American Traffic Solutions Incorporated v. Lenza et al

Filing 1

COMPLAINT. Filing fee received: $350.00, receipt number PHX 0970-5328764, filed by American Traffic Solutions Incorporated (submitted by John Blanchard). (Attachments: # 1 Exhibit, # 2 Civil Cover Sheet)(REK)

OSBORN
MALEDON
A PROFESSIONAL ASSOCIATION
ATTORNEYS AT LAW

______________________

The Phoenix Plaza
21st Floor
2929 North Central Avenue
Phoenix, Arizona 85012-2794
P.O. Box 36379
Phoenix, Arizona 85067-6379
Telephone
Facsimile

602.640.9000
602.640.9050

1 Scott W. Rodgers, 013082
[e-mail]
2 John L. Blanchard, 018995
3 [e-mail]
Kristin L. Windtberg, 024804
4 [e-mail]
OSBORN MALEDON, P.A.
5 2929 N. Central Avenue, Suite 2100
Phoenix, Arizona 85012-2793
6 [phone]
7 Attorneys for American Traffic Solutions, Inc.
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9

IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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American Traffic Solutions, Inc., a
Kansas corporation,

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Plaintiff,

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vs.

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Michael J. Lenza, an individual; Public
Finance Strategies, LLC, a Delaware
Limited Liability Company; and Photo
Enforcement Consultants, LLC, a
Delaware Limited Liability Company,

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17

Case No.

VERIFIED COMPLAINT FOR
PRELIMINARY AND PERMANENT
INJUNCTIVE RELIEF AND
DAMAGES
(Jury Trail Requested)

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Defendants.

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Plaintiff American Traffic Solutions, Inc. (“ATS”) states its Verified

21 Complaint for Injunctive and Other Relief against Defendants Michael Lenza, Public
22 Finance Strategies, LLC, and Photo Enforcement Consultants, LLC and alleges as
23 follows.
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PRELIMINARY STATEMENT
1.

This is an action for injunctive relief to halt and prevent ATS’s former

26 Senior Vice President for Financial Services, Michael Lenza, from continuing to

1 breach his post-employment obligations owed to ATS. ATS will suffer irreparable
2 injury unless a preliminary injunction is entered.
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2.

Mr. Lenza is party to three enforceable agreements that restrict his

4 ability to compete against ATS during and following his ATS employment. As a
5 condition of his employment, Mr. Lenza executed two agreements: an Executive
6 Employment Agreement (“Employment Agreement”), a copy of which is attached as
7 Exhibit A, and a Proprietary Rights Agreement (the “Proprietary Rights
8 Agreement”), a copy of which is attached as Exhibit B. Also in connection with his
9 employment, Mr. Lenza’s company, Public Finance Strategies, and ATS entered into
10 a separate Business Representation Agreement, a copy of which is attached as
11 Exhibit C.
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3.

In the course of working for ATS, Mr. Lenza acquired knowledge of

13 protected confidential information of ATS, including but not limited to, strategic sales
14 and marketing information, and confidential technical and planning information
15 relating to parking systems, toll and traffic violation enforcement management
16 systems and processes, revenue collection processing systems and software, methods
17 and manners of submitting proposals for contracts with municipalities and states, and
18 customer confidential and intellectual property.
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4.

Following Mr. Lenza’s voluntary resignation from ATS, the company

20 delivered to him a letter reminding him of his post-employment obligations and
21 restrictions and demanded the return of all ATS property.
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5.

Upon information and belief, while working for ATS, Mr. Lenza was a

23 dual agent—simultaneously working for both ATS and himself and competing and/or
24 preparing to compete directly against ATS. Mr. Lenza has violated his fiduciary and
25 contractual obligations by engaging in this competition and by directly interfering
26 with and impairing ATS’s ability to compete in the Massachusetts market.
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6.

Arizona law governs Mr. Lenza’s agreements with ATS. Under

2 Arizona law, the non-competition and non-solicitation restrictions in his agreements
3 are enforceable and prohibit Mr. Lenza from consulting, soliciting, or otherwise
4 working with ATS customers and potential customers.
5

7.

The Court should enjoin Mr. Lenza’s clear violations of his contractual

6 obligations and enter appropriate orders protecting ATS’s interests.
JURISDICTIONAL STATEMENT

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8

8.

ATS is incorporated under the laws of the State of Kansas, and has its

9 principal place of business in Scottsdale, Arizona.
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9.

On information and belief, Michael Lenza is a citizen of the State of

11 Massachusetts. Mr. Lenza and ATS are parties to agreements that were negotiated
12 and executed in Arizona, which select Arizona courts as the forum for any and all
13 disputes. In the agreements, Mr. Lenza expressly consented to the jurisdiction of this
14 Court.
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10.

Public Finance Strategies, LLC is a Delaware limited liability company

16 that is managed by Michael Lenza. On information and belief, the sole member of
17 Public Finance Strategies, LLC is Michael Lenza, or if it has other members, they are
18 residents of states other than Arizona. Public Finance Strategies and ATS are parties
19 to a Business Representation Agreement that was negotiated in Arizona, which selects
20 Arizona courts as the forum for any and all disputes arising out of that agreement.
21 Public Finance Strategies has consented to the jurisdiction of this Court.
22

11.

On information and belief, Photo Enforcement Consultants is a

23 Delaware limited liability company. On information and belief, the sole member of
24 Photo Enforcement Consultants is Michael Lenza, or if it has other members, they are
25 residents of states other than Arizona.
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12.

The amount in controversy, exclusive of interest and costs, exceeds

2 $75,000.
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13.

This Court has diversity jurisdiction under the provisions of 28 U.S.C.

4 §1332. Jurisdiction and venue are proper in this Court. Moreover, the applicable
5 agreements contain an exclusive forum selection clause that provides that any dispute
6 arising out of the Agreement will be adjudicated in Maricopa County, Arizona.
ALLEGATIONS APPLICABLE TO ALL CLAIMS

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14.

From September 30, 2006 until May 13, 2011, Mr. Lenza was employed

9 with ATS as Senior Vice President for Financial Services. Mr. Lenza solicited
10 customers and potential customers for ATS. On behalf of ATS, Mr. Lenza consulted
11 with municipalities on various issues relating to photo-traffic enforcement, including
12 assisting or educating those municipalities with establishing photo-traffic enforcement
13 systems and with collecting fines and penalties. As a condition of his employment,
14 Mr. Lenza executed the Employment Agreement (Exhibit A) and the Proprietary
15 Rights Agreement (Exhibit B).
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15.

The Employment Agreement and Proprietary Rights Agreement

17 expressly prohibit Mr. Lenza from competing with ATS during his employment and
18 for a one-year period following his termination. Specifically, Mr. Lenza is prohibited
19 during this period from engaging in the business of manufacturing, developing,
20 marketing, or selling photo-traffic enforcement software, technology, techniques,
21 equipment, or services as an employee, partner, consultant, advisor, or otherwise.
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16.

At the same time that Mr. Lenza joined ATS, he and ATS entered into a

23 Business Representation Agreement (Exhibit C). In that agreement, ATS and Mr.
24 Lenza’s company, Public Finance Strategies, agreed that ATS would represent Public
25 Financing Strategies’ photo-enforcement collections and other services. Public
26 Financing Strategies agreed that ATS was its exclusive representative and that Public
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1 Financing Strategies would not offer or provide its services to any competitor or
2 customer without written permission from ATS.
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17.

ATS recently discovered that while Mr. Lenza was ATS’s Senior Vice

4 President, Mr. Lenza was simultaneously competing directly with ATS by consulting
5 with municipal customers and potential customers and marketing photo-traffic
6 enforcement services. On information and belief, Mr. Lenza was directly diverting
7 opportunities away from ATS.
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18.

On information and belief, Mr. Lenza formed a company to compete

9 with ATS called Photo Enforcement Consultants, a Defendant in this action. Mr.
10 Lenza has offered consulting services in the photo-enforcement field through this
11 company.
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19.

Despite requests from ATS that Mr. Lenza honor his contractual

13 obligations, Mr. Lenza has continued to solicit his competitive consulting services.
14 On information and belief, Mr. Lenza also has solicited ATS’s potential customers
15 with whom he worked while at ATS.
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20.

On information and belief, Public Finance Strategies has materially

17 breached the Business Representation Agreement by, among other things, competing
18 with ATS and by working directly with customers without written consent from ATS.
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21.

Photo Enforcement Consultants has interfered with the Employment

20 Agreement and Proprietary Rights Agreement by permitting, assisting, and employing
21 Mr. Lenza with knowledge of his non-competition obligations and by directing or
22 allowing him to breach his non-competition obligations to ATS. Photo Enforcement
23 Consultants and Mr. Lenza have interfered with ATS’s potential customer
24 relationships by attempting to divert their business from ATS to Photo Enforcement
25 Consultants.
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22.

This tortious interference with actual and prospective business

2 relationships has subjected, and continues to subject, ATS to irreparable injury. The
3 Court should enjoin these clear violations of law and enter appropriate orders
4 protecting ATS’s proprietary trade secrets and contractual rights.
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COUNT ONE
(Injunctive Relief)

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23.

ATS incorporates by reference the above allegations of this Complaint.

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24.

The Employment Agreement and Proprietary Rights Agreement

9 expressly prohibit Mr. Lenza, for a period of one-year following his termination from
10 ATS, from engaging in the business of manufacturing, developing, marketing, or
11 selling photo-traffic enforcement software, technology, techniques, equipment, or
12 services as an employee, partner, consultant, advisor, or otherwise.
13

25.

Despite his contractual obligations, and in violation thereof, Mr. Lenza

14 has marketed his photo-traffic enforcement consulting services (the same consulting
15 services Mr. Lenza performed as an ATS Senior Vice President) to ATS potential
16 customers on behalf of himself and a competitor, Defendant Photo Enforcement
17 Consultants.
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26.

The Business Representation Agreement between ATS and Public

19 Finance Strategies granted ATS an exclusive right to contract with municipalities to
20 assist those customers in collecting unpaid fees and fines relating to photo-traffic
21 enforcement.
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27.

On information and belief, Public Finance Strategies has directly

23 competed against ATS and has contracted or attempted to contract with municipalities
24 without ATS’s knowledge or consent.
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28.

ATS has demanded that Defendants comply with their agreements with

2 ATS and applicable law, and refrain from wrongfully soliciting or competing with
3 ATS.
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29.

Mr. Lenza and Public Finance Strategies have been and are violating

5 contractual and legal duties owed by them to ATS.
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30.

Defendants have interfered and are interfering with ATS’s contracts,

7 potential customers, business, and operations.
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31.

Mr. Lenza has misappropriated for himself and for Photo Enforcement

9 Consultants, ATS’s potential customers, customer relationships, and ATS’s other
10 interests to ATS’s detriment and to the advantage of Mr. Lenza and Photo
11 Enforcement Consultants.
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32.

Mr. Lenza has failed, neglected, and refused to stop soliciting ATS

13 customers, and he has traded for himself or for the benefit f others upon ATS’s
14 relationships while employed with ATS.
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33.

As Photo Enforcement Consultants is operated by Mr. Lenza, it is well

16 aware of Mr. Lenza’s contractual obligations to ATS.
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34.

Mr. Lenza’s direct competition is interfering with ATS’s legitimate

18 business efforts, harming ATS’s goodwill and reputation in the industry, and should
19 be enjoined.
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35.

Defendants’ actions have resulted and will result in damage to ATS and

21 in Defendants’ unjust enrichment.
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36.

ATS does not yet know, and cannot yet estimate, the exact extent of its

23 actual and potential damages incurred and to be incurred, the damage to reputation,
24 good will and customer relationships, the number of sales lost, additional potential
25 costs incurred, and other harm suffered and to be suffered, as a direct and
26 consequential result of Defendants’ activities.
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37.

ATS has suffered damage and special damage flowing directly from the

2 actions and conduct of Defendants as alleged herein, as such actions and conduct (1)
3 have directly interfered with the business of ATS; (2) have damaged the reputation of
4 ATS; (3) have damaged ATS’s good will and customer or potential customer
5 relationships; (4) have prejudiced ATS in its trade and business and the conduct
6 thereof; (5) have resulted in expense to ATS, as ATS has been required to (a) expend
7 time, effort and money in trying to determine what Defendants’ conduct has been and
8 to counteract the effects of such conduct; (b) retain counsel and become obligated for
9 attorneys’ fees and costs in an effort to determine and counteract Defendants’
10 conduct; and (c) incurred disbursements in connection with the foregoing. While
11 sales and services to ATS’s customers have been interfered with, ATS cannot
12 determine at this time, every person or entity which has been so affected. The exact
13 amount is to be determined at trial.
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38.

Defendants’ actions will continue unless enjoined. ATS has no

15 adequate remedy at law. Defendants’ actions are causing, and unless remedied, will
16 continue to cause irreparable harm to ATS.
17

39.

ATS is entitled to injunctive and monetary relief for these violations of

18 legal duties and fiduciary obligations owing to ATS.
19

40.

ATS respectfully requests judgment against Defendants, for injunctive

20 and other relief as requested herein, and for damages, costs, fees, and such other and
21 further relief as this Court deems just, proper and equitable.
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COUNT TWO
(Breach Of Contract)
(As to Defendant Michael Lenza and Public Finance Strategies)

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25

41.

ATS incorporates by reference the above allegations of this Complaint.

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42.

Mr. Lenza is party to the enforceable Employment Agreement and

2 Proprietary Rights Agreement that, among other things, prohibit him from competing
3 with ATS and/or soliciting ATS’s customers for one year after the termination of his
4 employment.
5

43.

Mr. Lenza has breached the Employment Agreement and Proprietary

6 Rights Agreement by, among other things, marketing competitive consulting services
7 to ATS’s customers and potential customers and municipalities with whom he had
8 contact while employed by ATS.
9

44.

ATS has reminded Mr. Lenza of the Employment Agreement and

10 Proprietary Rights Agreement and demanded that he honor his contractual
11 commitments.
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45.

ATS has been damaged. As a result of the foregoing, ATS is entitled to

13 recover its actual damages from Mr. Lenza.
14

46.

Defendant Public Finance Strategies is a party to a Business

15 Representation Agreement, which, among other things, designates ATS as its
16 exclusive representative to market collection services to municipalities.
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47.

On information and belief, Public Finance Strategies has breached the

18 Business Representation Agreement by competing with ATS and by offering its
19 collection services directly to municipality customers without informing ATS or
20 obtaining ATS’s written consent.
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48.

ATS has suffered and will continue to suffer substantial damages

22 resulting from these breaches of contract. Defendants’ actions are likely to continue
23 unless enjoined. ATS has no adequate remedy at law. Defendants’ actions are
24 causing, and unless remedied, will continue to cause irreparable harm to ATS.
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COUNT THREE
(Breach of Fiduciary Duties)
(As to Michael Lenza)

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49.

ATS incorporates by reference the above allegations of this Complaint.

5

50.

As an agent and Senior Vice President of ATS, Mr. Lenza held a

6 position of responsibility, trust, and confidence. During his employment, Mr. Lenza
7 was obligated to act with undivided loyalty to ATS and not to take actions to the
8 detriment of ATS.
9

51.

During his relationship with ATS, Mr. Lenza was charged with

10 soliciting customers and potential customers for photo-traffic enforcement consulting
11 and other services.
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52.

While employed with ATS, and in breach of his fiduciary duties to

13 ATS, Mr. Lenza worked directly with ATS customers and potential customers and
14 offered competitive consulting services in the photo-traffic enforcement field.
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53.

Mr. Lenza has engaged in a course of conduct inconsistent with his

16 fiduciary obligations and duties of loyalty and fairness to protect the interests of ATS
17 and to refrain from doing anything that would improperly or unfairly injure ATS.
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54.

Mr. Lenza acted with an evil mind, and with an intent to injure ATS,

19 entitling ATS to an award of punitive damages.
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COUNT FOUR
(Aiding and Abetting Breach of Fiduciary Duties)
(As To Defendant Photo Enforcement Consultants)

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55.

ATS incorporates by reference the above allegations of this Complaint.

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56.

Mr. Lenza breached his fiduciary duties owed to ATS, causing

25 substantial damages to ATS.
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57.

Photo Enforcement Consultants, Mr. Lenza’s company, had knowledge

2 or a general awareness that the conduct of Mr. Lenza described herein constituted a
3 breach of his fiduciary duties to ATS.
4

58.

By virtue of its employment of Mr. Lenza and other encouragement

5 and/or support, Photo Enforcement Consultants provided substantial assistance or
6 encouragement to Mr. Lenza in the achievement of his breach, making it easier for
7 Mr. Lenza to breach his fiduciary duties.
8

59.

Photo Enforcement Consultants acted with an evil mind and with an

9 intent to injure ATS, entitling ATS to an award of punitive damages.
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COUNT FIVE
(Tortious Interference With Business Expectancy)
(As to All Defendants)

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60.

ATS incorporates by reference the above allegations of this Complaint.

14

61.

ATS had a reasonable expectancy that it would continue to do business

15 with its customers and prospective customers.
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62.

Defendants are aware of ATS’s existing and prospective business

17 relationships with its customers and potential customers.
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63.

Using improper motives and means, Defendants intentionally engaged

19 in the acts described above for the purpose of interfering with ATS’s enjoyment and
20 benefit of its contractual and prospective business relationships and expectancies with
21 its customers, thereby causing substantial damage to ATS in an amount to be proven
22 at trial and entitling ATS to injunctive relief.
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COUNT SIX
(Tortious Interference With Contract)
(As to Defendant Photo Enforcement Consultants)

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64.

ATS incorporates by reference the above allegations of this Complaint.
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65.

Photo Enforcement Consultants hired or continued to employ or engage

2 Mr. Lenza with knowledge of Mr. Lenza’s obligations under the Employment
3 Agreement and Proprietary Rights Agreement.
4

66.

Despite its knowledge of Mr. Lenza’s agreements with ATS, Photo

5 Enforcement Consultants has nevertheless proceeded to induce Mr. Lenza to breach
6 his agreements with ATS, or allowed him to do so, using improper motives or means,
7 thereby intentionally interfering with ATS’s enjoyment and benefit of its rights in the
8 Agreement.
9

67.

Photo Enforcement Consultants acted knowingly, improperly,

10 intentionally, wantonly and maliciously, in an effort to damage ATS.
11

68.

Photo Enforcement Consultants has no justification or excuse for

12 intentionally and willfully interfering with ATS’s rights under the Employment
13 Agreement and Proprietary Rights Agreement. Photo Enforcement Consultants has
14 interfered with ATS’s rights under Mr. Lenza’s agreements with ATS in bad faith,
15 and with the intent to harm ATS.
16

69.

ATS has been damaged as a result of the foregoing actions by

17 Defendants.
18

70.

As a result of the foregoing, ATS is entitled to recover its actual

19 damages from Photo Enforcement Consultants, as well as punitive damages.
20

71.

Photo Enforcement Consultants’ actions are likely to continue unless

21 enjoined. ATS has no adequate remedy at law. These actions threaten to cause
22 irreparable harm to ATS.
23

72.

ATS is entitled to injunctive relief to prevent Photo Enforcement

24 Consultants from instigating, inducing, or acquiescing in Mr. Lenza’s breaches of Mr.
25 Lenza’s agreement with ATS.
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COUNT SEVEN
(Constructive Trust)

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73.

ATS incorporates by reference the above allegations of this Complaint.

4

74.

Mr. Lenza breached his fiduciary duties to ATS by soliciting ATS

5 prospective customers on behalf of himself and/or a competitor while he was still
6 employed by ATS.
7

75.

Defendant Photo Enforcement Consultants maliciously aided and

8 abetted Mr. Lenza’s breaches of fiduciary duties and all Defendants have benefited
9 from Mr. Lenza’s breaches of duties owed to ATS.
10

76.

ATS had and has the resources and the motivation to service the

11 customers that Mr. Lenza diverted away from ATS.
12

77.

Defendants should be required to disgorge the profits they made from

13 any customers that Defendants misappropriated through Mr. Lenza’s efforts while he
14 was employed with ATS or afterwards in violation of Mr. Lenza’s duties, and a
15 constructive trust should be imposed over those profits and the businesses of
16 Defendants and for the benefit of ATS.
17

WHEREFORE, Plaintiff ATS requests:

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A.

Injunctive relief as set forth above.

19

B.

Constructive trust as set forth above.

20

C.

Monetary damages.

21

D.

ATS’ reasonable costs and expenses, including attorneys’ fees incurred

22 in connection with the prosecution of this action to the extent allowed by law.
23

E.

Such other and further relief as the Court may deem just and equitable.

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DATED this 18th day of May, 2011.

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OSBORN MALEDON, P.A.

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s/ John L. Blanchard
Scott W. Rodgers
John L. Blanchard
Kristin L. Windtberg
2929 N. Central Avenue, Suite 2100
Phoenix, AZ 85012-2793

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Attorneys for Plaintiff

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