Deman Data Systems, LLC et al v. Schessel et al
Filing
147
ORDER granting in part and denying in part 79 motion to dismiss. Signed by Judge Susan C Bucklew on 12/19/2013. (JD)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
TAMPA DIVISION
DEMAN DATA SYSTEMS,
LLC, ET AL.,
Plaintiffs,
v.
Case No. 8:12-cv-2580-T-24 EAJ
MARC S. SCHESSEL, ET AL.,
Defendants.
_________________________________/
ORDER
This cause comes before the Court on Defendant Marc Schessel’s Motion to Dismiss
Counts VIII and IX. (Doc. No. 79). Plaintiffs oppose the motion. (Doc. No. 87). As explained
below, the motion is granted in part and denied in part.
I. Standard of Review
In deciding a motion to dismiss, the district court is required to view the complaint in the
light most favorable to the plaintiff. See Murphy v. Federal Deposit Ins. Corp., 208 F.3d 959,
962 (11th Cir. 2000)(citing Kirby v. Siegelman, 195 F.3d 1285, 1289 (11th Cir. 1999)). The
Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon
which he bases his claim. Instead, Rule 8(a)(2) requires a short and plain statement of the claim
showing that the pleader is entitled to relief in order to give the defendant fair notice of what the
claim is and the grounds upon which it rests. See Bell Atlantic Corp. v. Twombly, 127 S. Ct.
1955, 1964 (2007)(citation omitted). As such, a plaintiff is required to allege “more than labels
and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id.
at 1965 (citation omitted). While the Court must assume that all of the allegations in the
complaint are true, dismissal is appropriate if the allegations do not “raise [the plaintiff’s] right
to relief above the speculative level.” Id. (citation omitted). The standard on a 12(b)(6) motion
is not whether the plaintiff will ultimately prevail in his or her theories, but whether the
allegations are sufficient to allow the plaintiff to conduct discovery in an attempt to prove the
allegations. See Jackam v. Hospital Corp. of Am. Mideast, Ltd., 800 F.2d 1577, 1579 (11th Cir.
1986).
II. Background
On November 14, 2012, Plaintiffs Deman Data Systems, LLC (“DDS”), Florida Software
Systems Corporation (“FSS”), Florida Software Systems, Inc. (“FSS-FL”), and Norman Dobiesz
filed this lawsuit. They filed an amended complaint, to which Defendants filed a motion to
dismiss. The Court granted the motion to dismiss in part, and thereafter, Plaintiffs filed a second
amended complaint. (Doc. No. 56, 71, 75). Below is a brief description of the relevant portions
of the second amended complaint. (Doc. No. 75).
A. Plaintiffs and the Software
FSS is the owner of certain proprietary software (“Software”) created for use in the
healthcare industry. FSS-FL is the developer of the Software under a license from FSS, which
allows FSS-FL to possess, utilize, and further license the Software to DDS. DDS is the
exclusive provider of certain data services utilizing the Software, and DDS is authorized to and
has granted limited, non-exclusive, non-transferable licenses to certain specifically identified
healthcare facilities, hospitals, and healthcare providers throughout the United States (“DDS
Customers”) to utilize the Software.
Dobiesz is the CEO, chairman, and currently 100% owner of the membership units of
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DDS. Dobiesz is also the sole officer and 100% owner of FSS-FL. FSS-FL is the Manager of
DDS.
B. Defendants’ Alleged Misconduct
Defendant Marc Schessel joined DDS and FSS-FL as an employee in 2003. In
connection with his employment, Schessel signed two employment agreements (in 2003 and
2009). The employment agreements both provided that Schessel agreed that any invention that
related to DDS’s business that he, alone or with others, developed during the term of the
employment agreement and for a period of one year after the termination of his employment
shall be exclusively assigned to DDS.
On or around July 30, 2012, DDS terminated Schessel’s employment for cause based on
the following: (1) Schessel’s resignation due to failure and refusal to report to work and perform
the substantial duties and responsibilities of his employment; (2) failure and refusal to carry out
the directions of DDS's chairman; (3) failure and refusal to follow the policies and directives
established by DDS; and (4) the revelation that Schessel had been convicted of criminal acts for
filing fraudulent or false tax returns. However, prior to and after his employment was
terminated, Schessel allegedly engaged in a pattern of misconduct, including: (1) accessing the
DDS servers to transfer and/or delete certain confidential information; (2) contacting DDS
Customers and partners to solicit their business on behalf of a company that Schessel was going
to form; (3) storing confidential information that he removed from the DDS computer system
and then permanently misappropriating and converting that information to his own use and for
the use and benefit of the company that he was going to form; (4) forming Defendant Primrose
Solutions LLC (“Primrose”) on October 4, 2012 for the purpose of targeting and soliciting DDS
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Customers and employees and utilizing DDS’s trade secrets and confidential information; (5)
actively targeting and soliciting DDS Customers; and (6) making multiple attempts, without
authorization, to access and actually accessing the computer systems of DDS and obtaining
confidential information. Additionally, Plaintiffs contend that Schessel withheld material
information from DDS and Dobiesz regarding: (1) the termination of Schessel’s prior
employment because he was suspected of being involved in fraudulent activities, (2) a fraud
investigation and Schessel’s guilty plea, (3) his statements at his sentencing that he was the sole
owner of DDS’s confidential information, (4) Schessel’s unpaid income tax obligations and IRS
levies, and (5) a lawsuit commenced against Schessel by his former employer.
C. Second Amended Complaint
The second amended complaint contains ten counts: (1) violation of the Computer Fraud
and Abuse Act, (2) misappropriation of trade secrets, (3) enforcement of restrictive covenants,
(4) civil theft, (5) tortious interference, (6) civil conspiracy, (7) breach of fiduciary duty, (8)
fraud, (9) breach of the 2003 and 2009 employment agreements, and (10) failure to pay
promissory notes. In response, Schessel moves to dismiss the fraud and breach of employment
agreements counts.
III. Motion to Dismiss
In the instant motion, Schessel argues that the fraud and breach of employment
agreements claims fail to state a claim. Accordingly, the Court will analyze each claim.
A. Fraud
DDS asserts a fraud claim against Schessel. In this count, Plaintiffs allege that DDS
hired Schessel based on his purported reputation for honesty, integrity, and truthfulness.
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However, Plaintiffs contend that Schessel intentionally misrepresented his character and
professional background by failing to disclose the following: (1) the termination of Schessel’s
prior employment because he was suspected of being involved in fraudulent activities, (2) a
fraud investigation and Schessel’s guilty plea, (3) his statements at his sentencing that he was the
sole owner of DDS’s confidential information, (4) Schessel’s unpaid income tax obligations and
IRS levies, and (5) a lawsuit commenced against Schessel by his former employer. Plaintiffs
contend that as a result of such misrepresentations, DDS hired Schessel, appointed him as
president, and allowed him to acquire 1/3 ownership in DDS.
Schessel argues that the fraud claim must be dismissed, because it is based on his alleged
failure to disclose certain information, but Plaintiffs have not alleged facts showing that Schessel
had a duty to disclose such information. Plaintiffs respond that the duty to disclose this
information arose when Schessel undertook the duty to disclose some information regarding his
character and professional background. See Friedman v. American Guardian Warranty Services,
Inc., 837 So. 2d 1165, 1166 (Fla. 4th DCA 2003)(stating that “[w]here a party in an arm’s length
transaction undertakes to disclose information, all material facts must be disclosed”).
The flaw in Plaintiffs’ argument is that there is no context in the second amended
complaint regarding when many of the events occurred that Plaintiffs contend Schessel had a
duty to disclose. Stated differently, it appears that Plaintiffs contend that prior to being hired,
Schessel was required to disclose the undisclosed information, but it is not clear that the
following conduct—(1) the fraud investigation and Schessel’s guilty plea, (2) Schessel’s
statements at his sentencing that he was the sole owner of DDS’s confidential information, (3)
Schessel’s unpaid income tax obligations and IRS levies, and (4) the lawsuit commenced against
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Schessel by his former employer—occurred prior to Schessel’s employment with DDS. As such,
there is no basis for finding that Schessel had a duty to disclose this information at the time that
he was hired (which, presumably, is the time that he undertook to disclose the information
regarding his character and professional background). As such, the fraud claim is dismissed to
the extent that it is based on these four non-disclosures.
However, to the extent that the fraud claim is based Schessel’s failure to disclose that his
prior employment was terminated because he was suspected of being involved in fraudulent
activities, the Court will allow the fraud claim to proceed. Plaintiffs allege that Schessel chose to
disclose information regarding his character and professional background, and in doing so, he
had a duty to disclose all relevant, material facts. If Schessel’s prior employment was terminated
because he was suspected of being involved in fraud and Schessel knew the reason for his
termination, such information would be necessary to provide an accurate description of his
character and professional background. Furthermore, Plaintiffs have alleged that based on
Schessel’s failure to disclose this information, DDS hired him, appointed him as president, and
allowed him to acquire a 1/3 ownership of DDS. Thus, to that extent, the fraud claim is
sufficiently pled and will not be dismissed.
B. Breach of Employment Agreements
DDS asserts a breach of employment agreements claim against Schessel based on alleged
breaches of the 2003 and 2009 employment agreements between Schessel and DDS. In
response, Schessel sets forth three arguments for dismissal.
1. Effect of the 2009 Agreement
Both agreements provide in paragraph 9.1 that Schessel agreed that any invention that
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related to DDS’s business that he, alone or with others, developed during “the term of this
Agreement” and for a period of one year after “any” termination of his employment, shall be
exclusively assigned to DDS (“the invention provision”). (Doc. No. 75, Exs. A & B). Schessel
argues that there cannot be a breach of the 2003 agreement, because the 2003 agreement was
superseded by the 2009 agreement. In support, Schessel points to paragraph 10 of the 2009
agreement, which states that the 2009 agreement “supersedes all prior understandings and
agreements.” (Doc. No. 75-2).
Plaintiffs respond that Schessel has taken the position that he did not execute the 2009
agreement and that his purported signature on it is a forgery. Because the validity of the 2009
agreement is at issue, the Court cannot conclude that the 2009 agreement supersedes the 2003
agreement. As such, the Court finds that dismissal is not appropriate on this ground.
2. Statute of Limitations
Next, Schessel argues that a claim for a breach of the 2003 agreement is barred by the
five year statute of limitations. Specifically, Schessel argues that under paragraph 6 of the 2003
agreement, his employment terminated on January 6, 2005, and as such, this claim had to be
brought by January 6, 2010.
Schessel’s argument is flawed. First, paragraph 6 states that “the employment of
[Schessel] hereunder shall terminate upon” the expiration of the two-year term set forth in
paragraph 3. The Court interprets paragraph 6 as stating that the employment of Schessel under
the terms of the 2003 agreement terminated on January 6, 2005. The Court does not interpret
paragraph 6 to mean, nor do Plaintiffs allege, that Schessel’s employment with DDS ended in
2005.
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Second, paragraph 9.1 controls, which states that any inventions made “during the term
of this Agreement and for a period of one (1) year after any termination of [Schessel’s]
employment, which ever shall occur last” shall be assigned to DDS. (Doc. No. 75-1). This
provision is broadly written to cover inventions made from January 6, 2003 through a period
ending one year after Schessel’s employment was terminated. While Schessel’s employment
under the terms of the 2003 agreement terminated on January 6, 2005, his employment with
DDS is not alleged to have terminated on that date. Instead, it is alleged that Schessel’s
employment was terminated in 2012. As such, the claim that Schessel breached the invention
provision in the 2003 agreement is not time-barred.
3. Damages
Next, Schessel argues that DDS has not alleged that it suffered any damages as a result of
his breaches of the 2003 and 2009 agreements. The breach of employment agreements claim is
not a model of clarity, and it basically consists of two allegations: (1) that Schessel violated the
invention provision of the agreements, and (2) that Schessel “failed and refused to perform the
substantial and material responsibilities entrusted to him as employee and president, resulting in
damages to DDS.” (Doc. No. 75, p. 2).
In response to Schessel’s argument that DDS has not alleged that it suffered any damages
as a result of his breaches of the 2003 and 2009 agreements, Plaintiffs respond that the damages
include the lost ownership in the inventions. As such, the Court concludes that the allegation
that Schessel “failed and refused to perform the substantial and material responsibilities
entrusted to him as employee and president, resulting in damages to DDS” is referring only to
Schessel’s failure to disclose and assign inventions to DDS. Therefore, to the extent that
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Plaintiffs intended this claim to cover any other type of breach, the claim is not sufficiently pled
and must be dismissed.
IV. Conclusion
Accordingly, it is ORDERED AND ADJUDGED that Schessel’s Motion to Dismiss
Counts VIII and IX (Doc. No. 79) is GRANTED IN PART AND DENIED IN PART: The
motion is GRANTED to the extent that: (1) the fraud claim is dismissed to the extent that it is
based on the failure to disclose (a) the fraud investigation and Schessel’s guilty plea, (b)
Schessel’s statements at his sentencing that he was the sole owner of DDS’s confidential
information, (c) Schessel’s unpaid income tax obligations and IRS levies, and (d) the lawsuit
commenced against Schessel by his former employer; and (2) the breach of employment
agreements claim is dismissed to the extent that it is based on any type of breach other than the
failure to disclose and assign inventions. Otherwise, the motion is DENIED.
DONE AND ORDERED at Tampa, Florida, this 19th day of December, 2013.
Copies to:
Counsel of Record
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