Nationwide Contractor Audit Service, Inc. v. Ncms

• Decision Date: 10 June 2008
• Docket Number: Civil Action No. 08-08.
• Citation: 622 F.Supp.2d 276
• Parties: NATIONWIDE CONTRACTOR AUDIT SERVICE, INC., Plaintiff, v. NATIONAL COMPLIANCE MANAGEMENT SERVICES, INC., Defendant.
• Court: U.S. District Court — Western District of Pennsylvania

622 F.Supp.2d 276

NATIONWIDE CONTRACTOR AUDIT SERVICE, INC., Plaintiff, v. NATIONAL COMPLIANCE MANAGEMENT SERVICES, INC., Defendant.

Civil Action No. 08-08.

United States District Court, W.D. Pennsylvania.

June 10, 2008.

COPYRIGHT MATERIAL OMITTED

Joseph Decker, Patrick R. Malone, Rachel E. Brown, Babst, Calland, Clements & Zomnir, Pittsburgh, PA, for Plaintiff.

Charles D. Lee, S. Eric Steinle, Martindell, Swearer & Shaffer LLP, Hutchinson, KS, Henry M. Sneath, Picadio, Sneath, Miller & Norton, Pittsburgh, PA, for Defendant.

MEMORANDUM OPINION

WILLIAM L. STANDISH, District Judge.

In this tortious interference and unfair competition case, Defendant National Compliance Management Services, Inc. ("NCMS"), has filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2) (Docket No. 7), arguing that Plaintiff Nationwide Contractor Audit Service, Inc. ("Nationwide"), cannot establish the Constitutional prerequisites which would allow this Court to exercise either specific or general jurisdiction over Defendant. For the reasons discussed below, Defendant's Motion is granted. However, the Court will exercise its discretion and transfer this matter to the District of Kansas for further consideration.

I. BACKGROUND

A. Factual History¹

Both NCMS and Nationwide assist the oil and gas pipeline industry in complying with certain regulations established by the United States Department of Transportation ("DOT") and the Pipeline and Hazardous Materials Safety Administration ("PHMSA.") Under these regulations, any company whose work involves connecting individual consumers to the main oil or gas delivery pipeline ("a Contractor") must establish an anti-drug use and alcohol abuse prevention program for its employees who directly work on the pipelines. The Contractors must also periodically test those employees for evidence of drug or alcohol abuse and provide certifications that they have complied with these requirements. Because many Contractors are small businesses, they often join a consortium with others and engage a third-party administrator to implement the programs. NCMS and Nationwide serve Contractors by performing audits of the information provided by Contractors or third party administrators to ensure that the programs themselves meet government standards, that the drug and alcohol tests are performed in a proper, timely manner, and that each Contractor has met the standards established by the regulations, i.e., that it is a "qualified" Contractor.

Under the same federal regulations, the operators of oil and gas pipelines ("Operators") are charged with assuring that the Contractors they hire have complied with the drug and alcohol regulations. NCMS and Nationwide serve these customers by maintaining lists of Contractors who have pre-qualified under the DOT/PHMSA regulations or with requirements established by a specific Operator.

Richard L. Rippert was employed by NCMS, a Kansas corporation with a principal place of business in Hutchinson, Kansas, sometime in the early 1990s. During the first few years, their relationship included a non-compete agreement. In September 1997, however, for reasons which are not clear from the record, the agreement was terminated by mutual consent. Mr. Rippert is regarded as a well-known authority on the DOT/PHMSA drug and alcohol regulations and Plaintiff alleges that "his name and reputation are valuable to compete in the business engaged in by Plaintiff and Defendant." (Complaint, ¶ 5.)

On April 13, 2007, Mr. Rippert resigned from NCMS and, together with Pennsylvania residents Eugene Miklaucic and Pamela Siegert, formed Nationwide as of May 16, 2007. Nationwide's principal place of business is located in Cranberry Township, Pennsylvania. Soon thereafter, Nationwide sent postcards to over 400 Operators announcing the formation of the new company. For its part, NCMS had sent an e-mail message to many of its clients announcing Mr. Rippert's departure within a few days of his resignation. However, apparently to Mr. Rippert's profound annoyance, NCMS continued to include his name on its website, despite repeated requests that it be removed.

Robert Frankhouser manages the drug and alcohol compliance program for Equitable Resources, Inc. ("Equitable"), whose office in Pittsburgh, Pennsylvania, oversees the company's oil and gas pipelines in western Pennsylvania and West Virginia. Mr. Rippert and Mr. Frankhouser apparently knew each other from a contract between NCMS and Equitable dating back to at least 2002. In the summer of 2007, Mr. Rippert contacted Mr. Frankhouser, informing him about his new venture and offering to set up a specialized database for the Equitable monitoring program. The two worked together for several months and, Plaintiff alleges, Mr. Frankhouser was prepared to move Equitable's business to Nationwide when the company's contract with NCMS expired.

In November 2007, Mr. Frankhouser sent a letter to the president of NCMS, Vergi Geurian, in which he advised her that he intended to terminate the monitoring contract between NCMS and Equitable and asked for confirmation that the contract ended as of December 31, 2007. Ms. Geurian, understandably eager to avoid this result, contacted Mr. Frankhouser by e-mail and voice mail, informing him that the contract actually terminated at the end of November and asking him what NCMS could do to keep Equitable's business. During a telephone call in late November, Ms. Geurian allegedly told Mr. Frankhouser that Mr. Rippert was still subject to a non-compete agreement which would be violated if Equitable became a customer of Nationwide. She also offered to reduce Equitable's annual service fee from $20,000 to $2,000.

Mr. Frankhouser subsequently decided Equitable would continue as a customer of NCMS for the upcoming year. When advised of this decision, Mr. Rippert asked Mr. Frankhouser if he had heard allegations from Ms. Geurian that he was still subject to a non-compete agreement. Mr. Frankhouser admitted she had made such statements, but told Mr. Rippert he had just decided not to change monitoring services in part because it was the middle of winter.

According to Plaintiff, at the time she made the statements about the non-compete agreement, Ms. Geurian knew they were false because she is both president of NCMS and the person who terminated the agreement in September 2007. Moreover, Ms. Geurian allegedly made similar false and misleading statements to Jeannie Myers, an employee of Columbia Gas Co. ("Columbia"), in Washington, Pennsylvania, and to Deborah Simmons of Centerpoint Energy Service Company, LLC ("Centerpoint") in Houston, Texas. According to Plaintiff, both Columbia and Centerpoint had previously expressed an interest in becoming Nationwide clients, but decided not to do so as a result of Ms. Geurian's comments. Plaintiff contends Ms. Geurian deliberately made these statements in order to interfere with Nationwide's prospective contracts, divert its business, disparage its reputation and that of Mr. Rippert, and unfairly compete with the new company.

B. Procedural History

Nationwide filed suit against NCMS in the Court of Common Pleas of Allegheny County, Pennsylvania, on December 10, 2007. In its Complaint, Nationwide first alleges that NCMS, through Ms. Geurian, knew of Nationwide's prospective contractual relationships with Equitable, Columbia, and Centerpoint, yet made false and misleading statements to representatives of those Operators with the intention of interfering with Nationwide's prospective contracts. In Count II, Plaintiff contends that NCMS, again through Ms. Geurian's actions, willfully and deliberately engaged in unfair competition in its commercial practices and has been unjustly enriched by obtaining clients it would not have otherwise obtained but for its unlawful conduct. In the same Count, Plaintiff alleges NCMS made false and misleading representations on its website which imply that the DOT has approved its drug and alcohol testing plans when, in fact, its plans are not approved and do not comply with current DOT regulations. In the third and final Count, Plaintiff alleges that these actions also constitute a violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). That is, in addition to the false and misleading statements about DOT approval, Defendant violated the Lanham Act by intentionally leaving Mr. Rippert's name on its website after he was no longer affiliated with NCMS, thereby trading on his name and reputation. The intent of these false and misleading statements, which were made in interstate commerce, was to deceive customers and potential customers of both Nationwide and NCMS. In addition to monetary damages, Plaintiff seeks a permanent injunction prohibiting Defendant from engaging in any of these detrimental activities.

On January 2, 2008, Defendant filed a timely notice of removal pursuant to 28 U.S.C. §§ 1441 and 1446, based on the original jurisdiction provided to federal district courts for Lanham Act claims. 15 U.S.C. § 1121. Plaintiff did not object to removal.

On February 6, 2008, Defendant filed the now-pending motion to dismiss the complaint for lack of personal jurisdiction. At the request of Plaintiff, the Court ordered the parties to conduct reciprocal discovery limited to the issue of this Court's jurisdiction over Defendant and directed them to file briefs in support of their respective positions on the jurisdictional question. (Docket No. 13.) The motion is now ripe for decision.

II. JURISDICTION AND VENUE

This Court has subject matter jurisdiction over Plaintiff's claims due to the presence of a federal question, the Lanham Act claim, and diversity of citizenship. See 28 U.S.C. §§ 1331, 1332. Jurisdiction over the common law claims for tortious interference with prospective contractual relations and unfair competition is established pursuant to 28 U.S.C. § 1367 inasmuch as those causes of actions are part of the same case...