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Contech Bridge Solutions, Inc., et al v. David E. Keaffaber

October 24, 2011

CONTECH BRIDGE SOLUTIONS, INC., ET AL, PLAINTIFFS,
v.
DAVID E. KEAFFABER, ET AL, DEFENDANTS.



The opinion of the court was delivered by: Judge Michael R. Barrett

OPINION & ORDER

This matter is before the Court on two motions to dismiss: (1) Defendant David E. Keaffaber's Motion to Dismiss for Lack of Subject Matter Jurisdiction, Lack of Personal Jurisdiction and Improper Venue, or in the Alternative, Motion to Transfer (Doc. 11)*fn1; and (2) the Motion to Dismiss of Defendant, Sanders Pre-Cast Concrete Systems, Inc., or in the Alternative, to Transfer Venue (Doc. 27). Plaintiffs Contech Bridge Solutions, Inc., Contech Construction Products Inc., and Contech Construction Products Holdings, Inc. (collectively "Contech") have filed responses in opposition to both motions (Docs. 15 & 29). Defendant David E. Keaffaber has filed a reply in support (Doc. 25), and Defendant Sanders Pre-Cast Concrete Systems, Inc. ("Sanders") has also filed a reply in support (Doc. 37). Additionally, the Court held a hearing (the "Hearing") regarding both pending motions on September 6, 2011. (See Doc. 50 for a transcript.) Following the Hearing, Plaintiffs filed a supplemental brief in opposition (Doc. 47), Defendant Sanders filed a supplemental brief in support (Doc. 48), and Defendant Keaffaber also filed a supplemental brief in support (Doc. 49). This matter is now ripe for review.

Plaintiffs' Complaint (Doc. 1) alleges seven causes of action: (1) a breach of the Ohio Uniform Trade Secrets Act (Doc. 1 ¶¶ 66--74); (2) a breach of the Indiana Uniform Trade Secrets Act (Doc. 1 ¶¶ 75--82); (3) tortious interference with business relationships (Doc. 1 ¶¶ 83--91); (4) breach of contract solely against Defendant Keaffaber (Doc. 1 ¶¶ 92--101); (5) unfair competition (Doc. 1 ¶¶ 102--08); (6) a claim for declaratory judgment (Doc. 1 ¶¶ 109--15); and (7) a claim for injunctive relief (Doc. 1 ¶¶ 116--24). Plaintiffs seek monetary damages, an accounting of Defendants' profits, costs, attorneys' fees, double or treble damages, punitive damages, injunctive relief, and a declaratory judgment. (Doc. 1, 22.) The Court summarizes its rulings below.

I. Background

Plaintiff Contech, whose principal places of business are in Ohio, is in the business of providing products and services related to retaining-wall systems and manufacturing and selling precast-concrete structures, including bridges, arches, culverts, and walls. (Doc. 1 ¶¶ 2--3, 5.) Defendant Sanders, an Indiana corporation, competes with Contech in both the precast-concrete structure industry and in the retaining-wall industry. (Doc. 1 ¶¶ 6, 8.) Defendant David E. Keaffaber, a resident of Indiana, was employed by Contech from July 2005 until April 8, 2011. (Doc. 1 ¶¶ 9, 113; Doc. 25-1 ¶ 5.) Between 1997 and 2005, Mr. Keaffaber was employed by BridgeTek, which was acquired by Contech in 2005. (Doc. 25-1 ¶¶ 3, 4.) Mr. Keaffaber's most recent position with Contech was as "Director -- Pre-Cast Bridge." But during his time at Contech he also held the positions of "Vice-President -- Regulatory Development" and "Vice-President -- Midwest." (Doc. 1 ¶ 10; Doc. 15-1 ¶ 3.) In his most recent position, Mr. Keaffaber was responsible for promoting various projects, providing training and sales support to field teams, managing regulatory activities, securing certain Department of Transportation regulatory approvals, and developing potential business opportunities. (Doc. 1 ¶ 15; Doc. 25-1 ¶ 7.) He worked from his home office in Fishers, Indiana. (Doc. 25-1, 8.)

Contech alleges that during the time it employed Mr. Keaffaber, he had access to confidential business records and trade secrets. (Doc. 1 ¶ 11.) To protect this confidential information, Contech and Mr. Keaffaber entered into a Duties and Covenants Agreement (the "Agreement").*fn2 (Doc. 1 ¶ 17.) In the Agreement, Mr. Keaffaber agreed to the following: (1) to devote his full working time to the business and affairs of his employer (Doc. 1 ¶ 19; Doc. 1-1, 2--3; Doc. 1-2, 2); (2) to not engage in any outside business "similar to that transacted by Contech without first having obtained the express written consent of Contech" (Doc. 1 ¶ 19; Doc. 1-1, 3; Doc. 1-2, 2); (3) to not divulge any trade secrets or other confidential information obtained during his employment (Doc. 1 ¶ 20; Doc. 1-1, 3; Doc. 1-2, 3); (4) to not compete with Contech during the term of employment and for two years thereafter (Doc. 1 ¶ 21; Doc. 1-2, 3); and (5) to not solicit Contech employees or customers or interfere with Contech's relationships with employees or customers during his term of employment and for two years thereafter (Doc. 1 ¶ 22; Doc. 1-1, 3--4). Although Mr. Keaffaber physically signed the Agreement at his home in Indiana, (Doc. 50, 74; Doc. 25, 3) he mailed it to Contech in Ohio (Doc. 25, 3). Furthermore, Ohio law governs the Agreement, (Doc. 1 ¶ 62; Doc. 1-1, 4; Doc. 1-2, 4), and more fundamentally, it creates a contractual relationship between Mr. Keaffaber and Contech-an entity with its principal place of business in Ohio (see Doc. 1 ¶¶ 2--4.)

In a June 10, 2010, response to a legal-compliance questionnaire, Mr. Keaffaber represented that he had no outside business or compensation, and he agreed that if that changed in the future, he would get Contech's advance approval. (Doc. 1 ¶ 26.) Plaintiffs allege that Mr. Keaffaber breached each of the above duties in the Agreement and misrepresented the true nature of his outside activities in the June 10, 2010, legal-compliance questionnaire. (Doc. 1 ¶ 27.)

Mr. Keaffaber's allegedly actionable conduct includes directly competing with Contech for business, sharing confidential information with Contech's competitors (including Defendant Sanders), assisting former Contech employees with efforts to compete with Contech, and soliciting the acceptance of competing products with governmental entities. (Doc. 1 ¶ 28.) One of the more specific allegations is that while he was working full time for Contech, in March 2010, Mr. Keaffaber entered into a consulting agreement with Sanders, and as a result, he provided Sanders with confidential business information and trade secrets. (Doc. 1 ¶¶ 29, 31, 36.) Pursuant to that consulting agreement, Mr. Keaffaber allegedly attempted to arrange for Ohio Department of Transportation regulatory approval of a certain Sanders retaining-wall product. (Doc. 1 ¶ 41.) This act was allegedly in direct competition with Contech given Contech's ongoing business relationship with the Ohio Department of Transportation involving retaining-wall products. (Doc. 1 ¶ 42.) Mr. Keaffaber also allegedly assisted a Contech employee with an attempt to set up a new business to compete with Contech. (Doc. 1 ¶ 49.) Plaintiffs make many other similar allegations. (See Doc. 1 ¶¶ 50--61.)

Relating to the issues of subject-matter jurisdiction, personal jurisdiction, and venue presently before the Court, in his role as Director -- Pre-Cast Bridge, the geographic region Mr. Keaffaber was responsible for included Ohio. (Doc. 15-1 ¶ 4.) The following bullet points detail specific instances of Mr. Keaffaber's work-related contacts with Ohio:

* Mr. Keaffaber regularly traveled to Contech's headquarters in West Chester, Ohio, to attend meetings. (Doc. 15-1 ¶ 5; Doc. 50, 19.) Inconsistent evidence in the record indicates that these meetings occurred either once every month or two (Doc. 15-1 ¶ 5), two or three times a year (Doc. 50, 19), or once each quarter (Doc. 25-1 ¶ 19).

* Mr. Keaffaber traveled to Contech headquarters in Ohio several times per year to train field teams. (Doc. 15-1 ¶ 6.) Keaffaber concedes that he was required to attend these meetings and that they were regional training sessions not specific to the state of Ohio. Likewise, he contends that these visits were unrelated to any Ohio-specific business. (Doc. 25-1 ¶¶ 19--22.)

* Mr. Keaffaber gave presentations at various seminars throughout Ohio, including one in 2009 and three in 2010. (15-1 ¶ 7.) He also voluntarily attended an engineering conference in Ohio for business purposes in 2008. (Doc. 50, 22--23.)

* Mr. Keaffaber marketed Contech products in Ohio, including at a lunch meeting with a potential customer in Ohio in 2010. (Doc. 50, 51.)

* Mr. Keaffaber maintains that he did not work on any Ohio projects (Doc. 25, 1) and that he did not single-handedly work on any projects in Ohio, (Doc. 50, 76) but his supervisor avers that he was involved in projects with Contech clients in Ohio and that he traveled to Ohio to meet with certain clients. (15-1 ¶ 9.) Mr. Keaffaber's testimony at the Hearing confirms that he did indeed travel to Ohio to give a presentation to at least one Contech client. (Doc. 50, 96--97.)

* Mr. Keaffaber was the primary contact for two colleagues who worked on projects in Ohio. (See 25-1 ¶¶ 31--33.) Likewise, he regularly corresponded with Contech employees in Ohio via telephone or e-mail. (Doc. 15-1 ¶ 10; see Doc. 50, 52, 53-- 55.)

* Finally, Mr. Keaffaber sent at least one e-mail to an Ohio Department of Transportation representative as part of his consulting work for Defendant Sanders. (Doc. 15-1 ¶ 11; Doc. 50, 55--57.)

Notwithstanding the foregoing, Mr. Keaffaber testified that he spent less than five percent of his time while working for Contech physically in Ohio. (Doc. 50, 70). He further maintains that two of his colleagues handled the daily duties in Ohio for Contech. (Doc. 50, 76.) Mr. Keaffaber further stated that if he did in any way compete with Contech, it would have been solely out of his home and office in Indiana. (Doc. 50, 85--87.) Mark Sanders, Defendant Sanders' President, avers that all of Sanders' contacts with Mr. Keaffaber took place in Indiana. (Doc. 27-1 ¶ 13.)

II. Legal Analysis

Defendant Keaffaber brings his motion to dismiss under Rules 12(b)(1), 12(b)(2), and 12(b)(3) of the Federal Rules of Civil Procedure. He argues for dismissal based on lack of subject-matter jurisdiction, lack of personal jurisdiction, and improper venue.

(Doc. 11, 1.) Defendant Sanders initially sought dismissal based on Rules 12(b)(2) and 12(b)(3), arguing for dismissal for lack of personal jurisdiction, and alternatively, transfer of venue. (Doc. 27, 1.) However, Sanders has since withdrawn its motion to dismiss based on personal jurisdiction. It now only seeks to transfer venue. (Doc. 40, 1.)

A. Rule 12(b)(1) Standard

Rule 12(b)(1) provides that an action may be dismissed for "lack of subject-matter jurisdiction." Fed. R. Civ. P. 12(b)(1). Plaintiffs bears the burden of proving jurisdiction when challenged by a Rule 12(b)(1) motion. Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990) (citing Rogers v. Stratton Indus., Inc., 798 F.2d 913, 915 (6th Cir. 1986)). "[T]he plaintiff must show that the complaint alleges a claim under federal law, and that the claim is substantial." Mich. S. R.R. Co. v. Branch & St. Joseph Counties Rail Users Ass'n, Inc., 287 F.3d 568, 573 (6th Cir. 2002) (internal quotations omitted) (quoting Musson Theatrical, Inc. v. Fed. Express Corp., 89 F.3d 1244, 1248 (6th Cir. 1996)). "The plaintiff will survive the motion to dismiss by showing 'any arguable basis in law' for the claims set forth in the complaint." Id. (quoting Musson Theatrical, 89 F.3d at 1248).

The Sixth Circuit recognizes that Rule 12(b)(1) motions to dismiss for lack of subject-matter jurisdiction fall into two categories: facial attacks and factual attacks. O'Bryan v. Holy See, 556 F.3d 361, 375 (6th Cir. 2009) (citing Gentek Bldg. Prods. v. Sherwin-Williams Claims, 491 F.3d 320, 330 (6th Cir. 2007)). A facial attack on subject-matter jurisdiction only questions the sufficiency of the pleading. Id. at 375--76. In reviewing a facial attack, the court takes the allegations in the complaint as true. Id. at 376. A factual attack is "not a challenge to the sufficiency of the pleading's allegations, but a challenge to the factual existence of subject matter jurisdiction." United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). In such a factual attack, the court must "weigh the conflicting evidence to arrive at the factual predicate that subject matter jurisdiction exists or does not exist." Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). Furthermore, in a factual attack, there is no presumption of truthfulness to the allegations in a complaint. Id. Here, it is apparent that Mr. Keaffaber brings a factual attack given that he questions the facts underlying subject-matter jurisdiction. (See Doc. 11-1, 7.)

B. Rule 12(b)(2) Standard

Rule 12(b)(2) provides for dismissal of a claim for "lack of personal jurisdiction." Fed. R. Civ. P. 12(b)(2). A plaintiff bears the burden of establishing personal jurisdiction. Air Prods. & Controls, Inc. v. Safetech Int'l, Inc., 503 F.3d 544, 549 (6th Cir. 2007). On a personal-jurisdiction motion to dismiss, district courts have discretion to either, decide the motion on affidavits alone, to permit discovery on the issue, or to conduct an evidentiary hearing to resolve factual questions. See, Inc. v. Imago Eyewear Pty, Ltd., 167 F. App'x 518, 520 (6th Cir. 2006) (citing Theunissen v. Matthews, 935 F.2d 1454, 1458 (6th Cir. 1991)). Here, the Court ordered an evidentiary hearing (the "Hearing"). See Serras v. First Tenn. Bank Nat'l Ass'n, 875 F.2d 1212, 1214 (6th Cir. 1989) ("If the written submissions raise disputed issues of fact or seem to require determinations of credibility, the court retains the power to order an evidentiary hearing, and to order discovery of a scope broad enough to prepare the parties for that hearing."). When such a hearing occurs, plaintiffs have an increased burden; they must show that jurisdiction exists under the preponderance of the evidence standard. Serras, 875 F.2d at 1214 (citing Welsh v. Gibbs, 631 F.2d 436, 439 (6th Cir. 1980)). Thus, Contech must establish that personal jurisdiction exists by a preponderance of the evidence.*fn3 See id.

C. Rule 12(b)(3) Standard

Rule 12 also provides for dismissal based on "improper venue." Fed. R. Civ. P. 12(b)(3). "However, a Rule 12(b)(3) motion to dismiss for improper venue is simply the procedural vehicle by which to challenge improper venue; the Rules of Civil Procedure do not contain any venue provisions or requirements. The requirements for venue are set by statute, as are the remedies available for improper and inconvenient venue." Kerobo v. Sw. Clean Fuels, Corp., 285 F.3d 531, 538 (6th Cir. 2002). Defendants argue that venue is improper under 28 U.S.C. §§ 1404 & 1406. (Doc. 27, 11; Doc. 11-1, 7.)

III. Defendant Keaffaber's Motion to Dismiss

Defendant Keaffaber argues that dismissal is warranted based on lack of subject-matter jurisdiction, lack of personal jurisdiction, and improper venue. In the alternative, he requests that this matter be transferred to the United States District Court for the Southern District of Indiana. (Doc. 11, 1.) The Court considers each basis below.

A. Subject-Matter Jurisdiction

Plaintiffs' Complaint alleges that this Court has subject-matter jurisdiction based on diversity of citizenship under 28 U.S.C. § 1332(a). (Doc. 1 ¶ 64.) Section 1332 states that "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between . . . citizens of different States." 28 U.S.C. § 1332(a). Contech alleges that the amount in controversy exceeds $75,000 (Doc. 1 ¶ 64), but Defendant Keaffaber argues that this allegation is erroneous and that the amount in controversy is not satisfied here (Doc. 11-1, 7). "When a statute conditions federal court jurisdiction on the satisfaction of an amount in ...


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