducement of breach of the contract; (4) the absence of justification; and (5) damages resulting from defendant's wrongful inducement of the breach.

In addition, it has been recognized that an action may lie under Indiana law for tortious interference with a business relationship even though there was no valid contract. In such cases, however, it appears to be critical that the defendant acted illegally in achieving his end.

Syndicate Sales, Inc. v. Hampshire Paper Corp. , 192 F.3d 633, 641 (7th Cir. 1999) (quoting Biggs v. Marsh , 446 N.E.2d 977, 983 (Ind. Ct. App. 1983) ).

1. Absence of justification

IEF contends that Plaintiff does not adequately allege absence of justification. The Complaint contains conclusory allegations: "Defendants' conduct was without justification" (Compl. ¶ 33) and "Defendants' conduct was without justification and unlawful" (id. ¶ 40). But it also contains substantive allegations tending to show the absence of justification, which allegations IEF's argument wholly ignores.

To determine whether interference with a contract is justified, Indiana courts consider the following factors:

(a) the nature of the defendant's conduct;

(b) the defendant's motive;

(c) the interests of the plaintiff with which the defendant's conduct interferes;

(d) the interests sought to be advanced by the defendant;

(e) the social interests in protecting the freedom of action of the defendant and the contractual interests of the plaintiff; (f) the proximity or remoteness of the defendant's conduct to the interference; and

(g) the relations between the parties.

Winkler v. V.G. Reed & Sons, Inc. , 638 N.E.2d 1228 (Ind. 1994) (quoting Restatement (Second) of Torts § 767 (1977) ). At this stage, Plaintiff has pleaded enough facts to support its contention that IEF acted without justification. Specifically, Plaintiff alleges that IEF interfered with Plaintiff's exclusive recruiting contract with SAF-IUNS by commandeering SAF-IUNS employees, offices, email accounts, and other resources to recruit on behalf of IEF and interfered with Plaintiff's business relationships with its university partners and member schools by using the confidential information, the commandeered SAF-IUNS employees, and other resources to solicit business from those university partners and members schools.

IEF further contends that Plaintiff has pleaded itself out of court by alleging that IEF interfered with the contracts and business relationships to compete with Plaintiff. But competition justifies interference only if, among other things, "the actor does not employ wrongful means." See Computs. Unlimited, Inc. v. Midwest Data Sys., Inc. , 657 N.E.2d 165, 169 (Ind. Ct. App. 1995) (quoting Restatement (Second) of Torts § 768 (1977) ). The wrongful means alleged in the Complaint is not justified simply because IEF sought to enrich itself at Plaintiff's expense.

2. Illegal act

IEF argues that Plaintiff's claim for tortious interference with a business relationship fails because Plaintiff does not allege an illegal act. It is not clear what constitutes an "illegal act" under Indiana law. See Syndicate Sales , 192 F.3d at 641–42 (noting the lack of Indiana cases indicating that the predicate illegal act must be criminal); Zimmer, Inc. v. Stryker Corp. , No. 3:14-cv-152, 2014 WL 3866454 at *9 (N.D. Ind. Aug. 6, 2014) ("the Indiana courts have not defined ‘illegality’ in this context"); CDW LLC v. NETech Corp. , No. 1:10-cv-530, 2011 WL 3844160 at *5 (S.D. Ind. Aug. 26, 2011) ("Indiana courts have not provided significant guidance regarding what actions are sufficiently ‘illegal’ to be actionable.").

Plaintiff's allegations include defamation and breach of contract, which courts have held do not amount to illegal...