Tech Usa, Inc. v. Evans, No. L-08-556.

Decision Date07 January 2009
Docket NumberNo. L-08-556.
Citation592 F.Supp.2d 852
PartiesTECH USA, INC., Plaintiff, v. J. Scott EVANS, et al., Defendants.
CourtU.S. District Court — District of Maryland

Allan P. Hillman, Shipman and Goodwin LLP, Hartford, CT, Grover C. Outland, III, ATL International Inc., Millersville, MD, for Plaintiff.

Mark J. Swerdlin, Shawe and Rosenthal LLP, Baltimore, MD, for Defendants.

MEMORANDUM

BENSON EVERETT LEGG, Chief Judge.

This breach of contract action arises from Plaintiff TECH USA, Inc.'s ("TECH USA") allegations that Defendant J. Scott Evans ("Evans") violated their confidentiality and non-compete agreement and committed other competition-based torts through Mr. Evans' operation of his company, Placement Solutions, Inc. ("PSI"). Now pending are (1) Defendants' Motion to. Dismiss for Improper Venue Pursuant to Fed.R.Civ.P. 12(b)(3) or, Alternatively, to Transfer Venue Pursuant to 28 U.S.C. § 1404(a), and (2) Plaintiffs Motion For Leave to File Surreply. Docket Nos. 9 and 12. The Court has reviewed the papers thoroughly and deems oral argument unnecessary. Local Rule 105.6. For the following reasons, the Court will DENY Defendants' Motion to Dismiss and DENY Defendants' Motion to Transfer Venue to the Northern District of Texas. In addition, the Court will DENY Plaintiffs Motion For Leave to File Surreply.

I. Background

Plaintiff TECH USA is a Maryland corporation that provides customized staffing and consulting support to government and private sector clients nationwide. Mr. Evans is the sole shareholder and officer of PSI, a staffing firm which he formed on September 9, 2003, with the assistance of a financial backer, Mr. Rasmi Almadah. In March 2006, Mr. Evans purchased the business from Mr. Almadah and registered as an LLC. Both Mr. Evans and PSI reside, and are domiciled, in Texas. Beginning in November 2005, various representatives from TECH USA contacted Mr. Evans, seeking to form a partnership with Mr. Evans and PSI. Initially, the parties proposed to structure the deal through an asset purchase, with TECH USA buying all assets of PSI. As the negotiations progressed through early 2006, however, TECH USA's President, Jason Beck, suggested restructuring the deal. He proposed an arrangement whereby Mr. Evans would be hired as an employee of TECH USA, with the understanding that Mr. Evans would bring in his contacts from PSI and assist TECH USA in developing the staffing portion of its business.

In June 2006, Mr. Evans received a contract from TECH USA's attorney regarding the proposed partnership. The contract contained a Confidentiality/Non-Competition Agreement ("the Agreement"), which sought to protect TECH USA's confidential information and trade secrets, and would require Evans to refrain from competing with TECH USA for a limited period of time and/or soliciting customers and employees after leaving its employ. The Agreement also contained a forum-selection clause effective upon the breach of the covenants relating to Confidential Information, Trade Secrets, Company Property, Non-Solicitation, and Non-Competition. In the event of any such breach, the signatories consented "to the jurisdiction of any federal or state court within the State of Maryland" and agreed to "waive all questions, issues, and defenses as to personal jurisdiction and venue for the purpose of carrying out this provision." Docket No. 1, Exh. A.

Mr. Evans and his attorney reviewed preliminary drafts of the Agreement and requested modification of certain provisions. A central area of dispute was TECH USA's forum-selection clause, to which Mr. Evans objected. After further negotiation, Mr. Evans returned a revised version of the Agreement to TECH USA, from which all language designating Maryland as the exclusive forum had been deleted. The parties were unable to come to an accord after two months of unsuccessful negotiations. Finally, on July 24, 2006, Mr. Beck sent an e-mail to Mr. Evans which contained a version of the Agreement with the unmodified forum-selection clause. Mr. Beck stated in the e-mail that Mr. Evans would have 24 hours to accept the Agreement, or the offer would be terminated. Mr. Evans acquiesced to these terms, and signed the final version of the Agreement. Under the terms of the Agreement, TECH USA hired Evans as Vice President, Mortgage & Finance at its Dallas office, where he was employed at-will. Defendant PSI was not a signatory to the Agreement.

Mr. Evans was employed in that capacity until January 7, 2008, when was terminated from his position at TECH USA. In the weeks following his severance from TECH USA, the company charges that Mr. Evans violated the post-termination terms of the Agreement through his continued contacts with TECH USA clients, among other alleged violations. TECH USA filed this seven-count suit against Evans and PSI on March 3, 2008.

II. Choice of Law and Standard of Review
A. Choice of Law

It is now well-established in the Fourth Circuit that "a motion to dismiss based on a forum-selection clause should be properly treated under Rule 12(b)(3) as a motion to dismiss on the basis of improper venue." Sucampo Pharms., Inc. v. Astellas Pharma, Inc., 471 F.3d 544 (4th Cir.2006); Silo Point II, LLC v. Suffolk Constr. Co., 578 F.Supp.2d 807, 809 (D.Md. 2008). When the validity of a forum-selection clause is challenged under Rule 12(b)(3), a district court must first decide whether to apply state or federal law. See Koch v. America Online, Inc., 139 F.Supp.2d 690, 692 (D.Md.2000). In a diversity action such as this one, courts in the District of Maryland apply state law in determining the applicability of forum-selection clauses, pursuant to the Fourth Circuit's unpublished decision in Nutter v. New Rents, Inc., No. 90-2493, 1991 WL 193490, 1991 U.S.App. LEXIS 22952 (4th Cir. Oct. 1, 1991). See Belfiore v. Summit Fed. Credit Union, 452 F.Supp.2d 629, 632 n. 3 (D.Md.2006); Davis Media Group, Inc. v. Best Western Int'l, Inc., 302 F.Supp.2d 464, 466 (D.Md.2004) (noting that "in diversity cases ... the Fourth Circuit applies state law to determine enforceability" of forum-selection clauses); Eisaman v. Cinema Grill Sys., Inc., 87 F.Supp.2d 446, 448 (D.Md.1999). Accordingly, the Court will apply state law in its analysis of the validity of the forum-selection clause here at issue.

B. Forum-Selection Clause

The Supreme Court held in The Bremen v. Zapata Off-Shore Co., 407 U.S 1, 10, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972) that a forum-selection clause is prima facie valid and should be enforced unless "unreasonable" under the circumstances. Either party may overcome this presumption of validity with a clear showing that the forum-selection clause is "unreasonable," as evidenced by the following factors: (1) formation was induced by fraud or overreaching, (2) the complaining party "will for all practical purposes be deprived of his day in court" because of the grave inconvenience or unfairness of the selected forum, (3) the fundamental unfairness of the chosen law may deprive the plaintiff of a remedy, or (4) enforcement of the forum-selection clause would contravene a strong public policy of the forum state. Allen v. Lloyd's of London, 94 F.3d 923, 928 (4th Cir.1996) (summarizing Bremen, 407 U.S. at 12-18, 92 S.Ct. 1907). The burden of proving the unreasonableness of a forum-selection clause is a heavy one, which requires a "strong showing" that the chosen forum should be set aside. See Bremen, 407 U.S. at 15, 92 S.Ct. 1907. See also Carnival Cruise Lines v. Shute, 499 U.S. 585, 592, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).

The Maryland Court of Appeals in Gilman v. Wheat, First Sec. Inc., 345 Md. 361, 692 A.2d 454 (1997) adopted the Bremen "unreasonableness" standard for determining the validity of forum-selection clauses. In so doing, the Gilman court restated the Bremen test as follows: a forum-selection clause is "unreasonable" if "(1) it was induced by fraud or overreaching, (2) the contractually selected forum is so unfair and inconvenient as, for all practical purposes, to deprive the plaintiff of a remedy or its day in court, or (3) enforcement would contravene a strong public policy of the State where the action was filed." Id. at 378, 692 A.2d 454. In the instant case, the parties have briefed the issue under both the Bremen and Maryland standards. Accordingly, the Court will apply the Bremen test, as adopted by the Maryland Court of Appeals in Gilman.1

Preliminary to analyzing the "reasonableness" of a forum-selection clause under Bremen, the Court must settle the threshold issue of whether the forum-selection clause is mandatory or permissive. See Davis Media Group, 302 F.Supp.2d at 467. Only mandatory forum-selection clauses are enforced under the Bremen standard. Eisaman, 87 F.Supp.2d at 449. Permissive forum-selection clauses, on the other hand, should not be dismissed under Rule 12(b)(3), as they permit jurisdiction in the selected forum without "precluding it elsewhere." Davis Media Group, 302 F.Supp.2d at 467. A mandatory forum-selection clause is "one containing clear language showing that jurisdiction is appropriate only in the designated forum." Koch, 139 F.Supp.2d at 693 (citing Excell, Inc. v. Sterling Boiler and Mech., Inc., 106 F.3d 318, 321 (10th Cir. 1997) (internal quotation omitted)).

C. Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a)

Defendants have moved in the alternative tc transfer venue pursuant to 28 U.S.C. § 1404(a), which provides that: "For the convenience of parties and witnesses in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." A motion to transfer under § 1404(a) must be analyzed under the standard set forth in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 29-31, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988), which requires district courts to weigh several case-specific factors in deciding whether to...

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