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Economic Research Services, Inc. v. Resolution Economics, LLC

United States District Court, District of Columbia

September 21, 2016

ECONOMIC RESEARCH SERVICES, INC., Plaintiff,
v.
RESOLUTION ECONOMICS, LLC, PAUL WHITE, AND ALI SAAD, Defendants.

          MEMORANDUM OPINION [DKT. #29]

          RICHARD J. LEON United States District Judge.

         Plaintiff Economic Research Services ("plaintiff or "ERS") commenced the instant action against defendants Resolution Economics, LLC ("Resolution"), Paul White ("White"), and Ali Saad ("Saad") (collectively, "defendants") in August 2015. In its Verified Complaint[1] ("Complaint") [Dkt. #1], ERS poses a veritable kitchen sink full of claims related to White departing from ERS to Resolution and the corresponding phenomenon of ERS's employees and clients doing the same. Presently before the Court is defendants' Motion to Dismiss the Complaint in its entirety. Defs.' Mot. to Dismiss [Dkt. #29]. Upon consideration of the pleadings, the relevant law, and the entire record herein, the Court GRANTS IN PART and DENIES IN PART defendants' Motion for the reasons set forth below.

         BACKGROUND

         Plaintiff ERS provides economic research and statistical analysis for corporations and law firms in a variety of disciplines, including employment discrimination, fair lending, insurance coverage, and intellectual property. See Compl. ¶ 19. White began a twenty-two year stint at ERS in 1993, when he was hired as an Economist. Compl. ¶¶21, 25. He thereafter moved up the ranks, receiving a promotion to Vice President in 1998 before ultimately becoming a Managing Director of ERS's Labor and Employment ("L&E") Group in ERS's Washington, D.C. office in 2010. Compl. ¶¶21, 25. In that role, White provided economic research, statistical analysis, and expert services related to the field of labor and employment to ERS's clients. Compl. ¶¶ 1, 3. White supervised the nine ERS employees in the L&E Group, interfaced directly with the clients, and was exposed to and had access to ERS's trade secrets and confidential and propriety information. Compl. ¶¶ 3, 27.

         As a condition of his employment, White signed periodic contracts with ERS, including the 2015 Managing Directors' Compensation Plan consummated on June 29, 2015 (the "2015 Employment Agreement" or the "Agreement"). Compl. Ex. 3 [Dkt. #1-3]; see Compl. ¶¶ 28-32; see also Compl. Ex. 1 [Dkt. #1-1]; Compl. Ex. 2 [Dkt. #l-2].[2] The 2015 Employment Agreement contains several restrictive covenants that are applicable to White given his role as a director, only a few of which are relevant here. First, the Agreement bars directors from disclosing ERS's confidential information to third parties at any time following their departure from ERS.[3] Compl. Ex. 3 § 3(i). Second, it prohibits directors from soliciting ERS employees or clients for the twelve months following their separation.[4] Compl. Ex. 3 §§ 3(k)(i)-(ii). Third, and finally, the Agreement precludes Directors, once again for a period of twelve months after leaving ERS, from performing "any act that [the] Director[s] knew, know[], or reasonably should have known might directly injure ERS or its parents and affiliates in any material respect." Compl. Ex. 3 § 3(k)(iv).

         On July 6, 2015, shortly after signing the 2015 Employment Agreement, White resigned from his position at ERS and, effective July 17, 2015, left to manage ERS's competitor Resolution's nascent Washington, D.C. office. Compl. ¶¶ 38-39. ERS then spoke with Saad, an owner and managing director of Resolution, about potentially selling the remainder of ERS's Washington, D.C.-based L&E Group and its related infrastructure to Resolution. Compl. ¶¶ 14, 49. Plaintiff alleges that Saad initially expressed interest in an acquisition of the whole group but then stated that since ERS's employees were free to simply leave ERS and work elsewhere it did not make sense to do so. Compl. ¶ 50. Thereafter, on July 17, 2015, White's first day at Resolution, Resolution sent an "email blast" directly to ERS's clients announcing that White had joined Resolution as a Partner and inviting them to contact White at his new phone numbers or email address. Compl. ¶¶ 42, 46; Compl. Ex. 5 [Dkt. #1-5]. ERS claims that White and Resolution's objective in sending the email announcement was to solicit ERS's clients, Compl. ¶ 45, and that White and Resolution then made additional attempts to win over ERS's clients by reaching out to them individually, Compl. ¶¶ 45-47. According to ERS, defendants' efforts were immediately successful, and ERS began to receive formal notices from its clients requesting that their files be transitioned to Resolution. See Compl. ¶ 46.

         The exodus was not limited to ERS's clients. In the wake of White's resignation, several other members of ERS's Washington, D.C. L&E Group, all of whom had worked for White, quit their jobs at ERS and joined Resolution.[5] See Compl. ¶ 52. By August 10, 2015, nine of the ten employees in the practice group had resigned their posts. Compl. ¶¶ 53-62. ERS places the blame for this defection squarely at White's feet, asserting that "White either actively solicited the Washington, D.C. [Labor and Employment] Group to join Resolution or, at the least, influenced Resolution to hire them in breach of his nonsolicitation obligations." Compl. ¶ 63. ERS contends, in short, that defendants "decimated" its Washington, D.C. office. Compl. ¶¶ 64-65.

         ERS commenced this suit on August 10, 2015, by filing a Complaint alleging breach of contract, numerous commercial torts, violations of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, et seq, and violations of the District of Columbia's Uniform Trade Secrets Act, D.C. Code § 36-401, et seq.[6] That same day, ERS moved for a preliminary injunction, which I denied on October 21, 2015. Mem. Op. [Dkt. #33]. In the meantime, defendants filed the present Motion to Dismiss.

         LEGAL STANDARD

         "[Federal Rule of Civil Procedure] 8(a) sets out a minimum standard for the sufficiency of complaints . . . ." Brown v. Califano, 75 F.R.D. 497, 498 (D.D.C. 1977). It requires "a short and plain statement of the claim" and is intended "to give fair notice of the claim being asserted so as to permit the adverse party the opportunity to file a responsive answer, prepare an adequate defense and determine whether the doctrine of res judicata is applicable." Id. It also "serves to sharpen the issues to be litigated and to confine discovery and the presentation of evidence at trial within reasonable bounds." Id. The rule "is by no means exacting, " and it "accords the plaintiff wide latitude in framing his claims for relief." Id. at 499.

         Under Rule 12(b)(6), meanwhile, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcrofi v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) ("Factual allegations must be enough to raise a right tc relief above the speculative level . . . ."). A court must "treat the complaint's factual allegations as true" and "grant plaintiff the benefit of all inferences that can be derived from the facts alleged[.]" Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (internal quotation marks omitted). However, the court need not "accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Commc 'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). "In ruling on a 12(b)(6) motion, a court may consider facts alleged in the complaint, documents attached to or incorporated in the complaint, matters of which courts may take judicial notice, and documents appended to a motion to dismiss whose authenticity is not disputed, if they are referred to in the complaint and integral to a claim." Harris v. Amalgamated Transit Union Lobal 689, 825 F.Supp.2d 82, 85(D.D.C2011).

         DISCUSSION

         I. Count I: Breach of Contract

         In Count I, plaintiff alleges that White breached his contractual obligations under the 2015 Employment Agreement not to solicit ERS clients, not to solicit ERS employees, not to disclose ERS's propriety or confidential data, and not to take action that he knew or reasonably should have known, might directly injure ERS. Compl. ¶¶ 68-71. The 2015 Employment Agreement provided that it "shall be construed according to the laws of the State of Virginia, " Compl. Ex. 3 § 3(f), and the parties assume Virginia law will apply to plaintiffs breach of contract claim. When determining which state law to apply, "the Court applies the District of Columbia's choice-of-law rules." Essroc Cement Corp. v. CTI/D.C, Inc., 740 F.Supp.2d 131, 141 (D.D.C. 2010). Under those rules as applied by District of Columbia courts, "parties to a contract may specify the law they wish to govern, as part of their freedom to contract, as long as there is some reasonable relationship with the state specified." Id. As White is a resident of Virginia, the '"reasonable relationship' threshold" is satisfied, and the Court will apply Virginia law to plaintiffs breach of contract claim.[7]Id.

         Under Virginia law, the elements of a breach of contract claim are: "(1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant's violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation." Filak v. George, 594 S.E.2d 610, 614 (Va. 2004). Defendants argue plaintiff has failed to state a claim of breach of any of the provisions of the 2015 Employment Agreement. After careful evaluation of the parties' respective arguments, I deny defendants' Motion as it pertains to plaintiffs claims that White breached the non-solicitation of clients, non-solicitation of employees, and do no harm provisions of the Agreement.

         I agree with defendants, however, that plaintiff failed to state a claim that White breached his obligation not to disclose ERS's confidential information. The Complaint alleges that White breached the Agreement by sharing ERS's customers' identities and non-public contact information with Resolution. Compl. ¶¶ 43, 70. But the Complaint does not sufficiently specify which aspect of the Agreement's confidentiality provision White violated by doing so. The 2015 Employment Agreement defines "Confidential Information" as

any and all information that is proprietary and/or confidential, secret or otherwise not generally known to those in ERS's industry and pertains directly or indirectly to ERS and its operations and activities, products, services, employees, contractors, consultants and suppliers, including any and all formulae, methods, techniques, processes, know-how and data, technical or non-technical whether written, graphic, computer-generated or orally furnished to [White] by ERS or any of ERS's authorized Representatives. This Confidential Information does not include matters that are owned by the client or that have been paid for by the client as part of the fees for using the services of ERS . . . Confidential Information does not include information that (i) is or becomes publicly known; or (ii) is known to [White] other than from ERS (and became known legally and without the violation of any rights of ERS) and is without any proprietary or confidentiality restrictions at the time [White] receives such information.

Compl. Ex. 3§ 3(i). As it failed to identify where the names and contact information of ERS's customers fit into this definition, plaintiff failed to state a plausible claim of breach of the non-disclosure obligation. Cf. Compel v. Citi Mortgage, Inc., Civ. No. 04-1377, 2005 WL 4904816, at *2 (E.D. Va. Feb. 23, 2005) (explaining that in order to state a claim of breach of contract, the plaintiff "must identify which provisions imposed the purportedly breached obligation" and that "[t]he absence of such detail prejudices defendant's understanding of the defenses available to it and how it should proceed"). Count I is ...


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