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Corporate Award Consultants, Inc v. Inspirus

November 22, 2011


The opinion of the court was delivered by: Herman J. Weber, Senior Judge United States District Court


This matter is before the Court upon the "Motion to Reactivate Proceedings" (doc. no. 13) by plaintiff Corporate Award Consultants, Inc. ("CAC"). Also pending is the "Motion to Dismiss or Transfer" (doc. no. 6) by defendant Inspirus, LLC ("Inspirus"), which plaintiff opposes. Having fully considered the record, including the pleadings, motions and memoranda (doc. nos. 6, 7, 9, 11, 13-15), and attached exhibits, the Court will grant the plaintiff's motion, lift the stay, and deny the defendant's motion to dismiss or transfer, for the following reasons:

I. Factual Allegations and Procedural History At issue are two related complaints filed in separate courts in Texas and Ohio.

The Texas case was filed on May 12, 2011, while the Ohio case was filed on June 24, 2011. Both are now in federal court. Although the relevant facts for purposes of jurisdiction are largely undisputed, the parties dispute whether the present case may go forward. In other words, they dispute under the "first-filed" rule whether the cases involve substantially similar parties and issues.

As for the underlying facts, the complaint before this Court indicates that Inspirus, LLC (a Texas company) retained CAC (a Kentucky company) in 2000 to act on its behalf as an independent sales representative in Ohio and Kentucky (doc. no. 1 at ¶ 1). Dennis Egan is the president/owner of CAC, and he personally signed a "Confidentiality Agreement" with Inspirus (doc. no. 7-1 at 9-11) regarding the dissemination of Inspirus' proprietary and/or confidential information.*fn1 The Confidentiality Agreement between Egan and Inspirus contained 1) a forum selection clause indicating that disputes "arising out of that Confidentiality Agreement" would be litigated in the courts in Ft. Worth, Texas, and 2) a choice of law provision indicating that Texas law would apply. The Confidentiality Agreement did not contain any provisions regarding the payment of commissions, and CAC was not a party to the Confidentiality Agreement.

CAC marketed Inspirus' products, negotiated long term sales contracts with customers ("Term Agreements"), and received compensation on a commission basis (doc. no. 1 at ¶ 1). Inspirus agreed to pay commissions to CAC based on the gross sales of its products reflected by each Term Agreement (¶ 9). CAC obtained multiple"Term Agreements" with its customers, totaling over $800,000.00 in annual sales (¶ 10). The payment of sales commissions by Inspirus to CAC apparently proceeded under an oral agreement (doc. no. 7-1 at ¶ 4.2).

By early 2011, the parties' relationship had soured. In its complaint, CAC alleges that Inspirus representatives (Michael Cobb and Robbie Floyd) flew to Ohio to meet with CAC's customers in an effort to secure assurances that those customers would continue to honor the ongoing Term Agreements, even if Inspirus cut CAC out of the deal altogether (doc. no. 1 at ¶¶ 13, 49). In March of 2011, Inspirus then sent a letter to Egan terminating their long-standing business relationship"for all purposes," effective March 15, 2011 (¶ 12). The letter indicated that Inspirus would pay commissions on paid invoices accrued through March 31, 2011, by the 15th of April, but would make no further payments (¶ 12). Despite requests by CAC, Inspirus refuses to pay any further commissions allegedly owed to CAC under the ongoing Term Agreements that CAC had negotiated (¶ 14). CAC asserts that Inspirus owes commissions for sales under existing Term Agreements with various customers, including Humana, Speedway, Marathon Oil, SuperAmerica, Camco, R.R. Jones, and St. Elizabeth Healthcare (¶¶ 17-19). The race to the courthouse then began.

On May 12, 2011, Inspirus filed suit against CAC and Egan in state court in Texas, contending that Egan had encouraged a customer (St. Elizabeth's Hospital) to switch from Inspirus' product to a competing product (doc. no. 7-1 at ¶ 4.3).*fn2 Inspirus alleged that, based on Egan's sales pitch and his alleged use of Inspirus' proprietary information in violation of the Confidentiality Agreement, Inspirus lost this customer (doc. no. 7-1, state court complaint at ¶ 4.3). Inspirus complains that this customer had generated net revenues to Inspirus of over $50,000.00 annually.

In its Texas complaint, Inspirus asserted claims for breach of contract, breach of fiduciary duty, tortious interference with existing contract, tortious interference with prospective business relationship, and declaratory judgment. After that case was removed to United States District Court for the Northern District of Texas, Fort Worth Division, CAC and Egan moved to dismiss for lack of personal jurisdiction over them in Texas.

On June 24, 2011, CAC filed the present five-count complaint against Inspirus in the United States District Court for the Southern District of Ohio, seeking to recover unpaid sales commissions pursuant to Ohio Rev. C. § 1335.01. CAC asserted claims for breach of express and implied contract, unjust enrichment and/or quantum meruit, promissory estoppel, declaratory relief,*fn3 and tortious interference with CAC's business relationships (doc. no. 1, Counts I-V). Dennis Egan is not named as a party in this Ohio action. On July 26, 2011, Inspirus moved to dismiss this Ohio federal case or transfer it back to the federal court in Texas, based on the "first to file" rule and the forum selection clause in the Confidentiality Agreement (doc. no. 6 at 1).

On August 9, 2011, the District Court in Texas dismissed that entire lawsuit (doc. no. 9, attached exhibit), but then reinstated the case on August 12, 2011 (doc. no. 11 at 2). On September 14, 2011, the present Court granted an unopposed request for a temporary stay of proceedings in this case while the District Court in Texas resolved the jurisdictional issues before it. Subsequently, on September 20, 2011, the District Court in Texas dismissed CAC as a party from that lawsuit for lack of personal jurisdiction (doc. no. 13-1 "Final Judgment").

II. Discussion

Given that the Texas court has resolved the jurisdictional issue and dismissed

CAC for lack of personal jurisdiction, and given that the Texas court's consideration of such issue was the stated reason for the temporary stay in the present case, the stay would appear to have little further purpose. Inspirus acknowledges that "it is appropriate to lift the stay by the terms of the Court's Order," but nonetheless contends that "the factors influencing a court's decision to exercise the 'first-filed' rule still weigh in favor of dismissal or ...

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