Manuel v. Convergys Corp.

• Decision Date: 15 November 2005
• Docket Number: No. 04-16032.,04-16032.
• Citation: 430 F.3d 1132
• Parties: William S. MANUEL, Plaintiff-Counter-Defendant-Appellee, v. CONVERGYS CORPORATION, Convergys Customer Management Group, Inc., Convergys Information Management Group, Inc., Defendants-Counter-Claimants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1132

430 F.3d 1132

William S. MANUEL, Plaintiff-Counter-Defendant-Appellee, v. CONVERGYS CORPORATION, Convergys Customer Management Group, Inc., Convergys Information Management Group, Inc., Defendants-Counter-Claimants-Appellants.

No. 04-16032.

United States Court of Appeals, Eleventh Circuit.

November 15, 2005.

William A. Clineburg, Jr., Todd C. Duffield, King & Spalding, LLP, Atlanta, GA, Grant S. Cowan, Frost Brown Todd, LLC, Cincinnati, OH, for Appellants.

Timothy S. Rigsbee, Jeffrey O. Bramlett, Bondurant, Mixson & Elmore, LLP, Atlanta, GA, for Appellee.

Appeal from the United States District Court for the Northern District of Georgia.

Before BIRCH, CARNES and FAY, Circuit Judges.

BIRCH, Circuit Judge:

There are three central issues in this appeal. First, we must decide whether the district court abused its discretion in entertaining a declaratory judgment action regarding a noncompetition agreement ("NCA") filed by William S. Manuel against Convergys Corporation and its subsidiaries (collectively "Convergys"). Second, we must decide whether the district court erred in ruling that Georgia has sufficient contacts with the declaratory judgment action to justify application of Georgia law to the NCA. Under Georgia law, the NCA is invalid and unenforceable. Third, we must decide whether the district court properly applied Georgia law in dismissing Convergys's trade secret counterclaim. Finding no reversible error, we AFFIRM.

I. BACKGROUND

A large, publicly traded company with its principal place of business in Ohio, Convergys offers information management and customer management services worldwide. A subsidiary sells outsourced human resource services for large public and private employers ("HR outsourcing"). In 1999 Manuel joined this subsidiary as a sales manager, and in June 2003 he was promoted to director of sales. At all times during his employment with Convergys, Manuel lived and worked in Florida.

Pursuant to the promotion in 2003, Manuel signed the NCA. This agreement prohibits Manuel from competing with Convergys or soliciting its customers for two years following the termination of his employment. The NCA contains a choice-of-law provision requiring the application of Ohio law and states that any disputes related to the NCA may be brought in the state and federal courts of Hamilton County, Ohio.

On 12 March 2004, Manuel interviewed with Mellon Financial Corporation ("Mellon") for a position with its HR outsourcing sales team, working either in Atlanta, Georgia or Charlotte, North Carolina. While there is some factual dispute as to whether Manuel first chose to work in North Carolina, he eventually was offered the job in Georgia. As to the NCA, Manuel advised Mellon that he did not believe Convergys would view Mellon as a competitor and would not challenge his employment. Nevertheless, Manuel and Mellon discussed the possibility that Convergys might sue to enforce the NCA.

Manuel subsequently sought counsel. His newly hired lawyer concluded that the NCA constituted an illegal restraint of trade under Georgia law and that Manuel should therefore be free to work for Mellon in Georgia. Manuel's lawyer warned, however, that if Convergys obtained an Ohio judgment validating the NCA, a Georgia court would likely enforce it. The lawyer therefore recommended that "the only thing [Manuel] could do to prevent this scenario would be to file first in Georgia." R3-17, Exh. F at 3.

After accepting Mellon's offer on 5 April 2004, Manuel met with the Georgia lawyers who would file this action. On 8 April 2004, Manuel resigned from Convergys, although he agreed to stay on until the middle of the month. During that time, Manuel told Convergys that he was not going to work for a competitor and that he had not accepted a job with another company. On 9 April 2004, Manuel signed an apartment lease in Georgia and obtained a Georgia driver's license. On 20 April 2004, Manuel filed suit against Convergys in Georgia seeking a declaration that the NCA was illegal, invalid, and unenforceable.

Six days later, a senior executive at Convergys told Manuel that he might be able to structure his job with Mellon so that he would not violate the NCA. Nevertheless, the lawsuit against Convergys proceeded. On 10 May 2004, Convergys removed the case to the U.S. District Court for the Northern District of Georgia. On the same day, Convergys filed suit against Manuel and Mellon in an Ohio state court for violation of the NCA and misappropriation of trade secrets. Subsequently, Convergys filed a counterclaim in this action that alleged misappropriation of trade secrets. The company also requested that the district court defer ruling on Manuel's motion for summary judgment pending resolution of the Ohio action. The district court denied Convergys's motion and granted both Manuel's motion for summary judgment and Manuel's motion to dismiss Convergys's counterclaim.

II. DISCUSSION

A. The Declaratory Judgment Action

The decision to hear a declaratory judgment action is reviewed for abuse of discretion. Wilton v. Seven Falls Co., 515 U.S. 277, 288, 115 S.Ct. 2137, 2144, 132 L.Ed.2d 214 (1995); Old Republic Union Ins. Co. v. Tillis Trucking Co., 124 F.3d 1258, 1260 (11th Cir.1997). The Supreme Court has described this discretion as "unique and substantial." Wilton, 515 U.S. at 286, 115 S.Ct. at 2142. "As we have stated previously, the abuse of discretion standard allows a range of choice for the district court, so long as that choice does not constitute a clear error of judgment." Rasbury v. IRS, 24 F.3d 159, 168 (11th Cir.1994) (internal quotations omitted).

The factors relevant in deciding whether to hear a declaratory judgment action are equitable in nature. See Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1952). As such, the Supreme Court has warned against a "rigid" and "mechanical" approach in applying the Federal Declaratory Judgments Act. Id. Our court has previously recognized convenience of the parties and the forum's connection with the controversy as relevant, albeit nonexclusive, factors. See Amerada Petroleum Corp. v. Marshall, 381 F.2d 661, 663 (5th Cir.1967). Some courts simply apply the same general factors that are considered in a motion to transfer under 28 U.S.C. § 1404(a).¹ See, e.g., Nat'l Patent Dev. Corp. v. Am. Hosp. Supply Corp., 616 F.Supp. 114, 118 (S.D.N.Y.1984) ("Essentially the same factors that are of significance on a motion to stay a `second-filed' action come into play on a motion to transfer under [28 U.S.C.] section 1404(a).").

Where two actions involving overlapping issues and parties are pending in two federal courts, there is a strong presumption across the federal circuits that favors the forum of the first-filed suit under the first-filed rule. See, e.g., United States Fire Ins. Co. v. Goodyear Tire & Rubber Co., 920 F.2d 487, 488 (8th Cir.1990) (describing the first-filed rule as "well-established"); Church of Scientology of Cal. v. United States Dep't of Defense, 611 F.2d 738, 750 (9th Cir.1979) (noting that the first-filed rule "should not be disregarded lightly"). We are no exception. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Haydu, 675 F.2d 1169, 1174 (11th Cir.1982). Moreover, we require that the party objecting to jurisdiction in the first-filed forum carry the burden of proving "compelling circumstances" to warrant an exception to the first-filed rule. Id.

In determining whether compelling circumstances exist, we have recognized that for declaratory judgment actions "one equitable consideration . . . is whether the . . . action was filed in apparent anticipation of the other pending proceeding." Ven-Fuel, Inc. v. Dep't of the Treasury, 673 F.2d 1194, 1195 (11th Cir.1982); see also Amerada Petroleum, 381 F.2d at 663 (noting that filing a declaratory judgment action in anticipation of suit in another forum "is an equitable consideration which the district court was entitled to take into account"). Even if a court finds that a filing is anticipatory, this consideration does not transmogrify into an obligatory rule mandating dismissal. See Ven-Fuel, 673 F.2d at 1195. Such a finding still remains one equitable factor among many that a district court can consider in determining whether to hear a declaratory judgment action. See id.; see also Wilton, 515 U.S. at 286, 115 S.Ct. at 2142.

In this case, Convergys argues that Ohio is the proper forum for full resolution of this action. Convergys's two central objections to the Georgia forum are (1) that Manuel lied to Convergys about his employment with Mellon to surreptitiously win a race to the courthouse, and (2) that Manuel engaged in improper forum shopping and selected a forum with a slight and manufactured connection to the controversy. Central to our analysis is the fact that Georgia was the forum in which this action was filed first. See Merrill Lynch, Pierce, Fenner & Smith, 675 F.2d at 1174 (11th Cir.1982) ("In the absence of compelling circumstances, the court initially seized of the controversy should be the one to decide the case."). We remain unconvinced that compelling circumstances exist to justify not only an exception to the well-established first-filed rule, but also to justify the abrogation of the district court's informed discretion.

As to the first objection, Convergys alleges that Manuel purposely lied about where he was going to work so that he could file suit in Georgia before Convergys was able to directly threaten him with imminent litigation in Ohio. In Convergys's view, Manuel won an illicit race to the courthouse and the district court thereby erred in rewarding him with a declaratory judgment action. While Manuel's behavior was not exemplary, it does not rise to a level that would require us to conclude that the district court abused its discretion. See Keener v. Convergys Corp., 342 F.3d 1264 (11th Cir.2003). In Keener, which is...