Power Home Solar, LLC v. Sigora Solar, LLC, Civil Action 3:20-cv-00042
| Decision Date | 30 August 2021 |
| Docket Number | Civil Action 3:20-cv-00042 |
| Parties | POWER HOME SOLAR, LLC, Plaintiff, v. SIGORA SOLAR, LLC, et al., Defendants. |
| Court | U.S. District Court — Western District of Virginia |
Defendants Sigora Solar, LLC (“Sigora”), Brian Ventura, and Raven Stephens (collectively, “Defendants”) have moved to dismiss Plaintiff Power Home Solar, LLC's (“PHS”) complaint in its entirety under Federal Rule of Civil Procedure 12(b)(6). Because PHS's complaint is replete with legal conclusions and devoid of sufficient facts to state any plausible claim, the court will grant Defendants' motion to dismiss.
PHS filed this lawsuit in the Circuit Court of the City of Charlottesville in June 2020 against Sigora, Stephens, and Ventura. Defendants removed the case to this court in July 2020. (ECF No. 1.)
PHS is a solar energy company that sells solar systems to homeowners and commercial businesses. Sigora is PHS's competitor in the renewable energy business. PHS alleges that Sigora induced its former employees-Stephens and Ventura-to cease their employment with PHS and join Sigora. When Stephens and Ventura left PHS for Sigora, PHS alleges that they absconded with its trade secrets at the behest of Sigora and are now misappropriating them. PHS also alleges that Stephens and Ventura are violating various provisions of employment agreements that they allegedly signed while employed at PHS.
PHS's complaint brings 12 counts: (1) breach of employment agreements by Stephens and Ventura; (2) aiding and abetting breach of restrictive covenants against Sigora; (3) misappropriation of trade secrets under the federal Defend Trade Secrets Act (“DTSA”) against Defendants (4) aiding and abetting misappropriation of trade secrets under the DTSA against Sigora; (5) misappropriation of trade secrets under Virginia's Uniform Trade Secrets Act (“VUTSA”) against Defendants; (6) common law unfair competition against Defendants; (7) civil conspiracy against Defendants; (8) tortious interference with contract against Sigora; (9) turnover of property to PHS and for an accounting against Defendants; (10) unjust enrichment against Defendants; (11) motion for preliminary and permanent injunctive relief; and (12) punitive damages against Defendants under VUTSA and DTSA.
Motions to dismiss under Rule 12(b)(6) test the legal sufficiency of a complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). To survive a Rule 12(b)(6) motion, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007)). A claim is facially plausible when the plaintiff's allegations “allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. While a complaint does not need “detailed factual allegations, ” complaints merely offering “labels and conclusions, ” “naked assertion[s] devoid of ‘further factual enhancement, ” or “a formulaic recitation of the elements of a cause of action will not do.” Id. (alteration in original) (internal quotation marks omitted) (quoting Twombly, 550 U.S. at 555, 557).
The first matter of concern is what law applies to the relevant contracts. PHS alleges that Ventura and Stephens signed an agreement called the “Restrictive Covenants and Invention Assignment Agreement” (“RCIAA”). (ECF No. 19 at 39-43.) Section 13 of the RCIAA states: “This Agreement, and all transactions contemplated by this Agreement, shall be governed by, construed and enforced in accordance with the laws of the State of Michigan.” (Id. at 42.)
“When deciding state law claims under supplemental jurisdiction, federal courts apply the choice-of-law rules of the jurisdiction in which they sit.” McFarland v. Va. Ret. Servs. of Chesterfield, LLC, 477 F.Supp.2d 727, 732 (E.D. Va. 2007) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941)). As such, this court must apply Virginia's choice-of-law rules to determine what law applies.
Under Virginia choice-of-law rules, “[i]f a contract specifies that the substantive law of another jurisdiction governs its interpretation or application, the parties' choice of substantive law should be applied.” Settlement Funding, LLC v. Von Neumann-Lillie, 645 S.E.2d 436, 438 (Va. 2007) (citation omitted). As such, Virginia gives choice-of-law clauses full effect except in “unusual circumstances.” PNC Bank, Nat'l Ass'n v. Dominion Energy Mgmt., Inc., No. 3:17cv311, 2018 WL 1768061, at *4 (E.D. Va. Apr. 12, 2018) (quoting Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 624 (4th Cir. 1999)). “Unusual circumstances exist where there is ‘no reasonable basis' for the choice-of-law provision, or where a party agreed to the provision due to improper means such as fraud or misrepresentation.” Id. ).
Here, the court finds that there is no reasonable basis for the Michigan choice-of-law provision. According to PHS's complaint, Stephens and Ventura have no relationship to Michigan; they both reside in Virginia and worked exclusively in Virginia for PHS. (See Compl. ¶¶ 3-5 [ECF No. 1-3].) PHS is also a Delaware limited liability company with its principal place of business in North Carolina. (Id. ¶ 1.) No allegations in the complaint demonstrate any factual relationship between the claims in this lawsuit and Michigan, and PHS brought claims exclusively under federal and Virginia state law. Therefore, under Virginia's choice-of-law rules, the court will apply Virginia law to PHS's breach of contract claim.
Defendants argue that the court can and should dismiss PHS's breach-of-contract claim with prejudice because the restrictive covenants in Stephens's and Ventura's employment agreements are facially unenforceable. PHS asserts that such a ruling would amount to “judgment on the pleadings.” (ECF No. 16 at 11.) PHS further states: “Discovery is just beginning, and to the extent the analysis of whether a covenant is reasonable is based on the circumstances of the case, a decision on this issue with a fact-intensive case as the subject action is not appropriate on a motion to dismiss.” (Id.)
The enforceability of a restrictive covenant is a matter of law to be decided by the court. Omniplex World Servs. Corp. v. U.S. Investigations Servs., Inc., 618 S.E.2d 340, 342 (Va. 2005). And courts adjudicate the legality of restrictive covenants at various stages of the proceeding: some at a motion to dismiss (or demurrer in Virginia state court), and some at a motion for summary judgment. See O'Sullivan Films, Inc. v. Neaves, 352 F.Supp.3d 617, 623- 27 (W.D. Va. 2018) (summary judgment); Capital One Fin. Corp. v. Kanas, 871 F.Supp.2d 520, 530-38 (E.D. Va. 2012) (summary judgment); Hawkins v. Fishbeck, , 301 F.Supp.3d 650, 659- 60 (W.D. Va. 2017) (motion to dismiss); Specialty Mktg, Inc. v. Lawrence, No. CL09000928-00, 2010 WL 7375616, at *2-3 (Va. Cir. Ct. Mar. 11, 2010) (demurrer).
At least one court in this district has warned, however, that “a court cannot adjudicate the enforceability of a [restrictive covenant] in a factual vacuum.” O'Sullivan, 352 F.Supp.3d at 624. “No two situations leading to the execution of a [restrictive covenant] are the same.” Capital One Fin. Corp., 871 F.Supp.2d at 530. As such, “[e]ach non-competition agreement must be evaluated on its own merits, balancing the provisions of the contract with the circumstances of the business and employees involved.” Omniplex, 618 S.E.2d at 342 (emphasis added). Recognizing that the enforceability of a restrictive covenant is a matter of law, the court also appreciates that the reasonableness of a restrictive covenant may depend on some facts-for example, the nature and geographic area of the employer's business, the market generally, and the relevant employee's position, seniority, and access to important information-that are not necessarily contained in the complaint.
Federal Rule of Civil Procedure 12(d) states:
If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.
Fed. R. Civ. P. 12(d). The Fourth Circuit has ruled that “no formal notice of conversion by the district court is required in cases where it is apparent that what is nominally a Rule 12(b)(6) motion to dismiss is subject to conversion to a summary judgment motion-for example, where the motion is captioned in the alternative as a motion for summary judgment and affidavits are attached to the motion.” Carter v. Balt. Cnty., 39 Fed.Appx. 930, 933 (4th Cir. 2002) (per curiam) (). A district court may also not convert a motion to dismiss without giving the plaintiff notice and a “reasonable opportunity to conduct discovery.” Id.
“It is often the case that a court should not convert a motion during the early stages of a case, when the nonmoving party may not have had an opportunity to conduct discovery and to present all material pertinent to the motion.” Caner v. Autry, 16 F.Supp.3d 689, 701 (W.D. Va. 2014) (citation and internal quotation marks omitted). When a...
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