Numsp, LLC v. St. Etienne
Decision Date | 22 May 2020 |
Docket Number | 20-CV-2916 (RA) |
Citation | 462 F.Supp.3d 330 |
Parties | NUMSP, LLC, Plaintiff, v. David ST. ETIENNE, Kenneth A. Raymond, Dulymus "Deuce" McAllister, and ProTek Solutions, Inc., Defendants. |
Court | U.S. District Court — Southern District of New York |
John Michael Vieira, Joshua Scott Bratspies, Sherman Wells Sylvester & Stamelman LLP, New York, NY, for Plaintiff.
Anna Conlon Aguilar, Lisa Dennis Bentley, Berger Legal, LLC, Ryan Weiner, Aguilar Bentley LLC, New York, NY, for Defendants.
Plaintiff NuMSP, LLC filed this action against Defendants David St. Etienne, Kenneth Raymond, Dulymus "Deuce" McAllister, and ProTek Solutions, Inc., asserting claims for breach of contract, unfair competition, and misappropriation of trade secrets, among others. Now before the Court is NuMSP's motion for a temporary restraining order and preliminary injunction, St. Etienne's motion to dismiss and/or compel arbitration, Raymond's motion to dismiss, and McAllister and ProTek's joint motion to dismiss. For the reasons that follow, the Court grants the motions to dismiss for lack of personal jurisdiction filed by Defendants Raymond, McAllister, and ProTek; denies St. Etienne's motion to dismiss but grants his motion to compel arbitration; and denies NuMSP's motion for a temporary restraining order and preliminary injunction.
Plaintiff NuMSP, LLC is a "leading provider of information technology (‘IT’) consulting services for businesses." Compl. ¶ 8.2 In 2018, NuMSP identified Ultimate Technical Services, Inc. ("UTSI"),3 a Louisiana-based IT consulting business founded in 1984 by Defendant David St. Etienne, as a "potential acquisition target." See id. ¶¶ 11-13; St. Etienne Decl. ¶¶ 4-5. Thereafter, NuMSP began negotiating with St. Etienne "to buy his business." Compl. ¶ 13.
On December 3, 2018, NuMSP, UTSI, and St. Etienne entered into an Asset Purchase and Sale Agreement (the "APA"), through which NuMSP agreed to purchase UTSI from St. Etienne for a total of $1,004,000. See Compl. Ex. B (APA) §§ 1.1, 3.1; see also Compl. ¶ 14. NuMSP agreed to pay $848,587 to St. Etienne at Closing,4 and $150,000 one year later, assuming "certain post-closing conditions were met." See Compl. ¶ 15. In purchasing St. Etienne's Business,5 NuMSP purchased "all the assets of the Business either owned by [UTSI] or essential to the operation of the Business," including "all goodwill in or arising from the Business as a going concern" and all of UTSI's customer relationships, customer contracts, and customer good will. See Compl. ¶ 15; APA § 1.1. NuMSP alleges that, in order to "protect NuMSP's interests in the business and customer relationships that it was buying," St. Etienne also agreed "as part of the sale transaction that he, both directly and indirectly through any other person or entity, would refrain for a three-year period ending in December 2021 from competing against NuMSP within Louisiana and from soliciting any of NuMSP's customers." Compl. ¶ 17. In particular, pursuant to Section 5 of the APA, St. Etienne agreed to deliver to NuMSP "Noncompetition Agreements" signed by UTSI and St. Etienne "with the restrictive covenants contained in Section 15 of this Agreement." See APA § 5.1(g).
Section 15, in turn, provides that, for a period of three years from the Closing Date, the "Seller Parties"—defined to include UTSI and St. Etienne together—and/or "any other entity owned in full or part directly or indirectly by the Seller Parties" shall not compete with NuMSP within the state of Louisiana or solicit any of NuMSP's customers. See APA §§ 15.1, 15.3, 15.4.
The APA contains a New York choice of law provision, as well as a mandatory arbitration provision. First, the APA provides that it "shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed wholly within such jurisdiction, without giving effect to the provisions, policies, or principles thereof relating to choice or conflict of laws." See APA § 18.3. Second, it provides that "[a]ny controversy or claim arising out of this Agreement will be settled by binding arbitration before a single arbitrator in New York, New York" in accordance with the American Arbitration Association's rules for commercial disputes, and that the "resolution of any controversy or claim as determined by the arbitrator will be binding on the Parties." See APA § 18.4. Section 18.4 provides further that a party "may seek from a court an order to compel arbitration, or any other interim relief or provisional remedies pending an arbitrator's resolution of any controversy or claim," and that "[a]ny such action or proceeding will be arbitrated within the jurisdiction of the state or Federal courts located in New York, New York." Id.
In Section 17 of the APA, the parties expressly acknowledged that "damage remedies available at law for any breach of this Agreement ... will not be adequately compensated by monetary damages alone due to the difficulty of assessing such damages," and that therefore, the non-breaching party would be entitled to "obtain injunctive relief or other equitable relief to restrain a breach or threatened breach of this Agreement or to specifically enforce this Agreement, without proving that any monetary damages have been sustained." APA § 17.
Finally, the APA provides that "[a]ll Schedules and other attachments or Closing Date documents signed referenced in this Agreement are part of this Agreement and are incorporated herein by reference," see APA § 18.11, and that the APA, "with its Schedules and all related Closing Date transaction documents[,] constitutes the entire agreement among the Parties and supersedes any prior agreement or understanding, whether oral or written, among the Parties concerning its subject matter," see APA § 18.12.
According to the Complaint, St. Etienne executed and delivered to NuMSP a separate Non-Compete Agreement "[a]s further protection for the assets and the business that NuMSP was purchasing from St. Etienne" and "in connection with the closing of the [APA]." Compl. ¶ 21. Specifically, the "Non-Compete, Nonsolicitation and Assignment Agreement," also dated December 3, 2018, was entered into between NuMSP and St. Etienne. See Compl. Ex. A (Non-Compete). The parties expressly acknowledged in the Non-Compete Agreement that NuMSP "would not purchase" UTSI from St. Etienne "without the additional protection and consideration provided by" the Non-Compete Agreement. See Compl. ¶ 22; Non-Compete at 1. As such, the Non-Compete Agreement was "attached to the APA." See St. Etienne Decl. ¶ 11.6
The Non-Compete Agreement provides that "[i]n consideration of the payments" made to St. Etienne under the APA, he agreed, for a three-year period after the APA's Closing Date, not to "directly or indirectly either individually, in partnership, jointly, or in conjunction with any Person, firm, or entity" compete with NuMSP or solicit NuMSP's customers. See Non-Compete § 1. St. Etienne also agreed not to "use, reveal or divulge" any of NuMSP's "Confidential Information" "at any time after execution" of the Agreement, nor any "Trade Secret" "at any time during or after the term of this Agreement." See Non-Compete §§ 2, 3.
The Non-Compete Agreement contains a New York choice of law provision, providing that "[t]his Agreement shall be governed under the laws of the state of New York, without regard to conflict of law principles," and a New York forum selection clause, providing that "[a]ny permissible action at law, suit in equity, or other judicial proceedings for the enforcement of this Agreement, or related to any provision of this Agreement, shall be instituted only in a federal or state court located in New York, New York, except that [NuMSP] may seek injunctive relief in any court having jurisdiction for any claim relating to the alleged misuse or misappropriation of [its] trade secrets or Confidential Information or proprietary information." Non-Compete § 8. Pursuant to the Non-Compete Agreement, St. Etienne also "expressly consent[ed] to venue and personal jurisdiction of the federal or state courts as set forth in this Section 8 for any lawsuit filed there against [him] by [NuMSP] arising from or relating to this Agreement." Id. St. Etienne agreed further that, in the event that he "breaches or threatens to breach any of the restrictive covenants contained herein, [NuMSP] shall be entitled to specific performance, or immediate temporary, preliminary, and/or permanent injunctive relief, as well as money damages insofar as they can be determined." See Non-Compete § 5.
NuMSP asserts that, following its purchase of UTSI, it hired St. Etienne as a "Project Sales Manager" to "sell new projects and products to the customer base that NuMSP just purchased from him."7 See Compl. ¶ 28. It also hired Defendant Kenneth Raymond, a former UTSI employee, as a "Business Development Manager" to "bring new managed service customers to NuMSP." See id. Raymond had previously worked at UTSI for "a little more than two years as a sales associate." See Raymond Decl. ¶ 4. "[I]n connection with their employment with NuMSP," and in order to "protect the confidentiality" of NuMSP's confidential information and trade secrets, St. Etienne and Raymond each executed and delivered to NuMSP a "Confidentiality, Non-Disclosure and Employee Covenants Agreement" (together, the "NDAs"). See Compl. ¶ 30; Compl. Ex. D (St. Etienne NDA); Compl. Ex. E (Raymond NDA).8
As relevant to the instant dispute, the terms of the two NDAs are substantively the same. The NDAs provide that St. Etienne and Raymond were each an "at will employee," meaning that NuMSP could "terminate the employment relationship with [them] at any time, for any reason and with or without...
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