Oceanside Ten Holdings.com, LLC et al v. MKTG, Inc. et al

Filing 42

OPINION AND ORDER granting 30 Motion to Transfer, and denying as moot 31 Motion for Stay, by Chief Judge Marcia S. Krieger on 5/18/18. (dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Marcia S. Krieger
Civil Action No. 17-cv-02984-MSK-KMT
OCEANSIDE TEN HOLDINGS.COM, LLC, and
MARKETONCE.COM, LLC,
Plaintiffs,
v.
MKTG, INC.,
SAMPLE SOLUTIONS, LLC, and
STEVEN H. GITTELMAN,
Defendants.
______________________________________________________________________________
OPINION AND ORDER GRANTING MOTION TO TRANSFER
______________________________________________________________________________
THIS MATTER comes before the Court pursuant to the Defendants’ Motion to Transfer
Venue (# 30), the Plaintiffs’ response (# 35), and the Defendants’ reply (# 40). Also pending is
the Defendants’ Motion to Stay (# 31) proceedings pending a ruling on the Motion to Transfer,
which is denied as moot as a result of this Order.
FACTS
According to the Complaint (# 1), the Plaintiffs are businesses involved in conducting
market research. Defendants Mktg, Inc. and Sample Solutions, LLC (collectively, “Sample”) are
involved in the same business and have devised software that assists in performing market
research.
In 2016, the parties began discussing the Plaintiffs purchasing the rights to market
research software owned by Sample, known as “ISIS” and “Crop Duster” (“the Software”). The

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Plaintiffs intended to modify the Software somewhat before reselling it, and emphasized to
Sample that, as part of the sale, they would require access to Raymond Nicoletti, a Sample
employee and the Software’s author, for assistance in making the modifications. Sample,
through Defendant Gittelman, its officer, promised to make Mr. Nicoletti available to the
Plaintiffs: he would remain a nominal employee of Sample, but would spend 3/4 of his work
time on the Plaintiffs’ projects, with the Plaintiffs paying 3/4 of his salary. The parties also
agreed that this arrangement would not violate an agreement between them not to solicit each
others’ employees. However, the Plaintiffs contend that, despite these promises, Mr. Gittelman
never had any intention of making Mr. Nicoletti available to the Plaintiffs.
The parties formalized and executed a written agreement for the sale of the Software (the
“software sales agreement”) in April 2017, although it is important to note that the agreement
does not contain any provisions regarding Mr. Nicoletti and that it contains an integration clause
excluding any parol agreements. Almost immediately thereafter, the Defendants “delayed in
fulfilling their obligations under that agreement,” such as delaying the handoff of the Software
itself for a period of several months and failing to provide additional data that was included in
the Plaintiffs’ purchase of the Software. The parties apparently resolved these disputes
eventually, but the Plaintiffs contend that the Defendants continued to withhold the services of
Mr. Nicoletti.
In October 2017, Mr. Nicoletti resigned from employment with Sample, stating that he
wanted to “follow the code” and joined the Plaintiffs to continue working on the Software.
However, in November 2017, Sample’s counsel wrote to Mr. Nicoletti, threatening to sue him if
he continued to work for the Plaintiffs. Fearing the cost and risk of litigation, Mr. Nicoletti

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tendered his resignation to the Plaintiffs. Mr. Nicoletti’s resignation caused delay in the
Plaintiffs’ intended sale of the modified Software, causing the Plaintiffs to suffer business losses.
Based on these allegations, the Complaint alleges five claims against the Defendants, all
sounding in tort: (i) “fraudulent inducement” against all Defendants, in that the Defendants
induced the Plaintiffs to purchase the Software by falsely representing their intention to make
Mr. Nicoletti available to the Plaintiffs; (ii) tortious interference with contract against all
Defendants, in that the Defendants wrongfully interfered with the Plaintiffs’ employment
contract with Mr. Nicoletti; (iii) tortious interference with prospective relations against all
Defendants, in that the Defendants’ actions prevented the Plaintiffs from completing their
modifications to the Software so that it could be marketed to the Plaintiffs’ customers as
anticipated; (iv) unjust enrichment against all Defendants in that the “Defendants received
numerous benefits ranging from consideration under the software sales agreement, to decreased
compensation from the Plaintiffs, to resultant increases profits for Defendants,” all at the
Plaintiffs’ expense; and (v) promissory estoppel against all Defendants, in that the Plaintiffs
detrimentally relied upon the Defendants’ representations about making Mr. Nicoletti available
when deciding to purchase the Software.
In the instant motion, the Defendants move (# 30) to transfer this action to a court in New
York State, consistent with a forum-selection clause included in the software sales agreement.
That clause provides that “any judicial action or proceeding arising hereunder or relating hereto
shall be brought in . . . the state or federal courts of Suffolk County, State of New York.” In
response, the Plaintiffs contend that the forum selection clause does not apply to the claims
asserted herein, because those claims do not “arise under or relate to” the software sales
agreement itself.

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ANALYSIS
A forum selection clause that states that a case “shall be” brought in a certain location is a
mandatory one. American Soda, LLP v. U.S. Filter Wastewater Group, Inc., 428 F.3d 921, 927
n. 4 (10th Cir. 2005). Court will enforce a mandatory forum selection clause unless the party
challenging it “clearly shows that enforcement would be unreasonable or unjust, or that the
clause was invalid for such reasons as fraud or overreaching.” Niemi v. Lasshoffer, 770 F.3d
1331, 1351 (10th Cir. 2014), citing M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). The
interpretation of a forum selection clause is governed by ordinary principles of contractual
analysis. Milk N’ More, Inc. v. Beavert, 963 F.2d 1342, 1345-46 (10th Cir. 1992).
Here, the parties’ dispute concerns whether the Plaintiffs’ claims in this case “arise
under” or “relate to” the software sales agreement. The Plaintiffs argue that none of their claims
“arise under” the software sales agreement because none of those claims allege a breach of any
contractual provision within the agreement. The Plaintiffs further contend that, to “relate to” the
sales agreement, their claims must “involve the same operative facts as a parallel breach of
contract claim” in order to fall within the scope of the forum selection clause. Citing Xantrex
Tech, Inc. v. Advanced Energy Indus., Inc., 2008 WL 2185882 (D. Colo. May 23, 2008). In
essence, the Plaintiffs contend that tort claims are governed by the forum selection clause only if
a breach of contract claim could be (and perhaps is) brought on the same set of facts implicated
by the tort claims.
The Plaintiffs’ reading of Xantrex and other cases is too narrow; none stand for the
proposition that only tort claims that duplicate or parallel a breach of contract claim “relate to” a
contract for purposes of a forum selection claims. Rather, a tort claim “relates to” a contract if it
is “connected by reason of an established or discoverable relation” between the tort and the

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contract. Huffington v. T.C. Group, LLC, 637 F.3d 18, 21-22 (1st Cir. 2011). This is “broader
than the concept of a causal connection.” Id. In Huffington, the plaintiff contracted to purchase
securities based on representations by a broker about the securities’ risk profile. When the
securities underperformed, the plaintiff sued the broker for misrepresentation (but, notably, not
for breach of contract), alleging that the representations about the securities’ risk were false. The
broker invoked the forum selection clause in the securities sale agreement that required disputes
“with respect to” the sales agreement to be litigated in another forum. After finding that “with
respect to” is functionally-identical to the term “relating to,” the First Circuit concluded that the
misrepresentation claims related to the securities sale agreement because the misrepresentations
in question “proximately caused the agreement.” Id. at 22. As the court noted, “[e]ach cause of
action Huffington asserted has as a prerequisite the loss that flowed from the agreement and
acquisition.” Id. Thus, the court found the contractual forum selection clause to apply to the
plaintiff’s tort claims, notwithstanding the absence of any breach of contract claim.
Accepting as true that the false promises by Mr. Gittelman about making Mr. Nicoletti
available to the Plaintiffs were not incorporated into the actual software sales agreement -- much
like the misrepresentations about the risk profile of the securities in Huffington were not
incorporated into the securities sales agreement – the injury that underlies the Plaintiffs’ tort
claims nevertheless arises, inexorably and proximately, from the Plaintiffs’ decision to purchase
the Software, and the Plaintiffs’ decision to purchase the software was predicated upon Mr.
Gittelman’s promise of access to Mr. Nicoletti. The Complaint repeatedly makes clear that the
Plaintiffs insisted on access to Mr. Nicoletti as a condition of purchasing the Software, and
would not have entered into the agreement if they had believed that the Defendants would not
produce Mr. Nicoletti. See Complaint, ¶ 37 (“Plaintiffs made it abundantly clear to Defendants

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that they would require Defendants’ agreement to let Nicoletti work with Plaintiffs in relation to
any potential purchase of the software”); ¶ 113, 116 (Plaintiffs “relied upon” the false statements
“regarding Nicoletti working for Plaintiffs” when “entering into the software sales agreement”).
Thus, as in Huffington, the tort claims here are sufficiently “relate[d] to” the software sales
agreement, even if they do not assert any breach of contract claim connected to the terms of the
agreement itself.
Here, there can be no dispute that the Plaintiffs’ fraudulent inducement, unjust
enrichment, and promissory estoppel claims all expressly refer to the Plaintiffs’ entry into the
software sales agreement as the mechanism by which the Plaintiffs were injured. See Complaint,
¶ 119, 135, 143. Thus, there can be no dispute that these claims “relate to” the agreement under
Huffington, and thus, that they are within the scope of the forum selection clause. Accordingly,
they must be litigated in New York.1
Admittedly, there is a colorable argument to be made that the Plaintiffs’ remaining claims
– tortious interference with contract and tortious interference with prospective business relations
– are not governed by the forum selection clause. The mechanism of injury for these claims is
not the software sale itself, but, rather, actions that the Defendants took after the sale was fully
completed. Thus, these claims would not be governed by the forum selection clause. But neither
party has addressed how they believe the Court should proceed if some of the Plaintiffs’ claims

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The Defendants have requested that any claims subject to the forum selection clause be
transferred to the United States District Court for the Eastern District of New York. The
Plaintiffs’ response brief does not take a position on whether they would prefer to litigate in that
federal court, or whether they would instead avail themselves of the right to bring these claims in
the New York State Supreme Court for Suffolk County. Because the Plaintiffs themselves chose
a federal forum here, and because it appears that claims brought in the New York State courts
might be subject to removal to federal court on diversity grounds in any event, this Court will
direct the transfer of the claims to the federal court in New York.
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are subject to the forum selection clause while others are not. The Court conceives of two
possible approaches.
First, the Court could bifurcate the tortious interference claims, retaining jurisdiction over
those two claims here in Colorado and transferring the remaining claims to the Eastern District
of New York. But such an approach yields two lawsuits proceeding simultaneously, in two
separate jurisdictions (nearly two thousand miles and two time zones apart), with identical
parties and somewhat overlapping facts. As the Court explained in Hill’s Pet Products v. A.S.
U., Inc., 808 F.Supp 774, 776-77 (D.Kan. 1992), such bifurcation “would not advance the goal of
judicial economy” and that “simultaneous prosecution in two different courts relating to the same
parties and issues leads to the wastefulness of time, energy, and money.”
The other alternative is for the Court to, sua sponte, exercise its discretion to transfer the
tortious interference claims to New York as well, pursuant to 28 U.S.C. § 1404(a). See Nalls v.
Coleman Low Federal Inst., 440 Fed.Appx. 704, 706 (11th Cir. 2011) (“A district court may sua
sponte transfer a civil action to any other district where it might have been brought if doing so
will be convenient for the parties and witnesses and serve the interest of justice”).2 Transfer of
venue pursuant to 28 U.S.C. § 1404(a) is governed by consideration of several factors relating to
each jurisdiction’s access to evidence and witnesses, administrative congestion, local interests,
and, significantly, the plaintiff’s own choice of forum. Atlantic Marine Const. Co. v. U.S.
District Court, 571 U.S. 49, 62 n. 6 (2013). Most of these factors are in equipoise for purposes
of choosing between Colorado and New York as fora for the claims herein: although the

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Nalls points out that, before effecting a transfer pursuant to § 1404, the Court should give
the parties an opportunity to be heard. Here, the Defendants’ initial motion squarely addressed
the various factors that courts weigh in deciding whether to transfer venue under § 1404, and
thus, the Court finds that the parties have had the opportunity to be heard on those factors as part
of the briefing herein.
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Plaintiffs’ principal place of business is Colorado, Defendants Gittelman and Mktg are located in
New York, and the locus of evidence relating to the parties’ dealings will likely be shared
equally between the parties’ respective locations. Both states have an interest in adjudicating
claims by or against their residents, and the Court cannot say that one jurisdiction’s courts are
considerably more congested than the other’s.
However, perhaps the most important figure in the Plaintiffs’ tortious interference claims
is Mr. Nicoletti himself, and the parties note (indirectly) that he does not reside in either
Colorado or New York. Rather, he is a citizen of North Carolina. This fact alters the landscape
somewhat. Again, recall that the Plaintiffs’ tortious interference with contract claim alleges that
the Defendants wrote threatening letters to Mr. Nicoletti in order to induce him to resign his
employment with the Plaintiffs. The locus of those actions, then, is the Defendants’ location in
New York (where the letters were sent) and Mr. Nicoletti’s residence in North Carolina (where
the letters were received); Colorado is significant only insofar as the injury to the Plaintiffs from
Mr. Nicoletti’s resignation was felt there. Moreover, as the parties note, Mr. Nicoletti has filed
his own lawsuit against Mr. Gittelman and Mktg in that state. The presence of yet another
lawsuit in yet another jurisdiction only serves to exacerbate the inefficiencies of multiplying
fora, and, in turn, underscores the desirability of corralling all of the various cases among these
parties to as few jurisdictions as possible. Because, as noted above, some of the Plaintiffs’
claims here must be brought in New York, and Mr. Nicoletti’s claims are being heard in North
Carolina, only the most profound of justifications would warrant adding a third forum, Colorado,
to the mix.
The factor tipping most strongly in favor of lodging some claims here in Colorado is the
fact that it is the Plaintiffs’ chosen forum for this suit. Without diminishing the obvious reasons

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why a party would desire to litigate in its own home state, this Court agrees with the reasoning of
Hill’s Pet Products: the undesirable inefficiencies of multi-jurisdiction litigation themselves
may3 outweigh the benefits of deferring to a plaintiff’s chosen forum. 808 F.Supp. at 777. This
is even more true here, where deferring to the Plaintiffs’ desire to litigate in Colorado adds a
third (not just second) jurisdiction to the litigation landscape. The Plaintiffs here have not
alleged any unusual reasons why Colorado is an especially important forum for their tortious
interference claims, and thus, the inefficiencies that accompany litigating in a third jurisdiction
outweigh the deference given to the Plaintiffs’ chosen forum.
Accordingly, the Court finds that, to the extent that the tortious interference claims are
not governed by the forum selection clause, the analysis under 28 U.S.C. § 1404(a) nevertheless
warrants the conclusion that those claims should be transferred to the Eastern District of New
York along with the other claims in this case.
CONCLUSION
For the foregoing reasons, the Court GRANTS the Defendants’ Motion to Transfer (#
30). All claims in this action a TRANSFERRED to the United States District Court for the
Eastern District of New York, Long Island Division, and the Clerk of the Court shall effectuate

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In many cases, the decision to transfer venue will be informed by the presence of parallel
litigation in other jurisdictions. This Court is not suggesting that the inefficiencies of multijurisdiction litigation will always outweigh the plaintiff’s choice of forum. There may very well
be situations where the plaintiff’s choice of forum is motivated by more than the ordinary
incidences of residence and convenience, and in such situations, the plaintiff’s reasons for
choosing the forum might justify maintaining litigation in two or more places simultaneously.
Here, however, the Plaintiffs’ response to the motion does not discuss the § 1404 factors, much
less purport to explain why unusual weight should be given to their choice to file this action in
Colorado.
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such transfer and thereafter close this case. The Defendants’ Motion for Stay (# 31) is DENIED
AS MOOT.
Dated this 18th day of May, 2018.
BY THE COURT:

Marcia S. Krieger
Chief United States District Judge

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