Phoenix Renovation Corp. v. Rodriguez, 1:05CV1196(JCC).

• Decision Date: 25 October 2006
• Docket Number: No. 1:05CV1196(JCC).,1:05CV1196(JCC).
• Citation: 461 F.Supp.2d 411
• Court: U.S. District Court — Eastern District of Virginia
• Parties: PHOENIX RENOVATION CORP., d/b/a Phoenix Construction, Inc. and Plumbing Express, Plaintiff, v. Peter RODRIGUEZ, et al., Defendants.

461 F.Supp.2d 411

PHOENIX RENOVATION CORP., d/b/a Phoenix Construction, Inc. and Plumbing Express, Plaintiff, v. Peter RODRIGUEZ, et al., Defendants.

No. 1:05CV1196(JCC).

United States District Court, E.D. Virginia, Alexandria Division.

October 25, 2006.

COPYRIGHT MATERIAL OMITTED

David Hirst Bruns, Williams Mullen PC, McLean, VA, for Plaintiff.

Lawrence Joseph McClafferty, McClandish & Lillard, Leesburg, VA, for Defendants.

MEMORANDUM OPINION

CACHERIS, District Judge.

The Plaintiff, Phoenix Renovation Corporation ("Phoenix"), brought this action alleging that the Defendants, Peter Rodriguez, Radek Koci, and Atlantic Re-Plumbing LLC, violated Phoenix's rights under the Copyright Act, breached their subcontractor agreements with Phoenix, tortiously interfered with Phoenix's business expectancies, engaged in unfair competition, and conspired to harm Phoenix's business. The Court conducted a bench trial of this matter from July 18, 2006 through July 20, 2006.

At the conclusion of the Plaintiffs evidence, the Court took under advisement Count I (copyright infringement) and ruled that Defendants Koci and Rodriguez were entitled to verdicts in their favor for the breach of contract claims in Counts II and III based on allegations that they violated their subcontractor agreements by soliciting Phoenix employees. The Court took under advisement the portion of the allegations in Counts II and III concerning Defendants' breaches of agreement with Phoenix prohibiting them from disclosing or making use of any "trade secret, confidential or proprietary information of the company or its affiliates." The Court also dismissed Count IV, for tortious interference with Phoenix' contracts and business expectancies. The Court now makes the following findings of fact and conclusions of law.

I. The Parties

1. Phoenix is a Virginia Corporation with its principal place of business in Alex

andria, Virginia. Phoenix does business under the name "Plumbing Express." It does business in thirty-eight states, including the greater Washington, D.C. metropolitan area as Plumbing Express. Phoenix offers specialized services in the niche market of polybutylene pipe replacement.

2. Defendant Peter Rodriguez ("Rodriguez") is a resident of Gaithersburg, Maryland and a former subcontractor of Phoenix who performed PB Replacement services.

3. Defendant Radek Koci ("Koci") is a resident of Virginia and a former subcontractor of Phoenix who performed PB Replacement services.

4. Defendant Atlantic Re-Plumbing LLC is a Virginia limited liability company organized by Koci and Rodriguez on June 23, 2003 and formed to compete directly with Phoenix in the polybutylene replacement industry.

II. The Claims

5. Count I of Phoenix's complaint alleges that Defendants reproduced and distributed original content from a consumer contract known as Phoenix's 2002 Interior Re-pipe Agreement, without Phoenix's authorization, in violation of the Copyright Act, 17 U.S.C. § 501.

6. Count II alleges that Koci breached three provisions of his Subcontractor Agreement with Phoenix: (1) the covenant not to compete and not to solicit Phoenix's prospective customers or clients; (2) the covenant not to solicit Phoenix employees; and (3) the confidentiality agreement.

7. Count III alleges that Rodriguez breached three provisions of his Subcontractor Agreement with Phoenix: (1) the covenant not to compete and not to solicit Phoenix's prospective customers or clients; (2) the covenant not to solicit Phoenix employees; and (3) the confidentiality agreement.

8. Count IV alleges that Defendants tortiously interfered with Phoenix's contracts and business expectancies with various other Phoenix employees and subcontractors by: (1) causing at least one Phoenix employee to secretly perform polybutylene replacement work during hours in which he was to be performing such work for Phoenix; (2) attempting, successfully and unsuccessfully, to induce key Phoenix employees to terminate their employment with Phoenix; and (3) inducing Scott Davis ("Davis") to work for Atlantic, despite Defendants' awareness of his covenant not to compete against Phoenix.

9. Count V alleges that Koci tortiously interfered with Phoenix's rights under its Subcontractor Agreement with Rodriguez, causing Rodriguez to breach his Subcontractor Agreement.

10. Count VI alleges that Rodriguez tortiously interfered with Phoenix's rights under its Subcontractor Agreement with Koci, causing Koci to breach his Subcontractor Agreement.

11. Count VII alleges that Defendants conspired to willfully and maliciously injure Phoenix in its business, in violation of Va.Code § 18.2-499, by tortiously interfering with Phoenix's prior employment relationship with Davis, intentionally misappropriating Phoenix's business methods and plans, infringing on Phoenix's copyright interests, and unlawfully soliciting Phoenix's employees.

12. Count VIII alleged that Defendants engaged in various acts of unfair competition. Upon Defendants' motion, this Court dismissed Count VIII in a Memorandum Opinion and Order dated December 8, 2005. See Phoenix Renovation Corp. v. Rodriguez, 403 F.Supp.2d 510, 517-18 (E.D.Va.2005).

13. Count IX alleges that Defendants engaged in a common law conspiracy to injure Phoenix in its business.

III. Jurisdiction

14. This Court has jurisdiction over Phoenix's copyright infringement claim pursuant to 28 U.S.C. §§ 1331, 1338(a).

15. This Court has supplemental jurisdiction over Phoenix's state law claims pursuant to 28 U.S.C. § 1367.

16. This Court is a proper venue pursuant to 28 U.S.C. § 1391(b)(2), because a substantial part of the events giving rise to Phoenix's claims occurred within the Eastern District of Virginia. Venue is also proper pursuant to 28 U.S.C. § 1400(a), since Defendants reside or may be found within the Eastern District of Virginia.

IV. Findings of Fact

A. The Polybutylene Replacement Market and Phoenix's Business Methods

17. John Ellis ("Ellis") and Peter Page incorporated Phoenix in 1989. Phoenix began providing polybutylene replacement services in 1993. (Tr. at 378).

18. Polybutylene replacement is a niche business within the plumbing industry. As of July 20, 2006, there are approximately sixteen companies that perform polybutylene replacement services. Three of these companies specialize in polybutylene replacement: Phoenix, Atlantic, and Mr. Renovator. (Tr. at 611-62).

19. The polybutylene replacement market is a finite market. After a house's polybutylene pipes have been replaced, there is no longer any need for such services in that house. (Tr. at 132-33).

20. There are no public records identifying buildings that contain polybutylene pipes. Houses with polybutylene pipes are typically found, however, on the same streets or in the same neighborhoods as other houses with such pipes. (Tr. at 384-85). For this reason, a company that learns of the existence of polybutylene pipes in one house can often accurately predict that other houses on the same street or in the same neighborhood will also contain polybutylene pipes. (Tr. at 384).

21. Phoenix developed, maintained, and continues to maintain records of its polybutylene replacement customer names and addresses in a proprietary database. Phoenix invested significant resources to develop this database. (Tr. at 382-83).

22. Phoenix uses this proprietary database to find streets and neighborhoods where there will likely be an abundance of houses with polybutylene pipe. Phoenix then uses targeted direct mail to market its polybutylene replacement services to the residents of these streets and neighborhoods. (Tr. at 387-88).

23. Phoenix does not share its customer list or its marketing lists with other businesses, and employee access to Phoenix's customer database is limited. (Tr. at 383).

24. Phoenix did not hold meetings or seminars to discuss marketing plans, business plans, or other trade secrets with its employees or subcontractors. (Tr. at 152-53; Tr. at 332).

25. When performing polybutylene replacement services, Phoenix used a consumer contract known as its Interior Re-Pipe Agreement. (Tr. at 394-95; Pl.'s Ex. 3).

26. Ellis developed the Interior Re-Pipe Agreement and continually revised it over time to reflect the scope of work, terms, conditions, and exclusions that he learned should be applicable to polybutylene replacement services. Ellis included terms in the Interior Re-pipe Agreement that addressed issues that had arisen from Phoenix's past experiences with customers. Over time, Ellis spent a total of approximately 200 hours developing and revising the Interior Re-pipe Agreement. (Tr. at 394-97).

27. The Interior Re-Pipe Agreement was a proprietary document containing original content. On August 2, 2005, Phoenix registered the version of the Interior Re-Pipe Agreement that it used in 2002 ("the Re-Pipe Agreement") with the United States Copyright Office. (Pl.'s Ex. 4B).

B. Phoenix's Former Employment/Contractual Relationships with Rodriguez and Koci

28. In 1995, Phoenix hired: Rodriguez as an employee. While in Phoenix's employment, Rodriguez performed drywall work exclusively on polybutylene replacement jobs. (Tr. at 46-47).

29. Prior to his employment with Phoenix, Rodriguez had no experience with polybutylene replacement work. Phoenix trained Rodriguez to do estimates on polybutylene replacement jobs by conducting "fixture counts," a method which entails counting the number of devices that provide a supply of water within a house. (Tr. at 47-48).

30. In 2000, Rodriguez asked to be treated as a nonexclusive independent contractor, and Phoenix complied with this request. (Tr. at 178).

31. On March 23, 2000, Rodriguez entered into a written Subcontractor Agreement with Phoenix. (Pl.'s Ex. 13).

32. The Subcontractor Agreement identified Rodriguez as the "Subcontractor" and provided, in pertinent part, as follows:

WHEREAS, the Company is in the business, among other things, of: 1) providing...