Coface Collections North America Inc. v. Newton
Filing
219
MEMORANDUM ORDER regarding jury trial. Signed by Judge Leonard P. Stark on 8/31/2012. (rpg)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
COFACE COLLECTIONS NORTH
AMERICA, INC.,
Plaintiff,
C.A. No. 11-00052-LPS
v.
WILLIAM J. NEWTON,
Defendant.
MEMORANDUM ORDER
I.
INTRODUCTION
Defendant William J. Newton ("Defendant") seeks a jury trial on the following claims
asserted in Coface Collections North America, Inc.'s ("Plaintiff') Amended Complaint (D.I. 44):
(1) Misappropriation of Trade Secrets; (2) Unfair Competition; and (3) Conversion. Plaintiffs
claims rely largely on the Asset Purchase Agreement ("AP A") executed by Plaintiff, as the buyer,
and Defendant, as the sellers' representative. (D .I. 164 at A 1-A 77) Defendant argues that he has
not waived his right to a jury trial with regard to the three claims listed above because the Jury
Trial Waiver contained in the APA is not broad enough to cover these claims. For the reasons
stated below, the Court will strike the parties' jury demands. The trial on all remaining claims
will be a bench trial.
II.
THE PARTIES' AGREEMENTS
The Jury Trial Waiver provision of the AP A states:
Each party hereto acknowledges and agrees that any controversy
which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore it hereby
irrevocably and unconditionally waives any right it may have to a
trial by jury in respect of any litigation directly or indirectly
arising out o(or relating to this Agreement and any ofthe
agreements delivered in connection herewith or the Contemplated
Transactions. Each party hereto certifies and acknowledges that (i)
no representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would
not, in the event oflitigation, seek to enforce such waiver, (ii) it
understands and has considered the implications of such waiver,
(iii) it makes such waiver voluntarily, and (d) [sic] it has been
induced to enter into this agreement by, among other things, the
mutual waivers and certifications in this Section 11.1 O(b ).
AP A § 11.1 O(b) (D.I. 164 at A 72) (emphasis added).
Plaintiffs three claims listed above are based on the AP A and also, in part, on
Defendant's Employment Agreement (D.I. 164 at A83-A89) with Plaintiff. Defendant does not
dispute that the Employment Agreement is an "agreement[] delivered in connection" with the
AP A, making any claim "directly or indirectly arising out of or relating to" the Employment
Agreement subject to the Jury Trial Waiver. (See D.I. 211 at 7; D.I. 212 at 3) 1 Defendant further
acknowledges that the Jury Trial Waiver in the APA is valid. (D.I. 211 at 5; D.I. 212 at 3) 2
1
During the August 28, 2012 hearing on this dispute, Defendant conceded that the
Employment Agreement is an agreement delivered in connection with the AP A and,
consequently, any claim arising out of or relating to the Employment Agreement is subject to the
Jury Trial Waiver. (Transcript of Aug. 28,2012 hearing ("Tr.") at 19-20)
2
"As a general matter, courts construe jury trial waivers narrowly and indulge every
reasonable presumption against waiver." In re DaimlerChrysler AG Sec. Litig., 2003 WL
22769051, at *2 (D. Del. 2003), aff'd, 502 F.3d 212 (3d Cir. 2007) (internal quotation marks
omitted). However, jury trial waivers are routinely enforced, and broadly worded waivers are
interpreted broadly, according to their plain meaning. See id. (enforcing a broad jury trial
waiver). The right to a jury trial "can be waived by contract if the waiver is knowing, voluntary
and intelligent." Id. "In determining whether a waiver was entered into knowingly, intentionally
and voluntarily, courts consider such factors as: (1) the negotiability of the contract terms; (2) any
disparity in bargaining power between the parties; (3) the business acumen of the party opposing
the waiver; and (4) the conspicuousness of the jury waiver provision." Id. Here, both parties
participated in drafting the terms of the AP A, as acknowledged in AP A § 11.12. Defendant was
the head of the business that Plaintiff acquired, and there was no significant disparity in
bargaining power. Defendant possessed sufficient business acumen, and the Jury Trial Waiver
2
Therefore, the Court must determine, for each of the three claims at issue, whether the claim
"directly or indirectly aris[ es] out of or relat[ es] to" the AP A or the Employment Agreement.
The Court turns to these matters below.
III.
THE JURY TRIAL WAIVER PROVISION APPLIES TO THE THREE CLAIMS
A.
Unfair Competition
Under Delaware law, the "essential element separating unfair competition from legitimate
market participation ... is an unfair action on the part of defendant by which he prevents plaintiff
from legitimately earning revenue." Accenture Global Servs. GMBHv. Guidewire Software Inc.,
581 F. Supp. 2d 654, 666 (D. Del. 2008) (internal quotation marks omitted). The "elements of
the tort of unfair competition are that the plaintiffhas a reasonable [business] expectancy ... ,
with which the defendant wrongfully interferes, and thereby defeats the plaintiff's legitimate
expectancy and causes him harm." Id. (internal quotation marks omitted).
In the AP A, Defendant agreed to the following:
For a period of five (5) years commencing on the Closing
Date [September 29, 2006] (the "Noncompete Period"),
[Defendant] shall not directly or indirectly own, have an
interest in ... , operate, join, control, or participate in, or be
connected with as an officer, employee, director, proprietor,
member, manager, partner, investor, creditor, adviser, sales
representative, agent, consultant or otherwise with, any
business similar to or competitive with the Business (a
"Restricted Business") anywhere in the world.
APA § 7.1(a).
Defendant also agreed that, during the Noncompete Period, he would not directly or
was no less conspicuous than any other part of the AP A. Indeed, it was contained in a section
entitled "Jurisdiction and Forum; Waiver of Jury Trial." (D.I. 164 at A72) Accordingly, the Jury
Trial Waiver provision is valid.
3
indirectly:
(i) hire, offer to hire, divert, entice away, solicit or in any other
manner persuade, or attempt to do any of the foregoing ("Solicit")
any person who is an officer or employee of [Plaintiff] or its
subsidiaries or a Business Employee, officer, agent or consultant to
the Sellers to terminate such person's employment with [Plaintiff]
or its subsidiaries or accept employment with a third party, or to
engage in any of the activities hereby prohibited under Section
7.1(a) above, or subparagraph (ii) below; or
(ii) Solicit (A) any actual or prospective customer of [Plaintiff] or
its subsidiaries to become a customer of any third party engaged in
a Restricted Business or (B) any customer, supplier, licensee,
licensor, consultant or other business relation to cease doing or
materially reduce its business with [Plaintiff] or its subsidiaries.
APA § 7.1(b); see also Employment Agreement (D.I. 164 at A86) (containing similar
provisions).
Plaintiff alleges that Defendant violated both of these provisions of the AP A before the
end of the Noncompete Period. Plaintiff also alleges that Defendant, by these violations,
prevented Plaintiff from legitimately earning revenue. Thus, Plaintiffhas alleged an unfair
competition claim that arises at least indirectly from and relates to the AP A. Therefore, the Jury
Trial Waiver provision applies, and Defendant is not entitled to a jury trial on this claim.
B.
Misappropriation Of Trade Secrets
The Delaware Uniform Trade Secrets Act ("DUTSA") states:
"Trade secret" shall mean information, including a formula,
pattern, compilation, program, device, method, technique or
process, that:
(a) Derives independent economic value, actual or
potential, from not being generally known to, and
not being readily ascertainable by proper means by,
other persons who can obtain economic value from
4
its disclosure or use; and
(b) Is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
6 Del. C. § 2001 (4 ). Misappropriation of a trade secret includes "[ d]isclosure or use of a trade
secret of another without express or implied consent" by someone who "[a]t the time of
disclosure or use, knew or had reason to know" that his information regarding the trade secret
was "[a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use."
6 Del. C. § 2001 (2)(b )(2)(B).
The Confidential Information Provision of the Employment Agreement provides:
[Defendant] acknowledges that the information,
observations and data (including trade secrets) obtained by
him or her while employed by [Plaintiff] ... ("Confidential
Information") are the property of [Plaintiff] ... .
Therefore, [Defendant] agrees that he shall not disclose to
any unauthorized person or use for his or her own purposes
any Confidential Information without the prior written
consent of the Board, unless and to the extent that the
Confidential Information becomes generally known to and
available for use by the public other than as a result of
[Defendant's] acts or omissions. [Defendant] shall deliver
to [Plaintiff] at the termination or expiration of the
Employment Period, or at any other time [Plaintiff] may
request, all memoranda, notes, plans, records, reports,
computer tapes, printouts and software and other
documents and data (and copies thereof) embodying or
relating to the Confidential Information ... or the business
of [Plaintiff] ... which he may then possess or have under
his or her control.
(D.I. 164 at A85) (emphasis added) The Employment Noncompete Provision of the Employment
Agreement provides:
5
[Defendant] acknowledges that in the course of his or her
employment with [Plaintiff] ... he shall and/or has become
familiar with [Plaintiffs] trade secrets and with other Confidential
Information concerning [Plaintiff] .... Therefore, [Defendant]
agrees that, during the Employment Period and for the greater of
(i) five (5) years following the date hereof and (ii) two years
following the termination ofthe Employment Period (the
"Noncompete Period"), he will not [compete with Plaintiff].
(D.I. 164 at A85-86) (emphasis added) As the Employment Agreement is dated September 29,
2006, Defendant was required to abide by the terms of the Employment Noncompete Provision
until at least September 29, 2011 -despite the fact that Defendant served as Plaintiffs employee
only until January 1, 2009. (D.I. 163 at 6) 3
Plaintiff alleges that Defendant began misappropriating its trade secrets before September
29, 2011, during the time that the Employment Noncompete Provision was in effect. Plaintiff
alleges that during that time: ( 1) Plaintiff was in possession of and had property rights to trade
secrets that had value because they were not readily or properly available to the general public;
(2) Plaintiff took precautions, as evidenced by the Employment Agreement itself, to protect the
secrecy of this information; and (3) Defendant acquired the trade-secret information under
circumstances that required him to maintain its secrecy. Accordingly, Plaintiffs trade secrets
claim arises at least indirectly from and relates to the Employment Agreement. Therefore, the
Jury Trial Waiver provision applies, and Defendant is not entitled to a jury trial on this claim.
3
The Employment Agreement explicitly states that the Confidential Information Provision
and the Employment Noncompete Provision "shall survive and continue in full force in
accordance with their terms notwithstanding the expiration or termination of the Employment
Period or this Agreement." (D.l. 164 at A87; see also D.l. 212 at 4) (the "Survival Provision")
(emphasis added) Therefore, it is irrelevant that the three claims accrued after the termination of
the Employment Agreement. (See Tr. at 20)
6
C.
Conversion
"Conversion is an act of dominion wrongfully exerted over the property of another, in
denial of his right, or inconsistent with it." Arnold v. Soc 'yfor Sav. Bancorp, Inc., 678 A.2d 533,
536 (Del. 1996) (internal quotation marks omitted). Thus, in order to prevail on its conversion
claim, Plaintiff must demonstrate that it had a property interest in the converted property (its
Customer Data and Comm Biz Reports) and that it had a right to possess it.
The provisions of the Employment Agreement cited above in connection with Plaintiffs
trade secrets claim establish the following:
•
The Customer Data and Comm Biz Reports qualify as Confidential Information;
•
Insofar as these items were Confidential Information, Plaintiff had a property
interest in and possessed these items;
•
Insofar as these items were Confidential Information, Plaintiffhad the contractual
right to request that Defendant return the Customer Data and Comm Biz Reports
at any time; and
•
Insofar as these items were Confidential Information, Defendant acted contrary to
Plaintiffs contractual right to require that Defendant obtain permission from
Plaintiff before using these items for his own purposes.
Therefore, Plaintiffs conversion claim at least indirectly arises from and relates to the
Employment Agreement. Accordingly, the Jury Trial Waiver provision applies, and Defendant is
not entitled to a jury trial on this claim.
IV.
DEFENDANT'S ARGUMENTS
Defendant emphasizes that Plaintiff included a jury trial demand in its Amended
7
Complaint. (D .I. 44) This does not alter the outcome. When a party demands a jury trial, the
trial on the relevant issues must be by jury unless "the court ... finds that on some or all of those
issues there is no federal right to a jury trial." Fed. R. Civ. Proc. 39(a)(2). Since Defendant has
waived his right to a jury trial on the three claims, Defendant does not have a federal right to a
jury trial on these claims. "[A]s [Defendant] had no independent right to a jury, [Plaintiffs]
demand did not abrogate [Defendant's] waiver and permit it to rely." Quinn Constr., Inc. v.
Skanska USA Bldg., Inc., 2010 WL 4909587, at *4 (E.D. Pa. Nov. 30, 2010). Neither does
Plaintiff have such a right- the Jury Trial Waiver applied to all parties to the AP A. Therefore,
Defendant could not have relied on Plaintiffs jury demand as a basis for obtaining a jury trial. 4
Defendant argues that, at the time the AP A was signed in 2006, the parties would not
have anticipated the three claims now at issue, which only arose in 201 0. Therefore, in
Defendant's view, the Jury Trial Waiver provision cannot apply to these claims. (Tr. at 15, 17)
Yet the Jury Trial Waiver provision is neither expressly nor implicitly limited to claims that
could have been anticipated. To the contrary, it broadly applies to "any litigation directly or
indirectly arising out of or relating to this Agreement and any of the agreements delivered in
connection herewith or the Contemplated Transactions," which- as already explained- is
sufficiently broad to encompass the three claims at issue. In any event, the parties did, in fact,
contemplate ongoing obligations including that Defendant would not unfairly compete,
misappropriate trade secrets, or wrongfully convert Plaintiffs property. To the extent
anticipation of claims is at all relevant, the Court is satisfied that the parties did, indeed,
4
Defendant conceded during the hearing that "if [Defendant] has waived a jury trial,
asserting a jury demand does not bring back a right he has waived." (Tr. at 14)
8
contemplate prohibiting Defendant from engaging in just the type of conduct in which he is
alleged to have engaged.
Finally, Defendant argued in his brief that if Plaintiffs claims are construed as arising in
connection with the Employment Agreement, Plaintiff is required to arbitrate them. (D .I. 211 at
8) However, Defendant has not moved to dismiss this case based on a requirement to arbitrate
(see Tr. at 22), and such a motion would be untimely. Therefore, the only relevance of the
arbitration provisions in the Employment Agreement and Consulting Agreement is that they
provide further confirmation that the parties - including Defendant - anticipated that disputes
that might arise between them would not be resolved through a jury trial.
VI.
CONCLUSION
Accordingly, for the reasons stated above, the Court concludes that Defendant (like
Plaintiff) has waived his right to a jury trial with regard to Plaintiffs claims of (1)
Misappropriation of Trade Secrets, (2) Unfair Competition, and (3) Conversion. IT IS,
THEREFORE, HEREBY ORDERED that the parties' jury demands are STRICKEN. The
remaining issues of liability and damages will be tri~~~·
August 31,2012
UNITE
9
STATES DIS
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?