Lancaster Bingo Co. v. Hockman
| Decision Date | 13 February 2023 |
| Docket Number | 2:22-cv-2252 |
| Parties | LANCASTER BINGO COMPANY LLC, Plaintiff, v. GREG HOCKMAN, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION & ORDER
This matter is before the Court on Defendants' Motion to Dismiss (ECF No. 10). For the reasons more fully stated below, this Court GRANTS IN PART AND DENIES IN PART Defendants' Motion (ECF No. 10). Defendants' Motion to Stay Discovery (ECF No. 11) pending the Court's ruling on their Motion to Dismiss is DENIED AS MOOT. Plaintiff is given fourteen (14) days to amend its complaint.
Plaintiff Lancaster Bingo Company (“LBC”) is a large full-service charitable gaming company. (ECF No. 5 ¶ 10). LBC distributes several products in its product line, including pull tab tickets, bingo paper, bingo ink makers, and electronic gaming equipment and accessories. (Id. ¶ 10). Through this work, LBC services charitable gaming, commercial sweepstakes, and lottery markets across the world. (Id.). Defendants Greg Hockman and Matthew Brueggemann are former sales employees of LBC. (Id. ¶ 1).
At some point around July 2011, LBC hired Hockman as a Sales Associate. When Hockman was hired, he signed a Non-Competition[1] and Non-Disclosure Agreement (“the Agreement”), under which he agreed not to compete with LBC for a period of two years posttermination. (Id. ¶ 22). He was promoted to Sales Representative for northern Virginia roughly a year later. (Id. ¶¶ 16-17). In this new role, Hockman was responsible for selling and distributing electronic bingo and electronic pull-tab machines and products including, for a time, Grover Gaming products. (Id. ¶ 18). Hockman was also expected to develop and foster relationships with new and existing customers along his assigned sales route. (Id.). Hockman was also provided with access to various trainings and confidential information such as LBC's sales data, route sales systems, product mix, product pricing, marketing initiatives, marking plans, product launch, and long-term sales goals. (Id. ¶ 19). In September 2021, Hockman signed a new version of the Agreement with the same terms as before, albeit with LBC's successor company. (Id. ¶ 26).
At some point around May 2017, LBC hired Brueggemann as a Sales Associate. (Id. ¶ 30). He signed the same Agreement as Hockman. (Id. ¶ 37). Brueggemann had been referred to LBC by Hockman. (Id. ¶ 31). Brueggemann was responsible for covering and supporting sales routes throughout Virginia, ensuring that sales objectives were met, and selling and distributing electronic bingo and electronic pull-tab machines and products. (Id. ¶ 32). Like Hockman, Brueggemann was provided with confidential data such as LBC's sales data, route sales systems, product mix, product pricing, marketing initiatives, marking plans, product launch, and long-term sales goals. (Id. ¶ 32). In his role, Brueggemann routinely assisted Hockman with his sales route. In September 2021, Brueggemann signed a new version of the Agreement with the same terms as before, albeit with LBC's successor company. (Id. ¶ 40).
LBC was the exclusive distributor for certain Grover Gaming machines in Virginia. (Id. ¶ 44). Defendants sold the machines in Virginia as part their employment with LBC. (Id.). In September 2021, Grover Gaming (“Grover”) attempted to cancel its distributorship agreement with LBC and instead distribute its products internally. (Id. ¶ 45). Both Defendants tendered their resignations to LBC on March 30, 2022. (Id. ¶ 47). Both Defendants became employees of Grover soon thereafter. (Id. ¶ 48).
Grover, like LBC, is in the business of manufacturing and distributing electronic pull-tab machines, gaming supplies, electronic bingo machines, and other charitable and for-profit gaming products. (Id. ¶ 49). Grover is also a licensed bingo supply manufacturer. (Id.). Grover recently opened a facility in North Carolina and obtained a license to manufacture charitable gaming products in North Dakota. (Id. ¶ 50). LBC “expects” that Grover “has applied or will soon be applying” for similar licenses in other states where it does business such as Virginia. (Id.). As of late, Grover is expanding its product line to include manufacturing paper charitable gaming products. (Id.). LBC alleges that, by virtue of this new paper product line, Grover is “competing even more directly with LBC in even more areas and could improperly benefit from the use of LBC's confidential information, trade secrets and goodwill through LBC's former employees like Hockman and Brueggemann to unfairly gain access to this market.” (Id.). LBC also alleges that Grover “induced [Defendants] to breach their Non-Competition and Non-Disclosure Agreements . . . so that it could take advantage of the customer relationships they cultivated while employed by LBC and steal the valuable confidential information that they learned during their employment with LBC.” (Id. ¶ 51).
On April 1, 2022, LBC sent a letter to Defendants informing them that their employment with Grover was in direct breach of the Agreement and requesting their “full compliance” with the same. (Id. ¶ 52). Defendants' counsel responded that Defendants would be working for Grover's “historical horse racing (“HHR”)” gambling business and thus would not be competing with LBC in those roles. (Id. ¶ 54). There are only four licensed locations in Virginia that allow HHR gambling, making it a small market that is “already at full capacity.” (Id. ¶ 55). LBC thus alleges that Defendants' new roles are simply pretext to allow them to work for a competitor while violating the terms of the agreements. (Id. ¶ 54). Nonetheless, LBC alleges, the HHR games that Defendants claim to work with are competitive with the charitable gaming products offered by LBC. (Id.). Defendants have also failed to return various LBC property and information, including detailed sales notebooks which contain logs of customer accounts, sales history, notes of visits, decisionmakers and other valuable confidential information. (Id. ¶ 55).
Plaintiff first filed this action in the Fairfield County Court of Common Pleas on April 26, 2022. (ECF No. 1-1). The case was removed to this Court on May 25, 2022. (ECF No. 4). The Complaint (ECF No. 5) contains three causes of action: Counts I and III contain breach of contract claims while Count II contains a claim for misappropriation of trade secrets. Defendants timely filed their Motion to Dismiss (ECF No. 10) and its Motion to Stay (ECF No. 11) discovery while the aforementioned motion is pending. This matter is now ripe for review.
Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint for a failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). To survive a motion to dismiss, “the plaintiff must allege facts that, if accepted as true, are sufficient to raise a right to relief above the speculative level and to state a claim to relief that is plausible on its face.” Hensley Mfg. v. ProPride, Inc., 579 F.3d 603, 609 (6th Cir. 2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)) (internal quotations omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)). And although the court “must accept all well-pleaded factual allegations in the complaint as true,” the court “need not accept as true a legal conclusion couched as a factual allegation.” Id. (quoting Twombly, 550 U.S. at 555) (internal quotations omitted). Finally, “[t]he defendant has the burden of showing that the plaintiff has failed to state a claim for relief.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007); Raymond v. Avectus Healthcare Sols., LLC, 859 F.3d 381, 383 (6th Cir. 2017); Taylor v. City of Saginaw, 922 F.3d 328, 331 (6th Cir. 2019).
While Twombly does not preclude a party from pleading factual allegations based upon “information and belief,” the complaint should indicate that “the facts are peculiarly within the possession and control of the defendant, or . . . the belief is based on factual information that makes the inference of culpability plausible.” Cassidy v. Teaching Co., LLC, No. 2:13-CV-884, 2014 WL 1599518, at *3 (S.D. Ohio Apr. 21, 2014) (quoting Arista Records, LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir.2010)). Pleading on information and belief may be permissible “when a plaintiff may lack personal knowledge of a fact, but have sufficient data to justify interposing an allegation on the subject or be required to rely on ‘information furnished by others.” Cap City Dental Lab, LLC v. Ladd, No. 2:15-CV-2407, 2016 WL 4573993, at *6 (S.D. Ohio Sept. 1, 2016).
Plaintiff proceeds on two separate breach of contract claims: one against both Defendants for working for Grover and disclosing trade secrets and the other against Defendant Hockman for soliciting Defendant Brueggemann to leave LBC to join him at Grover. This Court analyzes each in turn.
Under Count I (breach of contract), Plaintiff alleges that Defendants violated the Agreement by doing the following:
(1) taking a job with Grover Gaming; (2) competing, directly or indirectly, with LBC; (3) upon information and belief, taking or attempting to take LBC's customers and/or business; and (4) upon information and belief, taking, retaining, converting, using, disclosing, furnishing and/or making...
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