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TargetSmart Holdings, LLC v. GHP Advisors, LLC

United States District Court, District of Columbia

February 7, 2019




         This case arises out of an agreement between the Plaintiffs, TargetSmart Holdings, LLC and TargetSmart Communications, LLC (together, “TargetSmart”), and the Defendant, GHP Advisors, LLC, doing business as Good Harbor Partners (“GHP”), to explore opportunities for TargetSmart to partner or merge with other companies engaged in similar business. The arrangement with GHP, TargetSmart alleges, was a scheme to induce TargetSmart to disclose confidential and proprietary information to benefit its competitor, the Defendant, Catalist, LLC (“Catalist”).

         TargetSmart brought this action against GHP and Catalist under both federal and state law for misappropriation of trade secrets, unjust enrichment, and breach of contract.

         Remaining before me following the filing of an amended complaint is the motion [Dkt. No. 38] by Catalist to dismiss the complaint for lack of personal jurisdiction, or in the alternative, to transfer the case to the District of Columbia, and to dismiss for failure to state a claim.

         I. BACKGROUND

         A. The Parties

         TargetSmart Holdings, LLC is a technology and consulting company that specializes in providing campaigns, candidates, and organizations with data and software to expand their audience base. [Dkt. No. 36 at ¶ 11]. It is a Delaware Limited Liability Company with its principle place of business in Washington, DC. [Id. at ¶ 1]. TargetSmart Communications, LLC, is a wholly owned subsidiary of TargetSmart Holdings and is also a Delaware Limited Liability Company with its headquarters in Washington, DC. [Id. at ¶ 2].

         GHP is a Massachusetts Limited Liability Company headquartered in Boston. [Id. at ¶ 3].

         Catalist, LLC is a Delaware Limited Liability Company headquartered in Washington, DC. [Id. at ¶ 4]. Like TargetSmart, Catalist specializes in helping Democratic and progressive candidates reach wider audiences. [See id. at 1, Introduction Statement, ¶¶ 18, 35].

         This case can be said to have been brought pursuant to this court's federal question jurisdiction, 28 U.S.C. § 1331, because TargetSmart's claim of violation of the Federal Defend Trade Secrets Act appears to predominate. [Dkt. No. 36 at ¶ 82]. Since the state law claims arise out of the same set of factual circumstances, I may exercise supplemental jurisdiction to hear those claims, even in the absence of complete diversity of the parties. See generally 28 U.S.C. § 1367.

         B. Factual Background

         As reflected in the operative pleading, the Second Amended Complaint, the facts are as follows.

         1. The Agreement Between GHP and Catalist

         On November 3, 2017, GHP entered into an agreement with Catalist to advise the company “in connection with the potential acquisition of a specified, pre-identified target company.” [Dkt. No. 36 at ¶ 13; Dkt. No. 39-1, Exhibit 1, GHP Engagement Letter (hereinafter “Letter Agreement”), at 2]. The “target company” was TargetSmart, [Dkt. No. 36 at ¶ 14], and the agreement provided that GHP would conduct due diligence of the target company as “mutually determined to be appropriate.” [Dkt. No. 39-1, Letter Agreement at 2, § 2(a)]. It also required GHP to keep Catalist “informed of the activities undertaken by GHP . . . and all performances of Services required of GHP” under the terms of the Agreement. [Id. at 4, § 6].

         The Letter Agreement stated that GHP was not an employee or agent of Catalist, and instead was working as an “independent contractor.” [Id. at 4, § 6]. TargetSmart alleges that Catalist entered into the agreement with GHP in order to acquire its confidential business information, [Dkt. No. 36 at ¶ 18], and that it directed, ratified, or otherwise had a right to control GHP's interactions with TargetSmart. [Id. at ¶ 20].

         2. GHP Approaches TargetSmart

         In December 2017, GHP approached TargetSmart about a potential “business opportunity.” [Id. at ¶¶ 21-24]. During the initial call on December 13, 2017, GHP represented to TargetSmart that it had been retained by individual political donors who wanted to combine TargetSmart and other companies to improve and streamline the data infrastructure available to Democratic and progressive candidates. [Id. at ¶ 24]. As a result of the conversation, TargetSmart and GHP entered into a Mutual Nondisclosure Agreement (“Mutual NDA”) to allow the parties to exchange non-public, confidential, and proprietary information. [Id. at ¶¶ 27-28; see also Dkt. No. 39-2, Exhibit 2, Form Nondisclosure Agreement from TargetSmart]. The Mutual NDA prevented both parties from using or disclosing confidential information without the other's prior written consent. [Id. at ¶¶ 29-30]. In its amended motion to dismiss, Catalist provided this court with a copy of a form Nondisclosure agreement listing TargetSmart as one of the parties. [Dkt. No. 39-2, Exhibit 2]. However, I observe this copy of the NDA does not include the name or signature of the other party to the agreement.

         At GHP's request, and in anticipation of a meeting on December 21, 2017 in Boston, TargetSmart sent GHP a memorandum which included confidential and proprietary information about its data, products, services, platforms, and software, as well as information about its finances and possible growth opportunities. [Dkt. No. 36 at ¶¶ 31-32]. The memorandum stated that the information was protected by the Mutual NDA. [Id. at ¶ 32].

         At the December 21st meeting, GHP again told TargetSmart that it represented wealthy donors, and indicated that its clients were interested in combining TargetSmart and Catalist, its competitor. [Id. at ¶¶ 33-35]. TargetSmart informed GHP that it would only consider a merger if the funders acquired both companies, if TargetSmart remained in control, and if the Catalist leadership team was not part of the management of the combined entity. [Id. at ¶ 35]. GHP then indicated that it would like to proceed with the necessary due diligence for such a transaction and sought more information from TargetSmart about its book of business, its relationships with third parties, its vendor agreements, and its financial information. [Id. at 36].

         On January 3, 2018, TargetSmart told GHP that it was uncomfortable with the request and asked for GHP to provide a rough approximation of the proposed purchase price for its “political business” in exchange for access to TargetSmart's financials. [Id. at ¶¶ 37-39]. For its part, TargetSmart ultimately provided further information to GHP, including information about its financials. [Id. at ¶ 40].

         3. Information Is Acquired by Third Parties

         On February 8, 2018, TargetSmart learned that a writer with ties to the CEO of Catalist was contacting TargetSmart's employees and asking for information about its relationships with particular clients. [Dkt. No. 36 at ¶ 41]. TargetSmart contacted GHP about the inquiries, and GHP represented that the inquires were not part of its due diligence and that “they would be ‘shocked' if Catalist was behind the writer's inquiries.” [Id. at ¶ 44]. TargetSmart also contacted a member of the Board of Directors for Catalist, who promised that the inquiries would stop. [Id. at ¶ 45].

         On February 21, 2018, TargetSmart discovered that a third-party source had told its client that “Catalist was in the process of buying TargetSmart.” [Id. at ¶ 46]. It reported the leak to GHP, which reassured TargetSmart that it took the confidentiality of its clients very seriously. [Id. at ¶ 47].

         4. The Transaction Falls Through

         On March 14, 2018, TargetSmart met with GHP and Catalist in the District of Columbia to discuss the proposed transaction. [Dkt. No. 36 at ¶¶ 49-51]. During the meeting, Catalist indicated that it was not under an NDA and offered to leave the room while TargetSmart discussed the NDA with GHP. [Id. at ¶ 51]. At that meeting, GHP told TargetSmart that it had not raised enough money to fund the acquisition, but also indicated that GHP had shared information about TargetSmart with at least two representatives of Catalist and that one of Catalist's funders had broken the Mutual NDA. [Id. at ¶¶ 52-56].

         On April 10, 2018, TargetSmart, taking the position that GHP had violated the Mutual NDA, sought several assurances from GHP. [Id. at ¶ 59]. GHP responded on April 13, denying that it had breached the NDA but admitting that it had shared information with two individuals at Catalist. [Id. at ¶ 60]. GHP also attached a letter that purported to show that Catalist was under an NDA with TargetSmart. [Id. at ¶ 61].

         TargetSmart alleges that GHP altered the Mutual NDA by including signatures from individuals at Catalist, though Catalist itself never signed or received copies of the NDA. [Id. at ¶ 61]. TargetSmart further alleges ”Catalist knew or should have known that TargetSmart did not request that Catalist or any of its representatives sign an NDA.” [Dkt. No. 28; Dkt. No. 36 at ¶ 61].

         On April 13, 2018, TargetSmart contacted Catalist to assert that Catalist was using TargetSmart's proprietary information without consent. [Id. at ¶ 65]. Catalist responded on April 19, 2018, certifying that it received proprietary information from GHP, that GHP never shared or distributed the information to other investors, and that it had destroyed the information. [Id. at ¶ 67-71]. It did not make the same representations about its CEO. [Id. at ¶ 68]. Despite this denial, TargetSmart alleges that Catalist continues to use TargetSmart's proprietary information to take clients away from it. [Id. at ¶¶ 79-81].

         C. Procedural Background

         TargetSmart filed suit against both GHP and Catalist on June 28, 2018. [Dkt. No. 1]. In its original complaint, TargetSmart alleged that the agreement between GHP and Catalist, and their subsequent negotiations with TargetSmart, violated the Federal Defend Trade Secrets Act, 18 U.S.C. § 1836. [Dkt. No. 1 at ¶ 67]. It also alleged that the Defendants had misappropriated trade secrets, violating both the Massachusetts Trade Secrets Act, the Massachusetts Unfair and Deceptive Practices Act, and Massachusetts common law, [Id. at ¶¶ 77-91, 128-133], and were liable for damages for unjust enrichment under Massachusetts common law. [Id. at ¶¶ 115-121]. TargetSmart raised claims for breach of contract, breach of the covenant of good faith and fair dealing, and fraudulent misrepresentation by GHP, [Id. at ¶¶ 92-107, 122-27], and for tortious interference with contract by Catalist. [Id. at ¶¶ 108-114].

         On September 11, 2018, GHP filed an Answer, [Dkt. No. 12], and Catalist filed its motion to dismiss for lack of jurisdiction for failure to state a claim and on forum non conveniens grounds. [Dkt. No. 15]. The same day, Catalist filed a motion asking this court to admit its counsel, Attorneys Adam S. Caldwell and Patrick J. Curran of Davis Wright Tremaine LLP, pro hac vice. [Dkt. No. 14]. On September 17, 2018, TargetSmart filed an opposition to the admission of Attorneys Caldwell and Curran pro hac vice on the grounds that the law firm had a conflict of interest and could not represent Catalist consistent with its obligations under the Massachusetts Rules of Professional Conduct. [Dkt. No. 19]. After a hearing, I rejected TargetSmart's opposition to the proposed Catalist counsel, and admitted Attorneys Caldwell and Curran pro hac vice on December 10, 2018. [Dkt. No. 34].

         Meanwhile, on October 2, 2018, TargetSmart filed its First Amended Complaint. [Dkt. No. 22]. Though the factual allegations in the two complaints were substantially identical, in the First Amended Complaint, TargetSmart dropped its claim for tortious interference of contract against Catalist and instead added a claim for defamation. [Dkt. No. 22 at ¶¶ 142-147].

         On October 16, 2018, GHP again submitted an Answer to the First Amended Complaint, [Dkt. No. 26], and Catalist again submitted a motion to dismiss for lack of jurisdiction and failure to state a claim and a memorandum in support thereof. [Dkt. No. 24; Dkt. No. 25]. On October 30, 2018, TargetSmart filed its opposition to the motion to dismiss. [Dkt. No. 29].

         On October 25, 2018, a few days prior to filing its opposition, TargetSmart filed another motion to amend its complaint, in this instance to correct what was characterized as a scrivener's error. [Dkt. No. 28]. The motion indicated that Paragraph 61 of the First Amended Complaint mistakenly referred to GHP, instead of Catalist, and sought to correct that one word. [Id.]. Catalist filed an opposition to this motion to amend on November 6, 2018. [Dkt. No. 31]. I granted the motion on December 10, 2018, [Dkt. No. 34], and TargetSmart filed the Second Amended Complaint on December 13, 2018. [Dkt. No. 36].

         Catalist thereafter again responded with a motion to dismiss or, in the alternative, to transfer, [Dkt. No. 38] on December 20, 2018. The memorandum in support of Catalist's suggested transfer of the case to the District of Columbia, but otherwise presented the same arguments regarding personal jurisdiction and failure to state a claim as the motion filed in October 2018. [See generally Dkt. No. 25; Dkt. No. 39]. On January 4, 2019, GHP filed its opposition to Catalist's motion to transfer, but took no position with regard to personal jurisdiction or failure to state a claim. [Dkt. No. 40]. TargetSmart submitted its opposition to the motion to dismiss on January 11, 2019. [Dkt. No. 41].

         On January 23, 2019, I held a hearing on the present motion, during which GHP for the first time indicated that it would object to personal jurisdiction in the District of Columbia if the case were to be transferred there in its entirety. It had not raised this objection or argued that it would not be subject to the jurisdiction of the District of Columbia in its original opposition to the motion to transfer. [Dkt. No. 40]. TargetSmart indicated during the hearing that it would not oppose a transfer of the case to the District of Columbia if I found that personal jurisdiction over Catalist was unavailable in the District of Massachusetts.

         On January 30, 2019, GHP filed a supplemental opposition, with leave of the court, to Catalist's motion to dismiss. This opposition indicated only that GHP “did not waive its defenses under F.R.C.P. 12(b)(1), (2) and (6), ” but offered nothing by way of factual assertion or legal argument about personal jurisdiction in the District of Columbia. [Dkt. No. 46 at 2]. On February 4, 2019, Catalist filed a letter with the court indicating that its position had been adequately briefed in its original memorandum, and that it had nothing further to add. [Dkt. No. 48]. That same day, TargetSmart also filed a response to GHP's Supplemental Opposition, arguing that its case against GHP should not be transferred to the District of Columbia because such a transfer would further delay TargetSmart's ability to adjudicate the merits of its underlying claim. [Dkt. No. 49 at 2]. Instead, TargetSmart argued that some kind of coordination between the District of Massachusetts and the District of Columbia should be fashioned for separate cases against GHP (in Massachusetts) and Catalist (in the District of Columbia).


         A. Specific Jurisdiction Over Catalist

         Catalist seeks to dismiss TargetSmart's complaint for lack of personal jurisdiction over it in the District of Massachusetts. [Dkt. No. 38]. Because Catalist is incorporated in Delaware and has its principal place of business in the District of Columbia, its contacts with Massachusetts are not “so continuous and systematic as to render [it] essentially at home in [Massachusetts], ” and allow this court to exercise ...

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