Pritchard v. Dent Wizard International Corp.
| Decision Date | 29 July 2003 |
| Docket Number | No. C2-03-490.,C2-03-490. |
| Citation | 275 F.Supp.2d 903 |
| Parties | Justin L. PRITCHARD, Plaintiff, v. DENT WIZARD INTERNATIONAL CORP., Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
John William Ferron, Leslie Blair Graden, Ferron & Associates, Columbus, OH, for Plaintiff.
Luis Manuel Alcalde, Crabbe Brown & James, Columbus, OH, Hugh D. Berkson, Cleveland, OH, for Defendant.
This matter is before the Court on Defendant's Motion to Dismiss on Jurisdictional Grounds Only and Plaintiff's Motion for Preliminary Injunction. The Court held a hearing on June 19, 2003. Based on the evidence presented and the arguments of counsel, the Court DENIES Defendant's Motion to Dismiss on Jurisdictional Grounds Only and DENIES Plaintiff's Motion for Preliminary Injunction.
Defendant, Dent Wizard International Corp. ("Dent Wizard" or "Defendant"), is engaged in the paintless dent removal business. Paintless dent removal is the general process of removing dents from automobiles without requiring painting or refinishing of the surface. Dent Wizard's founder perfected a special paintless dent removal technique, which Dent Wizard employees utilize. Dent Wizard guards information about this technique, holding it as a trade secret and forbidding its employees from sharing information about the technique with anyone outside the company. Dent Wizard has its headquarters in St. Louis, Missouri.
Plaintiff, Justin Pritchard ("Pritchard" or "Plaintiff"), lives in the Columbus, Ohio, area, where he works as a paintless dent removal technician. He moved to the area in 1992 to take a job with a Dent Wizard franchisee, FD Investments, Inc. ("FDI"). A college friend of Pritchard's who had acquired the FDI franchise recruited him to Columbus. Shortly after joining FDI, Pritchard entered a Technician Employment Agreement (the "Employment Agreement") and a Dent Wizard Technician Secrecy Agreement (the "Secrecy Agreement") (collectively, the "Agreements") with FDI.
The Agreements each contain an arbitration clause, which states in relevant part as follows:
Except insofar as the Employer [FDI] elects to enforce this Agreement by judicial process as hereinabove provided, all disputes and claims relating to the provisions hereof, or the alleged breach hereof, shall be settled by arbitration only, at the office of the American Arbitration Association located closest to the Employer's principal office under the United States Arbitration Act (9 U.S.C. Section 1, et seq.), if applicable, and the Rules of the American Arbitration Association relating to commercial disputes. . . . This Agreement to arbitrate shall continue in full force and effect subsequent to, and notwithstanding, the expiration or termination of Employee's employment by Franchisee, the Employer, or any other franchisee of the Employer.
The Employment Agreement contains a choice-of-law provision requiring the agreement to be governed under Missouri law. The Secrecy Agreement contains a provision requiring it to be governed under Florida law "[e]xcept to the extent governed by the United States Arbitration Act and the federal common law of Arbitration." Pritchard also entered a secrecy agreement directly with Dent Wizard in 1992, which contains the same arbitration and choice-of-law clauses as the Secrecy Agreement. Furthermore, Pritchard signed an Addendum to Trainee Secrecy Agreement, Noncompete and Nondisclosure Agreement (the "Addendum") with Dent Wizard on February 28, 1997. The Addendum incorporated the provisions of the Secrecy Agreement and contained additional provisions related to Prichtard's training in a certain "advanced process."
The Agreements contain some handwritten alterations, which Pritchard did not make, but which he negotiated with FDI and Dent Wizard. For example, the Employment Agreement contains handwritten changes awarding Pritchard a draw and commission earlier in his employment than the Employment Agreement's standard terms would provide. Although Pritchard was required to sign the agreements if he intended to be employed by FDI and Dent Wizard, he was aware of the key terms of the Agreements. For example, Pritchard testified that he was aware of and somewhat concerned about one provision that required him to repay FDI certain training expenses if he left the company less than two years after he began his employment.
Although Pritchard testified that he was unaware of the arbitration provisions in the Agreements, he did know that Dent Wizard actively enforced its secrecy and noncompete agreements with other employees. Pritchard's employment with Dent Wizard was lucrative. In 2000, he earned about $140,000, and in 2001, before he resigned, he earned about $105,000.
In 1996, Gandalf, L.L.C. ("Gandalf") acquired FDI's Dent Wizard Franchise, and in 2001, Dent Wizard repurchased the franchise from Gandalf.1 Later in 2001, due in part to the sale of the franchise, Pritchard decided to terminate his employment with Dent Wizard. Pritchard sent a resignation letter to Dent Wizard's Missouri office on September 28, 2001. The letter stated that Pritchard intended to resign his employment effective October 12, 2001, two weeks after the letter. The letter also stated that Pritchard intended to terminate the Employment Agreement effective October 12, 2001, including any addenda to the Employment Agreement, including the Secrecy Agreement. With respect to termination, the Employment Agreement provides as follows: "[T]his agreement may be terminated at any time by either party for any reason whatsoever upon the giving of two (2) weeks prior written notice."
On October 15, 2001, Pritchard filed a Complaint for Declaratory Judgment in the Court of Common Pleas, Franklin County, Ohio, seeking a declaration that he had properly terminated the Agreements and did not possess any Dent Wizard trade secrets. On December 11, 2002, the Ohio court dismissed Pritchard's complaint for improper venue, finding that under the Agreements, venue was proper in Missouri, not in Ohio. Although Dent Wizard participated in the Ohio litigation to the extent that it responded to Pritchard's complaint, Dent Wizard primarily sought to dismiss the complaint for improper venue and to compel arbitration in Missouri. The Ohio court's order dismissing Pritchard's complaint for improper venue is currently on appeal.
In early 2002, Dent Wizard filed a Petition for Injunctive and Other Relief and Damages in the Circuit Court of St. Louis County, Missouri. Dent Wizard sought various forms of injunctive relief and damages for breaches of the Agreements. Pritchard removed the case to federal court, and moved to have the case dismissed or transferred to Ohio. Ultimately, Dent Wizard voluntarily dismissed the Missouri action.
In the meantime, however, Dent Wizard initiated arbitration proceedings in St. Louis. On April 2, 2002, Dent Wizard filed a Demand for Arbitration with the American Arbitration Association ("AAA"), demanding arbitration with Pritchard and alleging violations of the Secrecy Agreement. Pritchard sought to have the arbitration proceedings dismissed, arguing that Dent Wizard did not have a right to seek arbitration under the Agreements for a number of reasons, including that it had waived its right to arbitration when it sought judicial relief in Ohio and Missouri courts. On September 17, 2001, the arbitrator found that he had jurisdiction over the case and denied Pritchard's motion to dismiss the arbitration. The arbitrator's Order did not analyze any of Pritchard's arguments for dismissal.
Ultimately, the AAA arbitration was scheduled for May 30, 2003. On May 28, 2003, Pritchard filed his Complaint for Declaratory Judgment and Injunctive Relief in this Court. His Complaint seeks a declaration that he properly terminated the Agreements, that the forum selection clauses in the Agreements are unenforceable, and that Pritchard does not possess any Dent Wizard trade secrets. The Complaint also seeks injunctive relief staying the AAA arbitration proceedings in St. Louis. On May 28, 2003, Pritchard also sought a temporary restraining order and a preliminary injunction to enjoin the AAA arbitration proceedings. In order to give the Court additional time to consider Pritchard's motion for a temporary restraining order, the parties agreed to continue the AAA proceeding. On June 2, 2003, the Court denied Pritchard's motion for a TRO, but the parties agreed to reschedule the AAA arbitration to allow the Court an opportunity to conduct a hearing on Pritchard's Motion for Preliminary Injunction Staying Arbitration. On June 6, 2003, Defendant filed a Motion to Dismiss on Jurisdictional Grounds Only.
The Court now decides Pritchard's Motion for Preliminary Injunction Staying Arbitration and Dent Wizard's Motion to Dismiss.
As a threshold matter, the Court must consider whether it has jurisdiction to hear this case. This Court has subject matter jurisdiction in this case pursuant to 28 U.S.C. § 1332(a) because the amount in controversy exceeds $75,000 and Pritchard is a citizen of Ohio, while Dent Wizard is a citizen of Missouri.
Defendant argues in its Motion to Dismiss on Jurisdictional Grounds Only that this case should be dismissed based on the first-to-file rule, the Colorado River abstention doctrine, and res judicata.
Defendant argues that the first-to-file rule forbids this Court from considering Plaintiff's Complaint because he previously filed a nearly identical complaint in Ohio state court. According to the first-to-file rule, "`[i]n all cases of concurrent jurisdiction, the court which first had possession of the subject must decide it.'" Am. Modern Home Ins. v. Insured Accounts Co., 704 F.Supp. 128, 129 (S.D.Ohio 1988) ...
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